Enbridge Income Fund Holdings Inc. Announces First Quarter Results; Declares Monthly Dividend

Marketwired

CALGARY, ALBERTA--(Marketwired - May 6, 2013) -

HIGHLIGHTS

(all financial figures are unaudited and in Canadian dollars)

  • Earnings for the first quarter ended March 31, 2013 totaled $21.2 million ($0.40 per common share).
  • The Fund's cash available for distribution (CAFD) increased 25% in the first quarter of 2013 primarily as a result of contributions from a portfolio of crude oil storage assets and renewable power generation assets acquired in December 2012.
  • Bakken Expansion Program commenced operations on March 1, 2013.
  • Westspur Toll Settlement with a group of shippers announced; Fund recognizes $12.0 million impairment of regulatory asset.
  • The Fund's capitalization was rebalanced and bolstered with a $250 million equity injection from owners, including the Company's $119 million common share issuance.
  • A monthly dividend of $0.11125 per common share was declared by the Company's Board of Directors to be paid on June 17, 2013.

Enbridge Income Fund Holdings Inc. (ENF.TO) (ENF or the Company) announced today earnings of $21.2 million, or $0.40 per common share, for the three months ended March 31, 2013, reflecting the performance of its investment in Enbridge Income Fund (the Fund).

The Company's financial performance is a direct reflection of the Fund's ability to generate cash for distribution to its unitholders. The Fund's cash available for distribution (CAFD) totaled $70.2 million for the three months ended March 31, 2013 compared with $56.3 million in the prior year. The improvement in CAFD is primarily due to increased cash flow generated by the Hardisty Crude Oil Storage assets, Greenwich Wind Farm and Tilbury and Amherstburg Solar Farms following their acquisition in December 2012 (the 2012 Acquisition). CAFD also reflects cash flow from the Bakken Expansion Program which was declared in service on March 1, 2013.

"The Fund's strong first quarter results reflect the successful execution of our strategy to expand our diversified portfolio of high quality energy infrastructure assets through both organic growth and acquisition opportunities," said John Whelen, President, Enbridge Income Fund Holdings Inc. "The assets acquired in the 2012 Acquisition are a great fit for the Fund and were strong contributors to earnings and cash flow in the first quarter and the Bakken Expansion in our crude oil transportation business began to contribute incremental cash flow after going into service at the beginning of March."

On May 6, 2013, the Company's Board of Directors declared a monthly cash dividend of $0.11125 per common share to be paid on June 17, 2013 to shareholders of record at the close of business on May 31, 2013. The dividend is designated an eligible dividend for Canadian tax purposes which qualifies for the enhanced dividend tax credit.

FIRST QUARTER 2013 REVIEW

The unaudited financial statements and Management's Discussion and Analysis (MD&A) of both ENF and the Fund, which contain additional notes and disclosures, are available on the Company's website at www.enbridgeincomefund.com. We further draw your attention to Note 2 - Revision of Prior Period Financial Statements of the Fund's Consolidated Financial Statements as at and for the three months ended March 31, 2013 which discusses a non-cash revision to the comparative financial statements. These revisions were not material to the Fund's earnings in prior periods and did not impact the Fund's cash available for distribution.

  • The Company's earnings for the first quarter ended March 31, 2013 were $21.2 million ($0.40 per common share) compared with $14.3 million ($0.36 per common share) for the first quarter ended March 31, 2012. First quarter 2013 earnings reflected an 11% per unit increase in the Fund's distribution in December 2012 combined with the Company's increased ownership in the Fund following the December 2012 acquisition of 11,982,000 trust units of the Fund and February 2013 acquisition of 4,768,000 trust units.
  • The Fund generated cash available for distribution for the three months ended March 31, 2013 of $70.2 million. First quarter 2013 CAFD reflected cash flow generated by the Hardisty Crude Oil Storage assets, Greenwich Wind Farm and Tilbury and Amherstburg Solar Farms following the 2012 Acquisition. CAFD also reflected cash flow from the Bakken Expansion Program which was declared in service on March 1, 2013.

