Pembina Pipeline Corp. Ordinary Shares (Canada)

At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on February 28, 2025. I would now like to turn the conference over to Dan Tucanol, VP of Capital Markets. Please go ahead.

Thank you, Konstantin. Good morning, everyone. Welcome to Pembina's conference call and webcast to review highlights from the fourth quarter of 2024. On the call today, we have Scott Burrows, President and Chief Executive Officer, and Cameron Goldate, Senior Vice President and Chief Financial Officer, along with other members of Pembina's leadership team, including Jared Sprout, Janet LaDuca, Stu Taylor, Ava Bishop, and Chris Sherman. I would like to remind you that some of the comments made today may be forward-looking in nature. and are based on Pemina's current expectations, estimates, judgments, and projections. Forward-looking statements we may express or imply today are subject to risks and uncertainties, which could cause actual results to differ materially from expectations. Further, some of the information provided refers to non-GAAP measures. To learn more about these forward-looking statements and non-GAAP measures, please see the company's management's discussion and analysis dated February 27, 2025, for the period ended December 31, 2024, as well as the press release Pemina issued yesterday, which are all available online at Pemina.com and on both Cedar Plus and EDGAR. I will now turn things over to Scott.

Thanks, Dan. We were pleased yesterday to report our fourth quarter results, which included quarterly earnings of $572 million, record quarterly adjusted EBITDA of $1.254 billion, and record quarterly adjusted cash flow from operating activities of $922 million or $1.59 per share. We also delivered 2024 full-year earnings of $1.874 billion, record annual adjusted EBITDA of $4.408 billion, and record full-year adjusted cash flow from operating activities of $3.265 million or $5.70 per share. A record financial year reflects the positive impact of recent acquisitions, growing volumes in Western Canadian sedimentary basin, and a strong contribution from the marketing business. In addition to strong financial and operational results, 2024 was marked by several accomplishments that highlighted the successful execution of Pemina's strategy and our focus on strengthening our existing franchise, increasing our exposure to lighter hydrocarbons and resilient end-use markets, and accessing global market pricing for Canadian energy products. Highlights included growing our presence in resilient Northeast U.S. natural gas and NGL markets by fully consolidating ownership of Alliance and Oxable, furthering global market access for Canadian natural gas producers by reaching a positive FID on the Cedar LNG project, adding capital efficient, timely, and certain capacity to accommodating growing Western Canadian sedimentary basin production through completion of the Phase 8 Peace Pipeline expansion, supporting growth-focused Montney and DuVernay area customers with tailored solutions through two PGI transactions that included an expected $700 million gross to PGI funding for further infrastructure development that will be underpinned by long-term contracts and capitalizing on long-term stable demand for ethane from Alberta's growing petrochemical industry by entering a 50,000 barrel per day ethane supply agreement with Dow. We also continued commercial successes across the business in 2024, including executing incremental contracts or renewing contracts for approximately 170,000 VOE per day of pipeline transportation, primarily on Alliance and Peace Pipeline, as well as 25,000 barrels per day on the Nipissi Pipeline. Over 6 million barrels of storage at the Edmonton terminals, approximately 200 million cubic feet per day of gas processing, primarily at Musroe, Patterson Creek and K3, and additional fractionation services across the Redwater complex. On the major project front, we continue to progress various in-flight construction projects expected to enter service in 2026, including the RFS-4 expansion, the Wapiti plant expansion, and the K-3 cogeneration facility. We are also looking forward to the start of construction of Cedar LNG's floating vessel in mid-2025. Further, we are continuing to progress infrastructure solutions to meet Pemina's commitment under the 50,000 barrel per day ethane supply agreement with Dow. Pemina is seeking to fulfill its commitment in the most capital efficient manner possible and is evaluating a portfolio of opportunities, including the addition of a de-ethanizer tower at RFS3 within the Redwater complex. By leveraging its existing assets and capabilities, Pemina now expects the total capital investment required to be less than $300 million below the low end of the range previously communicated, resulting in improved capital efficiency as there is no change in the forecasted adjusted EBITDA contribution associated with the Dow Supply Agreement. And we are actively developing additional expansion opportunities to support growing demand for services on our conventional pipelines. These include the Taylor to Gordondale project, which is currently in the phase of the Canada Energy Regulators process, an expansion of the East Pipeline system to add up to approximately 200,000 barrels per day of capacity to its market delivery pipeline from Fox Creek to the Mayo, and additional expansions to support volume growth in Northeast BC. Finally, we were excited to announce yesterday two new business updates. The first was that Pemina has entered into agreements for a 50% interest in the Greenlight Electricity Centre Limited Partnership, which is developing a gas-fired combined-cycle power generation facility to be located in Alberta's industrial heartland on land owned by Pemina, adjacent to its redwater complex. The Greenlight Electricity Centre has been, and will continue to be, developed by Connecticut Asset Management. Greenlight is in active discussions with data centre customers to commercially underpin the project and believes the lands within the Alberta industrial heartland are well-suited given their proximity to transmission and utility infrastructure. The government in Alberta has set an ambitious target of attracting $100 billion in data center investments by 2030, encouraging developers to bring their own power. Pemina and Kineticorps are committed to supporting this vision by delivering reliable and cost-effective power solutions at scale to data centers looking to locate in Alberta. Along with our direct investment in Greenlight, Pemina is well-positioned to leverage its existing and future value chain to further support the project. The proximity of Alliance Pipeline offers potential accretive expansion opportunity to provide natural gas supply into Greenlight's electricity center, and the potential future development of Alberta Carbon Grid may provide a future emissions reduction solution. This is a great example of a project we had envisioned when we first announced the development of the Alberta Carbon Grid and the Pemina Low Carbon Complex. We are excited to be partnering with KinetiCorps to extend our value chain even further to provide power to a promising new Alberta-based data center industry. The second announcement was that Pemina has secured the sole extraction rights from the Yellowhead Main Line, a 1 billion cubic feet per day natural gas delivery pipeline that is under construction by ATCO. Pemina is currently advancing engineering of an up to 500 million cubic feet per day straddle facility at which up to 200, or sorry, 25,000 barrels per day of NGL mix would be extracted from the natural gas stream and transported to Fort Saskatchewan, Alberta for fractionation and sale. The straddle facility would be located on Pemina's own land and complement her already significant experience building and operating liquid extraction facilities that include approximately 1.8 billion cubic feet per day of extraction capacity through our empress and younger facilities. The many successes of 2024 have been followed by continued momentum into early 2025. Together, they reflect Pemina's leading position in the heart of the WCSB and the many opportunities available to enhance and expand our services alongside a growing Canadian energy industry. I will now turn things over to Cam to discuss in more detail the financial highlights for the fourth quarter and full year.

