Seeking Alpha: Enbridge Energy Partners Looking For A Pop From A Drop

I wasn't very keen on Enbridge Energy Partners (NYSE:EEP) a year ago, and while the units have outperformed many of the peer group MLPs, a 1% return before distributions doesn't leave me feeling as though I have missed very much by sitting on the sidelines (I liked Energy Transfer Equity (NYSE:ETE) better and that's up almost 20% over the same period). Clearly the steep drop in oil prices, the prospect of rising rates, and (more debatable) the big increase in MLP supply all have had their impact on the sector, but Enbridge Energy Partners has at least benefited from ongoing volume growth across its liquids pipelines. Now with the prospect of sizable drop-downs from its parent Enbridge (NYSE:ENB), maybe it's not too early to at least consider some due diligence on these units.

Owning Enbridge Energy Partners has a bigger "hassle factor" than a regular equity; as a partnership there are tax issues here that don't come up with regular equities and readers have to decide for themselves if those issues are problematic. I'm also still concerned that Enbridge Energy Partners is overstretched from a balance sheet perspective and will have to engage in complex, likely dilutive, financing to complete what could be up to $10 billion in asset drop-downs. All of that said, the shares look a little undervalued as is and meaningfully undervalued with the drop-downs and I don't think the outlook for liquids volumes is going to get too much worse from here.

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Enbridge Energy Partners Looking For A Pop From A Drop

Seeking Alpha: Enbridge Energy Partners Working A Tricky Balance

A lot is going on these days in the energy MLP sector, as companies try to balance their needs for cash distribution growth to shareholders/unitholders, keep a sustainable balance sheet, and fund the capital spending needed to exploit what could well be a once-in-a-career buildout of new infrastructure to handle North America's growing energy output.

When it comes to Enbridge Energy Partners, L.P. (EEP), the balancing act is a little trickier. Enbridge's (ENB) recent decision to cut its top incentive distribution rights is a positive for EEP, as was a drop-down to Midcoast Energy Partners, L.P. (MEP), but the company is still stretched on its distribution coverage and has a delicate balancing act ahead of it in managing billions of dollars of growth-oriented capex.

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Enbridge Energy Partners Working A Tricky Balance