- Over the 2022 to 2025 period, Keyera expects adjusted
EBITDA1 to grow at a compound average annual rate of 6
to 7% allowing for continued dividend growth and the ability to
bring net debt to adjusted EBITDA1 within the company's
previously identified targeted range of 2.5 to 3.0 times by the end
2023.
- The company has a rich inventory of high-quality, near and
long-term investment opportunities that enable the continued
compounding of returns to drive growth in DCF per share1
and growth in dividends per share1. Keyera's rigorous
investment criteria ensures investments are on strategy, generate
strong returns, are weighted toward projects with highly contracted
long-term cash flows and take ESG priorities into account.
- With the construction of the KAPS project now 65% complete,
and with good visibility to project completion, capital costs for
the project are expected to increase, yet still be within 10% of
the latest estimate of $800 million
net to Keyera. The project remains on schedule to be in-service in
early 2023.
- KAPS commercial negotiations continue to advance, with the
company having secured further commitments on the initial Zones
1-3, and the yet to be sanctioned Zone 4. The company expects to
soon have contracted the majority of the volumes required to
sanction Zone 4. A sanction decision is expected later this
year.
- 2022 realized margin1 guidance for the Marketing
segment is between $250 million and
$280 million. Annual base guidance
for the 2023 to 2025 period has been increased to between
$250 million and $280 million replacing the previous annual base
guidance of $180 million to
$220 million.
- Keyera is uniquely positioned to leverage its existing
lands, infrastructure, and expertise to build a strong energy
transition business. The new Keyera Low-Carbon Hub Strategy focuses
on offering industry-wide low carbon solutions for customers in the
industrial corridor between Edmonton and Fort
Saskatchewan. The strategy will enable Keyera to decarbonize
its Alberta Envirofuels (AEF) and Keyera Fort Saskatchewan (KFS)
sites, when it makes economic sense to do so, and offer a range of
value-added services to third parties. Services could include
low-carbon feedstocks, hydrogen transportation and storage and
connectivity to carbon transportation and storage hubs.
CALGARY, AB, March 29, 2022 /CNW/ - Today, Keyera Corp. (TSX:
KEY) ("Keyera") will host its 2022 Investor Day which will be
presented by members of Keyera's senior management team. The event
will be webcast at www.keyera.com beginning at 8am MDT (10am EDT,
4pm GMT).
"We are excited to show how Keyera is positioned to generate
strong returns for decades to come and how we'll remain competitive
as the world transitions to the energy sources of the future" said
President and CEO, Dean Setoguchi,
"Our focus will continue to be the growth of distributable cash
flow per share1, which enables further dividend growth
per share1. To achieve this, our strategy will be
anchored in four key areas which are to demonstrate ESG leadership,
have a strong focus on financial discipline, further drive the
competitiveness of our assets and strengthen our integrated value
chain".
2022 – 2025 ADJUSTED EBITDA GROWTH AND CAPITAL ALLOCATION
PRIORITIES
Over the 2022 to 2025 timeframe, Keyera expects 6 to 7% compound
annual growth in adjusted EBITDA1, with most of this
growth coming from projects with a high proportion of contracted,
long-term take-or-pay revenue. Funds will be allocated and
paced in a way that allows Keyera to stay within the target ranges
laid out in its financial framework. In 2023, this includes the
balancing of increasing cash returns to shareholders while bringing
net debt to adjusted EBITDA1 within the targeted range
of 2.5 to 3.0 times by the end of the year. For 2024 and 2025, it
will be a balance of priorities between returning cash to
shareholders and allocating about $300
million per year to growth capital.
Financial framework
|
|
Target
|
2021A
|
Preserve Financial
Strength and Flexibility
|
Credit ratings
|
BBB
|
BBB/BBB-
|
Net Debt / Adjusted
EBITDA1
|
2.5x -
3.0x
|
2.4x
|
Invest for Margin
Growth and Cash Flow
Stability
|
Corporate
ROIC1
|
>12%
|
14%
|
Fee-for-Service contribution of
Realized Margin1
|
>75%
|
69%
|
Cash Returns to
Shareholders
|
Dividend Payout
Ratio1
|
50% -
70%
|
63%
|
Share buybacks
activated as appropriate
|
Capital allocation priorities for 2022 to 2025
Year
|
Priorities
|
2022
|
- Fund major
strategic growth project (KAPS)
|
2023
|
Balance priorities
between:
- Bringing net debt to adjusted
EBITDA1 within target range by YE '23
- Increasing cash returns to
shareholders•Modest growth capital
|
2024
-2025
|
Balance priorities
between:
- Increasing cash returns to shareholders
- Growth spending
|
Rigorous investment criteria
Keyera has a rigorous investment criteria focused on generating
higher risk-adjusted returns. For capital investments, priority
will be given to projects that have strategic alignment, strong
returns, long-term contractual underpinning, and contribute toward
the company's ESG objectives including its targets for reducing
emissions intensity.
