All figures are in Canadian dollars unless otherwise
indicated
CALGARY, Alberta, Oct. 2, 2017 /PRNewswire/ -- Pembina Pipeline
Corporation (TSX: PPL; NYSE: PBA) ("Pembina") is pleased to
announce that it has completed its previously announced business
combination (the "Transaction") with Veresen Inc. (TSX: VSN)
("Veresen") pursuant to a plan of arrangement (the "Arrangement")
under Section 193 of the Business Corporations Act
(Alberta) to create one of
the largest energy infrastructure companies in Canada.
"Today marks another significant milestone for Pembina," said
Mick Dilger, Pembina's President and
Chief Executive Officer. "With increased size and scale, the
combined companies create a platform in which we can pursue
expanded growth opportunities while continuing to support future
dividend growth and value creation for our shareholders. Our
customers will also benefit from the enhanced service offerings
through the highly integrated asset base and the extended
geographic reach."
"We are also proud to have increased the common share dividend
for the second time this year – a testament to the strength of the
combined companies and to our commitment of providing value to our
shareholders," continued Mr. Dilger. "We have recently placed
$2.8 billion of projects into service
and expect to place approximately $2
billion of additional projects into service by early 2018.
Pembina has truly become a leading North American infrastructure
company and is well positioned to deliver top-tier performance
going forward. Our future is bright and I am excited to realize our
expected near term transformational results," concluded Mr. Dilger.
Pursuant to the Arrangement, Pembina acquired all of the issued
and outstanding common shares of Veresen in a transaction valued at
approximately $9.4 billion, including
the assumption of Veresen's debt (including subsidiary debt) and
preferred shares.
In accordance with the Arrangement, Veresen has been amalgamated
with Pembina and the outstanding Veresen preferred shares have been
exchanged for Pembina preferred shares with the same terms and
conditions, and will be listed on the Toronto Stock Exchange
("TSX") under the symbols PPL.PR.O (series 15, previously Series A
preferred shares of Veresen), PPL.PR.Q (series 17, previously
Series C preferred shares of Veresen) and PPL.PR.S (series 19,
previously Series E preferred shares of Veresen) within a few days
following closing. Dividends on the series 15, 17 and 19
preferred shares will continue to be paid on the last business day
of March, June, September and December in each year if, as and when
declared by the Board of Directors.
As previously announced, based on elections received, each
Veresen common shareholder (a "Shareholder") who elected cash will
receive, on a pro-rated basis, an aggregate amount that equals (i)
cash of approximately $6.4314, and
(ii) approximately 0.2809 of a Pembina common share, multiplied by
the number of Veresen common shares held by such Shareholder. For
certainty, the Shareholder will exchange a portion of their shares
for cash and a portion for Pembina common shares pursuant to the
terms of the Arrangement. Shareholders who elected Pembina common
shares or did not make an election will not be subject to
pro-rationing and will receive 0.4287 of a Pembina common share for
each Veresen common share held. No fractional Pembina shares
will be issued pursuant to the Arrangement and therefore the
consideration received by any individual shareholder may be subject
to adjustment according to the provisions for rounding described in
the management information circular of Veresen dated June 5, 2017.
The previously announced common shareholder dividend payable to
Veresen common shareholders of record on September 25, 2017 of $0.0833 per common share, will be paid to such
shareholders as planned on October 23, 2017.
The Veresen common shares and preferred shares will be delisted
from the TSX within a few trading days following closing. The
Pembina common shares issued to the former holders of Veresen
common shares pursuant to the Arrangement will be listed on the TSX
under the symbol "PPL" and on the New York Stock Exchange under the
symbol "PBA".
All regulatory conditions have been satisfied prior to closing.
These conditions included termination of the Hart-Scott-Rodino
waiting period by the US Federal Trade Commission on May 30, 2017; approval by the Minister of
Transport under the Canada Transportation Act on June 28, 2017; and expiry of the waiting period
under the Canadian Competition Act on September 13, 2017. With respect to the Canadian
Competition Act, Pembina has been working with the Commissioner of
Competition and his staff for several months relative to the
Alberta Ethane Gathering System ("AEGS"), and their review relating
to AEGS is ongoing. This work with the Commissioner of Competition
and his staff will continue post-closing. Should Pembina and the
Commissioner of Competition not reach a mutual agreement relative
to AEGS, the matter may be referred to the Competition Tribunal by
the Commissioner of Competition for resolution for a period of up
to one year from closing. The Company is of the view that its
ownership of AEGS is complementary to its natural gas liquids
("NGL") infrastructure, and Pembina's fee-for-service business
model will continue to drive increased volumes across both AEGS and
its NGL infrastructure benefiting producers and the broader NGL
market. Currently, AEGS comprises approximately one percent of
Pembina's forecasted 2018 adjusted EBITDA.
