Cedar LNG Announces Positive $4bn FID

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(Cedar LNG, 25.Jun.2024) — The Haisla Nation and Pembina Pipeline Corporation (TSX: PPL; NYSE: PBA), partners in Cedar LNG Partners LP, announced a positive Final Investment Decision (FID) on the Cedar LNG Project, a floating liquefied natural gas (LNG) (FLNG) facility with a nameplate capacity of 3.3 million tonnes per annum (mtpa), located in the traditional territory of the Haisla Nation, on Canada’s West Coast.

The project is strategically positioned to leverage Canada’s abundant natural gas supply and deliver a lower-carbon energy option to global markets. The facility will be powered by renewable electricity from BC Hydro, making it one of the lowest emitting LNG facilities in the world.

“Today, the Haisla Nation, with our partner Pembina, have made history as the world’s first Indigenous community to develop an LNG facility as majority owners,” said Crystal Smith, Chief Councillor of the Haisla Nation. “Because of our Nation’s determination and environmental leadership, Cedar LNG will make the most significant mark on economic reconciliation ever in our country. With Cedar LNG, we have proven that Indigenous communities can successfully forge a path to economic independence and generational prosperity. We have created a model for how sustainable energy development should be done, with Indigenous Nations as owners, balancing environmental interests with global demand for cleaner energy.”

Additional comments from Chief Councillor Smith, and other Haisla Nation members, are offered in a short video about this historic announcement, which can be accessed here.

“Together with our partner, the Haisla Nation, we are honoured to have made Cedar LNG a reality. This is a historic moment, and we are proud to be moving forward with a project that will deliver industry-leading, low-carbon, cost-competitive Canadian LNG to overseas markets and contribute to global energy security, while delivering jobs and economic prosperity to the local region,” said Scott Burrows, Pembina’s President and Chief Executive Officer. “Cedar LNG aligns perfectly with our strategy and where we want to be as a company moving forward. The Cedar LNG Project will enhance the resiliency of Pembina’s business, provide much needed new egress and greater access to global markets for our customers, and reflects the Haisla Nation and Pembina’s shared values and commitment to supporting a more sustainable future.”

“As a result of the Haisla Nation’s vision and determination, today we are demonstrating Canada’s ability to sustainably grow its LNG export sector to support the global clean energy transition,” said Doug Arnell, Chief Executive Officer of Cedar LNG. “Moreover, the Haisla Nation and Pembina, as true partners, are demonstrating a new model for how industry and Indigenous communities can work together for mutual benefit.”

The Right Honourable Justin Trudeau, Prime Minister of Canada offered his congratulations in a video statement, which can be accessed here.

The Honourable David Eby, Premier of British Columbia said, “This decision shows not only the perseverance of the Haisla Nation in achieving this historic milestone, but also confidence of investors in B.C.’s economy, and how the future for the natural resources sector is bright and will continue to support B.C.’s strong economic performance, which has led Canada’s large provinces in GDP growth since 2017.” Premier Eby added, “Cedar LNG is a shining example of how natural resource development should work in our province—in full partnership with First Nations and with the lowest emissions possible. By working together, we can build a stronger and cleaner economy that creates opportunities and benefits for all.” Premier Eby’s video statement can be accessed here.

Cedar LNG Financing Update

The project is expected to be funded with asset-level debt financing for approximately 60% of the project cost. Cedar LNG has secured a construction term loan with a syndicate of banks.

The remaining approximately 40% of the costs of the Project are expected to be financed through equity contributions from both partners. The Haisla Nation have obtained committed capital through the First Nations Finance Authority to fund their 20% equity contribution to the project. Pembina continues to anticipate its equity contribution will be funded from cash flow from operating activities. Pembina expects no material change to its 2024 Cedar LNG equity contributions disclosed previously, with no incremental post-FID contributions in 2024 anticipated.

Prior to FID, Pembina was required to provide financial assurances to advance project-related upstream infrastructure projects. Following the positive FID, the required financial assurances will be transferred to Cedar LNG. Cedar LNG has secured a letter of credit facility for the ongoing funding of the required financial assurances.

Cedar LNG received strong support from domestic and international capital providers reflecting the positive merits of the Project.

Comments from Cedar LNG Supporters

Cedar LNG’s positive FID builds on years of collaboration, including strong support from neighbouring Indigenous communities, the District of Kitimat, provincial, and federal governments, industry, and many others.

