RESULTS OF OPERATIONS

Our results of operations consist of our share of earnings of Enbridge Energy Partners, L.P. (the "Partnership") attributed to the i-units we own. At September 30, 2008 and 2007, through our ownership of i-units, we held an approximate 14.5 percent limited partner interest in the Partnership. We manage the Partnership on behalf of Enbridge Energy Company, Inc. (the "General Partner" of the Partnership), a subsidiary of Enbridge Inc. ("Enbridge"). Accordingly, we use the equity method to account for our investment and record earnings equal to our percentage ownership interest in the Partnership's net income allocable to its limited partners. Our percentage ownership will change over time, as the number of i-units we own becomes a different percentage of the total outstanding units of the Partnership.

The information set forth under "Part I, Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Partnership's Form 10-Q for the quarterly period ended September 30, 2008, is hereby incorporated by reference, as our results of operation, financial position and cash flows are dependent on the results of operation, financial position and cash flows of the Partnership.

The following table presents the Partnership's allocation of net income to the General Partner and limited partners for the periods presented.

                                           Three months ended       Nine months ended
                                             September 30,            September 30,
                                            2008         2007        2008        2007
                                                    (unaudited; in millions)
    Net income of the Partnership         $    119.4     $ 77.3    $   281.3    $ 185.0
    Less: net income allocated to the           14.1        9.4         35.8       26.4
    General Partner

    Net income allocated to limited       $    105.3     $ 67.9    $   245.5    $ 158.6
    partners

Our net income represents our equity earnings of the Partnership attributable to the i-units we own and the dilution gains we recognized from the Partnership's Class A common unit issuances, reduced by deferred income tax expense. Deferred income tax expense is calculated based on the difference between the accounting and tax basis of our investment in the Partnership and the combined federal and state income tax rates of 36.6% and 36.8% for the three and nine month periods ended September 30, 2008 and 2007, respectively, applied to our share of earnings of the Partnership for the respective periods.

In March 2008, the Partnership issued and sold 4.6 million Class A common units at $49.00 per unit, for proceeds of approximately $217.2 million, net of underwriters' discounts, commissions and expenses. Since we did not participate in the offering, our ownership interest in the Partnership was reduced from 14.8 percent, immediately prior to the issuance, to 14.1 percent following the issuance. As a result, we recognized a dilution gain of $6.4 million, since the per unit issuance price was greater than our average cost per i-unit.

Our net income increased by $3.1 million to $9.5 million for the three months ended September 30, 2008, from the $6.4 million we earned during the same period of 2007. The increase in net income is primarily attributable to higher equity income from our investment in the Partnership, due to the increase in the net income of the Partnership.

For the nine months ended September 30, 2008, our net income increased by $0.6 million to $26.7 million from the $26.1 million we earned in the same period of 2007. The increase in net income is primarily attributable to higher equity income from our investment in the Partnership partially offset by lower dilution gains on the sale of Class A common units recognized for the nine months ended September 30, 2008, as compared to the same period for 2007.

In May 2007, the Partnership issued and sold 5.3 million Class A common units at $58.00 per unit, for proceeds of approximately $301.9 million, net of underwriters' discounts, commissions and expenses. Additionally, in April 2007, the Partnership sold approximately 5.9 million Class C units in a private transaction to three institutional investors at a price of $53.11 per unit. As a result of these transactions, our percentage ownership interest in the Partnership declined from approximately 16.2 percent at March 31, 2007 to 14.3 percent at June 30, 2007. We recognized a dilution gain of $17.0 million for the Class A common unit issuance, since the per unit issuance price was greater than our average cost per unit. Although our ownership interest in the Partnership was also reduced by the issuance of Class C units, applicable accounting guidance precluded us from recognizing dilution gains when the Partnership issued Class C units because they represent convertible securities.

Both basic and diluted earnings per share are calculated by dividing our net income by our weighted-average number of shares outstanding during the period. We do not have any securities outstanding that may be converted into or exercised for our shares.

INCOME TAXES

Our income tax expense of $5.9 million and $15.8 million for the three and nine month periods ended September 30, 2008, is $2.4 million and $0.8 million more than the $3.5 million and $15.0 million we incurred for the three and nine months ended September 30, 2007. The increase in our income tax expense for the three and nine month periods ended September 30, 2008 from the same periods in 2007 is primarily attributable to the increase in our equity income from our investment in the Partnership, partially offset by lower dilution gains recognized for the nine month period ended September 30, 2008.

We computed our income tax expense for the three and nine month periods ended September 30, 2008 by applying a 36.6% effective income tax rate to our pre-tax income, which represents the federal statutory rate of 35.0% and the effective state income tax rate of 1.6%. For the three and nine month periods ended September 30, 2007, we applied an effective income tax rate of 36.8% to our pre-tax income, representing a 35.0% federal statutory rate and a 1.8% effective state income tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Our authorized capital structure consists of two classes of membership interests: (1) our Listed Shares, which represent limited liability company interests with limited voting rights, and (2) our Voting Shares, representing limited liability company interests with full voting rights, which are owned by the General Partner. At September 30, 2008, our issued capitalization consisted of cash contributed by the General Partner in exchange for its Voting Shares, and $586.9 million associated with the 14,355,598 of our Listed Shares outstanding.

The number of our shares outstanding, including the voting shares owned by the General Partner, will at all times equal the number of i-units we own in the Partnership. Typically, the General Partner and owners of the Partnership's Class A and B common units will receive distributions from the Partnership in cash. We do not, however, receive distributions of cash on the i-units we own and do not otherwise have any cash flow attributable to our ownership of the i-units. Instead, when the Partnership makes distributions of cash to its general partner and holders of its Class A and B common units, we receive additional i-units under the terms of the Partnership's partnership agreement. The amount of additional i-units we receive is calculated by dividing the amount of the cash distribution per unit paid by the Partnership on each of its Class A and B common units by the average closing price of one of our Listed Shares on the New York Stock Exchange, or NYSE, as determined for a 10-trading day period ending on the trading day immediately prior to the ex-dividend date for our shares, multiplied by the number of shares outstanding on the record date. We concurrently distribute additional shares to our shareholders that are equivalent in number to the additional i-units we receive from the Partnership. As a result, the number of our outstanding shares equals the number of i-units that we own in the Partnership.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

SUBSEQUENT EVENTS

On October 30, 2008, our Board of Directors declared a share distribution payable on November 14, 2008, to shareholders of record as of November 6, 2008, based on the $0.990 per common unit distribution declared by the Partnership. The Partnership's distribution increases the number of i-units we own. The amount of this increase is calculated by dividing the amount of the cash distribution paid by the Partnership on each common unit by the average market price of one of our Listed Shares as determined for the 10-trading day period ending on the trading day immediately prior to the ex-dividend date for our shares, multiplied by the number of shares outstanding prior to the distribution. We distribute additional Listed Shares to our listed shareholders and additional shares to Enbridge Energy Company, Inc, in respect of these additional i-units.