Common share dividend increase and declaration
In conjunction with closing of the Transaction, Pembina is
proceeding with the previously announced increase to its common
share dividend. As such, Pembina's Board of Directors has
declared a common share cash dividend for October 2017 of $0.18 per share to be paid, subject to applicable
law, on November 15, 2017 to
shareholders of record on October 25,
2017. This dividend reflects a 5.9 percent increase to the
current monthly common share dividend rate of $0.17 per share. This dividend is designated an
"eligible dividend" for Canadian income tax purposes. For
non-resident shareholders, Pembina's common share dividends should
be considered "qualified dividends" and are subject to Canadian
withholding tax. For shareholders receiving their common share
dividends in U.S. funds, the October
2017 cash dividend is expected to be approximately U.S.
$0.1443 per share (before deduction
of any applicable Canadian withholding tax) based on a currency
exchange rate of 0.8018. The actual U.S. dollar dividend will
depend on the Canadian/U.S. dollar exchange rate on the payment
date and will be subject to applicable withholding taxes.
Pembina pays cash dividends on its common shares in Canadian
dollars on a monthly basis to shareholders of record on the 25th
calendar day of each month (except for the December record date,
which is December 31st), if, as and
when determined by the Board of Directors. Should the record date
fall on a weekend or a statutory holiday, the effective record date
will be the previous business day. The dividend payment date is the
15th of the month following the record date. Should the payment
date fall on a weekend or on a holiday the business day prior to
the weekend or holiday becomes the payment date.
Business update
Pembina is pleased to announce that commissioning is now
underway for the Company's Duvernay assets (the "Duvernay Complex") which
includes its 100 million cubic feet per day ("MMcf/d") (75 MMcf/d
net to Pembina) shallow cut gas plant ("Duvernay I"), connecting
pipelines and the associated field hub infrastructure ("Field
Hub"). The Duvernay Complex is expected to be placed into service
on November 1, 2017, ahead of
schedule and under budget. This will represent the first
large-scale processing plant and infrastructure to be placed into
service that was specifically developed to handle the liquids-rich
Duvernay production.
Pembina also anticipates that the construction of the 160
kilometer northeast British
Columbia ("B.C.") pipeline (the "NEBC Expansion") will be
completed in October on time and on budget. The NEBC Expansion,
which is underpinned by long-term, cost-of-service agreements, is
expected to add approximately 75 thousand barrels per day ("mbpd")
of capacity and is centrally located to accommodate further
incremental transportation demands for the majority of producers in
the liquids-rich Montney resource
play. With continued development in the Montney, the NEBC Expansion offers producers a
cost-effective transportation solution and access to Pembina's
existing infrastructure at Taylor,
B.C. which feeds into the Edmonton, Alberta area market hub.
On June 30, 2017, Pembina placed
its Phase III Expansion into service, adding 420 mbpd of
incremental capacity between the Fox
Creek and Namao corridor of
Alberta on the Company's Peace and
Northern systems. Through the first six months of 2017, Pembina's
Conventional Pipeline revenue volumes averaged 692 mbpd,
representing a 42 mbpd increase over the full year 2016 average of
650 mbpd. Approximately half of this increase was related to
incremental volumes on Pembina's Peace and Northern systems in
anticipation of the Phase III Expansion being placed into service.
Pembina currently estimates Conventional Pipelines' revenue volumes
for the third quarter of 2017 will be over 750 mbpd, consistent
with Pembina's management's expectations. Combined with the
additional Peace connections that will be placed into service
throughout 2018 and the incremental Peace pipeline expansions
expected to be placed into service in late 2018, revenue generated
from the Peace pipeline will continue to ramp-up based on shipper
contractual obligations. As such, Pembina expects a continued
steady increase in Peace pipeline revenue volumes through the
remainder of 2017 and the first quarter of 2018, with another
step-change occurring in 2019, where current firm volume
commitments reach their peak.
