Q2 2021 Pembina Pipeline Corp Earnings Call
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Good day, Thank you for standing by and welcome to the payment on 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 telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Cameron Golda, Vice President capital markets. Thank you Sir Please go ahead.
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Good morning, everyone and welcome to <unk> Conference call on webcast to review the highlights from the second quarter of 2021 on.
On the call with me today are Mick Dilger, President and Chief Executive Officer, Scott Burrows, Senior Vice President and Chief Financial Officer Karri.
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 in nature and are based on permanent current expectations estimates judgments and projections.
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 on 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 <unk> Dot com and on both SEDAR and Edgar with that.
I'll now turn things over to Mick Thanks.
Thanks, Tom Good morning, everyone.
We're pleased yesterday to announce that based on the year to date results and the outlook for the remainder of the year Pembina has updated its 2021 adjusted EBITDA guidance range.
Raising the low end of the range.
Adjusted EBITDA is now expected to be 3.3 to $3.4 billion.
Effectively positioning us in the upper half of our original guidance range.
Excuse me.
Similar to what we have seen in our year to date results growing confidence in our 2021 outlook reflects stronger than expected full year marketing results net of significant realized hedging losses and modestly higher volumes across many of pent up pipeline systems and facility.
Relative to our original guidance range. 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 higher power costs in the conventional and oil sands 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 in the long term incentive compensation cost.
While supporting <unk> 2021 guidance update stronger commodity prices and rising volumes also mean pembina as customers are an ever better financial positions generates.
<unk> significant free cash flow and improving their balance sheets with many reaching their leverage targets earlier than expected.
At this stage, we believe for increased drilling activity and increased capital spending by producers into 2022 with positive implications for permanent business.
Constructive outlook for the WCS and customer demand for incremental service led to the reactivation of the peace phase 9 pipeline expansion too.
Supporting customers long term development plans while further.
Furthering product segregation on the peace pipeline system further decisions on the Pes 8 pipeline expansion and the Prince Rupert terminal expansion are expected later this year.
The same outlook also supports our confidence in 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 ESP attributes.
Our partnership with the highest live nation to develop.
Peter LNG project, a partnership with TC Energy Corporation, which envisions development of the Alberta carbon grid and.
<unk> pathway is a partnership with the western indigenous pipeline group to pursue ownership of the Trans Mountain pipeline once that project is de risked.
Collectively these partnership support permanent global market access strategy allow for meaningful indigenous 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, where.
We are proud of this work with communities and our role in creating meaningful solutions.
Finally in recent weeks Pembina announced and ultimately terminated its proposed acquisition of inter pipeline.
On the industrial logic of a combined pembina on their pipeline remains unparalleled in the value creation between certain of our assets is impossible to replicate.
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 or 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 is never reliant on a single investment.
On the record continues to show that while acquisitions may be a tool to execute our strategy. We will remain disciplined prioritizing shareholder returns on our financial guardrails, but for now we are enjoying the receipt of $350 million termination fee.
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 infrastructure and Duvernay III being placed into service and facilities and higher interruptible volumes on the peace pipeline system in the marketing business permanent benefited from higher margins on NGL and crude oil sales and the positive.
Impact of higher marketed NGL volumes. However, a portion of this improvement in marketing fundamentals was offset by an increase in the realized loss on commodity related derivatives as part of our systematic hedging program compared to a gain in the same quarter last year in.
In addition, second quarter marketing results were negatively impacted by approximately $8 million of rail transportation cost to reposition propane to Corona for sale in the fourth quarter of 2021 from first quarter of 2022.
Rather than for our sales in the second quarter further a portion of the period over period differences are due to the timing of storage related margins at the majority of 2020 storage margins were earned in the second quarter of 2020 compared to 2021, where storage margins are being realized evenly throughout the year.
Improved overall results in the marketing business were offset by a lower U S. Dollar exchange rate higher power costs, a portion of which were not recoverable in revenue and higher general and administrative expenses due to higher long term incentive costs driven by permanent increasing share price it.
It is worth noting that in 2021, specifically.
Each $1 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 rail terminal due to a onetime 11 million leasing adjustment made in the second quarter of last year that resulted in that quarter being better than it would have otherwise been.
And contextualize in 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 in foreign exchange rates.
Approximately 25% of <unk> business is exposed to foreign currency, primarily the U S. Dollar. This exposure primarily resides in our transmission assets in the pipeline division as well as our marketing business, where the primary pricing benchmarks for the purchase and sale of commodity products will occur in 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, while on the second quarter of 2021 at average nearly 123 U S dollars for the balance of 2021 for each <unk> 10 change in the Canadian U S.
Exchange rate it equates to roughly $6 million of adjusted EBITDA with.
With 2 million being attributed to the transmission assets and $4 million attributable to the marketing business.