Thanks, Scott. As Scott noted, Pemina reported record fourth quarter adjusted EBITDA of $1.254 billion. This represents a 21% increase over the same period in the prior year. In pipelines, factors impacting the quarter primarily included a higher contribution from Alliance due to increased ownership following the Alliance Oxable acquisition and higher demand for seasonal contracts, higher revenue related to the timing of capital recovery recognition, higher volumes on the NIPC pipeline, higher contracted volumes on a peace pipeline system and contractual emplacement adjustments on tolls, which were largely offset by earlier recognition of taker pay deferred revenue during the first half of 2024. And finally, lower net revenue on the coaching pipeline, largely due to lower firm tolls and lower interruptible volumes during the period. In facilities, factors impacting the quarter included the inclusion of OxAble following the OxAble Alliance acquisition, and a higher contribution from PGI due to higher revenue associated with oil batteries acquired in the fourth quarter of 2024, as well as higher volumes at certain PGI assets and the timing of capital recovery recognition. In marketing and new ventures, fourth quarter results reflect the net impact of higher net revenue from contracts with customers due to increased ownership interest in Oxable, higher NGL margins, and lower realized gains on commodity-related derivatives. Finally, in the corporate segment, fourth quarter results were higher than the prior period due to lower incentive costs. Earnings in the fourth quarter were $572 million. This represents an 18% decrease over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, the decrease in earnings in the fourth quarter was primarily due to the net impact of the reversal of the previous impairment related to the NIPC pipeline, which impacted the fourth quarter of 2023. unrealized gains recognized by PGI on interest rate derivative financial instruments compared to unrealized losses in 2023, unrealized losses on commodity-related derivatives compared to unrealized gains in the prior period, unrealized gains on interest rate derivative financial instruments recognized by CEDAR LNG, and higher interest expense and higher income tax expense. Total volumes were 3.67 million barrels per day in the fourth quarter. This represents an increase of 6% over the same period in the prior year, reflecting the net impact of the Alliance of Sable acquisition, the reactivation of the Nipissi pipeline, lower volumes on the peace pipeline system due to earlier recognition of take or pay deferred revenue in the first half of 2024, which more than offset the increase from higher contracted volumes and lower interruptible volumes on the Cochin pipeline. The fourth quarter contributed to full year results that included earnings of $1.874 billion, record adjusted EBITDA of $4.408 billion, which was 15% higher than in 2023, cash flow from operating activities of $3.214 billion, and record adjusted cash flow from operating activities of $3.265 billion. Thanks to strong results in 2024, Pemina generated meaningful free cash flow, which is allocated to strengthening the balance sheet and returning capital to shareholders by increasing the common share dividend by 3.4%. At December 31st, 2024, based on the trailing 12 months, the ratio of proportionally consolidated debt to adjusted EBITDA was 3.5 times. Notably, this ratio reflects only three quarters of contribution from the increased ownership in Alliance and Oxable, but all of the debt associated with that transaction. Our leverage remains at the low end of our targeted range, reflecting our strong balance sheet and supporting a strong BBB credit rating. I'll now turn things back to Scott.

Thanks, Cam. In closing, I'll once again say how excited we are about the opportunities ahead. We believe Pemina is best positioned to benefit from the growth we are seeing and expect to continue to see in the WCSB. Our extensive network of strategically placed assets provides a full suite of midstream and transportation services across all commodities, natural gas, NGLs, condensate, and crude oil. And we are confident that our customer service offering provides unmatched optionality and flexibility that our customers value. We have an abundance of opportunities ahead of us and a clear pathway to growth with approximately $4 billion of secured projects currently under construction and more than $4 billion of additional projects in various stages of development. We are looking forward to the year ahead and continuing to share our progress with you. Thank you for joining us this morning. And can you please open up the line for questions?

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of AJ O'Donnell from TPH. Your line is now open.

AJ O'Donnell, TPH, Hey, morning, everyone. I was just hoping to maybe start on the rights to the NGLs off the Yellowhead Mainline project. Trying to think about what kind of commercial and growth opportunities that might create for you. trying to think of this maybe along the lines of, you know, additional frac capacity or export dock capacity.

