Pembina Pipeline Corporation Provides Notice of Series 17 Preferred Share Conversion Right and Announces Reset Dividend Rates

Rhea-AI Summary

Pembina Pipeline Corporation (PBA) announced its decision not to redeem the outstanding Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 17, giving holders the option to convert into Series 18 Shares. The dividend rates for both series were disclosed, with a conversion deadline set for March 18, 2024.

Insights

Financial Analyst

The decision by Pembina Pipeline Corporation not to redeem its Series 17 Shares impacts the company's capital structure and investor decisions. The fixed cumulative preferential cash dividends for Series 17 Shares, set at 6.605% for the next five-year period, reflects a premium over the five-year Government of Canada bond yield, which is currently at 3.595%. This spread of 3.01% is indicative of the risk premium investors demand for holding Pembina's preferred shares over risk-free government securities.

For investors, the option to convert to Series 18 Shares with a floating dividend rate pegged to 90-day Government of Canada treasury bills plus 3.01% offers a hedge against rising interest rates. However, the floating rate also introduces variability in returns, which could be a concern for income-focused investors. The conversion feature and the conditions set for automatic conversion based on the number of shares remaining post-conversion are crucial for investors to monitor as they can influence liquidity and market pricing of these securities.

Market Research Analyst

Pembina's decision is reflective of broader market trends where corporations are looking to maintain flexibility in their capital allocation strategies. The choice to keep the Series 17 Shares outstanding rather than redeeming them may suggest that Pembina is conserving cash or that it finds the cost of redemption at this time not financially advantageous. This could be due to the current interest rate environment or the company's assessment of future capital needs.

Investors and analysts should consider the potential impact on Pembina's financial health, as the fixed and floating dividend rates imply a commitment to regular payouts, which could affect the company's cash flow. The conversion rights also introduce a potential change in the shareholder base, which could affect the demand and trading volume of Pembina's preferred shares. Understanding the preferences of Pembina's investors towards fixed versus floating dividends could provide insights into future market behavior of these securities.

Legal Expert

The legal framework governing the conversion rights and dividend payments for Pembina's Series 17 and Series 18 Shares is an essential aspect for investors to understand. The conditions set forth in the articles of amalgamation and the terms of the shares themselves dictate the circumstances under which conversions and dividend payments will occur. For instance, the automatic conversion clause based on the number of shares outstanding is a legally binding mechanism that could significantly alter an investor's position.

Investors should be aware of the conversion period and the strict deadline for expressing their conversion rights, as failing to adhere to these timelines can result in the forfeiture of the option to convert. Additionally, the legal stipulations regarding the payment date adjustment due to March 31, 2024, not being a business day, highlights the importance of understanding the nuances of share terms and their implications for cash flow timing.

CALGARY, Alberta--(BUSINESS WIRE)-- Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) announced today that it does not intend to exercise its right to redeem the currently outstanding Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 17 ("Series 17 Shares") (TSX: PPL.PR.Q) on March 31, 2024.

As a result of the decision not to redeem the Series 17 Shares, and subject to certain terms of the Series 17 Shares, the holders of the Series 17 Shares will have the right to elect to convert all or part of their Series 17 Shares on a one-for-one basis into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 18 of Pembina ("Series 18 Shares") on March 31, 2024 (the "Conversion Date"). Holders who do not exercise their right to convert their Series 17 Shares into Series 18 Shares will retain their Series 17 Shares.

As provided in the terms of the Series 17 Shares: (i) if Pembina determines that there would remain outstanding immediately following the conversion less than 1,000,000 Series 17 Shares, then all remaining Series 17 Shares will be automatically converted into Series 18 Shares on a one-for-one basis effective as of the Conversion Date; or (ii) if Pembina determines that there would be less than 1,000,000 Series 18 Shares outstanding immediately following the conversion, no Series 17 Shares will be converted into Series 18 Shares on the Conversion Date. There are currently 6,000,000 Series 17 Shares outstanding.

With respect to any Series 17 Shares that remain outstanding after the Conversion Date, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate for the Series 17 Shares for the five-year period from and including March 31, 2024, to, but excluding, March 31, 2029, will be 6.605 percent, being equal to the five-year Government of Canada bond yield of 3.595 percent determined as of today plus 3.01 percent, in accordance with the terms of the Series 17 Shares.

With respect to any Series 18 Shares that may be issued on the Conversion Date, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate applicable to the Series 18 Shares for the three-month floating rate period from and including March 31, 2024, to, but excluding, June 30, 2024, will be 7.991 percent, being equal to the annual rate of interest for the most recent auction of 90-day Government of Canada treasury bills of 4.981 percent plus 3.01 percent, in accordance with the terms of the Series 18 Shares (the "Floating Quarterly Dividend Rate"). The Floating Quarterly Dividend Rate will be reset on the last day of March, June, September and December in each year.

Beneficial holders of Series 17 Shares who wish to exercise their right of conversion during the conversion period, which runs from March 1, 2024, until 3:00 pm (MT) / 5:00 pm (ET) on March 18, 2024, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with the time to complete the necessary steps. Any notices received after this deadline will not be valid.

