Spectra Energy (SE) Gregory L. Ebel on Q4 2015 Results - Earnings Call Transcript

| About: Spectra Energy (SE)

Spectra Energy Corp. (NYSE:SE)

Q4 2015 Earnings Call

February 03, 2016 9:00 am ET

Executives

Julie A. Dill - Chief Communications Officer

John Patrick Reddy - Chief Financial Officer

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Analysts

Darren C. Horowitz - Raymond James & Associates, Inc.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Paul Lechem - CIBC World Markets, Inc.

Jeremy B. Tonet - JPMorgan Securities LLC

Christine Cho - Barclays Capital, Inc.

Nathan Allen Judge - Janney Montgomery Scott LLC

Christopher Paul Sighinolfi - Jefferies LLC

Nick S. Raza - Citigroup Global Markets, Inc. (Broker)

Operator

Good morning. My name is Blair and I'll be your conference operator today. At this time, I'd like to welcome everyone to Spectra Energy's Fourth Quarter 2015 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you.

Julie Dill, Chief Communications Officer, you may begin your conference.

Julie A. Dill - Chief Communications Officer

Great. Thank you, Blair, and good morning, everyone. Thanks so much for joining us today for our review of Spectra Energy's and Spectra Energy Partners' 2015 fourth quarter results. With me today are Greg Ebel, CEO of both Spectra Energy and Spectra Energy Partners; and Pat Reddy, our Chief Financial Officer of both companies.

Pat will go through our results for the quarter and the year, and then Greg will wrap things up with some closing thoughts on 2015. As always, we'll leave plenty of time for your questions related to our 2015 results following Greg's remarks.

Our Safe Harbor statement is contained within our presentation materials and available on our websites. This disclaimer is important and integral to all our remarks. So, I would ask that you refer to it as you review our materials. Also contained in our presentation materials are non-GAAP measures that we reconciled to the most directly comparable GAAP measures, and those reconciliations are also available on our website.

So with that, let me turn things over to Pat.

John Patrick Reddy - Chief Financial Officer

Cool. Thanks, Julie. Good morning, everyone, and thanks for joining us today. As you saw in our earnings release this morning, both Spectra Energy and Spectra Energy Partners had a very solid finish to 2015, due in large part to the strength of our U.S. Transmission business. Our 2015 performance sets us up well as we move into 2016.

Considering the declining economic and energy industry conditions last year, the success we had in 2015 reflects some key attributes of our business. We again demonstrated an ability to manage through various business and market cycles because of our diversified portfolio, strong balance sheet, and disciplined business model.

The steps we took in 2015 to reduce our costs, secure contracts, execute on our expansion plans, and solidify our financial position provide us with the strong platform for continued momentum. You'll hear more about that when we review our new three-year plan with you tomorrow.

Before I get into the details of the quarterly results, I want to discuss some special items we recorded, which lowered reported net income for the quarter by $452 million or $0.67 per share. These items were driven largely by non-cash, goodwill and asset impairments as a result of the continuing low commodity price environment.

You can see on this slide that the total cash effect of the special items is only $7 million. For the year, special items affected net income by $579 million or $0.86 per share with the cash effect of $18 million.

So, let's move to our ongoing EBITDA results beginning with SEP. Spectra Energy Partners' ongoing EBITDA for the quarter was $457 million, which was $33 million higher than the same quarter last year, and ongoing EBITDA at Spectra Energy was $672 million compared to $810 million in the prior year quarter.

Turning to the drivers of our ongoing results by segment, let's start with Spectra Energy Partners, where EBITDA was up 9% quarter-over-quarter. As you know, SEP consists of our U.S. Transmission and Liquids businesses, and is shown in the upper right-hand corner of slide five.

U.S. Transmission delivered EBITDA of $413 million, up $44 million over last year. These results were driven primarily by increased earnings from expansion projects placed into service and in execution. Projects including OPEN, Uniontown to Gas City, Kingsport and TEAM 2014, as well as our Sabal Trail, NEXUS and AIM projects.

The liquids business reported fourth quarter EBITDA of $62 million compared with $71 million in the prior year quarter. This decrease is the result of lower equity earnings from the Sand Hills and Southern Hills natural gas liquids pipelines that SEP owned for only one month of the quarter.

Let's move now to our Canadian business segments which are shown on the left-hand side of the slide. For the quarter, the Canadian dollar was about 18% lower than the previous year's quarter. As a result, the FX effect on EBITDA for our Canadian business segment this quarter compared to the same quarter last year was $20 million at Distribution and $22 million at Western Canada.