Good morning, AJ. Jared here. Thanks for the question. So, yeah, like Scott mentioned in his opening remarks, we were awarded exclusive extraction rights on the Yellowhead mainline, which will go into service kind of the latter half of 2027 based on public disclosure. We estimate we could build, you know, probably something in the neighborhood of maybe 500 million a day of extraction capacity, resulting in approximately 25,000 barrels of NGL extraction. So what we're doing right now, AJ, is we're just evaluating our two supply portfolios of C2, one which we've been fairly public with lately, supporting Dow's net-to-zero cracker, just evaluating how would this C2 fit into our overall portfolio, So that's ongoing, and we expect to have a little bit more information on that probably at the May call. But then obviously, so that's the C2 component of the opportunity. And then with the C3+, obviously, we're actively building RFS4, which is an incremental 55,000 barrels of C5 or C3+, extraction capacity, fractionation. This barrels, we could just shift it across the river and put that into our existing frac capacity if we're not fully contracted. And that would be very complementary to our marketing NGL book today. We have a large portfolio of C3+. It'd be very complementary to that. And Chris and his team, you know, they would continue to find the best market for those products, either domestically into the United States and or internationally through West Coast exports. Scott did mention, you know, through the acquisition of OxAble and closing that here this summer, Pemina does have a nice contiguous block of land right adjacent to Dow's Cracker. And that will be the terminus, essentially, of where we would put our extraction facility. We have access to the Agues Pipeline. That's the Alberta ethane gathering system right there. And then the Redwater Fractionation Complex, where we would most likely send our C3+, from this is just across the river and we have existing pipelines that go back and forth between today. So we have operations in the area. We have actually between Shanahan, Younger, and Empress, we have well over three BCF of this type of operation. So we're well versed in how to build, operate these types of assets.

Great, appreciate all of you.

I should also mention, AJ, Yes, sorry AJ. I just can also mention that the Alliance pipeline Scott mentioned the opportunity there is it it you know comes in close proximity to green light but also the Alliance pipeline goes right through this this plot of land so there'd be further evaluation down the road about you know potentially if we ever wanted to do you know straddling that pipeline down the road. So that's an option as well.

OK, I appreciate the detail that kind of goes into my next question. just on green light and just trying to think about the potential size of the gas requirement for the facility and, you know, how that could translate to additional capacity on Alliance. And then also just kind of along those lines, you know, if these projects kind of make it across the finish line and we see, you know, incremental capital invested into Alliance, you know, does that help mitigate at all the ongoing rate case situation with shippers? I mean, I realize that there's a timing mismatch here, but you know, is that being factored in your discussion with shippers currently?

AJ Stu Taylor, you know, with respect to the gas supply, It's one of the things that attracted us to this opportunity. But what we have right now is each phase will consume approximately 80 million cubic feet per day of gas. That'll grow as the phases get built out. Obviously, that's a significant number for gas egress for the province as well. I'll let Jared talk more.

Yeah, just on the Alliance. So where we're at with respect to that file and talking a little bit about expansion, So we've essentially met all the CER obligations here in the month of February. And then we have ongoing biweekly meetings with the large shipper group. It's about 40 plus individuals. And just working expeditiously to get a negotiated settlement here in 2025 and get that in front of the regulator. What I will say with respect to the expansion, there's some common themes that we continue to hear, AJ. Number one, Our shippers on Alliance very much value the service that Alliance provides. They very much like the endpoint, getting their gas into Chicago, but also the high reliability, availability, and the cost structure of the pipeline. And part of the conversation has got to expansion opportunities. So there is high demand for expansion opportunities from the shipper group. And we're just evaluating that right now. Would that be a short haul? type expansion opportunity into the Fort Saskatchewan area as industrial demand increases, or is that a long haul type expansion where we go all the way down to the Chicagoland area? If you recall, Alliance was originally set up to do what we call the B-site compressors, so building out the B-site compressors where Alliance already owns that land today. That would be the long haul. And then we could do a shorter haul version just into the Fort Saskatchewan area. So it is an active conversation we're having with the shippers.

Appreciate all the detail. Thank you. I'll turn it back.

Your next question comes from the line of Teresa Chen from Barclays. Your line is now open.

Morning. Thank you for taking my questions. Related to the NGLs off of the Yellowhead mainline and the potential 500 mm CF per day straddle facility, can you talk about what kind of capital requirement that could entail? And as it translates to potentially 25,000 barrels per day of NGL with a significant C2 component, How much of the 25,000 could be C2 to supplement your 50,000 barrel per day supply agreement? And then between that, the 300 and the $300 million deethanizer, you know, how much of the 50 could those two pieces comprise? Would just love to get more details of the, you know, quantitative makeup of the 50,000 barrels per day as you see it.

Okay. Yeah, I'm going to try to unpack those in order. So I think the first question was with respect to cost. An asset of this size, we believe, would be in that neighborhood of $400 to $500 million. Now, this is fairly preliminary. We're obviously going to be doing a significant amount more work with respect to the engineering and as we progress through our gating system here at Pemina. But that's the rough order of magnitude. With respect to the composition of that 25,000, you would expect to be roughly, call it 50% of that would be ethane. The remainder would be your C3 plus component. And then how does it fit into our overall portfolio? So that's what we're talking about right now is we have our existing supply agreements. There's also demand for future expansions in Alberta. Dow has been very public about, you know, phase three, et cetera. So we're just evaluating right now. Do we put these barrels into part of our existing supply portfolio or do we make this part of the incremental? You mentioned RFS3 deethanizer. We've been fairly public about that. There is an opportunity there too. We have existing barrels in our portfolio that we can add to the incremental demand. There is new opportunities such as the RFS3 DF and then there's these barrels. It's a little bit too early and premature to be talking about the actual details, but expect to provide a lot more color at our May conference call.

Understood. And maybe turning to the LNG front, given the geopolitical developments across Europe, Russia, Ukraine, as well as the policy movements in the U.S., Can you talk about your progress to date in contracting the capacity you have remaining on Cedar?

