(All financial figures are approximate and in Canadian
dollars unless otherwise noted. This news release refers to
adjusted earnings before interest, taxes, depreciation and
amortization ("Adjusted EBITDA"), which is a financial measure that
is not defined by Generally Accepted Accounting Principles
("GAAP"). For more information about Adjusted EBITDA, see "Non-GAAP
Measures" herein.)
CALGARY, Feb. 4, 2019 /PRNewswire/ - Pembina Pipeline
Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA)
along with Petrochemical Industries Company K.S.C. ("PIC") of
Kuwait, is pleased to announce a
positive final investment decision to construct a 550,000 tonne per
annum integrated propane dehydrogenation ("PDH") plant and
polypropylene ("PP") upgrading facility ("PDH/PP Facility") through
their equally-owned joint venture entity, Canada Kuwait
Petrochemical Corporation ("CKPC").
CKPC brings together two strategically aligned organizations,
with complimentary strengths, united in developing and operating a
world-scale Alberta PDH/PP Facility. PIC brings comprehensive PDH
and PP project experience, along with diversified global
petrochemical marketing expertise. Pembina will manage long-term
propane supply and provide Alberta-specific operating and project
execution experience, feedstock connectivity and strong producer
relationships.
The PDH/PP Facility will be strategically located in
Alberta's Industrial Heartland,
adjacent to Pembina's Redwater
fractionation complex ("RFS") and will consume approximately 23,000
barrels per day of local propane from RFS and other regional
fractionation facilities. Ideally located in the Western Canadian
Sedimenatry Basin, the facility will have long-term access to an
abundant supply of propane feedstock, with a structural cost
advantage when compared to other North American
facilities.
The PDH/PP Facility has a nameplate capacity of 550,000 metric
tonnes of PP per year, including impact and random copolymers. PP
is a high value polymer, which can be cost-effectively transported,
using existing third-party infrastructure, throughout North America and to global markets. PP is
fully recyclable and can be used in a wide range of finished
products including automobiles, medical devices, food packaging and
home electronic appliances, among others. The market for PP
continues to see favorable long-term fundamentals with global PP
demand growth outpacing global economic growth. PIC, with its
extensive global marketing experience and worldwide sales presence,
will be fundamental to ensuring CKPC becomes a PP supplier of
choice for customers.
CKPC has a detailed Class II level capital cost estimate of
$4.5 billion (gross), including
interest during construction. Included in this estimate is
$4 billion (gross) for the PDH and PP
plants and $0.5 billion for certain
supporting facilities. Pembina's net investment of
$2.5 billion represents a 50 percent
interest in CKPC, which will own the PDH and PP plants, and a 100
percent directly-owned interest in the supporting facilities under
an agreement between Pembina and CKPC whereby Pembina will own the
facilities and provide services under a long-term, take-or-pay
arrangement.
Pembina has secured in excess of 40 percent of its expected
Adjusted EBITDA from this project through a portfolio of long-term,
primarily take-or-pay, fee-for-service and other similar commercial
arrangements with third parties, having a weighted average tenor of
approximately 14 years, with the majority of counterparties being
investment grade. The arrangements entered into to date support
development of this project firmly within Pembina's publicly stated
guardrails. Further, based on ongoing negotiations currently
underway, Pembina is confident in achieving its stated goal of
achieving a minimum of 50 percent fee-for-service contribution to
Adjusted EBITDA.
The PDH/PP Facility is expected to be in-service in mid-2023,
subject to environmental and regulatory approvals, and is expected
to generate annual run-rate Adjusted EBITDA of $275 to $350
million, net to Pembina.
CKPC is pursuing asset-level debt financing for 50 percent of
the jointly-owned facilities, with the remaining 50 percent to be
financed through equity contributions from both partners. Pembina
intends to finance the supporting facilities consistent with its
long-term financing strategy of equal amounts of debt and
equity. Pembina continues to anticipate equity contributions
will be funded with cash flow after dividends.
In addition, CKPC has been awarded $300
million of royalty credits from the Alberta government, of which CKPC has, to
date, entered into agreements with Alberta hydrocarbon producers to monetize more
than 80 percent over the first several years of operation of the
PDH/PP Facility.
"Sanctioning of the PDH/PP Facility is the largest step taken to
date by Pembina in executing its strategy to secure global market
prices for customers' hydrocarbons produced in western Canada, and provides another exciting platform
for future growth," said Mick
Dilger, Pembina's President and Chief Executive Officer. Mr.
