EEQ » Topics » RESULTS OF OPERATIONS

This excerpt taken from the EEQ 10-Q filed May 5, 2009.

RESULTS OF OPERATIONS

Our results of operations consist of our share of earnings of the Partnership attributed to the i-units we own. At March 31, 2009 and 2008, through our ownership of i-units, we had an approximate 12.9 percent and 14.1 percent limited partner interest in the Partnership, respectively. 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 units outstanding due to our ownership 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 Form 10-Q for the quarterly period ended March 31, 2009 is hereby incorporated by reference, as our results of operation, 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 to the General Partner and limited partners for the periods presented.

 

     For the three months ended
March 31,
 
         2009             2008      
     (unaudited; in millions)  

Net income of the Partnership

   $ 68.6     $ 103.1  

Less: net income allocated to the General Partner

     (13.9 )     (11.3 )
                

Net income allocated to limited partners

   $ 54.7     $ 91.8  
                

Three months ended March 31, 2009 compared with three months ended March 31, 2008

Our net income of $4.7 million and $12.7 million for the three months ended March 31, 2009 and 2008, respectively, represents equity in earnings attributable to the i-units that we own, increased or decreased by the gain or loss we recognize for adjustments the Partnership makes to its capital accounts when it issues additional common units, 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 rate of 36.7% and 36.6% for the three months ended March 31, 2009 and 2008, respectively, applied to our share of the earnings of the Partnership for the respective periods.

Our earnings decreased by $8.0 million for the three months ended March 31, 2009 as compared to the same period in 2008, primarily due to $6.4 million of pre-tax net gains we recognized during the three months ended March 31, 2008 for adjustments the Partnership makes to its capital accounts when it issues additional common units as discussed below. We refer to these adjustments the Partnership makes to its capital accounts as capital account adjustments. There were no similar unit issuances by the Partnership during the three months ended March 31, 2009. We also experienced a $6.2 million decrease in equity income from the Partnership during the three months ended March 31, 2009 as compared to the same period in 2008 due to the decrease in the net income of the Partnership. These decreases were offset by a $4.6 million reduction in income taxes resulting from the decrease in our net income.

The Partnership records an adjustment to the carrying value of its book capital accounts when it issues additional common units and the new issuance price per unit is greater than or less than the average cost per unit for each class of units. We refer to these adjustments as capital account adjustments. Beginning January 1, 2009, in conjunction with our adoption of the provisions of Statement of Financial Accounting Standard No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”), we recognize any capital account adjustments recorded by the Partnership to the book capital account it maintains for our i-units by increasing or decreasing our investment in the Partnership and recording a corresponding

 

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capital account adjustment directly to “Stockholders’ equity” on our statement of financial position. We adopted prospectively the provisions of SFAS No. 160, except for any applicable presentation and disclosure requirements. Prior to our adoption of SFAS 160, we historically recognized the capital account adjustment recorded by the Partnership to the book capital account it maintains for our i-units by increasing or decreasing our investment in the Partnership and recording a corresponding gain or loss in our statement of income. Gain or loss recognition is an accounting convention we have historically applied as our method of recognizing these capital account adjustments made by the Partnership.

This excerpt taken from the EEQ 10-Q filed Oct 31, 2008.

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
September 30,
  Nine months ended
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 General Partner

    14.1     9.4     35.8     26.4  
                   

Net income allocated to limited partners

  $ 105.3   $ 67.9   $ 245.5   $ 158.6  
                   

        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.

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        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.

This excerpt taken from the EEQ 10-Q filed Jul 29, 2008.

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 June 30, 2008 and 2007, through our ownership of i-units, we held an approximate 14.3 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 June 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
June 30,
  Six months ended
June 30,
 
 
  2008   2007   2008   2007  
 
  (unaudited; in millions)
 

Net income of the Partnership

  $ 58.8   $ 68.6   $ 161.9   $ 107.7  

Less: net income allocated to the General Partner

    10.4     9.3     21.7     17.0  
                   

Net income allocated to limited partners

  $ 48.4   $ 59.3   $ 140.2   $ 90.7  
                   

        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 six month periods ended June 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.

        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 precludes us from recognizing dilution gains when the Partnership issues Class C units because they represent convertible securities.

