Q2 2021 Pembina Pipeline Corp Earnings Call
Good day, Thank you for standing by and welcome to the payment of pipeline Corporation 2021 second quarter results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star 1 on your tele.
And please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and went.
And I'd like to hand, the conference over to your speaker today camera and Golda.
Vice President capital markets. Thank you Sir Please go ahead.
Yeah.
Good morning, everyone and welcome to permanent conference call and webcast to review the highlights from the second quarter of 2021 on the call with me today are Mcdole group, President and Chief Executive Officer, Scott Burrows, Senior Vice President and Chief Financial Officer.
Carrie Anderson Senior Vice President and Chief operating Officer pipelines, Jaret, Sprott, Senior Vice President and Chief operating Officer facilities, Stu Taylor Senior Vice President marketing and New ventures, and corporate development Officer, and Janet <unk> Senior Vice President external affairs, and chief legal and sustainability officer.
I'd like to remind you that some of the comments made today may be forward looking and nature and are based on permanent current expectations estimates and judgments and projections and forward looking statements. We may express or imply today are subject to risks and uncertainties, which could cause actual results to differ materially from expectations. Further some of the information provided refers to non-GAAP measures.
To learn more about these forward looking statements and non-GAAP measures. Please see the company's management's discussion and analysis dated August 5.2021 for the period ended June 32021, which is available online at Pembina Dot com and on both SEDAR and Edgar and with that I'll now turn things over to Mick Thanks.
Thanks, Kevin Good morning, everyone.
We're pleased yesterday to announce at the debt based on the year to date results and the outlook for the remainder of the year Pembina has updated its 2021 adjusted EBITDA guidance.
By raising the low end of the range and.
Adjusted EBITDA is now expected to be 3.3 to $3.4 billion effectively positioning us and the upper half of our original guidance range.
Excuse me.
Similar to what we have seen and our year to date results growing confidence and our 2021 outlook reflects stronger than expected full year marketing results net of.
Significant realized hedging losses, and modestly higher volumes across many of our pipeline systems and facility.
Relative to our original guidance range for these positive factors are being partially offset by stronger than expected Canadian dollar relative to the U S. Dollar increased operating costs due to higher integrity spending and.
And higher power costs, and the conventional and Oilsands pipeline businesses.
And lower contributions from certain assets.
In addition, the revised outlook reflects higher general and administrative expense due to Pembina is rising share price and the resulting increase and the long term incentive compensation costs.
While supporting Pembina at 2021 guidance update stronger commodity prices and rising volumes also mean, Pam and as customers are an ever better financial positions genera.
<unk> significant free cash flow and improving their balance sheets with many reaching their leverage targets earlier than expected and sets. The stage. We believe for increased drilling activity and increased capital spending by producers into 2022 with positive implications for permanent business.
A constructive outlook for the WCS b and customer demand for incremental service led to the reactivation of the peace phase 9 pipeline expansion.
Supporting customers long term development plan, while further.
Furthering product segregation on the peace pipeline system further decisions on the piece 8 pipeline expansion and the Prince Rupert terminal expansion and are expected later this year.
And the same outlook also supports our confidence and the development of a portfolio of growth projects totaling more than $5 billion.
This quarter, Pembina announced 3 significant and transformational and strategic partnerships with compelling ESG attributes our partnership with the highest low nation to develop.
Peter LNG project, a partnership with TC Energy Corporation, which envisions development of the Alberta carbon grid.
<unk> pathway is a partnership with the western indigenous pipeline group to pursue ownership for the Trans Mountain pipeline once that project is de risked.
Collectively these partnership support permanent global market access strategy allow for meaningful and David and his participation in the Canadian energy development.
And provide important large scale infrastructure platform to assist Alberta based industries to manage their greenhouse gas emissions and contribute to a lower carbon economy.
We are proud of this work with communities and are rolling creating meaningful solutions.
Finally in recent weeks Pembina announced and ultimately terminated its proposed acquisition of inter pipeline.
