Enbridge Income Fund Holdings Inc. announced earnings of $37.3 million, or $1.33 per common share, for the year ended December 31, 2011, 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 $134.3 million for the year ended December 31, 2011, an increase of 34% over 2010. The improvement in CAFD is primarily due to increased cash flow from the Saskatchewan System Phase II Expansion Project and growth in the Fund's Green Power business following the acquisition of wind and solar assets from Enbridge Inc. in October.
"The completion of the Fund's acquisition of the Sarnia Solar Project and the Talbot and Ontario Wind Projects has, as anticipated, had an immediate and significant impact on the Fund's earnings and distributable cash in the fourth quarter," said John Whelen, President, Enbridge Income Fund Holdings, Inc. "We were pleased in turn to be able to increase the dividend paid by Enbridge Income Fund Holdings beginning in November 2011.
"The Fund remains focused on delivering stable, sustainable growth in distributable cash and, where prudent, distributions of distributable cash by pursuing a strategy that combines optimization of existing assets with modest growth via organic expansion or acquisition. Over 2012, the Fund will continue to pursue opportunities to acquire or develop new energy infrastructure that are in keeping with the risk and return profile of its existing businesses. The announcement by NRGreen of its first Alberta waste heat generating facility, expected to be in service in 2013, further contributes to the Fund's strategic objectives of growth and diversification."
In the fourth quarter, the Fund marked a significant milestone in its Saskatchewan System liquids pipeline business.
"We were pleased to receive approval from the National Energy Board of our proposed Bakken Pipeline Project in December 2011. We expect to begin construction of the approximately $190 million, 124-kilometre pipeline extension in the spring of 2012 and to be complete and in service in the first quarter of 2013," said Mr. Whelen.
The Board also announced today the appointment of Harry Roberts to the Board of Directors and Audit Committee of the Corporation.
"We're very pleased to welcome Harry Roberts to the Board," said Mr. Whelen. "Mr. Roberts held a number of senior finance positions during his 20 year career with Petro-Canada, the last as Executive Vice-President and Chief Financial Officer. Following Petro-Canada's merger with Suncor Energy Inc., he held the position of Senior Vice-President, Integration until his retirement in 2010. He brings both a wealth of energy industry experience as well as deep financial expertise and we look forward to his contribution to our Board."
On February 6, 2012, the Company's Board of Directors declared a monthly cash dividend of $0.103 per common share to be paid on March 15, 2012 to shareholders of record at the close of business on February 29, 2012.
FOURTH QUARTER 2011 REVIEW
The audited 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.
The Company's earnings for the fourth quarter and year ended December 31, 2011 were $16.8 million ($0.46 per common share) and $37.3 million ($1.33 per common share), respectively. The Company's earnings reflected cash distributions received from the Fund, net of income taxes. The Company's annual effective tax rate of 7.3% for 2011 reflected favorable tax attributes associated with the acquired renewable assets and resultant reduction in the taxability of Fund distributions.
The Fund completed the acquisition of a portfolio of wind and solar power generation facilities with a total capacity of close to 370-MW for an aggregate price of $1.24 billion, inclusive of working capital adjustments. The assets acquired consist of the 190-MW Ontario Wind Project, the 99-MW Talbot Wind Project and the 80-MW Sarnia Solar Project, which is one of the largest operating photovoltaic solar facilities in North America (Renewable Assets).
The Fund's earnings for the three months and year ended December 31, 2011 were $6.9 million and $38.2 million, respectively, and included increased earnings from the Saskatchewan System and Renewable Assets, net of higher interest, taxes and administrative costs. Interest expense included non-cash accretion of the ECT preferred units of $2.5 million and $6.6 million for the fourth quarter of 2011 and year ended December 31, 2011, respectively. Corporate costs for 2011 included one-time professional and advisory fees of $3.6 million related to the acquisition of the Renewable Assets.
Comparability of the Fund's earnings for 2011 with the prior year is impacted by the accounting treatment of the ECT preferred units. Following a modification to the terms of the ECT preferred units in December 2010, distributions on ECT preferred units are charged to equity and are no longer reflected as a corporate cost.
The Fund's cash available for distribution for the three months and year ended December 31, 2011 was $50.4 million and $134.3 million, respectively, an increase of 98% and 34% over the corresponding periods of 2010. The increase was primarily driven by higher cash contributions from the Saskatchewan System and cash flow generated by the Renewable Assets, net of higher interest and administrative costs.
The Fund financed the acquisition of the Renewable Assets with a combination of debt and equity. Enbridge provided the Fund with a $655.0 million unsecured, subordinated pre-payable 10-year loan at a fixed interest rate of 6% per annum. The Fund issued 16,051,000 preferred units of ECT to Enbridge at a price of $18.75 per unit (gross proceeds of $301.0 million) and 14,616,000 trust units to the Company at a price of $18.75 per unit (gross proceeds of $274.0 million). To finance its increased investment in the Fund, the Company completed an offering of 11,707,000 subscription receipts (subsequently converted to common shares) at a price of $18.75 per unit and issued 2,909,000 common shares to Enbridge at price of $18.75 per common share for total proceeds of $274.0 million.
In December 2011, the Fund issued $125.0 million of Medium Term Notes at a fixed interest rate of 4.0%. The proceeds from the issue were used to repay a portion of the $655.0 million loan provided by Enbridge in connection with the acquisition of the Renewable Assets.
The Company's Board of Directors declared monthly dividends of $0.096 per common share for October and $0.103 per common share for each of November and December.