It's Stu again. You know, we've been working hard since late 2024, working with potential acquirers of this capacity. We're very pleased with the response that we've had. We have a broad range of customers who are looking for LNG service. including both Canadian producers as well as NOC and IOC counterparts looking to participate. We've had term sheets out and term sheets returned well in excess of the capacity that we have, and so we're working through that process. We will soon be looking to shortlist and begin more detailed negotiations with these counterparts, and we're very excited about where we sit at this point in time.

Thank you.

Your next question comes from the line of Praneeth Satish from Wells Fargo. Your line is open.

Thanks. Maybe I'll just start with two questions here on the green light project. So first is just trying to understand how much is your share of capex. You know, if we just kind of assume $2,000 per kilowatt, then your share could be as high as $1.8 billion. And I know it's going to happen in phases, but I just want to understand if that's in the range of how you see your investment into the project and the timeframe for spending.

Yeah, so we're essentially 50% of the project. At this point in time, early days, what we're looking at essentially is you know, $1.5 billion per phase of 450 megawatts, so up to 1,800 megawatts. So our share would be, again, 50% on a go-forward basis. Our plan, you know, we will be a phase development. There could be opportunity as we stage this out. We could accelerate some of the phases and combine them. At this point in time, it's a phase development of the four phases with construction, you know, FID beginning. We're targeting sometime in 26th. and then construction through to 2030, 2029, 2030.

And maybe I'll just chime in. It's Cam here. And just as a reminder to all the listeners, you know, Where we stand today, following the Alliance and OxAble acquisition, our run rate of free cash flow after dividends available for investment is in the range of about a billion and a quarter to about a billion and a half per year. We've obviously said that through 2025 and 2026, as we're closing out some of the in-flight projects and the heaviest spend period on Cedar, we are running at probably... a little above a little excess free cash flow, but obviously closer to it. And then 2027 and beyond, we begin generating material free cash flow again available for all that investment. So that obviously lines up really well with the opportunities that we're talking about here.

Got it. That's helpful. And then maybe just on the project itself, Greenlight, can you help us understand what the return profile looks like relative to your traditional midstream investments? I mean, this is a bit of a step out in terms of taking a piece of the power generation part. So would you expect higher returns than your traditional hurdle rates? And then can you say whether the economics would be secured by long-term contracts or would you be taking on any merchant exposure?

Hey, Bernice. Let me start with, I think it was your second question there. And I think one of the things that we really want to make sure is very clear is that, obviously, you know, the power generation angle of this opportunity is a great project in its own right. But what really makes us excited about it as it relates to PEMMA's value chain is the integration potential. So the opportunity, obviously, you know, we have a significant gas business today through our gas processing business, through Allianz. Obviously, we have an aspiring carbon sequestration solution, so the integration of the opportunity with those projects is what really got us excited about it. To your specific questions, we would see base returns consistent with a midstream infrastructure return at this point, probably a little early to start throwing out exact multiples, but I would say it's within that range. And lastly, I think it is, of course, our intention to have a long-term contract underpinning this project. And obviously, those negotiations are ongoing. Got it. Thank you.

Your next question is from the line of Rob Hope from Scotiabank. Your line is now open.

Morning, everyone. Maybe going back to Alliance, can you add some color on kind of what the initial consultations have been with shippers as well as, you know, is the expectation that the existing contracts could get reopened or is this really just focused on IT and the SWAT tools?

Yeah, Rob, thanks. It's Jared here. So I would categorize the group into just a few buckets, right? So I mentioned there's obviously 40-plus folks in the room. You have long-term shippers. You have people who you play in the seasonal strip in the IT component, and then some really large long-term shippers. And then you have some of our smaller shippers on the pipeline. So those are kind of the three groups that we're working with right now. Can't get into too much detail with respect to what everyone wants, but we are trying to hone into a mutual agreement that meets the needs of all 40 plus individuals. And I can say it's going very well and the conversations have been extremely respectful and progressive as we continue to work. With respect to the contracts, that is actually what some of the conversations are around. Depending on which route we go, there could be different outcomes. And obviously, people that have a lot of capacity on the pipeline want to keep that capacity because obviously it supports your condensate development plans and those types of things long term. And there's obviously people who maybe don't have a lot of capacity on the asset who would love to have more capacity on the asset. So that's something that we're working through. But at the end of the day, The takeaway is it is a little bit early. I think in May we'll be able to give her a little bit more color. Demand is high for the asset. And we just got to kind of quote unquote grind through it here for the next couple of weeks. Anything else, Cam, Scott, you want to add on that?

No. All right. I appreciate that. And then maybe just going back to the FAA and capital intensity commentary about being below the $300 million range, but maintaining the EBITDA profile there. Can you maybe add a little bit more color on kind of where you're seeing the savings or kind of where you're leading to in terms of the optionality and solution?

It's not so much savings, Rob. It's just really like we had a portfolio of projects that could add to to the totality of our supply book. And it's really, we just got really diligent in just going through those and evaluating each one on a standalone basis. Where did we have extra capacity across our enterprise where we could, you know, maximize the ethane recoveries through existing assets? So that plays a portfolio, or sorry, a portion of the portfolio. So really just getting militant and grinding it down. And ultimately, you know, it's kind of, we've been signaling it's kind of honing in to that Redwater 3 portfolio deethanizer tower, which is the most capital efficient. Redwater III was built with a lot of the bells and whistles to accommodate that tower. So it was really just, you know, just doing the work and working through our portfolio of opportunities and getting the maximum out of our existing steel that we have in the ground. So through a combination of that, the team did a tremendous job of coming up with, you know, being at that low end of that capital range. now yellowhead obviously um now we have to just take a step back and evaluate the entire portfolio with yellowhead obviously comes a lot more c3 plus so just working that into the mix but like i said earlier there is incremental demand for for incremental phases of polymer development here in alberta great thank you thanks rob

Your next question comes from the line of Aaron McNeil from TD Cowan. Your line is now open.