As a reminder, about two-thirds of our currency exposure on earnings in Canada is naturally hedged with the net income level on an annual basis. For the quarter, the change in net income from controlling interest related to FX was $6 million.

Distribution reported fourth quarter EBITDA results of $113 million compared with $132 million in 2014. While there were a number of pluses and minuses in the quarter, including 20% warmer weather, the decrease quarter-over-quarter was essentially all driven by the lower Canadian dollar. Western Canada reported ongoing EBITDA of $123 million compared with $250 million in the prior-year quarter. The decrease in ongoing EBITDA quarter-over-quarter is due to lower earnings at Empress and the effect of the lower Canadian dollar.

You may recall last year's results at Empress included a significant non-cash mark-to-market gain associated with our risk management program. The change in the unrealized mark-to-market value in the fourth quarter of 2015 was a negative $90 million. As we mentioned in last year's call, we expected there would be some accounting noise in 2015 as the hedges rolled off and commodity prices moved, but cash would be realized as the contract settled. Importantly for the year, Empress generated cash of $52 million, well above our expectation of $30 million, and cash, of course, is what we're focused on.

Moving on to DCP. You'll recall that we show here as Spectra Energy's EBITDA from Field Services is actually our 50% share of DCP's net income plus any gains from DPM unit issuances. For the quarter, we reported ongoing EBITDA from Field Services of negative $36 million compared with negative $18 million last year.

The decrease on ongoing earnings is primarily driven by further declines in commodity prices. These decreases were partially offset by asset growth, improved operating efficiencies and other initiatives, including recontracting for more fee-based revenues as well as an increase in the ownership interest of the Sand Hills and Southern Hills NGL pipelines for two months of the quarter. It's important to note that even in this low-commodity price environment, DCP standalone adjusted EBITDA was considerable at almost $725 million for the full year 2015.

Let's turn now to our Distributable Cash Flow schedules, beginning with SEP on slide 6. SEP's standalone Distributable Cash Flow was $260 million for the quarter compared to the prior year quarter of $245 million. SEP ended the year with DCF of $1.2 billion and strong distribution coverage of 1.2 times, exceeding our original expectation of 1.1 times. SEP's strong DCF results for the year were driven by a 14.7% increase in ongoing EBITDA which was slightly offset by higher maintenance capital expense compared to the prior year.

Let's move now to Spectra Energy's DCF as shown on slide seven. At Spectra Energy, ongoing Distributable Cash Flow was $201 million for the quarter compared with $316 million last year. Ongoing DCF for the year was $1.3 billion with strong dividend coverage of 1.3 times exceeding our original plan expectations of 1.2 times, a significant accomplishment given the backdrop of the current environment and further demonstrating the power of our portfolio.

Our EBITDA was lower year-over-year as a result of lower commodity prices and the effect of a lower Canadian dollar. That decrease was partially offset by reduced maintenance capital expenditures and interest expense, both of which benefited from the lower Canadian dollar.

Greg is going to highlight our key successes for the year, but from a financial perspective, I'll note that we've performed very well during the year. Specifically, we exceeded our DCF coverages at both Spectra Energy and at SEP. We have solid balance sheets at both Spectra Energy and SEP as well as stable to improving investment-grade credit metrics.

You may have noticed in mid-December that one of the rating agencies improved Spectra Energy's outlook, moving us from negative to stable. This action was a significant achievement in this environment.

More than 90% of Spectra Energy's revenues and 95% of SEP's revenues are contracted with customers who are investment-grade or equivalent, or are secured by collateral, primarily letters of credit. Furthermore, the 90% figure for Spectra Energy excludes about $1 billion in revenue from Union Gas' residential cost of service customers with virtually no bad debt expense. Including these customers boosts the portion of Spectra Energy's revenues from investment-grade customers to 92%.

We have multiple ways to finance our Drive to 35, and we utilized a number of those vehicles with great success all the way through December. With the majority of our growth CapEx occurring at SEP, we utilized our at-the-market equity program and raised about $550 million of equity at SEP last year, with nearly $200 million raised in the fourth quarter. Given the continued success of this program, we filed a new multi-year shelf registration in December to upsize the ATM program to $1 billion.

