Enbridge Energy Partners, L.P. (NYSE:EEP) is dealing with difficult times. It started the year with high expectations, but it got hit by a Federal Energy Regulatory Commission (FERC) rule change that altered just about everything. Although the partnership offers a generous 12% yield, there's a lot going on right now. Here's what you need to know to understand if this high-yielder is a buy.

Out of the blue

When 2018 began, Enbridge Energy described 2017 as a transitional year, with president Mark Maki stating, "We now look forward to 2018 to continue to provide investors with reliable financial results and stable distributions from one of North America's most strategically positioned liquids pipeline infrastructure assets." Clearly, management had high hopes for the year, projecting distribution coverage of around 1.15 times. 

A woman drawing a risk versus reward chart

Image source: Getty Images.

Those plans got thrown for loop on March 15, when FERC announced a rule change that would effectively reduce the income that Enbridge Energy would generate from its midstream assets. The partnership estimated the change would reduce distribution coverage to just 1 time, a tight number that would leave little room for error. The partnership's shares fell sharply on the news.   

That, in turn, limited the benefit that parent Enbridge Inc. (NYSE:ENB) could derive from the partnership. Effectively, the lower unit price increased the cost of drop-downs (Enbridge Inc. selling assets to Enbridge Energy Partners, L.P., to raise cash at the parent level for investment) to the point where they no longer made sense. So, Enbridge Inc. offered to buy Enbridge Energy Partners, L.P., and another partnership it controlled, Spectra Energy Partners, L.P. (NYSE:SEP).   

Where we stand now

Enbridge Inc. owns 83% of Spectra's units, so it shouldn't be surprising that the acquisition of that partnership was quickly approved. But Enbridge Inc. only controls around 46% of Enbridge Energy Partners, L.P.'s units. No deal has been approved yet, though a special committee is looking at the offer. Getting Enbridge Energy Partners to approve a deal is not a slam-dunk since Enbridge would need two thirds of unitholders (including itself) to agree to the acquisition.   

Things got more complicated, though, when FERC announced an update that softened the blow of the new rule it created and would improve the partnership's distribution coverage. Although Enbridge Energy Partners hasn't offered a new estimate on coverage at this point, this positive turn of events materially changes the equation with regard to Enbridge Inc.'s acquisition offer. In fact, that offer may no longer be in the best interest of unitholders.   

EEP Chart

EEP data by YCharts.

The problem here is that, as Motley Fool's Matthew DiLallo recently estimated, agreeing to the deal would effectively mean a 40% distribution cut for Enbridge Energy Partners unitholders. And that doesn't include the tax headache such a transaction could cause because of the partnership's dissolution. With distribution coverage likely to be stronger than originally expected in March, it may be hard for Enbridge Energy Partners to justify selling itself without a shareholder fight and, perhaps, shareholder lawsuits.

What to do now?

Right now, Enbridge Energy Partners is a special-situation stock that's only appropriate for more aggressive investors. And even then, I'm not sure the benefits of getting involved in this mess are worth the effort. Most investors should avoid this complex situation until there is more clarity on the acquisition offer. Current unitholders, meanwhile, should probably sit tight and collect the high yield while they can. Selling now wouldn't materially improve your situation, and you would miss out on any premium paid should the acquisition go through.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Spectra Energy Partners. The Motley Fool has a disclosure policy.