pembina pipeline corporation · 2020. 11. 5. · pembina will continue to keep its employees and...
TRANSCRIPT
Q3Pembina Pipeline Corporation
2020 Interim Report
REPORTTOSHAREHOLDERSThirdQuarter2020
MANAGEMENT'SDISCUSSIONANDANALYSIS
TableofContents
1.AboutPembina..................................................................................................................................................................... 1
2.Financial&OperatingOverview........................................................................................................................................... 3
3.SegmentResults.................................................................................................................................................................... 7
4.Liquidity&CapitalResources................................................................................................................................................ 19
5.CapitalInvestments.............................................................................................................................................................. 23
6.Dividends.............................................................................................................................................................................. 23
7.SelectedQuarterlyInformation............................................................................................................................................ 25
8.SelectedEquityAccountedInvesteeInformation................................................................................................................ 27
9.Other..................................................................................................................................................................................... 28
10.AccountingPolicies&Estimates......................................................................................................................................... 30
11.RiskFactors......................................................................................................................................................................... 32
12.Non-GAAPMeasures.......................................................................................................................................................... 33
13.Abbreviations...................................................................................................................................................................... 36
14.Forward-LookingStatements&Information...................................................................................................................... 37
BasisofPresentationThefollowingManagement'sDiscussionandAnalysis("MD&A")ofthefinancialandoperatingresultsofPembinaPipelineCorporation("Pembina"orthe"Company")isdatedNovember5,2020,andissupplementaryto,andshouldbereadinconjunctionwith,Pembina'sunauditedcondensedconsolidatedinterimfinancialstatementsforthethreeandninemonthsendedSeptember30,2020("InterimFinancialStatements")aswellasPembina'sauditedconsolidatedannualfinancialstatements("ConsolidatedFinancialStatements")andMD&AfortheyearendedDecember31,2019.AllfinancialinformationhasbeenpreparedinaccordancewithIAS34InterimFinancialReportingandisexpressedinCanadiandollars,unlessotherwisenoted.AdescriptionofPembina'soperatingsegmentsandadditionalinformationaboutPembinaisfiledwithCanadianandU.S.securitiescommissions,includingquarterlyandannualreports,annualinformationforms(filedwiththeU.S.SecuritiesandExchangeCommissionunderForm40-F)andmanagementinformationcirculars,whichcanbefoundonlineatwww.sedar.com,www.sec.govandthroughPembina'swebsiteatwww.pembina.com.InformationcontainedinorotherwiseaccessiblethroughPembina'swebsitedoesnotformpartofthisMD&Aandisnotincorporatedintothisdocumentbyreference.
AbbreviationsForalistofabbreviationsthatmaybeusedinthisMD&A,refertothe"Abbreviations"sectionofthisMD&A.
Non-GAAPFinancialMeasuresPembinahasidentifiedcertainoperatingandfinancialperformancemeasuresthatmanagementbelievesprovidemeaningfulinformationinassessingPembina'sunderlyingperformance.ReadersarecautionedthatthesemeasuresdonothaveastandardizedmeaningprescribedbyInternationalFinancialReportingStandards("IFRS")andthereforemaynotbecomparabletosimilarmeasurespresentedbyotherentities.Refertothe"Non-GAAPMeasures"sectionofthisMD&Aforalistanddescription,includingreconciliationstothemostdirectlycomparableGAAPmeasures,ofsuchnon-GAAPmeasures.
RiskFactorsandForward-LookingInformationManagementhasidentifiedtheprimaryriskfactorsthatcouldhaveamaterialimpactonthefinancialresultsandoperationsofPembina.SuchriskfactorsarepresentedinPembina'sMD&AandAnnualInformationForm("AIF")fortheyearendedDecember31,2019andhavebeenupdatedinthe"RiskFactors"sectionofthisMD&Aasnecessary.TheCompany'sfinancialandoperationalperformanceispotentiallyaffectedbyanumberoffactors,including,butnotlimitedto,thefactorsdescribedwithinthe"Forward-LookingStatements&Information"sectionofthisMD&A.ThisMD&Acontainsforward-lookingstatementsbasedonPembina'scurrentexpectations,estimates,projectionsandassumptions.ThisinformationisprovidedtoassistreadersinunderstandingtheCompany'sfutureplansandexpectationsandmaynotbeappropriateforotherpurposes.
1PembinaPipelineCorporationThirdQuarter2020
1.ABOUTPEMBINAPembinaisaleadingtransportationandmidstreamserviceproviderthathasbeenservingNorthAmerica'senergyindustryfor
morethan65years.Pembinaownsanintegratedsystemofpipelinesthattransportvarioushydrocarbonliquidsandnatural
gasproductsproducedprimarilyinwesternCanada.TheCompanyalsoownsgasgatheringandprocessingfacilities;anoiland
naturalgasliquidsinfrastructureandlogisticsbusiness;isgrowinganexportterminalsbusiness;andisdevelopinga
petrochemicalfacilitytoconvertpropaneintopolypropylene.Pembina'sintegratedassetsandcommercialoperationsalong
themajorityofthehydrocarbonvaluechainallowittoofferafullspectrumofmidstreamandmarketingservicestothe
energysector.Pembinaiscommittedtoidentifyingadditionalopportunitiestoconnecthydrocarbonproductiontonew
demandlocationsthroughthedevelopmentofinfrastructurethatwouldextendPembina'sserviceofferingevenfurtheralong
thehydrocarbonvaluechain.Thesenewdevelopmentswillcontributetoensuringthathydrocarbonsproducedinthe
WesternCanadianSedimentaryBasinandtheotherbasinswherePembinaoperatescanreachthehighestvaluemarkets
throughouttheworld.
PurposeofPembina:
Tobetheleaderindeliveringintegratedinfrastructuresolutionsconnectingglobalmarkets;
• Customerschooseusfirstforreliableandvalue-addedservices;
• Investorsreceivesustainableindustry-leadingtotalreturns;
• Employeessaywearethe'employerofchoice'andvalueoursafe,respectful,collaborativeandfairworkculture;and
• Communitieswelcomeusandrecognizethenetpositiveimpactofoursocialandenvironmentalcommitment.
OngoingImpactoftheCOVID-19Pandemic
InMarch2020,theWorldHealthOrganizationdeclaredtheglobaloutbreakofanovelcoronavirus("COVID-19")apandemic.
Inresponse,manygovernmentsimposedrestrictionsonindividualsandbusinesses,resultinginasignificantslowdownofthe
globaleconomy.Whiletheserestrictionshavebeenrelaxedincertainjurisdictions,aresurgenceofviruscasesincertain
geographicareasandtheriskthatthiscouldoccurinotherareashascausedgovernmentsincertainjurisdictionstosustain
andinsomecasesre-imposerestrictions,whichcreatesuncertaintyastotheextentanddurationoftheglobaleconomic
slowdown.Theglobaleconomicslowdownhasledtosignificantoperationaldisruptionofbusinessesandtheirworkforces,a
significantincreaseineconomicuncertaintyandadecreaseindemandforcrudeoil,naturalgas,NGLandothercommodities.
Pembina'sgreatestassetsareitspeopleandtherelationshipswithitscustomers,investorsandthecommunitiesinwhichit
hasapresence.Pembinawillcontinuetokeepitsemployeesandstakeholderstopofmindandsupportedwhilenavigating
throughtheseevents.Pembinawilladjustitsresponse,asneeded,andwillcontinuetobasedecisionsonrecommendations
frompublichealthexperts,ongoingevaluationofglobalenergypricesandtheimpactonPembinaanditscustomers'
businesses.
TheimpactsoftheCOVID-19pandemichavebeenassessedthroughoutthisdocumentand,wherematerial,additional
disclosurehasbeenprovidedtoindicatethepotentialimpactsitmayhaveonPembinaanditsresultsofoperations.
PembinaPipelineCorporationThirdQuarter20202
2.FINANCIAL&OPERATINGOVERVIEWConsolidatedFinancialOverviewfortheThreeMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
Infrastructureandotherservicesrevenue 744 594 150 25
Productsalesrevenue 825 1,106 (281) (25)
TotalRevenue 1,569 1,700 (131) (8)
Netrevenue(1) 849 751 98 13
Grossprofit 563 613 (50) (8)
Earnings 318 370 (52) (14)
Earningspercommonshare–basic(dollars) 0.51 0.66 (0.15) (23)
Earningspercommonshare–diluted(dollars) 0.51 0.66 (0.15) (23)
Cashflowfromoperatingactivities 434 535 (101) (19)
Cashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 0.79 1.05 (0.26) (25)
Adjustedcashflowfromoperatingactivities(1) 524 530 (6) (1)
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 0.95 1.04 (0.09) (9)
Capitalexpenditures 174 421 (247) (59)
AdjustedEBITDA(1) 796 736 60 8
Totalvolume(mboe/d)(2) 3,451 3,436 15 —
BridgeAnalysisofEarnings($millions)
318318
370
4719
(115)
9
(6) (6)
EarningsQ32019
Pipelinesgrossprofit
Facilitiesgrossprofit
Marketing&New
Venturesgrossprofit
Corporate,G&Aandother
Netfinancecosts
Currenttax
expense
EarningsQ32020
ResultsOverview
Duringthethirdquarterof2020,Pembina'shighlycontractedbusinessagaindemonstrateditsstabilityandresiliency.
Earningsinthethirdquarterof2020werepositivelyimpactedbyhighergrossprofitinPipelinesandFacilities,asthe
contributionfromtheassetsacquiredintheKinderAcquisitionoffsetweakerglobalenergydemandresultingfromthe
ongoingCOVID-19pandemic.Marketing&NewVentureswasimpactedbylowermarginsoncrudeoilandNGLsalesduring
thequarterasaresultofreducedcrudeactivitiesduetotheimpactofCOVID-19onmarketconditions,inadditiontolower
fracspreadsimpactingNGLmargins.General&administrativeandotherdecreasedduetolowerincentivecostsasaresultof
adecreaseinPembina'ssharepricecomparedtothepriorperiod.
3PembinaPipelineCorporationThirdQuarter2020
ChangesinResultsfortheThreeMonthsEndedSeptember30Infrastructureandotherservicesrevenue
▲ $150millionincreaseinrevenueduetorevenuecontributedbytheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisition,partiallyoffsetbylowerinterruptiblevolumesinPipelinesandlowercapitalfeesinFacilities,largelyduetoreducedenergydemandasaresultoftheongoingCOVID-19pandemic.
Productsalesrevenue ▼ $281milliondecrease($40milliondecreasenetofcostofgoodssold),largelyduetotheimpactoftheCOVID-19pandemiconmarketconditionsresultinginlowercrudeoilprices,combinedwithlowermarketedNGLvolumes,partiallyoffsetbyhigherpropaneandbutanesalesprices.Additionally,marketconditionscompressedmarginsanddecreasedcrudeactivities,whilelowerfracspreadsimpactedNGLmargins.
Costofgoodssold ▲ $229milliondecrease,largelyduetolowercrudeoilprices,combinedwithlowermarketedNGLvolumes,partiallyoffsetbyhigherAECOnaturalgaspricesimpactingNGLsupplycosts.
Operatingexpenses ▼ $27millionincrease,largelyduetohigherlabourcosts,repairsandmaintenancecostsandpropertytaxesdrivenbygrowthinPembina'sbusinessfollowingtheKinderAcquisition,partiallyoffsetbylowerpowercostsduetoaloweraveragepowerpoolpriceduringthethirdquarterof2020.
Depreciationandamortizationincludedinoperations
▼ $49millionincrease,primarilyduetogrowthinPembina'sassetbasefollowingtheKinderAcquisitionandadditionalassetsbeingplacedintoservice.
Shareofprofitfromequityaccountedinvestees
▼ $28milliondecrease,largelyduetolowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential,resultinginalowercontributionfromAuxSableandlowerinterruptiblevolumesontheAlliancePipeline.
Realizedgainoncommodity-relatedderivatives
● Consistentwiththepriorperiod.
Unrealizedloss(gain)oncommodity-relatedderivatives
▼ $46millionnegativevariance,primarilyduetotherecoveryintheforwardpriceofpropaneandbutaneduringthethirdquarterof2020,combinedwithcontractsmaturingintheperiod.
General&administrativeandother
▲ $10milliondecrease,largelyduetolowerincentivecostsfollowingthedeclineinPembina'sshareprice.
Netfinancecosts ● Consistentwiththepriorperiod.Higherinterestexpenseassociatedwithhigheraveragedebtlevelsandinterestexpenseassociatedwithleaseslargelyoffsetgainsonnon-commodity-relatedderivativefinancialinstrumentsandforeignexchangegains.
Currenttaxexpense ● Consistentwiththepriorperiod.
Deferredtaxexpense ● Consistentwiththepriorperiod.
Earnings ▼ $52milliondecrease,duetothefactorsnotedabove.
Cashflowfromoperatingactivities
▼ $101milliondecrease,primarilydrivenbythe$72millionincreaseintaxespaid,ascorporatetaxinstallmentsweredeferreduntilthethirdquarterof2020duetotheCOIVD-19pandemic,$53millionincreaseinnetinterestpaid,$31milliondecreaseindistributionsfromequityaccountedinvesteesand$25millionchangeinnon-cashworkingcapital,partiallyoffsetbytheincreaseinoperatingresultsafteradjustingfornon-cashitems.
Adjustedcashflowfromoperatingactivities(1)
● Consistentwithpriorperiod,asthesamefactorsimpactingcashflowfromoperatingactivities,discussedabove,werelargelyoffsetbythechangeintaxespaid,netofthechangeinnon-cashworkingcapital.
AdjustedEBITDA(1) ▲ $60millionincrease,largelyduetothe$105millioncontributionfromtheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisition,partiallyoffsetbylowermarginsoncrudeoilandNGLsalesinthemarketingbusinessasaresultoflowercrudeoilpricesandfracspreadsduringthethirdquarterof2020,andlowercontributionfromAllianceduetolowerinterruptiblevolumesandAuxSableduelargelytolowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential,whichresultedinlowerrevenues.IncludedinadjustedEBITDAis$168million(2019:$183million)relatedtoequityaccountedinvestees.
Totalvolume(mboe/d)(2) ▲ 15mboe/dincrease,duetothecontributionfromtheCochinPipelineacquiredintheKinderAcquisition,combinedwithhighersupplyvolumesattheRedwaterComplex,DuvernayIIgoingintoserviceandhighertemporaryinterruptiblevolumesontheRubyPipeline,partiallyoffsetbylowerinterruptiblevolumesinPipelinesduetolowercrudeoilandNGLdemandandanarrowerAECO-Chicagonaturalgaspricedifferential.Revenuevolumesinclude310mboe/d(2019:316mboe/d)relatedtoequityaccountedinvestees.
▲ Increase; ▼ Decrease;or ● Noimpact; toearnings,adjustedEBITDA,cashflowfromoperations,adjustedcashflowfromoperatingactivitiesortotalvolumes.
(1) Refertothe"Non-GAAPMeasures"section.(2) Totalrevenuevolumes.Seethe"Abbreviations"sectionfordefinition.MarketedNGLvolumesareexcludedfromvolumestoavoiddoublecounting.Refertothe"Marketing
&NewVentures"sectionforfurtherinformation.
PembinaPipelineCorporationThirdQuarter20204
ConsolidatedFinancialOverviewfortheNineMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
Infrastructureandotherservicesrevenue 2,199 1,764 435 25
Productsalesrevenue 2,309 3,712 (1,403) (38)
Revenue 4,508 5,476 (968) (18)
Netrevenue(1) 2,490 2,283 207 9
Grossprofit 1,746 1,830 (84) (5)
Earnings 885 1,347 (462) (34)
Earningspercommonshare–basic(dollars) 1.39 2.45 (1.06) (43)
Earningspercommonshare–diluted(dollars) 1.39 2.44 (1.05) (43)
Cashflowfromoperatingactivities 1,486 1,804 (318) (18)
Cashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 2.70 3.53 (0.83) (24)
Adjustedcashflowfromoperatingactivities(1) 1,686 1,658 28 2
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 3.07 3.25 (0.18) (6)
Capitalexpenditures 868 1,216 (348) (29)
AdjustedEBITDA(1) 2,415 2,274 141 6
Totalvolume(mboe/d)(2) 3,462 3,408 54 2
BridgeAnalysisofEarnings($millions)
885885
1,347
119 31
(236)
49
(130) (17)
(278)
EarningsYTD2019
Pipelinesgrossprofit
Facilitiesgrossprofit
Marketing&NewVenturesgrossprofit
Corporate,G&Aandother
Netfinancecosts
Currenttax
expense
Deferredtax
expense
EarningsYTD2020
ResultsOverview
EarningsfortheninemonthsendedSeptember30,2020werepositivelyimpactedbyhighergrossprofitinbothPipelinesand
FacilitiesprimarilyasaresultoftheadditionalassetsacquiredintheKinderAcquisition.OffsettingtheresultsfromPipelines
andFacilities,Marketing&NewVentureswasnegativelyimpactedbylowermarginsoncrudeoilandNGLsalesandlower
marketedNGLvolumes,combinedwithalowercontributionfromAuxSableasaresultoflowerNGLmarginsandanarrower
AECO-Chicagonaturalgaspricedifferential,partiallyoffsetbyrealizedgainsoncommodity-relatedderivativesduetothe
lowerpricingenvironment.DeferredtaxesincreasedastheenactmentofAlberta'sBill3inJune2019,whichreducesthe
Albertacorporateincometaxratefrom12to8percentandresultinginalargedeferredtaxrecoveryduringthesecond
quarterof2019.Netfinancecostsincreasedduetohigherinterestexpense,drivenbyhigheraveragedebtlevels,andforeign
exchangelossesontherepaymentofU.S.dollardenominateddebt.General&administrativeandotherdecreasedinthe
periodduetotherecognitionofotherincomeassociatedwiththeCanadianEmergencyWageSubsidy("CEWS")andlower
incentivecosts.
5PembinaPipelineCorporationThirdQuarter2020
ChangesinResultsfortheNineMonthsEndedSeptember30Infrastructureandotherservicesrevenue
▲ $435millionincreaseinrevenueduetorevenuecontributedbytheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisition,partiallyoffsetbylowerinterruptiblevolumesinPipelinesandlowercapitalfeesinFacilities,largelyduetoreducedenergydemandasaresultoftheongoingCOVID-19pandemic.
Productsalesrevenue ▼ $1.4billiondecrease($216milliondecreasenetofcostofgoodssold),largelyduetoweakerglobalenergydemandduring2020,asaresultoftheongoingCOVID-19pandemic,resultingindecreasedpricesforcrudeoilandNGL,combinedwithlowermarketedNGLvolumes.Additionally,theimpactoftheCOVID-19pandemiconmarketconditionscompressedmarginsanddecreasedcrudeactivities,whilelowerfracspreadsimpactedNGLmargins,combinedwitha$33millionarbitrationawardpaymentreceivedduringthefirstquarterof2019.
Costofgoodssold ▲ $1.2billiondecrease,duetolowercrudeoilandNGLprices,combinedwithlowermarketedNGLvolumes.
Operatingexpenses ▼ $86millionincrease,largelyduetohigherlabourcosts,repairsandmaintenancecostsandpropertytax,asaresultofthelargerassetbasefollowingtheKinderAcquisition,partiallyoffsetbylowerpowercostsduetoaloweraveragepowerpoolpriceduring2020.
Depreciationandamortizationincludedinoperations
▼ $159millionincrease,primarilyduetogrowthinPembina'sassetbasefollowingtheKinderAcquisitionandadditionalassetsbeingplacedintoservice.
Shareofprofitfromequityaccountedinvestees
▼ $73milliondecrease,largelyduetolowerNGLmarginsandthenarrowerAECO-Chicagonaturalgaspricedifferential,resultinginlowerinterruptiblevolumesontheAlliancePipelineandlowercontributionfromAuxSable.
Realizedgainoncommodity-relatedderivatives
▲ $35millionincrease,duetolowermarketpricesintheperiodcreatingagainforcrudeandNGL-basedderivativessettledduring2020.
Unrealizedloss(gain)oncommodity-relatedderivatives
● Consistentwiththepriorperiod.
General&administrativeandother
▲ $47milliondecrease,largelyduetolowerincentivecosts,drivenbythedeclineinglobalequitymarketswhichimpactedPembina'sshareprice,combinedwithotherincomeassociatedwiththeCEWS,whichwerepartiallyoffsetbyprojectwrite-downsandacquisitionrelatedcosts.
Netfinancecosts ▼ $130millionincrease,primarilydrivenbyadditionalinterestexpenseassociatedwithhigheraveragedebtlevels,combinedwithanincreaseinforeignexchangelossesontherepaymentofU.S.dollardenominateddebtandincreasedinterestexpenserelatedtoleases.
Currenttaxexpense ▼ $17millionincrease,astaxableincomegeneratedfromtheassetsacquiredintheKinderAcquisitionandthetaximpactoftheCEWSwaspartiallyoffsetbydecreasedtaxableincomefromotherPembinaentities.
Deferredtaxrecovery ▼ $278millionincrease,largelyduetotheenactmentofAlberta'sBill3inJuneof2019,whichreducestheAlbertacorporatetaxratefrom12to8percentandresultinginalargedeferredtaxrecovery,partiallyoffsetbytheutilizationofnon-capitallossesin2019.
Earnings ▼ $462milliondecrease,duetothefactorsnotedabove.
Cashflowfromoperatingactivities
▼ $318milliondecrease,primarilydrivenbythe$175millionchangeinnon-cashworkingcapital,$173millionincreaseintaxespaid,asPembinamadethefinalpaymentof2019taxesandfirstinstallmentsof2020,$102milliondecreaseindistributionsfromequityaccountedinvesteesand$92millionincreaseinnetinterestpaid,partiallyoffsetbytheincreaseinoperatingresultsafteradjustingfornon-cashitemsand$48millionincreaseinpaymentsthatwerereceivedanddeferred.
Adjustedcashflowfromoperatingactivities(1)
▲ $28millionincrease,largelyduetothesamefactorsimpactingcashflowfromoperatingactivities,discussedabove,netofthechangeinnon-cashworkingcapital,increaseintaxespaidand$43millionloweraccruedshare-basedpayments,partiallyoffsetbythe$21millionincreaseinpreferredsharedividendsfollowingtheKinderAcquisition.
AdjustedEBITDA(1) ▲ $141millionincrease,duetothe$312millioncontributionfromtheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisition,combinedwiththerealizedgainoncommodityrelatedderivativesandlowergeneral&administrativeandotherexpenses,discussedabove,partiallyoffsetbylowermarginsoncrudeoilandNGLsalesinthemarketingbusinessasaresultoflowerdemandforcrudeoilandNGLduring2020,asaresultoftheCOVID-19pandemic,andlowercontributionfromAuxSableduetolowerNGLmarginsandAllianceduetothenarrowerAECO-Chicagonaturalgaspricedifferential.IncludedinadjustedEBITDAis$509million(2019:$603million)relatedtoequityaccountedinvestees.
Totalvolume(mboe/d)(2) ▲ 54mboe/dincrease,duetothecontributionsfromtheCochinPipelineacquiredintheKinderAcquisition,combinedwithhighertemporaryinterruptiblevolumesonRubyandDuvernayIIgoingintoservice,partiallyoffsetbylowerinterruptiblevolumesinPipelines,duetolowerdemandforcrudeoilandNGLandanarrowerAECO-Chicagonaturalgaspricedifferential.Revenuevolumesinclude312mboe/d(2019:320mboe/d)relatedtoequityaccountedinvestees.