The industrial logic of a combined pembina and your pipeline remains unparalleled and the value creation between certain of our assets is impossible to replicate.
And while we are disappointed with this outcome, we will continue to seek opportunities for growth through focused acquisition.
I say that not as a signal for any eminent for specific targets, but as a reminder, that such acquisitions have been part of having a success story over many years and will continue to be.
The execution of permanent long term strategy, it's never reliant on a single investment.
The record continues to show that while acquisitions may be a tool to execute our strategy. We will remain disciplined prioritizing shareholder returns and our financial guardrails, but for now we are enjoying the receipt of a $350 million termination fee.
And we're studying the options available to best invest the termination fee, including business reinvestment debt repayment and share buybacks with that I'll pass it over to Scott to discuss the financial highlights.
Thanks, Mick Pembina reported adjusted EBITDA of $778 million for the second quarter, 1% lower than the same period last year.
Within our core business segments, we saw strong performance from existing assets, along with Prince Rupert terminal and personal infrastructure and Duvernay 3 being placed into service and facilities and higher interruptible volumes on the peace pipeline system, and the marketing business and benefited from higher margins on NGL and crude oil sales and the positive.
The impact of higher marketed NGL volumes. However, a portion of this improvement and marketing fundamentals was offset by an increase and the realized loss on commodity related derivatives.
Part of our systematic hedging program compared to a gain and the same quarter last year.
In addition, second quarter marketing results were negatively impacted by approximately $8 million of rail transportation cost to reposition propane to corona for sale and the fourth quarter of 2021 and first quarter of 2022.
Rather than for a sale and the second quarter further a portion of the period over period differences are due to the timing and storage related margins at the majority of 2020 storage margins were earned and the second quarter of 2020 compared to 2021, where storage margins are being realized evenly throughout the year.
Improved overall results and the marketing business were offset by a lower U S. Dollar exchange rate higher power costs, a portion of which were not recoverable and revenue and higher general and administrative expenses due to higher long term incentive costs driven by permanent increasing share price.
And it's worth noting that in 2021, specifically.
Each 1 dollar move in Pembina share price impacts compensation related expense by about $2 million as well comparatively the current quarter was impacted by lower revenue at the Edmonton South rail terminal due to a onetime 11 million dollar leasing adjustment made in the second quarter of last year.
And in that quarter being better than it would have otherwise be.
And contextualize and our second quarter and year to date results as well as our outlook for the full year 2021, adjusted EBITDA. It is worth pausing on the impact of changes and foreign exchange rates.
<unk>, 25% of permanent business is exposed to foreign currency, primarily the U S dollar.
Exposure, primarily resides and our transmission assets and our pipeline division as well as our marketing business, where the primary pricing benchmarks for the purchase and sale of commodity products and the current U S dollars.
As part of Pembina is frac spread hedging program, we hedge the currency exposure embedded in those hedges.
Over the last 12 months, the Canada. The U S. Dollar exchange rate has exhibited significant volatility during the second quarter of 2020 to Canadian dollar average nearly 1.39 U S dollars, rather and the second quarter of 2021 and averaged nearly 123 U S dollars for the balance of 2021 for each 1 and change in the Canadian and U S.
Exchange rate it equates to roughly $6 million of adjusted EBITDA.
With 2 million being attributed to the transmission assets and $4 million attributable to the marketing business for.
And more given the seasonal profile of our marketing does and key sensitivities will vary when applied to quarterly results.
Second quarter earnings of $254 million were 2% lower than the same period and the prior year and in addition to the factors impacting EBITDA earnings were positively impacted by a lower unrealized loss and commodity related derivatives and lower current tax expense as well as various other factors outlined in our second quarter reported.
Total volume at $3.5 million barrels per day for the second quarter represent approximately a 2% increase over the same period and the prior year.
And pipeline higher interruptible volumes on peace and caution pipeline as well as higher seasonal volumes and alliance were offset by lower interruptible volumes on vantage as market conditions exist for end users to source their supply from the red water complex and lower volume on Ruby pipeline due to contract Expiries.