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        Our net income decreased by $11.9 million for the three months ended June 30, 2008, from the $16.4 million we earned during the same period of 2007. Net income during the three months ended June 30, 2007, included $17.0 million of dilution gains that were recognized in May 2007 from the Partnership's sale of its Class A common units as discussed above. Similar dilution gains were not present in the three month period ended June 30, 2008. Income taxes declined during the three month period ended June 30, 2008 as compared to the same period in 2007 due to the reduction in net income that was attributable to the decrease in dilution gains as discussed above. Also our average ownership interest decreased during the three months ended June 30, 2008 as compared to the same period in 2007 due to the Partnership's Class A common unit issuances in March 2008 and May 2007 and the Class C unit issuance in April 2007.

        For the six months ended June 30, 2008, our net income decreased by $2.5 million to $17.2 million from the $19.7 million we earned in the same period of 2007. The decrease in net income is primarily attributable to lower dilution gains on the sale of Class A common units recognized offset by higher equity income from our investment in the Partnership for the six months ended June 30, 2008, as compared to the same period for 2007. Our average ownership interest in the Partnership during the six months ended June 30, 2008 was lower in relation to the same period of 2007, which also contributed to the decrease in our net income for the six months ended June 30, 2008.

        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.

This excerpt taken from the EEQ 10-Q filed Apr 29, 2008.

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 March 31, 2008 and 2007, through ownership of i-units, we held an approximate 14.1 percent and 16.2 percent limited partner interest in the Partnership, respectively. 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 March 31, 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
March 31,

 
 
  2008
  2007
 
 
  (unaudited; in millions)

 
Net income of the Partnership   $ 103.1   $ 39.1  
Less: net income allocated to the General Partner     (11.3 )   (7.7 )
   
 
 
Net income allocated to limited partners   $ 91.8   $ 31.4  
   
 
 

        Our net income of $12.7 million and $3.3 million for the three months ended March 31, 2008 and 2007, respectively, represents our equity in earnings of the Partnership attributable to the i-units we own, plus the dilution gain from the Partnership's March 2008 issuance of Class A common units, 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 months ended March 31, 2008 and 2007, respectively, applied to our share of the earnings of the Partnership for the respective periods. Our earnings increased by $9.4 million for the three months ended March 31, 2008, from the $3.3 million we earned in the comparable period of 2007. The increase is primarily due to higher equity income associated with our investment in the Partnership, coupled with $6.4 million of dilution gains we recognized from the Partnership's sale in March 2008 of its Class A common units.

        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.

        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.

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These excerpts taken from the EEQ 10-K filed Feb 21, 2008.

RESULTS OF OPERATIONS

        Our results of operations consist of our share of earnings of the Partnership attributed to the i-units we own. At December 31, 2007, 2006 and 2005, through our ownership of i-units, we had an approximate 14.7 percent, 16.0 percent and 17.5 percent limited partner interest in the Partnership, respectively. 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 units outstanding due to our ownership of additional i-units and other issuances of limited partner interests by the Partnership.

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

 
  Year ended December 31,
 
 
  2007
  2006
  2005
 
 
  (in millions)

 
Net income of the Partnership   $ 249.5   $ 284.9   $ 89.2  
Less: net income allocated to the General Partner     (37.7 )   (30.9 )   (23.5 )
   
 
 
 
Net income allocated to limited partners   $ 211.8   $ 254.0   $ 65.7  
   
 
 
 

        Our net income of $31.4 million, $28.7 million and $12.4 million for the years ended December 31, 2007, 2006 and 2005, respectively, represents equity in earnings attributable to the i-units that we own, plus the dilution gain from the Partnership's issuance of Class A common units, 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 rate of 36.5% in 2007, 36.8% in 2006, and 37.3% in 2005, of our share of the earnings of the Partnership. Our earnings increased by $2.7 million from 2006 to 2007, primarily due to the $17.0 million of dilution gains we recognized from the Partnership's sale in May 2007 of its Class A common units, which were not present in 2006. This increase is partially offset by lower equity income from our investment in the Partnership that is

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the result of two factors: (1) net income allocated to the limited partners was lower due to non-cash mark-to-market losses that occurred during 2007 compared with gains that occurred during 2006 on derivative financial instruments held by the Partnership to hedge its commodity price exposure; and (2) issuances of Class A common units and Class C units that have reduced our percentage ownership interest in the net income allocated to limited partners.

        In May 2007, the Partnership issued and sold 5.3 million Class A common units which reduced our ownership interest in the Partnership from 15.2 percent, immediately prior to the issuance, to 14.3 percent following the issuance, since we did not participate. As a result, we recognized a dilution gain of $17.0 million, since the per unit issuance price was greater than our average cost per i-unit. Although our ownership interest in the Partnership is also reduced by the issuance and sale of Class C units, we do not recognize a gain or loss when the Partnership issues additional Class C units because they represent convertible securities.