ARC Resources

“Congratulations to the Haisla Nation and Pembina Pipeline on achieving this significant milestone. We are proud to partner with Cedar LNG on a project that advances Indigenous economic reconciliation and delivers tremendous economic benefits to communities and Canadians more broadly,” said Terry Anderson, President and Chief Executive Officer, ARC Resources Ltd. “The demand for cost-competitive natural gas from key consuming nations around the world is evident. We look forward to delivering low-cost Canadian LNG to global markets with partners who share our commitment to responsible energy development and innovation.”

Black & Veatch

“With this fundamental financial milestone achieved, we’re eager to continue advancing this project by leveraging our industry-leading PRICO technology and topside expertise in floating liquefied natural gas infrastructure,” said Brady Hays, Senior Vice President for Black & Veatch’s fuels and natural resources sector. “We’re proud to be associated with this project, our partner Samsung Heavy Industries, and other stakeholders as all of us pursue and deploy technologies that help lower carbon footprints.”

TC Energy / Coastal GasLink

“I want to congratulate the Haisla Nation and Pembina Pipeline on achieving this tremendous milestone and recognize how they have redefined the future of energy development in North America. Through Indigenous-ownership, Cedar LNG will create opportunities that will support Indigenous and local communities in northern British Columbia and deliver benefits to the world by meeting global demand for more secure, affordable and sustainable energy,” said François Poirier, President and CEO, TC Energy.

LNG Canada

“This remarkable achievement is the result of years of hard work, careful planning, and innovative thinking from the Haisla Nation and its members, Pembina Pipeline, and adjacent and local communities. On behalf of LNG Canada, we offer Cedar LNG our heartfelt congratulations on the occasion of reaching its final investment decision and wish them every success as they prepare to deliver made-in-B.C. LNG to the world,” said Jason Klein, President and CEO, LNG Canada.

District of Kitimat

“We are incredibly happy to celebrate the news that Cedar LNG will be moving forward. This decision is historic for the Haisla Nation and significant for all residents in Kitamaat Village and the District of Kitimat who are seeing our community continue to grow as an energy hub for the world, said Mayor Phil Germuth. “Congratulations to the Haisla Nation and to Pembina Pipeline for reaching today’s milestone.”

Source: Cedar LNG

Cedar LNG Backgrounder

Overview

  • Cedar LNG is majority-owned by the Haisla Nation, in partnership with Pembina Pipeline Corporation, with 50.1% and 49.9% ownership, respectively.
  • The Project is strategically positioned to leverage Canada’s abundant natural gas supply from the Western Canadian Sedimentary Basin to access global markets and is expected to achieve higher prices for Canadian producers and enhance global energy security.
  • Cedar LNG made several innovative design decisions to minimize the Project’s environmental footprint and ensure it is one of the lowest-emitting LNG facilities in the world. One of the most important decisions was to power the facility with renewable electricity from BC Hydro. In addition, the choice of site location allows the Project to leverage existing LNG infrastructure, including the Coastal GasLink pipeline, a deep-water port, roads, and other infrastructure.
  • Under a long-term transportation agreement with Coastal GasLink Pipeline Limited Partnership, the Cedar LNG facility will receive 400 million cubic feet per day of Canadian natural gas via the Coastal GasLink pipeline.
  • The project’s West Coast location provides one of the shortest shipping routes to key Asian markets. The Douglas Channel, leading to and from the site, offers an established, reliable shipping route and deepwater marine inlet, with year-round ice-free conditions.
  • The project has a total estimated cost of approximately US$4bn (gross), including estimated capital costs of approximately US$3.4bn (gross), of which US$2.3bn (gross), or approximately 70%, is under a fixed-price, lump-sum agreement, and US$0.6bn (gross) of interest during construction and transaction costs.
  • The FLNG facility is being designed and constructed by Samsung Heavy Industries and Black & Veatch, global industry leaders in marine construction and FLNG solutions. As the engineering, procurement and construction contractors, they bring extensive qualifications and deep experience to the Project.
  • Given the project will be a floating LNG facility, manufactured in the controlled conditions of a shipyard, it is expected that the project will have lower construction and execution risk.
  • The project is anticipated to be in service in late 2028.

Commercial agreements

  • Cedar LNG has secured 20-year take-or-pay liquefaction tolling services agreements with ARC Resources Ltd. and Pembina for 1.5 mtpa each. Commercial discussions are continuing with multiple other prospective customers as Pembina intends to assign its contracted capacity to a third-party.

Significant benefits for Indigenous and local communities

  • Critical to Cedar LNG’s success to date has been the strong support of neighbouring Nations. Cedar LNG is committed to sharing value with Indigenous and local communities in the region through construction jobs and contracting, training opportunities, long-term employment, and other measures that will contribute to economic prosperity in the region. The project is expected to create up to 500 jobs during peak construction and approximately 100 full-time jobs during operation.
Source: Cedar LNG

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