And facilities increased revenue volumes associated with Duvernay Treaty and placed into service and the fourth quarter of 2020 was largely offset by lower supply volumes on the east NGL system.
These assets are now being processed at the Empress NGL extraction facility.
Overall, however, as Mick highlighted we have seen strong year to date results and our outlook for the remainder of the year and into 2022 remains very positive, reflecting a stronger economic backdrop robust energy prices and improved outlook for producer activity levels I'll now turn things over to me for closing comments.
Thanks, Scott and closing what has emerged over the course of and exciting past few months reflects continued progress towards a clear vision for pembina future.
Our ambitions are being realized and we look forward to continuing to build out our diversified and integrated value chain.
<unk> and exceptional customer service offerings, including global market access for their products at.
And at the same time, we remain committed to providing industry, leading total shareholder returns include.
Including a stable and growing dividend and furthering our ESG strategy collectively and service of our employees communities customers and investors with.
We would once again like to thank all of our stakeholders for their support.
And with that we'll wrap things up operator, please open up the line for questions.
As a reminder, if you would like to ask a question that is star followed by the number 1 on your telephone keypad. Once again that is star 1 if you would like to ask a question.
Your first question comes from Ben Tam from BMO.
Alright, Thanks Margaret.
I wanted to ask.
First start off with a brighter carpeting and great. When you have a person out of that project cash referenced the timing of the intra pipeline acquisition yourself that project and your your packaged. This morning, so is that still an opportunity even regardless of that.
And you got moving forward and IPL.
Yes. It is.
Okay.
Okay, So and then.
Can you give any comments on.
And you start effects.
<unk>.
Hedging natural hedges.
Back on Corp.
Yeah.
Okay.
Hello, and Ben can you repeat the question sorry, we had trouble hearing you.
Yes.
Question about the U S dollar FX.
The status of your hedging strategy.
And you think about the sensitivity shifts and that looks like for kidney levels and and.
And how do you think about the next 6 to 12 months.
Yeah.
Yes, and I think as we as we think about the U S. Dollar I mean for some time, we've been talking about diversification of currencies as being core to our strategy and.
And through that.
Looking at our global more global enterprise for and that NAV.
Truly occurring so part of our strategy there has been obviously to hedge the marketing cash flows because.
Across the board and including the commodities as well as some of the foreign exchange on the Frac spread business, noting that that is some of the more variable cash flows and our business.
At the same time, we have been in the past having.
And a reasonably large U S dollar denominated capital spend as well and so we've always been.
Somewhat naturally hedged.
A little bit less so in the last couple of quarters.
Which is which is why we left the currency unhedged, but as we look forward and it's always something that we're thinking about.
As we as we execute our strategy.
Okay, Great and then maybe to close off on an acquisition and curious.
Curious what do you think the.
The biggest sources of acquisition could be for your next couple of years have been more consolidating the Canadian side and the Canadian assets have come up U S exposure.
But now as well for the landscape, there's just not many names like <unk>.
Got it and the U S more or is there still a.
A lot of opportunities do you see in Canada for some tuck ins like what's what's the thought process and that next couple of years.
Listen we were focused on we've talked about advantage, Canada, we believe that I think it's playing out.
Very well for us and the nice thing about Pembina is we're right in the middle of everything so everything we look to acquire we have tremendous synergy with so.
But I think most importantly, you can only buy things that are for sale, so weak and we have and continue to look at everything and and.
See what has the biggest.
And the strategic importance to us, which generally relates to.
Vertically integrating our value chain and pushing to tidewater on all products. So things that help us realize those those 2 goals are our most and scope.
Okay got it thank you.
Your next question is from share Nair Gershon <unk> from UBS.
Let's start off with a discussion about PVH just sort of following.
And the IPL merger debt, given the fact that and still longer proceeding just kind of thinking and just wondering you actually how we should sort of be thinking about your PVH needs with.
With respect to Pembina.
Do you consider potentially pursuing and JV option with book yields.
To build boats.
