DBRS Limited (DBRS Morningstar) notes that an affiliate of Brookfield Infrastructure Partners L.P. (BIP) has extended its offer to acquire all outstanding common shares of Inter Pipeline Ltd. (IPL or the Company; rated BBB Under Review with Developing Implications by DBRS Morningstar) to August 20, 2021.

BIP achieved an initial tender of 52% under its purchase offer. Given the small percentage of common shares required to achieve the statutory minimum tender condition of 55%, IPL's ratings remain Under Review with Developing Implications.

DBRS Morningstar also notes that IPL has provided the following update on the Heartland Petrochemical Complex (HPC): 1) HPC is expected to have a staggered start-up schedule, with the polypropylene (PP) facility expected to commence operations in Q2 2022 and the propane dehydrogenation facility (PDH) facility several months later (previously the PP and PDH facilities were scheduled to commence operations in early 2022); 2) there is an expected increase in the HPC project cost of $100 million; 3) financial guidance for HPC in 2022 has been withdrawn; and 4) there is an additional contract with an investment-grade counterparty resulting in 68% of HPC's overall production capacity being underpinned by take-or-pay (ToP) contracts with primarily investment-grade counterparties and a weighted-average term of approximately nine years.

DBRS Morningstar considers the delay in start-up of the PDH facility to be a credit negative as it postpones the expected improvement in the Company's credit metrics to 2023 from 2022. DBRS Morningstar also expects the Company's overall debt levels to increase by approximately $1.0 billion (previously $0.5 billion to $0.6 billion) in 2021 primarily as a result of the termination fee paid to Pembina Pipeline Corporation (rated BBB (high) with a Stable Trend by DBRS Morningstar) and the increase in project cost at HPC. While the ToP contracts at HPC provide a clear path to deleverage once HPC is fully operational, IPL's ratings have limited flexibility to withstand further project delays and cost overruns.

DBRS Morningstar will factor in both the delay, and, in the event the purchase offer from BIP is successful, BIP's business and financial strategy for IPL at the time of resolving the Under Review with Developing Implications designation.

Notes:

All figures are in Canadian dollars unless otherwise noted.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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