▲ Increase; ▼ Decrease;or ● Noimpact; toearnings,adjustedEBITDA,cashflowfromoperations,adjustedcashflowfromoperatingactivitiesortotalvolumes.
(1) Refertothe"Non-GAAPMeasures"section.(2) Totalrevenuevolumes.Seethe"Abbreviations"sectionfordefinition.MarketedNGLvolumesareexcludedfromvolumestoavoiddoublecounting.Refertothe"Marketing
&NewVentures"sectionforfurtherinformation.
PembinaPipelineCorporationThirdQuarter20206
3.SEGMENTRESULTSBusinessOverview
ThePipelinesDivisionprovidescustomerswithpipelinetransportation,terminalling,storageandrailservicesinkeymarket
hubsinCanadaandtheUnitedStatesforcrudeoil,condensate,naturalgasliquidsandnaturalgas.Thedivisionincludes
pipelinetransportationcapacityofapproximately3.1mmboe/d(1)andabovegroundstorageofapproximately11mmbbls(1)
withinitsconventional,oilsandsandheavyoil,andtransmissionassets.Theconventionalassetsincludestrategicallylocated
pipelinesandterminallinghubsthatgatherandtransportlightandmediumcrudes,condensateandnaturalgasliquidsfrom
westernAlbertaandnortheastBritishColumbiatotheEdmonton,Albertaareaforfurtherprocessingortransportationon
downstreampipelines.TheoilsandsandheavyoilassetstransportheavyandsyntheticoilproducedwithinAlbertatothe
Edmontonareaandofferassociatedstorage,terminallingandrailservices.Thetransmissionassetstransportnaturalgas,
ethaneandcondensatethroughoutCanadaandtheUnitedStatesonlonghaulpipelineslinkingvariouskeymarkethubs.In
addition,thePipelinesDivisionassetsprovidelinkagesbetweenPembina'supstreamanddownstreamassetsacrossNorth
America,enablingintegratedcustomerserviceofferings.Together,theseassetssupplyproductfromhydrocarbonproducing
regionstorefineries,fractionatorsandmarkethubsinAlberta,BritishColumbia,IllinoisandCalifornia,aswellasotherregions
throughoutNorthAmerica.
TheFacilitiesDivisionincludesinfrastructurethatprovidesPembina'scustomerswithnaturalgas,condensateandNGL
services.Pembina'snaturalgasgatheringandprocessingassetsarestrategicallypositionedinactive,liquids-richareasofthe
WCSBandWillistonBasinandareintegratedwiththeCompany'sotherbusinesses.Pembinaprovidessweetandsourgas
gathering,compression,condensatestabilization,andbothshallowcutanddeepcutgasprocessingserviceswithatotal
capacityofapproximately6bcf/d(2)foritscustomers.VirtuallyallofthecondensateandNGLextractedthroughCanadian-
basedfacilitiesaretransportedbyPembina'sPipelinesDivision.Inaddition,allNGLtransportedalongtheAlliancePipelineare
extractedthroughthePembinaoperatedChannahonFacilityattheterminus.TheFacilitiesDivisionincludesapproximately
326mbpd(2)ofNGLfractionation,21mmbbls(1)ofcavernstorageandassociatedpipelineandrailterminallingfacilitiesandthe
CompanyiscurrentlyconstructingaliquefiedpropaneexportfacilityonCanada'sWestCoast.Thesefacilitiesarefully
integratedwiththeCompany'sotherdivisions,providingcustomerswiththeabilitytoaccessacomprehensivesuiteof
servicestoenhancethevalueoftheirhydrocarbons.
TheMarketing&NewVenturesDivisionstrivestomaximizethevalueofhydrocarbonliquidsandnaturalgasoriginatinginthe
basinswheretheCompanyoperates.Pembinaseekstocreatenewmarkets,andfurtherenhanceexistingmarkets,tosupport
boththeCompany'sanditscustomers'overallbusinessinterests.Inparticular,Pembinaseekstoidentifyopportunitiesto
connecthydrocarbonproductiontonewdemandlocationsthroughthedevelopmentofinfrastructure.Pembinastrivesto
increaseproducernetbacksandproductdemandtoimprovetheoverallcompetitivenessofthebasinswheretheCompany
operates.WithintheMarketing&NewVenturesDivision,Pembinaundertakesvalue-addedcommoditymarketingactivities
includingbuyingandsellingproducts(naturalgas,ethane,propane,butane,condensateandcrudeoil),commodityarbitrage,
andoptimizingstorageopportunities.ThemarketingbusinessentersintocontractsforcapacityonbothPembina'sandthird-
partyinfrastructure,handlesproprietaryandcustomervolumesandaggregatesproductionforonwardsale.TheMarketing&
NewVenturesDivisionincludesanintegratedPDH/PPFacilitybeingdevelopedbyPembina'sjointventure,CKPCandthe
proposedJordanCoveLNGproject.
(1) Netcapacity;excludesprojectsunderdevelopment.(2) Netcapacity.IncludesAuxSablecapacity.ThefinancialandoperationalresultsforAuxSableareincludedintheMarketing&NewVenturesDivision;excludesprojectsunder
development.
7PembinaPipelineCorporationThirdQuarter2020
FinancialandOperationalOverviewbyDivision
3MonthsEndedSeptember30 9MonthsEndedSeptember30
2020 2019 2020 2019
($millions,exceptwherenoted) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2)
Pipelines 2,580 378 541 2,570 331 458 2,588 1,150 1,631 2,532 1,031 1,387
Facilities 871 180 251 866 161 233 874 517 757 876 486 701
Marketing&NewVentures(3) — 5 34 — 120 83 — 77 118 — 313 301
Corporate — — (30) — 1 (38) — 2 (91) — — (115)
Total 3,451 563 796 3,436 613 736 3,462 1,746 2,415 3,408 1,830 2,274(1) VolumesforPipelinesandFacilitiesarerevenuevolumes,whicharephysicalvolumesplusvolumesrecognizedfromtake-or-paycommitments.Volumesarestatedinmboe/
d,withnaturalgasvolumesconvertedtomboe/dfromMMcf/data6:1ratio.(2) Refertothe"Non-GAAPMeasures"section.(3) MarketedNGLvolumesareexcludedfromvolumestoavoiddoublecounting.Refertothe"Marketing&NewVentures"sectionforfurtherinformation.
PembinaPipelineCorporationThirdQuarter20208
Pipelines
FinancialOverviewfortheThreeMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
Conventionalrevenue(1) 323 327 (4) (1)
Transmissionrevenue(1) 120 50 70 140
OilSandsrevenue(1) 114 64 50 78
Pipelinesrevenue(1) 557 441 116 26
Operatingexpenses(1) 129 109 20 18
Shareofprofitfromequityaccountedinvestees 55 63 (8) (13)
Depreciationandamortizationincludedinoperations 105 64 41 64
Grossprofit 378 331 47 14
AdjustedEBITDA(2) 541 458 83 18
Volumes(mboe/d)(3) 2,580 2,570 10 —
Distributionsfromequityaccountedinvestees 84 99 (15) (15)
ChangeinResults
Conventionalrevenue(1) ● Consistentwiththepriorperiod.ReducedglobalenergydemandduetotheongoingCOVID-19pandemicresultedinlowerinterruptiblevolumesonthePeacePipelinesystemandtheDraytonValleyPipeline,largelyoffsetbyPhaseVIcomingintoserviceduringJune2020andadditionalrevenueontheNEBCPipelinesystem.
Transmissionrevenue(1) ▲ IncreaselargelyduetothecontributionfromtheCochinPipelinefollowingtheKinderAcquisition,partiallyoffsetbylowerinterruptiblevolumesontheVantageSystem,duetocurrentmarketconditions.
OilSandsrevenue(1) ▲ IncreaseprimarilyduetothecontributionfromtheEdmontonTerminalsfollowingtheKinderAcquisition.
Operatingexpenses(1) ▼ IncreaseprimarilyduetotheadditionaloperatingexpensesassociatedwiththeCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition.
Shareofprofitfromequityaccountedinvestees
▼ DecreaselargelyduetolowerinterruptiblevolumesontheAlliancePipeline,drivenbyanarrowerAECO-Chicagonaturalgaspricedifferential.
Depreciationandamortizationincludedinoperations
▼ IncreaseindepreciationduetothelargerassetbaseasaresultoftheadditionoftheassetsacquiredintheKinderAcquisition.
Distributionsfromequityaccountedinvestees
▼ $53million(2019:$68million)fromAllianceand$31million(2019:$31million)fromRuby.ThedecreaseindistributionsfromAllianceislargelyduetothesamefactorsimpactingshareofprofitfromequityaccountedinvesteesnotedabove.
Volumes(mboe/d)(3) ▲ IncreaseprimarilyduetothecontributionfromtheCochinPipelinefollowingtheKinderAcquisition,combinedwithhighertemporaryinterruptiblevolumesonRuby,partiallyoffsetbylowerthroughputonAlbertaEthaneGatheringSystemandlowerinterruptiblevolumesdiscussedabove.Revenuevolumesinclude126mboe/d(2019:141mboe/d)relatedtoAllianceand108mboe/d(2019:89mboe/d)relatedtoRuby.
AdjustedEBITDA(2) ▲ IncreaseduetohigherrevenueassociatedwiththeCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition,partiallyoffsetbyincreasedoperatingexpensesassociatedwiththelargerassetbaseandalowercontributionfromAllianceduetothenarrowerAECO-Chicagonaturalgaspricedifferential.IncludedinadjustedEBITDAis$66million(2019:$78million)relatedtoAllianceand$47million(2019:$48million)relatedtoRuby.
BridgeAnalysisofAdjustedEBITDA(2)($millions)
541541
458
(4)
70
50
(20) (1)(12)
AdjustedEBITDAQ32019
Conventionalrevenue
Transmissionrevenue
OilSandsrevenue
Operatingexpenses
G&Aandother
AdjustedEBITDAfromequityaccountedinvestees
AdjustedEBITDAQ32020
(1) Includesinter-divisiontransactions.SeeNote12oftheInterimFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.
9PembinaPipelineCorporationThirdQuarter2020
FinancialOverviewfortheNineMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
Conventionalrevenue(1) 951 960 (9) (1)
Transmissionrevenue(1) 342 129 213 165
OilSandsrevenue(1) 355 211 144 68
Totalrevenue(1) 1,648 1,300 348 27
Operatingexpenses(1) 362 299 63 21
Shareofprofitfromequityaccountedinvestees 170 209 (39) (19)
Depreciationandamortizationincludedinoperations 306 179 127 71
Grossprofit 1,150 1,031 119 12
AdjustedEBITDA(2) 1,631 1,387 244 18
Volumes(mboe/d)(3) 2,588 2,532 56 2
Distributionsfromequityaccountedinvestees 259 310 (51) (16)
ChangeinResults
Conventionalrevenue(1) ● Consistentwiththepriorperiod.LowerinterruptiblerevenuevolumesontheDraytonValleyPipelineduetotheongoingCOVID-19pandemicwhichhasreducedglobalenergydemand,largelyoffsetbyPhaseVIcomingintoserviceduringJune2020andadditionalrevenueontheNEBCPipelineSystem.
Transmissionrevenue(1) ▲ IncreaselargelyduetothecontributionfromtheCochinPipelineandhigheroperatingexpenserecoveriesontheAlbertaEthaneGatheringSystem.
OilSandsrevenue(1) ▲ IncreaseprimarilyduetocontributionfromtheEdmontonTerminalsfollowingtheKinderAcquisition,partiallyoffsetbytherecognitionof$22millionindeferredvariablerevenueinthesecondquarterof2019.
Operatingexpenses(1) ▼ IncreaseprimarilyduetotheadditionaloperatingexpensesassociatedwiththeCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition,partiallyoffsetbylowerrepairsandmaintenancecostsfortheconventionalassetsanddecreasedpowercostsduetoaloweraveragepowerpoolpriceduring2020.
Shareofprofitfromequityaccountedinvestees
▼ DecreaselargelyduetolowerinterruptiblevolumesontheAlliancePipeline,drivenbyanarrowerAECO-Chicagonaturalgaspricedifferential.
Depreciationandamortizationincludedinoperations
▼ Increaseindepreciationduetothelargerassetbase,primarilyasaresultoftheassetsacquiredintheKinderAcquisition.
Distributionsfromequityaccountedinvestees
▼ $166million(2019:$218million)fromAllianceand$93million(2019:$91million)fromRuby.ThedecreaseindistributionsfromAlliancewaslargelyduetothesamefactorsimpactingshareofprofitfromequityaccountedinvesteesnotedabove.
Volumes(mboe/d)(3) ▲ IncreaseprimarilyduetothecontributionfromtheCochinPipelinefollowingtheKinderAcquisition,combinedwithhighertemporaryinterruptiblevolumesonRuby,partiallyoffsetbylowerinterruptiblevolumesontheDraytonValleyPipelineandtheAlliancePipeline,discussedabove.Revenuevolumesinclude127mboe/d(2019:144mboe/d)relatedtoAllianceand104mboe/d(2019:89mboe/d)relatedtoRuby.
AdjustedEBITDA(2) ▲ IncreaseduetohigherrevenueassociatedwiththeCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition,partiallyoffsetbyincreasedoperatingexpensesassociatedwiththelargerassetbaseandalowercontributionfromAlliance,duetothenarrowerAECO-Chicagonaturalgaspricedifferential.IncludedinadjustedEBITDAis$207million(2019:$252million)relatedtoAllianceand$143million(2019:$150million)relatedtoRuby.
BridgeAnalysisofAdjustedEBITDA(2)($millions)
1,6311,631
1,387
(9)
213
144
(63)
11
(52)
AdjustedEBITDAYTD2019
Conventionalrevenue
Transmissionrevenue
OilSandsrevenue
Operatingexpenses
G&Aandother
AdjustedEBITDAfromequityaccountedinvestees
AdjustedEBITDAYTD2020
(1) Includesinter-divisiontransactions.SeeNote12oftheInterimFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.
PembinaPipelineCorporationThirdQuarter202010
OperationalOverview
3MonthsEndedSeptember30 9MonthsEndedSeptember30
2020 2019 2020 2019
($millions,exceptwherenoted) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2)
Pipelines
Conventional 863 210 253 908 208 248 866 632 760 894 633 740
Transmission 661 120 210 594 94 168 666 351 623 572 288 511
OilSands 1,056 48 78 1,068 29 42 1,056 167 248 1,066 110 136
Total 2,580 378 541 2,570 331 458 2,588 1,150 1,631 2,532 1,031 1,387(1) Revenuevolumesinmboe/d.Seethe"Abbreviations"sectionfordefinition.(2) Refertothe"Non-GAAPMeasures"section.
Projects&NewDevelopments(1)
Pipelinescontinuestofocusontheexecutionofvarioussystemexpansions.Theprojectsinthefollowingtablewererecently
placedintoserviceandimpactPipelinesresults.
SignificantProjects In-serviceDate
PhaseVIPeacePipelineExpansion June2020
WapitiCondensateLateral March2020
NEBCMontneyInfrastructure February2020
ThefollowingoutlinestheprojectsandnewdevelopmentswithinPipelines:
Aspreviouslyannounced,inresponsetotheCOVID-19pandemic,theresultingeconomicslowdownanddecreaseddemand
forcrudeoilandNGL,Pembinamadethedecisiontodefersomeofitspreviouslyannouncedexpansionprojects:
PhaseVIIPeacePipelineExpansion Status:Deferred
Thisexpansionisexpectedtoaddapproximately240mbpdofincrementalcapacityupstreamofFoxCreek,accessingcapacityavailableonthepipelinesdownstreamofFoxCreek.Includedintheexpansionisa20-inch,approximately220-kilometerpipelineintheLaGlace-Valleyview-FoxCreekcorridor,aswellassixnewpumpstationsorterminalupgrades,betweenLaGlaceandEdmonton,Alberta.Whiledeferred,theCompanycontinuestoadvanceengineeringworkandoptimizescopetomeetcustomers'needs.
ThecarryingvalueoftheprojectatSeptember30,2020was$300million.
PhaseVIIIPeacePipelineExpansion Status:Deferred
Thisexpansionwillinclude10-inchand16-inchpipelinesintheGordondaletoLaGlacecorridoraswellassixnewpumpstationsorterminalupgradeslocatedbetweenGordondaleandFoxCreek.
ThecarryingvalueoftheprojectatSeptember30,2020was$37million.
PhaseIXPeacePipelineExpansion Status:Deferred
Thisexpansionwillinclude6-inchand16-inchpipelinesdebottleneckingthecorridornorthofGordondaleaswellasupgradesatonepumpstation.Inaddition,thisexpansionwillseeexistingpipelines,whicharecurrentlybatching,convertedtosingleproductlines.
ThecarryingvalueoftheprojectatSeptember30,2020was$3million.(1) ForfurtherdetailsonPembina'ssignificantassets,includingdefinitions,refertoPembina'sAIFfortheyearendedDecember31,2019filedatwww.sedar.com(filedwiththe
U.S.SecuritiesandExchangeCommissionatwww.sec.govunderForm40-F)andonPembina'swebsiteatwww.pembina.com.
11PembinaPipelineCorporationThirdQuarter2020
Facilities
FinancialOverviewfortheThreeMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
GasServicesnetrevenue(1)(2) 145 151 (6) (4)
NGLServicesnetrevenue(1)(2) 163 137 26 19
Facilitiesnetrevenue(1)(2) 308 288 20 7
Operatingexpenses(1) 99 97 2 2
Shareofprofitfromequityaccountedinvestees 11 12 (1) (8)
Unrealizedlossoncommodity-relatedderivativefinancialinstruments (11) — (11) 100
Depreciationandamortizationincludedinoperations 51 42 9 21
Grossprofit 180 161 19 12
AdjustedEBITDA(2) 251 233 18 8
Volumes(mboe/d)(3) 871 866 5 1
Distributionsfromequityaccountedinvestees 25 24 1 4
ChangesinResults
GasServicesnetrevenue(1)(2) ● Consistentwiththepriorperiod.IncreasedrevenueassociatedwithDuvernayIIbeingplacedintoservice,combinedwithincreasedprocessingdaysatKakwaRiverduetoaturnaroundinthethirdquarterof2019,offsetlowerrevenuesattheResthavenfacilityandtheCutbankComplexduetolowercapitalfeesandlowervolumesattheYoungerfacilityduetoaregularlyscheduledturnaroundduringSeptember2020.
NGLServicesnetrevenue(1)(2) ▲ IncreaseprimarilyduetorevenuesfromtheVancouverWharvesfollowingtheKinderAcquisition.
Operatingexpenses(1) ● Consistentwithpriorperiod.IncreasedoperatingexpensesassociatedwiththeVancouverWharves,followingtheKinderAcquisition,combinedwithDuvernayIIandtheDuvernaySourTreatmentFacilitiesgoingintoservice,largelyoffsetbysavingsatYoungerfollowingthescheduledmaintenanceeventandlowerpowercostsduetoaloweraveragepowerpoolpriceduringthethirdquarterof2020.
Shareofprofitfromequityaccountedinvestees
● Consistentwiththepriorperiod.
Depreciationandamortizationincludedinoperations
▼ IncreaseindepreciationduetothelargerassetbaseasaresultoftheassetsacquiredintheKinderAcquisition,combinedwithDuvernayIIandDuvernaySourTreatmentFacilitiesgoingintoservice.
Distributionsfromequityaccountedinvestees
● $23million(2019:$23million)fromVeresenMidstreamand$2million(2019:$1million)fromFortCorp.
Volumes(mboe/d)(3) ● Consistentwiththepriorperiod.HighersupplyvolumesattheRedwaterComplexandrevenuevolumesassociatedwithDuvernayII,largelyoffsetlowervolumesattheYoungerfacility,discussedabove.Revenuevolumesinclude76mboe/d(2019:86mboe/d)relatedtoVeresenMidstream.
AdjustedEBITDA(2) ▲ IncreaseprimarilyduetothecontributionfromtheVancouverWharvesfollowingtheKinderAcquisitionandDuvernayIIbeingplacedintoservice,combinedwithincreasedrevenueatKakwaRiver,partiallyoffsetbylowerrevenueattheResthavenfacilityandCutbankComplexandlowervolumesattheYoungerfacility,discussedabove.IncludedinadjustedEBITDAis$41million(2019:$41million)relatedtoVeresenMidstream.
BridgeAnalysisofAdjustedEBITDA(2)($millions)
251251
233
(6)
26
(2)
AdjustedEBITDAQ32019
GasServices
netrevenue
NGLServices
netrevenue
Operatingexpenses
AdjustedEBITDAQ32020
(1) Includesinter-divisiontransactions.SeeNote12oftheInterimFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.
PembinaPipelineCorporationThirdQuarter202012
FinancialOverviewfortheNineMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
GasServicesnetrevenue(1)(2) 424 436 (12) (3)
NGLServicesnetrevenue(1)(2) 474 396 78 20
Facilitiesnetrevenue(1)(2) 898 832 66 8
Operatingexpenses(1) 281 264 17 6
Shareofprofitfromequityaccountedinvestees 41 36 5 14
Unrealizedgainoncommodity-relatedderivativefinancialinstruments (14) — (14) 100
Depreciationandamortizationincludedinoperations 155 118 37 31
Grossprofit 517 486 31 6
AdjustedEBITDA(2) 757 701 56 8
Volumes(mboe/d)(3) 874 876 (2) —
Distributionsfromequityaccountedinvestees 76 80 (4) (5)
ChangesinResults
GasServicesnetrevenue(1)(2) ▼ DecreaselargelyduetolowercapitalfeesattheResthavenfacilityandtheCutbankComplex,combinedwithlowervolumesattheYoungerfacility,duetoaregularlyscheduledturnaroundduringSeptember2020,partiallyoffsetbyrevenueassociatedwithDuvernayIIbeingplacedintoserviceandincreasedprocessingdaysatKakwaRiverduetoaturnaroundinthethirdquarterof2019.
NGLServicesnetrevenue(1)(2) ▲ IncreaseprimarilyduetoadditionalrevenuesfromtheVancouverWharvesfollowingtheKinderAcquisition,combinedwiththeRedwaterCo-generationfacilitygoingintoserviceinMarch2019.
Operatingexpenses(1) ▼ IncreaselargelyduetotheadditionoftheVancouverWharvesfollowingtheKinderAcquisition,combinedwithDuvernayIIandtheDuvernaySourTreatmentFacilitiesgoingintoservice,partiallyoffsetbylowerpowercostsatvariousfacilitiesduetoaloweraveragepowerpoolpriceduring2020andlowerrepairsandmaintenancecosts.
Shareofprofitfromequityaccountedinvestees
▲ Increaselargelyduetoaone-timerevenueadjustmentof$5millionrecognizedinthethirdquarterof2019relatedtoVeresenMidstream'sDawsonfacilities.
Depreciationandamortizationincludedinoperations
▼ IncreaseindepreciationduetothelargerassetbaseasaresultoftheadditionoftheassetsacquiredintheKinderAcquisitionandDuvernayIIandtheDuvernaySourTreatmentFacilitiesgoingintoservice.
