CALGARY, AB, Feb. 18, 2021 /CNW/ - Inter Pipeline
Ltd. ("Inter Pipeline") (TSX: IPL) announced its financial and
operating results for the three and twelve-month periods ended
December 31, 2020.
2020 Highlights
- Annual funds from operations (FFO) totalled $792 million
- Oil sands transportation business generated record annual FFO
of $616 million
- Net income of $359 million
- Declared cash dividends of $336
million, or $0.79 per
share
- Annual payout ratio* of 42 percent
- Completed the divestiture of the majority of our European bulk
liquid storage business
- Announced acquisition of Milk River pipeline system
in exchange for Empress II and V straddle plants
- Completed $180 million Central
Alberta pipeline system expansion, including a 75 km pipeline
and 260,000 barrels of additional storage
- Materially advanced construction and readiness programs of the
Heartland Petrochemical Complex
- Closed a new $1 billion committed credit facility and
successfully issued $700 million of senior unsecured
medium-term notes
Fourth Quarter 2020 Highlights
- Quarterly FFO of $204 million
- Total pipeline throughput volume averaged 1,486,700 barrels per
day (b/d)
- Bulk liquid storage utilization rates averaged 99 percent for
the quarter
- Quarterly payout ratio* of 25 percent
- Declared cash dividends of $52
million, or $0.12 per
share
* Please refer to
the "Non-GAAP Financial Measures" section of the
MD&A.
|
COVID-19 Response
Inter Pipeline continues to align its protective measures with
the requirements and recommendations from both the government and
public health authorities. The wellbeing of Inter Pipeline's
workforce and the continued operation and development of the
business remains the top priority.
"In 2020, Inter Pipeline was focused on the health and safety of
our workforce, our ongoing build of the Heartland Petrochemical
Complex, and completing several transactions to secure significant
financial flexibility to address the considerable challenges
brought on by the COVID-19 pandemic," remarked Christian Bayle, President and Chief Executive
Officer. "As we enter 2021, Inter Pipeline is well positioned to
provide meaningful shareholder value through our substantial growth
program, disciplined cost management and highly resilient asset
base."
Financial Performance
For 2020, Inter Pipeline generated funds from operations of
$792 million, nine percent lower than
2019. Inter Pipeline's oil sands transportation business
demonstrated exceptional stability, yielding record annual FFO. The
bulk liquid storage business also produced record FFO in 2020, with
European storage at near full capacity for the year. However, the
pandemic's dramatic impact on global energy supply-demand balances,
and correspondingly on energy pricing, had a negative impact on our
NGL processing and conventional oil pipeline businesses. Weaker NGL
frac spread pricing as well as lowered production volumes from
conventional oil producers directly impacted financial results in
these two business segments.
Fourth quarter funds from operations in 2020 totaled
$204 million, down six percent from
the comparable quarter of 2019. During the final quarter of 2020,
Inter Pipeline's oil sands business remained consistent year over
year, while NGL processing improved due to higher paraffinic and
Cochrane propane-plus frac spread
pricing. FFO from the bulk liquid storage business decreased from
the fourth quarter in 2019 as a result of Inter Pipeline divesting
the majority of its European assets in November 2020.
For the fourth quarter and full year 2020, Inter Pipeline's four
business segments generated funds from operations as follows:
Funds from
operations
(millions)
|
Three Months
Ended
December 31, 2020
|
Twelve Months
Ended
December 31, 2020
|
Oil sands
transportation
|
$154.0
|
$615.5
|
NGL
processing
|
$58.5
|
$189.7
|
Conventional oil
pipelines
|
$34.5
|
$128.9
|
Bulk liquid
storage
|
$23.9
|
$129.2
|
Overall corporate costs, including general and administrative,
financing and current tax expenses for the three and twelve months
ended December 31, 2020 were
$67 million and $271 million, respectively.
Cash Dividends
Dividend payments to shareholders in 2020 were $336 million or $0.79 per share, resulting in an annual payout
ratio of 42.4 percent. In the fourth quarter, Inter Pipeline
declared dividends of $52 million, or
$0.12 per share, resulting in a
quarterly payout ratio of 25.2 percent.
Inter Pipeline's monthly dividend rate is $0.04 per share, or $0.48 per share on an annualized basis.
Oil Sands Transportation
Inter Pipeline's oil sands transportation business generated
record financial results in 2020. Annual funds from operations were
$615.5 million, an increase of
$11.9 million compared to the
full-year 2019. This increase was as a result of higher capital fee
revenue from the Cold Lake and
Polaris pipeline systems. This business generates cash flow from a
variety of long-term, cost-of-service contracts and is not
materially impacted by throughput volume fluctuations.