Hey, morning all. Thanks for taking my questions. How would you characterize the Greenlight project's gas turbine slot reservations and other long lead time items? And more generally, how far along is the sort of feed process?

It's Stu again. So, you know, we've been working with the Kineticorps development team for, you know, for over a year and a half. They are at the beginning of, you know, our excitement with them is their expertise that they have, and they just completed the Cascade power plant in the Edson area, as well as they progressed the ASOQ position. And again, that's what excites us. a lot of our data center customers or the potential is the speed to market. You know, we are going to be in that turbine queue. You know, as we go out, we have not placed those orders at this point in time. But again, what I mentioned, FID is expected in 2026 and our insurer's date in the 2030 timeframe. So, you know, we're happy where we are with the queue. We're happy with the progress. We're engineering work to take place in 2025. and reaching that FID decision in 2026.

Gotcha. And then maybe just to return to AJ's question on increased NGL volumes flowing through the system, can you comment specifically about that dock capacity you asked about and, you know, helping your customers just export those incremental volumes more generally?

Go ahead, Aaron. It's Chris Sherman. we're certainly paying a lot of attention to what volume growth in general looks like uh in the basin and and and this is a piece of it and undoubtedly continue to see the value of of west coast export you know i think we've talked about some of the efficiencies we're driving in our own facility we've talked about some of the other projects that are that are on the go on the west coast and undoubtedly you know each incremental barrel definitely supports supports those those export positions so um we're keeping an eye on them we don't have anything specific linked to or related to to yellowhead per se um but but obviously we're we're bullish uh west coast export and like what we have there today and see that growth being supportive of the projects that are underway it should be noted that these these c3 plus barrels would be quote on like they would be proprietary pamina barrels they wouldn't be the barrels of of the shippers on the yellowhead pipeline gotcha

Appreciate taking my questions. I'll turn it over.

Thank you. Your next question comes from the line of Manav Gupta from UBS. Your line is now open.

Good morning. Thank you for taking my question. I wanted to go to slide 15, executing inside projects. A number of projects coming on in the first half of 2026. Can you give us some kind of progress percentage? What's the completion at this point and general progress that you're making to getting these three projects all in first half of 2026?

Yeah, thanks for the question. So project execution, I'll speak to probably just the three largest ones we have on the go here. So the K3 cogen, the Wapiti expansion, Wapiti gas plant expansion of PGI, both those projects are PGI projects that PEMIN is executing, and then our RFS4 um frac expansion and rail expansion so all three of those projects are going extremely well and and no concerns with respect to timing and or execution we've got through each one of those projects through some pretty material milestones uh equipment is showing up active boots on the ground at all three of those locations so no supply chain concerns and i would would like to just have a bit of a shout out with respect to You know, throughout the last couple of months, there's been some pretty extreme weather here in Alberta. The safety execution throughout the last couple of months and previous to that has been excellent. It's been world class in Pemina's opinion. And the cost structure continues to come in as expected. So, like I said, we're getting through some pretty key milestones here and equipment's getting delivered to site. And it's really impressive to see these new assets coming out of the ground.

Perfect. My quick follow-up here is you obviously talk to a lot of producers. What's your internal outlook for the West Canadian sedimentary basin volume growth, whether it's gas or liquids or oil? How should we think about the growth over the next two or three years based on your internal estimates?

Yeah, it's Scott here. We use a lot of our own internal data and third-party data, and generally speaking, they're lining up. When we look at third-party data, we're generally seeing growth in that kind of mid-single-digit area, and I would say that that's relatively consistent with our own internal forecast. I would say the only hesitation I have right now is just given all the volatility in the market and the uncertainty, that puts a little bit of a cloud over it. But absent that, that mid-single-digit is something that we continue to forecast.

Thank you so much.

I'd maybe just add to that that, you know, although the average is mid-single digits, some of Penman is big as shippers. If you go into their detailed public information, some of them are growing, you know, at higher than that. And it should be noted that some of our customers are drilling into take-or-pay contracts. Some of them would be over. So although the physical volumes will continue to grow, we believe that we're in a pretty good position to continue to meet their growth demand.

Your next question comes from the line of Maurice Choi from RBC Capital Markets. Your line is now open.

Thanks, and good morning, everyone. I just wanted to come back to the discussion about returns on green light. You mentioned that the base returns will be consistent with your midstream assets, but I suppose if you look at your existing value chains, There can be a relatively wide range, depending on your exposure to volumes and prices, for example. So if I think about this, are the returns more close to, say, the more traditional seven times, the multiples that you have, or are we talking about something close to nine or ten times for a long-term contract to take or pay infrastructure?

Yeah, Maurice, I mean, I think... negotiations are ongoing so i'm a little reticent to start to you know point to a specific data point uh you know i would just say obviously i mean you've obviously painted the range of uh of our our return profile historically and and we would characterize it within that range but uh you know given the stage of negotiations i'm reluctant to sort of specifically quantify it at this stage maybe just holistically if you took a step back away from from green like and look at

in an opportunity like this, Yellowhead and everything, where do you sense your appetite for risk versus returns? And has anything changed in the last six to 12 months in terms of how you view your next opportunity and how you view your return criteria?

