All figures are in Canadian dollars unless otherwise indicated
CALGARY, Oct. 2, 2017 /CNW/ - Pembina Pipeline Corporation
(TSX: PPL; NYSE: PBA) ("Pembina") is pleased to announce that it has completed its previously announced business combination (the
"Transaction") with Veresen Inc. (TSX: VSN) ("Veresen") pursuant to a plan of arrangement (the "Arrangement") under Section 193
of the Business Corporations Act (Alberta) to create one of the largest energy
infrastructure companies in Canada .
"Today marks another significant milestone for Pembina," said Mick Dilger, Pembina's President
and Chief Executive Officer. "With increased size and scale, the combined companies create a platform in which we can pursue
expanded growth opportunities while continuing to support future dividend growth and value creation for our shareholders. Our
customers will also benefit from the enhanced service offerings through the highly integrated asset base and the extended
geographic reach."
"We are also proud to have increased the common share dividend for the second time this year – a testament to the strength of
the combined companies and to our commitment of providing value to our shareholders," continued Mr. Dilger. "We have recently
placed $2.8 billion of projects into service and expect to place approximately $2 billion of additional projects into service by early 2018. Pembina has truly become a leading North American
infrastructure company and is well positioned to deliver top-tier performance going forward. Our future is bright and I am
excited to realize our expected near term transformational results," concluded Mr. Dilger.
Pursuant to the Arrangement, Pembina acquired all of the issued and outstanding common shares of Veresen in a transaction
valued at approximately $9.4 billion, including the assumption of Veresen's debt (including
subsidiary debt) and preferred shares.
In accordance with the Arrangement, Veresen has been amalgamated with Pembina and the outstanding Veresen preferred shares
have been exchanged for Pembina preferred shares with the same terms and conditions, and will be listed on the Toronto Stock
Exchange ("TSX") under the symbols PPL.PR.O (series 15, previously Series A preferred shares of Veresen), PPL.PR.Q (series 17,
previously Series C preferred shares of Veresen) and PPL.PR.S (series 19, previously Series E preferred shares of Veresen) within
a few days following closing. Dividends on the series 15, 17 and 19 preferred shares will continue to be paid on the last
business day of March, June, September and December in each year if, as and when declared by the Board of Directors.
As previously announced, based on elections received, each Veresen common shareholder (a "Shareholder") who elected cash will
receive, on a pro-rated basis, an aggregate amount that equals (i) cash of approximately $6.4314,
and (ii) approximately 0.2809 of a Pembina common share, multiplied by the number of Veresen common shares held by such
Shareholder. For certainty, the Shareholder will exchange a portion of their shares for cash and a portion for Pembina common
shares pursuant to the terms of the Arrangement. Shareholders who elected Pembina common shares or did not make an election will
not be subject to pro-rationing and will receive 0.4287 of a Pembina common share for each Veresen common share held. No
fractional Pembina shares will be issued pursuant to the Arrangement and therefore the consideration received by any individual
shareholder may be subject to adjustment according to the provisions for rounding described in the management information
circular of Veresen dated June 5, 2017.
The previously announced common shareholder dividend payable to Veresen common shareholders of record on September 25, 2017 of $0.0833 per common share, will be paid to such shareholders
as planned on October 23, 2017.
The Veresen common shares and preferred shares will be delisted from the TSX within a few trading days following closing. The
Pembina common shares issued to the former holders of Veresen common shares pursuant to the Arrangement will be listed on the TSX
under the symbol "PPL" and on the New York Stock Exchange under the symbol "PBA".
All regulatory conditions have been satisfied prior to closing. These conditions included termination of the Hart-Scott-Rodino
waiting period by the US Federal Trade Commission on May 30, 2017; approval by the Minister of
Transport under the Canada Transportation Act on June 28, 2017; and expiry of the waiting period
under the Canadian Competition Act on September 13, 2017. With respect to the Canadian Competition
Act, Pembina has been working with the Commissioner of Competition and his staff for several months relative to the Alberta
Ethane Gathering System ("AEGS"), and their review relating to AEGS is ongoing. This work with the Commissioner of Competition
and his staff will continue post-closing. Should Pembina and the Commissioner of Competition not reach a mutual agreement
relative to AEGS, the matter may be referred to the Competition Tribunal by the Commissioner of Competition for resolution for a
period of up to one year from closing. The Company is of the view that its ownership of AEGS is complementary to its natural gas
liquids ("NGL") infrastructure, and Pembina's fee-for-service business model will continue to drive increased volumes across both
AEGS and its NGL infrastructure benefiting producers and the broader NGL market. Currently, AEGS comprises approximately one
percent of Pembina's forecasted 2018 adjusted EBITDA.
