Pembina-Veresen Merger May Boost West Coast LNG Terminal, Other Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--The just-announced merger between Canadian midstream companies Pembina Pipeline Corporation (NYSE:PBA) (Calgary, Alberta) and Veresen Incorporated (TSX:VSN) (Calgary) would provide a platform to pursue larger growth projects and give a boost to projects like the Jordan Cove liquefied natural gas (LNG) plant and terminal in Oregon, executives with the firms said Monday. However, Jordan Cove might have to be "right sized" before moving forward, one executive indicated. Industrial Info is tracking US$12.5 billion in combined project activity in the U.S. and Canada by the two companies.

The merger would create one of the largest energy infrastructure companies in Canada, with a pro-forma enterprise value of about C$33 billion (US$24 billion), the company's top executives said during a conference call with investment analysts. The deal is expected to close in the second half of this year.

"The combined asset base is highly integrated across the value chain and extends the geographical reach of the combined company while enhancing its customer service offering," according to the joint press release. The combined company "would be positioned to execute on Pembina's and Veresen's aggregate secured growth portfolio totaling about C$6 billion (US$4.4 billion) through 2018. "The transaction is expected to result in an organization that has enhanced capabilities to progress projects of increasing scale and complexity than the companies could on a standalone basis," according to the joint release.

In addition, the companies have a combined unsecured growth portfolio totaling C$20 billion (US$14.6 billion), including Veresen's proposed 6 million-metric-tonne-per-year Jordan Cove liquefied natural gas (LNG) plant and terminal project in Coos Bay, Oregon.

The US$6 billion Jordan Cove project would serve overseas markets such as Japan. Veresen is pursuing the project despite past regulatory setbacks. The Federal Energy Regulatory Commission (FERC) approved Jordan Cove LNG's pre-filing applications on February 10. For more information, see Industrial Info's project report and February 22, 2017, article - Canada's Veresen Sells Power Business to Help Fund Natgas Projects.

In April, a top advisor to President Donald Trump appeared to endorse the Jordan Cove project. Gary Cohn, chair of the White House National Economic Council, was quoted by news media reports as saying "The first thing we're going to do is we're going to permit an LNG export facility in the northwest."

Pembina Pipeline Chief Executive Officer Mick Dilger, who would lead the combined company, voiced support Monday for a "right-sized" Jordan Cove project. "We think there is new wind in the sails for that project recently," he said. "We can right-size it. There has been some positive developments recently--I like it. We think it will work, and I think the combined entities give it a better chance."

Industrial Info is tracking two large Veresen natural gas-processing projects that are under construction in British Columbia: the US$715 million Tower cryogenic natural gas plant near Taylor, and the US$700 million Saturn plant near Dawson Creek. Veresen expects both facilities to be in service by the end of 2017. Together, they will add 600 million cubic feet per day of processing capacity, more than doubling the capacity of subsidiary Veresen Midstream. For more information, see Industrial Info's project reports on the Tower and Saturn projects. For related information, see December 6, 2016, article - Veresen Sees Plenty of Spending Opportunities in 2017.

Pembina recently announced it was moving aggressively on plans to develop its natural gas and natural gas liquids (NGL) capacity in Western Canada, in addition to plans to construct an export terminal in the Prince Rupert, British Columbia area and a large polypropylene facility. For related information, see April 12, 2017, article - Pembina Pipeline Ratchets Up Work at Natural Gas, NGL Projects, Eyes Export Terminal at Prince Rupert

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