Pembina Provides Business Update [PDF Download]

(Pembina, 12.Dec.2022) — Pembina Pipeline Corporation (TSX: PPL) (NYSE: PBA) announced today its 2023 financial guidance and a business update, including the sale of Pembina Gas Infrastructure’s (PGI) interest in the Key Access Pipeline System (KAPS).

Highlights:

— 2023 adjusted EBITDA guidance of $3.5bn to $3.8bn and a 2023 capital investment program of $730mn. The midpoint of the guidance range reflects an approximately five percent increase in adjusted EBITDA contribution from Pembina’s fee-based business.

— Capital expenditures in 2023 are expected to be fully funded with cash flow from operating activities, net of dividends.

— Under the prevailing market conditions, and in support of future development opportunities, cash flow from operating activities in excess of dividends and capital expenditures in 2023 is expected to be directed towards debt repayment.

— PGI has entered into an agreement for the sale of its interest in KAPS for $662.5mn.

Business Update

With an expected record setting financial year in 2022 drawing to a close, results continue to showcase both the resiliency and the opportunities to thrive inherent in Pembina’s business. To serve customers’ growing volumes, Pembina is focused on optimizing its existing assets by enhancing utilization while pursuing new projects to add additional capacity to its integrated value chain. Pembina is diversified across commodity types and the strategic combination of the company’s fee-based tolling business with the commodity exposed marketing business provides natural hedges across various market cycles. Furthermore, through Pembina’s partnerships with the Haisla Nation and TC Energy Corporation, respectively, the proposed Cedar LNG project would access world markets via Canada’s West Coast and the proposed Alberta Carbon Grid would be a world-scale carbon dioxide transportation and sequestration solution to help Canada meet its greenhouse gas emission targets. In addition to advancing these important projects throughout 2023, Pembina is pleased to announce the following updates:

Nipisi Pipeline and the Clearwater Play

Pembina intends to reactivate the Nipisi Pipeline system to serve customers in the rapidly growing Clearwater oil play. Pembina is in late-stage discussions with a customer regarding a significant long-term contractual commitment for firm service and expects to finalize the agreement by the end of 2022. Discussions are underway with various other customers in the area regarding additional long-term contractual commitments. Reactivation of Nipisi is anticipated in the third quarter of 2023.

Redwater Expansion

Pre-sanctioning development activities for a new 55,000 barrel per day, propane-plus fractionator at the Redwater Complex are continuing. Existing infrastructure at the Redwater Complex, including storage caverns and extensive unit train capable rail facilities, provide Pembina an advantage in being able to offer incremental fractionation capacity at a competitive cost, despite prevailing inflationary pressures. In addition to significant re-contracting of existing capacity, the recently signed commercial agreements with three leading Northeast British Columbia producers could provide significant volumes to underpin the new facility. A final investment decision is now expected in the first quarter of 2023. 

Sale of PGI Interest in Key Access Pipeline System

PGI, which is owned 60 percent by Pembina and 40 percent by KKR’s global infrastructure funds, has through its subsidiary entered into an agreement to sell its 50 percent non-operated interest in KAPS. Under the agreement, PGI will continue to fund its share of the project costs under the current project scope until the end of 2023. The current project scope aligns with the capital cost estimate of $1bn, net to PGI, most recently disclosed by the operator. Upon closing of the sale, PGI will receive cash proceeds of $662.5mn. PGI will use the proceeds to repay drawn credit facilities associated with the KAPS construction funding. Additional total equity contributions from Pembina to PGI related to KAPS funding under the current project scope are expected to be approximately $50mn between the fourth quarter of 2022 and the end of 2023. Closing is expected to occur in the first quarter of 2023 and is subject to approval by the Commissioner of Competition as well as satisfaction of other closing conditions. 

Scotiabank is acting as financial advisor and Torys LLP as legal advisor to PGI. Blake, Cassels & Graydon LLP is acting as legal advisor to Pembina.

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