We also had several successful debt issuances during the year. We issued $1 billion of incremental senior unsecured notes at SEP in the first quarter of the year. In the third quarter, we refinanced maturing debt and upsized the issuance for a total of CAD 450 million at Union Gas, and we refinanced $800 million of existing senior unsecured debt at Gulfstream. In December, Westcoast Energy refinanced CAD 350 million of Canadian debt, and we successfully reentered the preferred share market with CAD 115 million issuance at Westcoast Energy in late November. All of these issuances were completed at very favorable rates.

Lastly, we have significant liquidity available across the company of $2.8 billion as of December 31. This financial flexibility gives us confidence in our continued capacity to successfully fund our growth projects in an effective and efficient manner. My point is, in this time of difficult capital markets, we continue to have the financial flexibility and access to capital to successfully fund our growth. I'm pleased with what we accomplished in 2015, and I look forward to talking with you tomorrow about our outlook for the next three years.

So with that, let me turn things over to Greg.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Well, thanks very much, Pat, and good job fighting through that cold. I'm sure tomorrow you'll be in fine form after a little bit of bourbon maybe tonight. But welcome, everybody, on the phone. And I too, like Pat, am pleased with our 2015 performance and really continuing that consistent record of executing on growth opportunities that not only drive earnings, but also cash flow now and well into the future.

We're going to keep things pretty brief this morning since we'll be talking to you tomorrow about our new three-year plan. But I think it's valuable to take a couple of minutes to reflect on 2015. Last year, we told you that we'd deliver real results through this real world cycle, and we did that. Our ability to do what we say and what – in terms of what we'll say and what we'll do, especially in a year with deteriorating economic and energy industry conditions like 2015, further highlights the strong fundamentals of our underlying businesses in the first and last mile advantage of our asset footprint.

As we look back on the year, one where NGL and crude prices were about 20% lower than what we had originally forecast, where natural gas prices were 25% or so lower than what we expected and where the Canadian dollar was more than 10% lower than what we budgeted, Spectra Energy was still within 3% of our original EBITDA forecasts.

I think that's quite a result, but it really shouldn't be surprising because I think it reflects the strength of our resilient portfolio through the cycles, as well as the natural hedges we have across our broad spectrum of businesses and geographies. Our businesses in SEP are not affected by near-term changes in currency or commodity. And for the other business segments, we have natural offsets to variables like currency changes, through interest expense and maintenance capital. Of course, we also took a number of cost management steps throughout the year, totaling about $150 million across Spectra Energy's entities to help position us for the changing environment in 2016 and beyond.

We said we'd deliver strong DCF in dividend and distribution coverage at both Spectra Energy and SEP, and we did, and exceeded our original expectations. We beat our DCF outlook by 7% at Spectra Energy, and by more than 8.5% at SEP. And we beat our coverage targets for both Spectra Energy and SEP, and ended the year with coverage ratios of 1.3 times and 1.2 times, respectively.

We said we'd continue to successfully execute on our 2015 growth plan, and we were able to do that. Along with the other projects we placed into service during the year, we brought the greenfield portion of OPEN into service in the fourth quarter, as well as the 2015 Dawn-Parkway project was placed into service ahead of schedule, again really demonstrating our project execution advantage.

We said we'd continue to move additional projects into execution, and we did that, adding another $600 million expansions of our Dawn to Parkway system and about $1.2 billion of projects on our cost of service BC Pipeline in Western Canada; including another $150 million pipeline expansion in the Montney region, put into execution in the fourth quarter, the Wyndwood project. You'll hear more about that project tomorrow from Mark Fiedorek.

We said we'd strengthen DCP's structure and optimize the value at DCP Midstream, and we were able to do that as well. Between actions taken by the parents as well as a number of self-help initiatives, DCP has achieved a one-third improvement in its cash breakeven NGL price. DCP is stronger today as a result of those actions.

We said we'd maintain our investment-grade ratings and, as you heard from Pat, we did that. We said we'd increase our annual dividend at Spectra Energy by $0.14 per share and our quarterly distributions at SEP by $0.0125 per unit, and we did that. And just this morning, we announced our 33rd consecutive quarterly distribution increase at SEP. As a matter of record, we've increased our distributions every single quarter since SEP's inception.

We said we'd operate reliably to meet our customers' needs, and we were able to do that, achieving record deliveries on our major pipeline systems: Texas Eastern, Algonquin, Union's Dawn-Parkway system, and T-South in Western Canada. This is another indication that our customers use and value capacity on our pipes on the days they need it most.