Distributionsfromequityaccountedinvestees
● $72million(2019:$76million)fromVeresenMidstreamand$4million(2019:$4million)fromFortCorp.
Volumes(mboe/d)(3) ● Consistentwiththepriorperiod.LowerrevenuevolumesattheYoungerfacilityduetoaregularlyscheduledturnaroundandincreasedcompetitionfromacompetitorpipeline,combinedwithlowerrevenuevolumesatVeresenMidstreamasaresultoflowcommodityprices,werelargelyoffsetbyrevenuevolumesassociatedwithDuvernayIIbeingplacedintoservice,combinedwithhighersupplyvolumesattheRedwaterComplex.Revenuevolumesinclude81mboe/d(2019:88mboe/d)relatedtoVeresenMidstream.
AdjustedEBITDA(2) ▲ IncreaseprimarilyduetoadditionalcontributionfromtheVancouverWharvesandtheRedwaterCo-generationfacility,combinedwithlowergeneral&administrativeexpense,asaresultoflowerlong-termincentivecosts,partiallyoffsetbylowercapitalfeesinGasServices.IncludedinadjustedEBITDAis$132million(2019:$134million)relatedtoVeresenMidstream.
BridgeAnalysisofAdjustedEBITDA(2)($millions)
757757
701
(12)
78
(17)
8
(1)
AdjustedEBITDAYTD2019
GasServices
netrevenue
NGLServices
netrevenue
Operatingexpenses
G&Aandother
AdjustedEBITDAfromequityaccountedinvestees
AdjustedEBITDAYTD2020
(1) Includesinter-divisiontransactions.SeeNote12oftheInterimFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.
13PembinaPipelineCorporationThirdQuarter2020
OperationalOverview
3MonthsEndedSeptember30 9MonthsEndedSeptember30
2020 2019 2020 2019
($millions,exceptwherenoted) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2)
Facilities
GasServices 657 94 138 672 83 133 664 267 420 674 247 405
NGLServices 214 86 113 194 78 100 210 250 337 202 239 296
Total 871 180 251 866 161 233 874 517 757 876 486 701(1) Revenuevolumesinmboe/d,withnaturalgasvolumesconvertedtomboe/dfromMMcf/data6:1ratio.Seethe"Abbreviations"sectionfordefinition.(2) Refertothe"Non-GAAPMeasures"section.
Projects&NewDevelopments(1)
Facilitiescontinuestobuild-outitsnaturalgasandNGLprocessingandfractionationassetstoservicecustomerdemand.The
projectsinthefollowingtablewererecentlyplacedintoserviceandimpactFacilitiesresults.
SignificantProjects In-serviceDate
DuvernaySourTreatmentFacilities March2020
DuvernayII November2019
RedwaterCo-generationFacility March2019
BurstallEthaneStorage January2019
Subsequenttothequarter,PembinacompletedthestartupofnewfractionationandterminallingfacilitiesattheEmpressNGL
ExtractionFacility.Thisprojectwasplacedintoserviceontimeandonbudget.Thesenewassetsaddapproximately30mbpd
ofpropane-plusfractionationcapacityandenablePembinatooptimizepropanemarketingfromthefacilitybetweeneastern
andwesternmarkets.
ThefollowingoutlinestheprojectsandnewdevelopmentswithinFacilities:
DuvernayIII
CapitalBudget:$200million In-serviceDate:Fourthquarterof2020 Status:Ontime,trendingunderbudget
DuvernayIIIisthesecondtrancheofinfrastructuredevelopmentunderthe20-yearinfrastructuredevelopmentandserviceagreementwithChevronCanadaLimitedandKuwaitForeignPetroleumExplorationCompany.Thisdevelopmentincludesa100MMcf/dsweetgas,shallowcutprocessingtrain,20mbpdofinletcondensatestabilizationandotherassociatedinfrastructure.Constructionissubstantiallycompleteandcommissioningworkiscurrentlyprogressingasplanned.
PrinceRupertTerminal
CapitalBudget:$250million In-serviceDate(2):Firstquarterof2021 Status:Delayed,trendingoverbudget
ThePrinceRupertTerminalislocatedonWatsonIsland,BritishColumbiaandisexpectedtohaveapermittedcapacityofapproximately25mbpdofpropane.ThepropanesupplywillbesourcedprimarilyfromtheCompany'sRedwaterComplex.AllsiteconstructionactivitieshaverestartedsincebeingtemporarilyhaltedduringMarch,AprilandMayasaresultoftheCOVID-19pandemic.Facilitypiping,on-sitesphereconstruction,marineandelectricalworkcontinuetoprogresstocompletion.
HytheDevelopments
CapitalBudget(3):$240million In-serviceDate:Late2020 Status:Ontime,trendingonbudget
Pembinaandits45percentownedjointventure,VeresenMidstream,willconstructnaturalgasgatheringandprocessinginfrastructureinthePipestoneMontneyregion.Theinfrastructureconsistsofanexpansionofupto125MMcf/d(56MMcf/dnettoPembina)ofsourgasprocessingatVeresenMidstream'sexistingHytheFacilityandanew,approximately65km,12-inchsourgaspipeline,tobeownedbyVeresenMidstreamandconstructedbyPembina.Inaddition,VeresenMidstreamwillfundandownacompressorstation,builtandoperatedbyNuVistaEnergyLtd.Pembinawillownandconstructvariousotherlaterals.Constructionissubstantiallycomplete.
PembinaPipelineCorporationThirdQuarter202014
Aspreviouslyannounced,inresponsetotheCOVID-19pandemic,theresultingeconomicslowdownanddecreaseddemand
forcrudeoilandNGL,Pembinamadethedecisiontodefersomeofitspreviouslyannouncedexpansionprojects:
PrinceRupertTerminalExpansion Status:Deferred
ThePrinceRupertTerminalExpansionwillincreasepropaneexportcapacitytoapproximately40mbpd.
ThecarryingvalueoftheprojectatSeptember30,2020was$8million.
EmpressCo-generationFacility Status:Deferred
ThisprojectwillenablePembinatobemoreefficientwithitsproduction,utilizeheatrecoveryandprovideasecondsourceofpowerthroughtheinstallationofaco-generationunitattheEmpressNGLExtractionFacility.
ThecarryingvalueoftheprojectatSeptember30,2020was$12million.(1) ForfurtherdetailsonPembina'ssignificantassets,includingdefinitions,refertoPembina'sAIFfiledatwww.sedar.com(filedwiththeU.S.SecuritiesandExchange
Commissionatwww.sec.govunderForm40-F)andonPembina'swebsiteatwww.pembina.com.(2) Subjecttoenvironmentalandregulatoryapprovals.Seethe"Forward-LookingStatements&Information"section.(3) NettoPembina.
15PembinaPipelineCorporationThirdQuarter2020
Marketing&NewVentures
FinancialOverviewfortheThreeMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
Marketingrevenue(1) 825 1,106 (281) (25)
Costofgoodssold(1) 793 1,034 (241) (23)
Netrevenue(1)(2) 32 72 (40) (56)
Shareof(loss)profitfromequityaccountedinvestees (5) 14 (19) (136)
Realizedgainoncommodity-relatedderivativefinancialinstruments (7) (5) 2 (40)
Unrealizedloss(gain)oncommodity-relatedderivativefinancialinstruments 17 (40) (57) 143
Depreciationandamortizationincludedinoperations 12 11 1 9
Grossprofit 5 120 (115) (96)
AdjustedEBITDA(2) 34 83 (49) (59)
Volumes(mboe/d)(3) 169 176 (7) (4)
Distributionsfromequityaccountedinvestees 2 19 (17) (89)
ChangeinResults
Netrevenue(1)(2) ▼ DecreaselargelyduetotheimpactofCOVID-19pandemiconmarketconditionsresultinginlowercrudeoilprices,compressedmarginsanddecreasedcrudeactivities,combinedwithlowermarketedNGLvolumesandlowerfracspreadswhichimpactedNGLmargins.
Shareof(loss)profitfromequityaccountedinvestees
▼ DecreaselargelyduetolowerrevenuesatAuxSableasaresultoflowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential.
Realizedgainoncommodity-relatedderivatives
● Consistentwiththepriorperiod.
Unrealizedloss(gain)oncommodity-relatedderivatives
▼ Unrealizedlossoncommodity-relatedderivativesprimarilyduetotherecoveryintheforwardpriceofpropaneandbutaneduringthethirdquarterof2020,combinedwithcontractsmaturingintheperiod.
Depreciationandamortizationincludedinoperations
● Consistentwiththepriorperiod.
Distributionsfromequityaccountedinvestees
▼ DecreaseduetothelowerrevenuesatAuxSableasaresultoflowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential.
Volumes(mboe/d)(3) ▼ MarketedNGLvolumesdecreasedasPembinaproactivelyincreasedstoragepositionswiththeintentiontomonetizethemduringtheupcomingwinterseason,partiallyoffsetbyincreasedvolumesatAuxSable.Revenuevolumesincludes37mboe/d(2019:33mboe/d)relatedtoAuxSable.
AdjustedEBITDA(2) ▼ DecreaselargelyduetolowermarginsoncrudeoilandNGLsalesasaresultofthelowercrudeoildifferentialsandfracspreadsduringthethirdquarterof2020,combinedwithalowercontributionfromAuxSable,duetolowerNGLmarginsandthenarrowerAECO-Chicagonaturalgaspricedifferential,whichresultedinlowerrevenues.IncludedinadjustedEBITDAis$1million(2019:$15million)relatedtoAuxSable.
BridgeAnalysisofAdjustedEBITDA(2)($millions)
3434
83
(281)
241 2
(11)
AdjustedEBITDAQ32019
Marketingrevenue
Costofgoodssold
Realizedgainoncommodity-
relatedderivatives
AdjustedEBITDAfromequityaccounted
investees
AdjustedEBITDAQ32020
(1) Includesinter-divisiontransactions.SeeNote12oftheInterimFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) MarketedNGLvolumes.Seethe"Abbreviations"sectionfordefinition.
PembinaPipelineCorporationThirdQuarter202016
FinancialOverviewfortheNineMonthsEndedSeptember30
ResultsofOperations
($millions,exceptwherenoted) 2020 2019 Change %Change
Marketingrevenue(1) 2,309 3,712 (1,403) (38)
Costofgoodssold(1) 2,241 3,428 (1,187) (35)
Netrevenue(1)(2) 68 284 (216) (76)
Shareof(loss)profitfromequityaccountedinvestees (2) 37 (39) (105)
Realizedgainoncommodity-relatedderivativefinancialinstruments (60) (25) 35 (140)
Unrealizedloss(gain)oncommodity-relatedderivativefinancialinstruments 12 (10) (22) 220
Depreciationandamortizationincludedinoperations 37 43 (6) (14)
Grossprofit 77 313 (236) (75)
AdjustedEBITDA(2) 118 301 (183) (61)
Volumes(mboe/d)(3) 173 189 (16) (8)
Distributionsfromequityaccountedinvestees 15 62 (47) (76)
ChangeinResults
Netrevenue(1)(2) ▼ DecreaselargelyduetolowercrudeoilandNGLpricesandlowermarketedNGLvolumes,primarilyasaresultoftheCOVID-19pandemicandtheresultingdecreaseinglobalenergydemand.Marketconditionsalsocompressedmarginsanddecreasedcrudeactivities,whilelowerfracspreadsimpactedNGLmargins,combinedwitha$33millionarbitrationawardpaymentreceivedduringthefirstquarterof2019.
Shareof(loss)profitfromequityaccountedinvestees
▼ DecreaselargelyduetolowerrevenuesatAuxSableasaresultoflowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential,partiallyoffsetbyloweroperatingandgeneralandadministrativeexpenses.
Realizedgainoncommodity-relatedderivatives
▲ IncreaseduetolowermarketpricescreatingagainforcrudeandNGL-basedderivativessettledduringtheperiod.
Unrealizedloss(gain)oncommodity-relatedderivatives
▼ Unrealizedlossprimarilyduetocontractsmaturingduringtheperiod,combinedwithadditionalcontactsadded,partiallyoffsetbyanincreaseintheforwardpriceofnaturalgas.
Depreciationandamortizationincludedinoperations
● Consistentwiththepriorperiod.
Distributionsfromequityaccountedinvestees
▼ DecreaselargelyduetothelowermarginsatAuxSable,discussedinshareofprofitfromequityaccountedinvesteesabove.
Volumes(mboe/d)(3) ▼ MarketedNGLvolumesdecreasedduetoreduceddemandforpropaneandbutaneasaresultoftheon-goingCOVID-19pandemic,combinedwithincreasedNGLstoragepositions,builtupduringthesecondandthirdquarters,tobemonetizedduringtheupcomingwinterseason,partiallyoffsetbyhigherethanevolumesatAuxSable.Revenuevolumesincludes37mboe/d(2019:33mboe/d)relatedtoAuxSable.
AdjustedEBITDA(2) ▼ DecreaselargelyduetolowermarginsoncrudeoilandNGLsalesasaresultoflowercrudeoilpricesandfracspreadsduring2020,combinedwithalowercontributionfromAuxSableduetolowerNGLmarginsandthenarrowerAECO-Chicagonaturalgaspricedifferential,partiallyoffsetbyhigherrealizedgainoncommodity-relatedderivativefinancialinstruments.IncludedinadjustedEBITDAis$14million(2019:$56million)relatedtoAuxSable.
BridgeAnalysisofAdjustedEBITDA(2)(4)($millions)
118118
301
(1,370)
1,187 35 8 (43)
AdjustedEBITDAYTD2019
Marketingrevenueincluding
adjustments
Costofgoodssold
Realizedgainoncommodity-
relatedderivatives
G&Aandother
AdjustedEBITDAfromequityaccountedinvestees
AdjustedEBITDAYTD2020
(1) Includesinter-divisiontransactions.SeeNote12oftheInterimFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) MarketedNGLvolumes.Seethe"Abbreviations"sectionfordefinition.(4) Marketingrevenueexcludesthepositivearbitrationawardpaymentof$33million.
17PembinaPipelineCorporationThirdQuarter2020
OperationalOverview
3MonthsEndedSeptember30 9MonthsEndedSeptember30
2020 2019 2020 2019
($millions,exceptwherenoted) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2)
Marketing&NewVentures
Marketing 169 3 36 176 118 84 173 74 127 189 311 311
NewVentures(3) — 2 (2) — 2 (1) — 3 (9) — 2 (10)
Total 169 5 34 176 120 83 173 77 118 189 313 301(1) MarketedNGLvolumesinmboe/d.Seethe"Abbreviations"sectionfordefinition.(2) Refertothe"Non-GAAPMeasures"section.(3) AllNewVenturesprojectshavenotyetcommencedoperationsandthereforehavenovolumes.
Projects&NewDevelopments(1)
ThefollowingoutlinestheprojectsandnewdevelopmentswithinMarketing&NewVentures:
JordanCoveLNGProject(proposed)
TheproposedJordanCoveLNGproject("JordanCove")isaworld-scaleLNGexportfacility,whichwouldtransportNorthAmericannaturalgastoworldmarkets.Theprojectismadeupoftwoparts:theLNGterminal,withaplanneddesigncapacityof7.8milliontonnesperannum,andthePacificConnectorGasPipelinewhichwouldtransportnaturalgasfromMalin,OregontoanLNGterminalinCoosCounty,Oregon.
PembinahasreceivedacertificateofapprovalfromtheU.S.FederalEnergyRegulatoryCommissionforJordanCove.
OnJuly6,2020,theUnitedStatesDepartmentofEnergyannouncedanissuanceorderauthorizingJordanCovetoexportliquefiednaturalgasfromtheproposedexportterminalinCoosBay,Oregon.TheissuanceorderbytheDepartmentofEnergymarkedanotherimportantstepforwardforJordanCove.
TheCompanyremainsfocusedoncompletingtheregulatoryprocess,receivingtheremainingpermitsrequiredtoproceedandenablingthecommercialviabilityoftheproject.Thetimingandultimateapprovalofthisprojectisuncertainanddependentuponreceiptoftheseremainingapprovals.
Inconjunctionwithafinalinvestmentdecision,theCompanyintendstoseekpartnersforboththePacificConnectorGasPipelineandLNGTerminaltherebyreducingits100percentownershipinteresttoanetownershipinterestofbetween40and60percentwiththeintentiontoreducethecapital,operatingandotherprojectrisks.
ThecarryingvalueoftheprojectatSeptember30,2020was$371million,includingcapitalizedborrowingcostsof$20million.
Aspreviouslyannounced,inresponsetotheCOVID-19pandemic,theresultingeconomicslowdownanddecreaseddemand
forcrudeoilandNGL,PembinamadethedecisiontodeferitsinvestmentinitsintegratedPDH/PPprojectbeingdeveloped
throughitsjointventureentityCKPC.
PDH/PPFacility Status:Deferred
ThePDH/PPFacilitywillbelocatedadjacenttoPembina'sRedwaterfractionationcomplexandwillconvertapproximately23,000bpdoflocallysuppliedpropaneintopolypropylene,ahighvaluerecyclablepolymerusedinawiderangeoffinishedproductsincludingbutnotlimitedtoautomobiles,medicaldevices,foodpackagingandhomeelectronicappliances,amongothers.
ThecarryingvalueofinvestmentinCKPCatSeptember30,2020was$326million.
(1) ForfurtherdetailsonPembina'ssignificantassets,includingdefinitions,refertoPembina'sAIFfortheyearendedDecember31,2019filedatwww.sedar.com(filedwiththeU.S.SecuritiesandExchangeCommissionatwww.sec.govunderForm40-F)andonPembina'swebsiteatwww.pembina.com.
PembinaPipelineCorporationThirdQuarter202018
4.LIQUIDITY&CAPITALRESOURCESAvailableSourcesofLiquidity
($millions) September30,2020 December31,2019
Workingcapital(1)(4) (370) (468)
Variableratedebt(2)(3)
Bankdebt 1,644 2,100
Variableratedebtswappedtofixed (333) —
Totalvariableratedebtoutstanding(weightedaverageinterestrateof1.6%(2019:3.3%)) 1,311 2,100
Fixedratedebt(2)
Seniorunsecurednotes — 273
Seniorunsecuredmedium-termnotes 9,300 7,800
Variabledebtswappedtofixed 333 —
Totalfixedratedebtoutstanding(weightedaverageinterestrateof3.9%(2019:4.0%)) 9,633 8,073
Totaldebtoutstanding 10,944 10,173
Cashandunutilizeddebtfacilities 2,539 1,040(1) AsatSeptember30,2020,workingcapitalincluded$250million(December31,2019:$74million)associatedwiththecurrentportionofloansandborrowings.(2) Facevalue.(3) NoU.S.dollarvariableratedebtoutstandingatSeptember30,2020(December31,2019:U.S.$454million).(4) TheDecember31,2019balancehasbeenrecast.SeeNote3totheInterimFinancialStatements.
Pembinacurrentlyanticipatesitscashflowfromoperatingactivities,themajorityofwhichisderivedfromfee-based
contracts,willbemorethansufficienttomeetitsshort-termandlong-termoperatingobligations,capitalinvestment
requirementsandtofunditsdividends.Pembinaexpectstosourcefundsrequiredforcapitalprojectsandcontributionsto
investmentsinequityaccountedinvesteesfromcash,itscreditfacilitiesandbyaccessingthecapitalmarkets,asrequired.
Basedonitssuccessfulaccesstofinancinginthecapitalmarketsoverthepastseveralyears,Pembinaexpectstocontinueto
haveaccesstoadditionalfundsasrequired.However,dependingonthedurationandseverityoftheCOVID-19pandemic,the
resultingslowdownoftheglobaleconomyandthedecreaseindemandforcrudeoilandNGL,Pembina'sabilitytoaccess
financinginthecapitalmarketscouldbeadverselyimpacted.Referto"RiskFactors–OngoingImpactofCOVID-19Pandemic"
belowand"RiskFactors–GeneralRiskFactors–AdditionalFinancingandCapitalResources"inPembina'sMD&AandNote24
totheConsolidatedFinancialStatementsformoreinformation.Managementcontinuestomonitorthesituationandremains
satisfiedthattheleverageemployedinPembina'scapitalstructureissufficientandappropriategiventhecharacteristicsand
operationsoftheunderlyingassetbase.
ManagementmayadjustPembina'scapitalstructureasaresultofchangesineconomicconditionsortheriskcharacteristics
oftheunderlyingassets.TomaintainormodifyPembina'scapitalstructureinthefuture,Pembinamayrenegotiatedebt
terms,repayexistingdebt,seeknewborrowings,issueadditionalequityand/orrepurchaseshares.
19PembinaPipelineCorporationThirdQuarter2020
AsatSeptember30,2020,Pembina'screditfacilitiesconsistedof:anunsecured$2.5billion(December31,2019:$2.5billion)
revolvingcreditfacility,whichincludesa$750million(December31,2019:$750million)accordionfeatureandmaturesin
May2024;anunsecured$500million(December31,2019:$500million)non-revolvingtermloan,whichmaturesinAugust
2022;anunsecured$800millionrevolvingcreditfacility(December31,2019:nil),whichmaturesinApril2022;anunsecured
U.S.$250millionnon-revolvingtermloan(December31,2019:nil),whichmaturesinMay2025andanoperatingfacilityof
$20million(December31,2019:$20million)whichisdueinMay2021andistypicallyrenewedonanannualbasis,
collectivelythe"CreditFacilities".Therearenorepaymentsdueoverthetermofthesefacilities.AsatSeptember30,2020,
Pembinahad$2.5billion(December31,2019:$1.0billion)ofcashandunutilizeddebtfacilities.AtSeptember30,2020,
Pembinahadloansandborrowings(excludingdeferredfinancingcosts)of$10.9billion(December31,2019:$10.2billion).
Pembinaisrequiredtomeetcertainspecificandcustomaryaffirmativeandnegativefinancialcovenantsunderitsmedium-
termnotesandCreditFacilities,includingarequirementtomaintaincertainfinancialratios.Pembinaisalsosubjectto
customaryrestrictionsonitsoperationsandactivitiesunderitsmedium-termnotesandCreditFacilities,includingrestrictions
onthegrantingofsecurity,incurringindebtednessandthesaleofitsassets.
FinancingActivity
OnJanuary10,2020,Pembinaclosedanofferingof$1.0billionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedinthreetranches,consistingof$250millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-
termnotes,series10,havingafixedcouponof4.02percentperannum,payablesemi-annuallyandmaturingonMarch27,
2028;$500millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-termnotes,series11,havingafixed
couponof4.75percentperannum,payablesemi-annuallyandmaturingonMarch26,2048;and$250millionissuedthrough
are-openingofPembina'sseniorunsecuredmedium-termnotes,series12,havingafixedcouponof3.62percentperannum,
payablesemi-annuallyandmaturingonApril3,2029.
