All financial figures are in Canadian dollars unless otherwise
noted. This news release refers to certain financial measures and
ratios that are not specified, defined or determined in accordance
with Generally Accepted Accounting Principles ("GAAP"), including
Cedar LNG annual run rate adjusted earnings before interest, taxes,
depreciation and amortization ("adjusted EBITDA"). For more
information see "Non-GAAP and Other Financial Measures" herein.
Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX:
PPL; NYSE: PBA) with its partner the Haisla Nation are pleased to
announce the significant progress achieved on the proposed Cedar
LNG project (the "Project"), including securing long-term
commercial offtake support and issuing a Notice to Proceed ("NTP")
to Samsung Heavy Industries and Black & Veatch (collectively
the "EPC contractors"). These critical milestones allow Cedar LNG
to initiate the project financing process and the Haisla Nation to
commence a process to support its equity contributions in advance
of a final investment decision ("FID"), expected by the middle of
2024.
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Highlights
- Commercial Offtake Secured – a 20-year take-or-pay
liquefaction tolling services agreement with a fixed toll has been
signed with ARC Resources Ltd. ("ARC Resources") for 1.5 million
tonnes per annum ("mtpa"). In addition, Pembina has executed an
identical bridging agreement with Cedar LNG for 1.5 mpta. Pembina
intends to assign its capacity to a third-party following a
positive FID, with commercial offtake discussions continuing with
multiple other customers.
- Issued Notice to Proceed – in order to maintain
schedule, a NTP has been issued to the EPC contractors to continue
the engineering, procurement and construction for the design,
fabrication and delivery of the Project’s floating liquefied
natural gas ("LNG") production unit.
- Capital Costs – Cedar LNG has completed a detailed Class
III level capital cost estimate of approximately US$3.4 billion
(gross), including US$2.3 billion (gross), or approximately 70
percent, which is under a fixed-price, lump-sum agreement.
- Advancing Pembina’s Strategic Priorities – subject to a
positive FID, Cedar LNG is expected to generate annual run-rate
adjusted EBITDA of US$200 million to US$260 million, net to
Pembina, derived from low risk, long-term, take-or-pay cash flows,
together with potential incremental cargos and marketing upside,
while further extending Pembina’s value chain to access resilient
markets and increasing its exposure to lighter hydrocarbons.
Cedar LNG Overview
The Project is a proposed floating LNG facility in Kitimat,
British Columbia, within the traditional territory of the Haisla
Nation. While the Project was originally contemplated as a 3.0 mtpa
facility, its nameplate capacity of 3.3 mtpa reflects engineering
optimization and a capital efficient option to enhance the
Project’s economics. The Project will provide a valuable outlet for
Western Canadian Sedimentary Basin ("WCSB") natural gas to access
global markets and is expected to achieve higher prices for
Canadian producers, contribute to lower overall global emissions,
and enhance global energy security. 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. Further, powered by BC Hydro, the
Project is expected to be one of the lowest emissions LNG
facilities in the world.
Pembina expects Asian markets to be the key growth driver of
long-term global LNG demand, with North American projects well
positioned to meet this growing demand. Cedar LNG is competitively
advantaged to supply Asian markets due to a low-cost, abundant
natural gas feedstock from the growing Montney play and a shorter
shipping route, along with providing offtakers with geographic
portfolio diversification and the avoidance of Panama Canal
shipping delays.
Commercial Structure
Cedar LNG has secured a 20-year take-or-pay, fixed toll contract
with ARC Resources for 1.5 million mtpa of LNG. As part of the
agreement, ARC Resources will supply Cedar LNG approximately 200
million cubic feet per day of natural gas via Coastal GasLink
("CGL") from its production base in the Montney. ARC Resources is a
global leader in providing reliable and responsibly produced energy
to key consuming markets. To date, ARC Resources has announced
long-term agreements with industry-leading LNG projects in Canada
and the U.S. Gulf Coast. Having ARC Resources participate in Cedar
LNG is a testament to the value proposition the Project has on a
global scale.
