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

DBRS has today confirmed the Issuer Rating and Unsecured Medium Term Notes of Inter Pipeline Fund (IPF) at BBB (high) with Stable trends. The confirmation reflects IPF’s improving business profile supported by major integrated oil sands expansion projects, particularly the Cold Lake and Polaris pipeline systems, which are backed by long term shipping contracts with FCCL (partnership of Cenovus Energy Inc. and ConocoPhillips (rated A (low) and “A,” respectively, by DBRS). These long-term cost-of-service contracts with predictable cash flows, combined with existing contracts, are expected to contribute 60% of IPF’s projected EBITDA by 2015 compared with 37% in 2012. DBRS expects leverage to rise in the near term due to IPF’s expansion plans but become more manageable once these projects are commissioned and provide incremental cash flow.

IPF has a stable cash flow profile due to its (1) portfolio of diversified energy infrastructure assets, (2) successful operation in oil sands and conventional transportation segments, (3) long-term contracts with strong investment grade counterparties, and (4) expertise in execution of major oil sands transportation projects.

IPF has continued to manage its ongoing refinancing risk which provides the financial flexibility to execute major capital projects. In April 2013, the size of its unsecured revolving credit facility was increased from $750 million to $1.25 billion, with a maturity date of December 2017. In December 2012, Inter Pipeline (Corridor) Inc. (Corridor; see related press release) extended the maturity date on its $1,550 million non-recourse credit facility from December 2015 to December 2016. The facility is available to backstop Corridor’s commercial paper program.

IPF recently announced that it has completed several internal transactions (the Internalization Transactions) related to the restructuring of its current limited partnership structure to position the business for a planned conversion to a corporation. DBRS does not expect the Internalization Transactions or the corporate conversion plans to have any material impact on IPF’s underlying business risk and financial profile, and its credit metrics continue to support the current ratings (see DBRS press release dated June 3, 2013).

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.