All financial figures are approximate and in Canadian dollars
unless otherwise noted. This news release refers to adjusted
earnings before interest, taxes, depreciation and amortization
("adjusted EBITDA"), adjusted cash flow from operating activities
("adjusted cash flow") and total enterprise value which are
financial measures that are not defined by Generally Accepted
Accounting Principles ("GAAP"). For more information about these
metrics, see "Non-GAAP Measures" herein.
CALGARY, May 1, 2017 /CNW/ - Pembina Pipeline Corporation
(TSX: PPL; NYSE: PBA) ("Pembina" or the "Company") and Veresen Inc.
(TSX: VSN) ("Veresen") are pleased to announce they have entered
into an arrangement agreement to create one of the largest energy
infrastructure companies in Canada
with a pro-forma enterprise value of approximately $33 billion (the "Transaction").
Overview of the Combination – Highlights:
The combined company will feature an asset base supported by
long-life, economic hydrocarbon reserves concentrated in some of
the most prolific resource plays in North
America. The diversified portfolio will include crude oil,
liquids and natural gas pipelines, terminal, storage and midstream
operations, gas gathering and processing facilities as well as
fractionation facilities. The combined company expects to drive
significant shareholder value through the following benefits of the
Transaction:
i.
|
The combined asset
base is highly integrated across the value chain and extends the
geographical reach of the combined company while enhancing its
customer service offering.
|
ii.
|
The combined company
will benefit from diversification across basins and products, as
well as customers and currency.
|
iii.
|
The cash flows of the
combined entity will be over 85 percent fee-for-service weighted,
ensuring the maintenance of a strong balance sheet.
|
iv.
|
The Transaction
creates an organization of meaningful scale able to pursue larger
growth projects.
|
"This Transaction is highly strategic for Pembina and Veresen
alike, providing clear visibility to creating long-term value for
our respective shareholders," said Mr. Randy Findlay, Pembina's Chair of the Board of
Directors. "It represents an ideal opportunity to continue building
on our respective low-risk, long-term, fee-for-service business
models while growing and substantially diversifying our respective
asset bases. The combined platform offers compelling customer
service offering enhancements, as well as integration and
investment potential, exceeding what we could do individually.
Combined, these factors give us confidence to increase our dividend
by 5.9 percent upon close of the Transaction."
"The creation of an integrated business across the energy
infrastructure value chain results in a combined entity that is
greater than the sum of its parts," added Mr. Stephen Mulherin, Veresen's Chairman of the
Board of Directors. "The combined scale and financial strength,
along with a proven track record of safe, on-time and on-budget
project delivery, gives us confidence that the collective growth
program currently under construction of approximately $6 billion will translate into meaningful value
for shareholders. Furthermore, we believe combining these two
organizations augments our ability to compete for future investment
opportunities and execute on a larger, more complex suite of
opportunities than each company on a standalone basis."
Summary of Transaction Terms
Under the terms of the arrangement agreement, Pembina is
offering to acquire all the issued and outstanding shares of
Veresen by way of a plan of arrangement under the Business
Corporations Act (Alberta). The Transaction is valued at
approximately $9.7 billion including
the assumption of Veresen's debt (including subsidiary debt) and
preferred shares.
Pembina is offering to acquire all of the outstanding Veresen
common shares in exchange for either (i) 0.4287 of a common share
of Pembina or (ii) $18.65 in cash,
subject to pro-ration based on maximum share consideration of
approximately 99.5 million Pembina common shares and maximum cash
consideration of approximately $1.523
billion. Assuming full pro-ration, each Veresen shareholder
would receive $4.8494 in cash and
0.3172 of a common share of Pembina for each Veresen common share.
This offer represents a 21.8 percent premium to Veresen's 20 day
weighted average price of $15.31 and
a 22.5 percent premium to Veresen's closing share price of
$15.23 on April 28, 2017.
The Transaction was unanimously approved by the Boards of
Directors of both companies and is expected to close late in the
third quarter or early in the fourth quarter of 2017. The
Transaction is subject to approval of at least 662/3
percent of holders of Veresen's common shares represented in person
or by proxy at a special meeting of Veresen common shareholders to
be called to consider the Transaction, approval of the Court of
Queen's Bench, certain regulatory approvals in Canada and the
United States ("U.S."), and other customary conditions. Upon
completion of the Transaction, Pembina's common shareholders are
expected to own approximately 80 percent of the combined company
and Veresen's shareholders are expected to own approximately 20
percent. Affirming their belief in the value of the Transaction,
the Board of Directors and executive management of Veresen will
elect to receive share consideration.