In the fourth quarter of 2020, funds from operations were
$154.0 million, consistent with the
same period in 2019. Average throughput volume was 1,321,500 b/d in the fourth quarter of 2020
compared to 1,324,900 in Q4 2019.
Volume
(000 b/d)
|
Three Months
Ended
December 31, 2020
|
Twelve Months
Ended
December 31, 2020
|
Cold Lake
|
621.2
|
621.3
|
Corridor
|
422.1
|
374.3
|
Polaris
|
278.2
|
244.7
|
NGL Processing
NGL processing business generated annual funds from operations
of $189.7 million in 2020, compared
to $236.6 million in 2019. These
results were primarily impacted by depressed frac-spread pricing in
both our natural gas and offgas processing operations, offset
slightly by higher throughput volumes.
For 2020, Inter Pipeline's three straddle facilities produced
108,300 b/d of ethane and
propane-plus, which was consistent with 2019 levels. Annual sales
volume from the Redwater Olefinic Fractionator improved year over
year to a record 34,900 b/d,
representing a nine percent increase compared to 2019.
Funds from operations from this business were $58.5 million
for the fourth quarter 2020, an increase of $8.2 million from the same quarter in 2019. This
increase was primarily driven by improved paraffinic and
propane-plus frac spread pricing during quarter and lower operating
costs.
Inter Pipeline's Cochrane and
Empress straddle facilities
produced 91,200 b/d of propane-plus
and ethane during the quarter. Average sales volume from the
Redwater Olefinic Fractionator for the fourth quarter of 2020 was
36,500 b/d, an increase of
approximately eight percent compared to the same period in
2019.
Frac-spread (USD/USG)
|
Three Months
Ended
December 31, 2020
|
Twelve Months
Ended
December 31, 2020
|
Cochrane
propane-plus
|
$0.43
|
$0.35
|
Offgas
Olefinic*
|
$0.65
|
$0.55
|
Offgas
Paraffinic*
|
$0.30
|
$0.21
|
*Price after
applicable benchmark adjustment
|
Heartland Petrochemical Complex (HPC)
Despite the extraordinary complexities created by the global
pandemic, Inter Pipeline safely and successfully concluded HPC's
third year of construction with all major milestones met. The
project continues to track the revised schedule and cost estimate.
The propane dehydrogenation facility is expected to be
substantially mechanically complete by May
2021, and the polypropylene facility by the end of the year.
The full HPC in-service date remains early 2022, supported by
strong business and operations readiness programs.
In the fourth quarter of 2020, Inter Pipeline invested
approximately $270 million on the HPC
project, bringing the total capital investment to approximately
$3.2 billion.
Significant work performed at site in 2020 included installation
of remaining modules and major equipment. At the propane
dehydrogenation facility, work has transitioned from general
construction to systems completion. As systems are completed, they
are being turned over to the start-up and commissioning
teams. At the polypropylene facility, notable 2020
installations included completion of the reactor structure,
pelletizer and flare stack. In addition, the railyard was completed
which will enable HPC to ship polypropylene to various North
American markets.
The process to secure a partner to purchase a material interest
in the Heartland Petrochemical Complex is ongoing and is expected
to conclude in the first half of 2021. While there can be no
certainty that a definitive agreement will be reached, a partner
would benefit from joining a well-developed, world-scale
petrochemical project that has substantial commercial
advantages.
Conventional Oil Pipelines
Results from our conventional oil pipeline business were
impacted by lower global energy prices that resulted in lowered
production volumes and reduced marketing activities. Funds from
operations for this business were $128.9
million, a decrease of $39.1
million compared to 2019.
Year over year, the conventional oil pipeline systems reported
an average volume of 161,600 b/d in
2020, down 13 percent from 2019.
For the fourth quarter of 2020, funds from operations were
$34.5 million, a $10.1 million decrease from FFO of $44.6 during the comparable quarter in 2019.
Average throughput volume for the fourth quarter of 2020 was
165,200 b/d, compared to 189,300 b/d during the same period in 2019.
In the first half of 2020, the 75-kilometre Viking Connector
pipeline and 260,000-barrel storage tank expansion project was
placed into service on time and on budget. This $180 million investment concluded the first
two-phases of Inter Pipeline's Central
Alberta pipeline system and provides enhanced access to the
Edmonton market hub and additional
market flexibility for producers.
