CALGARY, Alberta - Pembina Pipeline (NYSE:PBA) Corporation (TSX: PPL (NYSE:PPL); NYSE: PBA), in partnership with the Haisla Nation, has announced significant progress on the Cedar LNG project. The advancements include securing a 20-year take-or-pay liquefaction tolling services agreement with ARC Resources Ltd. for 1.5 million tonnes per annum (mtpa) and an identical bridging agreement with Cedar LNG for another 1.5 mtpa. These agreements are pivotal as they enable the initiation of project financing and equity contribution processes ahead of the expected final investment decision (FID) by mid-2024.
The project has also issued a Notice to Proceed to Samsung (KS:005930) Heavy Industries and Black & Veatch for the engineering, procurement, and construction of the floating LNG production unit. This step is critical to maintain the project schedule. Cedar LNG has completed a detailed cost estimate of approximately US$3.4 billion (gross), with 70 percent under a fixed-price, lump-sum agreement.
Cedar LNG, a floating facility proposed in Kitimat, British Columbia, is expected to produce 3.3 mtpa, reflecting engineering optimization. The project aims to provide Western Canadian Sedimentary Basin (WCSB) natural gas access to global markets, potentially achieving higher prices and contributing to lower global emissions. The facility is anticipated to be one of the lowest emissions LNG facilities globally, powered by renewable energy from BC Hydro.
Pembina's partnership with the Haisla Nation aligns with the company's strategic priorities, including extending its value chain to access resilient markets and increasing exposure to lighter hydrocarbons. Subject to a positive FID, Cedar LNG is projected to generate annual run-rate adjusted EBITDA of US$200 million to US$260 million, net to Pembina.
The capital cost estimate for the project is approximately US$4.0 billion (gross), including interest during construction and transaction costs. The project financing is expected to comprise approximately 60 percent asset-level debt and 40 percent equity contributions from the partners. Pembina anticipates its equity contribution will be funded from operating cash flows.
InvestingPro Insights
As Pembina Pipeline Corporation (NYSE: PBA) moves forward with the Cedar LNG project, it's important for investors to consider the company's financial health and market performance. Based on the latest data from InvestingPro, Pembina has a market capitalization of $20.69 billion and a P/E ratio of 16.07, which adjusts to 19.1 for the last twelve months as of Q4 2023. These metrics suggest a stable valuation relative to earnings.
InvestingPro Tips indicate that Pembina has been a consistent performer, maintaining dividend payments for 20 consecutive years, which is a sign of the company's commitment to shareholder returns. The dividend yield as of early 2024 stands at a substantial 5.57%, reflecting this commitment. Additionally, analysts predict Pembina will be profitable this year, and the company has already been profitable over the last twelve months.
Investors should note that while Pembina's short-term obligations exceed its liquid assets, the stock generally trades with low price volatility, offering a degree of stability in the portfolio. The company's revenue has seen a decline in the last twelve months as of Q4 2023, with a -21.41% change, but it's worth considering the long-term potential of projects like Cedar LNG in possibly reversing this trend.
For those interested in a deeper dive into Pembina's financials and future outlook, InvestingPro offers additional insights and tips. There are more InvestingPro Tips available, which can be accessed through the InvestingPro platform. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking valuable information that can guide investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.