Furthermore, Veresen will be seeking approval of holders of
outstanding Veresen preferred shares to effect the exchange of such
shares for Pembina preferred shares with the same terms and
conditions as the outstanding Veresen preferred shares. For such
exchange to occur at closing of the Transaction, approval of at
least 662/3 percent of holders of Veresen's preferred
shares is required, voting as one class, represented in person or
by proxy at a special meeting of Veresen preferred shareholders to
be called to consider the Transaction. Closing of the Transaction
is not conditional on the approval of the holders of Veresen's
preferred shares.
Benefits of the Combination – Details:
i) The combined asset base is highly
integrated across the value chain and extends the geographical
reach of the combined company while enhancing its customer service
offering.
The success of Pembina's business model is largely predicated on
integration along the hydrocarbon value chain in the prolific
geographic areas in which it operates. Through its existing gas
gathering and processing, conventional pipelines and midstream
businesses, which are primarily concentrated in the Western
Canadian Sedimentary Basin ("WCSB"), Pembina provides customers
with a comprehensive suite of services from field production to end
use markets.
The majority of the combined asset base is already physically
connected or presents the opportunity to be connected with relative
ease in the future, which allows for operational integration, the
potential to realize significant synergies and overall enhancements
to customer service. For example, Pembina's Redwater and Empress Facilities are key
receipt points on Veresen's Alberta Ethane Gathering System
("AEGS"). Additionally, the AEGS system is connected to Pembina's
Vantage Pipeline and Empress Assets, which serves as a key link
between Bakken ethane production and the Alberta Petrochemical
market.
Veresen is also actively pursuing development of midstream
infrastructure in the British
Columbia ("B.C.") Montney,
which is one of the most prolific resource plays in the WCSB.
Veresen is currently progressing construction of 1.5 billion cubic
feet per day ("bcf/d") (gross) of gas processing and related
compression, gathering and liquids handling network under a
long-term, fee-based agreement, with line of sight to sanction
additional capital projects to support expected future development.
This infrastructure is very complementary to Pembina's
approximately 1.7 bcf/d of field gas processing capacity in the
Deep Basin, Duvernay and
Alberta Montney, as well as its
previously announced pipeline expansion and lateral development in
the B.C. Montney, which feed into Pembina's $2.4 billion Phase III Expansion (expected to be
complete in July 2017).
The enhanced customer service offering will also benefit from a
joint interest in the Alliance Pipeline, a marquee North American
energy infrastructure asset. With a gross capacity of 1.65 bcf/d,
the long-haul pipeline, which is readily expandable to 2.1 bcf/d,
transports natural gas produced in the WCSB and the U.S. Bakken
into the Chicago market, and
enables shippers to access numerous end-use markets. Originating in
Northeastern B.C., the Alliance Pipeline serves some of the fastest
growing resource plays in western Canada, including the Montney and the
Duvernay. The Aux Sable natural
gas extraction and fractionation facility is located at the
terminus of the Alliance Pipeline. Aux Sable has natural gas
processing capacity of 2.1 bcf/d (gross) and natural gas liquids
("NGL") fractionation capacity of 131,500 barrels per day (gross).
The opportunities to integrate its gas processing infrastructure in
the WCSB with the Alliance Pipeline and Aux Sable will be explored,
with the aim of increasing market access for its customers, thereby
enhancing its customer service offering.
In addition to allowing for integration along the hydrocarbon
value chain and enhanced customer service within existing operating
areas, the Transaction also represents an attractive opportunity to
meaningfully extend the reach of the joint asset base, creating new
opportunities to build an integrated service model in other areas
across the continent. As mentioned above, the Alliance Pipeline
provides the opportunity to connect a substantial asset base in the
WCSB to new end-use markets. There is a similar opportunity with
the non-operated preferred interest in the Ruby Pipeline, which
extends from the Opal Hub in southwest Wyoming to the Malin Hub in southern
Oregon and transports natural gas
from the major U.S. Rockies basin to consumers in California, Nevada and the Pacific
Northwest.
ii) The combined company will benefit from
diversification across basins and products, as well as customers
and currency.
The combined company will benefit from a strong position in the
WCSB, with Pembina's assets primarily located in the prolific Deep
Basin, Duvernay and Alberta Montney being well complemented by
Veresen's position in the B.C. Montney.