You've often heard me speak of the key attributes of Spectra Energy and Spectra Energy Partners that position us for success now and in the future. Our premium (16:58) asset positioning and connectivity that takes us where the lights are; safe, reliable operations; responsible development of new projects; strong earnings growth and cash flows; and attractive, reliable dividend and distribution increases for investors throughout all market cycles.

Investors in Spectra Energy and Spectra Energy Partners don't have to choose between growth and strong coverage. They get them both, and they get them now. 2015 has positioned us well as we move into the new year, and our team is looking forward to speaking tomorrow about our very positive 2016 to 2018 plan and our ability to continue to navigate through the energy and economic environment we're in, while also continuing to meet or exceed the commitments we've already made to investors.

So with that, we'll be happy to take your answers on our quarter and year-end results.

Question-and-Answer Session

Operator

Your first question comes from the line of Darren Horowitz from Raymond James.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Morning, Darren.

Operator

Your line is open.

Darren C. Horowitz - Raymond James & Associates, Inc.

Hey. Good morning, guys. Just two quick questions for me since I know we're going into a lot of detail tomorrow. But the first, with regard to the earnings in Western Canada, when you consider the variance between, as you mentioned Pat, Empress relative to the Canadian dollar and some commodity price fluctuations, as well as that risk management program and maybe additional mark-to-market, was there anything within the quarter just in terms of the composition of the variance that was surprising relative to what you had budgeted?

John Patrick Reddy - Chief Financial Officer

Well, I think, Darren, this is Pat. We don't budget mark-to-market, but there was really nothing fundamentally in the business. I will tell you that we had a very large mark-to-market change, $90 million in the quarter. And what that reflected was we had a gain in the fourth quarter of last year of about $80 million and that turned to a loss of $10 million, so a swing of $90 million year-over-year. And that's obviously not cash; we did generate $52 million at Empress versus our $30 million bogey. So that's one that at the EBITDA line even we just can't predict where the market's going to go. And then the Canadian dollar, the effect there was $22 million. So there's really nothing in the operation, I don't think, Greg, that came through.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah. Darren, a year or maybe probably a couple of years ago, we said we kind of target that $30 million. I know the accountants will hate this, the $30 million cash EBITDA, but that's really what we're trying to do to make sure that there's little variability in the cash that we actually generate from Empress, even though you may see mark-to-market moves up or down.

Darren C. Horowitz - Raymond James & Associates, Inc.

Okay. Yeah, that makes sense, that's the most important. Final question for me, and let me apologize in advance, I know you're going to go through when you discuss in detail the three-year plan tomorrow. But Pat, since you mentioned it specifically on slide eight and you were talking about liquidity and the various different options, when you reconcile the $9.5 billion of expansion projects that you have in execution and you consider the volatility in the market and maybe across the different financing options, fluctuations in cost of capital, has there anything changed with regard to how you might balance, let's just say, additional ATM issuances at SEP versus possibly incremental senior debt or utilizing a revolver or maybe even replicating the success that you had with an additional preferred issuance?

John Patrick Reddy - Chief Financial Officer

Well, Darren, you've covered on most of the levers that we have available to us, which is what we like about our position between our liquidity, our ability to issue in Canada and the U.S., and you will hear a lot more about it tomorrow. But most of the growth CapEx that we have in 2016 is at projects that are at Spectra Energy Partners. We have upsized our ATM, so we have plenty of headroom there. We had $200 million that we issued in the fourth quarter going right up till the end of the year and – when we had to shut it down as we went into earnings, and we had strong reverse inquiry interest in that program. And so I think our financing needs are very doable next year, most of it being concentrated at SEP, but we will get into more detail on that tomorrow.

Darren C. Horowitz - Raymond James & Associates, Inc.

Okay. Thank you.

Operator

Your next question comes from the line of Brandon Blossman from Tudor, Pickering, Holt & Company. Your line is open.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Good morning, everyone.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Morning, Brandon.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

I guess one real quick bookkeeping item. OPEN and Dawn-Parkway, was that a full quarter of contribution from an EBITDA perspective for the fourth quarter?

John Patrick Reddy - Chief Financial Officer

No. So, typically, the Union projects kick in the 1st of November, and OPEN was basically the 1st of November as well. And almost always, Brandon – sometimes we come in early with projects, but almost always our capital projects come in the 1st of November. So you only get a couple of months the first year that they come into service.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Okay. Fair enough. And related, and I'm guessing we'll hear more about this tomorrow, but AIM timing in the back half of 2016, any updates there?

