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The Alberta petrochemical complex at the heart of Brookfield Inter Pipeline bid

February 26/2021

MOSCOW (MRC) -- Inter Pipeline Ltd's ambitious petrochemical plant was meant to unlock new markets, instead it has left the Canadian company battling cost overruns and vulnerable to a hostile USD5.64 billion takeover from Brookfield Infrastructure Partners, said Hydrocarbonprocessing.

Some investors have ruled out a rival bid to Monday's offer for the oil and gas transportation company, and expect Brookfield to snap up Inter just before its newest asset, the Heartland Petrochemical Complex, comes into service.

The CD4 billion Heartland plant near Edmonton, Alberta, is Inter's first petrochemical project and its largest ever capital investment. It is due for completion early next year, several months behind schedule and CD500 million over budget as a result of the COVID-19 pandemic.

Heartland will boost Inter's adjusted annual EBITDA, which are earnings before certain items are taken into account, by CD500 million or roughly 50% from 2020 levels. But the project's cost is weighing on the company's balance sheet and a lack of information on sales contracts has spooked many investors.

The pandemic also stalled Inter's search for a joint venture partner for Heartland, leaving the company exposed to cost and construction risks. That has hurt its shares, some investors say, making it an easy takeover target.

"If Inter could have brought a partner in, that could have protected them from this scenario," said Ryan Bushell, president of Newhaven Asset Management, which owns shares in both companies. "Inter is stuck between a rock and a hard place. They're not going to be able to drum up a better offer and Brookfield knows that. They're buying Heartland basically for free, with a fully running company."

Bushell said he would prefer Heartland to remain an Inter asset so the company can realize the full value of the project.

As per MRC, Inter Pipeline Ltd. announced that its board of directors has authorized the construction of a world-scale integrated propane dehydrogenation (PDH) and polypropylene (PP) plant. The facilities, collectively referred to as the Heartland Petrochemical Complex, are estimated to cost USD3.5 B in aggregate and will be located in Strathcona County, Alberta near Inter Pipelines Redwater Olefinic Fractionator.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry, Exxon Mobil.
Category:General News
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