In the third quarter of 2020, Inter Pipeline reached an
agreement to acquire the Milk River pipeline system from Plains
Midstream Canada ULC in exchange for its 100 percent ownership
interest in the Empress II and 50 percent ownership interest in the
Empress V straddle plants. Inter Pipeline will also receive cash
proceeds of $35 million. Closing of
this transaction is expected to occur in the first half of 2021,
following completion of customary conditions.
Bulk Liquid Storage
In the fourth quarter 2020, Inter Pipeline completed the
agreement to divest the majority of its European bulk liquid
storage business to the CLH Group for approximately $727 million, before closing adjustments. Inter
Pipeline retains eight terminals in Sweden and Denmark, comprising of approximately 19
million barrels of storage capacity.
The bulk liquid storage business reported record 2020 financial
results, benefitting from nearly full capacity utilization during
the year. With annual funds from operations of $129.2 million, this business posted a
$14.2 million increase compared to
2019.
Funds from operations for the quarter were $23.9 million, a decrease of $6.9 million over the same period in 2019. This
result was impacted by the November 12,
2020 closing of the bulk liquid storage sale. Overall, the
average storage utilization rate during the fourth quarter
increased to 99 percent compared to 93 percent for the same period
a year ago.
Financing Activity
As at December 31, 2020, Inter
Pipeline had approximately $2.5
billion of available capacity on its committed revolving
credit facilities. Inter Pipeline also continues to take additional
measures to ensure balance sheet flexibility and capacity is
available to fund near term capital expenditures, including
remaining costs for the Heartland Petrochemical Complex. In June of
2020, Inter Pipeline successfully issued $700 million of 7-year senior unsecured
medium-term notes to reduce indebtedness under its $1.5 billion revolving credit facility and to
repay $500 million of medium-term
notes that matured in July 2020.
In February 2021, Inter Pipeline
reduced the pricing margin and extended the maturity of its
$1 billion credit facility to
December 2022. Concurrently, Inter
Pipeline also reduced the borrowing costs associated with its
$500 million term loan facility,
which matures in August 2022.
At year-end, Inter Pipeline had a consolidated net debt to total
capitalization ratio of 42.2 percent, significantly below the
maximum covenant level of 65 percent.
Inter Pipeline maintains investment grade credit ratings.
Standard & Poor's and DBRS Limited have assigned Inter Pipeline
a credit rating of BBB- (negative outlook) and BBB (stable trend),
respectively.
Conference Call and Webcast
Inter Pipeline will hold its year end and fourth quarter 2020
financial and operating results conference call and webcast on
February 19, 2021 at 11:00 a.m. MT (1:00 p.m.
ET) for interested shareholders, analysts and media
representatives.
To participate in the conference call, please dial 1 (888)
231-8191. The conference ID is 5296602. A replay of the conference
call will be available until February 26,
2021 by calling 1 (855) 859-2056. The code for the replay is
5296602.
Select Financial
and Operating Highlights
|
(millions, except
voume, per share and % amounts)
|
|
|
Three Months Ended
December 31
|
Years Ended December
31
|
|
|
|
|
|
Operating
Results
|
2020
|
2019
|
2020
|
2019
|
Pipeline volume (000s
b/d)
|
|
|
|
|
Oil sands
transportation
|
|
1,321.5
|
|
1,324.9
|
|
1,240.3
|
|
1,216.7
|
Conventional oil
pipelines
|
|
165.2
|
|
189.3
|
|
161.6
|
|
186.3
|
Total pipeline
volume
|
|
1,486.7
|
|
1,514.2
|
|
1,401.9
|
|
1,403.0
|
|
|
|
|
|
NGL processing volume
(000s b/d)(1)
|
|
|
|
|
Natural gas processing
- Ethane
|
|
50.3
|
|
59.8
|
|
63.8
|
|
63.4
|
Natural gas processing
- Propane-plus
|
|
40.9
|
|
41.7
|
|
44.5
|
|
44.2
|
Redwater Olefinic
Fractionator sales volume
|
|
36.5
|
|
33.7
|
|
34.9
|
|
31.9
|
Total NGL processing
volume
|
|
127.7
|
|
135.2
|
|
143.2
|
|
139.5
|
|
|
|
|
|
Bulk liquid storage
capacity utilization
|
99%
|
93%
|
98%
|
87%
|
|
|
|
|
|
Financial
Results
|
|
|
|
|
Revenue
|
$
|
|
624.3
|
$
|
|
644.0
|
$
|
|
2,400.5
|
$
|
|
2,535.3
|
Funds from
operations
|
|
|
|
|
Oil sands
transportation
|
$
|
|
154.0
|
$
|
|
153.8
|
$
|
|
615.5
|
$
|
|
603.6
|
NGL
processing
|
$
|
|
58.5
|
$
|
|
50.3
|
$
|
|
189.7
|
$
|
|
236.6
|
Conventional oil
pipelines
|
$
|
|
34.5
|
$
|
|
44.6
|
$
|
|
128.9
|
$
|
|
168.0
|
Bulk liquid
storage(2)
|
$
|
|
23.9
|