Combined, Pembina and Veresen will own approximately 5.8 bcf/d
(net) of gas processing infrastructure across the WCSB by 2018. The
combined infrastructure is very complementary and will be
integrated with Pembina's previously announced pipeline expansions
in the Alberta and B.C. Montney, including the Company's
$2.4 billion Phase III Expansion
(expected to be complete in July
2017).
The combined entity will also have exposure to long-life,
economic hydrocarbon reserves in key producing basins in the U.S.
Rockies, where Pembina does not currently have a position, by way
of the Ruby Pipeline. The Ruby Pipeline provides for 1.5 bcf/d
(gross) of transportation capacity from numerous resource plays in
the U.S. Rockies that present an attractive combination of
supportive supply/demand market fundamentals.
Pembina's existing assets are primarily focused on NGL,
condensate, crude oil and heavy oil, while Veresen's assets provide
size and scale in natural gas midstream infrastructure.
The combined company will attain a more diverse customer base,
while creating the opportunity to strengthen relationships with its
respective largest customers. Further, the combined company will
also benefit from currency diversity, with approximately 25 to 30
percent contribution expected to be in U.S. dollars.
iii) The cash flows of the combined entity
will be over 85 percent fee-for-service weighted, ensuring the
maintenance of a strong balance sheet.
The management philosophies underlying both Pembina and Veresen
are very much aligned, particularly with respect to generating
long-term, sustainable shareholder value through low-risk,
highly-contracted asset bases and business models.
Through 2018, the combined company is expecting its low-risk,
fee-for-service adjusted EBITDA to increase to in excess of 85
percent while pro-forma adjusted EBITDA is expected to increase to
$2.55 - $2.75 billion in 2018.
Pembina expects the Transaction to be accretive to adjusted cash
flow per share on a run-rate basis beginning in 2018. Executing on
longer-term strategic initiatives and growth projects, many of
which are described below, provides visibility to meaningfully
increasing and extending the expected accretion from the
Transaction.
The combined company anticipates realizing significant near-term
synergies through the Transaction including, but not limited to,
corporate, financing and operating cost savings and tax
efficiencies. On a run-rate basis, before tax, these synergies are
expected to average $75 to $100
million annually.
The combined entity also anticipates maintaining one of the
strongest balance sheets of its Canadian infrastructure peers and
preserving its 'BBB' credit rating, with debt to adjusted EBTIDA
estimated at approximately 4 times pro-forma the Transaction in
2018.
Subject to successful completion of the Transaction, Pembina
intends to increase its monthly common share dividend by 5.9
percent (from $0.17 per common share
per month to $0.18 per common share
per month) upon closing, reflecting the positive accretion expected
beginning in the first full year of ownership, the strong
fee-for-service pro-forma cash flow and the combined entity's
continued financial strength and diversification.
iv) The Transaction creates an organization
of meaningful scale able to pursue larger growth projects.
The combined company, with a pro-forma enterprise value of
$33 billion, will be
ideally-positioned to execute on Pembina's and Veresen's aggregate
secured growth portfolio totaling approximately $6 billion through 2018. The Transaction is
expected to result in an organization that has enhanced
capabilities to progress projects of increasing scale and
complexity than the companies could on a standalone basis.
Together, the combined entity will pursue an ambitious portfolio
of both secured and unsecured growth, building on the Company's
respective track records of safe, on time and on budget project
execution and delivery.
Pembina is nearing the completion of over $4 billion in growth projects this year and is
actively working towards longer-term development. In its Midstream
business, Pembina continues to advance its proposed propane
dehydrogenation and polypropylene facility and recently announced
that a site has been identified for a potential propane export
terminal. In Pembina's Gas Services business, the Company continues
to progress opportunities under the recently announced Duvernay infrastructure agreement and other
initiatives to support its customer base in key producing
areas.
Veresen is advancing a number of large-scale, longer-term growth
opportunities across the energy infrastructure value chain. The
entirety of Veresen's approximately $1.5
billion secured growth projects are directly connected into
Pembina's Conventional Pipeline infrastructure. Further, the growth
projects, both under development and evaluation, in Veresen
Midstream, represent attractive opportunities to grow in one of the
most prolific resource plays in the WCSB and could provide for
additional growth along Pembina's existing value chain. The
combination of these projects could also serve to bolster the
potential expansion of the Alliance Pipeline, which is currently
under discussion.
In addition to the capital discussed above, the combined company
is expected to have an unsecured growth portfolio of approximately
$20 billion, which provides a strong
foundation to support its long-term adjusted cash flow per share
growth target of 8 percent to 10 percent.