Are you sort of looking at kind of the amount of volume that you can pool can you essentially can and equity stake and the project through and NBC and just kind of wondering what the strategy and just kind of on a go forward basis, and how youre thinking about.
Truly recognize it and you're probably very early and the process right now.
Yes, and no I mean.
When we when we laid down for <unk>.
Amazon TD, 8% the first time.
It was.
Really because of the pandemic and the lump sum turnkey contracts got away from us, but we never said that project was council. We said it was suspended we said LNG and <unk>.
And value added projects remained and strategy and so if you zoom out from that for us to get products.
For Tidewater somewhat sometimes we need to turn them into something different so we're trying to create demand for our customers products and.
And that might be direct export of propane are turning propane and propylene or propylene into polypropylene and then exporting it or.
So.
It's all got the same route.
And to the extent, we can build fee for surface infrastructure and the petrochemical business.
That's an avenue for us to create great local demand and get get our customers' products too.
For the highest value markets and.
Sometimes that's just the product and its current form sometimes you got to liquefy.
Methane.
Move it so all that remains and scope for us, but it has the same route.
Which is we think that.
Hydrocarbon demand.
Long after North America, stabilizes and we don't know.
And when peak demand is in North America.
But long after that they'll be growing demand internationally, and we need to connect our world leading base and to that demand.
Okay.
The point is is that you'll probably still pursuing that with this option.
Is that kind of the takeaway, yes, yes, we've stated LNG and <unk>.
And.
Value added projects, including.
Production of polypropylene provided they meet our guardrails and they are petrochemical infrastructure.
And not necessarily being in a commodity chemical business, they remain and strategy yes.
Alright, perfect and maybe to just pivot to a quick discussion about you and your guidance that you just laid out.
From our perspective to give us a bit of a challenge.
Yes, you definitely have raised your guidance for this year kind of curious what you're thinking about with respect to your kind of your exit rate for for Q.
As we sort of think about what that means some setup for 2022.
Yes.
Yes.
We we think we're building through the year I think our.
Clearly the raising the lower and is a good thing.
I know some analysts were hoping we would raise the top and but it's still pretty early in the year and I sure don't know what I'm going to read in the newspaper next week and.
And so there's still a lot of moving pieces. We just didn't think debt there was compelling evidence to.
Do more than what we've done, but we're definitely building through the year.
Some of the quarterly results I've read.
I think like <unk>, I think day, but they bump there.
Capital spending for the year, so we're starting to see.
People drill 1 extra pad for example, and 1 pad can be.
100 million, a day of gas and 20000 barrels a day illiquid, so those things matter and.
And <unk>.
People are reaching their debt targets earlier.
And they are buying back their shares and I'm talking about our customers.
But.
And as generalists step into this space and share prices go up.
At some point and Theres, a tipping point, where producers are going to start to drill because that's a better investment than their shares.
And when they were trading at.
Sure.
3 or 4 times cash flow you can't blame them for buying back their shares but you know.
Lots of lots of wells have have 100% rate of return too so.
And that tipping point is we don't think it's necessarily now until debt targets have been reached but we think for a lot of producers that spin off and that's going to change and and.
And kind of waiting for.
For 2022 capital guidance like like a kid waiting for Christmas because.
Think I think it's going to be pretty exciting to see to see what the base and does next.
Okay.
For the key takeaway here is that we should outside of seasonal factors, which are always there we should know on the base business.
Sequential improvements <unk> versus <unk>, <unk> versus <unk> and it sets up for 'twenty 2 with.
Tipping point that you just articulated it comes to fruition is that kind of thinking about it.
Yes, that's how I think about it I mean, you heard the forward looking information waiver a lot can happen and I missed it.
Crazy World, where it and right now, but but yes and listen our second quarter is usually our weakest quarter last year was kind of anomalous because we made all of our storage revenue and 1 month versus kind of ratably through the year. So.
We feel really good about the way the year is going to kind of finish we're seeing some some nice signs like alliances back and the money.
The basis differential we haven't seen that the dollar.
Canadian dollar.
Dropped a little bit I think from the end of the second.
