Brookfield sent a letter
https://www.streetinsider.com/dr/news.php?id=18321135 Brookfield Infrastructure Encourages Inter Pipeline to Increase Transparency and Put Shareholders First April 28, 2021 7:16 AM More than 75 days have passed since Brookfield Infrastructure announced its intention to make the Offer, and yet the IPL Special Committee has not provided shareholders with any real update regarding the Strategic Review process IPLs recent update on the Heartland Petrochemical Complex raises many more questions than it answers; the Company has been challenged to identify a partner for this project since commencement of a process in late 2019 Based on the current trading price of Brookfield Infrastructure Corporation (NYSE: BIPC; TSX: BIPC) class A exchangeable shares as of market close on April 27, 2021, the Offer now implies aggregate consideration to IPL shareholders of approximately C$17 per share (based on prorating), representing a premium of 30% to IPLs 30-day volume-weighted average share price prior to the date that Brookfield Infrastructure announced its intention to make the Offer Despite Brookfield Infrastructures clear desire to participate in the Strategic Review process, IPL has continued to demonstrate a lack of urgency to include us in that process, and we have not yet been granted data room access Brookfield Infrastructures Offer is based exclusively on public information. Any ability for Brookfield Infrastructure to increase the Offer would be predicated on completing customary due diligence that supports such an increase The Offer remains open for acceptance until 5:00 p.m. (MST) on Monday, June 7, 2021 BROOKFIELD, NEWS, April 28, 2021 (GLOBE NEWSWIRE) -- On February 10, 2021, Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN), together with its institutional partners (collectively, Brookfield Infrastructure, we or our) announced its intention to pursue a privatization transaction in respect of Inter Pipeline Ltd. (TSX: IPL) (IPL or the Company), pursuant to which it would acquire all of the outstanding common shares of the Company not already owned by Brookfield Infrastructure at a price per IPL common share equal to C$16.50 (the Offer). On February 22, 2021, the Offer was formally launched and the Offer to Purchase and Bid Circular was mailed to IPL shareholders, filed with the Canadian securities regulators and posted on the Brookfield Infrastructure site for the Offer (www.ipl-offer.com). Given the significant passage of time since announcement of the Offer, and shareholder inquiries we have received, we find it appropriate to provide an update to the market and fellow shareholders at this time. Brookfield Infrastructure continues to believe the Offer is in the best interests of IPL shareholders. Correspondence between Brookfield Infrastructure and IPL After receiving no contact from IPL or the Special Committee of IPLs board of directors (Special Committee) since launching our Offer, Brookfield Infrastructure sent a letter to the Special Committee on April 13, 2021 with the following key messages: A number of IPLs largest shareholders have been in dialogue with us following the Offer, including many event-driven investors. Shareholders have expressed surprise that the Special Committee has chosen not to engage with Brookfield Infrastructure, as the publicly-announced mandate of the Special Committee should be to actively engage with all prospective credible parties. A number of significant shareholders have stated to us that the status quo or any just say no strategy undertaken by the Company would be unacceptable. We need meaningful engagement by the Special Committee on realistic terms and reasonable access to a comprehensive data room so that we have sufficient information to determine whether to increase our Offer. Further delays by the Special Committee in providing Brookfield Infrastructure access to due diligence would bring into question the motivations and credibility of the Strategic Review process. Despite our outreach efforts, IPL has demonstrated a lack of urgency and has failed to credibly engage in a manner that would allow Brookfield Infrastructure to participate in the Strategic Review process. On April 20, 2021, the Special Committee provided us with a short response indicating an openness to Brookfield Infrastructure participating in the Strategic Review process. Subsequent dialogue initiated by us with IPLs financial advisors revealed that the Special Committee seeks to impose unreasonable conditions on Brookfield Infrastructure in exchange for providing access to due diligence information, including seeking restrictions on Brookfield Infrastructures ability to increase the Offer price. We are not willing to agree to restrictions designed to frustrate and limit our ability to offer shareholders a higher price in exchange for reasonable access to due diligence. These types of restrictions are not commercial, are suggestive of management and board entrenchment, and are not in the best interest of IPL or its shareholders. Brookfield remains open to engaging on commercial terms. Brookfield Infrastructures Observations on IPLs April 22, 2021 HPC Update After reviewing the Companys selective update on the Heartland Petrochemical Complex (HPC), we have significant unanswered concerns regarding the appropriateness of the