Enbridge Energy Partners LP (EEP) received a proposal initiated by Enbridge Inc., under which Enbridge would drop down its 66.7% interest in the U.S. segment of the Alberta Clipper Pipeline to EEP for total consideration of about $900 million. That amount includes about $300 million in cash, plus about $600 million of new Class E limited partner equity units to be issued to Enbridge by EEP. The proposal would not require EEP to issue any equity in the public market.

The Enbridge Energy Management LLC board of directors appointed a special committee comprised of independent directors to review the proposal. Its acceptance is subject to the review and favorable recommendation by the special committee and final approval by the board. The targeted closing date is by the end of 2014. The proposed contribution value is about an 11 times multiple of expected 2015 EBITDA. EEP estimates that the proposed dropdown is expected to be immediately accretive to distributable cash flow per unit by about 3%.

The U.S. segment of the Alberta Clipper Pipeline is a 325-mile, 36-inch diameter crude oil pipeline from the U.S. border near Neche, N.D., to Superior, Wis. Initial capacity is 450,000 barrels per day bbl/d, and it is currently undergoing expansion in two phases to a capacity of 800,000 bbl/d through the addition of increased pumping horsepower. The segment’s building costs were subject to a joint funding agreement, under which Enbridge funded two-thirds of the capital costs in return for a corresponding economic interest in the earnings and cash flow from the investment. The required expansion investments are subject to separate joint funding arrangements between Enbridge and EEP.

The Class E limited partner units in the transaction would be entitled to the same distributions as the Class A common units held by the public and would be convertible into Class A common units on a one-for-one basis at Enbridge’s option. If not converted by Enbridge, the units would be redeemable at EEP’s option after 30 years. The units would have a liquidation preference equal to their fair value at closing. Enbridge’s economic interest in EEP would increase from about 34% to about 36% as a result of the transfer.