On September 21, 2017, Veresen
announced that the Jordan Cove Energy Project and Pacific Connector
Gas Pipeline have filed applications with the United States Federal
Regulatory Commission for the construction and operations of a 7.8
million tonne per annum liquefied natural gas ("LNG") export
terminal in Coos Bay, Oregon and
the related Pacific Connector that will transport natural gas from
the Malin Hub in southern Oregon
to the LNG export terminal.
On September 27, 2017, Veresen
announced the successful start-up of the Tower rich gas processing
plant on September 20, 2017, ahead of
schedule and under budget. The Tower processing plant has the
capacity to process 200 MMcf/d of natural gas, and is the first of
three Veresen Midstream facilities that support the Cutbank Ridge
Partnership's ("CRP") condensate-focused growth plan in the
Montney within the Dawson Creek region of northeast B.C. The two
remaining plants currently under construction are also expected to
be placed into service ahead of schedule and under budget. The 400
MMcf/d Sunrise processing plant is expected to start-up by
mid-October with throughput anticipated to ramp-up throughout 2018.
The Saturn processing plant is anticipated to have one of its two
200 MMcf/d trains in-service by year-end, followed by the second
train expected to be placed into service in the first half of 2018.
When all three facilities are operational, Veresen Midstream will
have 1.5 billion cubic feet per day of gas processing capacity in
operation in the core of the Montney, one of North America's most prolific and competitive
liquids-rich resource plays. As of September
28, 2017, Pembina has commissioned the tie-in of the Tower
plant to the Peace pipeline system.
About Pembina
Calgary-based Pembina is a
leading transportation and midstream service provider that has been
serving North America's energy
industry for over 60 years. Pembina owns and operates an integrated
system of pipelines that transport natural gas and various products
derived from natural gas and hydrocarbon liquids produced primarily
in western Canada. The Company
also owns and operates gas gathering and processing facilities and
an oil and natural gas liquids infrastructure and logistics
business. Pembina's integrated assets and commercial operations
along the majority of the hydrocarbon value chain allow it to offer
a full spectrum of midstream and marketing services to the energy
sector. Pembina is committed to working with its community and
aboriginal neighbours, while providing value for investors in a
safe, environmentally responsible manner. This balanced approach to
operating ensures the trust Pembina builds among all of its
stakeholders is sustainable over the long term. Pembina's common
shares trade on the Toronto and
New York stock exchanges under the
symbols PPL and PBA, respectively. Pembina's preferred shares also
trade on the Toronto stock
exchange. For more information, visit www.pembina.com.
Forward-looking Information
Certain information contained in this news release constitutes
forward-looking information under applicable securities laws. All
statements, other than statements of historical fact, which address
activities, events or developments that Pembina expects or
anticipates may or will occur in the future, are forward-looking
information. In some cases, forward-looking information can be
identified by the use of words such as "continue", "will",
"future", "expect", or similar words suggesting future outcomes or
outlook. In particular, this news release contains forward-looking
statements with respect to: anticipated synergies and
benefits of the Transaction to Pembina and its shareholders;
remedies that may be imposed by the Competition Bureau with respect
to the Arrangement; anticipated timing, capacities, and revenue
volumes of Pembina's capital projects; future dividends which may
be declared on Pembina's common and preferred shares, the dividend
payment and the tax treatment thereof; and the timing of the
listings of the Pembina common and preferred shares. The
forward-looking information provided in this news release is based
upon a number of material factors and assumptions that Pembina has
made in respect thereof as of the date of this news release,
including, without limitation: that favourable circumstances
continue to exist in respect of current operations and current and
future growth projects; future levels of oil and natural gas
developments; potential revenue and cash flow enhancement; that any
remedies that may be imposed by the Competition Bureau with respect
to the Arrangement will have minimal impact on Pembina's
business and its operations; with respect to Pembina's future
dividends and results: prevailing commodity prices, margins and
exchange rates, that the businesses of the combined company will
continue to achieve sustainable financial results and that the
combined company's future operations and results of operations will
be consistent with past performance of Pembina and Veresen and
management expectations in relation thereto including, the
sanctioning and completion of any third party projects relating to
growth projects, future operating costs, the availability and
sources of capital, ongoing utilization and future expansion of the
combined company, future production rates, the ability to reach
required commercial agreements, the ability to obtain required
regulatory and environmental approvals on the necessary terms and