$
|
|
30.8
|
$
|
|
129.2
|
$
|
|
115.0
|
Corporate
costs
|
$
|
|
(66.6)
|
$
|
|
(62.7)
|
$
|
|
(271.1)
|
$
|
|
(250.3)
|
Total funds from
operations
|
$
|
|
204.3
|
$
|
|
216.8
|
$
|
|
792.2
|
$
|
|
872.9
|
Per
share(3)
|
$
|
|
0.48
|
$
|
|
0.52
|
$
|
|
1.85
|
$
|
|
2.12
|
Net income
|
$
|
|
168.7
|
$
|
|
100.5
|
$
|
|
359.0
|
$
|
|
539.0
|
Per share – basic and
diluted
|
$
|
|
0.39
|
$
|
|
0.24
|
$
|
|
0.84
|
$
|
|
1.31
|
Adjusted
EBITDA(3)
|
$
|
|
232.3
|
$
|
|
263.4
|
$
|
|
961.9
|
$
|
|
1,051.2
|
|
|
|
|
|
Supplemental
Financial Information
|
|
|
|
|
Cash dividends
declared
|
$
|
|
51.6
|
$
|
|
179.3
|
$
|
|
335.7
|
$
|
|
706.4
|
Per
share(4)
|
$
|
|
0.120
|
$
|
|
0.428
|
$
|
|
0.788
|
$
|
|
1.710
|
|
|
|
|
|
Payout
ratio(3)
|
25.2%
|
82.7%
|
42.4%
|
80.9%
|
|
|
|
|
|
Capital
expenditures
|
|
|
|
|
Growth(3)
|
$
|
|
302.4
|
$
|
|
414.8
|
$
|
|
1,095.2
|
$
|
|
1,524.0
|
Sustaining(3)
|
$
|
|
20.5
|
$
|
|
25.5
|
$
|
|
50.3
|
$
|
|
69.6
|
Total capital
expenditures
|
$
|
|
322.9
|
$
|
|
440.3
|
$
|
|
1,145.5
|
$
|
|
1,593.6
|
|
|
(1)
|
Empress V NGK
production reported on a 100% basis.
|
(2)
|
Utilization for
the European divestiture group is only included for periods up to
November 12, 2020.
|
(3)
|
Please refer to
the NON-GAAP FINANCIAL MEASURES section.
|
(4)
|
Dividends to
shareholders per share are calculated based on the number of common
shares outstanding at each record date.
|
About Inter Pipeline Ltd.
Inter Pipeline is a major petroleum transportation and natural
gas liquids processing business based in Calgary, Alberta, Canada. Inter Pipeline owns
and operates energy infrastructure assets in western Canada and is building the Heartland
Petrochemical Complex — Canada's
first integrated propane dehydrogenation and polypropylene
facility. Inter Pipeline is a member of the S&P/TSX 60 Index
and its common shares trade on the Toronto Stock Exchange under the
symbol IPL. www.interpipeline.com
Contact Information
Investor Relations:
Jeremy
Roberge
Vice President, Finance and Investor Relations
Email: investorrelations@interpipeline.com
Tel: 403-290-6015 or 1-866-716-7473
Media Relations:
Breanne
Oliver
Director, Corporate Communications
Email: mediarelations@interpipeline.com
Tel: 587-475-1118 or 1-866-716-7473
Disclaimer
Certain information contained herein may constitute
forward-looking statements and information (collectively,
"forward-looking statements") within the meaning of applicable
securities legislation that involve known and unknown risks,
assumptions, uncertainties and other factors. Forward-looking
statements often contain terms such as "may", "will", "should",
"anticipate", "expects" and similar expressions. Readers are
cautioned not to place undue reliance on forward-looking
statements, including, but not limited to, statements regarding: 1)
the stability of Inter Pipeline's business and funds from
operations and the ability to pay dividends to its shareholders at
current levels; 2) that Inter Pipeline's cash flow from a variety
of long-term, cost-of-service contracts is not materially impacted
by throughput volume fluctuations; 3) financial forecasts or
anticipated financial performance; 4) timing for completion,
estimated costs and anticipated benefits of ongoing capital or
growth projects (including the Heartland Petrochemical Complex); 5)
the timing for conclusion of the process to secure a partner to
purchase a material interest in the Heartland Petrochemical Complex
and that a partner would benefit from joining a well-developed,
world-scale petrochemical project that has substantial commercial
advantages; 6) the Central Alberta
pipeline system's ability to provide new enhanced access to the
Edmonton market hub and additional
market flexibility for producers; 7) the value of the proceeds from
the Milk River transaction and the divestiture of European bulk
liquids storage business, and the expected timing for the closing
of the Milk River transaction and the expected benefits of each
transaction; 8) Inter Pipeline's ability to take additional
measures to ensure balance sheet flexibility and capacity is
available to fund near term capital expenditures, including
remaining costs for the Heartland Petrochemical Complex; and 9) the
timing for holding our quarterly conference call. Such statements
reflect the current views of Inter Pipeline with respect to future
events and are subject to certain risks, uncertainties and
assumptions that could cause Inter Pipeline's results to differ
materially from those expressed in the forward-looking statements.