You know, I, I think what we, you know, what we look at is, is obviously, uh, a full scale value chain across the business and obviously, um, opportunities across that value chain, which, which continue to, to come. You know, I think part of it is obviously the commercial angle. Part of it is, is execution and, and control your costs and protecting that. I think, you know, Jared, uh, Jared exemplified, uh, what we think is one of our advantages. in that our track record on capital execution, I think, has been incredibly strong historically. And so for us, that gives us a lot of confidence to be able to put forward a compelling proposition to the customer's In terms of the commerce, obviously, that's market-facing. I think we have a history of trying to find creative solutions. I think that shows up through a couple of the transactions that we did with PGI and Whitecap and Varian over the course of this year. I think it's shown up historically in our contracting and our pipelines business. And so we continue to look for opportunities to be creative. Ultimately, the market drives what returns are, but I think we control what we can control. And when you look at our capabilities in building assets specifically, relative to competition, that is one area where we differentiate ourselves and where we believe we have a competitive advantage.

Thanks. And me just finishing off with more a holistic strategy question about using green light as an example here. Obviously, you mentioned that green light benefits from being close in proximity to Alliance and maybe what you may want to do with ACG. Does that mean that you can probably scope down future power opportunities to once they're close to infrastructure versus you know, being a more big IPP player within the province.

100%. You know, this is all about the data center play, the value chain extension, sited behind the fence on our lands. You're not going to see us do an IPP in Lethbridge or something like that. This is very focused and targeted and on strategy. As you said, thanks for that.

Your next question comes from the line of Spiro Dunis from Citi. Your line is now open.

Thanks, operator. Morning, everybody. I want to touch first on tariffs. As you guys pointed out in the release, no imminent impact to operations, but it does seem to have reinvigorated a broader discussion in Canada just around energy infrastructure and maybe what best suits your needs. So, curious if that's reshaping how you're thinking about projects that you're pursuing longer term. And if you're already maybe seeing that sort of shift, you know, where projects are coming in that maybe weren't on the radar a few months ago.

Yeah, it's Scott here. You know, as we pointed out, as you said in a press release, no immediate financial impact from the tariffs. You know, from our perspective, we're hearing all the right things, and now we need to start to see all the right things. You know, and so from our perspective, yeah, We do see a sentiment change in terms of politicians, in terms of the general public, which we think is generally positive for the industry. You know, we've been progressing lots of projects in the background and we will continue to progress those projects, you know, and hopefully with what's happening, it'll be obvious to the country that these projects need to get built. And so we think that there's definitely positive tailwinds. You're not going to see anything in the next day or two, obviously, but we continue to see tailwinds in terms of potentially deregulation, speedier project approvals, which should benefit the industry long term.

Got it. That's helpful color, Scott. Second question, just a quick cleanup one related to CapEx. The December guidance pointed to the potential for CapEx maybe increase as much as $200 million if more projects got sanctioned. Obviously, you sort of announced a few last night and today. So just curious kind of where we sit with that $200 million number.

It's Cam here. I think some of them have progressed along the way. I'd say it might be about half of that has progressed along. One of the big pieces there was the de-ethanizer at RFS. We're continuing to move through gates internally on that, as well as some of the Northeast BC spending, which continues to move through gates. So I would say that at this point, we're not all the way towards

that uh that upper end we're we're marching marching through the range and you know if you want to pick a point probably about halfway got it that's uh help cam thanks for that i'll leave it there next question is from the line of jeremy tonant from jp morgan please go ahead hey good morning everyone this is eli johnson on for jeremy um maybe just on the 2025 guide i mean We saw a pretty strong print in 4Q, and we recognize some seasonality in the business, but how should we think about the 4.2 to 4.5 range incorporating some conservatism? Is that tied to any cushion for Alliance, or can you just help frame that up a bit?

Yeah, morning, Eli. So I think the way we would characterize the range is a couple of things. Obviously, there is seasonality in our business, and I think You know, it comes from about three different places. Obviously, the first is obviously the inherent seasonality in the marketing business, which is weighted to Q1 and Q4. I think that's generally well understood. You know, with the advent of more West Coast egress for the liquids business in the last sort of two to three years, I mean, obviously that has increased. moderated some, but even, you know, you still see that in large extent on the pricing side. And I think you'd see that this year as well. The second thing would be obviously the repair and integrity work portfolio that occurs in our business. And so You know, often that results in much of that occurring in the third quarter. Some of our work occurs in the first and the fourth quarter because of winter access only. But, you know, there is some seasonality in that just based on obviously getting through spring, getting to work and planning our work plan. And then the last piece would obviously be the alliance interruptible profile. So as we've seen in past years and continue to be our outlook this year is is obviously winter seasons tend to see higher interruptible demand, consequently higher demand for service, and that would lead to a relatively softer Q2 and Q3 for that asset relative to Q1 and Q4. In some cases, the seasonality has been in some years upwards of 15%, like from a Q1 to Q2 type of sequential number. I think we think about that and we see that. I think the last point I would make with respect to the overall guidance for the year is I want to remind everyone that we do our guidance and our forecasting based on the forward strip as it relates to the direct commodity exposure part of our business in the marketing segment. And if you look at that business today, obviously, you know, we've had a very good January so far. I mean, I think most of the pricing, you know, despite the tariff noise and volatility has shown up well. You know, we see we saw Bellevue propane, you know, in the 90 cent range. Obviously, the dollar, a Canadian dollar has weakened and that's a net positive for our business. But I think when you look at the curves for the balance of the year, I mean, if you were to look at a frack spread curve, for example, through the balance of the year, you know, there's effectively a $10 difference between January and December for Axprite. So there's a fair amount of backwardation in the curves at the moment. Obviously, if we continue to see each month churn by and not see that backwardation occur, you know, that's a positive for us. But, you know, we only know what the market tells us right now or what we're willing to put our fingers on. And that's what's reflected in the guidance.