OnApril6,2020,Pembinaenteredintoanunsecured$800millionrevolvingcreditfacilitywithcertainexistinglenders,which
providesadditionalliquidityandflexibilityinPembina’scapitalstructureinthecurrentmarketconditions.Thecreditfacility
hasaninitialtermoftwoyears.Theothertermsandconditionsofthecreditfacility,includingfinancialcovenants,are
substantiallysimilartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
OnMay7,2020,PembinaenteredintoanunsecuredU.S.$250millionnon-revolvingtermloanwithaglobalbank,which
providesadditionalliquidityandflexibilityinPembina'scapitalstructureinthecurrentmarketconditions.Thetermloanhas
aninitialtermoffiveyears.Theothertermsandconditionsofthecreditfacility,includingfinancialcovenants,are
substantiallysimilartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
OnMay28,2020,Pembinaclosedanofferingof$500millionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedintwotranches,consistingof$400millioninseniorunsecuredmedium-termnotes,series16,havingafixed
couponof4.76percentperannum,payablesemi-annually,andmaturingonMay28,2050and$100millionissuedthrougha
re-openingofPembina'sseniorunsecuredmedium-termnotes,series7,havingafixedcouponof3.71percentperannum,
payablesemi-annuallyandmaturingonAugust11,2026.
OnJuly10,2020,Pembina's$200millionseniorunsecurednotes,seriesC,werefullyrepaidthroughanearlyredemption,of
whichnoticewasprovidedtoholdersonJune5,2020.TheseriesCnoteswereoriginallysettomatureinSeptember2021.
PembinaPipelineCorporationThirdQuarter202020
Covenants
Pembina'sfinancialcovenantsincludethefollowing:
DebtInstrument FinancialCovenant(1) Ratio RatioasatSeptember30,2020
Seniorunsecuredmedium-termnotes FundedDebttoCapitalization Maximum0.70 0.40
CreditFacilitiesDebttoCapital Maximum0.65 0.40
EBITDAtoSeniorInterestCoverage Minimum2.5:1.0 7.7(1) Termsasdefinedinrelevantagreements.
PembinawasincompliancewithallcovenantsunderitsnoteindenturesandcreditagreementsasatSeptember30,2020
(December31,2019:incompliance).
CreditRisk
Pembinacontinuestoactivelymonitorandreassessthecreditworthinessofitscounterparties.Therecentslowdownofthe
globaleconomyanddecreaseindemandforcrudeoil,NGLandothercommoditiesasaresultoftheongoingCOVID-19
pandemicincreasesPembina'scounterpartyrisk,asithasthepotentialtonegativelyimpactthefinancialpositionof
Pembina'scustomers'andrelatedparties'andtheiraccesstocredit,capitalmarketsandothersourcesofliquidity.The
majorityofPembina'screditexposureistoinvestmentgradeorsplit-investmentgradeentities.Pembinaassessesall
counterpartiesduringtheon-boardingprocessandactivelymonitorscreditlimitsandexposureacrossthebusiness.Financial
assurancestomitigateandreduceriskmayincludeguarantees,lettersofcreditandcash.Lettersofcredittotaling$142
million(December31,2019:$90million)wereheldasatSeptember30,2020,primarilyinrespectofcustomertrade
receivables.
OutstandingShareData
Issuedandoutstanding(thousands) October30,2020
Commonshares 549,942
Stockoptions 20,348
Stockoptionsexercisable 9,717
ClassA,Series1Preferredshares 10,000
ClassA,Series3Preferredshares 6,000
ClassA,Series5Preferredshares 10,000
ClassA,Series7Preferredshares 10,000
ClassA,Series9Preferredshares 9,000
ClassA,Series11Preferredshares 6,800
ClassA,Series13Preferredshares 10,000
ClassA,Series15Preferredshares 8,000
ClassA,Series17Preferredshares 6,000
ClassA,Series19Preferredshares 8,000
ClassA,Series21Preferredshares 16,000
ClassA,Series23Preferredshares 12,000
ClassA,Series25Preferredshares 10,000
21PembinaPipelineCorporationThirdQuarter2020
CreditRatings
ThefollowinginformationwithrespecttoPembina'screditratingsisprovidedassuchinformationrelatestoPembina's
financingcostsandliquidity.Specifically,creditratingsaffectPembina'sabilitytoobtainshort-termandlong-termfinancing
andthecostofsuchfinancing.AreductioninthecurrentratingsonPembina'sdebtbyitsratingagencies,particularlya
downgradebelowinvestment-graderatings,couldadverselyaffectPembina'scostoffinancinganditsaccesstosourcesof
liquidityandcapital.Inaddition,changesincreditratingsandtheassociatedcostsmayaffectPembina'sabilitytoenterinto
normalcoursederivativeorhedgingtransactions.Creditratingsareintendedtoprovideinvestorswithanindependent
measureofcreditqualityofanyissuesofsecurities.Thecreditratingsassignedbytheratingagenciesarenot
recommendationstopurchase,holdorsellthesecurities,nordothecreditratingscommentonmarketpriceorsuitabilityfor
aparticularinvestor.Anycreditratingmaynotremainineffectforagivenperiodoftimeormayberevisedorwithdrawn
entirelybyaratingagencyinthefutureif,initsjudgment,circumstancessowarrant.
Pembinatargetsstrong'BBB'creditratings.DBRSLimited("DBRS")ratesPembina'sseniorunsecurednotesandsenior
unsecuredmedium-termnotes'BBB'andratesPembina'sClassAPreferredShares'Pfd-3'.Thelong-termcorporatecredit
ratingfromS&PGlobalRatings("S&P"),adivisionofTheMcGraw-HillCompanies,onPembinais'BBB'anditsratingofthe
ClassAPreferredSharesis'P-3(High)'.DBRSandS&PaffirmedPembina'screditratingsduringthesecondquarterof2020.
ContractualObligationsandOff-BalanceSheetArrangements
ContractualObligations
PembinahadthefollowingcontractualobligationsoutstandingatSeptember30,2020:
ContractualObligations(1) PaymentsDueByPeriod
($millions) Total Lessthan1year 1–3years 3–5years After5years
Leases(2) 1,084 131 222 175 556
Loansandborrowings(3) 16,466 701 2,621 2,828 10,316
Constructioncommitments(4) 1,396 303 301 298 494
Other(5) 599 111 162 80 246
Totalcontractualobligations 19,545 1,246 3,306 3,381 11,612(1) Pembinaentersintoproductpurchaseagreementsandpowerpurchaseagreementstosecuresupplyforfutureoperations.PurchasepricesofbothNGLandpowerare
dependentoncurrentmarketprices.VolumesandpricesforNGLandpowercontractscannotbereasonablydetermined,andtherefore,anamounthasnotbeenincludedinthecontractualobligationsschedule.Productpurchaseagreementsrangefromoneto10yearsandinvolvethepurchaseofNGLproductsfromproducers.Assumingproductisavailable,Pembinahassecuredbetween35and175mbpdofNGLeachyearupto,andincluding,2029.Powerpurchaseagreementsrangefromoneto25yearsandinvolvethepurchaseofpowerfromelectricalserviceproviders.Pembinahassecuredupto80megawattsperdayeachyearupto,andincluding,2044.
(2) Includesterminals,rail,officespace,landandvehicleleases.(3) Excludingdeferredfinancingcosts.IncludinginterestpaymentsonPembina'sseniorunsecurednotes.(4) Excludingsignificantprojectsthatareawaitingregulatoryapproval,projectswhichPembinaisnotcommittedtoconstruct,andprojectsthatareexecutedbyequity
accountedinvestees.(5) Includes$28millionincommitmentsrelatedtoleasesthathavenotyetcommenced.
Off-BalanceSheetArrangements
Pembinadoesnothaveanyoff-balancesheetarrangementsthathave,orarereasonablylikelytohave,acurrentorfuture
effectonPembina'sfinancialcondition,resultsofoperations,liquidityorcapitalexpenditures.
LettersofCredit
Pembinahasprovidedlettersofcredittovariousthirdpartiesinthenormalcourseofconductingbusiness.Thelettersof
creditincludefinancialguaranteestocounterpartiesforproductpurchasesandsales,transportationservices,utilities,
engineeringandconstructionservices.Thelettersofcredithavenothadandarenotexpectedtohaveamaterialimpacton
Pembina'sfinancialposition,earnings,liquidityorcapitalresources.AsatSeptember30,2020,Pembinahad$96million
(December31,2019:$103million)inlettersofcreditissuedtofacilitatecommercialtransactionswiththirdpartiesandto
supportregulatoryrequirements.
PembinaPipelineCorporationThirdQuarter202022
5.CAPITALINVESTMENTS
3MonthsEndedSeptember30 9MonthsEndedSeptember30
($millions) 2020 2019 2020 2019
Pipelines 53 212 511 637
Facilities 98 167 296 426
Marketing&NewVentures 10 34 34 135
Corporateandotherprojects 13 8 27 18
Totalcapitalinvested 174 421 868 1,216
Contributionstoequityaccountedinvestees(1)(2) 28 25 224 143(1) ContributionsforthethreemonthsendedSeptember30,2020include$28million(2019:$24million)toVeresenMidstreamandnil(2019:$1million)toAuxSable.(2) ContributionsfortheninemonthsendedSeptember30,2020include$69million(2019:$50million)toVeresenMidstream,$3million(2019:$3million)toAuxSableand
$152million(2019:$90million)toCKPC.
CapitalInvested
Inboth2020and2019,PipelinescapitalinvestmentswereprimarilyrelatedtoPembina'songoingpipelineexpansionprojects.
In2020,FacilitiescapitalinvestmentswerelargelyrelatedtoconstructiononDuvernayIII,EmpressExpansionandthePrince
RupertTerminal.In2019,FacilitiescapitalinvestmentswerelargelyrelatedtoconstructionofDuvernayII,Empress
InfrastructureandthePrinceRupertTerminal.CapitalinvestmentsinMarketing&NewVenturesinboth2020and2019were
primarilyrelatedtotheJordanCoveLNGproject.
ContributionstoEquityAccountedInvestees
ContributionsmadetoCKPCduring2020and2019weretoprogressthedevelopmentofthePDH/PPFacility,combinedwitha
parentalguaranteeonCKPC'srevolvingcreditfacilityprovidedbyPembinaduringthefirstquarterof2020,discussedfurther
inthe"RelatedPartyTransactions"sectionbelow.ContributionstoCKPCincreasedinthefirstninemonthsof2020,compared
tothefirstninemonthsof2019,followingtheexecutionofalumpsumengineering,procurementandconstructioncontract
relatedtotheconstructionofthePDHFacility,priortoPembina'sMarch18,2020announcementthatithaddeferredcapital
spendingonthePDH/PPFacility.AsaresultofPembina'sdecisiontodeferinvestmentinCKPC,Pembinahasdeferredfuture
contributionstoCKPC.
ContributionsmadetoVeresenMidstreamduringboth2020and2019werelargelyrelatedtoconstructionoftheHythe
Developments.
23PembinaPipelineCorporationThirdQuarter2020
6.DIVIDENDSCommonShareDividends
Commonsharedividendsarepayableif,as,andwhendeclaredbyPembina'sBoardofDirectors.Theamountandfrequency
ofdividendsdeclaredandpayableisatthediscretionofPembina'sBoardofDirectors,whichconsidersearnings,cashflow,
capitalrequirements,thefinancialconditionofPembinaandotherrelevantfactorswhenmakingitsdividenddetermination.
PreferredShareDividends
TheholdersofPembina'sClassApreferredsharesareentitledtoreceivefixedcumulativedividends.DividendsontheSeries
1,3,5,7,9,11,13and21ClassApreferredsharesarepayablequarterlyonthefirstdayofMarch,June,Septemberand
December,if,asandwhendeclaredbytheBoardofDirectorsofPembina.DividendsontheSeries15,17and19ClassA
preferredsharesarepayableonthelastdayofMarch,June,SeptemberandDecemberineachyear,if,asandwhendeclared
bytheBoardofDirectorsofPembina.DividendsontheSeries23and25ClassApreferredsharesarepayableonthe15thday
ofFebruary,May,AugustandNovemberineachyear,if,asandwhendeclaredbytheBoardofDirectorsofPembina.
OnJune1,2020,PembinaannouncedthatitdidnotintendtoexerciseitsrighttoredeemtheeightmillionCumulative
RedeemableRateResetClassAPreferredShares,series19sharesoutstandingonJune30,2020.Theannualdividendratefor
theseries19Sharesforthefive-yearperiodfromandincludingJune30,2020to,butexcluding,June30,2025is4.684
percent.
Subsequenttoquarterend,onNovember2,2020,Pembinaannouncedthatitdoesnotintendtoexerciseitsrighttoredeem
theninemillionCumulativeRedeemableRateResetClassAPreferredShares,Series9("PreferredShares,Series9")shares
outstandingonDecember1,2020.
PembinaPipelineCorporationThirdQuarter202024
7.SELECTEDQUARTERLYINFORMATIONSelectedQuarterlyOperatingInformation
(mboe/d) 2020 2019 2018
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Volumes(1)(2)
Pipelines
ConventionalPipelines 863 834 902 958 908 895 880 897
TransmissionPipelines 661 668 668 646 594 558 563 566
OilSandsPipelines 1,056 1,053 1,059 1,063 1,068 1,065 1,064 1,066
Facilities
GasServices 657 658 678 690 672 668 682 683
NGLServices 214 214 201 220 194 198 214 241
Total 3,451 3,427 3,508 3,577 3,436 3,384 3,403 3,453(1) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.(2) IncludesPembina'sproportionateshareofvolumesfromequityaccountedinvestees.
DeferredTake-or-payRevenue
($millions) 2020 2019 2018
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Pipelines
Openingbalance 45 22 8 17 23 19 7 —
Revenuedeferred 66 53 40 31 27 27 36 34
Revenuerecognized (69) (30) (26) (40) (33) (23) (24) (27)
Endingtake-or-paycontractliabilitybalance 42 45 22 8 17 23 19 7
Facilities
Openingbalance 2 1 — — — 1 2 3
Revenuedeferred 1 1 1 — — 2 — —
Revenuerecognized (3) — — — — (3) (1) (1)
Endingtake-or-paycontractliabilitybalance — 2 1 — — — 1 2
QuarterlySegmentedAdjustedEBITDA(1)($millions)
715715
773773 765765736736
787787 830830789789 796796
Pipeline Facilities Marketing&NewVentures
Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320
(1)Refertothe"Non-GAAPMeasures"section.
25PembinaPipelineCorporationThirdQuarter2020
QuarterlyFinancialInformation
($millions,exceptwherenoted) 2020 2019 2018
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Revenue 1,569 1,268 1,671 1,754 1,700 1,808 1,968 1,726
Netrevenue(1) 849 776 865 837 751 758 774 706
Operatingexpenses 178 154 179 177 151 134 140 165
Realized(gain)lossoncommodity-relatedderivativefinancialinstruments (7) (36) (17) (8) (5) (1) (19) (5)
Shareofprofitfromequityaccountedinvestees 61 65 83 88 89 97 96 129
Grossprofit 563 455 728 603 613 629 588 663
Earnings 318 253 314 145 370 664 313 368
Earningspercommonshare–basic(dollars) 0.51 0.39 0.50 0.21 0.66 1.23 0.55 0.66
Earningspercommonshare–diluted(dollars) 0.51 0.39 0.50 0.21 0.66 1.23 0.55 0.66
Cashflowfromoperatingactivities 434 642 410 728 535 661 608 674
Cashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 0.78 1.17 0.75 1.41 1.05 1.29 1.20 1.33
Adjustedcashflowfromoperatingactivities(1) 524 586 576 576 530 550 578 543
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 0.95 1.07 1.05 1.11 1.04 1.08 1.14 1.07
Commonsharesoutstanding(millions):
Weightedaverage–basic 550 550 549 518 512 511 509 507
Weightedaverage–diluted 550 550 549 519 513 513 511 509
Endofperiod 550 550 550 548 512 511 510 508
Commonsharedividendsdeclared 346 347 346 314 307 302 290 289
Dividendspercommonshare 0.63 0.63 0.63 0.60 0.60 0.59 0.57 0.57
Preferredsharedividendsdeclared 38 37 38 34 31 30 31 31
Capitalexpenditures 174 211 483 429 421 434 361 356
Contributionstoequityaccountedinvestees 28 2 194 120 25 28 90 —
Distributionsfromequityaccountedinvestees 111 116 123 123 142 140 170 158
AdjustedEBITDA(1) 796 789 830 787 736 765 773 715(1) Refertothe"Non-GAAPMeasures"section.
Duringtheperiodsinthetableabove,Pembina'sfinancialandoperatingresultswereimpactedbythefollowingfactorsand
trends:
• TheKinderAcquisition,whichwascompletedonDecember16,2019;
• TheCOVID-19pandemicandtheresultingdecreaseindemandforcommodities,whichledtoasignificantdeclinein
globalenergyprices,resultinginareductionincapitalspendingbudgetsbyPembinaanditscustomers;
• ThenarrowingoftheAECO-Chicagonaturalgaspricedifferential;
• IncreasedproductioninkeyoperatingareasandresourceplayswithintheWCSB(DeepBasin,MontneyandDuvernay)
priortotheCOVID-19Pandemic,whichincreasedrevenueandsalesvolumesonPembina'sexistingassetsinPipelines
andFacilities;
• Newlarge-scalegrowthprojectsacrossPembina'sbusinessbeingplacedintoservice;
• Volatilityincommoditymarketpricesimpactingmarginswithinthemarketingbusiness,partiallymitigatedthrough
Pembina'sriskmanagementprogram;
• ImpairmentofPembina'sconvertiblepreferredinterestinRubyinthefourthquarterof2019;
• AdecreaseintheAlbertacorporatetaxratefrom12to8percentfollowingtheenactmentofBill3inJune2019;
• Highernetfinancecostsimpactingearningsassociatedwithdebtrelatedtofinancingacquisitions,growthprojectsand
volatilityinforeignexchangerates;
• IncreasedcommonandpreferredsharesoutstandingandcorrespondingdividendsduetotheKinderAcquisition;and
• TheadoptionofIFRS16onJanuary1,2019.
PembinaPipelineCorporationThirdQuarter202026
8.SELECTEDEQUITYACCOUNTEDINVESTEEINFORMATIONLoansandBorrowingsofEquityAccountedInvestees
Underequityaccounting,theassetsandliabilitiesofaninvestmentarenetintoasinglelineitemintheconsolidated
statementoffinancialposition,"InvestmentsinEquityAccountedInvestees".Toassistreaders'understandingandtoevaluate
thecapitalizationofPembina'sinvestments,loansandborrowingsassociatedwithinvestmentsinequityaccountedinvestees
arepresentedbelowbasedonPembina'sproportionateownershipasatSeptember30,2020.Inaddition,certainofthe
equityaccountedinvesteeshaveborrowingarrangementswithanamortizationstructure,therebynecessitatingperiodic
repaymentsofprincipal.TheserepaymentsoccurpriortothedistributionofresidualcashflowtoPembina.Theloansand
borrowingsandamortizationschedulesarepresentedbelowandclassifiedbythedivisioninwhichtheresultsforthe
investmentarereported.Pleaserefertothe"Abbreviations"sectionforasummaryofPembina'sinvestmentsinequity
accountedinvesteesandthedivisioninwhichtheirresultsarereported.
($millions)(1) September30,2020 December31,2019
Pipelines 1,012 1,057
Facilities 1,175 1,150
Total 2,187 2,207
AmortizationScheduleofLoansandBorrowingsofEquityAccountedInvestees
9MonthsEnded Remainderof
($millions)(1)September30,
2020 2020 2021 2022 2023 2024+
Pipelines 95 63 118 606 62 163
Facilities — — 12 36 36 1,091
Total 95 63 130 642 98 1,254(1) BalancesreflectPembina'sownershippercentageoftheoutstandingbalancefacevalue.
FinancingActivitiesforEquityAccountedInvestees
PriortoCKPC'sdecisiontodeferfurtherinvestmentinthePDH/PPFacility,onFebruary27,2020,CKPCclosedasyndicated
seniorsecuredU.S.$1.7billionamortizingtermfacilityandaU.S.$150millionrevolvingcreditfacility,bothofwhichhave
beenguaranteedequallyonaseveralbasisbytheownersofCKPCthroughthecompletionofconstruction.Thefinalmaturity
dateofboththetermfacilityandrevolvingcreditfacilityisFebruary27,2027.Theparentalguaranteeresultedinthe
recognitionofafinancialguaranteeliability,currentlyvaluedatU.S.$14million,netofamortization,onPembina'sbalance
sheet,withanoffsettingamountrecordedasanequitycontributiontotheinvestmentinCKPC.
OnApril27,2020,Rubyfullyrepaidits364-daytermloan.Concurrenttorepayment,Rubyenteredintoanewtermloanthat
willmatureonMarch31,2021.ThetermloanwillamortizeU.S.$32millionin2020and2021(U.S.$16millionnetto
Pembina),intwoequalpaymentseachyearwiththefirstpaymentmadeinJune2020.
OnJune30,2020,CKPCanditslendersagreedtoamendandwaivecertaintermsandconditionsoftheCKPCcreditfacility.In
connectionwiththeamendment,CKPCvoluntarilyrepaidtheU.S.$26milliondrawnunderthenon-revolvingtermloan.CKPC
alsoretainedtheabilitytore-drawandaccessthefulltermloanofU.S.$1.7billionuponresumptionofkeyactivities.
27PembinaPipelineCorporationThirdQuarter2020
CommitmentstoEquityAccountedInvestees
PembinaiscontractuallycommittedtoprovideCKPCwithfundingtoconstructassetsthatwillformpartofCKPC'sPDH/PP
Facility,subjecttocertainconditionsbeingmet.FollowingCKPC'sdecisiontodeferinvestmentinthePDH/PPFacility,
PembinahasdeferredfuturecontributionstoCKPC.
PembinahasacontractualcommitmenttoadvanceU.S.$16milliontoRubybyMarch31,2021.
Pembinahascommitmentstoprovidecontributionstocertainequityaccountedinvesteesbasedonannualbudgetsapproved
bythejointventurepartners.
CreditRiskforEquityAccountedInvestees
AtSeptember30,2020,lettersofcredittotaling$103million(December31,2019:$84million)wereheldbyPembina's
variousequityaccountedinvestees,primarilyinrespectofcustomertradereceivables.
9.OTHERImpairmentAssessment
InresponsetotheongoingCOVID-19pandemicanditsimpactontheglobaleconomyanddemandforenergyproducts,
Pembinaperformedadetailedassessmentofitscashgeneratingunitstodetermineifanyindicatorsofimpairmentexistedas
atSeptember30,2020.Theassessmentdidnotidentifyindicatorsofimpairmentrequiringanassessmentofrecoverable
amountsofanyofPembina'scashgeneratingunits.PembinawillcontinuetoevaluatethesituationrelatedtotheCOVID-19
pandemicandglobalenergydemandandupdatetheimpairmentassessmentasrequired.
RelatedPartyTransactions
Pembinaentersintotransactionswithrelatedpartiesinthenormalcourseofbusinessandontermsequivalenttothosethat
prevailinarm'slengthtransactions.PembinacontractscapacityfromAlliance,itsequityaccountedinvestee,andadvances
fundstosupportoperationsandprovidesservicestoequityaccountedinvestees.
DuringthethreeandninemonthsendedSeptember30,2020,PembinaadvancedU.S.$8millionandU.S.$24million,
respectively,toRubyPipelineL.L.C.,tofundtherepaymentofitsoutstandingbankfacility.