John Patrick Reddy - Chief Financial Officer

Bang on target. As you know, that was a two-season build and we got through our first season build and expect a November 1 startup, as we originally predicted when we put this project into execution a couple of years back.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Perfect, all right. Greg, and I almost hate to ask this question, but as your equities hang in there quite nicely relative to the rest of the market, any incremental or updated thoughts on M&A for you guys?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

No. I mean, look, I think that you see a variety of people having some challenges now. I guess I look at us, and I still don't see anybody saying they're willing to sell at prices maybe they should sell at, and we continue to build at – in all our U.S. projects at 6 times to 8 times EBITDA. So that seems to be the better process at this point in time. But we're always looking at some point in time there may be some folks that see a value in an entity like Spectra and value in currency like Spectra. But at this point in time, we're going to continue with our organic growth and drive forward with our growth on that basis.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

All right, good enough. Thank you for that. That's all from me.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Thanks.

Operator

And your next question comes from the line of Paul Lechem from CIBC. Your line is open.

Paul Lechem - CIBC World Markets, Inc.

Thank you. Good morning.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Morning, Paul.

Paul Lechem - CIBC World Markets, Inc.

Good morning. Just on Western Canada, a little bit more if I can. Even taking into account the change in mark-to-market and the FX, it was still down about 10% in terms of EBITDA, so just trying to understand the variance there. Can you go through the volumes, what volume exposure you have there?

And then also as a second related question, in the quarter, Keyera shut down their Caribou gas plant, specifically mentioning your Station 2 pricing was one of the issues that caused production to be shut in. So I'm just trying to square that away with the High Pine and Wyndwood projects and sort of fueling (24:36) growth elsewhere. So I'm just trying to understand the dynamics that you're seeing and where you have volume exposure there. Thanks.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Right. So, remember, our G&P business, very different than the United States, so our G&P business in Canada is a fee-based business that doesn't have volume risk. Now, you have shorter contracts life there. I think our average contract life runs around five years in Western Canada on G&P. So I can't speak to Keyera. So we really didn't see a decline there. You didn't have as many volumes going through some of your plants, you're still getting – you're getting paid. And remember the projects, projects like Wyndwood which you'll hear about tomorrow, pipeline projects, so very much to your Station #2 issue, people want to get gas to other markets.

And so I think where you see growth in Western Canada, and you'll hear about this and the stuff that we've put into execution in 2015, is very much related to pipeline projects, which are cost of service, right? So I think that's why maybe some other folks in Western Canada see a little difference. Our pipeline throughput in Western Canada was off by less than 5% versus the prior year. So even with low price, I think that speaks to the utilization of the pipeline. And in fact, this is the first time, I think, in 10 years we've been fully contracted for. So really the G&P revenues, and basically in line with what we expected, were only down about $11 million quarter-on-quarter.

Paul Lechem - CIBC World Markets, Inc.

Perfect. Thanks, Greg.

Operator

Your next question comes from the line of Jeremy Tonet from JPMorgan. Your line is open.

Jeremy B. Tonet - JPMorgan Securities LLC

Good morning. Congratulations on a strong year.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Hey, Jeremy. Thanks.

Jeremy B. Tonet - JPMorgan Securities LLC

I was just wondering, looking at NEXUS, if you could remind us exactly how full the contracted volumes are there and where you're looking to get that. And we've seen some other projects in midstream where competing projects have come together to create kind of a one combined project. And is there any appetite or thoughts on doing that for NEXUS or any other project?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Well, good to hear a question on NEXUS. We're about two-thirds contracted on NEXUS and really importantly both in the quarter, but from a macro perspective, a significant portion of that two-thirds is with utilities, so Union Gas and Enbridge Distribution. And in fact, the regulators, as you probably – well, I hope you know, in the fourth quarter approved those contracts. So I think some of the things you're seeing in some other projects are basically entirely underwritten by E&P players. So I think the strength of our project is that not only are we serving a demand market, we have approved contracts from regulated entities taking that away.

So now that being said, I mean, I think our project, as you know, we typically put out realistic timeframes, et cetera. I guess if somebody wanted to join our project, I'm always open for that. Something we've been able to do in the last year is, beyond the existing contracts we have, we've had requests for and signed up deals for 1.4 Bcf of interconnects along the NEXUS Pipeline. And you're going to get a good feel from that from Bill Yardley tomorrow. So Jeremy, maybe wait for that slide tomorrow. I think it'll really show the strength of NEXUS. And I don't know, maybe others would like to join that project if some projects are having problems.