underlying assumptions used by the Company to forecast long-term run-rate EBITDA, and a continued general lack of transparency with shareholders, particularly in the following areas: HPC EBITDA Guidance: Recent guidance for 2023 incorporates Alberta Petrochemicals Incentive Program (APIP) grants paid out over three years. Excluding these grants, 2023 EBITDA guidance is now C$264 C$314 million, leaving a C$186 million gap to bridge to the Companys long-term guidance of C$450 C$500 million. Lack of transparency on how IPL expects to bridge this significant gap has led research analysts to speculate the gap will be made up through a combination of improved commodity prices, better contracts in the future and further capital investments to expand capacity. We are concerned that these optimistic underlying assumptions may not materialize, resulting in further financial strain on IPL with an inability to significantly reduce leverage, improve credit ratings, and reinstate historical dividend levels on a reasonable timeline. IPL has chosen not to disclose when it expects the HPC Long-Term target to be achieved (e.g., 5-10 years, >20 years, etc.) HPC Facility Production: No disclosure was provided on utilization, ramp-up timeline, or production rates for the near-term forecast guidance. An assessment of the reasonable, run-rate utilization relative to IPLs disclosed capacity is important due to its effect on the viability and value of HPC. HPC Contract Counterparties: We question IPLs inclusion of short-term, government grants in the calculation of counter-party credit quality/exposure and require access to information to assess the true customer credit quality of HPC on a long-term basis. Furthermore, we remain concerned that IPL may use its newly-formed and wholly-owned Marketing Segment when reporting contracted capacity given that contracting with one of its subsidiaries will not change the risk of the Company on a consolidated basis. HPC Contracting Terms: We note that IPL no longer refers to HPC contracts as being cost-of-service (as per IPLs March 2020 Investor Presentation) terminology which under a standard industry interpretation implies a full recovery of operating and capital costs. We assume IPL is agreeing to offtake contracts where certain previously unanticipated operating cost risks are now borne by the Company. Contractual detail beyond headline price is critical to properly assess risk allocation, creditworthiness, long-term financing capacity and consequently the value of the Company. HPC Capital Cost Overruns: No substantive update was or has been provided on HPCs capital cost estimate since May 2020, and no guidance was or has been provided on the third-party owned Central Utility Block since September 2018. Given the highly complex nature of this project combined with IPL having no experience building large petrochemical facilities, IPLs lack of clarity on the aggregate construction cost is concerning. Further material cost overruns could have a material adverse effect on the economic merits of this project and the Company. 2017 2020 April 22, 2021 HPC Build Cost Total project cost of ~$3.5 bnHPC Presentation (Dec 18, 2017) Updated Heartland Petrochemical Complex cost estimate to $4 bnQ1 2020 Results (May 7, 2020) Total HPC cost of ~$4 bnInvestor Presentation (Apr 2021) HPC EBITDA Guidance C$450 C$500mm C$450-C$500mm 2023: C$264 C$314mmLong-Term: C$450 C$500mm Implied HPC Build Multiple (Midpoint) ~7.4x 8.4x 2023: ~13.8xLong-Term: ~8.4x Concluding Remarks Despite limited time remaining before the expiration of the Offer, and the Companys representation that it will continue to welcome constructive dialogue with Brookfield we await credible engagement on commercially reasonable terms that do not impede our ability to increase the Offer price. Further time-delay tactics and a general lack of transparency on both HPC and the Strategic Review process serves no benefit to IPL shareholders. We again strongly urge the Special Committee to collaboratively engage with Brookfield Infrastructure and provide access to the data room in the first instance. The April 22, 2021 HPC update raised more questions than answers and reinforced our need to conduct customary due diligence once we have been provided the necessary documentation by the Company, failing which Brookfield Infrastructure will be unable to increase the Offer price. We do not see a genuine rationale to continue delaying a public HPC construction cost update. IPLs currently elevated share price reflects a public market expectation of a privatization transaction within the indicative range we previously communicated to the Company (and noted in our Offer documentation), which was subject to due diligence. The market clearly anticipates a transaction within that range, which can only happen if IPL and the Special Committee provide us with timely data room access to substantiate such a valuation. Brookfield Infrastructure reiterates its sincere hope that the directors of IPL will fulfill their fiduciary duty and listen to IPLs institutional shareholders many of whom we understand have reached out to the Company and its directors directly since our Offer was launched to voice their frustrations and provide access to the information needed on balanced terms so that we can conduct customary due diligence.