Morris given the seasonal profile of our marketing business day sensitivities will vary when applied to quarterly results.
Second quarter earnings of $254 million or 2% lower than the same period in the prior year. In addition to the factors impacting EBITDA earnings were positively impacted by a lower unrealized loss on commodity related derivatives and lower current tax expense as well as various other factors outlined in our second quarter reported.
Total volume of $3.5 million barrels per day for the second quarter represent approximately a 2% increase over the same period in the prior year.
And pipelines higher interruptible volumes on peace and caution pipelines as well as higher seasonal volumes on 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 volumes on Ruby pipeline due to contract Expiries.
And facilities increase in revenue volumes associated with juvenile <unk> placed into service in 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 Nick highlighted we are seeing 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 from producer activity levels I will now turn things over to make some closing comments.
Thanks, Scott and closing what has emerged over the course of an 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.
At the same time, we remain committed to providing industry, leading total shareholder returns.
Including a stable and growing dividend and furthering our ESP strategy collectively in service of our employees communities customers and investors.
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 <unk> from BMO.
Alright, Thanks Margaret.
I wanted to.
First start off with a brighter carpeting and grit personnel thought process referenced with high net worth the inter pipeline acquisition yourself on projects in your package. This morning. So is that that's still an opportunity regardless of.
You are not moving forward on the IPL.
Yes. It is.
Okay.
Okay, So and then.
Can you give any comment on that.
Yes.
Next on our strategy.
Hedging natural hedges and claw back on court.
Hello, Ben can you repeat the question sorry, we had trouble hearing you.
Yes.
Question about the U S dollar FX.
On the status of your hedging strategy.
You think about the sensor champney share some thoughts on consumer.
The level is on.
But the next 6 to 12 months.
Yeah.
Yes, 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 through that.
Looking at on.
A global more global enterprise for profit in that.
Naturally occurring so part of our strategy there has been obviously to hedge the marketing cash flows because.
On across the board, including the commodities.
Well, it's some of the foreign exchange on the Frac spread business, noting that that is some of the more variable cash flows in our business.
At the same time, we have been in the past.
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 I mean, 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 on acquisition.
What do you think the.
The biggest sources of acquisition could be for your next couple of years, even more consolidating the Canadian side, that's on the Canadian asset has come up.
Military.
But now as you look at the line scanners, there's just not many names like <unk>.
Got it in the U S more or is there still a.
A lot of opportunities that we see in Canada for some tuck ins.
Thought process on 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 flow.
But I think most importantly, you can only buy things that are for sale. So we have and continue to look at everything and.
See what has the biggest.
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 most since COVID-19.
Okay got it thank you.
Your next question is from share nearer Gershon <unk> from UBS.
Let's start off with a discussion about PVH just sort of following.
On the IPL merger debt given the fact that it's no longer proceeding just kind of thinking just wondering actually how we should sort of be thinking about your PVH needs.
With respect to Pembina.
Do you consider potentially pursuing a JV option with book yields.
To build those.
Are you sort of looking at kind of the amount of volume that you can true can you potentially get an equity stake in the project.
Non NBC I'm, just kind of wondering what the strategy is kind of on a go forward basis, and how you're thinking about.
Truly recognize that youll, probably very early in the process right now.
Yes, no I mean.
When we when we laid down.
<unk> on PTH, the first time.
It was.
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 on strategy and so if you zoom out from that for us to get products to tidewater somewhat sometimes we need to turn them into something different.
So we're trying to create demand for our customers' products.
And that might be direct export of propane are turning propane into propylene or propylene into polypropylene and then exploring it or.
So it's all about the same route.
Extent, we can build fee for surface infrastructure in the petrochemical business.
That's an avenue for us to create great local demand and get our customers' products to to the highest value markets.
<unk>.
Sometimes the product in its current form sometimes you got to liquefy.
<unk>.
Move it so all that remains in 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.
When 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 basin to that demand.
Okay.
Point is is that you'll probably still pursuing this option.
Is that kind of the pathway, yes, yes, we've stated LNG and <unk>.
Value added projects, including.
Production of polypropylene provided they meet our guardrails they are petrochemical infrastructure.
And not necessarily being in a commodity chemical business they remain in strategy yes.
Alright, perfect maybe to just pivot to a quick discussion about 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 I'm kind of curious what you're thinking about with respect to your kind of your exit rate per <unk>.
As we sort of think about what that means as we set up from 2022.
Yes.
Yes.
We we think we're building through the year I think our.
Clearly the raising the lower end is a good thing.
I know some analysts were hoping we would raise the top end, 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 so theres still a lot of moving pieces. We just didn't think that 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 C. NRL I think they but they bump there.
Capital spending for the year, so we're starting to see.