And second quarter oil prices are stabilizing around 70 U S.
So.
There are some positive things going on net.
Ah.
Had us raise the low end of our guidance.
Like I said it was just a little early I think with given what we're reporting now to to go beyond that I think are are raising the low end of our guidance was prudent.
Perfect. Thank you very much really appreciate the color today and have a great weekend.
You as well.
Your next question is from Robert Kwan from RBC capital markets.
And good morning.
And just come back to how you're approaching or how you approach acquisitions.
And you had IPL and other corporate deals you have and it's kind of.
Air lease team left I know there is some correction, but pretty.
That's where the equity gets placed.
And think about doing discrete asset deal.
And let's say the seller doesn't want to take equity how much does the financing size factor.
And to the magnitude of what you pursue.
Just from that deal size perspective.
I'll just give you my layman's perspective, and then I'll turn it over to Tom and Scott, who have a much deeper knowledge, but.
And if you look at the Kinder I'll give you a real life example.
The bid ask spread with Kinder after it was close to a year of negotiating was really.
Concord by.
The seller, taking our equity.
I think 100 million box give or take at that point and and.
And that was the bid ask spreads. So so those are important dollars to retain between the buyer and the seller.
And if you look back at all of our large acquisitions, they've been funded with permanent equity.
And if you look back.
Things went well for the people who took our equity they they.
Generally.
<unk> got.
<unk> got 100 cents on the dollar or maybe add.
Point of leakage, but often they actually.
Held a little while and and.
Money you know.
And some of the happiest shareholder.
And have the privilege of meeting our came in at Provident and and.
And they've really really rung the bell and they are really low <unk> and.
I would hazard to say, if we had closed enter pipe a bunch of those shareholders would have been very happy as well as the synergies unfolded.
So it's an important part of.
And of value sharing between buyers and sellers cash.
Scott do you have in total.
And then maybe I'll just jump in here.
And obviously Robert to the extent that we do anything and the public market, there's pretty significant friction costs that come along with that so are our preference has always been to work directly with sellers and use our shares directly but backing up a step and I think answering the question more directly as it relates to kind of discrete assets.
I think from our perspective.
With access to the equity markets the debt markets hybrids crafts.
And I can say is that we havent run across the transaction and that's been inhibited by our ability to access capital.
Feel pretty comfortable and and not just our own opinion, but advice of our third party advisers and our ability to raise pretty significant capital now that being said I think what has evolved over the last couple of years as our thinking around capital recycling.
To the extent debt.
We are limited by capital markets, where it makes sense, we have options as it relates to capital recycling and also over the last couple of years, we've developed some pretty significant.
Relationships and could look at various partnerships or JV opportunities and as well to help bridge financing. So all of that to be said is it's certainly something that and we think a lot about but to date haven't run into any major roadblocks as it relates to that.
Got it.
Just as part of the guidance you had a quote.
Temporary and.
What you did just with lower contribution and are expected lower contribution from certain assets.
Just wondering which ones are you referring to specifically and maybe as part of that can you just give some comments on the <unk> situation.
And once that's done Scott Scott you want to take that.
Sure I think as we as we looked at Q2 specifically.
We had slightly lower contributions.
And it relates to Ruby.
Alliance volumes were okay, I think the interruptible pools and what.
And were slightly lower.
Kinder tanks had slightly lower revenue this quarter and as we stated previously.
There was some lower interruptible volumes on vantage, so I wouldn't say Robert it was any kind of 1 specific asset it was kind of a small amount across a couple of different assets.
Got it and if I can just finish for the question here on hedging I think for 'twenty 2 hedges based on your disclosure, we're all out of either in Q2 or subsequent to the quarter. If you had additional activity can you just frame.
And especially you can what what that pricing looks like for 'twenty 2.
And I don't know if you can just do it again and elimination of the realized losses that you've had on the hedge book today.
Scott and maybe I can I can.
Sorry go ahead and correct Tim.
Go ahead.
I was just going to say I think.
Your point is accurate in terms of when those hedges have been added and.