I would just add as well, you know, there were some, call it one-time capital recoveries in Q4 and just ensuring that those obviously aren't annualized into 2025. Those were selected in 2024. So just ensuring everyone on the call is aware of that and doesn't carry that forward.

That's a really good caller there. Thank you. And then maybe just on CEDAR, It seems like the project risk profile has decreased meaningfully, so how should we think about future offtake contracts that you do sign maybe carrying a higher rate to reflect that? Can you give us some color about what kind of demand market you're seeing? I know you highlighted in the release there's a lot of demand, so just color on that contracting environment.

So, Stu, again, so again, we went out and like you stated, we do believe that we were de-risking the project and we undertook and stepped up to FID the project. As such, we're out in the market. We've looked at to benefit from that de-risking at this point in time. And as I stated previously, we've had lots of response and lots of positive response. from both multinational oil companies and Canadian producers and LNG off-takers today. So we're pretty excited about taking that next step and believe we are, one, de-risking the project, as you stated, but at the same time improving the economics for the project as well.

Great. I'll leave it there. Thanks, guys.

Your next question comes from the line of Robert Cotelier from CIBC Capital Markets. Please go ahead.

Yeah, thank you. I just wanted to follow up on the green light project a little bit here. I wonder if you could talk about the genesis of the project and what attracted you to gas fire power in the first place other than the integration aspect.

Hey Robert, Stu again. You know we started down the path and you know we've mentioned and talked about our land adjacent to the red water assets, our low carbon complex, and so we started looking for tenants and opportunities. um to utilize that land and power generation was one of of those opportunities we looked at in the early days you know the carbon sequestration link and the the connection to that as as things went on and we began working with the kinetochore team um and as the markets changed and where this this power what was the plan for the power sale as opposed to just selling into you know into the grid as such uh kinetochore changed and and pivoted and we started talking about and began meeting with, you know, co-locators and hyperscalers. And we've seen this opportunity to take the power generation right to, you know, a midstream type model with, you know, long-term contracts off the back end. So it quickly became, you know, very appealing to PEM that we could make this look exactly like one of our other businesses. And as you mentioned, beyond that and the success we see with that change in the data center growth, Obviously, the interconnection, we always talked about providing services. You know, gas supply is a potential. We have the capability and the infrastructure to provide gas, to provide water, to provide the land, as I've already mentioned. And so, the integration opportunity just grew, but we like the project right from the start located on our land.

Yeah, that's helpful, and that's a good segue to the follow-up here about merchant exposure. I'm just curious, just in general, how much capital you're comfortable allocating to power. I know there's a couple other projects go, Jen, at K3, and then really the merchant exposure you're willing to take on. For example, I know you want to contract this in a way that it looks like the rest of your risk profile, but you have an internal load that can act as a bit of an internal hedge, and then to the extent that your appetite is different than your partners for future phases. For example, they might want to do more on spec than than you're interested in doing. Are there off ramps where that in the circumstance where you're not aligned with your partner that you know you don't have to FID subsequent phases?

Rob, I'll start out. I mean, I think first of all our intention here is is. to match the power load with the need from the facility. So, you know, we don't see ourselves getting into the merchant power business. That's not what this is about. This is very much about leveraging the facilities in and around our existing assets, leveraging the integration, and obviously having a really attractive, you know, sort of long-term annuity with, you know, very high quality, high trustworthy counterparties. and the ability to use that to leverage the rest of our business. In terms of how much capital we could see allocating to this, I mean, obviously, we've talked about three phases as a part of this, as sort of the initial piece. I think we need to see where that goes. And what I mean by that is we haven't talked about more than that. If the opportunities to grow are larger, I think we'll analyze that as we always would. you know, to go back to my initial response, you know, this is not an intention to get into the merchant business. This is a long-term fee-based annuity, just like the rest of our business.

Yeah, okay, understood. And then finally, just wanted to follow up on the tariff question a bit here. I'm curious how you're changing your approach to the MGL marketing year, given the threat of tariffs, and now they've been seemingly kicked out to April, which is not helpful given the marketing year. So are you doing anything in terms of language in your agreements or changing maybe the amount of exposure you want to have to marketing this year given the tariff threat?

It's Chris Sherman. Yeah, you mentioned that timing isn't great for the NGO contract year as far as sort of getting those contracts buttoned down. But we've been largely positioning ourselves, not tariff-specific, but largely positioning ourselves as much off the West Coast as possible. And so that's really helped insulate us, first of all. And then I'd say, secondly, at least to date, we've seen a fairly reasonable approach with buyers where tariffs could have an impact. And I think we will certainly be adding terms that are, you know, tariff specific and finding the right way to get that business done. It's not a big concern for us going into the NGO year.

Okay, great. Thanks, everyone.

Your next question comes from the line of Ben Pham from BMO Capital Markets. Please go ahead.

Hi, thanks. Good morning. I wanted to go to your guidance you initiated last year, the 4% to 6% CAGR, and can you comment on directionally with the quotient recontracting and some of the levers you're seeing going forward, how you're thinking about where you're tracking that range? And then also, is your plan directionally, is this an annual role? you're contemplating on that guide, or is it more of a wait until it ends and you're rolling a couple of years out?

Hey, Ben, it's Cam here. Listen, I think in terms of the guide, obviously we put it out last May. We're sort of halfway through it. I would say that We're happy with what we're seeing. We're seeing good opportunities. Big focus on that timeframe on productivity and margin in the business. Certainly, we're trending well. I'm reluctant to quantify it at this point in terms of exactly where we are, but certainly, we're very pleased with where we are tracking in the range. And I think there, you know, there's a number of opportunities here, which, which the team is working on in, in some of them will occur in, in that timeframe. Some of them will occur beyond, but, you know, like to, like to sort of see that come to fruition before we start to, you know, stretch the timeline out even further. I would sort of mention that I think when we look at our guidance, lots of numbers out there in the peer group. We always talk about ours on a fee-based dollar per share. And we think as we look at some of those comparable numbers from some of our peers, the 4% to 6% continues to stack up in line with our peers and well for the most part.

