AltaGas and Vopak reach positive final investment decision on
Ridley Island Energy Export Facility
AltaGas and Vopak reach positive final investment
decision on Ridley Island Energy Export Facility
World class export facility will strengthen Canada’s
position as a growing global energy exporter
Calgary and Prince Rupert, Canada; Rotterdam, The
Netherlands
29 May 2023 – 6:30pm Mountain Standard Time / 30 May 2023 – 3:30
Central European Time. All figures contained in the press
release are in Canadian dollars unless otherwise stated.
AltaGas Ltd. (“AltaGas”) (TSX:
ALA) and Royal Vopak (“Vopak”) (XAMS:
VPK) (together the “Joint Venture”, “Partners” or
“Partnership”) 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.
Vopak Conference Call
Vopak will host an analysts’ presentation with
Vopak’s CFO, Michiel Gilsing via an on-demand audio webcast on
Vopak’s corporate website, details as follows:
- Date: 30 May 2024
- Time: 08:30 CEST
- Webcast
Link: https://channel.royalcast.com/vopakinvestors/#!/vopakinvestors/20240530_1
APPENDIX:
Project Overview
REEF will be developed on a 190-acre (77
hectare) site adjacent to AltaGas and Vopak’s existing Ridley
Island Propane Export Terminal (RIPET), on lands administered by
the Port of Prince Rupert (PRPA) for which the Joint Venture has
executed a long-term lease. REEF has been granted the key Federal
and Provincial permits to construct storage tanks, a new dedicated
jetty, rail and other infrastructure required to operate a
state-of-the-art facility.
The project will have the capability to
facilitate the export of LPGs, methanol and other bulk liquids that
are vital for everyday life. The project will be developed and
brought online in phases. This approach will provide the most
capital efficient buildout of the project, match energy export
supply with throughput capacity, mitigate impacts on local
communities and provide local construction and employment
opportunities that will extend over longer time horizons.
Phase 1 will include approximately 55,000
barrels a day of initial LPG export capacity, including propane and
butane, 600,000 barrels of LPG storage (95 thousand cbm
equivalent), a new dedicated multi-product jetty, and extensive
rail and logistics infrastructure. The infrastructure will include
10 dual sided rail offloading slots and 25 kilometers of
multi-track infrastructure that is unit-train capable and will
provide flexibility to overcome congestion and outages. More than
80 percent of Phase 1 capital investments will be able to be
leveraged in future REEF phases, providing capital efficient
buildout of subsequent expansions. The REEF project design has
multiple additional advantages compared to other recent large
energy infrastructure projects in Canada, including being a single
site and operating jurisdiction, having all major regulatory
approvals in place, utilizing proven technologies and being aligned
with the Partners’ core competencies.
As disclosed in the first quarter of 2024,
AltaGas has made considerable contracting progress across its
global exports’ platform, including tolling levels increasing to 56
percent starting in the second quarter of 2024. AltaGas is in
active negotiations with several long-term counterparties, which
would move the company to its long-term tolling target of 60
percent of total export volumes, for the beginning of the 2027
natural gas liquids (NGL) year, starting on April 1.
REEF will be constructed under the Joint Venture’s
exclusive rights for LPG exports on Ridley Island
REEF will be constructed and operate under
AltaGas and Vopak’s existing exclusive rights granted by the PRPA
to develop LPG, methanol and other bulk liquids exports on Ridley
Island. The provision of these exclusive rights was important to
ensure the certainty needed to advance large capital projects
through long and fulsome development periods and ensure developers
advance projects with comprehensive environmental and community
stewardship.
REEF will have optionality for alternative
fuels
In subsequent phases, the Joint Venture will
have the option to progress evaluation work on fuels of the future,
such as hydrogen, which has growing customer interest in Asia,
particularly Japan and South Korea. The Joint Venture has strong
core competencies in this area with Vopak offering one of the
preeminent third-party hydrogen storage platforms globally, with
multiple terminals in operation across several countries. Through
this deep experience, the Partners will consider participation in
hydrogen exports from Canada with evaluation work expected to be
done methodically with a critical emphasis on safety and
stewardship.
REEF benefits from structural west coast advantage to
Asian markets
With only 10 shipping days to the fastest
growing demand markets in Northeast Asia, REEF will be able to
efficiently connect Canada's vital energy products to the
world. This includes having an approximate 60 percent base time
savings over the U.S. Gulf Coast, which requires a minimum 25-day
shipping time to Northeast Asia, and approximately 45 percent
base time savings over the Arabian Gulf, which requires a minimum
18-day shipping time. This geographic advantage expands when there
is significant congestion in the Panama Canal, as has recently
been experienced or when other global shipping pinch points
experience disruptions.
AltaGas and Vopak are pleased to move forward
with REEF. The REEF project advances Canada’s growing role in
connecting Canadian energy, vital to everyday life, to global
markets. We are thankful to all stakeholders for their continued
support and ongoing partnership.
About AltaGas
AltaGas is a leading North American
infrastructure company that connects customers and markets to
affordable and reliable sources of energy. The Company operates a
diversified, lower-risk, high-growth Energy Infrastructure business
that is focused on delivering resilient and durable value for its
stakeholders.
From wellhead to tidewater, AltaGas’ Midstream
business is focused on providing its customers with safe and
reliable service and connectivity that facilitates the best
outcomes for their businesses. This includes global market access
for North American LPGs, which provides North American producers
and aggregators with the best netbacks for LPGs while delivering
diversity of supply and stronger energy security to its downstream
customers in Asia.
Throughout AltaGas’ operations, the company is
playing a vital role within the larger energy ecosystem that keeps
the global economy moving forward and is powering the possible
within our society, and in a safe, reliable, and affordable manner.
For more information, please visit www.altagas.ca.
About Royal Vopak
Royal Vopak helps the world flow forward. At
ports around the world, we provide storage and infrastructure
solutions for vital products that enrich everyday life. These
products include liquids and gases that provide energy for homes
and businesses, chemicals for manufacturing products, and edible
oils for cooking. For all of these, our worldwide network of
terminals supports the global flow of supply and demand. For more
than 400 years, Vopak has been at the forefront of fundamental
transformations. With a focus on safety, reliability, and
efficiency, we create new connections and opportunities that drive
progress. Now more than ever, our talented people are applying this
mindset to support the energy transition. Together with our
partners and customers, we are accelerating the development of
infrastructure solutions for hydrogen, ammonia, CO₂, long-duration
energy storage, and low-carbon fuels & feedstocks – paving the
way to a more sustainable future. Vopak is listed on the Euronext
Amsterdam and is headquartered in Rotterdam, the Netherlands. For
more information, please visit www.vopak.com.
For more information please contact:
AltaGas:
- Analysts and Investors: Jon
Morrison, Senior Vice President, Corporate Development and
Investor Relations (Jon.Morrison@altagas.ca) or Aaron
Swanson, Vice President, Investor Relations
(Aaron.Swanson@altagas.ca)
- Media Inquiries: Bryn
Lukowiak, Senior Communications Advisor
(media.relations@altagas.ca).
Vopak:
- Analysts and Investors: Fatjona
Topciu - Head of Investor Relations
(investor.relations@vopak.com)
- Press: Liesbeth Lans -
Manager External Communication
(global.communication@vopak.com)
- REEF illustration 1
- REEF illustration 2
- REEF illustration 3
- REEF illustration 4
- REEF Press Release May 2024
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