"The Cedar LNG project will play a critical role in bringing
low-cost, low-emissions Canadian natural gas to the world, while
delivering economic benefits to communities and Canadians here at
home," said Terry Anderson, President and Chief Executive Officer
of ARC Resources. "We are proud to partner with Cedar LNG, the
Haisla Nation and Pembina Pipeline who share our commitment to
responsible energy development."
Pembina has also entered into an identical bridging agreement
with Cedar LNG for 1.5 mtpa of capacity. Commercial offtake
negotiations with multiple other customers continue to progress as
Pembina plans to assign its capacity to a third-party following a
positive FID. Having the Project fully contracted by investment
grade counterparties allows Cedar LNG and the Haisla Nation to
initiate their respective financing processes, which reduces
Pembina’s exposure to future cash outlays and financial assurances,
maintains the Project’s FID and in-service timing, preserves the
validity of the EPC contract, and avoids incremental delay related
cost escalation risk.
"We are extremely pleased to be working with ARC Resources to
deliver Canadian LNG to world markets, given their expertise and
track-record as a responsible producer of natural gas and knowledge
of global LNG dynamics," said Scott Burrows, Pembina’s President
and Chief Executive Officer. "Working together, the Haisla Nation,
ARC Resources, and Pembina are committed to making an Indigenous
majority-owned LNG facility a reality while simultaneously being a
leader in environmental stewardship and delivering low carbon
energy solutions."
Baker Botts L.L.P. acted as legal counsel to Cedar LNG with
respect to the commercial agreements.
EPC Contract
Following the finalization of the commercial offtake agreements
and in order to maintain schedule, Cedar LNG issued a NTP to the
EPC contractors to continue the engineering, procurement and
construction for the design, fabrication and delivery of the
Project’s floating LNG production unit. Samsung Heavy Industries is
a global leader with 50 years of experience in shipbuilding and
delivering offshore EPC projects. Black & Veatch brings decades
of proven leadership in FLNG performance with a safe, efficient,
and on-time execution track record. The EPC contractors
collectively bring extensive qualifications and deep experience to
the Project.
"Today’s achievements mark an exciting time for our Nation as we
seek to make Cedar LNG – the world’s lowest carbon and first
Indigenous majority-owned LNG Facility – a reality in the coming
months," said Crystal Smith, Chief Councillor Haisla Nation. "I am
incredibly grateful to our Nation, all levels of government,
Pembina and all our partners who have supported our journey to
advance a project that protects our environmental and cultural
values, while delivering prosperity for decades to come."
King & Spalding LLP acted as legal counsel to Cedar LNG with
respect to the EPC contract.
Delivering on Pembina’s Strategic Priorities
In early 2023, Pembina outlined a strategy designed to ensure it
remains resilient into the future. Cedar LNG advances each of
Pembina’s four strategic priorities.
- To be resilient we will sustain, decarbonize, and enhance
our business. Consistent with Pembina’s well-established
commitment to its financial guardrails, Cedar LNG will enhance the
commercial model underpinning its business by growing the
contribution from low risk, long-term, take-or-pay contracted cash
flows from investment grade counterparties. Additionally, Cedar LNG
creates incremental egress for WCSB natural gas, enabling core
business growth opportunities, including transportation and
fractionation services for associated NGL volumes. Furthermore,
Cedar LNG will afford integration opportunities within the
business, including potential marketing opportunities.
- To thrive, we will invest in the energy transition to
improve the basins in which we operate. Pembina is committed to
developing new business platforms within the low-carbon space that
are strategically aligned with, and benefit from, Pembina’s core
business. The Project is expected to be one of the lowest emissions
LNG facilities in the world and provide export service for Canadian
natural gas, which is expected to contribute to global
decarbonization and increase Pembina’s exposure to lighter
hydrocarbons.
- To meet global demand, we will transform and export our
products. Pembina is committed to identifying and pursuing
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. Cedar LNG will contribute to ensuring that
hydrocarbons produced in the WCSB can reach the highest value
markets throughout the world. This Project provides valuable egress
to resilient and growing international markets to meet global
energy demand and diversifies our exposure to end-use markets.
