Vern Yu is President and CEO of AltaGas
PRINCE RUPERT – AltaGas Ltd. (TSX: ALA) and Royal Vopak (XAMS: VPK) are pleased to announce a positive final investment decision (FID) on the Ridley Island Energy Export Facility (REEF), a large-scale liquefied petroleum gas (LPG) and bulk liquids terminal with rail, logistics and marine infrastructure on Ridley Island, British Columbia. Following a five-year environmental preparation and review process, extensive engagement with multiple stakeholders including Indigenous rights holders and local communities, the Joint Venture is set to deliver a world class export facility that will operate with industry-leading environmental stewardship.
“This positive FID enables AltaGas to continue connecting Canadian energy to Asian markets and drive valuable outcomes for all our customers,” said Vern Yu, President and CEO of AltaGas. “Canada has a structural advantage in delivering LPGs to Asia with the shortest shipping time and lowest maritime emissions footprint. AltaGas delivers more than 19 percent of Japan’s propane and 13 percent of South Korea’s LPG imports, connecting our upstream customers with customers in Asia. We look forward to working with our partners to drive more long-term value creation with REEF.”
“We are excited to be able to execute on our growth strategy and invest in export infrastructure on this highly strategic location” said Dick Richelle, Chairman of the Executive Board and CEO of Royal Vopak. “Prince Rupert, with the shortest shipping distances between North America and Asia, gives the opportunity to drive progress by increasing the trade between Canada and the Asia Pacific region. We are proud to contribute to this development and are thankful for the good collaboration with our partner AltaGas and other key stakeholders. The trust and support of local First Nations and communities makes this envisioned terminal a reality.”
Capital Cost, Economics, Funding and Delivery Schedule
@vopak.com
Projected gross capital cost of $1.35 billion, excluding governmental incentives and support, and annual Partnership EBITDA of $185 million – $215 million are in-line with the Joint Venture’s expectations. Vopak and AltaGas are expected to fund their pro-rata 50 percent ownership through each organization’s respective financial capacity with no leverage at the Partnership level.
The capital cost breakdown of Phase 1 includes approximately $875 million for construction of the facility, balance of the plant and LPG storage tanks and $475 million for construction of the new dedicated jetty and extensive rail and logistics infrastructure. The infrastructure includes additional redundancies to provide operational flexibility that benefits the Joint Venture and customers over the long term.
AltaGas will minimize onsite work to reduce capital cost risk, with approximately 90 percent of equipment, packaging and pipes being prefabricated offsite in controlled operating environments. In addition, AltaGas expects to lock-in more than 60 percent of the Phase 1 estimated capital cost through fixed-price, lump-sum engineering, procurement and construction contracts, prior to the start of construction of individual phases.
The bulk of REEF’s construction activities are planned to take place over 2025 and 2026 with select workstreams beginning in 2024. This includes plans for the Partners to incur approximately $200 million of incremental gross capital expenditures in 2024. As part of the positive FID, AltaGas is increasing its 2024 capital expenditure guidance from $1.2 billion to $1.3 billion. AltaGas maintains a disciplined approach to capital allocation and plans to fund its portion of the project using internally generated cash flows and its annual investment capacity.
During construction, AltaGas will leverage the benefit of operating a diversified platform by adjusting capital spending across other parts of the business to ensure the company is balancing its three long-term objectives of financial strength and flexibility, continued organic growth, and long-term dividend growth.
Vopak’s disciplined capital allocation policy is driving value through accretive growth investments that will deliver attractive operating cash return. Vopak’s growth capex guidance for FY 2024 remains unchanged. The long-term commitment to invest EUR 1 billion to grow in industrial and gas by 2030 and EUR 1 billion to accelerate towards new energies by 2030 remains unchanged. Vopak plans to fund its portion of the project using the strong balance sheet position. The efficient use of the capital structure will further support cash flow generation at Vopak level.
REEF has strong community support following extensive stakeholder engagement
Vopak and AltaGas have been working closely with First Nations rights holders and key stakeholders, including the local communities in Northwestern British Columbia, as well as the PRPA, and Federal and Provincial regulators for more than five years to deliver a project that will operate with industry-leading environmental and community stewardship. AltaGas and Vopak have developed strong relationships with local Indigenous communities through its existing operations, where the partners have worked collaboratively on economic and social development opportunities, including skills training, emergency response preparedness and other community-identified priorities. REEF will drive strong economic benefits to these local communities in the region through construction activities, long-term job creation, and community investment targeted at driving positive economic outcomes across all stakeholders.
Source: Altagas.ca
