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

DBRS has today confirmed the Issuer Rating of Inter Pipeline (Corridor) Inc. (Corridor) at “A,” along with confirmation of the Commercial Paper and Senior Unsecured Debenture ratings at R-1 (low) and “A” , respectively. All trends are Stable. 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 (Shell Canada) 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’s business risk profile is supported by 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. (SPNV), 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 (Chevron; rated AA by DBRS)); and (c) 20% by Marathon Oil Canada Corporation (Marathon Canada), a subsidiary of Marathon Oil Corporation (Marathon).

Corridor has continued to manage its ongoing refinancing risk. In December 2013, Corridor extended the maturity date of its $1,550 million unsecured revolving credit facility to December 15, 2017. The facility has no repayment requirements until maturity and is available to backstop Corridor’s commercial paper (CP) program, which had an outstanding balance of $1,298 million as at March 31, 2014. Corridor’s next debt maturity is related to its $150 million senior unsecured debentures due on February 2, 2015.

Corridor has maintained a stable financial profile with predictable cash flows, and financial metrics have remained within the expectations of DBRS for the current rating category.

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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are Rating Pipeline and Diversified Energy Companies (January 2014) and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (February 2014), which can be found on our website under Methodologies.