- To set ourselves apart, we will create a differentiated
experience for our stakeholders. Cedar LNG sets a new standard
of responsible and sustainable energy development. The partnership
between the Haisla Nation and Pembina is based on shared values and
a commitment to meaningful Indigenous equity ownership and equal
participation. Once in service, it will contribute to the Haisla
Nation’s long-term economic prosperity.
Capital Cost Estimate and Funding
Cedar LNG has obtained a detailed Class III level capital cost
estimate of approximately US$3.4 billion (gross), including US$2.3
billion (gross), or approximately 70 percent, for the FLNG
production unit, which is under a fixed-price, lump-sum agreement,
and US$1.1 billion (gross) related to onshore infrastructure,
owner’s costs, commissioning and start-up costs, financial
assurances during construction, and other costs.
The total Project cost, including US$0.6 billion (gross) of
interest during construction and transaction costs, is expected to
be approximately US$4.0 billion (gross).
Cedar LNG is pursuing asset-level debt financing for
approximately 60 percent of the Project cost and has engaged MUFG
Bank, Ltd. to act as financial advisor on the project financing,
with the remaining 40 percent to be financed through equity
contributions from both partners. Simultaneously, the Haisla
Nation, along with its financial advisor CIBC, has initiated the
financing process to raise capital to fund the Haisla Nation’s 20
percent equity contribution to the Project. Pembina continues to
anticipate its equity contribution will be funded from cash flow
from operating activities.
Pembina's net investment of approximately US$2.0 billion
represents a 50 percent interest in Cedar LNG, which will be
financed through a combination of project debt and approximately
US$0.8 billion of equity contributions. Pembina has invested
approximately US$150 million (C$200 million) to the end of 2023 and
expects incremental net contributions to be approximately US$225
million (C$300 million) through to the expected FID in the middle
of 2024. Further, Pembina was required to provide financial
assurances to advance upstream infrastructure projects, with a
total of up to US$200 million (C$270 million) required in 2024.
These financial assurances may become payable in the case of a
negative FID or will be transferred to Cedar LNG in conjunction
with a positive FID.
Once operational, Cedar LNG is expected to generate annual
run-rate adjusted EBITDA of US$200 million to US$260 million, net
to Pembina. The low-end of the adjusted EBITDA range represents the
take-or-pay commitments, whereas the high-end includes potential
contribution from incremental cargos and marketing upside.
FID and In-Service Timelines Remain on Target
Throughout 2023, Cedar LNG received all material regulatory
approvals for the Project, including receiving an Environmental
Assessment Certificate from the British Columbia government, a
positive Decision Statement from the federal Minister of
Environment and Climate Change, and a pipeline permit for the Cedar
LNG Pipeline connection to CGL, as well as a LNG Facility Permit
from the BC Energy Regulator.
Cedar LNG will continue to work closely with the federal and
provincial governments to advance a best-in-class LNG project that
is expected to be one of the lowest carbon emissions intensity
facilities in the world and meaningfully contribute to the
transition to a lower-carbon economy. Significant milestones have
been completed to date and the Project is continuing to progress
towards a FID by the middle of 2024, with an anticipated in-service
date in late 2028.
About Pembina
Pembina Pipeline Corporation is a leading energy transportation
and midstream service provider that has served North America's
energy industry for 70 years. Pembina owns an integrated network of
hydrocarbon liquids and natural gas pipelines, gas gathering and
processing facilities, oil and natural gas liquids infrastructure
and logistics services, and an export terminals business. Through
our integrated value chain, we seek to provide safe and reliable
energy solutions that connect producers and consumers across the
world, support a more sustainable future and benefit our customers,
investors, employees and communities. For more information, please
visit www.pembina.com.
Purpose of Pembina: We deliver extraordinary energy solutions so
the world can thrive.
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.
About Haisla Nation
The Haisla Nation is the band government of the Haisla people.
Our mission is to build a powerful, prosperous and proud community,
healthy in mind, body and spirit. We believe in building a strong
and thriving community, with healthy and happy members and a
sustained and prosperous environment. We are about 1700 people,
with the majority living in Kitamaat Village. We have lived off the
land and waters of our traditional territory for thousands of
years, and it remains the focus of all we do. We believe that
careful and appropriate economic development will bring our people
necessary self-sufficiency. Sustainable and realistic economic
opportunities are increasingly available and promise benefits for
our people – and for every British Columbian. We know that in order
to attain strength and independence our Nation must work together –
with government, business, the community, and internally – with a
spirit of respect and partnership. For more information, visit
www.haisla.ca.