Factors that could cause actual results to vary from
forward-looking statements or may affect the operations,
performance, development and results of Inter Pipeline's businesses
include, among other things, risks and assumptions associated with
operations, such as Inter Pipeline's ability to successfully
implement its strategic initiatives and achieve the expected
benefits therefrom, including the further development of its
projects and facilities; assumptions concerning operational
reliability; the potential delays of and costs of overruns on
construction projects and future expansions of Inter Pipeline's
assets; the realization of the anticipated benefits of transactions
and other projects Inter Pipeline is developing; the timing,
financing and completion of transactions and other projects Inter
Pipeline is developing; risks inherent in Inter Pipeline's Canadian
and foreign operations; risks associated with the failure to
finalize formal agreements with counterparties in certain
circumstances where letters of intent or similar agreements have
been executed and announced by Inter Pipeline; Inter Pipeline's
ability to generate sufficient cash flow from operations to meet
its current and future obligations; Inter Pipeline's ability to
maintain its current level of cash dividends to its shareholders;
Inter Pipeline's ability to access sources of debt and equity
capital; Inter Pipeline's ability to make capital investments and
the amounts of capital investments; Inter Pipeline's ability to
maintain its credit ratings; the availability and price of labour,
equipment and construction materials; the status, credit risk and
continued existence of counterparties having contracts with Inter
Pipeline and its affiliates and their performance of such
contracts; competitive factors, pricing pressures and supply and
demand in the oil and gas transportation, natural gas liquids
processing and storage industries; increases in maintenance,
operating or financing costs; availability of adequate levels of
insurance; difficulty in obtaining necessary regulatory approvals
or land access rights and maintenance of support of such approvals
and rights; risks of war, hostilities, civil insurrection,
instability and political and economic conditions in or affecting
countries in which Inter Pipeline and its affiliates operate;
severe weather conditions and risks related to climate change;
terrorist threats; risks associated with technology; availability
of energy commodities; volatility of and assumptions regarding
prices of energy commodities; fluctuations in currency and interest
rates; changes in laws and regulations, including environmental,
regulatory and taxation laws, and the interpretation of such
changes to Inter Pipeline's business; the risks associated with
existing and potential or threatened future lawsuits, legal
proceedings and regulatory actions against Inter Pipeline and its
affiliates; general economic and business conditions; the effects
and impacts of the COVID-19 pandemic as further described below,
the extent and duration of which are uncertain at this time, on
Inter Pipeline's business and general economic and business
conditions and markets, and such other risks and uncertainties
described from time to time in Inter Pipeline's reports and filings
with the Canadian securities authorities.
In particular and without limitation of the foregoing, the
outbreak of COVID-19 has had a negative impact on global financial
conditions. Inter Pipeline cannot accurately predict the impact
COVID-19 will have on its ability to execute its business plans in
response to government public health efforts to contain COVID-19
and to obtain financing or third parties' ability to meet their
contractual obligations with Inter Pipeline, including due to
uncertainties relating to the ultimate geographic spread of the
virus, the severity of the disease, the duration of the outbreak,
and the length of travel and quarantine restrictions imposed by
governments of affected jurisdictions; and future demand for Inter
Pipeline's services. In the event that the prevalence of COVID-19
continues to increase (or fears in respect of COVID-19 continue to
increase), governments may increase regulations and restrictions
regarding the flow of labour or products, and travel bans, and
Inter Pipeline's operations, suppliers and customers, and ability
to advance its projects or carry out its ongoing business plan,
could be adversely affected. In particular, should any employees or
consultants of Inter Pipeline become infected with COVID-19 or
similar pathogens, it could have a material negative impact on the
Inter Pipeline's operations, prospects, business, financial
condition and results of operations.