  • The Fund issued 4,768,000 trust units to the Company at a price of $25.00 per unit (gross proceeds of $119.2 million) and Enbridge Inc. subscribed for 5,232,000 preferred units of Enbridge Commercial Trust (ECT) at a price of $25.00 per unit (gross proceeds of $130.8 million). To finance its increased investment in the Fund, the Company completed an offering of 3,820,000 common shares at a price of $25.00 per share and issued 948,000 common shares to Enbridge at price of $25.00 per common share for total gross proceeds of $119.2 million.

  • On April 1, 2013, the Fund announced it concluded a settlement (the Settlement) with a group of shippers relating to new tolls on the Westspur System. Pursuant to the Settlement, the tolls on the Westspur System will be fixed and increased annually with reference to a pre-identified inflation index, subject to throughput remaining within a volume band close to volumes recently transported on the Westspur System. The Settlement resulted in the discontinuance of rate regulated accounting for the Westspur System and the Fund recorded an after-tax write-off of approximately $12 million in the first quarter of 2013 related to a deferred regulatory asset which will not be collected under the terms of the Settlement. At the request of certain shippers who did not execute the Settlement, the NEB has not removed the interim status from the historical tolls and has made the new tolls interim as well. As of May 6, 2013, the Fund continues to work with shippers to resolve the matter.

  • The NEB denied the recovery of indirect costs incurred by Alliance Canada resulting in a one-time charge to the Fund's earnings of $2.1 million in the first quarter of 2013. The indirect costs related to the 2012 planned system outage to accommodate the relocation of a segment of the Alliance pipeline as required by the NEB.

  • The Fund and other renewable power generators reached an agreement with the Ontario Power Authority to amend existing power purchase agreements to include both annual and contract term curtailment caps beyond which renewable power generators will be compensated for lost production. The Fund expects uncompensated curtailment, which will impact the Ontario Wind Project, Talbot Wind Project and Greenwich Wind Project, to be less than 1% of the operating hours of the affected assets both annually and over the life of the contracts.

  • The 145,000 barrels per day (bpd) Bakken Expansion Program was declared in service on March 1, 2013. The estimated final cost of the Canadian portion of the project is expected to be within the project's $190 million budget. As a result of high crude oil differentials at markets serviced by downstream pipelines, capacity is not expected to be well utilized in 2013. However, the Fund is collecting revenues pursuant to firm take-or-pay commitments totaling 100,000 bpd, a portion of which are subject to a waiver of 25% of the take-or-pay amount in 2013.

  • In the first quarter of 2013, the Fund amended its policy for certain operations related to recognition of a regulatory asset equal to the cumulative amount of depreciation expense not yet recovered in tolls but required to be recovered in future tolls under the terms of applicable long term shipper contracts and as approved by federal regulatory authorities. The Fund's historic accounting method treatment was adopted at inception in 2003. The Fund's auditors, PwC LLP (PwC), agreed with this treatment. Accounting guidance found in ASC 980-340 (previously FAS 92) was deemed to be not applicable to the Fund's circumstances given the high degree of assurance over collectability of the regulatory asset afforded by the long-term contracts. Management applied its policy consistently from inception to 2012. 

    In April 2013, Management became aware that the predominant view among accounting authorities is now that FAS 92 represents a blanket prohibition on the recognition of such regulatory assets. The Fund has prepared its financial statements for the three months ended March 31, 2013 following the method now viewed to be appropriate by Management and its auditors, PwC, and will apply this method going forward. Financial statements for prior periods have been revised to permit comparability on a consistent basis. The new method has no effect on cash flow, past or future, and the revisions to the historical periods are not material.

  • The Company's Board of Directors declared monthly dividends of $0.11125 per common share for each of January, February and March 2013. In addition, monthly dividends of $0.11125 per common share were declared on April 15, 2013 and on May 6, 2013 for payment to shareholders on May 15, 2013 and June 17, 2013, respectively.

