DBRS Confirms Inter Pipeline Fund at BBB (high), Stable

DBRS has today confirmed the Unsecured Medium Term Notes (MTN) rating of Inter Pipeline Fund (IPF) at BBB (high) with a Stable trend. The confirmation reflects the following factors:

(1) Successful pipeline operation following completion of the $1.85 billion expansion project at its subsidiary, Inter Pipeline (Corridor) Inc. (Corridor; concurrent confirmation at “A” and R-1 (low), both with Stable trends, see separate press release). The $1.85 billion Corridor expansion entered commercial service on January 1, 2011. On that date, expansion construction costs were added to the rate base and Corridor began to receive incremental revenue. Corridor’s rate base more than tripled relative to the previous level. IPF’s business risk profile has improved as low-risk Corridor earnings have become a larger part of IPF’s operations. Corridor is supported by a long-term cost-of-service firm service agreement (FSA) with quality shippers.

(2) Successful resolution of certain refinancing risks over the past few quarters. (a) In December 2011, IPF renewed its $750 million credit facility, extending its maturity date to December 5, 2016. In late May 2012, IPF closed a $400 million MTN issue and restored availability under its credit facility to in excess of $600 million from $264 million at March 31, 2012. (b) In December 2011, Corridor reached agreement on a new $1,550 million credit facility with a maturity date of December 15, 2015. The facility is available to backstop Corridor’s CP program, which had an outstanding balance of $1,455 million as at March 31, 2012.

(3) IPF’s financial and business risk profiles remain within the parameters of its rating following the January 2012, acquisition of DONG Energy Oil Terminals (DEOT), which owns four petroleum storage terminals in Denmark, for $461.6 million net of acquired cash, although significant credit metric flexibility has been used up at the current rating level as the transaction was largely debt financed. DBRS views the business risk profile of the DEOT acquisition as modest, as about 90% of revenue is fixed under term storage contracts with a well-diversified customer base. The remaining 10% of revenue comes from throughput fees, blending activities and harbour fees. There is no direct commodity price exposure.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating North American Pipeline and Diversified Energy Companies, which can be found on the DBRS website under Methodologies.