Further, without limitation of the foregoing, future dividend
payments, if any, and the level thereof is uncertain, as Inter
Pipeline's dividend policy and the funds available for the payment
of dividends from time to time is dependent upon, among other
things, available funds from operations, financial requirements for
Inter Pipeline's operations and the execution of its growth
strategy, fluctuations in working capital and the timing and amount
of capital expenditures, debt service requirements and other
factors beyond Inter Pipeline's control. The ability of Inter
Pipeline to pay dividends is subject to applicable laws (including
the satisfaction of the solvency test contained in applicable
corporate legislation) and contractual restrictions contained in
the instruments governing its indebtedness, including its credit
facilities.
Many of the risk factors and other assumptions related to the
forward-looking information are discussed further in Inter
Pipeline's most recent MD&A and Annual Information Form, and
other documents it files from time to time. You can find these
documents by referring to Inter Pipeline's profile on SEDAR
(www.sedar.com). As actual results could vary significantly from
the forward-looking information, you should not put undue reliance
on forward-looking information. Such information, although
considered reasonable by 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
are deemed to be forward-looking statements. The forward-looking
statements contained in this news release are made as of the date
of this document, and, except to the extent required by applicable
law, 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.
Non-GAAP Financial Measures
EBITDA, consolidated net debt to total capitalization, FFO
per share and payout ratio 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 an
alternative to other measures of financial performance calculated
in accordance with GAAP such as net income. EBITDA is expressed as
net income before financing charges, income taxes, depreciation and
amortization; adjusted EBITDA also includes additional adjustments
for loss (gain) on disposal of assets, non-cash expense (recovery),
and non-cash financing charges. These additional adjustments are
made to exclude various non-cash items, or items of an unusual
nature that are not reflective of ongoing operations. These
adjustments are also made to better reflect the historical
measurement of EBITDA used in the investment community as an
approximate measure of an entity's operating cash flow based on
data from its income statement. See our most recent MD&A for an
example of the reconciliation of EBITDA net income. Consolidated
net debt to total capitalization is disclosed and discussed in the
Financial Covenant table of the "Liquidity and Capital Resources"
section of our most recent MD&A. This measure in combination
with other measures, is used by the investment community to assess
the financial strength of the business. FFO is a financial measure
that Inter Pipeline uses in managing its business and in assessing
future cash requirements that impact the determination of future
dividends to shareholders. Inter Pipeline expresses FFO as cash
provided by operating activities less net changes in non-cash
working capital. The impact of net change in non-cash working
capital is excluded in the calculation of FFO primarily to
compensate for the seasonality of working capital throughout the
year. Certain Inter Pipeline revenue contracts dictate an exchange
of cash that differs, on a monthly basis, from the recognition of
revenue. Within a 12-month calendar year, there is minimal
variation between revenue recognized and cash exchanged. Inter
Pipeline therefore excludes the net change in non-cash working
capital in its calculation of FFO to mitigate its quarterly impact.
The intent is to not skew the results of Inter Pipeline in any
quarter for exchanges of cash, but to focus the results on cash
that is generated in any reporting period. FFO per share is
calculated on a weighted average basis using basic common shares
outstanding during the period. This measure, in combination with
other measures, is used by the investment community to assess the
source, sustainability and cash available for dividends. Payout
ratio is calculated by expressing dividends declared for the period
as a percentage of FFO. This measure, in combination with other
measures, is used by the investment community to assess the
sustainability of the current dividends.
Credit Ratings
Credit ratings are intended to provide investors with an
independent measure of credit quality of an issue of securities.
Credit ratings are not recommendations to purchase, hold or sell
securities and do not address the market price or suitability of a
specific security for a particular investor. There is no assurance
that any rating will remain in effect for any given period of time
or that any rating will not be revised or withdrawn entirely by a
rating agency in the future if, in its judgment, circumstances so
warrant.
Currency
All dollar values are expressed in Canadian dollars unless
otherwise noted.
SOURCE Inter Pipeline Ltd.