DBRS Confirms Inter Pipeline (Corridor) Inc. at “A” and R-1 (low), Stable

DBRS has today confirmed the Issuer Rating and Senior Unsecured Debentures rating of Inter Pipeline (Corridor) Inc. (Corridor) at “A” and its Commercial Paper Rating at R-1 (low), all with Stable trends. The confirmations reflect Corridor’s strategic position as the sole pipeline servicing the Athabasca Oil Sands Project (AOSP), long-term ship-or-pay contracts with strong investment grade shippers and good operational efficiencies.

Corridor owns the Corridor Pipeline System, which is the sole transporter of diluted bitumen produced by AOSP. It provides a vital link for the transportation of bitumen and diluent between two major components of the AOSP: the Muskeg River Mine and the Jackpine Mine, north of Fort McMurray, Alberta, and the Scotford Upgrader adjacent to Shell Canada Energy’s Scotford Refinery, near Edmonton, Alberta. DBRS believes that the shippers’ large commitment to the AOSP ensures their strong incentive to make sure that Corridor is fully utilized to the highest extent possible.

Corridor is supported by a long-term cost-of-service Firm Service Agreements (FSA) with quality shippers, which are also the AOSP sponsors: (a) 60% of the commitments from Shell Canada, guaranteed by Shell Petroleum N.V., with exceptional credit quality. DBRS notes that the guarantee may be revoked under certain circumstances, although that is highly unlikely to occur; (b) 20% by Chevron Canada (guaranteed by its parent, Chevron Corporation (rated AA by DBRS)); and (c) 20% by Marathon Oil Canada Corporation, a subsidiary of Marathon Oil Corporation.

Corridor has continued to manage its ongoing refinancing risk. In December 2011, Corridor entered into a new $1,550 million unsecured revolving credit facility with a maturity date of December 15, 2015, to replace outstanding expansion and construction debt. On December 15, 2012, Corridor extended the maturity date of this facility to December 15, 2016. The facility has no repayment requirements until maturity and is available to backstop Corridor’s commercial paper program, which had an outstanding balance of $1,344 million as at March 31, 2013. Corridor’s next debt maturity is related to its $150 million senior unsecured debentures due on February 2, 2015.

Corridor’s financial metrics have remained within the expectations of DBRS. Leverage has continued to decline and coverage ratios have remained stable.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating North American Pipeline and Diversified Energy Companies (May 2011), which can be found on our website under Methodologies.