Jeremy B. Tonet - JPMorgan Securities LLC

Great. Thanks for that color. That's helpful. And just on SEP, I think you touched on it a little bit, but the maintenance CapEx, I think it was a little bit higher than what we were expecting. Was that just timing kind of pulling some projects forward or anything else you can share there?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah. I think we're $20 million, $25 million bucks higher in 2015 than what we originally had stated. And indeed, we did do some more work on the maintenance front, some work in South Texas that had to be done that we got done this year, and obviously that provides some benefits on a go-forward basis as well, Jeremy.

Jeremy B. Tonet - JPMorgan Securities LLC

Great. Thanks for that. And then just one last one, if I could, on SEP. The unit count was a little bit higher than what we expected for quarter-end given the reduction post Sand Hills and Southern Hills. And I know there was some draw on the ATM at that point. Were there any other items in (29:26) right now?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

No, Jeremy. I think as Pat said, we issued about $200 million in units in the fourth quarter. So I'm not sure what you had in your model, but that maybe account for the delta.

Jeremy B. Tonet - JPMorgan Securities LLC

Okay. Great. Thanks for all that.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Okay.

Jeremy B. Tonet - JPMorgan Securities LLC

See you tomorrow. Thanks.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah.

Operator

Your next question comes from the line of Christine Cho from Barclays Capital. Your line is open.

Christine Cho - Barclays Capital, Inc.

Hi, everyone. I have two questions. First, in your presentations, you guys always give out the financial covenant metrics for your debt. But from a debt-to-EBITDA perspective at SE, you're over 5 times, and we've seen rating agencies be a little more aggressive with putting companies on negative review or outlook.

When I think about the composition of your assets, your Canadian assets are regulated, and I think that that composition in ratemaking is only 35% to 40% or something like that. Do the rating agencies recognize that and take that into account? Can you give us some insight into how they look at SE and why you guys feel good about your ratings here?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah. I think, Christine, you hit the nail on the head. When you think about the size of our assets in Canada and they have typically a 65/35 debt-equity ratio. By definition, you're going to have a higher debt-to-EBITDA, but you actually have lower risk on those assets. You don't have cost risks within prudency. You don't have capital growth risks within prudency, obviously. And as such, I think the rating agencies and long (31:08) – I would say this has actually been synced up across the border now. You have different groups for S&P and Moody's and Fitch on both sides of the border, have started to recognize that. And you'd have to speak to them. But I think that's part of their view on Spectra Energy.

That said, I would expect that over the next few years, and Pat will speak about this tomorrow, that you will still see our debt to EBITDA metrics moderate over the coming years.

John Patrick Reddy - Chief Financial Officer

Our peak spend is 2016 as you'll see tomorrow and our debt-to-EBITDA comes nicely after that. And to Greg's point, when you think about our Canadian peers, like in Enbridge or TransCanada, their debt-to-EBITDA is around 7 times. But because of the quality of regulation, they're rated excellent from a business risk perspective. And so, I think we've had lots of discussions with the agencies about the fact that we're kind of unique. We are a U.S. C-Corp but 40% of our business comes from those Canadian fee-based and/or regulated activities. So, I do think we're getting recognition that as long as we're on a good glide path to get down to around 5 times in our planned period that we feel like that should be okay for a rating.

Christine Cho - Barclays Capital, Inc.

Right, right. Okay. That was actually really helpful. Thanks. My other question actually is on the heels of Jeremy's question. The maintenance CapEx at SEP looks like, as you said, it came in about $25 million above guidance. But if I look at consolidated SE, it looks like it was down, despite the over-budget at SEP. So, that to me says the other segments were down in maintenance CapEx. Is there any explanation there and should we think of that as kind of the new run rate?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah. Well, here's the way you should think about it. I mean, this is off the top; maybe I didn't say it very artfully. But Christine, remember, really important offsets to declines in EBITDA associated with Canadian dollars is the offset to the tune of two-thirds on the interest expense line and the maintenance capital? And we have actually a greater amount of maintenance capital in Canada.

So, you actually see a decline in maintenance capital quarter-over-quarter, very much related to the C$. So, I think last year, the C$ was running in the, call it, C$1.15, C$1.20 range. And this year it was probably running in the $1.40 range. So, it's EBITDA, but equally hits our Canadian interest expense and maintenance, and that's really the explanation for that delta.

Christine Cho - Barclays Capital, Inc.

Okay, that's helpful. If I was to adjust for the Canadian dollar, is it about where it should have came in?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah.

