DBRS Confirms Inter Pipeline (Corridor) Inc. at “A,” R-1 (low), Stable

DBRS Limited (DBRS) has confirmed the Issuer Rating and Senior Unsecured Debentures rating of Inter Pipeline (Corridor) Inc. (Corridor) at “A,” as well as its Commercial Paper (CP) rating at R-1 (low). All trends are Stable. The confirmations reflect Corridor’s strategic position as the sole pipeline servicing the Athabasca Oil Sands Project (AOSP), as well as its long-term ship-or-pay contracts with strong investment-grade shippers and good operational efficiencies.

Corridor owns the Corridor Pipeline System, which is the sole transporter of diluted bitumen produced by AOSP. It provides a vital link for the transportation of bitumen and diluent between two major components of AOSP: the Muskeg River Mine (MRM) and the Jackpine Mine (JPM) north of Fort McMurray, Alberta, and the Scotford Upgrader (SU), adjacent to Shell Canada Limited’s (Shell Canada) Scotford Refinery near Edmonton, Alberta. DBRS believes that the shippers’ large commitment to the AOSP ensures their strong incentive to make sure that Corridor is fully utilized to the highest extent possible.

Corridor’s business risk profile is supported by long-term cost-of-service (COS) Firm Service Agreements (FSA) with quality shippers, which are also the AOSP sponsors: (a) 60% of the commitments from Shell Canada, guaranteed by Shell Petroleum N.V. (SPNV), with exceptional credit quality (DBRS notes that the guarantee may be revoked under certain circumstances, although that is highly unlikely to occur); (b) 20% by Chevron Canada Limited (Chevron Canada; guaranteed by its parent, Chevron Corporation (Chevron; rated AA with Negative trend by DBRS)); and (c) 20% by Marathon Oil Canada Corporation (Marathon Canada), a subsidiary of Marathon Oil Corporation (Marathon).

Corridor has continued to manage its ongoing refinancing risk. Corridor extended the maturity date of its $1,550 million unsecured revolving credit facility by one year to December 13, 2019. The facility has no repayment requirements until maturity and is available to backstop Corridor’s CP program, which had an outstanding balance of approximately $1.4 billion as at March 31, 2016. In February 2015, Corridor’s $150 million Series B debentures matured and were repaid with funds available under Corridor’s $1,550 million unsecured revolving credit facility. Corridor’s remaining debt maturity is related to its $150 million Senior Unsecured Debentures due in February 2020.

Corridor’s ratings incorporate DBRS’s review of financial information and other relevant information that are not disclosed in this rating report because of Corridor’s private nature. DBRS notes that Corridor has maintained a stable financial profile with predictable cash flows supported by the long-term FSAs.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Companies in the Pipeline and Diversified Energy Industry (December 2015) and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (April 2016), which can be found on our website under Methodologies.

This rating was initiated at the request of the rated entity.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.