You can look across the frac spreads for Q2.
Relative to Q1 and recognize that they are they've been fairly consistent on a ratable basis and I think thats.
A good proxy for.
For for where the numbers are.
And then just.
Looking forward to the realized losses.
I think a bit about about your answer but.
To put into context.
The losses from this year have been realized obviously for hedges that were put on sort of throughout.
Throughout the balance of 2020.
True till really the end of October of 2020 on a relatively ratable basis.
And if you look back those those levels are sort of.
<unk>.
<unk> of where we are today.
And so I think that gives you a bit of a framework of how the losses.
Mike calibrate to what we're seeing currently and looking forward to 2022.
Okay, that's great thanks very much.
Your next question is from Robert <unk> from CIBC capital markets.
Hey, good morning, most of those are going to be follow ups, but I wondered if you could provide a little bit more.
Color on the bus too so the break fee on 1 hand, you have a lot of.
Projects, you can do internally.
Some of the major projects.
Long development cycles and so.
And what point does it make more sense to.
And just buy back the stock quickly, we're suggesting and.
1 of the projects split and you can always find out later.
Wondering if you could provide more color on.
Really the best use for Brexit and the index.
6 months.
Robert It's the same debate, we always have internally the finance guys want to pay off debt and I want to invest it and future projects and.
Yeah.
Others want to support the stock because we think it's the yield is very high and.
It's a little underappreciated, so that debate is alive and well and I think.
We were sitting down.
Our management team and and really assessing.
<unk>.
The.
How and when our business growth it would be ashamed to buy back stock and then pay a big Commission kind of further debt to Robert Kwan.
Comment pay a big commission to raise new money and you'd look a little foolish then on the other hand, it's kind of.
A windfall and and we weren't counting on that money.
And 90 days ago, and and here it is and so.
And I'll have some fun with it so but we don't know honestly.
And every uses is a good use debt.
Among the 3 choices.
Yes.
Our answer.
A little bit more of a detailed question here, but just on the Alberta crude terminal capacity.
Cannot be repurposed or.
For example for bio fuels or anything else or what's the plan there.
Yeah, Great question and that can be repurposed from but I think as we've talked about it and under long term contract with our partner there. So obviously that would be subject.
Appreciated arrangement with our partner.
Yes, I mean, its way under us Robert I mean, you're spot on.
It's a shame the rate of Underutilization of that asset. So that's on our on our to do list.
Okay, Great and just last for.
And I'll caution there given that change and basis differential have you seen much.
Improvement in activity on the alliance.
Not for volumes, but the re contracting efforts.
Yes, we're seeing really positive signs and even before.
Probably more of the shorter term improvement and the basis.
Jim and uptick and interest so feeling directionally it will be positive for broader Robert yes, it's kind of hitting like.
It's always hard when when you got a little pinch, but if you look back over a long period of time that pipes and the money part.
<unk> early when you consider the valuable cargo of Ngls and that carries.
That's a that's a great pipe it's unique and.
And things tend to revert to the mean there.
So.
We will.
Yeah.
It is nice to see it come back and the money I'm not going to lie, but it's doing what we expected on a more macro basis, we feel really strong and from the structural advantages.
Roy and Charles 10 Bcf.
LNG facility still being constructed and commissioning and I think our longer term perspective.
And we're seeing from a market and stuff for the U S was going to be on a net basis with LNG exports short so we feel like alliances and a longer term basis already positive structural position.
Okay. Thanks, guys.
Great weekend.
Cheers.
Your next question is from Patrick Kenny from National Bank financial.
Hey, good morning, everybody.
Maybe just to start with some of the higher maintenance and integrity costs.
And the quarter just curious if there were any unforeseen geotechnical issues.
For any acceleration of activities that that might actually reduce and.
Integrity expense going forward.
On the geotechnical perspective, Patrick There've been no surprises.
And then given the relatively dry spring season, we have it's been good from that perspective.
The integrity work was really a rollover of some deferred work from last year, but we were working through and our integrity group to get our arms around on when the spend needs to happen.
