td securities london energy conference · transformational transaction 11 . ... received deis nov...
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TD Securities
London Energy Conference
January 12 – 13, 2015 Don Althoff
President and CEO
Forward-Looking and Non-GAAP Information Advisory
Certain information contained in this presentation constitutes forward-looking information under applicable Canadian securities laws. All information, other than
statements of historical fact, which addresses activities, events or developments that we expect or anticipate may or will occur in the future, is forward-looking
information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend",
"target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this presentation include, but are not limited
to, statements with respect to: timing of the closing of the completion of the Veresen Midstream transaction, the returns provided by the Dawson MSA, sources
of funding for Veresen Midstream, the use of the cash proceeds received by Veresen from the transaction, annual distributions in respect of the Ruby Preferred
Interest, expected returns and contributions to cash flow from Ruby, future markets from Ruby, future growth prospects of Ruby, and the ability of Veresen to
recognize synergies between Ruby and the Jordan Cove LNG project, potential future increases in production in the Cutbank Ridge region; opportunities for
future midstream infrastructure investment; our ability to pay future dividends; the ability of Alliance to successfully implement new services; the sources of
additional rich-gas supplies for transportation on the Alliance pipeline and for processing at Aux Sable’s Channahon facility; the cost estimate and timing of the
Aux Sable expansion, the cost estimate, timing of, and our ability to successfully obtain regulatory approvals for Jordan Cove LNG and the Pacific Gas
Connector Pipeline, the timing of decisions to proceed with construction of, and the in-service date of the Jordan Cove LNG and the Pacific Gas Connector
Pipeline; and the ability of each of our businesses to generate distributable cash in 2015. The risks and uncertainties that may affect the operations,
performance, development and results of our businesses include, but are not limited to, the following factors: our ability to successfully implement our strategic
initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted
customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials;
fluctuations in foreign exchange and interest rates; our ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other
laws and regulations; competitive factors in the pipeline, NGL and power industries; operational breakdowns, failures, or other disruptions; and the prevailing
economic conditions in North America. Additional information on these and other risks, uncertainties and factors that could affect our operations or financial
results are included in our filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time.
Although we believe the expectations conveyed by the forward-looking information are reasonable based on information available to us on the date of
preparation, we can give no assurances as to future results, levels of activity and achievements. Readers should not place undue reliance on the information
contained in this presentation, as actual results achieved will vary from the information provided herein and the variations may be material. We make no
representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-
looking statements contained herein are made as of the date hereof, and, except as required by law, we do not undertake any obligation to update publicly or to
revise any forward-looking information, whether as a result of new information, future events or otherwise. We expressly qualify any forward-looking information
contained in this presentation by this cautionary statement.
Certain financial information contained in this presentation may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in the
United States and may not be comparable to similar measures presented by other entities. These measures are considered to be important measures used by
the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in the United States. For further
information on non-GAAP financial measures we use, see the section entitled “Non-GAAP Financial Measures” contained in our annual Management Discussion
and Analysis, filed with Canadian securities regulators.
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A Strong and Diversified Portfolio of Energy Infrastructure Assets
3
Delivering superior and predictable value to our shareholders
through safe and reliable operations.
Pipelines Midstream Power
Pipelines
• Length (km)
6,000+
Midstream
• Gathering (km)
• Processing (MMcf/d)
• Horsepower
• Fractionation (BPD)
900
670
100K
100k
Power
• Plants
• Generation (kw)
• Avg PPA length (yrs)
13
830
17
Veresen’s Current Asset Base (1)
(1) Based on all assets in portfolio and gross ownership
Optimize our existing assets
• Drive productivity
• Re-contracting Alliance
• Expand Aux Sable fractionation capacity
Grow where we have strategic advantage
• Midstream: Western Canada/Hythe/Steeprock and Alliance Pipeline/ Aux Sable footprint
• Pipelines: Alliance gathering systems, Ruby, AEGS recontracting and expansions
• LNG: Jordan Cove LNG and Pacific Connector Gas Pipeline
• Power: Gas-fired cogeneration
Maintain financial strength and flexibility
• Strong balance sheet
• Prudent capital structure
• Cash flow supported by long-term, fee-for-service contracts
Our Corporate Strategy
4
Alliance Re-contracting Strategy Work Plan
5
Fill the Fractionator
Fill the Remaining Space on the Pipe
Seek Regulatory Approval for
Services and Tolls