Rich project inventory to deliver visible growth
Keyera has a rich inventory of near and long-term investment
opportunities to allow for the continued compounding of investment
returns that drive growth in DCF and dividends per
share1. The projects have been paced to fit within
Keyera's financial framework and self-funded business model.
Keyera Project
Inventory
|
Status
|
Expected Timeline to
Completion
|
Optimizations Across
the Value Chain
|
Ongoing
|
Ongoing
|
Cheecham Sulphur
Plant
|
Under
construction
|
2H 2022
|
Storage Cavern
18
|
Under
construction
|
2H 2022
|
KAPS Zone
1-3
|
Under
construction
|
Q1 2023
|
Pipestone Gas Plant
Capacity Expansion
|
Not
sanctioned
|
2023
|
KAPS Zone 4
|
Not
sanctioned
|
2025
|
Fractionation Expansion
at KFS (Frac 3)
|
Not
sanctioned
|
2025+
|
De-Carbonization at AEF
and KFS
|
Not
sanctioned
|
2026+
|
Hydrogen Transportation
and Storage
|
Not
sanctioned
|
2026+
|
Connectivity to CCS Via
Low Carbon Hub
|
Not
sanctioned
|
2026+
|
KAPS PIPELINE CONSTRUCTION AND COMMERCIAL UPDATE
The KAPS project is strategically important to Keyera as it
connects growing Montney and
Duvernay liquids volumes from the
company's north region Gathering and Processing business, and other
third-party facilities, to its downstream fractionation, storage,
logistics and marketing business for additional margin capture.
Once complete, the project will meet strong customer demand for a
competing alternative provider and be one of only two integrated
liquids solutions servicing the area.
Construction and capital cost update
Construction of the project continues to advance steadily. The
company implemented several cost containment measures at the outset
of the project which have limited Keyera's exposure to
industry-wide inflation. With 65% of the project now complete,
including the purchase and receipt of all the required steel pipe
and the vast majority of other materials, the project cost is
expected to increase, yet still be within 10% of the latest
estimate of $800 million net to
Keyera. The majority of the remaining 35% of the project relates to
construction activities for which signed contracts are in place
with contractors who are currently performing work for KAPS and are
familiar with the project.
Commercial update
Keyera has successfully increased the level of contracting on
Zones 1 – 3 and the yet to be sanctioned Zone 4. Additionally, the
company is in advanced negotiations with numerous parties to secure
additional contracts. Select progress to date includes:
- Additional contracting for Zones 1 – 3 including increased
commitments from new and existing customers.
- Secured new contracts for the proposed Zone 4 extension of the
KAPS pipeline from Pipestone to
Gordondale, which would also flow through Zones 1 – 3.
- The company expects to soon have contracted the majority of the
volumes required to sanction Zone 4. A sanction decision is
expected later this year.
KAPS unlocks downstream margin growth
Increased volumes from the KAPS pipeline system will provide
additional growth and margin capture opportunities through Keyera's
downstream fractionation, storage, rail, pipeline and marketing
businesses including a potential fractionation expansion at KFS.
Keyera benefits from its advantaged position to efficiently add
fractionation capacity given its superior connectivity to propane,
butane and condensate markets, large storage capabilities and
secured location for the expansion.
MARKETING SEGMENT AND GROWTH CAPITAL GUIDANCE UPDATE
2022 Marketing segment guidance
With the April 2022 to
April 2023 NGL contracting season
near complete, Keyera expects 2022 Marketing segment realized
margin1 to range between $250
million and $280 million which
reflects the six-week planned turnaround at AEF.
Increasing base guidance for the Marketing segment for the
2023 to 2025 period
The ongoing annual "base guidance" range for the Marketing
segment has now been adjusted upward to $250
million to $280 million,
replacing the previous range of $180
million to $220 million.
This new range reflects:
- Increased margins from AEF resulting from successful efforts to
access higher value iso-octane markets in the U.S. Rockies and
Mid-West regions while also reducing transportation costs.
- Higher go-forward commodity price assumptions including a U.S.
$65 to U.S. $75 WTI assumption
- Increased future contribution from recently completed US assets
(Galena Park and Wildhorse)
This new range indicates management's current view of what is
achievable with a high degree of confidence and is based on certain
assumptions including commodity prices and asset utilization
rates.