Common share dividend increase and declaration
In conjunction with closing of the Transaction, Pembina is proceeding with the previously announced increase to its common
share dividend. As such, Pembina's Board of Directors has declared a common share cash dividend for October 2017 of $0.18 per share to be paid, subject to applicable law, on
November 15, 2017 to shareholders of record on October 25, 2017. This
dividend reflects a 5.9 percent increase to the current monthly common share dividend rate of $0.17
per share. This dividend is designated an "eligible dividend" for Canadian income tax purposes. For non-resident shareholders,
Pembina's common share dividends should be considered "qualified dividends" and are subject to Canadian withholding tax. For
shareholders receiving their common share dividends in U.S. funds, the October 2017 cash dividend
is expected to be approximately U.S. $0.1443 per share (before deduction of any applicable Canadian
withholding tax) based on a currency exchange rate of 0.8018. The actual U.S. dollar dividend will depend on the Canadian/U.S.
dollar exchange rate on the payment date and will be subject to applicable withholding taxes.
Pembina pays cash dividends on its common shares in Canadian dollars on a monthly basis to shareholders of record on the 25th
calendar day of each month (except for the December record date, which is December 31st), if, as
and when determined by the Board of Directors. Should the record date fall on a weekend or a statutory holiday, the effective
record date will be the previous business day. The dividend payment date is the 15th of the month following the record date.
Should the payment date fall on a weekend or on a holiday the business day prior to the weekend or holiday becomes the payment
date.
Business update
Pembina is pleased to announce that commissioning is now underway for the Company's Duvernay
assets (the "Duvernay Complex") which includes its 100 million cubic feet per day ("MMcf/d") (75 MMcf/d net to Pembina) shallow
cut gas plant ("Duvernay I"), connecting pipelines and the associated field hub infrastructure ("Field Hub"). The Duvernay
Complex is expected to be placed into service on November 1, 2017, ahead of schedule and under
budget. This will represent the first large-scale processing plant and infrastructure to be placed into service that was
specifically developed to handle the liquids-rich Duvernay production.
Pembina also anticipates that the construction of the 160 kilometer northeast British
Columbia ("B.C.") pipeline (the "NEBC Expansion") will be completed in October on time and on budget. The NEBC Expansion,
which is underpinned by long-term, cost-of-service agreements, is expected to add approximately 75 thousand barrels per day
("mbpd") of capacity and is centrally located to accommodate further incremental transportation demands for the majority of
producers in the liquids-rich Montney resource play. With continued development in the
Montney, the NEBC Expansion offers producers a cost-effective transportation solution and access
to Pembina's existing infrastructure at Taylor, B.C. which feeds into the Edmonton, Alberta area market hub.
On June 30, 2017, Pembina placed its Phase III Expansion into service, adding 420 mbpd of
incremental capacity between the Fox Creek and Namao corridor
of Alberta on the Company's Peace and Northern systems. Through the first six months of 2017,
Pembina's Conventional Pipeline revenue volumes averaged 692 mbpd, representing a 42 mbpd increase over the full year 2016
average of 650 mbpd. Approximately half of this increase was related to incremental volumes on Pembina's Peace and Northern
systems in anticipation of the Phase III Expansion being placed into service. Pembina currently estimates Conventional Pipelines'
revenue volumes for the third quarter of 2017 will be over 750 mbpd, consistent with Pembina's management's expectations.
