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Pembina takes C$1.6B write-down over Jordan Cove, other projects

Pembina Pipeline Corp. executives said they "sadly" can no longer predict when the company will be able to commercially sanction its proposed Jordan Cove LNG export terminal in Oregon, one of three projects behind a large write-down the company was forced to make in the fourth quarter of 2020.

Pembina said it had to record the C$1.6 billion noncash, after-tax hit because of the pandemic and "changing commodity price dynamics combined with changing government priorities." The impairments also recognized the reduced value of the company's stake in Ruby Pipeline LLC and its investment in a petrochemical facility developed by Canada Kuwait Petrochemical Corp.

"While we believe the time for these projects may come, as we can no longer predict with certainty when that time may be, we were compelled to reflect their impairments through a noncash charge," Pembina President and CEO Mick Dilger said Feb. 26 on a fourth-quarter 2020 earnings call.

Dilger said the projects still "make economic sense, if de-risked."

Pembina has faced major permitting difficulties over the Jordan Cove project at the federal, state and local levels. The Federal Energy Regulatory Commission authorized construction of the project in March 2020 after rejecting a previous application for Natural Act certification in 2016. But the project has continued to face stiff opposition in Oregon. In January, Jordan Cove LNG hit a new permitting wall when FERC found that it could not approve an order that would get the project past a state agency's denial of Clean Water Act certification.

The Jordan Cove developer has also struggled to build sufficient commercial support to advance the project to construction. Pembina has not announced any firm long-term supply agreements tied to Jordan Cove.

Pembina said it was evaluating the path forward for the project but still believed in the strategic rationale and considered the proposed terminal to be aligned with the company's environmental, social and governance aspirations.

The write-down on the Ruby pipeline stemmed in part from the uncertainty over Jordan Cove. The export project would ultimately be expected to utilize some capacity on the Ruby line, Pembina said. But the company pointed to additional reasons, including shipping contracts that are expiring in mid-2020 and declining fundamentals for production from the Rocky Mountain shale basins.

Pembina on Feb. 25 posted fourth-quarter 2020 adjusted EBITDA of C$866 million, up from C$787 million a year earlier. The S&P Capital IQ consensus adjusted EBITDA estimate for the quarter was C$838.2 million. For the full year, the company posted adjusted EBITDA of C$3.28 billion, an increase from C$3.06 billion in the prior-year period. The S&P Capital IQ consensus estimate for full-year adjusted EBITDA was C$3.24 billion.