Inaddition,PembinaprovidedaparentalguaranteetoCKPConitsprojectfinancingarrangement,currentlyvaluedatU.S.$14
million,netofamortization.Theparentalguaranteeistreatedasafinancialguaranteeforaccountingpurposes,whichresults
intherecognitionofaliabilityonPembina'sbalancesheet,withanoffsettingamountrecordedasanequitycontributionto
theinvestmentinCKPC.
ForthethreeandninemonthsendedSeptember30,2020,Pembinahadnoothertransactionswith"relatedparties"(as
definedinIAS24RelatedPartyDisclosures)exceptthosepertainingtocontributionstoPembina'sdefinedbenefitpension
planandremunerationofkeymanagementpersonnelandtheBoardofDirectorsofPembina,intheordinarycourseoftheir
employmentordirectorshipagreements,respectively.
PembinaPipelineCorporationThirdQuarter202028
RiskManagement
HedgeofNetInvestmentinForeignOperations
OnMay7,2020,PembinadesignatedtheU.S.$250millionnon-revolvingtermloanitenteredintoasahedgeofthe
Company'snetinvestmentinU.S.functionalcurrencyforeignoperations.Thedesignateddebthasbeenassessedashavingno
ineffectivenessastheU.S.dollardebthasanequalandoppositeexposuretoU.S.dollarfluctuations.Foreignexchangegains
andlossesonthedesignateddebtarerecognizedinthecurrencytranslationreserveinaccumulatedothercomprehensive
income.
InterestRateRisk-CashFlowHedge
OnMay8,2020,Pembinadesignatedfinancialderivativecontractsthatfixtheinterestrateon$250millionofvariablerate
debtascashflowhedginginstruments.Thedesignatedcashflowhedgehasbeenassessedashavingnoineffectivenessasthe
criticaltermsarealigned.Unrealizedgains(losses)onderivativesindesignatedcashflowhedgingrelationshipsarerecognized
inthecashflowhedgereserveinaccumulatedothercomprehensiveincome,withrealizedgains(losses)beingreclassifiedto
netfinancecosts.
DisclosureControlsandProcedures("DC&P")andInternalControloverFinancialReporting("ICFR")
Management'sReportonInternalControlOverFinancialReporting
Pembina'smanagementisresponsibleforestablishingandmaintainingdisclosurecontrolsandproceduresandinternal
controloverfinancialreporting,asthosetermsaredefinedinNationalInstrument52-109CertificationofDisclosureinIssuers'
AnnualandInterimFilings.Theobjectiveofthisinstrumentistoimprovethequality,reliabilityandtransparencyof
informationthatisfiledorsubmittedundersecuritieslegislation.
ThePresidentandChiefExecutiveOfficerandtheSeniorVicePresidentandChiefFinancialOfficerhavedesigned,withthe
assistanceofmanagement,DC&PandICFRtoprovidereasonableassurancethatmaterialinformationrelatingtoPembina's
businessismadeknowntothem,isreportedonatimelybasis,thatfinancialreportingisreliableandthatfinancialstatements
preparedforexternalpurposesareinaccordancewithIFRS.
ChangesinInternalControlOverFinancialReporting
EffectiveMay1,2020,PembinacompletedtheintegrationoftheKinderAcquisitionintoitsexistingenterpriseresource
planning("ERP")system.AsaresultoftheERPsystemintegration,certainprocessessupportingPembina'sICFRfortheKinder
Acquisitionchangedinthesecondquarterof2020.TheCompany'sICFRintegrationoftheKinderAcquisitionisnowcomplete
andtheoverallcontrolsandprocedureswefollowinestablishingICFRwerenotsignificantlyimpacted.Assetsattributableto
theKinderAcquisitionrepresentedapproximately16percentofPembina'stotalassetsasatSeptember30,2020and
revenuesattributabletotheKinderAcquisitionfortheninemonthsendedSeptember30,2020representedapproximately10
percentofPembina'stotalrevenueforthatperiod.
Therewerenochangesinthethirdquarterof2020thathadorarelikelytohaveamaterialimpactonPembina'sICFR.
29PembinaPipelineCorporationThirdQuarter2020
10.ACCOUNTINGPOLICIES&ESTIMATESChangesinAccountingPolicies
TheaccountingpoliciesusedinpreparingtheInterimFinancialStatementsaredescribedinNote4ofPembina'sConsolidated
FinancialStatements.Exceptasnotedbelow,therewerenonewaccountingstandardsadoptedinthefirstninemonthsof
2020thatareexpectedtohaveamaterialimpactonPembina'sfinancialstatements.
FinancialInstruments
DerivativeFinancialInstrumentsandHedgeAccounting
Pembinaholdsderivativefinancialinstrumentstomanageitsinterestrate,commodity,powercostsandforeignexchangerisk
exposures.Derivativesarerecognizedinitiallyatfairvalue.Subsequenttoinitialrecognition,derivativesaremeasuredatfair
valuewithchangesrecognizedimmediatelyinearnings,unlesshedgeaccountingisapplied.
Pembinaapplieshedgeaccountingtocertainfinancialinstrumentsthatqualifyforandaredesignatedforhedgeaccounting
treatment.Atinceptionofadesignatedhedgingrelationship,formaldocumentationispreparedandincludestherisk
managementobjectiveandstrategyforundertakingthehedge,identificationofthehedgeditemandthehedginginstrument,
thenatureoftheriskbeinghedgedandhowPembinawillassessthehedginginstrument'seffectivenessinoffsettingthe
exposuretochangesinthehedgeditem.
Forderivativesthataredesignatedandqualifiedcashflowhedges,theeffectiveportionofchangesinfairvalueis
accumulatedinothercomprehensiveincome.Theamountaccumulatedisreclassifiedtoearningsinthesameperiodor
periodsduringwhichthehedgedexpectedfuturecashflowsoccur.Anyineffectiveportionofchangesinfairvalueofhedges
arerecordedinearnings.
Fornon-derivativefinancialliabilitiesdesignatedashedginginstrumentsinahedgeofthenetinvestmentinforeign
operations,theeffectiveportionofforeignexchangegainsandlossesarisingontranslationofthefinancialliabilityis
recognizedinothercomprehensiveincome.Anyineffectiveportionoftheforeignexchangegainsandlossesarisingfromthe
translationofthefinancialliabilityisrecognizedimmediatelyinearnings.Theamountaccumulatedintheother
comprehensiveincomeisreclassifiedtoearningsondisposaloftheforeignoperation.
Hedgeaccountingisdiscontinuedprospectivelywhenthehedgingrelationshipnolongerqualifiesforhedgeaccountingorthe
hedginginstrumentissoldorterminated.
PembinaPipelineCorporationThirdQuarter202030
Newstandardsandinterpretationsnotyetadopted
InterbankOfferedRates("IBOR")Reform-Phase2
InAugust2020,theIASBissuedamendmentstoIFRS9FinancialInstruments,IFRS7FinancialInstruments:Disclosuresand
IFRS16LeasestoaddressissuesthatimpactfinancialreportingatthetimeofIBORreplacementwithalternativerates.The
amendmentsprovideapracticalexpedienttoeasethepotentialburdenofaccountingforchangesincontractualcashflows,
providerelieffromspecifichedgeaccountingrequirements,andadddisclosurerequirements,atthetimeofIBOR
replacement.PembinawilladopttheamendmentsontheeffectivedateofJanuary1,2021andexpectstheamendmentsto
haveaninsignificantimpactonitsearningsandfinancialpositiononadoption.
CriticalAccountingJudgments&Estimates
CriticalaccountingjudgmentsandestimatesusedinpreparingtheInterimFinancialStatementsaredescribedinNote2of
Pembina'sConsolidatedFinancialStatementsandMD&AfortheyearendingDecember31,2019.Thepreparationof
consolidatedfinancialstatementsinconformitywithIFRSrequiresmanagementtomakebothjudgmentsandestimatesthat
couldmateriallyaffecttheamountsrecognizedinthefinancialstatements.Bytheirnature,judgmentsandestimatesmay
changeinlightofnewfactsandcircumstancesintheinternalandexternalenvironment.Therehavebeennomaterial
changestoPembina'scriticalaccountingestimatesandjudgmentsduringthethreeandninemonthsendedSeptember30,
2020,exceptforthegeneralimpactofsignificantuncertaintiescreatedbytheCOVID-19pandemic,asdiscussedbelow.
OngoingImpactoftheCOVID-19Pandemic
FollowingtheWorldHealthOrganizationdeclaringtheCOVID-19outbreaktobeapandemic,manygovernmentshavetaken
stepstocontainthespreadofthevirus,resultinginaslowdownoftheglobaleconomy,whichhasledtoasignificant
disruptionofbusinessoperationsandasignificantincreaseineconomicuncertainty.Thisuncertaintyhascreatedvolatilityin
assetprices,currencyexchangeratesandamarkeddeclineinlong-terminterestrates.Inaddition,theresultingdecreasein
demandforcrudeoilhasresultedinadeclineinglobalenergyprices.Managementappliedjudgmentandwillcontinueto
assessthesituationindeterminingtheimpactofthesignificantuncertaintiescreatedbytheseeventsandconditionsonthe
carryingamountsofassetsandliabilitiesintheInterimFinancialStatements.
31PembinaPipelineCorporationThirdQuarter2020
11.RISKFACTORSManagementhasidentifiedtheprimaryriskfactorsthatcouldpotentiallyhaveamaterialimpactonthefinancialresultsand
operationsofPembina.Withtheexceptionoftherisksnotedbelow,therehavebeennomaterialchangestotheriskfactors
presentedinPembina'sMD&AandAIFfortheyearendedDecember31,2019.Pembina'sMD&AandAIFareavailableat
www.sedar.com,www.sec.govandthroughPembina'swebsiteatwww.pembina.com.
OngoingImpactoftheCOVID-19Pandemic
COVID-19RelatedImpacts
Pembina'sbusinessandoperationshasbeenandwillcontinuetobemateriallyadverselyaffectedbytheCOVID-19pandemic,
includingongoinguncertaintywithrespecttotheextentanddurationofthepandemic.TheongoingCOVID-19pandemic,and
actionsthathave,andmaybe,takenbygovernmentalauthoritiesinresponsetheretohasresulted,andmaycontinueto
resultin,amongotherthings:anoverallslowdownintheglobaleconomy;adecreaseinglobalenergydemand;increased
volatilityinfinancialandcommoditymarkets;disruptionstoglobalsupplychains;labourshortages;significantimpactstothe
workforce;reductionsintradevolumes;temporaryoperationalrestrictionsandrestrictionsongatheringsofindividuals,as
wellasshelter-in-placedeclarationsandquarantineorders;businessclosuresandtravelbans;politicalandeconomic
instability;andcivilunrest.TherecentresurgenceofCOVID-19casesincertaingeographicareas,andthepossibilitythata
resurgencemayoccurinotherareas,hasresultedinthere-impositionofcertainoftheforegoingrestrictionsbygovernmental
authoritiesincertainjurisdictions.Thisfurtherincreasestheriskanduncertaintyastotheextentanddurationofthe
COVID-19pandemicanditsultimateimpactontheglobaleconomyandotheritemsnotedabove.
TheriskstoPembinaoftheongoingCOVID-19pandemicinclude,amongotherthings:riskstothehealthandsafetyof
Pembina'semployees;aslowdownortemporarysuspensionofoperationsincertaingeographiclocationsinwhichPembina
operates;delaysinthecompletion,ordeferral,ofPembina'sgrowthandexpansionprojects;andsupplychaindisruptions,all
oranyofwhichcouldmateriallyadverselyimpactPembina'sbusinessoperationsandfinancialresults.Pembinahasalready
deferredcertaingrowthprojectsasaresultoftheCOVID-19pandemicandresultingdeclineinglobalenergydemandandthe
resultingdecreaseincommoditypricesduring2020.
ThefullextentandimpactoftheCOVID-19pandemiccontinuestobeunknownatthistimeandthedegreetowhichitmay
impactPembina'sbusinessoperationsandfinancialresultswilldependonfuturedevelopments,whicharehighlyuncertain
andcannotbepredictedwithanydegreeofcertainty,including:theduration,severityandgeographicspreadoftheCOVID-19
virus,includinginrespectoftheresurgenceofviruscasesincertaingeographicareas,includingcertainareasinwhich
Pembinaoperates;furtheractionsthatmaybetakenbygovernmentalauthorities,includinginrespectoftravelrestrictions
andbusinessdisruptions;theeffectivenessofactionstakentocontainandtreattheCOVID-19virus;andhowquicklyandto
whatextentnormaleconomicandoperatingconditionscanresume.
ImpactonGeneralRisks
DependingontheextentanddurationoftheCOVID-19pandemic,itmayalsohavetheeffectofheighteningmanyofthe
otherrisksdescribedinPembina'sotherdisclosuredocuments,includingPembina'sMD&AandAIFfortheyearended
December31,2019,suchasrisksrelatingtoPembina'sexposuretocommodityprices;thesuccessfulcompletionofPembina's
growthandexpansionprojects,includingtheexpectedreturnoninvestmentthereof;Pembina'sabilitytomaintainitscredit
ratings;restrictedaccesstocapitalandincreasedborrowingcosts;Pembina'sabilitytopaydividendsandserviceobligations
underitsdebtsecuritiesandotherdebtobligations;andotherwisecomplyingwiththecovenantscontainedinthe
agreementsthatgovernPembina'sexistingindebtedness.
PembinaPipelineCorporationThirdQuarter202032
12.NON-GAAPMEASURESThroughoutthisMD&A,PembinahasusedthefollowingtermsthatarenotdefinedbyGAAPbutareusedbymanagementto
evaluatetheperformanceofPembinaanditsbusinesses.Sincenon-GAAPmeasuresdonothaveastandardizedmeaning
prescribedbyIFRSandarethereforeunlikelytobecomparabletosimilarmeasurespresentedbyothercompanies,applicable
securitiesregulationssuggestthatnon-GAAPmeasuresbeclearlydefined,qualifiedandreconciledtothemostdirectly
comparableGAAPmeasure.Thesenon-GAAPmeasuresarecalculatedanddisclosedonaconsistentbasisfromperiodto
period.
Theintentofnon-GAAPmeasuresistoprovideadditionalusefulinformationwithrespecttoPembina'soperationaland
financialperformancetoinvestorsandanalysts,thoughthemeasuresdonothaveanystandardizedmeaningunderIFRS.The
measuresshouldnot,therefore,beconsideredinisolationorusedinsubstituteformeasuresofperformancepreparedin
accordancewithIFRS.Otherissuersmaycalculatethesenon-GAAPmeasuresdifferently.
Investorsshouldbecautionedthatnetrevenue,adjustedEBITDA,adjustedEBITDApercommonshare,adjustedcashflow
fromoperatingactivities,cashflowfromoperatingactivitiespercommonshare,andadjustedcashflowfromoperating
activitiespercommonshareshouldnotbeconstruedasalternativestorevenue,earnings,cashflowfromoperatingactivities,
grossprofitorothermeasuresoffinancialresultsdeterminedinaccordancewithGAAPasindicatorsofPembina's
performance.
Non-GAAPProportionateConsolidationofInvestmentsinEquityAccountedInvesteesResults
InaccordancewithIFRS,Pembina'sjointlycontrolledinvestmentsareaccountedforusingequityaccounting.Underequity
accounting,theassetsandliabilitiesoftheinvestmentarepresentednetinasinglelineitemintheConsolidatedStatementof
FinancialPosition,"InvestmentsinEquityAccountedInvestees".Netearningsfrominvestmentsinequityaccountedinvestees
arerecognizedinasinglelineitemintheConsolidatedStatementofEarningsandComprehensiveIncome"ShareofProfit
fromEquityAccountedInvestees".Cashcontributionsanddistributionsfrominvestmentsinequityaccountedinvestees
representPembina'ssharepaidandreceivedintheperiodtoandfromtheinvestmentsinequityaccountedinvestees.
Toassistinunderstandingandevaluatingtheperformanceoftheseinvestments,PembinaissupplementingtheIFRS
disclosurewithnon-GAAPproportionateconsolidationofPembina'sinterestintheinvestmentsinequityaccounted
investees.Pembina'sproportionateinterestinequityaccountedinvesteeshasbeenincludedinadjustedEBITDA.
NetRevenue
Netrevenueisanon-GAAPfinancialmeasurewhichisdefinedastotalrevenuelesscostofgoodssoldincludingproduct
purchases.Managementbelievesthatnetrevenueprovidesinvestorswithasinglemeasuretoindicatethemarginonsales
beforenon-productoperatingexpensesthatiscomparablebetweenperiods.Managementutilizesnetrevenuetocompare
consecutiveresults,inMarketing&NewVenturesandFacilities,toaggregaterevenuegeneratedbyeachoftheCompany's
divisionsandtosetcomparableobjectives.
3MonthsEndedSeptember30
Pipelines FacilitiesMarketing&NewVentures
Corporate&Inter-divisionEliminations Total($millions)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Revenue 557 441 311 288 825 1,106 (124) (135) 1,569 1,700
Costofgoodssold,includingproductpurchases — — 3 — 793 1,034 (76) (85) 720 949
Netrevenue 557 441 308 288 32 72 (48) (50) 849 751
33PembinaPipelineCorporationThirdQuarter2020
9MonthsEndedSeptember30
Pipelines FacilitiesMarketing&NewVentures
Corporate&Inter-divisionEliminations Total($millions)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Revenue 1,648 1,300 905 834 2,309 3,712 (354) (370) 4,508 5,476
Costofgoodssold,includingproductpurchases — — 7 2 2,241 3,428 (230) (237) 2,018 3,193
Netrevenue 1,648 1,300 898 832 68 284 (124) (133) 2,490 2,283
AdjustedEarningsBeforeInterest,Taxes,DepreciationandAmortization("AdjustedEBITDA")
AdjustedEBITDAisanon-GAAPmeasureandiscalculatedasearningsfortheyearbeforenetfinancecosts,incometaxes,
depreciationandamortization(includedinoperationsandgeneralandadministrativeexpense)andunrealizedgainsorlosses
oncommodity-relatedderivativefinancialinstruments.Theexclusionofunrealizedgainsorlossesoncommodity-related
derivativefinancialinstrumentseliminatesthenon-cashimpactofsuchgainsorlosses.
AdjustedEBITDAalsoincludesadjustmentstoearningsforlosses(gains)ondisposalofassets,transactioncostsincurredin
respectofacquisitions,impairmentchargesorreversalsinrespectofgoodwill,intangibleassets,investmentsinequity
accountedinvesteesandproperty,plantandequipment,certainnon-cashprovisionsandotheramountsnotreflectiveof
ongoingoperations.Theadjustmentsmadetoearningsarealsomadetoshareofprofitfrominvestmentsinequityaccounted
investees.Inaddition,Pembina'sproportionateshareofresultsfrominvestmentsinequityaccountedinvesteeswitha
preferredinterestispresentedinadjustedEBITDAasa50percentcommoninterest.Theseadditionaladjustmentsaremade
toexcludevariousnon-cashandotheritemsthatarenotreflectiveofongoingoperations.
ManagementbelievesthatadjustedEBITDAprovidesusefulinformationtoinvestorsasitisanimportantindicatorofan
issuer'sabilitytogenerateliquiditythroughcashflowfromoperatingactivitiesandequityaccountedinvestees.Management
alsobelievesthatadjustedEBITDAprovidesanindicatorofoperatingincomegeneratedfromcapitalinvested,whichincludes
operationalfinanceincomefromlessorleasearrangements.AdjustedEBITDAisalsousedbyinvestorsandanalystsfor
assessingfinancialperformanceandforthepurposeofvaluinganissuer,includingcalculatingfinancialandleverageratios.
ManagementutilizesadjustedEBITDAtosetobjectivesandasakeyperformanceindicatoroftheCompany'ssuccess.
PembinapresentsadjustedEBITDAasmanagementbelievesitisameasurefrequentlyusedbyanalysts,investorsandother
stakeholdersinevaluatingtheCompany'sfinancialperformance.
3MonthsEndedSeptember30
Pipelines FacilitiesMarketing&NewVentures
Corporate&Inter-divisionEliminations Total($millions,exceptpershareamounts)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Earningsbeforeincometax 368 329 172 144 2 112 (114) (111) 428 474
Adjustmentstoshareofprofitfromequityaccountedinvesteesandother 59 63 34 33 9 1 — — 102 97
Netfinancecosts 8 2 6 14 (7) (1) 76 62 83 77
Depreciationandamortization 105 64 51 42 12 11 11 9 179 126
Unrealized(gain)lossoncommodity-relatedderivativefinancialinstruments — — (11) — 17 (40) — — 6 (40)
CEWS — — — — — — (9) — (9) —
Lossondisposalofassets 1 — — — — — — 1 1 1
Transactioncostsincurredinrespectofacquisitions — — — — — — 6 2 6 2
Impairmentchargesandnon-cashprovisions — — (1) — 1 — — (1) — (1)
AdjustedEBITDA 541 458 251 233 34 83 (30) (38) 796 736
AdjustedEBITDApercommonshare–basic(dollars) 1.45 1.44
PembinaPipelineCorporationThirdQuarter202034
9MonthsEndedSeptember30
Pipelines FacilitiesMarketing&NewVentures
Corporate&Inter-divisionEliminations Total($millions,exceptpershareamounts)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Earningsbeforeincometax 1,111 1,005 490 457 38 282 (426) (364) 1,213 1,380
Adjustmentstoshareofprofitfromequityaccountedinvesteesandother 183 196 103 109 15 19 — — 301 324
Netfinancecosts 24 7 19 17 2 — 319 210 364 234
Depreciationandamortization 306 179 155 118 37 43 34 32 532 372
Unrealized(gain)lossoncommodity-relatedderivativefinancialinstruments — — (14) — 12 (10) — — (2) (10)
Arbitrationawardpayment — — — — — (33) — — — (33)
CEWS — — — — — — (37) — (37) —
COVID-19restructuring 3 — 2 — 1 — 4 — 10 —
Loss(gain)ondisposalofassets 1 — 1 — — — (1) 2 1 2
Transactioncostsincurredinrespectofacquisitions — — — — — — 16 2 16 2
Impairmentchargesandnon-cashprovisions 3 — 1 — 13 — — 3 17 3
AdjustedEBITDA 1,631 1,387 757 701 118 301 (91) (115) 2,415 2,274
AdjustedEBITDApercommonshare–basic(dollars) 4.39 4.46
AdjustedCashFlowfromOperatingActivities,CashFlowfromOperatingActivitiesperCommonShare
andAdjustedCashFlowfromOperatingActivitiesperCommonShare
Adjustedcashflowfromoperatingactivitiesisanon-GAAPmeasurewhichisdefinedascashflowfromoperatingactivities
adjustingforthechangeinnon-cashoperatingworkingcapital,adjustingforcurrenttaxandshare-basedpaymentexpenses,
anddeductingpreferredsharedividendspaid.Adjustedcashflowfromoperatingactivitiesdeductspreferredsharedividends
paidbecausetheyarenotattributabletocommonshareholders.Thecalculationhasbeenmodifiedtoincludecurrenttaxand
share-basedpaymentexpenseasitallowsmanagementtobetterassesstheobligationsdiscussedbelow.Management
believesthatadjustedcashflowfromoperatingactivitiesprovidescomparableinformationtoinvestorsforassessingfinancial
performanceduringeachreportingperiod.Managementutilizesadjustedcashflowfromoperatingactivitiestosetobjectives
andasakeyperformanceindicatoroftheCompany'sabilitytomeetinterestobligations,dividendpaymentsandother
commitments.Percommonshareamountsarecalculatedbydividingcashflowfromoperatingactivities,oradjustedcash
flowfromoperatingactivities,asapplicable,bytheweightedaveragenumberofcommonsharesoutstanding.