People drill 1 extra pad for example on 1 pad can be 100.
100 million, a day of gas and 20000 barrels a day illiquid, so those things matter.
And <unk>.
People are reaching their debt targets earlier.
And they are buying back their shares I'm talking about our customers.
But.
As is the general step into this space and share prices go up.
At some point.
As a tipping point, where producers are going to start to drill because that's a better investment than their shares.
When they're trading at.
Sure.
3 or 4 times cash flow you can't blame them for buying back your shares but.
Lots of lots of wells have have a 100% rate of return too so.
When 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 on that's going to change and.
On a waiting for.
For 2022 capital guidance like like a kid waiting for Christmas because.
Thank you.
It's going to be pretty exciting to see to see what the basin doesn't AXT.
Okay.
On the key takeaway here is that we ship outside of seasonal factors, which are always there we should know on the base business sales.
Sequential improvements <unk> versus <unk>, <unk> versus <unk> and it sets up per 2000 tier with.
Tipping point that you just articulated comes to fruition.
Third with bolt on it.
Yes, that's how I think about it I mean, you heard the forward looking information waiver a lot can happen in this crazy world. We're in right now, but but yes analyst in our second quarter is usually our weakest quarter last year was kind of anomalous because we made all of our storage revenue on 1 month versus kind of ratably through the year.
So.
We feel pretty good about the way the year is going to kind of finish we're seeing some some nice signs like.
<unk> is back in the money.
The basis differential we haven't seen on the dollar.
Canadian dollar.
We dropped a little bit from the end of the second.
Second quarter oil prices are stabilizing around 70 U S.
So.
There are some positive things going on net.
Had us raise the low end of our guidance.
But like I said it was <unk>.
It's a little early I think with.
Given what we're reporting now to to go beyond that I think.
We 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.
Hey, good morning.
To come back to how you are approaching or how you approach acquisition.
And you had IPL and other corporate deals you have kind of clear.
Clearly seem less I know there is some correction.
Cmos, where the equity is quite.
You think about doing discrete asset deal, where let's say the seller doesn't want to take equity how much does the financing side.
Doctor into 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.
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.
Bye.
The seller, taking our equity that was I think 100 million box give or take at that point in 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.
<unk> went well for the people who took our equity they <unk>.
Generally.
<unk>.
<unk> got 100 cents on the dollar or maybe at a point of leakage, but often they actually held a little while on and made money.
Some of the happiest shareholders.
Have the privilege of meeting our came in at Provident.
And they've really really rung the bell and they have really low ACB.
I would hazard to say, if we had closed enterprise a bunch of those shareholders would have been very happy as well as the synergies unfolded.
It is an important part of.
Of.
Value sharing between buyers and sellers.
Camera Scott do you have in total.
Maybe I'll just jump in here.
Obviously, Robert to the extent that we do anything in 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 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.
What I can say is that we haven't run on cost of transaction, that's been inhibited by our ability to access capital, we feel pretty comfortable and not just our own opinion, but advice of our third party advisors on 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.
So to the extent debt.
We are limited by capital markets or 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 <unk>.
<unk> chips and could look at various partnerships or JV opportunities as well to help bridge financing. So all of that can be said is it's certainly something that we think a lot about but to date haven't run into any major roadblocks as it relates to that.
Got it.
As part of the guidance you had a quote.
Temporary.
What you did just with lower contribution or 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 revenue situation.
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.
As it relates to Ruby.
Alliance volumes were okay.
Interruptible tolls.
We are slightly lower.
Our 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 with a question here on hedging I think the 22 hedges based on your disclosure, we're all out of either in Q2, our subsequent.
For the quarter. If you had additional activity can you just frame.
On the best you can what what that pricing looks like for 2002.
I don't know if you can just do it again.
Elimination of the realized losses that you've had on the hedge book today.
Okay.
Scott, maybe I can I can.
Sorry go ahead go ahead Tim.
Go ahead.
I was just going on I think.
Your point is accurate in terms of when those hedges have been added in.
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.
A good proxy 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.
Through till really the end of October of 2020 on on a relatively ratable basis.
And if you look back those those levels are sort of close to half of where we are today. So.
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 past 2 so the break fee on 1.
On hand, you have a lot of.
Projects, you can do internally.
On the major projects.
Long development cycles.
At.
What point does it make more sense to interest.
Buy back to start quickly we're suggesting.
1 of the projects have slipped and you can always find us later.
I was just wondering if you could provide more color on.
Really the best use of a breakthrough in the next 6 months.
Hey, Robert it's the same debate, we always have internally the finance guys want to pay off debt and I want to invest it in future projects.
<unk>.
Others want to.
Port.
On the stock because we think the yield is very high.
A little underappreciated, so that debate is alive and well.
I think we were sitting down.