Christine Cho - Barclays Capital, Inc.

Okay.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah, very much so.

Christine Cho - Barclays Capital, Inc.

Okay. Thank you.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

And tomorrow, based on the assumptions we'll give you tomorrow on our view on the Canadian dollar, obviously that will have some impact on that as well.

Christine Cho - Barclays Capital, Inc.

Okay. Thank you.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Okay.

Operator

Your next question comes from the line of Nathan Judge. Mr. Judge, please state your company. Your line is open.

Nathan Allen Judge - Janney Montgomery Scott LLC

Hi. It's Janney. Good morning. Just wanted to do a little bit of checking on the mark-to-market. Could you just give us what the full-year mark-to-market gain or loss was for 2015?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Yeah, we can dig that up, and if we don't have it – I think the whole mark was running around $50 million...

John Patrick Reddy - Chief Financial Officer

During the year.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

...during the year.

John Patrick Reddy - Chief Financial Officer

And let me get that for you.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

But, Nathan, if we don't have it right here, we're happy to kind of get it for you offline.

Nathan Allen Judge - Janney Montgomery Scott LLC

Yeah. Or tomorrow is fine. Thank you very much. I just...

John Patrick Reddy - Chief Financial Officer

Nathan, the mark-to-market gain for the year ended 2015 was $108 million.

Nathan Allen Judge - Janney Montgomery Scott LLC

And is there any quarter-to-quarter variance? Do you happen to have quarters on that, or I guess just a question as we look into the next couple of – in 2016, what would be the swing on that?

John Patrick Reddy - Chief Financial Officer

Yeah. We do look at that quarterly as the hedges roll off and we settle. And so, you get realizations and reverse losses and gains. And so, we do have that quarterly accounting that we can – I don't know, Julie.

Julie A. Dill - Chief Communications Officer

Focus on cash.

John Patrick Reddy - Chief Financial Officer

Yeah. I mean, we're really focused on the cash effects of it because who knows, right, how prices in the Canadian dollar are going to move in the future.

And one of the reasons we entered the hedging program for Empress was to be able to say, we're going to deliver $30 million. This year we did better, but $30 million is our run rate of cash and not have to talk about the impact on Distributable Cash Flow. So, given the complexity of the accounting for it...

Gregory L. Ebel - Chairman, President & Chief Executive Officer

But we will break it out in the quarters after the fact...

John Patrick Reddy - Chief Financial Officer

Yes.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

...so that you know how much of the delta was down (36:09), so you can see the base business. But from a forecasting perspective, I think the $30 million is the way to look at it, Nathan.

Nathan Allen Judge - Janney Montgomery Scott LLC

Great. Very well. Thank you much.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Thank you.

Operator

And the next question comes from the line of Chris Sighinolfi from Jefferies. Your line is open.

Christopher Paul Sighinolfi - Jefferies LLC

Hey, Greg. How are you?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Hey, Chris. Good. How are you doing?

Christopher Paul Sighinolfi - Jefferies LLC

I'm great. I guess my first question is for Pat, actually. So, Pat, just a follow up to Nathan's question. When we look at slide seven of your presentation materials (36:46), you have the Empress non-cash items. Is that – what is included in that? Because I know you highlighted $14 million of Western Canadian items in the release but I'm assuming this also includes the mark-to-market. So, I hate to beat a dead horse, I'm just trying to figure out how to parcel out those different components.

John Patrick Reddy - Chief Financial Officer

Okay. So, let me get the breakdown for you. I don't have it right in front of me but that's something we can provide to you for the quarter.

Christopher Paul Sighinolfi - Jefferies LLC

Okay. That would be helpful.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

I think the $14 million in the release is related to the impairment in Western Canada. So, virtually all of it was goodwill, but there was a $14 million impairment from an (37:28) perspective, so...

John Patrick Reddy - Chief Financial Officer

Yeah. We had some overhead costs that – some costs we incurred to affect the reductions. So, the $70 million in cost savings that we got at Southwest there were some costs to achieve that. So, they didn't belong in the goodwill or the asset impairment line, but that's a different item.

Christopher Paul Sighinolfi - Jefferies LLC

Right. So, there was $7 million of sort of cash cost tethered to that and then $7 million of asset impairment, which is non-cash. And then I'm seeing...

John Patrick Reddy - Chief Financial Officer

That's right.