Optimize the system and develop growth projects
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16
Contract with
producers who had
choices for how they
would manage their
liquids rich gas to ship
to our NGL
fractionator in Chicago
After maximizing liquids rich carrying capacity of
Alliance and Aux Sable fractionation, an amount of
firm gas capacity remains to be filled with dry gas
and interruptible service
File for approval with NEB
and FERC once sufficient
progress was obtained on
new RGP contracts
Once sufficient progress has been
made on filling the fractionator and
pipe, consider debottlenecking projects
and system optimization opportunities
Key Growth Projects
6
Over the past 12 months Veresen has progressed three significant growth
opportunities:
Project Close Capital
Ruby Pipeline November 2014 US$1.4 Billion
Veresen Midstream March 2015 (E) Cdn$2.5 - $5 Billion
Jordan Cove LNG FID 2nd half 2015 (E) US$6.8 Billion
Ruby Pipeline Acquisition
• Acquired a 50% a convertible preferred interest in Ruby for US$1.4 billion
• Unique opportunity to acquire a large interest in a long-haul natural gas pipeline with strong market
fundamentals
• Attractive strategic and financial attributes
• Stable, long-term contracted cash flows with significant expected growth
• Ruby provides direct access to the U.S. West Coast through the proposed Pacific Connector Gas
Pipeline which would supply the proposed Jordan Cove LNG terminal
• Provides significant future upside associated with Jordan Cove LNG
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Veresen / KKR Midstream Partnership
and Montney Expansion Transactions
• 30-year, fee-for-service agreements with Encana and Cutbank Ridge Partnership (“CRP”)
• Multi-year, large scale contracted growth profile
• Requires no up-front funding from Veresen
• Earnings and cash flow accretive to Veresen as development projects come on-stream
• Creates scale and a powerful platform for growth in the Montney
• 50/50 ownership Veresen and KKR
• Structure provides Veresen with a disproportionate share of cash flow during the
construction period
Class A 50% 25%
Class B (PIK) - 25%
Total 50% 50%
8
30-Year Fee-For-Service Arrangement
within an Area of Mutual Interest (“AMI”)
Pro-Forma Veresen Midstream
Hythe / Steeprock Incremental
Field Compression
(„000 HP)
Processing Capacity
(MMcf/d)
Gathering Pipelines
(km)
AMI spans 240,000 acres of top tier Montney acreage
40
100125
2015 Stand-Alone 2015 Pro-Forma 2018 Pro-Forma
516 516
1,150
2015 Stand-Alone 2015 Pro-Forma 2018 Pro-Forma
370
900
1,300
2015 Stand-Alone 2015 Pro-Forma 2018 Pro-Forma
9
Cash Flow Accretive to Veresen as
Projects Come On-Stream
• Cash flow neutral in 2015 and accretive as new development projects come
on-stream
• Additional cash flow potential through attracting third-party volumes
2015 2016 2017 2018 20192015 Status-QuoCash Flow
Less: Hythe /Steeprock
EBITDA (Net ofG&A)
Plus: VeresenMidstreamDistribution
Plus: InterestSavings
2015 Pro-FormaCash Flow
Capex (Projects
Under Development)
EBITDA(1)
Cash Flow Neutral in 2015 Built-In Material Growth Profile
(1) Non-GAAP measure; see MD&A
10
Veresen Midstream
• Strong Innovative Agreement
• Financial structure – this adds meaningful growth without a significant equity
contribution from Veresen
• KKR alliance – strong partner with access to significant capital
• Strong Counterparty – Encana/Mitsubishi are strong dependable counterparties
• Fills out short and medium term growth wedge
• Material earnings growth prior to Jordan Cove coming on line
• Further diversifies Veresen‟s portfolio
• Platform for expansion
• Opportunity to bring in third parties
Transformational Transaction
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The Jordan Cove LNG Advantage
• Tolling model
• Gas-linked price diversification
• Gas supply from two large distinct gas basins
• Vertical integration into US and Canada gas markets
• Significant cost savings for Asian buyers
• 9 days shipping from Coos Bay, Oregon to Tokyo
• Advanced permitting/regulatory status
• Strong local and political support
12
Jordan Cove LNG and Pacific Connector Gas Pipeline
• 6 mtpa facility expandable to 9 mtpa
• 500-acre site includes two 160,000 m3 full
containment tanks, marine facility, four 1.5
mtpa PRICO liquefaction plants, two gas
treating facilities and dedicated power
plant (420 MW)
• Ownership: 100% Veresen
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• Design capacity of ~1 Bcf/d for 6 mtpa LNG terminal requirements
• 370-kilometre (232-mile), 36-inch diameter pipeline (1440 psig MAOP)
• Ownership: 50% Veresen; 50% Williams
Jordan Cove LNG is Highly Competitive with
Unique Advantages
14 Source: Terminal websites, DOE Japan as comparative market
~9 shipping days to
Asia (4300 nmi)
~9 shipping days
to Asia
USGC LNG
~22 shipping days to Asia (9200
nmi) plus Panama Canal Costs
USGC LNG
~9 shipping days to
Europe
Australia LNG
~7 to 9 shipping days to Asia
(3100 - 4300 nmi)
Parallel Work Streams to Reach FID
Key Milestones
15
Regulatory
• FERC: Received DEIS Nov 7, 2014, projected to receive FEIS by Feb 27, 2015
• Power Plant: Oregon DEQ deemed the application complete December 2014,
projected draft order in February 2015
• Term sheet agreed: December 2014
• Projecting contract signed: Q1 2015
EPC Contract
• Signed 6 HOAs in 2013/14
• Projecting contracts signed in Q1 2015
Commercial Off-take
Agreements
• Equity raised in Q2 2015
• Debt raised in Q2/Q3 2015
Project Financing
FID
2nd Half
2015
Regulatory
approvals are
critical path to
achieving FID
Building a Strong Operating Culture
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Environment, Health & Safety
Reliability
Operational Excellence
Building a
Track Record
of Strong
Operational
Performance