3MonthsEndedSeptember30
9MonthsEndedSeptember30
($millions,exceptpershareamounts) 2020 2019 2020 2019
Cashflowfromoperatingactivities 434 535 1,486 1,804
Cashflowfromoperatingactivitiespercommonshare–basic(dollars) 0.79 1.05 2.70 3.53
Add(deduct):
Changeinnon-cashoperatingworkingcapital 89 64 168 (7)
Currenttaxexpense (52) (46) (195) (178)
Taxespaid,netofforeignexchange 89 18 289 118
Accruedshare-basedpayments 1 (4) 6 (37)
Share-basedpayments 1 — 45 50
Preferredsharedividendspaid (38) (37) (113) (92)
Adjustedcashflowfromoperatingactivities 524 530 1,686 1,658
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars) 0.95 1.04 3.07 3.25
35PembinaPipelineCorporationThirdQuarter2020
13.ABBREVIATIONSThefollowingisalistofabbreviationsthatmaybeusedinthisMD&A:
Other
AECO AlbertaEnergyCompanybenchmarkpricefornaturalgas
B.C. BritishColumbia
GAAP Canadiangenerallyacceptedaccountingprinciples
IFRS InternationalFinancialReportingStandards
LNG Liquefiednaturalgas
LPG Liquefiedpetroleumgas
NGL Naturalgasliquids
U.S. UnitedStates
WCSB WesternCanadianSedimentaryBasin
Deepcut Ethane-pluscapacityextractiongasprocessingcapabilities
Shallowcut Sweetgasprocessingwithpropaneand/orcondensate-plusextractioncapabilities
KinderAcquisition Pembina'sacquisitionofKinderMorganCanadaLimitedandtheU.S.portionoftheCochinPipelinesystemonDecember16,2019
Volumes VolumesforPipelinesandFacilitiesarerevenuevolumes,definedasphysicalvolumesplusvolumesrecognizedfromtake-or-paycommitments.VolumesforMarketing&NewVenturesaremarketedNGLvolumes.Volumesarestatedinmboe/d,withnaturalgasvolumesconvertedtomboe/dfromMMcf/data6:1ratio.
Measurement
mbbls thousandsofbarrels
mbpd thousandsofbarrelsperday
mmbpd millionsofbarrelsperday
mmbbls millionsofbarrels
mboe/d thousandsofbarrelsofoilequivalentperday
mmboe/d millionsofbarrelsofoilequivalentperday
MMcf/d millionsofcubicfeetperday
bcf/d billionsofcubicfeetperday
km kilometer
InvestmentsinEquityAccountedInvestees
Pipelines:
Alliance 50percentinterestintheAlliancePipeline
Ruby 50percentconvertiblepreferredinterestintheRubyPipeline
Facilities:
VeresenMidstream 45percentinterestinVeresenMidstreamLimitedPartnership,whichownsassetsinwesternCanadaservingtheMontneygeologicalplayinnorthwesternAlbertaandnortheasternB.C.includinggasprocessingplantsandgasgatheringpipelinesandcompression
FortCorp 50percentinterestinFortSaskatchewanEthyleneStorageLimitedPartnershipandFortSaskatchewanEthyleneCorporation
Marketing&NewVentures:
AuxSable AnownershipinterestinAuxSable(approximately42.7percentinAuxSableU.S.and50percentinAuxSableCanada),whichincludesanNGLfractionationfacilityandgasprocessingcapacitynearChicago,IllinoisandothernaturalgasandNGLprocessingfacilities,logisticsanddistributionassetsintheU.S.andCanada,aswellastransportationcontractsonAlliance
CKPC 50percentinterestinthepropanedehydrogenation("PDH")plantandpolypropylene("PP")upgradingfacility("PDH/PPFacility")
ReadersarereferredtotheAIFdatedFebruary27,2020onwww.sedar.comforadditionaldescriptions.
PembinaPipelineCorporationThirdQuarter202036
14.FORWARD-LOOKINGSTATEMENTS&INFORMATION
IntheinterestofprovidingPembina'ssecurityholdersandpotentialinvestorswithinformationregardingPembina,includingmanagement'sassessmentoftheCompany'sfutureplansandoperations,certainstatementscontainedinthisMD&Aconstituteforward-lookingstatementsorforward-lookinginformation(collectively,"forward-lookingstatements").Forward-lookingstatementsaretypicallyidentifiedbywordssuchas"anticipate","continue","estimate","expect","may","will","project","should","could","would","believe","plan","intend","design","target","undertake","view","indicate","maintain","explore","entail","schedule","objective","strategy","likely","potential","outlook","aim","purpose","goal"andsimilarexpressionssuggestingfutureeventsorfutureperformance.
Bytheirnature,suchforward-lookingstatementsinvolveknownandunknownrisks,uncertaintiesandotherfactorsthatmaycauseactualresultsoreventstodiffermateriallyfromthoseanticipatedinsuchforward-lookingstatements.Pembinabelievestheexpectationsreflectedinthoseforward-lookingstatementsarereasonablebutnoassurancecanbegiventhattheseexpectationswillprovetobecorrectandsuchforward-lookingstatementsincludedinthisMD&Ashouldnotbeundulyreliedupon.Theseforward-lookingstatementsspeakonlyasofthedateoftheMD&A.
Inparticular,thisMD&Acontainsforward-lookingstatementspertainingtothefollowing:
• thepotentialimpactsoftheCOVID-19pandemiconPembina,andPembina'sresponsethereto;
• futurelevelsandsustainabilityofcashdividendsthatPembinaintendstopaytoitsshareholders,thedividendpaymentdate;
• planning,construction,locations,capitalexpenditureestimates,schedules,regulatoryandenvironmentalapplicationsandanticipatedapprovals,expectedcapacity,incrementalvolumes,completionandin-servicedates,rights,sourcesofproduct,activities,benefitsandoperationswithrespecttonewconstructionof,orexpansionsonexisting,pipelines,systems,gasservicesfacilities,processingandfractionationfacilities,terminalling,storageandhubfacilitiesandotherfacilitiesorenergyinfrastructure,aswellastheimpactofPembina'snewprojectsonitsfuturefinancialperformance;
• pipeline,processing,fractionationandstoragefacilityandsystemoperationsandthroughputlevels;
• treatmentundergovernmentalregulatoryregimesinCanadaandtheU.S.,includingtaxesandtaxregimes,environmentalandgreenhousegasregulationsandrelatedabandonmentandreclamationobligations,andIndigenous,landownerandotherstakeholderconsultationrequirements;
• Pembina'sstrategyandthedevelopmentandexpectedtimingofnewbusinessinitiativesandgrowthopportunitiesandtheimpactthereof;
• expectedfuturecashflowsandthesufficiencythereof,financialstrength,sourcesofandaccesstofundsatattractiverates,futurecontractualobligations,futurefinancingoptions,futurerenewalofcreditfacilities,availabilityofcapitalforcapitalprojectsandcontributionstoinvestmentsinequityaccountedinvestees,operatingobligationsanddividendsandtheuseofproceedsfromfinancings;
• Pembina'scapitalstructure,includingthesufficiencyoftheamountofleverageemployedthereinandfutureactionsthatmaybetakenwithrespectthereto;
• Pembina'sexpectationsregardingthecreditworthinessofitscounterparties;• Pembina'sexpectationsregardinginvolvementofpartnersonJordanCove;• currentratingstargetsonPembina'sdebtandthelikelihoodofadowngradebelow
investment-graderatings;• tollsandtariffsandprocessing,transportation,fractionation,storageandservices
commitmentsandcontracts;• operatingrisks(includingtheamountoffutureliabilitiesrelatedtopipelinesspills
andotherenvironmentalincidents)andrelatedinsurancecoverageandinspectionandintegrityprograms;
• expectationsregardingPembina'sNGLstoragepositionsanditsintentionswithrespectthereto;
• Pembina'sintentionswithrespecttotheconversionofthePreferredShares,Series9;and
• theexpecteddemandfor,andpricesandinventorylevelsof,crudeoilandotherpetroleumproducts,includingNGL;andtheimpactofcurrentmarketconditionsonPembina.
VariousfactorsorassumptionsaretypicallyappliedbyPembinaindrawingconclusionsormakingtheforecasts,projections,predictionsorestimationssetoutinforward-lookingstatementsbasedoninformationcurrentlyavailabletoPembina.Thesefactorsandassumptionsinclude,butarenotlimitedto:
• oilandgasindustryexplorationanddevelopmentactivitylevelsandthegeographicregionofsuchactivity;
• thesuccessofPembina'soperations;• prevailingcommodityprices,interestratesandexchangeratesandtheabilityof
Pembinatomaintaincurrentcreditratings;• theavailabilityofcapitaltofundfuturecapitalrequirementsrelatingtoexisting
assetsandprojects;• expectationsregardingPembina'spensionplan;• futureoperatingcostsincludinggeotechnicalandintegritycostsbeingconsistent
withhistoricalcosts;• oilandgasindustrycompensationlevelsremainingconsistent;
• inrespectofcurrentdevelopments,expansions,plannedcapitalexpenditures,completiondatesandcapacityexpectations:thatthirdpartieswillprovideanynecessarysupport;thatanythird-partyprojectsrelatingtogrowthprojectswillbesanctionedandcompletedasexpected;thatanyrequiredcommercialagreementscanbereached;thatallrequiredregulatoryandenvironmentalapprovalscanbeobtainedonthenecessarytermsinatimelymanner;thatcounterpartieswillcomplywithcontractsinatimelymanner;thattherearenounforeseeneventspreventingtheperformanceofcontractsorthecompletionoftherelevantfacilities,andthattherearenounforeseenmaterialcostsrelatingtothefacilitieswhicharenotrecoverablefromcustomers;
• inrespectofthestabilityofPembina'sdividends:prevailingcommodityprices,marginsandexchangerates;thatPembina'sfutureresultsofoperationswillbeconsistentwithpastperformanceandmanagementexpectationsinrelationthereto;thecontinuedavailabilityofcapitalatattractivepricestofundfuturecapitalrequirementsrelatingtoexistingassetsandprojects,includingbutnotlimitedtofuturecapitalexpendituresrelatingtoexpansion,upgradesandmaintenanceshutdowns;thesuccessofgrowthprojects;futureoperatingcosts;thatcounterpartiestomaterialagreementswillcontinuetoperforminatimelymanner;thattherearenounforeseeneventspreventingtheperformanceofcontracts;andthattherearenounforeseenmaterialconstructionorothercostsrelatedtocurrentgrowthprojectsorcurrentoperations;
• prevailingregulatory,taxandenvironmentallawsandregulationsandtaxpoolutilization;and
• theamountoffutureliabilitiesrelatingtolawsuitsandenvironmentalincidentsandtheavailabilityofcoverageunderPembina'sinsurancepolicies(includinginrespectofPembina'sbusinessinterruptioninsurancepolicy).
TheactualresultsofPembinacoulddiffermateriallyfromthoseanticipatedintheseforward-lookingstatementsasaresultofthematerialriskfactorssetforthbelow:
• thefailuretorealizetheanticipatedbenefitsandsynergiesoftheKinderAcquisitionfollowingclosing;
• theregulatoryenvironmentanddecisionsandIndigenousandlandownerconsultationrequirements;
• theimpactofcompetitiveentitiesandpricing;• labourandmaterialshortages;• relianceonkeyrelationships,jointventurepartners,andagreementsandthe
outcomeofstakeholderengagement;• thestrengthandoperationsoftheoilandnaturalgasproductionindustryand
relatedcommodityprices;• non-performanceordefaultbycounterpartiestoagreementswhichPembinaorone
ormoreofitssubsidiarieshasenteredintoinrespectofitsbusiness;• actionsbyjointventurepartnersorotherpartnerswhichholdinterestsincertainof
Pembina'sassets;• actionsbygovernmentalorregulatoryauthoritiesincludingchangesintaxlawsand
treatment,changesinroyaltyrates,climatechangeinitiativesorpoliciesorincreasedenvironmentalregulation;
• fluctuationsinoperatingresults;• adversegeneraleconomicandmarketconditionsinCanada,NorthAmericaand
elsewhere,includingchanges,orprolongedweakness,asapplicable,ininterestrates,foreigncurrencyexchangerates,commodityprices,supply/demandtrendsandoverallindustryactivitylevels;
• risksrelatingtothecurrentandpotentialadverseimpactsoftheCOVID-19pandemicandcontinueddepressedcommodityprices;
• constraintson,ortheunavailabilityofadequateinfrastructure;• changesinthepoliticalenvironment,inNorthAmericaandelsewhere,andpublic
opinion;• abilitytoaccessvarioussourcesofdebtandequitycapital;• changesincreditratings;• technologyandsecurityrisks;• naturalcatastrophes;and• theotherfactorsdiscussedunder"RiskFactors"hereinandinPembina'sMD&Aand
AIFfortheyearendedDecember31,2019,whichareavailableatwww.sedar.com,www.sec.govandthroughPembina'swebsiteatwww.pembina.com.
Thesefactorsshouldnotbeconstruedasexhaustive.Unlessrequiredbylaw,Pembinadoesnotundertakeanyobligationtopubliclyupdateorreviseanyforward-lookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.Anyforward-lookingstatementscontainedhereinareexpresslyqualifiedbythiscautionarystatement.
37PembinaPipelineCorporationThirdQuarter2020
CONDENSEDCONSOLIDATEDINTERIMSTATEMENTSOFFINANCIALPOSITION(unaudited)
($millions) September30,2020 December31,2019(1)
AssetsCurrentassets
Cashandcashequivalents 31 129
Tradereceivablesandother 637 694
Inventory 217 126
Derivativefinancialinstruments(Note14) 31 40
916 989
Non-currentassets
Property,plantandequipment(Note4) 19,486 18,734
Investmentsinequityaccountedinvestees(Note5) 6,114 5,954
Intangibleassetsandgoodwill 6,415 6,458
Right-of-useassets(Note6) 703 730
Financeleasereceivable(Note6) 140 145
Advancestorelatedpartiesandotherassets 221 156
33,079 32,177
Totalassets 33,995 33,166
LiabilitiesandequityCurrentliabilities
Tradepayablesandother 699 1,013
Loansandborrowings(Note7) 250 74
Dividendspayable 115 110
Leaseliabilities 97 112
Contractliabilities(Note10) 92 39
Taxespayable 14 103
Derivativefinancialinstruments(Note14) 19 6
1,286 1,457
Non-currentliabilities
Loansandborrowings(Note7) 10,737 10,078
Leaseliabilities 686 707
Decommissioningprovision(Note8) 1,073 864
Contractliabilities(Note10) 236 192
Deferredtaxliabilities 3,056 2,919
Otherliabilities 152 179
15,940 14,939
Totalliabilities 17,226 16,396
Equity
Attributabletoshareholders 16,709 16,710
Attributabletonon-controllinginterest 60 60
Totalequity 16,769 16,770
Totalliabilitiesandequity 33,995 33,166(1) PembinahasrecastcertaincomparativeinformationtoreflectchangestothePurchasePriceAllocationoriginallypresentedDecember31,2019.SeeNote3.
Seeaccompanyingnotestothecondensedconsolidatedinterimfinancialstatements
PembinaPipelineCorporationThirdQuarter202038
CONDENSEDCONSOLIDATEDINTERIMSTATEMENTSOFEARNINGSANDCOMPREHENSIVEINCOME(unaudited)
3MonthsEndedSeptember30 9MonthsEndedSeptember30
($millions,exceptpershareamounts) 2020 2019 2020 2019Revenue(Note10) 1,569 1,700 4,508 5,476
Costofsales(Note12) 1,068 1,221 3,033 3,963
Gainoncommodity-relatedderivativefinancialinstruments (1) (45) (62) (35)
Shareofprofitfromequityaccountedinvestees(Note5) 61 89 209 282
Grossprofit 563 613 1,746 1,830
Generalandadministrative 56 64 176 214
Other(income)expense (4) (2) (7) 2
Resultsfromoperatingactivities 511 551 1,577 1,614
Netfinancecosts(Note11) 83 77 364 234
Earningsbeforeincometax 428 474 1,213 1,380
Currenttaxexpense 52 46 195 178
Deferredtaxexpense(recovery) 58 58 133 (145)
Incometaxexpense 110 104 328 33
Earnings 318 370 885 1,347
Othercomprehensive(loss)income,netoftax(Note13&14)
Exchange(loss)gainontranslationofforeignoperations (110) 42 143 (119)
Impactofhedgingactivities 6 — 15 —
Re-measurementofdefinedbenefitliability — — 14 —
Totalcomprehensiveincomeattributabletoshareholders 214 412 1,057 1,228
Earningsattributabletocommonshareholders,netofpreferredsharedividends 279 338 768 1,252
Earningspercommonshare–basic(dollars) 0.51 0.66 1.39 2.45
Earningspercommonshare–diluted(dollars) 0.51 0.66 1.39 2.44
Weightedaveragenumberofcommonshares(millions)
Basic 550 512 550 510
Diluted 550 513 550 513
Seeaccompanyingnotestothecondensedconsolidatedinterimfinancialstatements
39PembinaPipelineCorporationThirdQuarter2020
CONDENSEDCONSOLIDATEDINTERIMSTATEMENTSOFCHANGESINEQUITY(unaudited)
AttributabletoShareholdersoftheCompany
($millions)
CommonShareCapital
PreferredShareCapital Deficit AOCI(1) Total
Non-Controlling
InterestTotalEquity
December31,2019 15,539 2,956 (1,883) 98 16,710 60 16,770
Totalcomprehensiveincome
Earnings — — 885 — 885 — 885
Othercomprehensiveincome(Note13) — — — 172 172 — 172
Totalcomprehensiveincome — — 885 172 1,057 — 1,057
TransactionswithshareholdersoftheCompany
PartVI.1taxonpreferredshares(Note9) — (5) — — (5) — (5)
Share-basedpaymenttransactions(Note9) 99 — — — 99 — 99
Dividendsdeclared–common(Note9) — — (1,039) — (1,039) — (1,039)
Dividendsdeclared–preferred(Note9) — — (113) — (113) — (113)
TotaltransactionswithshareholdersoftheCompany 99 (5) (1,152) — (1,058) — (1,058)
September30,2020 15,638 2,951 (2,150) 270 16,709 60 16,769
December31,2018 13,662 2,423 (2,058) 317 14,344 60 14,404
Impactofchangeinaccountingpolicy — — 22 — 22 — 22
OpeningvalueJanuary1,2019 13,662 2,423 (2,036) 317 14,366 60 14,426
Totalcomprehensiveincome
Earnings — — 1,347 — 1,347 — 1,347
Othercomprehensiveincome
Exchangelossontranslationofforeignoperations — — — (119) (119) — (119)
Totalcomprehensiveincome — — 1,347 (119) 1,228 — 1,228
TransactionswithshareholdersoftheCompany
PartVI.1taxonpreferredshares — (3) — — (3) — (3)
Share-basedpaymenttransactions 152 — — — 152 — 152
Dividendsdeclared–common — — (899) — (899) — (899)
Dividendsdeclared–preferred — — (92) — (92) — (92)
TotaltransactionswithshareholdersoftheCompany 152 (3) (991) — (842) — (842)
September30,2019 13,814 2,420 (1,680) 198 14,752 60 14,812(1) AccumulatedOtherComprehensiveIncome("AOCI").
Seeaccompanyingnotestothecondensedconsolidatedinterimfinancialstatements
PembinaPipelineCorporationThirdQuarter202040
CONDENSEDCONSOLIDATEDINTERIMSTATEMENTSOFCASHFLOWS(unaudited)
3MonthsEndedSeptember30 9MonthsEndedSeptember30
($millions) 2020 2019 2020 2019
Cashprovidedby(usedin)
Operatingactivities
Earnings 318 370 885 1,347
Adjustmentsfor:
Shareofprofitfromequityaccountedinvestees (61) (89) (209) (282)
Distributionsfromequityaccountedinvestees 111 142 350 452
Depreciationandamortization 179 126 532 372
Unrealizedloss(gain)oncommodity-relatedderivativefinancialinstruments 6 (40) (2) (10)
Netfinancecosts(Note11) 83 77 364 234
Netinterestpaid (124) (71) (297) (205)
Incometaxexpense 110 104 328 33
Taxespaid (90) (18) (290) (117)
Share-basedcompensationexpense 4 9 8 49
Share-basedcompensationpayment (1) — (45) (50)
Netchangeincontractliabilities (7) (7) 35 (13)
Other (5) (4) (5) (13)
Changeinnon-cashoperatingworkingcapital (89) (64) (168) 7
Cashflowfromoperatingactivities 434 535 1,486 1,804
Financingactivities
Bankborrowingsandissuanceofdebt(Note7) 521 — 1,583 94
Repaymentofloansandborrowings (289) (1,000) (2,328) (1,599)
Repaymentofleaseliability (26) (14) (69) (46)
Issuanceofmediumtermnotes(Note7) — 1,518 1,578 2,318
Issuecostsandfinancingfees — (7) (11) (13)
Exerciseofstockoptions 5 25 88 140
Dividendspaid (384) (344) (1,146) (985)
Cashflowused(providedby)infinancingactivities (173) 178 (305) (91)
Investingactivities
Capitalexpenditures (174) (421) (868) (1,216)
Contributionstoequityaccountedinvestees (28) (25) (202) (86)
Receiptoffinanceleasepayments 2 — 7 —
Interestpaidduringconstruction (10) (11) (36) (28)
Recoveryofassetsorproceedsfromsale (1) — 1 6
Advancestorelatedparties (10) (11) (32) (53)
Changesinnon-cashinvestingworkingcapitalandother (81) 55 (140) 132
Cashflowusedininvestingactivities (302) (413) (1,270) (1,245)
Changeincashandcashequivalents (41) 300 (89) 468
Effectofmovementinexchangeratesoncashheld (1) (8) (9) (5)
Cashandcashequivalents,beginningofperiod 73 328 129 157
Cashandcashequivalents,endofperiod 31 620 31 620
Seeaccompanyingnotestothecondensedconsolidatedinterimfinancialstatements
41PembinaPipelineCorporationThirdQuarter2020
NOTESTOTHECONDENSEDCONSOLIDATEDUNAUDITEDINTERIMFINANCIALSTATEMENTS
1.REPORTINGENTITY
PembinaPipelineCorporation("Pembina"orthe"Company")isaCalgary-based,leadingtransportationandmidstream
serviceproviderservingNorthAmerica'senergyindustry.Thecondensedconsolidatedunauditedinterimfinancialstatements
("InterimFinancialStatements")includetheaccountsoftheCompany,itssubsidiarycompanies,partnershipsandany
investmentsinassociatesandjointarrangementsasatandforthethreeandninemonthsendedSeptember30,2020.These
InterimFinancialStatementsandthenotesheretohavebeenpreparedinaccordancewithInternationalFinancialReporting
Standards("IFRS")asissuedbytheInternationalAccountingStandardsBoard("IASB")applicabletothepreparationofinterim
financialstatements,includingInternationalAccountingStandard34InterimFinancialReporting("IAS34").TheseInterim
FinancialStatementshavebeenpreparedfollowingthesameaccountingpoliciesandmethodsofcomputationastheaudited
annualconsolidatedfinancialstatementsoftheCompanyasatandfortheyearendedDecember31,2019("Consolidated
FinancialStatements"),exceptasnotedbelow,andshouldbereadinconjunctionwiththeConsolidatedFinancialStatements.