As previously announced, the dividend payable on March 31, 2024, to holders of the Series 17 Shares of record on March 15, 2024, will be $0.301313 per Series 17 Share. Pursuant to the terms of the Series 17 Shares, as March 31, 2024 is not a business day, payment will occur on April 1, 2024. For more information on the terms of the Series 17 Shares and the Series 18 Shares, please see the articles of amalgamation dated October 2, 2017, which can be found on SEDAR+ at www.sedarplus.ca.

About Pembina

Pembina Pipeline Corporation is a leading energy transportation and midstream service provider that has served North America's energy industry for 70 years. Pembina owns an integrated network of hydrocarbon liquids and natural gas pipelines, gas gathering and processing facilities, oil and natural gas liquids infrastructure and logistics services, and an export terminals business. Through our integrated value chain, we seek to provide safe and reliable energy solutions that connect producers and consumers across the world, support a more sustainable future and benefit our customers, investors, employees and communities. For more information, please visit www.pembina.com.

Purpose of Pembina: We deliver extraordinary energy solutions so the world can thrive.

Pembina is structured into three Divisions: Pipelines Division, Facilities Division and Marketing & New Ventures Division.

Pembina's common shares trade on the Toronto and New York stock exchanges under PPL and PBA, respectively. For more information, visit www.pembina.com.

Forward-Looking Information and Statements

This news release contains certain forward-looking information and statements (collectively, "forward-looking statements"), including forward-looking statements within the meaning of the "safe harbor" provisions of applicable securities legislation, that are based on Pembina's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In some cases, forward-looking statements can be identified by terminology such as "continue", "anticipate", "schedule", "will", "expects", "estimate", "potential", "planned", "future", "outlook", "strategy", "protect", "trend", "commit", "maintain", "focus", "ongoing", "believe" and similar expressions suggesting future events or future performance.

In particular, this news release contains forward-looking statements relating to, without limitation, the conversion rights, future dividend rates and payment terms for the Series 17 Shares and the Series 18 Shares. The forward-looking statements are based on certain assumptions that Pembina has made in respect thereof as at the date of this news release regarding, among other things: the success of Pembina's operations and growth projects; prevailing commodity prices, margins, volumes and exchange rates; that Pembina's future results of operations will be consistent with past performance and management expectations in relation thereto; the availability of capital to fund future capital requirements relating to existing assets and projects; future operating costs; that all required regulatory and environmental approvals can be obtained on the necessary terms in a timely manner; prevailing regulatory, tax and environmental laws and regulations; maintenance of operating margins; and the availability of coverage under Pembina’s insurance policies (including in respect of Pembina’s business interruption insurance policy).

Although Pembina believes the expectations and material factors and assumptions reflected in these forward-looking statements are reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. These forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks and uncertainties including, but not limited to: the regulatory environment and decisions; Indigenous and landowner consultation requirements; the impact of competitive entities and pricing; reliance on third parties to successfully operate and maintain certain assets; the strength and operations of the oil and natural gas production industry and related commodity prices; non-performance or default by counterparties to agreements which Pembina or one or more of its affiliates has entered into in respect of its business; actions by governmental or regulatory authorities; the ability of Pembina to acquire or develop the necessary infrastructure in respect of future development projects; fluctuations in operating results; adverse general economic and market conditions in Canada, North America and worldwide; risks relating to inflation; the ability to access various sources of debt and equity capital; changes in credit ratings; counterparty credit risk; and certain other risks and uncertainties detailed in Pembina's management's discussion and analysis and annual information form, each for the year ended December 31, 2023, and from time to time in Pembina's public disclosure documents available at www.sedarplus.ca, www.sec.gov and through Pembina's website at www.pembina.com.

This list of risk factors should not be construed as exhaustive. Readers are cautioned that events or circumstances could cause actual results to differ materially from those predicted, forecasted or projected. The forward-looking statements contained in this news release speak only as of the date hereof. Pembina does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240301006874/en/

For further information:

Investor Relations

(403) 231-3156

1-855-880-7404

e-mail: investor-relations@pembina.com

www.pembina.com

Source: Pembina Pipeline Corporation

FAQ

What is the ticker symbol for Pembina Pipeline Corporation?

The ticker symbol for Pembina Pipeline Corporation is PBA.

What type of shares are holders allowed to convert Series 17 Shares into?

Holders of Series 17 Shares can convert them into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 18.

What is the annual dividend rate for Series 17 Shares from March 31, 2024, to March 31, 2029?

The annual dividend rate for Series 17 Shares for the period is 6.605 percent.

When is the deadline for holders to exercise their right of conversion for Series 17 Shares?

The deadline for holders to convert Series 17 Shares is March 18, 2024, until 3:00 pm (MT) / 5:00 pm (ET).

When will the dividend payable on March 31, 2024, to Series 17 Shareholders be paid?

The dividend payable on March 31, 2024, will be paid on April 1, 2024, as March 31, 2024, is not a business day.