Inter Pipeline Fund Provides Update on Corridor Pipeline Capacity Expansion Project
CALGARY, ALBERTA--(Marketwire - Aug. 10, 2009) - Inter Pipeline Fund ("Inter Pipeline") (TSX:IPL.UN) today provided an update on the construction, cost, and timing of its $1.8 billion capacity expansion project on the Corridor pipeline system. This project commenced in 2006 and primarily involves the construction of a new 42-inch diameter diluted bitumen pipeline between the Athabasca Oil Sands Project's ("AOSP"s) bitumen mining operations near Fort McMurray, Alberta and the Scotford upgrading facility near Edmonton, Alberta.
The Corridor expansion project, Inter Pipeline's largest organic growth project to date, is designed to increase diluted bitumen capacity on the Corridor pipeline system from 300,000 barrels per day to 465,000 barrels per day. With the installation of additional pumping capacity, the 42-inch diameter pipeline can be further expanded to approximately 1.4 million barrels per day to accommodate future bitumen production from the Fort McMurray region.
David Fesyk, President and Chief Executive Officer of Inter Pipeline, commented "We are extremely pleased to have delivered the core construction elements of this project on time, under budget and with an exceptional overall safety performance record. These accomplishments took place during a period of unprecedented industry activity, clearly underscoring the success of this large-scale energy infrastructure project."
Mechanical Construction Complete
The Corridor expansion project required the installation of 467 kilometres of 42-inch diameter pipeline and 43 kilometers of 20-inch diameter pipeline. Four large-scale pump stations were also constructed as part of the project. Inter Pipeline is pleased to announce that the project is now mechanically complete and all facilities have been successfully dry-commissioned. Over 3.9 million man-hours have been invested in the project to date.
Remaining work includes minor remediation activities along the pipeline rights-of-way and wet-commissioning of new facilities when oil is initially delivered into the system. This work will continue into 2010.
Cost Exposure Eliminated
During development of the Corridor expansion project, Inter Pipeline was exposed to certain cost over-run risks related to the construction of the new pipelines and pump stations. Inter Pipeline is pleased to report that these activities were completed on schedule and approximately $100 million under budget. With the project mechanically complete, Inter Pipeline has materially eliminated its exposure to cost over-run risk.
Certain other project components, including product storage tanks, line fill and interest incurred during construction will be added to Corridor's rate base at their actual cost. As a result, Inter Pipeline has no cost exposure to these items. Shell Canada Limited is currently finalizing the construction of the product storage tanks at the bitumen mine site and the Scotford upgrader. Inter Pipeline expects to purchase these facilities in August 2009, and the line fill is expected to be acquired in 2010.
Total costs for the Corridor expansion project are currently estimated to be $1.8 billion, which is in line with the original project budget. This aggregate amount takes into account the under-budget performance of Inter Pipeline on directly incurred costs and an updated estimate of remaining non-controllable costs.
Firm Revenue Commencement Date
The Corridor expansion project is expected to enter into service in the latter part of 2010, at which time it will begin generating incremental revenue for Inter Pipeline under the terms of a 25 year ship-or-pay contract with shippers on the Corridor system. Inter Pipeline anticipates generating approximately $185 million annually in EBITDA from Corridor once the project costs are added to rate base.
The specific timing of revenue commencement is dependent on the completion of certain construction and commissioning activities related to the AOSP bitumen mining and upgrading expansion. In any event, Inter Pipeline confirms that Corridor expansion costs will be added to the rate base and begin generating revenue no later than January 1, 2011.
Upon revenue commencement, Inter Pipeline will be obligated to fund its approximately $450 million equity share of the Corridor rate base. Inter Pipeline expects to fund this requirement through capacity available under its existing revolving credit facility. In light of Inter Pipeline's successful $173 million equity issuance in June 2009 and proceeds generated under the new Distribution Reinvestment Plan, Inter Pipeline does not anticipate the need to raise additional equity capital from public markets in order to fund it's Corridor commitments.
Inter Pipeline Fund
Inter Pipeline is a major petroleum transportation, bulk liquid storage and natural gas liquids extraction business based in Calgary, Alberta, Canada. Structured as a publicly traded limited partnership, Inter Pipeline owns and operates energy infrastructure assets in western Canada, the United Kingdom, Germany and Ireland. Additional information about Inter Pipeline can be found at www.interpipelinefund.com.
Inter Pipeline is a member of the S&P/TSX Composite Index. Class A Units trade on the Toronto Stock Exchange under the symbol IPL.UN.
Only persons who are residents of Canada, or if partnerships, are Canadian partnerships, in each case for purposes of the Income Tax Act (Canada) are entitled to purchase and own Class A Units of Inter Pipeline.
Certain information set forth above may contain forward-looking statements that involve risks and uncertainties. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the cost, timing, financing, and expected future cash flows of the Corridor expansion. Such information, although considered reasonable by the General Partner of Inter Pipeline at the time of preparation, may later prove to be incorrect and actual results may differ materially from those anticipated in the statements made. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions. Such risks and uncertainties include, but are not limited to, risks associated with operations, such as loss of markets, regulatory matters, environmental risks, industry competition and the ability to access sufficient capital from internal and external sources. You can find a discussion of those risks and uncertainties in Inter Pipeline's securities filings at www.sedar.com. Except to the extent required by applicable securities laws and regulations, Inter Pipeline assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary note.
All dollar values are expressed in Canadian dollars unless otherwise noted.
Non-GAAP Financial Measures
Certain financial measures referred to in this news release are not measures recognized by GAAP. These non-GAAP financial measures do not have standardized meanings prescribed by GAAP and therefore may not be comparable to similar measures presented by other entities. Investors are cautioned that these non-GAAP financial measures should not be construed as alternatives to other measures of financial performance calculated in accordance with GAAP.
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