About Cedar LNG
Cedar LNG is a partnership between the Haisla Nation and Pembina
Pipeline Corporation to develop a floating LNG facility in Kitimat,
British Columbia, Canada, within the traditional territory of the
Haisla Nation. Strategically positioned to leverage Canada’s
abundant natural gas supply and BC’s LNG infrastructure, Cedar LNG
will be powered by renewable electricity from BC Hydro, making it
one of the lowest carbon intensity LNG facilities in the world.
More information on Cedar LNG can be found at www.cedarlng.com.
About ARC Resources
ARC Resources Ltd. is a pure-play Montney producer and one of
Canada's largest dividend-paying energy companies, featuring
low-cost operations and leading ESG performance. ARC's
investment-grade credit profile is supported by commodity and
geographic diversity and robust risk management practices around
all aspects of the business. ARC's common shares trade on the
Toronto Stock Exchange under the symbol ARX. For more information,
please visit www.arcresources.com.
Forward-Looking Statements and Information
This news release contains certain forward-looking statements
and forward-looking information (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 some cases,
forward-looking statements can be identified by terminology such as
"continue", "anticipate", "will", "expects", "estimate",
"potential", "planned", "future", "outlook", "strategy", "protect",
"plan", "commit", "maintain", "focus", "ongoing", "believe" and
similar expressions suggesting future events or future
performance.
In particular, this news release contains forward-looking
statements, including certain financial outlooks, pertaining to,
without limitation, the following: expectations relating to Cedar
LNG and the development of the Project, including the anticipated
benefits, to Pembina and otherwise, therefrom; current and future
activities and operations with respect to the Project, including
expected emissions therefrom; expectations with respect to the
timing of the final investment decision and in-service date in
respect of the Project; estimates with respect to the capital and
other development costs of the Project, including Pembina's portion
thereof; the intentions of Pembina and the Haisla Nation with
respect to the financing and funding of the costs of the Project,
including the timing thereof; expectations with respect to the
annual run-rate adjusted EBITDA of Cedar LNG; Pembina's intention
to assign its liquefaction tolling services agreement with Cedar
LNG to a third party following a final investment decision in
respect of the Project; and expectations about industry activities
and development opportunities, including outlooks for future
international and national economic conditions and industry
developments.
The forward-looking statements are based on certain assumptions
that Pembina has made in respect thereof as at the date of this
news release regarding, among other things: prevailing commodity
prices, margins and exchange rates, that Cedar's financial results
will be consistent with management expectations in relation
thereto, the availability and sources of capital, operating costs,
ongoing utilization and future expansions, the ability to reach
required commercial agreements, and the ability to obtain required
regulatory approvals.
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. These forward-looking statements are not guarantees of
future performance and are subject to a number of known and unknown
risks and uncertainties that could cause actual events or results
to differ materially, including, but not limited to: the regulatory
environment and decisions and Indigenous and landowner consultation
requirements; the impact of competitive entities and pricing;
reliance on key relationships, joint venture partners and
agreements; labour and material shortages; the strength and
operations of the oil and natural gas production industry and
related commodity prices; non-performance or default by
counterparties to agreements which Pembina or one or more of its
affiliates has entered into in respect of its business; actions by
governmental or regulatory authorities, including changes in tax
laws and treatment, changes in royalty rates, changes in regulatory
processes or increased environmental regulation; fluctuations in
operating results; adverse general economic and market conditions,
including potential recessions in Canada, North America and
worldwide resulting in changes, or prolonged weaknesses, as
applicable, in interest rates, foreign currency exchange rates,
inflation rates, commodity prices, supply/demand trends and overall
industry activity levels; constraints on, or the unavailability of,
adequate supplies, infrastructure or labour; the political
environment in North America and elsewhere, and public opinion; the
ability to access various sources of debt and equity capital;
adverse changes in credit ratings; counterparty credit risk;
technology and cyber security risks; natural catastrophes; and
certain other risks detailed in Pembina's Annual Information Form
and Management's Discussion and Analysis, each dated February 22,
2024 for the year ended December 31, 2023, and from time to time in
Pembina's public disclosure documents available at
www.sedarplus.ca, www.sec.gov and through Pembina's website at
www.pembina.com.