And then and then on the operating cost side, it's all driven by Alberta power costs for Brexit.
Okay, great and maybe on that front. So Scott thanks for the FX sensitivities, but just on the power cost exposure. It looks like about 2 thirds of your power costs are flow through from reading that correctly.
Maybe just some color on how far you're able to go out and hedge the remaining 1 third.
And how you might be thinking about mitigating your longer term exposure, perhaps refresh on other opportunities across the portfolio that'd be great.
Good morning, Pat Jaret here.
With respect to the co Gen. So yes.
You are fairly accurate and the 2 thirds.
That is recoverable and the.
And thats going in at Empress.
That is a.
And our marketing asset so once that and service queue for 2022 that will mitigate a significant chunk of power there and exposure to those costs.
We're also well and we have 2 other sites that we're actively pursuing the engineering and doing our front and feed.
And our gas processing business with co gens.
And which will mitigate another pretty big chunk of power and then I'll, let Steve talk about.
And the recent PPA that we that we signed go forward that will help mitigate those costs and the future Hey, Patrick So.
Yes, we're really pleased with.
Working with Transalta on our first PPA contract 100 megawatts of power we.
And obviously really like the pricing and at the same time, the the credits and the benefits that will come with that.
And that.
That power is being built we are on some some short term benefits from some additional power that are coming in and we will grow from 50 megawatts to 100 megawatts over the next 2 years. So we're excited about the first 100 megawatts, we are active and conversation for additional PPA contracts. We believe it is.
Beneficial to lock those in and we're seeing some positives on the pricing side.
Particularly when it relates to the recent uptick and the power pricing that we've seen so we're very active on the larger scale power PPA contracts, we're looking at smaller opportunities as well as we look at some of our assets and <unk>.
<unk> mentioned some of the co gens, but theres theres additional opportunities to pursue what we believe and some some cheaper power pricing for permanent assets for the for both the benefit of permanent itself and our customers.
Excellent that's great color guys last 1 for me just on the Cedar LNG I'm, just curious how the coastal gas link cost overrun might jeopardize the economics.
And your chances of reaching a positive for idea on the project I know you still have until 2023 to make the call but.
Given it's a very fluid situation right now and any color on how sensitive the $3 billion of capital cost and overall returns might be to the pipeline project itself that'd be great.
As we went in.
Obviously.
We were aware of the challenges the coastal gas link was experiencing we'd factored in that into the economics, we still believe.
And the Cedar LNG project.
<unk> of our floating LNG project, our ability to to.
Have that built and a I'll call it <unk> and lump sum environment overseas to bring that here the uniqueness of the size and the great work done by the highs law and securing that capacity we've taken into account Patrick the some cost increase there. We are we are working closely with obviously LNG cash.
Canada.
As the major contractor on the coastal gasoline pipeline.
Working.
And there'll be many conversations with coastal gasoline for themselves but.
But we've taken that into account and the economics and still believe Cedar is economically advantage from a cost structure perspective of delivering LNG into the Asian markets on a go forward basis. So as.
As you said, we've got lots of work to do as we work through the feed engineering there'll be many conversations over the next little while.
I believe those will be intense and accelerated as theres a lot of money on the ground already from for many many people and so we're anxiously watching but we do enjoy the benefit of the great work that the hydro data and security and the capacity and the commercial arrangements on coastal gasoline.
Okay, great. Thanks for that too and enjoy the rest of the summer guys.
Thanks, Matt.
There are no further questions in queue I would now like to turn the conference back to Mr. Mick Dilger from closing comments.
Well.
And thanks, everybody for your support through the <unk>.
<unk> call it the IPL saga, thanks to all my.
My colleagues here for for the Great work and it wasn't what we hope for as I mentioned, but was still a good outcome for us.
And I think it was kind of a window into the future for Amazon and all the things, we can do and and.
We will be focused on over the years to come so.
Have a great summer, everybody and hope to see and person sometime soon but.
This does conclude today's conference call. Thank you for your participation you may now disconnect.
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