RELATED PARTY TRANSACTIONS | 14. RELATED PARTY TRANSACTIONS Administrative and Workforce Related Services We do not directly employ any of the individuals responsible for managing or operating our business nor do we have any directors. Enbridge and its affiliates provide management and we obtain managerial, administrative, operational and workforce related services from our General Partner, Enbridge Management and affiliates of Enbridge pursuant to service agreements among our General Partner, Enbridge Management, affiliates of Enbridge, and us. Pursuant to these service agreements, we have agreed to reimburse our General Partner, Enbridge Management and affiliates of Enbridge, for the cost of managerial, administrative, operational and director services they provide to us. Where directly attributable, the cost of all compensation, benefits expenses and employer expenses for these employees are charged directly by Enbridge to the appropriate affiliate. Enbridge does not record any profit or margin for the administrative and operational services charged to us. The affiliate amounts incurred by us for services received pursuant to the services agreements are reflected in “Operating and administrative affiliate” on our consolidated statements of income. Enbridge and its affiliates allocated direct workforce costs to us for our construction projects of $4.8 million as of June 30, 2017 and $28.4 million as of December 31, 2016, respectively, that we recorded as additions to “Property, plant and equipment, net” on our consolidated statements of financial position. Affiliate Revenues We record operating revenues in our Liquids segment for storage, transportation and terminalling services we provide to affiliates, which are presented in “Transportation and other services affiliate” on our consolidated statements of income. Sale of Accounts Receivable We and certain of our subsidiaries were parties to a receivables purchase agreement (the Receivables Agreement), with an indirect, wholly-owned subsidiary of Enbridge. On April 27, 2017, we terminated our Receivables Agreement with the indirect, wholly-owned subsidiary of Enbridge in exchange for a one-time $5.0 million payment to us, which was recorded within “Other income” in our consolidated statements of income. As a result of the termination of the Receivables Agreement we discontinued the sale of our receivables balance. For the three months ended June 30, 2017, no receivables were sold and derecognized. We sold and derecognized receivables of $428.1 million for the three months ended June 30, 2016. For the six months ended June 30, 2017 and 2016, we sold and derecognized receivables of $458.0 million and $894.4 million, respectively, to an indirect, wholly-owned subsidiary of Enbridge. We received no cash proceeds for the three months ended June 30, 2017 and received $468.9 million for the six months ended June 30, 2017. We received cash proceeds of $427.9 million and $894.0 million for the three and six months ended June 30, 2016, respectively. Consideration for the receivables sold was equivalent to the carrying value of the receivables less a discount for credit risk. The difference between the carrying value of the receivables sold and the cash proceeds received was recognized in “Operating and administrative affiliate” expense in our consolidated statements of income. For the three and six months ended June 30, 2017 and 2016, the expense stemming from the discount on the receivables sold was not material. As of June 30, 2017, we had no significant remaining derecognized receivables that had not been collected on behalf of the Enbridge subsidiary. As of December 31, 2016, we had $155.5 million of receivables, which had been sold and derecognized that had not been collected on behalf of the Enbridge subsidiary. Financial Transactions with Affiliates EUS Credit Agreement In connection with our investment in the Bakken Pipeline System, on February 15, 2017, we entered into the EUS Credit Agreement. The EUS Credit Agreement was a committed senior unsecured revolving credit facility that permitted aggregate borrowings of up to, at any one time outstanding for the purpose of funding our investment in the Bakken Pipeline System, $1.5 billion, (i) on a revolving basis for a 364-day period and (ii) for a 364-day term on a non-revolving basis following the expiration of the revolving period; provided that the EUS Credit Agreement would mature on the date any project financing was completed. Loans under the EUS Credit Agreement accrued interest based, at our election, on either the Eurocurrency rate or a base rate, in each case, plus an applicable margin. A facility fee accrued at the applicable margin rate, which is based on our non-credit-enhanced, senior unsecured long-term debt rating at the applicable time. On April 27, 2017, we re-paid the facility in full and terminated the EUS Credit Agreement. For further details refer to Note 9 Debt. EUS 364-day Credit Facility We are party to an unsecured revolving 364-day credit agreement (the EUS 364-day Credit Facility), with EUS. The EUS 364-day Credit Facility is a committed senior unsecured revolving credit facility that permits aggregate borrowings of up to, at any one time outstanding, $750 million, (i) on a revolving basis for a 364-day period and (ii) for a 364-day term on a non-revolving basis following the expiration of the revolving period. Loans under the EUS 364-day Credit Facility accrue interest, at our election, based on either the Eurocurrency rate or a base rate, in each case, plus an applicable margin. On July 25, 2017 we entered into an agreement with EUS whereby the termination date was extended to July 24, 2018. The terms of our agreement with EUS remain unchanged. At that time, we may elect to convert any outstanding loans to term loans, which would mature on July 23, 2019. As