Veresen Inc. T.VSN.DB.B

CIBC

[lotus1]

CIBC Institutional Equity Research

April 21, 2017

Veresen Inc.

Cohn Hints At Federal Support For Jordan Cove LNG

Conclusion

Support from the U.S. Presidential administration for permitting of Jordan Cove LNG is a meaningful boost to the project's chances of receiving approval, in our opinion, however significant permitting and procedural challenges may continue to cause the project delays. Assuming Veresen can sell 50% of the project to an offtaker (as the company has indicated it intends) we see potential $6.00/sh upside on a DCF-basis (not including benefits to Ruby Pipeline), if the project is built. Given the announcement, we think the market may price in one-third of our estimated upside (or ~$2/share).

Cohn's Comments

Gary Cohn, chief economic advisor to President Trump, speaking at the Institute of International Finance Washington Policy Summit signaled the Administration's support for U.S. LNG exports. Citing demand from Japan and Germany (due to nuclear retirements) and China (relating to its economic growth), and given the available supply, he indicated a desire for the U.S. to become the largest LNG exporter in the world. Cohn said the first action would be to permit an LNG export facility in the north west – to take advantage of the reduced travel time to Japan - and specifically mentioned that the site under consideration has been turned down twice already. Given the relative absence of west coast LNG export proposals, the recent meetings of Jordan Cove LNG and Veresen executives with President Trump, and the twice-denied comment, it appears likely he is referencing Jordan Cove LNG.

There are many gating items to a successful FID decision, but the three most important are permitting, customer agreements and financing. Given the positive implications for permitting inferred by the administration's comments we could see the market begin to price in up to a third of the project's value, in our opinion.