        Our earnings increased by $16.3 million from 2005 to 2006, primarily due to higher equity income from our investment in the Partnership that was partially offset by a reduction in our percentage ownership of the Partnership due to its Class C unit issuance in August 2006. Our 2006 earnings were also offset by dilution gains that were not present in 2006 as compared with 2005 and greater income tax expense associated with additional taxable income. We recognize dilution gains when the Partnership issues additional Class A common units and we do not participate in the issuance.

        Both basic and diluted earnings per share are calculated by dividing our net income by our weighted-average number of outstanding shares during the period. Earnings per share was $2.40 for the year ended December 31, 2007 as compared with $2.35 for the year ended December 31, 2006. Earnings per share was $2.35 for the year ended December 31, 2006 as compared with $1.10 for the year ended December 31, 2005. The increase in earnings per share from 2006 to 2007 is primarily attributable to the $17.0 million of dilution gains we recognized partially offset by the lower equity income from our investment in the Partnership discussed above. The increase in earnings per share from 2005 to 2006 is attributable to higher net income that was partially offset by an increase in the weighted average number of our shares outstanding.

        We do not have any securities outstanding that may be converted into or exercised for our shares.

RESULTS OF OPERATIONS



        Our results of operations consist of our share of earnings of the Partnership attributed to the i-units we own. At December 31, 2007, 2006 and
2005, through our ownership of
i-units, we had an approximate 14.7 percent, 16.0 percent and 17.5 percent limited partner interest in the Partnership, respectively. 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 units outstanding due to our ownership of additional i-units and
other issuances of limited partner interests by the Partnership.



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






















































































 
 Year ended December 31,
 
 
 2007
 2006
 2005
 
 
 (in millions)

 
Net income of the Partnership $249.5 $284.9 $89.2 
Less: net income allocated to the General Partner  (37.7) (30.9) (23.5)
  
 
 
 
Net income allocated to limited partners $211.8 $254.0 $65.7 
  
 
 
 




        Our
net income of $31.4 million, $28.7 million and $12.4 million for the years ended December 31, 2007, 2006 and 2005, respectively, represents equity in
earnings attributable to the i-units that we own, plus the dilution gain from the Partnership's issuance of Class A common units, 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 rate of 36.5% in 2007,
36.8% in 2006, and 37.3% in 2005, of our share of the earnings of the Partnership. Our earnings increased by $2.7 million from 2006 to 2007, primarily due to the $17.0 million of
dilution gains we recognized from the Partnership's sale in May 2007 of its Class A common units, which were not present in 2006. This increase is partially offset by lower equity income from
our investment in the Partnership that is



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the
result of two factors: (1) net income allocated to the limited partners was lower due to non-cash mark-to-market losses that occurred during 2007
compared with gains that occurred during 2006 on derivative financial instruments held by the Partnership to hedge its commodity price exposure; and (2) issuances of Class A common units
and Class C units that have reduced our percentage ownership interest in the net income allocated to limited partners.



        In
May 2007, the Partnership issued and sold 5.3 million Class A common units which reduced our ownership interest in the Partnership from 15.2 percent, immediately
prior to the issuance, to 14.3 percent following the issuance, since we did not participate. As a result, we recognized a dilution gain of $17.0 million, since the per unit issuance
price was greater than our average cost per i-unit. Although our ownership interest in the Partnership is also reduced by the issuance and sale of Class C units, we do not recognize
a gain or loss when the Partnership issues additional Class C units because they represent convertible securities.




        Our
earnings increased by $16.3 million from 2005 to 2006, primarily due to higher equity income from our investment in the Partnership that was partially offset by a reduction in
our percentage ownership of the Partnership due to its Class C unit issuance in August 2006. Our 2006 earnings were also offset by dilution gains that were not present in 2006 as compared with
2005 and greater income tax expense associated with additional taxable income. We recognize dilution gains when the Partnership issues additional Class A common units and we do not participate
in the issuance.



        Both
basic and diluted earnings per share are calculated by dividing our net income by our weighted-average number of outstanding shares during the period. Earnings per share was $2.40
for the year ended December 31, 2007 as compared with $2.35 for the year ended December 31, 2006. Earnings per share was $2.35 for the year ended December 31, 2006 as compared
with $1.10 for the year ended December 31, 2005. The increase in earnings per share from 2006 to 2007 is primarily attributable to the $17.0 million of dilution gains we recognized
partially offset by the lower equity income from our investment in the Partnership discussed above. The increase in earnings per share from 2005 to 2006 is attributable to higher net income that was
partially offset by an increase in the weighted average number of our shares outstanding.



