9. PARTNERS' CAPITAL

Distribution to Partners

The following table sets forth our distributions, as approved by the board of directors of Enbridge Energy Management, or Enbridge Management, during the six months ended June 30, 2015.

							Amount of
					Cash		Distribution		Retained
					available		of i-units to		from
Distribution		Distribution	Distribution		for		i-unit		General		Distribution
Declaration Date	Record Date	Payment Date	per Unit		distribution		Holders ⁽¹⁾		Partner ⁽²⁾		of Cash
			(in millions, except per unit amounts)
April 30, 2015	May 8, 2015	May 15, 2015	$	0.5700	$	249.9	$	39.5	$	0.8	$	209.6
January 29, 2015	February 6, 2015	February 13, 2015	$	0.5700	$	233.9	$	38.9	$	0.8	$	194.2

⁽¹⁾

We issued 2,099,401 i-units to Enbridge Management, the sole owner of our i-units, during 2015 in lieu of cash distributions.

⁽²⁾

We retained an amount equal to 2% of the i-unit distribution from our General Partner to maintain its 2% general partner interest in us.

Changes in Partners' Capital

The following table presents significant changes in partners' capital accounts attributable to our General Partner and limited partners as well as the noncontrolling interests in our consolidated subsidiaries, Enbridge Energy, Limited Partnership, or OLP, the North Dakota Pipeline Company LLC, or NDPC, and MEP, for the six months ended June 30, 2015 and 2014. The noncontrolling interest in the OLP arises from the joint funding arrangements with our General Partner and its affiliate to finance: (1) expansion of our Lakehead system to transport crude oil to destinations in the Midwest United States, which we refer to as the Eastern Access Projects; and (2) further expansion of our Lakehead system to transport crude oil between Neche, North Dakota and Superior, Wisconsin, which we refer to as the Mainline Expansion Projects. Noncontrolling interest in NDPC arises from our agreement with Williston Basin Pipeline LLC, or Williston, an affiliate of Marathon Petroleum Corporation, to, among other things, become a member of NDPC. Williston funds 37.5% of the Sandpiper Project that will expand the North Dakota feeder system to Superior, Wisconsin mainline system terminal. Noncontrolling interest in MEP arises from its public unitholders' ownership interests in MEP.

	For the six months
	ended
	June 30,
	2015			2014
	(in millions)
Series 1 Preferred interests
Beginning balance	$	1,175.6		$	1,160.7
Net income		45.0			45.0
Accretion of discount on preferred units		8.0			7.3
Distribution payable		(45.0	)		(45.0	)
Ending balance	$	1,183.6		$	1,168.0
General and limited partner interests
Beginning balance	$	4,156.2		$	4,637.7
Proceeds from issuance of partnership interests, net of costs		294.8			—
Net income		43.0			137.2
Distributions		(403.8	)		(356.9	)
Acquisition of noncontrolling interest in subsidiary		403.7			—
Ending balance	$	4,493.9		$	4,418.0
Accumulated other comprehensive loss
Beginning balance	$	(211.4	)	$	(76.6	)
Changes in fair value of derivative financial instruments reclassified to earnings		(3.5	)		16.6
Changes in fair value of derivative financial instruments recognized in other comprehensive loss		(44.1	)		(152.4	)
Ending balance	$	(259.0	)	$	(212.4	)
Noncontrolling interest
Beginning balance	$	3,609.0		$	1,975.6
Capital contributions		502.6			612.9
Acquisition of noncontrolling interest in subsidiary		(403.7	)		—
Other comprehensive loss allocated to noncontrolling interest		(2.6	)		(0.3	)
Net income		61.3			78.7
Distributions to noncontrolling interest		(171.2	)		(42.5	)
Ending balance	$	3,595.4		$	2,624.4
Total partners' capital at end of period	$	9,013.9		$	7,998.0

Alberta Clipper Drop Down

On January 2, 2015, we completed a transaction, or the Drop Down, pursuant to which we acquired the remaining 66.7% interest in the U.S. segment of the Alberta Clipper Pipeline from our General Partner. The consideration consisted of approximately 18,114,975 units of a new class of limited partner interests designated as Class E units issued to the General Partner. The Class E units were issued at a notional value of $38.31 per unit, which was determined based on the trailing five-day volume-weighted average price of our Class A common units as of that date, which was the date on which we and the General Partner entered into a contribution agreement setting forth the terms of the Drop Down. In addition, we repaid the borrowings outstanding of $306.0 million on the A1 Term Note owed to the General Partner.

