HomeNewsAltaGas and Royal Vopak take FID on large-scale LPG terminal

AltaGas and Royal Vopak take FID on large-scale LPG terminal

5/30/2024

AltaGas Ltd. and Royal Vopak are pleased to announce a positive final investment decision (FID) on the Ridley Island Energy Export Facility (REEF), a large-scale liquefied petroleum gas (LPG) and bulk liquids terminal with rail, logistics and marine infrastructure on Ridley Island, British Columbia, Canada. Following a five-year environmental preparation and review process, extensive engagement with multiple stakeholders including Indigenous rights holders and local communities, the Joint Venture is set to deliver a world class export facility that will operate with industry-leading environmental stewardship.

KEY HIGHLIGHTS

  • The Joint Venture has completed all major gating items, including front-end engineering design (FEED) and a detailed Class III capital estimate.
  • Site clearing work is more than 95 percent complete and with required permits in hand, the project is expected to come online near 2026 year-end.
  • Projected gross Joint Venture capital cost of $1.35 billion, excluding governmental incentives and support, with annual Partnership EBITDA of $185 million - $215 million are in-line with the Partners' expectations.
  • Onsite work will be minimized to reduce capital cost risk and community impacts, with 90 percent of equipment, packaging and pipes expected to be prefabricated offsite in controlled operating environments.
  • The Joint Venture expects to lock-in more than 60 percent of the Phase 1 capital costs through fixed-price, lump-sum engineering, procurement and fabrication contracts prior to construction.
  • Vopak and AltaGas expect to fund their 50 percent pro-rata ownership through each company's respective financial capacity with no leverage at the Partnership level.
  • REEF will enhance Canada's role as a growing global energy exporter, strengthen Canadian and Asia Pacific energy connectivity and provide Canadian producers and aggregators with access to the premium global markets for LPGs.
  • With only ten shipping days to the fastest growing demand markets in Northeast Asia, REEF has a structural advantage in delivering LPGs to Asia with the shortest shipping time globally.
  • The project has First Nations support agreements in place and will drive further economic benefits to local communities in Northwestern B.C. through construction activities, long-term job creation and community investment focused on delivering positive outcomes for all stakeholders.
  • REEF will be constructed and operate under AltaGas and Vopak's existing exclusive rights granted by the Prince Rupert Port Authority (PRPA) to develop LPG, methanol and other bulk liquids exports on Ridley Island.

"This positive FID enables AltaGas to continue connecting Canadian energy to Asian markets and drive valuable outcomes for all our customers," said Vern Yu, President and CEO of AltaGas. "Canada has a structural advantage in delivering LPGs to Asia with the shortest shipping time and lowest maritime emissions footprint. AltaGas delivers more than 19 percent of Japan's propane and 13 percent of South Korea's LPG imports, connecting our upstream customers with customers in Asia. We look forward to working with our partners to drive more long-term value creation with REEF."

"We are excited to be able to execute on our growth strategy and invest in export infrastructure on this highly strategic location" said Dick Richelle, Chairman of the Executive Board and CEO of Royal Vopak. "Prince Rupert, with the shortest shipping distances between North America and Asia, gives the opportunity to drive progress by increasing the trade between Canada and the Asia Pacific region. We are proud to contribute to this development and are thankful for the good collaboration with our partner AltaGas and other key stakeholders. The trust and support of local First Nations and communities makes this envisioned terminal a reality."

Capital Cost, Economics, Funding and Delivery Schedule

Projected gross capital cost of $1.35 billion, excluding governmental incentives and support, and annual Partnership EBITDA of $185 million - $215 million are in-line with the Joint Venture's expectations. Vopak and AltaGas are expected to fund their pro-rata 50 percent ownership through each organization's respective financial capacity with no leverage at the Partnership level.

The capital cost breakdown of Phase 1 includes approximately $875 million for construction of the facility, balance of the plant and LPG storage tanks and $475 million for construction of the new dedicated jetty and extensive rail and logistics infrastructure. The infrastructure includes additional redundancies to provide operational flexibility that benefits the Joint Venture and customers over the long term.

AltaGas will minimize onsite work to reduce capital cost risk, with approximately 90 percent of equipment, packaging and pipes being prefabricated offsite in controlled operating environments. In addition, AltaGas expects to lock-in more than 60 percent of the Phase 1 estimated capital cost through fixed-price, lump-sum engineering, procurement and construction contracts, prior to the start of construction of individual phases.

The bulk of REEF's construction activities are planned to take place over 2025 and 2026 with select workstreams beginning in 2024. This includes plans for the Partners to incur approximately $200 million of incremental gross capital expenditures in 2024. As part of the positive FID, AltaGas is increasing its 2024 capital expenditure guidance from $1.2 billion to $1.3 billion. AltaGas maintains a disciplined approach to capital allocation and plans to fund its portion of the project using internally generated cash flows and its annual investment capacity. During construction, AltaGas will leverage the benefit of operating a diversified platform by adjusting capital spending across other parts of the business to ensure the company is balancing its three long-term objectives of financial strength and flexibility, continued organic growth, and long-term dividend growth.

Vopak's disciplined capital allocation policy is driving value through accretive growth investments that will deliver attractive operating cash return. Vopak's growth capex guidance for FY 2024 remains unchanged. The long-term commitment to invest EUR 1 billion to grow in industrial and gas by 2030 and EUR 1 billion to accelerate towards new energies by 2030 remains unchanged. Vopak plans to fund its portion of the project using the strong balance sheet position. The efficient use of the capital structure will further support cash flow generation at Vopak level.

REEF has strong community support following extensive stakeholder engagement

Vopak and AltaGas have been working closely with First Nations rights holders and key stakeholders, including the local communities in Northwestern British Columbia, as well as the PRPA, and Federal and Provincial regulators for more than five years to deliver a project that will operate with industry-leading environmental and community stewardship. AltaGas and Vopak have developed strong relationships with local Indigenous communities through its existing operations, where the partners have worked collaboratively on economic and social development opportunities, including skills training, emergency response preparedness and other community-identified priorities. REEF will drive strong economic benefits to these local communities in the region through construction activities, long-term job creation, and community investment targeted at driving positive economic outcomes across all stakeholders.

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