Dilger added, "Today's announcement is the culmination of many
years of hard work with our partner to develop a project that is
well positioned to capitalize on Alberta's abundant supply of propane and
undertake value-added processing that benefits all of Pembina's
stakeholders, the Province of Alberta and indeed all of Canada. It has
been a pleasure to work with PIC and our strong partnership has
helped mitigate the risks of entry into this new market
segment."
"The PDH/PP Facility is ideally aligned with PIC's continued
pursuit of sustainable and globally-diversified growth," said
Mohammed Abdullatif Al-Farhoud,
PIC's Chief Executive Officer. "Our investment in CKPC provides PIC
an opportunity to build on our existing asset base in Alberta by developing large-scale
petrochemical infrastructure with a highly strategic partner in a
market with long-term feedstock security and a supportive local
government," added Mr. Al-Farhoud.
Further information on the PDH/PP Facility is included in a
detailed slide presentation available on Pembina's website at
www.pembina.com.
About Pembina
Calgary-based Pembina Pipeline
Corporation is a leading transportation and midstream service
provider that has been serving North
America's energy industry for over 60 years. Pembina owns an
integrated system of pipelines that transport various hydrocarbon
liquids and natural gas products produced primarily in western
Canada. The Company also owns 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 identifying additional opportunities to connect
hydrocarbon production to new demand locations through the
development of infrastructure that would extend Pembina's service
offering even further along the hydrocarbon value chain. These new
developments will contribute to ensuring that hydrocarbons produced
in the Western Canada Sedimentary Basin and the other basins where
Pembina operates can reach the highest value markets throughout the
world.
Pembina strives to provide sustainable, industry-leading total
returns for our investors; reliable and value-added services for
our customers; a net positive impact to communities; and a safe,
respectful, collaborative and fair work culture for our
employees.
Pembina's strategy is to:
- Preserve value by providing safe, environmentally
conscious, cost-effective and reliable services;
- Diversify by providing integrated solutions which
enhance profitability and customer service;
- Implement Growth by pursuing projects or assets that are
expected to generate cash flow per share accretion and capture
long-life, economic hydrocarbon reserves; and
- Secure Global Markets by understanding what the world
needs, where they need it, and delivering it.
Pembina is structured into three Divisions: Pipelines Division,
Facilities Division and Marketing & New Ventures Division.
Pembina's common shares trade on the Toronto and New
York stock exchanges under PPL and PBA, respectively. For
more information, visit www.pembina.com.
Forward-Looking Information and Statements
This news release contains certain forward-looking
information and statements (collectively, "forward-looking
statements") including forward-looking statements within the
meaning of the "safe harbor" provisions of applicable securities
legislation, that are based on Pembina's current expectations,
estimates, projections and assumptions in light of its experience
and its perception of historical trends. In this news release, such
forward-looking information and statements can be identified by
terminology such as "plans", "will", "would", "could", "expects",
"continue", "anticipate", "potential", "may", and similar
expressions.
In particular, this news release contains forward-looking
statements, including certain financial outlooks, pertaining to,
without limitation, the following: planning, construction,
capital expenditure estimates, schedules, regulatory and
environmental applications and approvals, incremental input
and output volumes, in-service dates, contractual and fee
arrangements, rights, activities and operations with respect to
planned new construction of, or expansions in relation to Pembina's
and its affiliates' pipeline and infrastructure
expansions; expectations around continuing producer activity
and development and growth of product supply; the ongoing
utilization and expansions of and additions to Pembina's business
and asset base, growth and growth potential; expectations regarding
future demand for transportation and processing services; Pembina's
and its affiliates' corporate strategy; anticipated future adjusted
EBITDA from growth projects; ongoing negotiations and discussions
with customers for additional services; and expectations regarding
synergies, operational efficiencies, and integration of growth and
development projects with Pembina's existing business and asset
base; Pembina's corporate strategy expectations about future
growth opportunities and demand for our service; expectations
regarding new corporate developments and impact on access to
markets; and anticipated Adjusted EBITDA projections and financial
performance expectations resulting from Pembina's capital
expenditures.
