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EEQ > SEC Filings for EEQ > Form 10-Q on 2-May-2014All Recent SEC Filings

Show all filings for ENBRIDGE ENERGY MANAGEMENT L L C

Form 10-Q for ENBRIDGE ENERGY MANAGEMENT L L C


2-May-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

Our results of operations consist of our share of earnings of Enbridge Energy Partners, L.P., or the Partnership, attributed to the i-units, a special class of the Partnership's limited partner interests, we own. At March 31, 2014 and 2013, through our ownership of i-units, we had an approximate 19.5% and 16.3%, respectively, limited partner interest in the Partnership. Our percentage ownership of the Partnership will change over time as the number of i-units we own becomes a different percentage of the total limited partner interests outstanding due to our acquisition of additional i-units and other issuances of limited partner interests by 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 Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 is hereby incorporated by reference, as our results of operations, financial position and cash flows are dependent on the results of operations, financial position and cash flows of the Partnership.

The following table presents the Partnership's allocation of net income and loss to Enbridge Energy Company, Inc., the general partner of the Partnership, referred to as the General Partner, and limited partners for the periods presented.

                                                            For the three month period
                                                                 ended March 31,
                                                           2014                 2013
                                                             (unaudited; in millions)
Net income (loss) attributable to general and
limited partner ownership interests in Enbridge
Energy Partners, L.P.                                   $      93.3        $         (83.3 )
Less: Net income allocated to General Partner
(before two-class method) (1)                                  35.0                   30.3

Net income (loss) allocated to limited partners
(before two-class method) (1)                           $      58.3        $        (113.6 )

(1) Amounts represent the equity income pick-up by the general and limited partners of the Partnership. The equity income present in the general and limited partners' net income pick-up does not include the two-class method which is included in the calculation of earnings per unit for the Partnership as set forth in its partnership agreement.

Our net income of $7.2 million and net loss of $13.8 million for the three month periods ended March 31, 2014 and 2013, respectively, represent equity attributable to the i-units that we own reduced by deferred income taxes. Deferred income tax expense, or benefit, 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 37.1% and 36.8% for the three month periods ended March 31, 2014 and 2013, respectively, applied to our share of the earnings, or losses, of the Partnership for the respective periods.

For the three month period ended March 31, 2014, our net income increased by $21.0 million as compared to the net loss in the same period in 2013. The net income is primarily attributable to the $33.2 million increase in equity income from the Partnership resulting from the increase in its net income in relation to its net loss in the same period in 2013. This income was partially offset by $12.2 million of increased income tax expense associated with the increase in our net income. For the three month period ended March 31, 2014, the Partnership had lower operating expenses in its Liquids segment as compared to the same period in 2013, primarily due to additional environmental expenses recognized in the first quarter of 2013. The environmental expenses related to ongoing oil spill clean-up activities on the Partnership's Line 6B in Michigan. As a result, our equity income, for the three month period ended March 31, 2013, was reduced by $18.0 million, after tax, which related to these increased environmental expenses while no such activity was present in 2014.


Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Our authorized capital structure consists of two classes of limited liability company interests: (1) our Listed Shares, which are traded on the New York Stock Exchange, or NYSE, and represent limited liability company interests with limited voting rights, and (2) our voting shares, which represent limited liability company interests with full voting rights and are held solely by the General Partner. At March 31, 2014, our issued capitalization consisted of $1,638.5 million associated with our 64,984,745 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. Instead of receiving cash distributions on the i-units we own, however, we receive additional i-units under the terms of the Partnership's limited partnership agreement. The number of additional i-units we receive is calculated by dividing the amount of the cash distribution 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 NYSE for the 10 trading day period immediately preceding the ex-dividend date for our shares, multiplied by the number of our shares outstanding on the record date. We make share distributions to our shareholders concurrently with the i-unit distributions we receive from the Partnership that increase the number of i-units we own. As a result of our share distributions, the number of shares outstanding is equal to the number of i-units that we own in the Partnership.

INCOME TAXES

We had an income tax expense of $4.2 million for the three month period ended March 31, 2014 as compared to an income tax benefit of $8.0 million for the corresponding period in 2013. The increase in income tax expense for the three month period ended March 31, 2014 as compared to the same period in 2013 was due to the increase in our net income primarily associated with increased amounts of equity income we recognized from the Partnership.

We computed our income tax expense for the three month period ended March 31, 2014 by applying a 37.1% 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 2.1%. For the three month period ended March 31, 2013, our income tax benefit was computed by applying a 36.8% 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 1.8%.

SUBSEQUENT EVENTS

Share Distribution

On April 30, 2014, our board of directors declared a share distribution payable on May 15, 2014, to shareholders of record as of May 8, 2014, based on the $0.5435 per limited partner 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 cash amount distributed by the Partnership per common unit by the average closing price of one of our Listed Shares on the NYSE for the 10 trading day period immediately preceding the ex-dividend date for our shares, multiplied by the number of shares outstanding on the record date. We distribute additional Listed Shares to our Listed shareholders and additional voting shares to the General Partner in respect of these additional i-units.

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