        We
do not have any securities outstanding that may be converted into or exercised for our shares.




This excerpt taken from the EEQ 10-Q filed Oct 30, 2007.

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, 2007 and 2006, through ownership of i-units, we held an approximate 14.5 percent and 15.8 percent limited partner interest in the Partnership, respectively. 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, 2007, 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
September 30,

  Nine months ended
September 30,

 
  2007
  2006
  2007
  2006
 
   
  (in millions)

   
Net income of the Partnership   $ 77.3   $ 82.2   $ 185.0   $ 233.7
Less: net income allocated to the General Partner     9.4     8.7     26.4     23.1
   
 
 
 
Net income allocated to limited partners   $ 67.9   $ 73.5   $ 158.6   $ 210.6
   
 
 
 

        Our net income of $6.4 million and $8.5 million for the three months ended September 30, 2007 and 2006, respectively, and $26.1 million and $24.2 million for the nine months ended September 30, 2007 and 2006, respectively, represents our equity in earnings of the Partnership attributable to the i-units we own, and for 2007, the dilution gains we recognized from the Partnership's sale in May 2007 of its Class A common units, 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 36.8% for the three and nine month periods ended September 30, 2007 and 2006, respectively, applied to our share of the earnings of the Partnership for the respective periods.

        Our net income decreased by $2.1 million for the three months ended September 30, 2007, from the $8.5 million we earned during the same period of 2006. The decrease is attributable to lower equity income from our investment in the Partnership that is the result of two factors: 1) Net income allocated to limited partners was lower; and 2) issuances of Class A common units and Class C units have reduced our percentage ownership interest in the net income allocated to limited partners.

        For the nine months ended September 30, 2007, our net income increased by $1.9 million from the $24.2 million we earned in the same period of 2006. The increase is primarily attributable to the $17.0 million of dilution gains we recognized from the Partnership's sale in May 2007 of its Class A common units. Similar dilution gains were not present in the nine month period ended September 30, 2006. The increases are partially offset by lower equity income from our investment in the Partnership that occurred for the same reasons discussed in the preceding paragraph.

        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.

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Additionally, in April 2007, the Partnership sold approximately 5.9 million Class C units in a private transaction to three institutional investors at a purchase price of $53.11 per unit. We recognized a dilution gain of $17.0 million for the issuance and sale of the Class A common units, since the issuance price per unit 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 precludes us from recognizing dilution gains when the Partnership issues Class C units because they represent convertible securities. Due to the reduction of our percentage ownership resulting from these transactions, our equity income from the partnership is lower for the three and nine month periods ended September 30, 2007 than the same periods in 2006. We expect our equity income from the Partnership to be lower in future periods due to the reduction of our percentage ownership in the Partnership resulting from its issuances of Class A common units and Class C units.

        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.

This excerpt taken from the EEQ 10-Q filed Apr 30, 2007.

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 March 31, 2007 and 2006, through ownership of i-units, we held an approximate 16.2 percent and 17.8 percent limited partner interest in the Partnership, respectively. 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 March 31, 2007, 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
March 31,

 

 

 

     2007     

 

     2006     

 

 

 

(unaudited; in millions)

 

Net income of the Partnership

 

 

$

39.1

 

 

 

$

81.1

 

 

Less: net income allocated to the General Partner

 

 

(7.7

)

 

 

(7.2

)

 

Net income allocated to limited partners

 

 

$

31.4

 

 

 

$

73.9

 

 

 

Our net income of $3.3 million and $8.4 million for the three months ended March 31, 2007 and 2006, respectively, represents our equity in earnings of the Partnership attributable to the i-units we own, 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 36.8% and 37.2% for the three months ended March 31, 2007 and 2006, respectively, applied to our share of the earnings of the Partnership for the respective periods. Our earnings declined by $5.1 million for the three months ended March 31, 2007, from the $8.4 million we earned in the comparable period of 2006. The decline is primarily due to lower equity income from our investment in the Partnership and a reduction in our percentage ownership interest in the Partnership due to its Class C unit issuance in August 2006.

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.

On April 2, 2007, the Partnership sold approximately 5.9 million Class C units in a private transaction to three institutional investors at a purchase price of $53.11 per unit. As a result of this issuance, our limited partnership interest in the Partnership was reduced from approximately 16.2 percent at March 31, 2007 to 15.0 percent at April 2, 2007. We expect the income we are allocated for our limited partnership interest to be lower in future periods due to the reduction of our ownership interest in the Partnership and as a result of further issuances by the Partnership of Class A common units and potentially additional Class C units.

9




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