Increasing 2022 growth capital guidance range
As a result of the expected increased cost for the KAPS project,
2022 growth capital is now expected to be $620 million to $660
million, excluding capitalized interest. This new
range replaces the previous range of $570
million to $610 million.
KEYERA'S LOW CARBON HUB
STRATEGY
Keyera is uniquely positioned to create a strong energy
transition business in a way that can generate investment returns
via long-term contracts with world-class creditworthy
counterparties. The new low-carbon hub strategy leverages Keyera's
existing competitive advantages which are existing land, proximity
to large industrial players, optionality to add more cavern
storage, infrastructure connectivity, logistics and expertise and
provides a platform to accelerate participation in the energy
transition and offer value-added services to customers. Offerings
could include:
- Transportation and storage of low carbon products
- Connectivity to carbon capture and storage hubs
- Supply of low-carbon feedstocks
- Low carbon power generation including co-generation
- Access to both major rail lines
Keyera continues to engage with potential partners to advance
sustainable energy solutions. This includes the recent
agreement with Shell Canada Limited (Shell). Keyera and Shell will
explore opportunities to build a future gathering and distribution
network to transport captured CO2 from Keyera and other operations
in the region to Shell's proposed Polaris CCS storage hub for safe,
reliable, and economic storage. As part of this
collaboration, Keyera would also leverage an existing
hydrogen-rated pipeline to complement a hydrogen manufacturing and
distribution network.
INVESTOR DAY DETAILS
Date:
March 29, 2022
Time:
8:00 a.m.
MT (10:00 a.m. ET or
15:00 GMT London)
Webcast Registration: Link
The presentation and webcast replay will be made available
immediately following the event at
https://www.keyera.com/investors/events-and-presentations/.
About Keyera Corp.
Keyera Corp. (TSX:KEY) operates an
integrated Canadian-based energy infrastructure business with
extensive interconnected assets and depth of expertise in
delivering energy solutions. Its predominantly fee-for-service
based business consists of natural gas gathering and processing;
natural gas liquids processing, transportation, storage and
marketing; iso-octane production and sales; and an industry-leading
condensate system in the Edmonton/Fort
Saskatchewan area of Alberta. Keyera strives to provide high
quality, value-added services to its customers across North America and is committed to conducting
its business ethically, safely and in an environmentally and
financially responsible manner.
Additional Information
For more information about
Keyera Corp., please visit our website at www.keyera.com or
contact:
Dan Cuthbertson, Director,
Investor Relations
Calvin Locke, Manager, Investor
Relations
Rahul Pandey, Senior Advisor,
Investor Relations
Email: ir@keyera.com Telephone: 403.205.7670
Toll free: 888.699.4853
|
1 Not a
standardized measure under GAAP or is a supplementary financial
measure and therefore, may not be comparable to similar measures
reported by other entities. See the section titled "Non-GAAP and
Other Financial Measures" of this news release for additional
information.
|
Non-GAAP and Other Financial Measures
This news release refers to certain financial and other measures
that are not determined in accordance with Generally Accepted
Accounting Principles (GAAP) and as a result, may not be comparable
to similar measures reported by other entities. Management believes
that these non-GAAP and other financial measures facilitate the
understanding of Keyera's results of operations, leverage,
liquidity and financial position. These measures do not have any
standardized meaning under GAAP and therefore, should not be
considered in isolation, or used in substitution for measures of
performance prepared in accordance with GAAP. For additional
information regarding the composition of these measures, how
management utilizes them, and where applicable, a reconciliation of
Keyera's historical non-GAAP financial measures to the most
directly comparable GAAP measure, refer to Management's Discussion
and Analysis (MD&A) for the year ended December 31, 2021, which is available on SEDAR at
www.sedar.com and Keyera's website at www.keyera.com.
Specifically, the sections of the MD&A for the year ended
December 31, 2021 titled "Segmented
Results of Operations", "EBITDA", "Dividends: Funds from Operations
and Distributable Cash Flow", "Adjusted Cash Flow from Operating
Activities and Return on Invested Capital" and "Non-GAAP and Other
Financial Measures" include information that has been incorporated
by reference for these non-GAAP and other financial measures.
This news release includes certain non-GAAP financial measures
that include forward-looking information. Below is a summary of the
equivalent historical non-GAAP financial measures.