TheInterimFinancialStatementswereauthorizedforissuebyPembina'sBoardofDirectorsonNovember5,2020.
Pembinaownsanintegratedsystemofpipelinesthattransportvarioushydrocarbonliquidsandnaturalgasproducts
producedprimarilyinwesternCanada.TheCompanyalsoownsgasgatheringandprocessingfacilitiesandanoilandnatural
gasliquidsinfrastructure,storageandlogisticsbusiness.Pembina'sintegratedassetsandcommercialoperationsalongthe
majorityofthehydrocarbonvaluechainallowittoofferafullspectrumofmidstreamandmarketingservicestotheenergy
sector.
FinancialInstruments
DerivativeFinancialInstrumentsandHedgeAccounting
Pembinaholdsderivativefinancialinstrumentstomanageitsinterestrate,commodity,powercostsandforeignexchangerisk
exposures.Derivativesarerecognizedinitiallyatfairvalue.Subsequenttoinitialrecognition,derivativesaremeasuredatfair
valuewithchangesrecognizedimmediatelyinearnings,unlesshedgeaccountingisapplied.
Pembinaapplieshedgeaccountingtocertainfinancialinstrumentsthatqualifyforandaredesignatedforhedgeaccounting
treatment.Atinceptionofadesignatedhedgingrelationship,formaldocumentationispreparedandincludestherisk
managementobjectiveandstrategyforundertakingthehedge,identificationofthehedgeditemandthehedginginstrument,
thenatureoftheriskbeinghedgedandhowPembinawillassessthehedginginstrument'seffectivenessinoffsettingthe
exposuretochangesinthehedgeditem.
Forderivativesthataredesignatedandqualifiedcashflowhedges,theeffectiveportionofchangesinfairvalueis
accumulatedinothercomprehensiveincome.Theamountaccumulatedisreclassifiedtoearningsinthesameperiodor
periodsduringwhichthehedgedexpectedfuturecashflowsoccur.Anyineffectiveportionofchangesinfairvalueofhedges
arerecordedinearnings.
Fornon-derivativefinancialliabilitiesdesignatedashedginginstrumentsinahedgeofthenetinvestmentinforeign
operations,theeffectiveportionofforeignexchangegainsandlossesarisingontranslationofthefinancialliabilityis
recognizedinothercomprehensiveincome.Anyineffectiveportionoftheforeignexchangegainsandlossesarisingfromthe
translationofthefinancialliabilityisrecognizedimmediatelyinearnings.Theamountaccumulatedintheother
comprehensiveincomeisreclassifiedtoearningsondisposaloftheforeignoperation.
Hedgeaccountingisdiscontinuedprospectivelywhenthehedgingrelationshipnolongerqualifiesforhedgeaccountingorthe
hedginginstrumentissoldorterminated.
PembinaPipelineCorporationThirdQuarter202042
Newstandardsandinterpretationsnotyetadopted
InterbankOfferedRates("IBOR")Reform-Phase2
InAugust2020,theIASBissuedamendmentstoIFRS9FinancialInstruments,IFRS7FinancialInstruments:Disclosuresand
IFRS16LeasestoaddressissuesthatimpactfinancialreportingatthetimeofIBORreplacementwithalternativerates.The
amendmentsprovideapracticalexpedienttoeasethepotentialburdenofaccountingforchangesincontractualcashflows,
providerelieffromspecifichedgeaccountingrequirements,andadddisclosurerequirements,atthetimeofIBOR
replacement.PembinawilladopttheamendmentsontheeffectivedateofJanuary1,2021andexpectstheamendmentsto
haveaninsignificantimpactonitsearningsandfinancialpositiononadoption.
UseofEstimatesandJudgments
Managementisrequiredtomakeestimatesandassumptionsandusejudgmentintheapplicationofaccountingpoliciesthat
couldhaveasignificantimpactontheamountsrecognizedintheInterimFinancialStatements.Actualresultsmaydifferfrom
estimatesandthosedifferencesmaybematerial.Bytheirnature,judgmentsandestimatesmaychangeinlightofnewfacts
andcircumstancesintheinternalandexternalenvironment.TherehavebeennomaterialchangestoPembina'scritical
accountingestimatesandjudgmentsduringthethreeandninemonthsendedSeptember30,2020,exceptforthegeneral
impactofsignificantuncertaintiescreatedbythecoronavirus("COVID-19")pandemic,asdiscussedbelow.
OngoingImpactoftheCOVID-19Pandemic
FollowingtheWorldHealthOrganizationdeclaringtheCOVID-19outbreaktobeapandemic,manygovernmentshavetaken
stepstocontainthespreadofthevirus,resultinginaslowdownoftheglobaleconomy,whichhasledtoasignificant
disruptionofbusinessoperationsandasignificantincreaseineconomicuncertainty.Thisuncertaintyhascreatedvolatilityin
assetprices,currencyexchangeratesandamarkeddeclineinlong-terminterestrates.Inaddition,theresultingdecreasein
demandforcrudeoilhasresultedinadeclineinglobalenergyprices.Managementappliedjudgmentandwillcontinueto
assessthesituationindeterminingtheimpactofthesignificantuncertaintiescreatedbytheseeventsandconditionsonthe
carryingamountsofassetsandliabilitiesintheInterimFinancialStatements.
2.DETERMINATIONOFFAIRVALUES
AnumberoftheCompany'saccountingpoliciesanddisclosuresrequirethedeterminationoffairvalueforbothfinancialand
non-financialassetsandliabilities.Fairvalueshavebeendeterminedformeasurementand/ordisclosurebasedonmethods
assetoutintheConsolidatedFinancialStatements.Thesemethodshavebeenappliedconsistentlytoallperiodspresentedin
theseInterimFinancialStatements.
OngoingImpactoftheCOVID-19Pandemic
Measuringfairvaluesusingsignificantunobservableinputshasbecomemorechallenginginthecurrentenvironment,where
eventsandconditionsrelatedtotheCOVID-19pandemicaredrivingsignificantdisruptionofbusinessoperationsanda
significantincreaseineconomicuncertainty.Managementapplieditsjudgmentindeterminingtheimpactofthesignificant
uncertaintiescreatedbytheseeventsandconditionsontheassessedfairvaluesofassetsandliabilitiesintheseInterim
FinancialStatements.
43PembinaPipelineCorporationThirdQuarter2020
3.ACQUISITION
OnDecember16,2019,PembinaacquiredalltheissuedandoutstandingsharesofKinderMorganCanadaLimited("Kinder
MorganCanada")bywayofaplanofarrangementandtheU.S.portionoftheCochinPipelinesystem(collectively,the
"KinderAcquisition")fortotalconsiderationof$4.3billion.
Thepurchasepriceallocation,subjecttofinalization,isbasedonassessedfairvaluesandisasfollows:
AsatDecember16,2019
($millions) PreviouslyReported Adjustments Recast
Purchasepriceconsideration
Commonshares 1,710 — 1,710
Cash(netofcashacquired) 2,009 — 2,009
Preferredshares 536 — 536
4,255 — 4,255
Currentassets 68 2 70
Property,plantandequipment 2,660 (41) 2,619
Intangibleassets 1,254 — 1,254
Right-of-useassets 348 (92) 256
Financeleasereceivable — 116 116
Goodwill 809 28 837
Otherassets 9 — 9
Currentliabilities (124) — (124)
Deferredtaxliabilities (281) (13) (294)
Decommissioningprovision (74) — (74)
Leaseliability (348) — (348)
Otherliabilities (66) — (66)
4,255 — 4,255
Formoreinformation,seeNote6oftheConsolidatedFinancialStatements.DuringtheninemonthsendedSeptember30,
2020,Pembinaadjustedthepurchasepriceallocationtoreflectupdatedassumptionsfortheidentificationandclassification
ofleases,whichresultedintherecognitionoffinanceleaseassetsof$118million,andreductionsinproperty,plantand
equipmentof$26millionandinright-of-useassetsof$92million.Pembina'sverificationofinformationsupportingthefair
valueofassetsacquiredalsoresultedina$15millionreductiontothefairvalueofcertainCanadianproperty,plantand
equipmentwithacorrespondingdecreaseindeferredtaxliabilitiesof$3millionandincreaseingoodwillof$12million.
PembinaalsoadjustedtheallocationoffairvaluebetweenCanadianandU.S.legalentities,resultingina$16millionincrease
inthedeferredtaxliabilityandacorrespondingincreaseingoodwillof$16million.Thepurchasepriceallocationisnotfinalas
Pembinaiscontinuingtoobtainandverifyinformationrequiredtodeterminethefairvalueofcertainassetsandliabilities
includingotherprovisionsrelatingtotaxes.
PembinaPipelineCorporationThirdQuarter202044
4.PROPERTY,PLANTANDEQUIPMENT
($millions)Landand
LandRights PipelinesFacilitiesandEquipment
CavernStorageand
OtherAssetsUnderConstruction Total
Cost
BalanceatDecember31,2019(1) 440 8,803 8,730 1,945 1,493 21,411
Additionsandtransfers 8 433 285 54 146 926
Changeindecommissioningprovision — (13) 198 — — 185
Foreignexchangeadjustments 2 23 9 — 7 41
Disposalsandother — (6) (11) (5) (12) (34)
BalanceatSeptember30,2020 450 9,240 9,211 1,994 1,634 22,529
Depreciation
BalanceatDecember31,2019 16 1,363 1,015 283 — 2,677
Depreciation 4 139 115 111 — 369
Disposalsandother — (1) (1) (1) — (3)
BalanceatSeptember30,2020 20 1,501 1,129 393 — 3,043
Carryingamounts
BalanceatDecember31,2019 424 7,440 7,715 1,662 1,493 18,734
BalanceatSeptember30,2020 430 7,739 8,082 1,601 1,634 19,486
Assetssubjecttooperatingleases
December31,2019(1) — 477 514 62 — 1,053
September30,2020 — 472 506 62 — 1,040(1) December31,2019balanceshavebeenrecast.SeeNote3.
5.INVESTMENTSINEQUITYACCOUNTEDINVESTEES
OwnershipInterest
ShareofProfit(Loss)fromEquityInvestments
EquityInvestments9MonthsEndedSeptember30
($millions) September30,2020 December31,2019 2020 2019 September30,2020 December31,2019
Alliance 50% 50% 79 119 2,568 2,620
AuxSable 42.7%-50% 42.7%-50% (5) 35 417 426
Ruby(1) - - 93 90 1,306 1,273
VeresenMidstream 45% 45% 37 34 1,383 1,348
CKPC 50% 50% 3 2 326 171
Other 50%-75% 50%-75% 2 2 114 116
209 282 6,114 5,954(1) Pembinaownsa50percentconvertiblepreferredinterestinRuby.
AtSeptember30,2020,PembinahadU.S.$2.3billionininvestmentsinequityaccountedinvesteesheldbyentitieswhose
functionalcurrencyistheU.S.dollar.Theresultingforeignexchangegainsandlossesareincludedinothercomprehensive
income.ForthethreeandninemonthsendedSeptember30,2020,Pembinarecognizedaforeignexchangelossof$60
millionandaforeignexchangegainof$78million(2019:$42milliongainand$103millionloss),respectively.
45PembinaPipelineCorporationThirdQuarter2020
FinancingActivities
PriortoCKPC'sdecisiontodeferfurtherinvestmentinthePDH/PPFacility,onFebruary27,2020,CKPCclosedasyndicated
seniorsecuredU.S.$1.7billionamortizingtermfacilityandaU.S.$150millionrevolvingcreditfacility,bothofwhichhave
beenguaranteedequallyonaseveralbasisbytheownersofCKPCthroughthecompletionofconstruction.Thefinalmaturity
dateofboththetermfacilityandrevolvingcreditfacilityisFebruary27,2027.Theparentalguaranteeresultedinthe
recognitionofafinancialguaranteeliability,currentlyvaluedatU.S.$14million,netofamortization,onPembina'sbalance
sheet,withanoffsettingamountrecordedasanequitycontributiontotheinvestmentinCKPC.
OnApril27,2020,Rubyfullyrepaidits364-daytermloan.Concurrenttorepayment,Rubyenteredintoanewtermloanthat
willmatureonMarch31,2021.ThetermloanwillamortizeU.S.$32millionin2020and2021(U.S.$16millionnetto
Pembina),intwoequalpaymentseachyearwiththefirstpaymentmadeinJune2020.
OnJune30,2020,CKPCanditslendersagreedtoamendandwaivecertaintermsandconditionsoftheCKPCcreditfacility.In
connectionwiththeamendment,CKPCvoluntarilyrepaidtheU.S.$26milliondrawnunderthenon-revolvingtermloan.CKPC
alsoretainedtheabilitytore-drawandaccessthefulltermloanofU.S.$1.7billionuponresumptionofkeyactivities.
6.LEASES
LesseeLeases
Pembinaentersintoarrangementstosecureaccesstoassetsnecessaryforoperatingthebusiness.Leased(right-of-use)
assetsincludeterminals,rail,buildings,landandotherassets.Totalcashoutflowsrelatedtoleaseswere$34millionand$98
million,respectively,forthethreeandninemonthsendedSeptember30,2020(2019:$21millionand$62million).
Right-of-UseAssets
($millions) Terminals Rail Buildings Land&Other Total
BalanceatDecember31,2019(1) 225 238 118 149 730
Additions(2) — 2 21 15 38
Amortization (9) (30) (15) (11) (65)
BalanceatSeptember30,2020 216 210 124 153 703(1) TheDecember31,2019balanceofTerminalsRight-of-UseAssetshasbeenrecast.SeeNote3.(2) Includedinadditionsis$13millionrelatedtotheremeasurementofthedecommissioningprovisionfortherestorationofleasedlandassetstotheconditionrequiredbythe
termsoftheunderlyinglease.
LessorLeases
Pembinahasenteredintocontractsfortheuseofitsassetsthathaveresultedinleasetreatmentforaccountingpurposes.
Assetsunderoperatingleasesincludepipelines,terminalsandstoragetanksandcaverns.SeeNote4forcarryingvalueof
property,plantandequipmentunderoperatingleases.Assetsunderfinanceleasesincludeofficesub-leasesandterminal
assets.
PembinaPipelineCorporationThirdQuarter202046
MaturityofLeaseReceivables
AsatSeptember30,2020
OperatingLeases FinanceLeases($millions)
Lessthanoneyear 150 22
Onetotwoyears 142 24
Twotothreeyears 140 22
Threetofouryears 124 22
Fourtofiveyears 110 22
Morethanfiveyears 899 230
Totalundiscountedleasereceipts 1,565 342
Unearnedfinanceincomeonleasereceipts (203)
Discountedunguaranteedresidualvalue 8
Financeleasereceivable 147
Lesscurrentportion(1) (7)
Totalnon-current 140(1) IncludedintradereceivablesandotherontheCondensedConsolidatedInterimStatementofFinancialPosition.
Expectedcreditlossesonleasereceivablesaredeterminedusingaprobability-weightedestimateofcreditlosses,measured
asthepresentvalueofallexpectedcashshortfalls,discountedattheinterestratesimplicitintheleases,usingreasonableand
supportableinformationaboutpastevents,currentconditionsandforecastsoffutureeconomicconditions.Pembina
considerstheriskofdefaultrelatingtoleasereceivableslowbasedonPembina'sassessmentofindividualcounterpartycredit
riskthroughestablishedcreditmanagementtechniquesasdisclosedintheConsolidatedFinancialStatements.
47PembinaPipelineCorporationThirdQuarter2020
7.LOANSANDBORROWINGS
ThisnoteprovidesinformationaboutthecontractualtermsofPembina'sinterest-bearingloansandborrowings,whichare
measuredatamortizedcost.
CarryingValue,TermsandConditions,andDebtMaturitySchedule
CarryingValue
($millions)Authorizedat
September30,2020Nominal
InterestRateYearofMaturity September30,2020 December31,2019
Seniorunsecuredcreditfacilities(1)(3)(4) 4,153 1.58(2) Various(1) 1,638 2,097
SeniorunsecurednotesseriesA — 5.57 2020 — 74
SeniorunsecurednotesseriesC — 5.58 2020 — 199
Seniorunsecuredmedium-termnotesseries1 250 4.89 2021 250 250
Seniorunsecuredmedium-termnotesseries2 450 3.77 2022 449 449
Seniorunsecuredmedium-termnotesseries3 450 4.75 2043 446 446
Seniorunsecuredmedium-termnotesseries4 600 4.81 2044 596 596
Seniorunsecuredmedium-termnotesseries5 450 3.54 2025 449 449
Seniorunsecuredmedium-termnotesseries6 500 4.24 2027 498 498
Seniorunsecuredmedium-termnotesseries7 600 3.71 2026 603 498
Seniorunsecuredmedium-termnotesseries8 650 2.99 2024 646 646
Seniorunsecuredmedium-termnotesseries9 550 4.74 2047 542 542
Seniorunsecuredmedium-termnotesseries10 650 4.02 2028 662 398
Seniorunsecuredmedium-termnotesseries11 800 4.75 2048 844 298
Seniorunsecuredmedium-termnotesseries12 650 3.62 2029 654 398
Seniorunsecuredmedium-termnotesseries13 700 4.54 2049 713 714
Seniorunsecuredmedium-termnotesseries14 600 2.56 2023 598 598
Seniorunsecuredmedium-termnotesseries15 600 3.31 2030 597 597
Seniorunsecuredmedium-termnotesseries16 400 4.67 2050 397 —
Seniorunsecuredmedium-termnotesseries3A 50 5.05 2022 52 52
Seniorunsecuredmedium-termnotesseries5A 350 3.43 2021 353 353
Totalinterestbearingliabilities 10,987 10,152
Lesscurrentportion (250) (74)
Totalnon-current 10,737 10,078(1) Pembina'sunsecuredcreditfacilitiesincludea$2.5billionrevolvingfacilitythatmaturesinMay2024,a$500millionnon-revolvingtermloanthatmaturesinAugust2022,a
$800millionrevolvingfacilitythatmaturesinApril2022,aU.S.$250millionnon-revolvingtermloanthatmaturesinMay2025anda$20millionoperatingfacilitythatmaturesinMay2021,whichistypicallyrenewedonanannualbasis.
(2) ThenominalinterestrateistheweightedaverageofalldrawncreditfacilitiesbasedonPembina'screditratingatSeptember30,2020.Borrowingsunderthecreditfacilitiesbearinterestatprime,Bankers'Acceptance,orLIBORrates,plusapplicablemargins.
(3) NoU.S.dollarvariableratedebtoutstandingatSeptember30,2020(December31,2019:U.S.$454million).(4) TheU.S.dollardenominatednon-revolvingtermloanisdesignatedasahedgeoftheCompany’snetinvestmentinselectedforeignoperationswithaU.S.dollarfunctional
currency.RefertoNote14forforeignexchangeriskmanagement.
OnJanuary10,2020,Pembinaclosedanofferingof$1.0billionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedinthreetranches,consistingof$250millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-
termnotes,series10,havingafixedcouponof4.02percentperannum,payablesemi-annuallyandmaturingonMarch27,
2028;$500millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-termnotes,series11,havingafixed
couponof4.75percentperannum,payablesemi-annuallyandmaturingonMarch26,2048;and$250millionissuedthrough
are-openingofPembina'sseniorunsecuredmedium-termnotes,series12,havingafixedcouponof3.62percentperannum,
payablesemi-annuallyandmaturingonApril3,2029.
OnApril6,2020,Pembinaenteredintoanunsecured$800millionrevolvingcreditfacilitywithcertainexistinglenders,which
providesadditionalliquidityandflexibilityinPembina’scapitalstructureinthecurrentmarketconditions.Thecreditfacility
hasaninitialtermoftwoyears.Theothertermsandconditionsofthecreditfacility,includingfinancialcovenants,are
substantiallysimilartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
PembinaPipelineCorporationThirdQuarter202048
OnMay7,2020,PembinaenteredintoanunsecuredU.S.$250millionnon-revolvingtermloanwithaglobalbank,which
providesadditionalliquidityandflexibilityinPembina'scapitalstructureinthecurrentmarketconditions.Thetermloanhas
aninitialtermoffiveyears.Theothertermsandconditionsofthecreditfacility,includingfinancialcovenants,are
substantiallysimilartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
OnMay28,2020,Pembinaclosedanofferingof$500millionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedintwotranches,consistingof$400millioninseniorunsecuredmedium-termnotes,series16,havingafixed
couponof4.76percentperannum,payablesemi-annually,andmaturingonMay28,2050and$100millionissuedthrougha
re-openingofPembina'sseniorunsecuredmedium-termnotes,series7,havingafixedcouponof3.71percentperannum,
payablesemi-annuallyandmaturingonAugust11,2026.
OnJuly10,2020,Pembina's$200millionseniorunsecurednotes,seriesC,werefullyrepaidthroughanearlyredemption,of
whichnoticewasprovidedtoholdersonJune5,2020.TheseriesCnoteswereoriginallysettomatureinSeptember2021.
8.DECOMMISSIONINGPROVISION
($millions) 2020
BalanceatJanuary1 867
Unwindingofdiscountrate 14
Changeinrates 212
Additions 20
Changeincostestimatesandother (38)
Total 1,075
Lesscurrentportion(1) (2)
BalanceatSeptember30 1,073(1) IncludedintradepayablesandotherontheCondensedConsolidatedInterimStatementofFinancialPosition.
Pembinaappliedarisk-freerealreturnrateof-0.2percent(December31,2019:0.3percent)toestimatethepresentvalueof
thedecommissioningprovision.Changesinthemeasurementofthedecommissioningprovisionareaddedto,ordeducted
from,thecostoftherelatedproperty,plantandequipmentorright-of-useasset.
9.SHARECAPITAL
CommonShareCapital
($millions,exceptasnoted)
NumberofCommonShares
(millions)Common
ShareCapital
BalanceatDecember31,2019 548 15,539
Share-basedpaymenttransactions 2 99
BalanceatSeptember30,2020 550 15,638
PreferredShareCapital
($millions,exceptasnoted)
NumberofPreferredShares
(millions)Preferred
ShareCapital
BalanceatDecember31,2019 122 2,956
PartVI.1tax — (5)
BalanceatSeptember30,2020 122 2,951
49PembinaPipelineCorporationThirdQuarter2020
Dividends
ThefollowingdividendsweredeclaredbyPembina:
9MonthsEndedSeptember30
($millions) 2020 2019
Commonshares
$1.89percommonshare(2019:$1.76) 1,039 899
Preferredshares
$0.92perSeries1preferredshare(2019:$0.92) 9 9
$0.84perSeries3preferredshare(2019:$0.84) 5 5
$0.85perSeries5preferredshare(2019:$0.90) 9 9
$0.82perSeries7preferredshare(2019:$0.84) 8 8
$0.89perSeries9preferredshare(2019:$0.89) 8 8
$1.07perSeries11preferredshare(2019:$1.07) 7 7
$1.07perSeries13preferredshare(2019:$1.07) 11 11
$0.84perSeries15preferredshare(2019:$0.84) 7 7
$0.90perSeries17preferredshare(2019:$0.92) 5 6
$0.92perSeries19preferredshare(2019:$0.94) 7 8
$0.92perSeries21preferredshare(2019:$0.91) 15 14
$0.98perSeries23preferredshare(2019:nil) 12 —
$0.98perSeries25preferredshare(2019:nil) 10 —
113 92
OnJune1,2020,PembinaannouncedthatitdidnotintendtoexerciseitsrighttoredeemtheeightmillionCumulative
RedeemableRateResetClassAPreferredShares,Series19sharesoutstandingonJune30,2020.
