Morningstar DBRS Confirms Credit Ratings of Inter Pipeline (Corridor) Inc. at A (low) and R-1 (low) With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating of Inter Pipeline (Corridor) Inc. (Corridor or the Company) at A (low) the credit rating on the Company's Commercial Paper at R-1 (low). All trends are Stable. Corridor is 100% owned by Inter Pipeline Ltd. (rated BBB (low) with a Negative trend).

KEY CREDIT RATING CONSIDERATIONS
The overall operating environment for Corridor remained positive in 2025. Crude oil prices have remained well above the breakeven oil prices for Corridor's shippers, and thus the Company is expected to continue to report strong earnings and surplus cash flow. In December 2024, Canadian Natural Resources Limited (CNRL; rated A (low) with a Negative trend) purchased Chevron Canada Limited's Alberta assets including its stake in Athabasca Oil Sands Project (AOSP) and became the primary shipper on Corridor. As a result of the debt raised for the acquisition, the trends on CNRL's credit ratings were changed to Negative from Stable. Morningstar DBRS notes that the overall credit profile of the shippers will remain strongly investment grade and supportive of the current ratings, even in the event of a single-notch downgrade to CNRL's credit ratings. Morningstar DBRS also notes that the increase in interest rates had a positive impact on Corridor's earnings as financing costs are recoverable from shippers, while the Company's allowed return on equity (ROE) is linked to long-term interest rates.

Morningstar DBRS expects Corridor to maintain a stable financial profile with predictable cash flows supported by the long-term firm service agreement (FSA). Morningstar DBRS notes that Corridor has maintained its debt-to-rate base ratio at or around the benchmark criteria of 75% (Q1 2025: 73%).

CREDIT RATING DRIVERS
A positive credit rating action is unlikely given the Company's relatively stable business and financial risk profiles. The ratings could come under pressure if the credit quality of the shippers deteriorates materially.

EARNINGS OUTLOOK
The ratings incorporate Morningstar DBRS' review of the Company's financial and other relevant information. Earnings are stable and predictable, underpinned by the FSA, as two shippers cover 100% of pipeline capacity and tolls are based on a cost-of-service (COS) methodology with no throughput or commodity risk. All shipper obligations are on a several basis, that is, each entity is responsible only for its own share of costs. The FSA provides for long-term ship-or-pay contracts, resulting in recovery of all operating costs, including depreciation, taxes, and financing costs, plus ROE over the term of the contracts. Revenue and toll rates are tied to changes in allowed ROE.

FINANCIAL OUTLOOK
The financial outlook of Corridor is stable, provided the stable and predictable earning profile of the Company is supported by the long-term FSA.

CREDIT RATING RATIONALE
-- Comprehensive Business Risk Assessment (CBRA): A
Corridor's CBRA of A is supported by a COS-based FSA with relatively strong investment-grade shippers that are also the AOSP sponsors: CNRL owns 90%, including 80% through its affiliate Canadian Natural Upgrading Limited, and Shell Canada Limited owns 10%. The FSA extends to 2049 and allows recovery of substantially all operating costs, including depreciation, taxes, and financing costs, plus an ROE on the rate base, which eliminates volume or commodity price risks and provides a steady stream of cash flows. Corridor's business risk profile is also supported by ample recoverable bitumen reserves at AOSP and the Company's position as the sole pipeline with exclusive rights to transport diluted bitumen (dilbit) produced from AOSP. Morningstar DBRS believes that AOSP will remain a key focus asset for the shippers given its low decline rate and ability to generate positive netbacks at low crude oil prices, incentivizing them to use the pipeline.

-- Comprehensive Financial Risk Assessment (CFRA): BBBH/BBB
Corridor's CFRA of BBBH/BBB reflects the predictable earning profile of the Company supported by the long-term FSA's.

-- Intrinsic Assessment (IA): AL
The IA represents the midpoint of the IA Range and is based on the CBRA and CFRA. The IA also considers the current credit rating trend and peer comparisons, among other factors.

-- Additional Considerations: None
Corridor's credit ratings include no further negative or positive adjustments because of additional considerations.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Further details on the Issuer's Intrinsic Assessment can be found at https://www.dbrsmorningstar.com/research/456819.

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

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in the Oil and Gas, Oilfield Services, Pipeline and Midstream Energy Industries (May 6, 2025) https://dbrs.morningstar.com/research/453396

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:
-- Morningstar DBRS Global Corporate Criteria (February 3, 2025) https://dbrs.morningstar.com/research/447186

-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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 under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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