Thanks, Matt. And maybe I'll follow up on the alliance. I'm not sure if maybe Stuart has mentioned this, is things are going quite well. Can you unpack that a bit? Is that more of you feel pretty good about the timing of how this could get resolved, maybe a little bit quicker than you expected in terms of discovery? Or is it related to maybe something else that you're referring to?

Hey, Ben. Jared here. Yeah, I can't really get into the details. I think my commentary around it, it's going well, is we have routine meetings with the shipper group. The shipper group is, you know, we're having great conversations in the room, really trying to get down to, you know, brass tacks on what all the parties want. So that is the encouragement here. And then I mentioned it earlier in the call, but hopefully in the May timeframe, we're able to give a lot more color with respect to the progression of commercial opportunities there.

Okay, got it, thanks, Fred.

Okay, thanks, everybody. Your last question for today comes from the line of Patrick Kenny from National Bank. Please go ahead.

Yeah, hey, guys. I know there's been a lot on green light already, but I just wanted to confirm, since you won't be in the driver's seat, per se, on the development and construction process, and I know you're still currently in negotiations, but I'm curious if you might be contemplating anything unique within your LP with the Kinetic Core that might mitigate or protect your exposure to the risk of cost overruns as the complex is built out, just given this isn't really your core business?

Pat, it's Stu. In taking this step with Greenlight and the JV that we've entered into, we look back, did our due diligence with respect to Kinetic Core, their capabilities, where they are sitting, the progress that they've made to date and became comfortable. We are a 50% partner as described as we go forward. We made sure that we secured the correct governance that we need to have this go forward with our controls in place and our oversight that we thought we needed as we would go. We're making sure that we have the right people to stay on top of the project from this position, and we're comfortable where we're going. Yeah, and just to remind, you know, again, these are not new. They've just completed building the Cascade Power Plant. We're excited about, you know, working with them and, again, believe that we've made, you know, selected the correct partner for us in this endeavor.

Got it. Okay. Thanks for that, Stu. And then switching gears to Northeast BC, just with the renewed support for resource infrastructure in the province, can you provide a bit more color as to what you think industry might need over the near to medium term with respect to whether it's additional fractionation capacity or other infrastructure over and above what you might have in flight today? I'm thinking really especially if and when LNG Canada sanctions phase two.

Hey, Pat, Jared. Yeah, great question. So obviously, Scott mentioned in our call that we're actively proceeding. I can't mention we're deploying capital on our Northeast BC expansions. You know, with just what's in front of us with LNG Canada Phase 1, Cedar, Woodfiber, et cetera, we see a material amount of, of NGLs condensate and, and obviously your C3 plus coming out of that area. So, um, our long-term view, the macro view would be not only does feminist projects are going to be required, but there's probably other third party projects that are, that are going to be required and, and that, you know, that we're supportive of, um, taking place because the industry is going to require it, especially with, LNG Canada Phase 2 potentially on the horizon. Maybe Suey gets a Cedar 2 one day, etc, etc. But there is a lot of, there's a lot of very good momentum with respect to West Coast exports. With respect to fractionation, our RFS 4 project continues, you know, Really glad that we sanctioned that when we did. We're going to deliver that at a very effective cost per barrel when you do the math on that Greenfield project. And it's getting highly contracted and adding a bunch of more NGLs from Yellowhead to Sherman's book on our marketing business takes up more NGL capacity. So we do believe macro that another fractionator will be required to meet that NGL demand, obviously, because we're tight.

competitors have been talking about it emin has been talking about it and we think we're in obviously a really good situation to be able to capture more of that growth opportunity as well okay thanks jared uh appreciate that and not sure if you could provide any update on your application on the western pipeline system looks like we might get a decision in april but just wondering what what the financial impact might be if you do get the green light to shut down the line, or I'm not sure if you took any provision in the quarter or not, but maybe on the flip side, if you do need to keep the pipe operating, roughly what quantum of capital might be required to maintain the integrity of the line? Thanks.

Good question, Pat. So, yeah, you know, we shut down the southern portion of the Western line, I think in 2022, we took that out of service. You know, this pipeline is significantly older than myself. I would say that it's getting to its useful end of economic life. We're going to have to deploy more and more capital to maintain the operability to save reliable operation of that asset, and hence the abandonment application. The financial impact is very immaterial to our overall business, taking the pipeline out of service. So we're just kind of working through that right now. I don't think, you know, I won't get into the magnitude of the capital that's required to keep it in service, but it's not a material amount, all things considered with respect to our overall integrity program. But it is a substantial amount of work internally for us to maintain that asset and keep it in the safe, reliable operation that we expect across our asset base.

I would just add that of course, you know there is a single customer on that line today and as has been the case, you know, it's a it's a cost recovery mechanism for capital spent and for for repairs and maintenance uh you know we would continue to expect that if if investment was required going forward and that is obviously part of the uh you know the dynamic here is whether uh whether it can be operated in an economic way in the future understood okay that's great thanks guys appreciate all the comments

There are no further questions at this time. I would like to turn the call over to Scott Burrows for closing comments. Please go ahead.

Thanks, everybody, for joining us today. And we were very pleased to end the year with a very strong Q4 and some exciting new growth projects. So thanks to all of those on the call, our investors, our shareholders, our employees. We look forward to a great 2025. Thank you.

This concludes today's conference call. Thank you very much for your participation. You may now disconnect.