Realized Margin
|
Annual Base
Guidance
|
2022
Guidance
|
For the year ended
December 31, 2021
|
Realized margin for the
Marketing segment
|
$250 million – $280
million1
|
$250 million – $280
million
|
$323 million
|
Note:
1 The annual base guidance for the Marketing segment's
realized margin relates to the 2023 to 2025 period. This annual
base guidance has been adjusted upward to replace the previous
range of $180 million to $220 million.
Adjusted EBITDA
On an equivalent historical basis, adjusted EBITDA was
$956 million for the year ended
December 31, 2021.
Forward-Looking Information
To provide readers with information regarding Keyera, including
its assessment of future plans, operations and financial
performance, certain statements contained herein contain
forward-looking information within the meaning of applicable
Canadian securities legislation (collectively, "forward-looking
information"). Forward-looking information relate to future events
and/or Keyera's future performance. Forward-looking information are
predictions only; actual events or results may differ materially.
Use of words such as "anticipate", "continue", "estimate",
"expect", "may", "will", "project", "should", "plan", "intend",
"believe", and similar expressions (including negatives thereof),
is intended to identify forward-looking information. All statements
other than statements of historical fact contained herein are
forward-looking information, including, without limitation,
statements regarding future dividends, future financial position of
Keyera, future returns from capital projects, Keyera's vision,
business strategy and plans of management, anticipated growth and
proposed activities, future opportunities, expected capacities
associated with capital projects, expected sources of and demand
for energy, estimated utilization rates, and expected commodity
prices and production levels.
Forward-looking information reflect management's current beliefs
and assumptions with respect to such things as outlook for general
economic trends, industry forecasts and/or trends, commodity
prices, capital markets, and government, regulatory and/or legal
environment and potential impacts thereof. In some instances,
forward-looking information may be attributed to third party
sources. Management believes its assumptions and analysis are
reasonable and that expectations reflected in forward-looking
information contained herein are also reasonable. However, Keyera
cannot assure readers these expectations will prove to be
correct.
All forward-looking information involve known and unknown risks,
uncertainties and other factors that may cause actual results,
events, levels of activity and achievements to differ materially
from those anticipated in the forward-looking information. These
unknown risks, uncertainties, and other factors affecting Keyera
and its business are contained in Keyera's 2021 Year-End Report and
in Keyera's Annual Information Form, each dated February 16, 2022, each filed on SEDAR at
www.sedar.com and available on the Keyera website at
www.keyera.com.
Proposed construction and completion schedules and budgets for
capital projects are subject to many variables, including the
continued uncertainty of the COVID-19 pandemic; weather;
availability of and/or prices of materials and/or labour; customer
project schedules and expected in-service dates; contractor
productivity; contractor disputes; quality of cost estimating;
decision processes and approvals by joint venture partners; changes
in project scope at the time of project sanctioning; regulatory
approvals, conditions or delays (including possible intervention by
third parties); Keyera's ability to secure adequate land rights and
water supply; and macro socio-economic trends. As a result,
expected timing, costs and benefits associated with these projects
may differ materially from descriptions contained herein. Further,
some of the projects discussed herein are subject to securing
sufficient producer/customer interest and may not proceed if
sufficient commitments are not obtained. Typically, the earlier in
the engineering process that projects are sanctioned, the greater
the likelihood that the schedule and budget may change.
In addition to factors referenced above, Keyera's expectations
with respect to future returns associated with: (i) growth capital
projects sanctioned and in development as of the date hereof, and
(ii) the KAPS project, are based on a number of assumptions,
estimates and projections developed based on past experience and
anticipated trends, including but not limited to: capital cost
estimates assuming no material unforeseen costs; timing for
completion of growth capital projects; customer performance of
contractual obligations; reliability of production profiles;
commodity prices, margins and volumes; tax and interest rates;
availability of capital at attractive prices; and no changes in
regulatory or approval requirements, including no delay in securing
any outstanding regulatory approvals.
All forward-looking information contained herein are expressly
qualified by this cautionary statement. Readers are cautioned they
should not unduly rely on these forward-looking information and
that information contained in such forward-looking information may
not be appropriate for other purposes. Further, readers are
cautioned that the forward-looking information contained herein is
made as of the date of this Investor Day Presentation. Unless
required by law, Keyera does not intend and does not assume any
obligation to update any forward-looking information. All
forward-looking information contained in this Investor Day
Presentation is expressly qualified by this cautionary statement.
Further information about the factors affecting forward-looking
statements and management's assumptions and analysis thereof, is
available in filings made by Keyera with Canadian provincial
securities commissions, which can be viewed on SEDAR at
www.sedar.com.
SOURCE Keyera Corp.