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Inter Pipeline announces $900m capital expenditure program for 2018

Inter Pipeline has announced a $900 million capital expenditure program for 2018, with 91% of it will be for organic growth initiatives.

The remaining $80 million invested for sustaining capital projects.

In 2018, the majority of Inter Pipeline’s growth capital program is expected to be directed towards engineering and construction activities for the Heartland Petrochemical Complex which was sanctioned on December 18, 2017. Smaller investments will be made to enhance the connectivity of Inter Pipeline’s oil sands transportation and conventional oil pipeline assets, expand NGL processing infrastructure, and develop European storage operations.   

NGL Processing

Within the NGL processing business, Inter Pipeline will focus primarily on advancing the development of the $3.5 billion Heartland Petrochemical Complex. This facility, located in Strathcona county, Alberta, will be designed to convert locally sourced, low-cost propane into 525,000 tonnes per year of polypropylene, a high value plastic used in the manufacturing of a wide range of finished products.

In 2018, approximately $600 million is expected to be invested in the complex on a number of activities including finalizing engineering, continued procurement of equipment, facility module fabrication and site construction activities. Construction of this large-scale facility is expected to be complete by late 2021.

At Inter Pipeline’s Redwater Olefinic Fractionator, approximately $65 million will be invested in 2018 primarily focused on capacity expansion activities, as well as rail loading and storage investments. Other modest organic growth activities at the Cochrane and Empress straddle plants account for the remaining $5 million. 

Oil Sands Transportation

Inter Pipeline expects to invest approximately $110 million in its oil sands transportation business in 2018. Approximately $35 million will be directed towards the continued development of a diluent and bitumen blend connection to the Canadian Natural’s Kirby North oil sands project. In aggregate, Inter Pipeline will invest approximately $110 million to connect the Kirby North production facility to the Cold Lake and Polaris pipeline systems by 2020.

The remaining capital will be invested in various organic growth projects on the Cold Lake, Polaris and Corridor pipeline systems and primarily focus on the construction of new diluent receipt and bitumen blend delivery connections.

Conventional Oil Pipelines

In 2018, Inter Pipeline expects to invest $20 million on several smaller projects across its two conventional oil pipeline systems.

These investments include expanding oil battery connections, truck terminal construction and capacity expansions on the Mid-Saskatchewan and Bow River conventional oil pipeline systems.

Bulk Liquid Storage

Demand for storage services at Inter Pipeline’s European terminals continues to remain robust. In aggregate, Inter Pipeline plans to invest approximately $20 million on various organic growth projects at its terminals in the U.K, Germany, Denmark and Sweden.

These projects include jetty and tank storage infrastructure enhancements as well as cavern improvements.

Sustaining Capital

Sustaining capital expenditures in 2018 are expected to total $80 million. Approximately $21 million of the total will be spent in the European bulk liquid storage business on tank upgrades with an additional $28 million spent on several projects across Inter Pipeline’s NGL processing business segment including automation improvements and equipment upgrades.

Approximately $17 million will be invested in corporate infrastructure in 2018, including improvements to corporate information technology systems. The remaining $14 million will be spent on a number of projects across Inter Pipeline’s transportation businesses. 

Financing

Funding for Inter Pipeline’s 2018 capital program is expected to be provided through a combination of capacity available under its existing $1.5 billion committed credit facility, undistributed cash flow from operations, the periodic issuance of new term debt and proceeds from existing dividend re-investment programs.

At current participation levels, Inter Pipeline expects to raise $25 million per month, or $300 million annually, under its regular and premium dividend re-investment programs. Inter Pipeline has no plan to finance its 2018 capital program utilizing underwritten equity offerings.