OnOctober6,2020,PembinaannouncedthatitsBoardofDirectorshaddeclaredadividendof$0.21percommonshare
($2.52annually)inthetotalamountof$115million,payableonNovember13,2020toshareholdersofrecordonOctober23,
2020.Pembina'sBoardofDirectorsalsodeclaredquarterlydividendsforPembina'spreferredsharesasoutlinedinthe
followingtable:
Series RecordDate PayableDate PerShareAmountDividendAmount
($millions)
Series1 November2,2020 December1,2020 $0.306625 3
Series3 November2,2020 December1,2020 $0.279875 2
Series5 November2,2020 December1,2020 $0.285813 3
Series7 November2,2020 December1,2020 $0.273750 3
Series9 November2,2020 December1,2020 $0.296875 3
Series11 November2,2020 December1,2020 $0.359375 2
Series13 November2,2020 December1,2020 $0.359375 4
Series15 December15,2020 December31,2020 $0.279000 2
Series17 December15,2020 December31,2020 $0.301313 2
Series19 December15,2020 December31,2020 $0.292750 2
Series21 November2,2020 December1,2020 $0.306250 5
Series23 November2,2020 November16,2020 $0.328125 4
Series25 November2,2020 November16,2020 $0.325000 3
38
Subsequenttoquarterend,onNovember2,2020,Pembinaannouncedthatitdidnotintendtoexerciseitsrighttoredeem
theninemillionCumulativeRedeemableRateResetClassAPreferredShares,Series9sharesoutstandingonDecember1,
2020.
PembinaPipelineCorporationThirdQuarter202050
10.REVENUE
Revenuehasbeendisaggregatedintocategoriestoreflecthowthenature,timinganduncertaintyofrevenueandcashflows
areaffectedbyeconomicfactors.
a. RevenueDisaggregation
2020 2019
3MonthsEndedSeptember30
Pipelines Facilities
Marketing&New
Ventures Total Pipelines Facilities
Marketing&New
Ventures Total($millions)
Take-or-pay(1) 428 197 — 625 288 151 — 439
Fee-for-service(1) 55 22 — 77 100 33 — 133
Productsales(2) — — 825 825 — — 1,106 1,106
Revenuefromcontractswithcustomers 483 219 825 1,527 388 184 1,106 1,678
Operationalfinanceleaseincome 3 — — 3 — — — —
Fixedoperatingleaseincome 31 8 — 39 16 6 — 22
Totalexternalrevenue 517 227 825 1,569 404 190 1,106 1,700(1) Revenuerecognizedovertime.(2) Revenuerecognizedatapointintime.
2020 2019
9MonthsEndedSeptember30
Pipelines Facilities
Marketing&New
Ventures Total Pipelines Facilities
Marketing&New
Ventures Total($millions)
Take-or-pay(1) 1,206 556 — 1,762 862 469 — 1,331
Fee-for-service(1) 220 80 — 300 288 74 — 362
Productsales(2) — — 2,309 2,309 — 3 3,712 3,715
Revenuefromcontractswithcustomers 1,426 636 2,309 4,371 1,150 546 3,712 5,408
Operationalfinanceleaseincome 11 — — 11 — — — —
Fixedoperatingleaseincome 100 26 — 126 47 21 — 68
Totalexternalrevenue 1,537 662 2,309 4,508 1,197 567 3,712 5,476(1) Revenuerecognizedovertime.(2) Revenuerecognizedatapointintime.
51PembinaPipelineCorporationThirdQuarter2020
b. ContractLiabilities
Significantchangesinthecontractliabilitiesbalancesduringtheperiodareasfollows:
9MonthsEndedSeptember30,2020 12MonthsEndedDecember31,2019
($millions) Take-or-Pay
OtherContractLiabilities
TotalContractLiabilities Take-or-Pay
OtherContractLiabilities
TotalContractLiabilities
Openingbalance 8 223 231 9 159 168
Additions(netintheperiod) 42 103 145 4 35 39
Acquisition(Note3) — — — — 77 77
Revenuerecognizedfromcontractliabilities(1) (8) (40) (48) (5) (48) (53)
Closingbalance 42 286 328 8 223 231
Lesscurrentportion(2) (42) (50) (92) (8) (31) (39)
Endingbalance — 236 236 — 192 192(1) Recognitionofrevenuerelatedtoperformanceobligationssatisfiedinthecurrentperiodthatwereincludedintheopeningbalanceofcontractliabilities.(2) AsatSeptember30,2020,thebalanceincludes$42millionofcashcollectedundertake-or-paycontractswhichwillberecognizedwithinoneyearasthecustomerchoosesto
ship,process,orotherwiseforegotheassociatedservice.
ContractliabilitiesdepictPembina'sobligationtoperformservicesinthefutureforcashandnon-cashconsiderationwhich
hasbeenreceivedfromcustomers.Contractliabilitiesincludeup-frontpaymentsornon-cashconsiderationreceivedfrom
customersforfuturetransportation,processingandstorageservices.Contractliabilitiesalsoincludeconsiderationreceived
fromcustomersfortake-or-paycommitmentswherethecustomerhasamake-uprighttoshiporprocessfuturevolumes
underafirmcontract.Theseamountsarenon-refundableshouldthecustomernotuseitsmake-uprights.
Pembinadoesnothaveanycontractassets.Inallinstanceswheregoodsorserviceshavebeentransferredtoacustomerin
advanceofthereceiptofcustomerconsideration,Pembina'srighttoconsiderationisunconditionalandhasthereforebeen
presentedasareceivable.
11.NETFINANCECOSTS
3MonthsEndedSeptember30 9MonthsEndedSeptember30
($millions) 2020 2019 2020 2019
Interestexpenseonfinancialliabilitiesmeasuredatamortizedcost:
Loansandborrowings 91 71 269 216
Leases 9 4 29 13
Unwindingofdiscountrate 5 3 14 10
Financeleaseincome(1) — — (1) (1)
(Gain)lossinfairvalueofnon-commodity-relatedderivativefinancialinstruments (11) 2 11 5
Foreignexchange(gains)lossesandother (11) (3) 42 (9)
Netfinancecosts(1) 83 77 364 234(1) Excludesoperationalfinanceleaseincomefromlessorleasearrangementswhichisincludedinrevenueasthisincomeisgeneratedfromphysicalassetsinthenormalcourse
ofoperations.
PembinaPipelineCorporationThirdQuarter202052
12.OPERATINGSEGMENTS
Pembina'soperatingsegmentsareorganizedbythreedivisions:Pipelines,FacilitiesandMarketing&NewVentures.
3MonthsEndedSeptember30,2020
Pipelines(1) FacilitiesMarketing&New
Ventures(2)
Corporate&Inter-divisionEliminations Total($millions)
Revenuefromexternalcustomers 517 227 825 — 1,569
Inter-divisionrevenue 40 84 — (124) —
Totalrevenue(3) 557 311 825 (124) 1,569
Operatingexpenses 129 99 — (50) 178
Costofgoodssold,includingproductpurchases — 3 793 (76) 720
Depreciationandamortizationincludedinoperations 105 51 12 2 170
Costofsales 234 153 805 (124) 1,068
Realizedgainoncommodity-relatedderivativefinancialinstruments — — (7) — (7)
Shareofprofit(loss)fromequityaccountedinvestees 55 11 (5) — 61
Unrealized(gain)lossoncommodity-relatedderivativefinancialinstruments — (11) 17 — 6
Grossprofit 378 180 5 — 563
Depreciationincludedingeneralandadministrative — — — 9 9
Othergeneralandadministrative 6 2 9 30 47
Other(income)expense (4) — 1 (1) (4)
Reportablesegmentresultsfromoperatingactivities 376 178 (5) (38) 511
Netfinancecosts(income) 8 6 (7) 76 83
Reportablesegmentearnings(loss)beforetax 368 172 2 (114) 428
Capitalexpenditures 53 98 10 13 174
Contributionstoequityaccountedinvestees — 28 — — 28
3MonthsEndedSeptember30,2019
Pipelines(1) FacilitiesMarketing&
NewVentures(2)
Corporate&Inter-divisionEliminations Total($millions)
Revenuefromexternalcustomers 404 190 1,106 — 1,700
Inter-divisionrevenue 37 98 — (135) —
Totalrevenue(3) 441 288 1,106 (135) 1,700
Operatingexpenses 109 97 — (55) 151
Costofgoodssold,includingproductpurchases — — 1,034 (85) 949
Depreciationandamortizationincludedinoperations 64 42 11 4 121
Costofsales 173 139 1,045 (136) 1,221
Realizedgainoncommodity-relatedderivativefinancialinstruments — — (5) — (5)
Shareofprofitfromequityaccountedinvestees 63 12 14 — 89
Unrealizedgainoncommodity-relatedderivativefinancialinstruments — — (40) — (40)
Grossprofit 331 161 120 1 613
Depreciationincludedingeneralandadministrative — — — 5 5
Othergeneralandadministrative 5 3 9 42 59
Other(income)expense (5) — — 3 (2)
Reportablesegmentresultsfromoperatingactivities 331 158 111 (49) 551
Netfinancecosts(income) 2 14 (1) 62 77
Reportablesegmentearnings(loss)beforetax 329 144 112 (111) 474
Capitalexpenditures 212 167 34 8 421
Contributionstoequityaccountedinvestees — 24 1 — 25(1) Pipelinestransportationrevenueincludes$62million(2019:$7million)associatedwithU.S.pipelinerevenue.(2) Marketing&NewVenturesincludesrevenueof$33million(2019:$28million)associatedwithU.S.midstreamsales.(3) Duringthethirdquarterof2020,noonecustomeraccountedfor10percentormoreoftotalrevenuesreportedthroughoutallsegments.Duringthethirdquarterof2019,
onecustomeraccountedfor10percentormoreoftotalrevenueswith$244millionreportedthroughoutallsegments.
53PembinaPipelineCorporationThirdQuarter2020
9MonthsEndedSeptember30,2020
Pipelines(1) FacilitiesMarketing&New
Ventures(2)
Corporate&Inter-DivisionEliminations Total($millions)
Revenuefromexternalcustomers 1,537 662 2,309 — 4,508
Inter-divisionrevenue 111 243 — (354) —
Totalrevenue(3) 1,648 905 2,309 (354) 4,508
Operatingexpenses 362 281 — (132) 511
Costofgoodssold,includingproductpurchases — 7 2,241 (230) 2,018
Depreciationandamortizationincludedinoperations 306 155 37 6 504
Costofsales 668 443 2,278 (356) 3,033
Realizedgainoncommodity-relatedderivativefinancialinstruments — — (60) — (60)
Shareofprofit(loss)fromequityaccountedinvestees 170 41 (2) — 209
Unrealized(gain)lossoncommodity-relatedderivativefinancialinstruments — (14) 12 — (2)
Grossprofit 1,150 517 77 2 1,746
Depreciationincludedingeneralandadministrative — — — 28 28
Othergeneralandadministrative 16 7 24 101 148
Other(income)expense (1) 1 13 (20) (7)
Reportablesegmentresultsfromoperatingactivities 1,135 509 40 (107) 1,577
Netfinancecosts 24 19 2 319 364
Reportablesegmentearnings(loss)beforetax 1,111 490 38 (426) 1,213
Capitalexpenditures 511 296 34 27 868
Contributionstoequityaccountedinvestees — 69 155 — 224
9MonthsEndedSeptember30,2019
Pipelines(1) FacilitiesMarketing&New
Ventures(2)
Corporate&Inter-DivisionEliminations Total($millions)
Revenuefromexternalcustomers 1,197 567 3,712 — 5,476
Inter-divisionrevenue 103 267 — (370) —
Totalrevenue(3) 1,300 834 3,712 (370) 5,476
Operatingexpenses 299 264 — (138) 425
Costofgoodssold,includingproductpurchases — 2 3,428 (237) 3,193
Depreciationandamortizationincludedinoperations 179 118 43 5 345
Costofsales 478 384 3,471 (370) 3,963
Realizedgainoncommodity-relatedderivativefinancialinstruments — — (25) — (25)
Shareofprofitfromequityaccountedinvestees 209 36 37 — 282
Unrealizedgainoncommodity-relatedderivativefinancialinstruments — — (10) — (10)
Grossprofit 1,031 486 313 — 1,830
Depreciationincludedingeneralandadministrative — — — 27 27
Othergeneralandadministrative 22 12 28 125 187
Other(income)expense (3) — 3 2 2
Reportablesegmentresultsfromoperatingactivities 1,012 474 282 (154) 1,614
Netfinancecosts 7 17 — 210 234
Reportablesegmentearnings(loss)beforetax 1,005 457 282 (364) 1,380
Capitalexpenditures 637 426 135 18 1,216
Contributionstoequityaccountedinvestees — 50 93 — 143(1) Pipelinestransportationrevenueincludes$170million(2019:$18million)associatedwithU.S.pipelinerevenue.(2) Marketing&NewVenturesincludesrevenueof$98million(2019:$126million)associatedwithU.S.midstreamsales.(3) During2020,noonecustomeraccountedfor10percentormoreoftotalrevenuesreportedthroughoutallsegments.During2019,onecustomeraccountedfor10percentor
moreoftotalrevenueswith$681millionreportedthroughoutallsegments.
PembinaPipelineCorporationThirdQuarter202054
13.ACCUMULATEDOTHERCOMPREHENSIVEINCOME(LOSS)
($millions)
CurrencyTranslation
Reserve
CashFlowHedgeReserve
PensionandotherPost-RetirementBenefitPlan
Adjustments(2) Total
BalanceatDecember31,2018 348 — (31) 317
Othercomprehensivelossbeforehedgingactivities (119) — — (119)
BalanceatSeptember30,2019 229 — (31) 198
BalanceatDecember31,2019 134 — (36) 98
Othercomprehensivegainbeforehedgingactivities 143 — 14 157
Othercomprehensivegain(loss)resultingfromhedgingactivities(1) 17 (1) — 16
Taximpact (1) — — (1)
BalanceatSeptember30,2020 293 (1) (22) 270(1) AmountsrelatetohedgesoftheCompany'snetinvestmentinforeignoperations(reportedinCurrencyTranslationReserve)andinterestratederivativesdesignatedascash
flowhedges(reportedinCashFlowHedgeReserve)(Note14).(2) PensionandotherPost-RetirementBenefitPlanAdjustmentswillnotbereclassifiedintoearnings.
14.FINANCIALINSTRUMENTS&RISKMANAGEMENT
RiskManagement
HedgeofNetInvestmentinForeignOperations
OnMay7,2020,PembinadesignatedtheU.S.$250millionnon-revolvingtermloanitenteredintoasahedgeofthe
Company'snetinvestmentinselectedU.S.functionalcurrencyforeignoperations.Thedesignateddebthasbeenassessedas
havingnoineffectivenessastheU.S.dollardebthasanequalandoppositeexposuretoU.S.dollarfluctuations.Foreign
exchangegainsandlossesonthedesignateddebtarerecognizedinthecurrencytranslationreserveinaccumulatedother
comprehensiveincome(Note13).
InterestRateRisk-CashFlowHedge
OnMay8,2020,PembinadesignatedfinancialderivativecontractsthatfixtheinterestrateonU.S.$250millionofvariable
ratedebtascashflowhedginginstruments.Thedesignatedcashflowhedgehasbeenassessedashavingnoineffectiveness
asthecriticaltermsarealigned.Unrealizedgains(losses)onderivativesindesignatedcashflowhedgingrelationshipsare
recognizedinthecashflowhedgereserveinaccumulatedothercomprehensiveincome,withrealizedgains(losses)being
reclassifiedtonetfinancecosts(Note13).
55PembinaPipelineCorporationThirdQuarter2020
FairValues
Thefairvaluesoffinancialassetsandliabilities,togetherwiththecarryingamountsshowninthecondensedconsolidated
interimstatementsoffinancialposition,areshowninthetablebelow.Certainnon-derivativefinancialinstrumentsmeasured
atamortizedcostincludingcashandcashequivalents,tradereceivablesandother,financeleasereceivables,advancesto
relatedpartiesandtradepayablesandotherhavebeenexcludedbecausetheyhavecarryingamountsthatapproximatetheir
fairvalueduetothenatureoftheitemortheshorttimetomaturity.TheseinstrumentswouldbeclassifiedinLevel2ofthe
fairvaluehierarchy.Afinancialguaranteeincludedinotherliabilitieshasacarryingamountthatapproximatesfairvalueat
thereportingdateduetothenatureoftheunderlyingdevelopmentprojectandisclassifiedinLevel3ofthefairvalue
hierarchyandhasbeenexcludedfromthetablebelow.
September30,2020 December31,2019
CarryingValue
FairValue(1) CarryingValue
FairValue(1)
($millions) Level1 Level2 Level3 Level1 Level2 Level3
Financialassetscarriedatfairvalue
Derivativefinancialinstruments(3) 75 — 75 — 48 — 48 —
Financialliabilitiescarriedatfairvalue
Derivativefinancialinstruments(3) 22 — 22 — 9 — 9 —
Financialliabilitiescarriedatamortizedcost
Loansandborrowings(2) 10,987 — 11,939 — 10,152 — 10,729 —(1) ThebasisfordeterminingfairvalueisdisclosedinNote2.(2) Carryingvalueofcurrentandnon-currentbalances.(3) AtSeptember30,2020allderivativefinancialinstrumentsarecarriedatfairvaluethroughearnings,exceptfor$1millionininterestratederivativefinancialliabilitiesthat
havebeendesignatedascashflowhedges(December31,2019:nil)
15.COMMITMENTSANDCONTINGENCIES
Commitments
PembinahadthefollowingcontractualobligationsoutstandingatSeptember30,2020:
ContractualObligations PaymentsDuebyPeriod
($millions) Total Lessthan1Year 1–3Years 3–5Years After5Years
Leases(1) 1,084 131 222 175 556
Loansandborrowings(2) 16,466 701 2,621 2,828 10,316
Constructioncommitments(3) 1,396 303 301 298 494
Other(4) 599 111 162 80 246
Totalcontractualobligations 19,545 1,246 3,306 3,381 11,612(1) Includesterminals,rail,officespace,landandvehicleleases.(2) Excludingdeferredfinancingcosts.IncludinginterestpaymentsonPembina'sseniorunsecurednotes.(3) Excludingsignificantprojectsthatareawaitingregulatoryapproval,projectswhichPembinaisnotcommittedtoconstruct,andprojectsthatareexecutedbyequity
accountedinvestees.(4) Includes$28millionincommitmentsrelatedtoleasesthathavenotyetcommenced.
Pembinaentersintoproductpurchaseagreementsandpowerpurchaseagreementstosecuresupplyforfutureoperations.
PurchasepricesofbothNGLandpoweraredependentoncurrentmarketprices.VolumesandpricesforNGLandpower
contractscannotbereasonablydeterminedandthereforeanamounthasnotbeenincludedinthecontractualobligations
schedule.Productpurchaseagreementsrangefromoneto10yearsandinvolvethepurchaseofNGLproductsfrom
producers.Assumingproductisavailable,Pembinahassecuredbetween35and175mbpdofNGLeachyearuptoand
including2029.Powerpurchaseagreementsrangefromoneto25yearsandinvolvethepurchaseofpowerfromelectrical
serviceproviders.Pembinahassecuredupto80megawattsperdayeachyearuptoandincluding2044.
PembinaPipelineCorporationThirdQuarter202056
CommitmentstoEquityAccountedInvestees
PembinaiscontractuallycommittedtoprovideCKPCwithfundingtoconstructassetsthatwillformpartofCKPC'sPDH/PP
Facility,subjecttocertainconditionsbeingmet.FollowingCKPC'sdecisiontodeferinvestmentinthePDH/PPFacility,
PembinahasdeferredfuturecontributionstoCKPC.
PembinahasacontractualcommitmenttoadvanceU.S.$16milliontoRubybyMarch31,2021.
Pembinahascommitmentstoprovidecontributionstocertainequityaccountedinvesteesbasedonannualbudgetsapproved
bythejointventurepartners.
Contingencies
Pembina,itssubsidiariesanditsinvestmentsinequityaccountedinvesteesaresubjecttovariouslegalandregulatoryandtax
proceedings,actionsandauditsarisinginthenormalcourseofbusiness.Werepresentourinterestsvigorouslyinall
proceedingsinwhichweareinvolved.Legalandadministrativeproceedingsinvolvingpossiblelossesareinherentlycomplex,
andweapplysignificantjudgmentinestimatingprobableoutcomes.Whiletheoutcomeofsuchactionsandproceedings
cannotbepredictedwithcertainty,managementbelievesthattheresolutionsofsuchactionsandproceedingswillnothavea
materialimpactonPembina'sfinancialpositionorresultsofoperations.
LettersofCredit
Pembinahasprovidedlettersofcredittovariousthirdpartiesinthenormalcourseofconductingbusiness.Thelettersof
creditincludefinancialguaranteestocounterpartiesforproductpurchasesandsales,transportationservices,utilities,
engineeringandconstructionservices.Thelettersofcredithavenothadandarenotexpectedtohaveamaterialimpacton
Pembina'sfinancialposition,earnings,liquidityorcapitalresources.
AtSeptember30,2020,Pembinahad$96million(December31,2019:$103million)inlettersofcreditissuedtofacilitate
commercialtransactionswiththirdpartiesandtosupportregulatoryrequirements.
57PembinaPipelineCorporationThirdQuarter2020
www.pembina.com
HEAD OFFICEPembina Pipeline Corporation
Suite 4000, 585 – 8th Avenue SW
Calgary, Alberta T2P 1G1
AUDITORSKPMG LLP
Chartered Accountants
Calgary, Alberta
TRUSTEE, REGISTRAR & TRANSFER AGENTComputershare Trust Company of Canada
Suite 600, 530 – 8th Avenue SW
Calgary, Alberta T2P 3S8
1.800.564.6253
STOCK EXCHANGEPembina Pipeline Corporation
Toronto Stock Exchange listing symbols for:COMMON SHARES PPL
PREFERRED SHARES PPL.PR.A, PPL.PR.C, PPL.PR.E, PPL.PR.G, PPL.PR.I, PPL.PR.K,
PPL.PR.M, PPL.PR.O, PPL.PR.Q, PPL.PR.S, PPL.PF.A, PPL.PF.C and PPL.PF.E
New York Stock Exchange listing symbol for:Common shares PBA
INVESTOR INQUIRIESPhone 403.231.3156
Fax 403.237.0254
Toll Free 1.855.880.7404
Email [email protected]
Website www.pembina.com