The combined entity will continue to build upon the momentum of
the Jordan Cove liquefied natural gas ("LNG") development project
as it progresses toward key regulatory and commercial milestones.
Jordan Cove is the most advanced LNG export project on the west
coast of North America and can
compete with LNG from brownfield expansion in the Gulf of Mexico on a delivered to Tokyo basis.
Additional Transaction Details
The Transaction is subject to certain closing conditions,
including the approval of Veresen's common shareholders and the
Court of Queen's Bench of Alberta, as well as certain regulatory
and government approvals and other customary closing conditions. In
Canada, completion of the
Transaction is subject to acceptance of the Toronto Stock Exchange
and approval under the Competition Act and the Canada
Transportation Act. In the U.S., the Transaction will be
subject to the expiration or termination of any applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976. Pembina currently expects the Transaction will close late in
the third quarter or early in the fourth quarter of 2017.
The arrangement agreement in respect of the Transaction includes
customary provisions relating to non-solicitation, fiduciary outs
for Veresen with respect to financially superior alternate
proposals and Pembina's right to match such proposals until the
date of the Veresen shareholders' approval of the Transaction.
The cash consideration associated with the Transaction will be
initially funded through the company's $2.5
billion unsecured credit facility. Subsequently, Pembina
expects to refinance this with a combination of internally
generated cash flows and the issuance of Medium Term Notes and
preferred shares.
In addition, a special meeting of the holders of preferred
shares of Veresen will be called to approve the Transaction. If the
holders of Veresen preferred shares, voting together as a single
class, approve the Transaction, each preferred share of Veresen
would be exchanged, on a one for one basis, for a new preferred
share of Pembina having the same terms and conditions as the
Veresen preferred shares. Completion of the Transaction is not
conditional upon the approval of the Transaction by holders of
Veresen's preferred shares.
If the holders of Veresen's preferred shares do not approve the
Transaction, voting as a single class but separate from common
shares, the Veresen preferred shares will remain outstanding
following completion of the Transaction.
Subject to successful completion of the proposed Transaction,
Pembina's Senior Executive Team will be responsible for leading the
combined company with Mick Dilger as
President and Chief Executive Officer. Further, three of the
current members of the Veresen Board of Directors will be appointed
to the Pembina Board of Directors at closing of the Transaction and
Don Althoff, Veresen's President and
Chief Executive Officer will continue to be involved in the
combined company. Mr. Findlay will maintain his position as Chair
of the Board of Pembina.
Further information regarding the proposed Transaction will be
contained in an information circular that Veresen will prepare,
file and mail in due course to its shareholders in connection with
the common and preferred shareholder meetings. Veresen expects the
meeting will take place on or about July 11,
2017, with closing expected to occur as soon as possible
thereafter following receipt of the final order of the Court of
Queen's Bench of Alberta and subject to receipt of all the required
court and regulatory approvals.
A copy of the arrangement agreement with respect to the
Transaction will be filed on Pembina's and Veresen's SEDAR profile
and will be available for viewing at www.sedar.com.
Conference Call & Webcast
Pembina and Veresen will host a joint conference call and
webcast to discuss the Transaction on May 1,
2017 at 6:30 am MT
(8:30 am ET). A presentation will be
available prior to the conference call at
http://www.pembina.com/investor-centre/presentations-and-events/
and at http://www.vereseninc.com/invest/events-presentations.
The conference call dial-in numbers for Canada and the U.S. are 888-231-8191 or
647-427-7450. A recording of the conference call will be available
for replay until May 10, 2017. To
access the replay, please dial either 416-849-0833 or 855-859-2056
and enter the passcode 10261314.
A live webcast of the call can be accessed on Pembina's website
at www.pembina.com or by entering
http://event.on24.com/r.htm?e=1412733&s=1&k=08119FE1A202513249DCD37801A45185
in your web browser. Shortly after the call, an audio archive will
be posted on www.pembina.com for 90 days.
Advisors
CIBC World Markets Inc. is acting as financial advisor to
Pembina with respect to the Transaction. CIBC World Markets Inc.
has provided an opinion to the Pembina Board of Directors stating
that, as of the date thereof and subject to the assumptions,
limitations and qualifications contained therein, the consideration
payable pursuant to the arrangement agreement is fair, from a
financial point of view, to Pembina. Blake, Cassels & Graydon
LLP is acting as Canadian legal advisor to Pembina and Bracewell
LLP is acting as United States
legal advisor to Pembina.