The Class E units are entitled to the same distributions as Class A common units held by the public and are convertible into Class A common units on a one-for-one basis at the General Partner's option. The Class E units were not entitled to distributions with respect to the quarter ended December 31, 2014. The Class E units are redeemable at our option after 30 years, if not earlier converted by the General Partner.

The Class E units have a liquidation preference equal to their notional value at December 23, 2014 of $38.31 per unit. If the aggregate Earnings Before Interest, Taxes, Depreciation and Amortization, or EBITDA, attributable to the Series AC interest in the OLP for calendar years 2015 and 2016 is less than $265.9 million, then 1,305,142 of the Class E units will be cancelled by us effective as of June 15, 2017, for no consideration and will no longer be deemed outstanding for any purposes under our partnership agreement.

In addition, during each taxable year during the period from January 1, 2015 through December 31, 2037 in which a majority of the Class E units issued on the closing date of the Drop Down remain outstanding, holders of Class A common units, Class B common units and Class D units (including those held by the General Partner) will be specially allocated items of gross income that would otherwise be allocated to holders of Class E units, to the extent that such an amount of gross income exists, in an annual amount equal to $40.0 million. The annual amount of such allocation will be reduced to $20.0 million for each taxable year beginning after December 31, 2037.

We recorded the Drop Down as an equity transaction. No loss on the acquisition of the remaining ownership interests in Alberta Clipper was recognized in our consolidated statement of income or comprehensive income. We reduced the carrying value of the related “Noncontrolling interest” in Alberta Clipper of $403.7 million to zero. In addition, we recorded the Class E units at their fair value of $767.7 million. We determined the fair value of the Class E units using a market approach based upon the closing price of the Class A common units as of January 2, 2015, adjusted for differences in specific rights such as the liquidation preference granted to the Class E units and other economic factors that would affect the fair value of the Class E units.

The difference of $364.0 million between the fair value of the Class E units and the carrying value of the noncontrolling interest in Alberta Clipper was recorded as a reduction to the carrying amounts of the capital accounts of the Class A and Class B common units, the i-units and the General Partner interest on a pro rata basis. The recording of this transaction reduced the carrying values of the Class A and Class B common units below zero. Our partnership agreement requires that such capital account deficits are brought back to zero, or “cured,” by additional allocations from the capital accounts of the i-units and General Partner interest on a pro-rata basis. As a result the i-units' and General Partner interest's capital balances were reduced by $46.7 million and $1.0 million, respectively, to cure the deficit balances in the Class A and Class B common units. This initial curing did not impact earnings allocated to either the i-units or the General Partner interest.

Additional Curing

During the three months ended June 30, 2015, the carrying amounts for the capital accounts of the Class A and Class B common units were reduced below zero due to distributions to partners exceeding earnings. As a result, the capital balances of the i-units and general partner interests were reduced by $62.2 million and $1.4 million, respectively, to cure the deficit balances in the Class A and Class B common units.

Shelf-Registration Statement

From time to time, we may seek to satisfy liquidity needs through the offer and sale of debt or equity securities in public offerings. In February 2015, we filed with the SEC a new automatically effective shelf registration statement, or the 2015 Shelf, on Form S-3 that replaced our prior shelf registration statement which expired in December 2014. The 2015 Shelf allows us to issue an unlimited amount of equity and debt securities in underwritten public offerings.

Issuance of Class A Common Units

In March 2015, we sold 8 million Class A common units in an underwritten public offering pursuant to the 2015 Shelf for net proceeds of $288.8 million. The following table presents the net proceeds from our Class A common unit issuances for the current year. The proceeds from the March 2015 offering were used to fund a portion of our capital expansion projects and for general partnership purposes.

Net Proceeds

Number of

Including

Class A

Offering Price

Net Proceeds

General

2015

common units

per Class A

to the

Partner

Issuance Date

Issued

common unit

Partnership⁽¹⁾

Contribution⁽²⁾

Contribution

(in millions, except units and per unit amount)

March

8,000,000

36.70

288.8

6.0

294.8

⁽¹⁾	Net of underwriters' fees and discounts, commissions and issuance expenses.
⁽²⁾	Contributions made by the General Partner to maintain its 2% general partner interest.