Our management team and really assessing.
The.
How and when our business growth it would be ashamed to buy back stock and then pay a big Commission kind of further to Robert Kwan.
Comment pay a big commission to raise new money you'd look a little foolish then.
On the other hand, it's kind of.
From a windfall and we weren't counting on that money.
90 days ago and here it is and so.
Have some fun with it so but we don't know honestly.
Every uses is a good use debt.
Among the 3 choices.
Yes.
That's a fair answer.
A bit more of a detailed question here, but just on the Alberta crude terminal capacity.
Cannot be repurposed or.
For example per bio fuels or anything else or what so what's the point on there.
Yeah, Great question that can be repurposed from but I think as we've talked about it it's under long term contract growth with our partner there. So obviously that would be subject.
<unk> 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 under utilization of that asset. So that's on our on our to do list.
Okay, Great and just last.
Cause caution there given the change in basis differential August 18 months.
Improvement in activity on the alliance.
Volume was but the re contracting efforts.
Yes, we're seeing really positive signs from even before.
Probably more of a shorter term improvement on that basis.
Jim and uptick in interest so feeling directionally it would be positive per partner Robert Yes.
Kind of fitting.
It's always hard when when you got a little pinch, but if you look back over a long period of time that pipe and the money part.
<unk> early when you consider the valuable cargo of Ngls it carries.
That's a great pipe it's unique.
And things tend to revert to the mean there.
So.
We will.
Hello.
It is nice to see it come back on the mining I'm not going to lie, but it's doing what we expected on them.
Macro basis, we feel really strong and from the structural advantages that.
I am Charles <unk>.
<unk> on.
LNG facility still being constructed on commissioning and I think our longer term perspective.
<unk> perspective, we're seeing from the market in 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, we're really positive structural position.
Okay. Thanks, guys I agree with you Ken.
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.
In the quarter just curious.
There were any unforeseen geotechnical issues.
Or any acceleration of activities that that might actually reduce integrity expense going forward.
Okay.
On the geotechnical perspective, Patrick there are no surprises.
Even the.
Relatively dry spring season, we have it's been good from our perspective.
On the integrity work was really a rollover of some deferred work from last year, but we were working through with our integrity group to get our heads around on when the spend needs to happen.
And then on the operating cost side, it's all driven by Alberto power cost pool prices.
Okay, great and maybe on that front so Scott.
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, but maybe just some color on how far you're able to go out and hedge the remaining 1 third.
How you might be thinking about mitigating your longer term exposure.
Refresh on other co gen opportunities across the portfolio that'd be great.
Hi, good morning, Pat Jaret here.
With respect to the co Gen. So yes.
You are fairly accurate on the 2 thirds.
That is recoverable.
The cogent on Thats going on at Empress So that that is a <unk>.
Pembina marketing asset so once that's in service Q4, 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 end feed.
And our gas processing business with co gens.
Which will mitigate another.
The big chunk of power and then I'll, let Steve talk about.
The recent PPA that we that we signed to go forward that will help mitigate those costs in the future Okay Patrick.
So yes, we're really pleased working with Transalta on our first PPA contract 100 megawatts of power we.
Obviously really like the pricing and at the same time the the credits on the benefits that will come with that debt.
That.
With that power will is being built we are on some some short term benefit 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 in 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 in 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> mentioned some of the co gens, but there's there's additional opportunities to pursue what we believe is some some cheaper.
Power pricing for permanent assets for the for both the benefit of permanent itself and our customers.
Excellent Thats great color guys last 1 from me just on the Cedar LNG I'm, just curious how the coastal gas link cost overrun might jeopardize the economics I.
I guess your chances of reaching a positive S idea on the project I know you still have until 2023 to make the call but.
Given it is a very fluid situation right now any color on how sensitive the $3 billion capital cost and overall returns might be to the pipeline project itself that'd be great.
Yes, 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 the Cedar LNG project the benefit of a floating LNG project or our ability to to have.
<unk> built in a I'll call it a lump sum environment overseas to bring that here the uniqueness of the size and the.
The great work done by the highs law in securing that capacity, we've taken into account Patrick the some cost increase there. We are we are working closely with our <unk>.
LNG, Canada.
As the major contractor on the coastal gasoline pipeline.
Working.
There'll be many conversations with coastal gasoline themselves but.
But we've taken that into come on 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 on accelerated is 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 did in securing 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. Gilligan from closing comments.
Okay.
Well.
Thanks, everybody for your support through the <unk>.
On call it the IPL saga, thanks to all my.
My colleagues here for the great work that 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 patent on and all the things we can do and.
We will be focused on over the years to come so.
Have a great summer everybody and hope to see in person sometime soon.
Yeah.
This does conclude today's conference call. Thank you for your participation you may now disconnect.
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