of June 30, 2017, we had $420.6 million outstanding under this facility, excluding any accrued interest to date. The commitment under the EUS 364-day Credit Facility may be permanently reduced by EUS, from time to time, by up to an amount equal to the net cash proceeds to us from the sale by us of debt or equity securities in a registered public offering. Distribution from MEP The following table presents distributions paid by MEP prior to its sale on June 28, 2017, representing the noncontrolling interest in MEP, and to us for our ownership of Class A common units. No distributions were made during the second quarter of 2017. Distribution Distribution Amount Paid to Amount Paid to Total MEP (in millions) January 26, 2017 February 14, 2017 $ 8.9 $ 7.6 $ 16.5 Joint Funding Arrangement for Bakken Pipeline On April 27, 2017, we finalized a joint funding arrangement with our General Partner with respect to our investment in the Bakken Pipeline System. Under the terms of the arrangement, our General Partner owns 75% and we own 25% of DakTex, with an option for us to increase our interest by 20% at a price equal to net book value, at any time during the five years subsequent to the in-service date of the Bakken Pipeline system. We received distributions from DakTex in the amount of $1.14 billion. The funds received were used to repay our borrowing, under the EUS Credit Agreement. Joint Funding Arrangement for Line 3 Replacement On January 26, 2017, our Board of Directors approved a joint funding arrangement with our General Partner for the U.S. L3R Program. Under the terms of the arrangement, our General Partner will fund 99% and we will fund 1% of the capital cost of the U.S. L3R Program. We have an option to increase our interest in the U.S. L3R Program assets up to 40% in the U.S. portion at book value at any time up to four years after the project goes into service. Our General Partner paid $450.1 million for its 99% interest in the project, including our share of the construction costs to date and other incremental amounts. The carrying amount of our 99% interest in the project at the transaction date was $411.0 million and was recorded as an increase to noncontrolling interest. The $39.1 million difference between the cash received and the carrying amount was recorded as an increase to the capital accounts of our common units, i-units, and General Partner interest on a pro-rata basis. Our General Partner made equity contributions totaling $100.0 million to the OLP for the six months ended June 30, 2017, to fund its equity portion of the construction costs associated with the U.S. L3R Program. Joint Funding Arrangement for Eastern Access Projects We have a joint funding arrangement with the General Partner that established an additional series of partnership interests in the OLP, which we refer to as the EA interests. The EA interests were created to finance the Eastern Access Project to increase access to refineries in the U.S. Upper Midwest and in Ontario, Canada for light crude oil produced in western Canada and the United States. On January 26, 2017, we exercised our option under the Eastern Access joint funding arrangement to acquire an additional 15% interest in the Eastern Access Project, therefore increasing our ownership interest from 25% to 40% and reducing the interest of our General Partner form 75% to 60%, respectively. The exercise of our option occurred at book value of approximately $360 million and reduced noncontrolling interest by approximately $360 million. The Eastern Access Project was placed into service June 2016. Our General Partner made equity contributions totaling $5.6 million and $7.2 million to the OLP for the six months ended June 30, 2017 and 2016, respectively, to fund its equity portion of the construction costs associated with the Eastern Access Project. Distribution to Series EA Interests The following table presents distributions paid by the OLP during the six months ended June 30, 2017, to our General Partner and its affiliate, representing the noncontrolling interest in the Series EA, and to us, as the holders of the Series EA general partner interests and certain limited partner interests. Distribution Distribution Amount Paid to Amount Paid to Total Series EA (in millions) April 27, 2017 May 15, 2017 $ 29.3 $ 62.0 $ 91.3 January 26, 2017 February 14, 2017 22.9 68.8 91.7 $ 52.2 $ 130.8 $ 183.0 Joint Funding Arrangement for U.S. Mainline Expansion Projects The OLP also has a series of partnership interests, which we refer to as the ME interests. The ME interests were created to finance the Mainline Expansion Projects to increase access to the markets of North Dakota and western Canada for light oil production on our Lakehead System between Neche, North Dakota and Superior, Wisconsin. Our General Partner owns 75% of the ME interests, and the projects are jointly funded by our General Partner at 75% and us at 25% with an option for us to increase our ownership interest by an additional 15% at cost, under the Mainline Expansion joint funding arrangement. Our General Partner has made equity contributions totaling $26.0 million and $42.8 million to the OLP for the six months ended June 30, 2017 and 2016, respectively, to fund its equity portion of the construction costs associated with the Mainline Expansion Projects. Distribution to Series ME Interests The following table presents distributions paid by the OLP during the six months ended June 30, 2017, to our General Partner and its affiliate, representing the noncontrolling interest in the Series ME, and to us, as the holders of the Series ME general partner and certain limited partner interests. Distribution Distribution Amount Paid to Amount Paid to Total Series ME (in millions) April 27, 2017 May 15, 2017 $ 12.7 $ 38.0 $ 50.7 January 26, 2017 February 14, 2017 14.2 42.7 56.9 $ 26.9 $ 80.7 $ 107.6 |