Combined with the additional Peace connections that will be placed into service throughout 2018 and the incremental Peace
pipeline expansions expected to be placed into service in late 2018, revenue generated from the Peace pipeline will continue to
ramp-up based on shipper contractual obligations. As such, Pembina expects a continued steady increase in Peace pipeline revenue
volumes through the remainder of 2017 and the first quarter of 2018, with another step-change occurring in 2019, where current
firm volume commitments reach their peak.
On September 21, 2017, Veresen announced that the Jordan Cove Energy Project and Pacific
Connector Gas Pipeline have filed applications with the United States Federal Regulatory Commission for the construction and
operations of a 7.8 million tonne per annum liquefied natural gas ("LNG") export terminal in Coos Bay,
Oregon and the related Pacific Connector that will transport natural gas from the Malin Hub in southern Oregon to the LNG export terminal.
On September 27, 2017, Veresen announced the successful start-up of the Tower rich gas
processing plant on September 20, 2017, ahead of schedule and under budget. The Tower processing
plant has the capacity to process 200 MMcf/d of natural gas, and is the first of three Veresen Midstream facilities that support
the Cutbank Ridge Partnership's ("CRP") condensate-focused growth plan in the Montney within the
Dawson Creek region of northeast B.C. The two remaining plants currently under construction are
also expected to be placed into service ahead of schedule and under budget. The 400 MMcf/d Sunrise processing plant is expected
to start-up by mid-October with throughput anticipated to ramp-up throughout 2018. The Saturn processing plant is anticipated to
have one of its two 200 MMcf/d trains in-service by year-end, followed by the second train expected to be placed into service in
the first half of 2018. When all three facilities are operational, Veresen Midstream will have 1.5 billion cubic feet per day of
gas processing capacity in operation in the core of the Montney, one of North America's most prolific and competitive liquids-rich resource plays. As of September 28, 2017, Pembina has commissioned the tie-in of the Tower plant to the Peace pipeline system.
About Pembina
Calgary-based Pembina is a leading transportation and midstream service provider that has
been serving North America's energy industry for over 60 years. Pembina owns and operates an
integrated system of pipelines that transport natural gas and various products derived from natural gas and hydrocarbon liquids
produced primarily in western Canada. The Company also owns and operates gas gathering and
processing facilities and an oil and natural gas liquids infrastructure and logistics business. Pembina's integrated assets and
commercial operations along the majority of the hydrocarbon value chain allow it to offer a full spectrum of midstream and
marketing services to the energy sector. Pembina is committed to working with its community and aboriginal neighbours, while
providing value for investors in a safe, environmentally responsible manner. This balanced approach to operating ensures the
trust Pembina builds among all of its stakeholders is sustainable over the long term. Pembina's common shares trade on the
Toronto and New York stock exchanges under the symbols PPL and
PBA, respectively. Pembina's preferred shares also trade on the Toronto stock exchange. For more
information, visit www.pembina.com.
Forward-looking Information
Certain information contained in this news release constitutes forward-looking information under applicable securities laws.
All statements, other than statements of historical fact, which address activities, events or developments that Pembina expects
or anticipates may or will occur in the future, are forward-looking information. In some cases, forward-looking information can
be identified by the use of words such as "continue", "will", "future", "expect", or similar words suggesting future outcomes or
outlook. In particular, this news release contains forward-looking statements with respect to: anticipated synergies and
benefits of the Transaction to Pembina and its shareholders; remedies that may be imposed by the Competition Bureau with respect
to the Arrangement; anticipated timing, capacities, and revenue volumes of Pembina's capital projects; future dividends which may
be declared on Pembina's common and preferred shares, the dividend payment and the tax treatment thereof; and the timing of the
listings of the Pembina common and preferred shares. The forward-looking information provided in this news release is based upon
a number of material factors and assumptions that Pembina has made in respect thereof as of the date of this news release,
including, without limitation: that favourable circumstances continue to exist in respect of current operations and current and
future growth projects; future levels of oil and natural gas developments; potential revenue and cash flow enhancement; that any
remedies that may be imposed by the Competition Bureau with respect to the Arrangement will have minimal impact on
Pembina's business and its operations; with respect to Pembina's future dividends and results: prevailing commodity
prices, margins and exchange rates, that the businesses of the combined company will continue to achieve sustainable financial
results and that the combined company's future operations and results of operations will be consistent with past performance of
