Inter Pipeline to pursue debt financing for C$2.1 billion project

By Lisa Kerner

Charlotte, N.C., July 31 - Inter Pipeline Fund will invest C$2.1 billion to construct 840 kilometers of new pipeline and seven new pump stations, chief operating officer Christian Bayle said during a conference call on Tuesday.

The program is required under a binding shipper support agreement to provide bitumen blend and diluent transportation services to three major oil sands projects owned by the FCCL Partnership, a business venture between Cenovus Energy and ConocoPhillips.

"FCCL has agreed to provide up to C$225 million in cash funding commitments to procure long lead-time materials, support detailed engineering costs and fund ongoing regulatory activities," Bayle said.

Additional funding is expected to be provided through a combination of debt and equity financing sources, although no specifics were given during the call.

An additional C$70 million of backstopped funding from more than one unnamed source was discussed during Inter Pipeline's question-and-answer session.

The company said it expects to meet capital commitments over the next four years through a combination of capacity available under existing committed credit facilities, undistributed cash flow from operations, the periodic issuance of new term debt and proceeds from existing distribution reinvestment programs.

Inter Pipeline does not expect the need for a material, underwritten equity offering to finance its funding obligations, according to a company news release.

The company expects all operating and sustaining capital requirements to be recovered on a flow-through basis.

FCCL and Inter Pipeline expect to finalize a series of transportation service agreements by year's end. The agreements are designed to provide Inter Pipeline with stable, predictable cash flow and feature a long-term, ship-or-pay contract structure.

Should the transportation service agreements not become finalized, Inter Pipeline will be reimbursed for up to C$225 million of incurred expenditures under the terms of the shipper support agreement.

Two of the new facilities are expected to be operational in mid-2014, and the third is expected to come online in mid-2016.

Calgary, Alta.-based Inter Pipeline Fund owns and operates energy infrastructure assets that include petroleum transportation and storage.

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