ABOUT ENBRIDGE INCOME FUND HOLDINGS INC.

Enbridge Income Fund Holdings Inc. is a publicly traded corporation. The Company, through its investment in Enbridge Income Fund, holds high quality, low risk energy infrastructure assets. The Fund's assets include interests in more than 500 megawatts of renewable and alternative power generation capacity, a portfolio of liquids transportation and storage businesses and a 50% interest in the Canadian segment of the Alliance Pipeline. Information about Enbridge Income Fund Holdings Inc. is available on the Company's website at www.enbridgeincomefund.com.

FORWARD-LOOKING INFORMATION

In the interest of providing the Company's shareholders and potential investors with information about the Company and its investee, the Fund, and the Fund's subsidiaries and joint ventures, including management's assessment of the Company's and the Fund's future plans and operations, certain information provided in this News Release constitutes forward-looking statements or information (collectively, "forward-looking statements"). This information may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. In particular, forward-looking statements include:

  • expected earnings or earnings per share;
  • expected costs related to projects under construction;
  • expected scope and in-service dates for projects under construction;
  • expected timing and amount of recovery of capital costs of assets;
  • expected capital expenditures;
  • expected future dividends, Fund distributions and taxability thereof;
  • the Fund's expected cash available for distribution; and
  • expected future actions of regulators.

Although the Company believes that these forward-looking statements are reasonable based on the information available on the date such statements are made and processes are used to prepare the information, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Material assumptions include assumptions about: the expected supply and demand for crude oil, natural gas, natural gas liquids and green energy; prices of crude oil, natural gas, natural gas liquids and green energy; expected exchange rates; inflation; interest rates; the availability and price of labour and construction materials; operational reliability; customer project approvals; maintenance of support and regulatory approval for the Fund's projects; anticipated in-service dates and weather. Assumptions regarding the expected supply and demand of crude oil, natural gas, natural gas liquids and green energy, and the prices of these commodities, are material to and underlay all forward-looking statements. These factors are relevant to all forward-looking statements as they may impact current and future levels of demand for the Fund's services. Similarly, exchange rates, inflation and interest rates impact the economies and business environments in which the Company and the Fund operates, may impact levels of demand for the Fund's services and cost of inputs, and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty, particularly with respect to expected earnings and associated per unit or per share amounts, or estimated future distributions or dividends. The most relevant assumptions associated with forward-looking statements on projects under construction, including estimated in-service dates and expected capital expenditures, include: the availability and price of labour and construction materials; the effects of inflation on labour and material costs; the effects of interest rates on borrowing costs; and the impact of weather, customer and regulatory approvals on construction schedules.

The Company's forward-looking statements, and forward looking statements with respect to the Fund, are subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, weather, economic conditions, exchange rates, interest rates and commodity prices, including but not limited to those risks and uncertainties discussed in this News Release and in the Company's and the Fund's other filings with Canadian securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and the Company's and the Fund's future course of action depends on management's assessment of all information available at the relevant time. Except to the extent required by law, the Company and the Fund assume no obligation to publicly update or revise any forward-looking statements made in this News Release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements whether written or oral, attributable to the Company or the Fund or persons acting on the Company's or the Fund's behalf, are expressly qualified in their entirety by these cautionary statements.

NON-GAAP MEASURES

This News Release contains references to the Fund's cash available for distribution (CAFD). CAFD represents the Fund's cash available to fund distributions on Fund Units and ECT Preferred Units as well as for debt repayments and reserves. This measure is important to shareholders as the Company's objective is to provide a predictable flow of dividends to shareholders and the Company's cash flows are derived from its investment in the Fund. CAFD is not a measure that has standardized meaning prescribed by United States Generally Accepted Accounting Principles (U.S.GAAP) and is not considered a GAAP measure. Therefore, this measure may not be comparable with similar measures presented by other issuers. The Fund's CAFD reconciliation is as follows:

     
     
Three months ended March 31, 2013   2012  
(millions of Canadian dollars)        
 Cash provided by operating activities1 49.6   60.6  
   Add/(deduct):        
   Retrospective pre-Acquisition cash flows1 -   (22.4 )
   Green Power maintenance capital expenditures (0.1 ) (0.2 )
   Green Power joint ventures cash distributed/(retained) (0.1 ) 0.2  
   Liquids Transportation and Storage maintenance capital expenditures (1.1 ) (1.7 )
   Change in operating assets and liabilities in the period 21.9   19.8  
Cash available for distribution 70.2   56.3  
(1) In accordance with U.S. GAAP, cash provided by operating activities for 2012 periods has been retrospectively adjusted to furnish comparative information related to the 2012 Acquisition. The impact of the retrospective adjustments has been eliminated from CAFD as these cash flows were not available to distribute to unitholders.  

SELECTED FINANCIAL AND OPERATING HIGHLIGHTS

ENBRIDGE INCOME FUND HOLDINGS INC. Three months ended
March 31,
2013 2012
(millions of Canadian dollars, except share and per share amounts)        
Earnings   21.2   14.3
   Earnings per common share, basic and diluted $ 0.40 $ 0.36
Cash provided by operating activities   17.3   11.7
Dividends declared   18.3   12.3
   Dividends per common share $ 0.334 $ 0.309
Number of common shares outstanding   56,491,000   39,741,000
         
ENBRIDGE INCOME FUND1 Three months ended
March 31,
 
2013   20122,3  
(millions of Canadian dollars, except unit and per unit amounts)            
Earnings            
    Green Power   26.1     23.4  
    Liquids Transportation and Storage   2.9     12.2  
    Alliance Canada   12.3     13.1  
    Corporate   (27.7 )   (30.8 )
    Retrospective Adjustments3   -     9.2  
    13.6     27.1  
Cash available for distribution4            
  Green Power   41.2     36.0  
  Liquids Transportation and Storage   33.1     19.2  
  Alliance Canada   17.9     18.2  
  Corporate   (22.0 )   (17.1 )
    70.2     56.3  
Cash provided by operating activities3   49.6     60.6  
Cash distributions declared   54.4     37.4  
  Distributions per trust unit and ECT preferred unit $ 0.403   $ 0.362  
Number of units outstanding            
  ECT preferred units   72,465,750     54,074,750  
  Trust units   65,991,000     49,241,000  
Operating Results            
  Green Power (thousands of megawatt hours produced)            
    Wind Projects   354.3     298.2  
    Solar Projects   23.9     23.0  
    Waste Heat Projects   19.2     19.6  
  Liquids Transportation and Storage (thousands of barrels per day)            
    Westspur System   161.2     215.2  
    Saskatchewan Gathering System   112.0     146.1  
    Weyburn System   31.8     31.8  
    Virden System   24.7     24.7  
  Alliance Canada (millions of cubic feet per day)   1,632.0     1,632.0  
             

(1) Financial Highlights for Enbridge Income Fund have been extracted from financial statements prepared in accordance with U.S. GAAP.

(2) Earnings for the three months ended March 31, 2012 have been revised. See Note2 of the March 31, 2013 financial statements of Enbridge Income Fund. 

(3) In accordance with U.S. GAAP, earnings and cash provided by operating activities for all 2012 periods have been retrospectively adjusted to furnish comparative information related to the 2012 Acquisition. Financing charges have not been retrospectively adjusted. The impact of the retrospective adjustments has been eliminated from CAFD as these cash flows were not available to distribute to unitholders.

(4) See Non-GAAP Measures.

Contact:
Enbridge Income Fund Holdings Inc.
Jennifer Varey
Media
(403) 508-6563
jennifer.varey@enbridge.com

Enbridge Income Fund Holdings Inc.
Teri Majer
Investment Community
(403) 508-3185
teri.majer@enbridge.com

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