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CALGARY - Pembina Pipeline Corporation (TSX:PPL; NYSE:PBA), a $21.6 billion market cap energy infrastructure company with a strong "GOOD" financial health rating according to InvestingPro, announced on Thursday that Alliance Pipeline Limited Partnership has reached a negotiated settlement with shippers on the Canadian portion of the Alliance Pipeline and filed for regulatory approval. The company, currently trading near its Fair Value based on comprehensive analysis, has maintained consistent dividend payments for 21 consecutive years.
The 10-year settlement, effective November 1, 2025, through October 31, 2035, includes revised term-differentiated tolls that are expected to reduce existing long-term firm tolls by an average of 14 percent on a volume weighted average basis. This adjustment comes as Pembina demonstrates robust financial performance, with revenue growing nearly 30% over the last twelve months to $5.6 billion. For deeper insights into Pembina’s financial metrics and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro.
The agreement, which follows a November 2024 order from the Canada Energy Regulator (CER) to submit a detailed toll application, was supported by a Shipper Committee consisting of over 30 members in a vote on July 23.
Key elements of the settlement include fixed tolls for the 10-year period, a one-time term extension option for existing shippers, and a 50/50 revenue sharing arrangement for biddable transportation service above the long-term firm capacity of 1.325 billion cubic feet per day.
Pembina estimates the settlement will reduce Alliance’s long-term firm service revenue by approximately C$50 million annually over the next decade, with additional impact from the new revenue sharing provision dependent on future commodity prices.
"The negotiated tolls are competitive and will provide toll certainty to Shippers," said Scott Burrows, Pembina’s President and Chief Executive Officer, in a press release statement. "The Settlement is fair and equitable to Alliance and all Shippers."
Alliance will also return approximately C$95 million currently held as an existing liability on its balance sheet.
Separately, Alliance announced it is soliciting non-binding expressions of interest for a new regional short-haul transportation service to Alberta’s Industrial Heartland, with potential capacity of up to 350 million cubic feet per day and an anticipated in-service date in late 2029.
The settlement requires approval from the CER, which Alliance has requested by September 15, 2025.
In other recent news, Pembina Pipeline Corporation has received approval from the Toronto Stock Exchange to initiate a share repurchase program. This program allows Pembina to buy back up to five percent of its outstanding common shares, indicating confidence in the company’s value. The repurchase plan will begin on May 16, 2025, and could potentially increase earnings per share by reducing the number of shares in circulation. Meanwhile, RBC Capital Markets has adjusted its price target for Pembina Pipeline, lowering it to Cdn$62.00 from Cdn$65.00, while maintaining an Outperform rating. RBC Capital’s Maurice Choy highlighted the ongoing Alliance Pipeline settlement discussions as a factor affecting investor sentiment. Despite this, Choy believes that once the settlement is resolved, Pembina’s strong cash flow and undervaluation will become more evident to investors. These developments suggest that Pembina is actively managing its financial strategies and investor perceptions.
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