Pembina and Veresen and management expectations in relation thereto including, the sanctioning and completion of any third party
projects relating to growth projects, future operating costs, the availability and sources of capital, ongoing utilization and
future expansion of the combined company, future production rates, the ability to reach required commercial agreements, the
ability to obtain required regulatory and environmental approvals on the necessary terms and in a timely manner, and the
continuation of timely performance by counterparties to material agreements. Although Pembina believes that 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. Forward-looking information is subject to
a number of risks and other factors that could cause actual results and events to vary materially from that anticipated by such
forward-looking information, including, but not limited to: the failure to realize the anticipated synergies or benefits of the
Transaction following closing due to integration issues, incorrect assumptions, any post-closing regulatory remedies or
otherwise; changes to applicable tax laws; the sufficiency of budgeted capital expenditures in carrying out planned activities;
the availability and cost of labour and services; non-performance of agreements in accordance with their terms; the impact of
competitive entities and pricing; reliance on key industry partners, alliances and agreements; lower than anticipated results of
operations and accretion from Pembina's business initiatives; the inability of Pembina to raise sufficient capital; the strength
and operations of the oil and natural gas production industry and related commodity prices, and certain other risks detailed from
time to time in Pembina's public disclosure documents including, among other things, those detailed under "Risk Factors" in
Pembina's management's discussion and analysis and annual information form for the year ended December 31,
2016, which can be found at www.sedar.com under
Pembina's profile. Readers are also urged to consult the disclosure provided under the heading "Risk Factors" in Veresen's
management information circular dated June 5, 2017, which was filed on SEDAR under Veresen's
profile, for further information respecting the risks and other factors applicable to the Arrangement. Readers are cautioned that
this list of risk factors is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking
statement is not determinable with certainty as these factors are independent and management's future course of action would
depend on its assessment of all information at that time. Accordingly, readers are cautioned that events or circumstances could
cause results to differ materially from those predicted, forecasted or projected. Furthermore, the forward-looking statements
contained herein are made as of the date hereof, and Pembina does not undertake any obligation to update publicly or to revise
any forward-looking information, whether as a result of new information, future events or otherwise, except as required by
applicable laws.
Any forward-looking information contained herein is expressly qualified by this cautionary statement.
In this news release, Pembina has used the term adjusted EBITDA. For more information about this non-GAAP measure, see the
"Non-GAAP measures" section below. The information contained herein with respect to future adjusted EBITDA is to assist investors
in understanding the combined company's expected financial results, and this information may not be appropriate for other
purposes.
Any forward-looking information contained herein is expressly qualified by this cautionary statement.
Non-GAAP Measures
In this press release, Pembina has used the term "adjusted EBITDA" which is not defined by GAAP but is used by management to
evaluate the Transaction. Since non-GAAP measures do not have a standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies, securities regulations require that non-GAAP measures
are clearly defined and qualified. The intent of non-GAAP measures is to provide additional useful information with respect to
the Transaction to investors and analysts though the measures do not have any standardized meaning under IFRS. Adjusted EBITDA is
a non-GAAP measure and is calculated as earnings for the year plus share of profit (loss) from equity accounted investees (before
tax, depreciation and amortization) plus net finance costs, income taxes, depreciation and amortization (included in operations
and general and administrative expense) and unrealized gains or losses on commodity-related derivative financial instruments. The
exclusion of unrealized gains or losses on commodity-related derivative financial instruments eliminates the non-cash impact of
such gains or losses. Adjusted EBITDA also includes adjustments for loss (gain) on disposal of assets, transaction costs incurred
in respect of acquisitions, impairment charges or reversals and write-downs in respect of goodwill, intangible assets and
property plant and equipment, and non-cash provisions. These additional adjustments are made to exclude various non-cash and
other items that are not reflective of ongoing operations. Management believes that Adjusted EBITDA provides useful information
to investors as it is an important indicator of an issuer's ability to generate liquidity through cash flow from operating
activities. Management utilizes Adjusted EBITDA to set objectives and as a key performance indicator of the Company's
success.
SOURCE Pembina Pipeline Corporation
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