This list of risk factors should not be construed as exhaustive.
Readers are cautioned that events or circumstances could cause
results to differ materially from those predicted, forecasted or
projected by forward-looking statements contained herein. The
forward-looking statements contained in this news release speak
only as of the date of this news release. 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. Management approved the Cedar LNG
annual run-rate adjusted EBITDA guidance contained herein on April
3, 2024. The purpose of the Cedar LNG annual run-rate adjusted
EBITDA guidance is to assist readers in understanding Pembina's
expected and targeted financial results for Cedar LNG, and this
information may not be appropriate for other purposes. The
forward-looking statements contained in this news release are
expressly qualified by this cautionary statement.
Non-GAAP and Other Financial Measures
Throughout this news release, Pembina has disclosed certain
financial measures that are not specified, defined or determined in
accordance with GAAP and which are not disclosed in Pembina's
financial statements. Non-GAAP financial measures either exclude an
amount that is included in, or include an amount that is excluded
from, the composition of the most directly comparable financial
measure specified, defined and determined in accordance with GAAP.
These non-GAAP financial measures together with financial measures
and ratios specified, defined and determined in accordance with
GAAP, are used by management to evaluate the performance and cash
flows of Pembina and its businesses, including the business of its
equity accounted investees and to provide additional useful
information respecting Pembina's financial performance and cash
flows to investors and analysts.
In this news release, Pembina has disclosed the following
non-GAAP financial measures: Cedar LNG annual run-rate adjusted
EBITDA ,share. The non-GAAP financial measures disclosed in this
news release do not have any standardized meaning under
International Financial Reporting Standards ("IFRS") and may not be
comparable to similar financial measures or ratios disclosed by
other issuers. Such financial measures should not, therefore, be
considered in isolation or as a substitute for, or superior to,
measures and ratios of Pembina's financial performance, or cash
flows specified, defined or determined in accordance with IFRS,
including revenue and earnings.
Except as otherwise described herein, these non-GAAP financial
measures are calculated on a consistent basis from period to
period. Specific reconciling items may only be relevant in certain
periods.
Adjusted EBITDA from Equity Accounted
Investees
In accordance with IFRS, Pembina's jointly controlled
investments are accounted for using equity accounting. Under equity
accounting, the assets and liabilities of the investment are
presented net in a single line item in the Consolidated Statement
of Financial Position, "Investments in Equity Accounted Investees".
Net earnings from investments in equity accounted investees are
recognized in a single line item in the Consolidated Statement of
Earnings and Comprehensive Income "Share of Profit from Equity
Accounted Investees". The adjustments made to earnings are also
made to share of profit from investments in equity accounted
investees. Cash contributions and distributions from investments in
equity accounted investees represent Pembina's share paid and
received in the period to and from the investments in equity
accounted investees.
12 Months Ended December 31
Pipelines
Facilities
Marketing &
New Ventures
Corporate &
Inter-segment
Eliminations
Total
($ millions)
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Share of profit (loss) from equity
accounted investees
109
171
233
108
(26)
82
—
—
316
361
Adjustments to share of profit from equity
accounted investees:
Net finance costs
22
23
160
79
1
—
—
—
183
102
Income tax expense
—
—
41
14
—
—
41
14
Depreciation and amortization
150
149
207
138
25
25
—
—
382
312
Unrealized loss on commodity-related
derivative financial instruments
—
—
16
27
—
—
—
—
16
27
Transaction costs incurred in respect of
acquisitions and non-cash provisions
—
—
14
13
58
—
—
—
72
13
Total adjustments to share of profit from
equity accounted investees
172
172
438
271
84
25
694
468
Adjusted EBITDA from equity accounted
investees
281
343
671
379
58
107
—
—
1,010
829
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For further information: Investor Relations (403) 231-3156
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media@pembina.com www.pembina.com
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