Christopher Paul Sighinolfi - Jefferies LLC

...$18 million non-cash here. And it's just the difference between Western Canada and Empress, knowing that Empress is included in Western Canada. If maybe tomorrow if we can just talk about that, just so I have it squared away on our model.

John Patrick Reddy - Chief Financial Officer

Okay. I'm happy to do that.

Christopher Paul Sighinolfi - Jefferies LLC

Okay. Thanks a lot. And then, Greg, you had mentioned I think in your prepared remarks that the cost reduction and efficiency efforts at DCP had lowered the breakeven NGL price for the business by about a third, I think is what you said?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Right.

Christopher Paul Sighinolfi - Jefferies LLC

And I was just curious what sort of price point that translates into now?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Sure. And we'll speak about this a little bit tomorrow and the third is a year-on-year and I think we're actually even getting better. So, if I went pre-2015, so if I went at the end of 2014, let's call it, and these numbers will actually show it to you a little bit better, the breakeven price was around $0.60 and where we are today is the mid-$0.30s. In 2015, it was about down to $0.40 or so. So, it keeps going down. You're going to hear a little bit about that from Bowder (39:08). And, obviously, that's got to do with cost cuts, that's got to do with a change in contract issues, a whole variety of things that lead to that.

And in some respects, maybe you shouldn't be too surprised because I think as you see across elements of people's companies that might have some commodity exposure and that's really the only one that we have that, in fact, people are finding different ways to make money at different prices, right? So, that's really where we've gone. So think about $0.60 to $0.40 and then tomorrow you'll hear about how Bowder (39:40) and the DCP folks working with 66 and SE are bringing that down to low-to-mid $0.30s.

Christopher Paul Sighinolfi - Jefferies LLC

Okay. Great. Well, I'll save the rest of my harassment for tomorrow. Thanks so much, guys.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

We look forward to it.

Christopher Paul Sighinolfi - Jefferies LLC

Right.

John Patrick Reddy - Chief Financial Officer

Yeah, Chris, a quick answer on the non-cash fees for Empress. We have the unrealized mark-to-market of $10 million and then half of that $14 million of special items that wasn't cash, that's basically the $18 million add back.

Christopher Paul Sighinolfi - Jefferies LLC

Okay. Perfect. Thanks a lot for that, Pat.

John Patrick Reddy - Chief Financial Officer

You're welcome.

Operator

Your next question comes from the line of Nick Raza from Citigroup. Your line is open.

Nick S. Raza - Citigroup Global Markets, Inc. (Broker)

Thanks, guys. Apologies if someone already asked this. But as a result of everything that's going on, have you guys sort of seen any delays in the $8 billion of sort of projects that you have in execution right now, and specifically any service delays?

Gregory L. Ebel - Chairman, President & Chief Executive Officer

No. We have not. In fact, as you probably know if you look at our entire portfolio, I think part of the reason for that is about 75% of our projects are demand pull. So a lot of the delays you're probably picking maybe with some other players are because of their supply push. In other words, they're largely E&P driven as opposed to consumer driven.

Obviously, two ends of the pipe. One end of the pipe, not so happy with low prices. The other end of the pipe, the consumer, pretty happy with it. And at SEP, the numbers are more like 80% are demand pull. So, if you think of our AIM projects, Atlantic Bridge, Sabal, you probably saw yesterday, I'm sure you'll picked it up that Sabal got its FERC approval yesterday, and obviously that's another example that this project is motoring on and that's for Duke and NextEra, and those folks are utilities.

So, I think probably a little different customer base is why we continue to see us progressing with the projects that we have in execution. And obviously, the projects we have in execution are things that we have contracts for as well.

Nick S. Raza - Citigroup Global Markets, Inc. (Broker)

Fair enough. That's all I had. Thanks, guys.

Gregory L. Ebel - Chairman, President & Chief Executive Officer

Thank you.

Operator

And there are no further audio questions at this time. I will now turn the call back over to the presenters.

Julie A. Dill - Chief Communications Officer

Thank you, Blair, and thanks, everyone, for joining us on the call today. We're really looking forward to seeing you or hearing from you tomorrow when we roll out our 2016 business outlook and our three-year financial plan during our Analyst and Investor Meeting.

So, again, for information on participating at that Investor meeting via the phone or Internet, please visit the Investors section of either spectraenergy.com or spectraenergypartners.com.

As always, if you have additional questions, feel free to call Roni Cappadonna or me, and we will look forward to seeing you very soon. Thanks so much.

Operator

This concludes today's conference call. You may now disconnect.

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