in a timely manner, and the continuation of timely performance by
counterparties to material agreements. Although Pembina believes
that the expectations and material factors and assumptions
reflected in these forward-looking statements are reasonable as of
the date hereof, there can be no assurance that these expectations,
factors and assumptions will prove to be correct. Forward-looking
information is subject to a number of risks and other factors that
could cause actual results and events to vary materially from that
anticipated by such forward-looking information, including, but not
limited to: the failure to realize the anticipated synergies or
benefits of the Transaction following closing due to integration
issues, incorrect assumptions, any post-closing regulatory remedies
or otherwise; changes to applicable tax laws; the sufficiency of
budgeted capital expenditures in carrying out planned activities;
the availability and cost of labour and services; non-performance
of agreements in accordance with their terms; the impact of
competitive entities and pricing; reliance on key industry
partners, alliances and agreements; lower than anticipated results
of operations and accretion from Pembina's business initiatives;
the inability of Pembina to raise sufficient capital; the strength
and operations of the oil and natural gas production industry and
related commodity prices, and certain other risks detailed from
time to time in Pembina's public disclosure documents including,
among other things, those detailed under "Risk Factors" in
Pembina's management's discussion and analysis and annual
information form for the year ended December
31, 2016, which can be found at www.sedar.com under
Pembina's profile. Readers are also urged to consult the disclosure
provided under the heading "Risk Factors" in Veresen's management
information circular dated June 5,
2017, which was filed on SEDAR under Veresen's profile, for
further information respecting the risks and other factors
applicable to the Arrangement. Readers are cautioned that this list
of risk factors is not exhaustive. The impact of any one risk,
uncertainty or factor on a particular forward-looking statement is
not determinable with certainty as these factors are independent
and management's future course of action would depend on its
assessment of all information at that time. Accordingly, readers
are cautioned that events or circumstances could cause results to
differ materially from those predicted, forecasted or projected.
Furthermore, the forward-looking statements contained herein are
made as of the date hereof, and Pembina does not undertake any
obligation to update publicly or to revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by applicable laws.
Any forward-looking information contained herein is expressly
qualified by this cautionary statement.
In this news release, Pembina has used the term adjusted EBITDA.
For more information about this non-GAAP measure, see the "Non-GAAP
measures" section below. The information contained herein with
respect to future adjusted EBITDA is to assist investors in
understanding the combined company's expected financial results,
and this information may not be appropriate for other purposes.
Any forward-looking information contained herein is expressly
qualified by this cautionary statement.
Non-GAAP Measures
In this press release, Pembina has used the term "adjusted
EBITDA" which is not defined by GAAP but is used by management to
evaluate the Transaction. Since non-GAAP measures do not have a
standardized meaning prescribed by IFRS and are therefore unlikely
to be comparable to similar measures presented by other companies,
securities regulations require that non-GAAP measures are clearly
defined and qualified. The intent of non-GAAP measures is to
provide additional useful information with respect to the
Transaction to investors and analysts though the measures do not
have any standardized meaning under IFRS. Adjusted EBITDA is a
non-GAAP measure and is calculated as earnings for the year plus
share of profit (loss) from equity accounted investees (before tax,
depreciation and amortization) plus net finance costs, income
taxes, depreciation and amortization (included in operations and
general and administrative expense) and unrealized gains or losses
on commodity-related derivative financial instruments. The
exclusion of unrealized gains or losses on commodity-related
derivative financial instruments eliminates the non-cash impact of
such gains or losses. Adjusted EBITDA also includes adjustments for
loss (gain) on disposal of assets, transaction costs incurred in
respect of acquisitions, impairment charges or reversals and
write-downs in respect of goodwill, intangible assets and property
plant and equipment, and non-cash provisions. These additional
adjustments are made to exclude various non-cash and other items
that are not reflective of ongoing operations. Management believes
that Adjusted EBITDA provides useful information to investors as it
is an important indicator of an issuer's ability to generate
liquidity through cash flow from operating activities. Management
utilizes Adjusted EBITDA to set objectives and as a key performance
indicator of the Company's success.
For further information: Pembina Investor Inquiries:
Cam Goldade, Vice President, Capital
Markets, (403) 231-3156, 1-855-880-7404; Pembina Media Inquiries:
(403) 231-3148, media@pembina.com