Financial Report - Veresen Inc.

On May 26, 2009, the NEB adopted a report on the financial issues of pipeline abandonment that will require NEB-regulated pipeline
companies to set aside funds to cover future abandonment costs. The issuance of this report followed a public hearing held in January
2009 into the financial matters of pipeline abandonment.
As a result of the mandated framework and action plan, Alliance filed preliminary abandonment cost estimates, largely based on
NEB assumptions, for the Canadian segment of its pipeline with the NEB on November 30, 2011.
The NEB held Pipeline Abandonment hearings in November 2012 to consider the reasonableness of each company’s submitted cost
estimates, including abandonment methods, environmental considerations, the scope and rationale of each abandonment activity
considered for estimating the costs, and the approach to the estimation of the contingency and provision for post-abandonment.
On February 14, 2013, the NEB issued its decision on Alliance’s abandonment cost estimates. The NEB has directed Alliance to
submit revised cost estimates based on a higher pipeline removal percentage and to increase the post-abandonment monitoring
and remediation requirements. The revised cost estimates are to be filed by April 16, 2013.
On February 28, 2013, affected companies including Alliance filed a joint application for a process and mechanism to set aside the
funds for pipeline abandonment costs. A second filing detailing affected companies’ proposed collection mechanism is required by
May 2013. Under the NEB’s current directive, affected companies will have to start collecting such funds no later than the 2015 toll year.
AEGS
AEGS’ revenues and earnings are based on long-term, take-or-pay ethane transportation agreements, referred to as “ETAs”, which
extend to December 31, 2018. The ETAs provide for a minimum revenue stream based on specified committed volumes and the
recovery of all operating costs.
Operational Highlights
Toll volumes for the three months ended December 31, 2012 were 291.1 mbbls/d compared to 277.8 mbbls/d for the same period last
year, reflecting higher natural gas exports. Toll volumes for the year ended December 31, 2012 averaged 284.4 mbbls/d compared to
286.9 mbbls/d for the same period last year. Planned turnarounds performed at two major petrochemical plants served by AEGS in
the second quarter of 2012 resulted in lower annual ethane deliveries.
Financial Highlights
For the three and 12 months ended December 31, 2012, AEGS generated $6.8 million and $25.0 million in EBITDA, respectively, a
$0.8 million and $1.1 million increase compared to $6.0 million and $23.9 million for the same periods last year. The increase reflects
higher transportation revenues, and higher operating cost recoveries.
Net income before tax for the three and 12 months ended December 31, 2012 was $2.1 million and $6.5 million, respectively, a
$0.7 million and $0.9 million increase compared to $1.4 million and $5.6 million for the same periods last year. The increase in
net income before tax primarily resulted from higher EBITDA.
Midstream Business
Three months ended December 31, 2012 Three months ended December 31, 2011
Hythe/
Hythe/
($ Millions, except where noted) Total Steeprock Aux Sable (1) Total Steeprock Aux Sable (1)
EBITDA 13.7 13.7 19.0 – – 35.3
Depreciation & amortization (9.4) (9.4) (3.0) – – (2.3)
Interest – – – – – (0.3)
Equity income 16.0 – 16.0 32.7 – 32.7
Net income before tax 20.3 4.3 16.0 32.7 – 32.7
Volumes (100%)
Fee Volumes (3) 392.3 –
mmcf/d
Ethane 22.3 47.5
Propane plus 49.8 39.7
72.1 87.2
mbbls/d
mbbls/d
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