These forward-looking statements are being made by Pembina
based on certain assumptions that Pembina has made in respect
thereof as at the date of this news release, regarding, among other
things: the ability of Pembina to successfully
negotiate and complete final commercial agreements; that
counterparties to material agreements will continue to perform in a
timely manner; that Pembina's joint venture partners will continue
to provide support joint venture projects; the ability of Pembina
and any required third parties to effectively engage with
stakeholders; oil and gas industry exploration and development
activity levels; the success of Pembina's operations and growth
projects; prevailing commodity prices, margins, volumes and
exchange rates; that Pembina's future results of operations will be
consistent with past performance and management expectations in
relation thereto; the continued availability of capital at
attractive prices to fund future capital requirements relating to
existing assets and projects, including but not limited to future
capital expenditures relating to expansion, upgrades and
maintenance shutdowns; that any third party projects relating to
Pembina's growth projects will be sanctioned and completed as
expected; that any required commercial agreements can be reached;
that all required regulatory and environmental approvals can be
obtained on the necessary terms in a timely manner; that there are
no unforeseen events preventing the performance of contracts; that
there are no unforeseen material construction, integrity or other
costs related to current growth projects or current operations; and
prevailing interest and tax rates.
Although Pembina believes 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. Readers are cautioned that events or
circumstances could cause results to differ materially from those
predicted, forecasted or projected. By their nature,
forward-looking statements involve numerous assumptions, known and
unknown risks and uncertainties that contribute to the possibility
that the predictions, forecasts, projections and other
forward-looking statements will not occur, which may cause actual
performance and financial results in future periods to differ
materially from any projections of future performance or results
expressed or implied by such forward-looking statements and
information. These known and unknown risks and uncertainties,
include, but are not limited to: the regulatory environment
and decisions; the ability of Pembina or its joint venture
partners or customers to raise sufficient capital (or to raise
sufficient capital on favourable terms) to fund future expansions
and growth projects and satisfy future commitments; failure to
negotiate and conclude any required commercial agreements or
failure to obtain project sanctioning; increased construction
costs, or construction delays, on Pembina's expansion and growth
projects; labour and material shortages; non-performance of
agreements in accordance with their terms; the impact of
competitive entities and pricing; reliance on key industry
partners, alliances and agreements; the strength and operations of
the oil and natural gas production industry and related commodity
prices; the continuation or completion of third-party projects;
actions by governmental or regulatory authorities including changes
in tax laws and treatment, changes in royalty rates or increased
environmental regulation; adverse general economic and market
conditions in Canada, North America and elsewhere;
construction delays; labour and material shortages; and certain
other risks detailed from time to time in Pembina's public
disclosure documents including, among other things, those detailed
under the heading "Risk Factors" in Pembina's management's
discussion and analysis and annual information form for the year
ended December 31, 2017, which can be found
at www.sedar.com.
The forward-looking statements are expressly qualified by the
above statements and speak only as of the date of this document.
Pembina does not undertake any obligation to publicly update or
revise any forward-looking statements or information contained
herein, except as required by applicable laws. The forward-looking
statements contained in this document are expressly qualified by
this cautionary statement. Readers are cautioned that management of
Pembina approved the financial outlook contained herein as of the
date of this press release. The purpose of the financial outlook
contained herein is to give the reader an indication of the value
to Pembina of planned capital projects and ongoing operations. The
purpose of the Adjusted EBITDA projections is to provide investors
with an indication of the value to Pembina of the PDH/PP
facility or our expected financial results. Readers should be
aware that the information contained in the financial outlook
contained herein may not be appropriate for other purposes.
Non-GAAP Measures
In this news release, Pembina has used the term adjusted
earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA), which is a non-GAAP measure. Management believes
that Adjusted EBITDA provides useful information to investors as it
is an important indicator of Pembina's ability to generate
liquidity through cash flow from operating activities and is also
used by investors and analysts for assessing financial performance
and for the purpose of valuing the Company, including calculating
financial and leverage ratios. Adjusted EBITDA does not have any
standardized meaning under International Financial Reporting
Standards ("IFRS") and should not, therefore, be considered in
isolation or used in substitute for measures of performance
prepared in accordance with IFRS. These Non-GAAP measures are
calculated and disclosed on a consistent basis from period to
period. Specific adjusting items may only be relevant in certain
periods. For additional information regarding non-GAAP measures,
including reconciliations to measures recognized by GAAP, please
refer to Pembina's financial reports, which are available on SEDAR
at www.sedar.com and at www.pembina.com.
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SOURCE Pembina Pipeline Corporation