Scotiabank is acting as financial advisor to Veresen with
respect to the Transaction. Scotiabank has provided verbal opinions
to the Veresen Board of Directors stating that, as of the date
thereof and subject to the assumptions, limitations and
qualifications contained therein, the consideration to be received
by the Veresen common shareholders and the Veresen preferred
shareholders is fair, from a financial point of view, to the
Veresen common shareholders and the Veresen preferred shareholders,
respectively. Osler, Hoskin &
Harcourt LLP is acting as legal advisor to Veresen.
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 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,
respectively. Pembina's preferred shares also trade on the
Toronto stock exchange. For
further information, please visit www.pembina.com.
About Veresen
Veresen is a publicly-traded dividend paying corporation based
in Calgary, Alberta that owns and
operates energy infrastructure assets across North America. Veresen is engaged in three
principal businesses: a pipeline transportation business comprised
of interests in the Alliance Pipeline, the Ruby Pipeline and the
Alberta Ethane Gathering System; a midstream business which
includes a partnership interest in Veresen Midstream Limited
Partnership, which owns assets in western Canada, and an ownership interest in Aux
Sable, which owns a world-class natural gas liquids (NGL)
extraction facility near Chicago,
and other natural gas and NGL processing energy infrastructure;
Veresen is also developing Jordan Cove LNG, a 7.8 million tonne per
annum natural gas liquefaction facility proposed to be constructed
in Coos Bay, Oregon, and the
associated Pacific Connector Gas Pipeline. In the normal course of
business, Veresen regularly evaluates and pursues acquisition and
development opportunities.
Veresen's Common Shares, Cumulative Redeemable Preferred Shares,
Series A, Cumulative Redeemable Preferred Shares, Series C, and
Cumulative Redeemable Preferred Shares, Series E trade on the
Toronto Stock Exchange under the symbols, respectively. For further
information, please visit www.vereseninc.com.
Forward-Looking Information and Statements
This document contains certain forward-looking statements and
information (collectively, "forward-looking statements") within the
meaning of the "safe harbor" provisions of applicable securities
legislation that are based on Pembina's and Veresen's current
expectations, estimates, projections and assumptions in light of
their experience and their perception of historical trends. In some
cases, forward-looking statements can be identified by terminology
such as "expects", "will", "would", "anticipates", "plans",
"estimates", "develop", "intends", "potential", "continue",
"could", "create", and similar expressions suggesting future events
or future performance.
In particular, this press release contains forward-looking
statements, including certain financial outlooks, pertaining to,
without limitation, the following: the Transaction, including the
expected closing date and the anticipated benefits of the
Transaction to Pembina and Veresen's securityholders, the expected
size and processing capabilities of the combined company, as well
as anticipated synergies (including strategic integration and
diversification opportunities, tax benefits and the accretion to
cash flow of Pembina) and expected size thereof; financial results
related to and growth opportunities associated with the assets of
the combined company; future dividends, including the increase in
amount thereof, which may be declared on Pembina's common shares
and any future dividend payment date; the ongoing utilization and
expansions of and additions to the combined company's business and
asset base, growth and growth potential; the timing and anticipated
receipt of required regulatory, court and securityholder approvals
for the Transaction; the ability of Pembina and Veresen to satisfy
the other conditions to, and to complete, the Transaction; the
anticipated timing of the mailing of the information circular
regarding the Transaction; the holding of Veresen's meetings of
common and preferred shareholders, and the closing of the
Transaction, including expected timing thereof; expectations
regarding the combined company's anticipated credit rating and the
composition of Pembina's board of directors following closing of
the Transaction.
These forward-looking statements and information are being
made by Pembina and Veresen based on certain assumptions that
Pembina and Veresen have made in respect thereof as at the date of
this news release, including: the ability of the parties to satisfy
the conditions to closing of the Transaction in a timely manner and
substantially on the terms described in this press release; that
favourable circumstances continue to exist in respect of current
operations and current and future growth projects (including the
ability to finance operations and such projects on favorable
terms), future levels of oil and natural gas development, potential
revenue and cash flow enhancement; future cash flows; 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, operating costs, ongoing
utilization and future expansion for the combined company, the
ability to reach required commercial agreements, and the ability to
obtain required regulatory and environmental approvals on the
necessary terms and in a timely manner, the continuation of timely
performance by counterparties to material agreements; and that
unforeseen events will not prevent the continued performance of
contracts.
Although Pembina and Veresen believe 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.
These forward-looking statements are not guarantees of future
performance and are subject to a number of known and unknown risks
and uncertainties, which may cause actual performance and financial
results to differ materially from the results expressed or implied,
including, but not limited to: the ability of the parties to
receive, in a timely manner, the necessary regulatory, court,
securityholder, stock exchange and other third-party approvals,
including but not limited to the receipt of applicable competition
approvals; the ability of the parties to satisfy, in a timely
manner, the other conditions to the closing of the Transaction; the
failure to realize the anticipated benefits or synergies of the
Transaction following closing due to integration issues or
otherwise and expectations and assumptions concerning, among other
things: customer demand for the combined company's services;
commodity prices and interest and foreign exchange rates; planned
synergies, capital efficiencies and cost-savings; applicable tax
laws; future production rates; the sufficiency of budgeted capital
expenditures in carrying out planned activities; and 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; the strength and operations of
the oil and natural gas production industry and related commodity
prices; the continuation or completion of third-party projects; the
regulatory environment and the ability to obtain required
regulatory approvals; fluctuations in operating results; lower than
anticipated results of operations and accretion from Pembina's
business initiatives; the ability of Pembina to raise sufficient
capital (or to raise capital on favourable terms) to complete
future projects and satisfy future commitments and certain other
risks detailed from time to time in Pembina's public disclosure
documents including, among other things, those detailed under the
heading "Risk Factors" in Pembina's and Veresen'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 respective
company's profiles. In addition, the closing of the
Transaction may not be completed, or may be delayed if the parties'
respective conditions to the closing of the Transaction, including
the timely receipt of all necessary regulatory approvals, are not
satisfied on the anticipated timelines or at all. Accordingly,
there is a risk that the Transaction will not be completed within
the anticipated time, on the terms currently proposed and disclosed
in this press release or at all.
In respect of the forward-looking statements and information
concerning the potential increase in Pembina's dividend following
completion of the Transaction, Pembina and Veresen have provided
such in reliance on certain assumptions that they believe are
reasonable at this time, including assumptions in respect of:
prevailing commodity prices, margins and exchange rates; that the
combined entities future results of operations will be consistent
with past performance and management expectations in relation
thereto; the continued availability of capital at attractive prices
to fund future capital requirements relating to existing assets and
projects, including but not limited to future capital expenditures
relating to expansion, upgrades and maintenance shutdowns; the
success of growth projects; future operating costs; that
counterparties to material agreements will continue to perform in a
timely manner; that there are no unforeseen events preventing the
performance of contracts; and that there are no unforeseen material
construction or other costs related to current growth projects or
current operations.
Accordingly, readers are cautioned that events or
circumstances could cause results to differ materially from those
predicted, forecasted or projected. Such forward-looking statements
are expressly qualified by the above statements. The
forward-looking statements contained in this document speak only as
of the date of this document. 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.
In this news release, Pembina has used the terms adjusted
EBITDA, adjusted cash flow and enterprise value, all of which are
non-GAAP measures. For more information about these non-GAAP
measures, 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.
The forward-looking statements contained in this document are
expressly qualified by this cautionary statement.
Non-GAAP Measures
Throughout this press release, Pembina has used the following
terms that are not defined by GAAP but are 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.
Adjusted cash flow from operating activities is a non-GAAP
measure which is defined as cash flow from operating activities
plus the change in non-cash operating working capital, adjusting
for current tax and share-based payment expenses, and deducting
preferred share dividends declared. Adjusted cash flow from
operating activities excludes preferred share dividends because
they are not attributable to common shareholders. The calculation
includes current tax and share-based payment expense as it allows
management to better assess the obligations discussed below.
Management believes that adjusted cash flow from operating
activities provides comparable information to investors for
assessing financial performance during each reporting period.
Management utilizes adjusted cash flow from operating activities to
set objectives and as a key performance indicator of the Company's
ability to meet interest obligations, dividend payments and other
commitments. Per common share amounts are calculated by dividing
cash flow from operating activities, or adjusted cash flow from
operating activities, as applicable, by the weighted average number
of common shares outstanding.
Total enterprise value is a non-GAAP measure which is
calculated by aggregating the market value of common shares,
preferred shares and convertible debentures at a specific date plus
senior debt less cash and cash equivalents. Management believes
that total enterprise value provides useful information to
investors to assess the overall market value of the Company and as
an input to calculate financial ratios. Management utilizes total
enterprise value to assess Pembina's growth.
SOURCE Pembina Pipeline Corporation