AGM 2020

May 12, 2020

Press Release

Afternoon, everyone. My name is Jim Bertram, Chair of Keyera's Board of Directors. Thank you for joining us here today for our 2020 Annual Meeting of Shareholders. As you are aware, due to the serious public health impact of COVID-nineteen pandemic, we're holding this meeting in a virtual only format via live audio webcast. Although we are unable to meet in person, we have endeavored to structure the meeting to enable shareholders to vote on each item of business and submit questions as though you were attending in person. Each year, we look forward to the opportunity to engage directly with you, our shareholders, other stakeholders and employees at our annual meeting. We have every intention of returning to our regular meeting format next year and look forward to seeing and speaking with you directly at that time. Today, I'm joined by David Smith, Keyera's Chief Executive Officer and by Nancy Brennan, Keyera's General Counsel and Corporate Secretary. The remainder of our Board of Directors and Keyera's executive team are in attendance virtually today as well. At Keyera, we start every meeting with a safety moment. Today, our safety moment pertains to COVID-nineteen and the initiative taken by 1 key employee to support frontline workers. We have many examples of employees supporting their communities through the challenges created by COVID-nineteen. These examples range from fundraising for 1st responders to slowing face masks. Today, I wanted to share the ingenuity and resourcefulness of Graham Mann, a millwright at our fractionation facility in Fort Saskatchewan. When Graeme read a local news story about creating much needed face masks, he quickly stepped up to help. Using a 3 d printer in his garage, Graeme created what he calls ear savers. These are plastic backings for face mask used to prevent shopping, increase the longevity and comfort of face masks used by healthcare workers. Graham was able to source a design specification to create reusable clips or ear savers, which has been distributing free of charge to healthcare workers in Grand Prairie, Sherwood Park and Edmonton. Graham estimates he has made about 600 of these Ear Savers. Thank you, Graham, for your initiative and resourcefulness in helping our brave frontline healthcare workers and for demonstrating your commitment to your community during this unprecedented time. Further information about Cara's response to COVID-nineteen will be provided by our CEO, David Smith, and his business update following the business portion of this meeting. I will now ask Nancy to take us through the details of the meeting. Nancy? Thank you, Jim. Welcome to our shareholders and other guests participating in the meeting this afternoon. As Jim noted, also in attendance today are our Board of Directors, each of whom have been nominated for election at this meeting. In addition to our Chair, Mr. Jim Bertram, our directors are Doug Hagee, Blair Goertzen, Gianna Maines, Don Nelson, Michael Norris, Tom O'Connor, Charlene Ripley, David Smith and Janet Woodruff. We are also joined today by Deloitte LLP, our independent auditors. Today's meeting will consist of 3 parts. First, we will conduct the business portion of the meeting. During this portion, shareholders will have the opportunity to vote and submit questions on each item of business described in our notice of meeting. Following termination of the business portion of the meeting, our CEO, David Smith, will provide a business update on Keyera. Following David's presentation, we will conduct the final portion of the meeting consisting of a question and answer session to address inquiries submitted online during the meeting. Please be reminded that only shareholders and proxy holders who have logged on to the meeting using their 15 digit control number are entitled to vote during the meeting. Such shareholders and proxy holders may vote on any and all business items at any time during the business portion of the meeting. Thank you to those shareholders who voted prior to the meeting. If you voted in advance and do not wish to change your vote, there is nothing further you need to do. If you do wish to change your vote now, you can submit your vote online during the meeting. This action will have the same effect as revoking your previously submitted proxy. Instructions on how to vote will appear on your screens. To vote, please click on the voting tab at the top of the online platform. Voting polls will remain open until the conclusion of the business portion of the meeting. Shareholders and proxy holders may also submit questions at any time during the meeting. To submit a question, please use the Ask a Question tab at the top of the online platform. You may submit a question at any time from now until conclusion of the Q and A portion of the meeting. We will endeavor to address as many of the questions submitted as we can during the meeting. Unanswered questions will be addressed on our website shortly following the meeting. I would also like to remind you that some statements made in this meeting may be considered forward looking. We encourage you to review the cautionary statements and other information filed in our contained in our filings on SEDAR, which outline a number of factors that could cause actual results to differ materially from those projected in any forward looking statements made during the meeting. Copies of these filings are available on our website atwww.ciara.comoronsedar@www.sedar.com. As this virtual format relies on technology as well as coordination among individuals who due to physical distancing are not in the same room, we appreciate your patience as we may need to pause from time to time or in the event we experience technical difficulties during the meeting. I will now invite Mr. Bertram to call the meeting to order. Thank you, Nancy. It's now shortly after 2 pm Mountain Standard Time on May 12, 2020. This meeting is officially called to order. As provided in our bylaws, I will act as Chairman of this meeting and Nancy Brennan will act as Secretary. Stephanie Tuss and Erica Rao of Computershare Trust Company of Canada have been appointed to act as scrutineers for the meeting. We will now deal with the business items specified in the notice of the meeting. Voting on these items will be conducted by poll. You may vote on or any one of the business items at any time prior to closing the polls. I now declare voting to be open on all resolutions. I now ask Nancy to lead us through each of these business items. Nancy? Thank you, Jim. I confirm that on April 3, 2020, notice of the meeting, related management information circular and form of proxy were mailed to shareholders of record as of March 25, 2020. The scrutineers report shows that a quorum of shareholders is present for transaction of business at this meeting. A copy of the Scrutineers' Report along with an affidavit confirming the mailing of the notice of meeting and related meeting materials will be filed with the records of today's meeting. With respect to the formal business portion of the meeting, I will read each business item. We will then briefly pause to enable shareholders and proxy holders an opportunity to vote. We will also confirm whether any related questions have been submitted through the online platform. Where a question has been received on a specific business item, we will address it at that time. Please submit any questions regarding these items using the online platform. Questions of a more general nature will be addressed during the Q and A portion of the meeting. As Jim has noted, voting for all business items is now open. Voting will remain open until the last item of business is concluded and voting is declared to be closed. Certain shareholders have volunteered to move or second these motions in respect of each item of business. I will call on these shareholders at the appropriate time. Preliminary voting results will be received and announced at conclusion of the formal business portion of the meeting. The first item of business is to receive the audited consolidated statements and corresponding auditors' report of the corporation for the year ended December 31, 2019. These financial statements and the report were approved by the Board of Directors and have been previously mailed to shareholders. I can confirm we have received no questions on the financial statements or the auditor's report. As no vote by shareholders is required or proposed with respect to the financial statements and related auditors report, I will now proceed to the next item of business. The next item of business is the election of directors. The board has fixed the number of directors to be elected at this meeting at 10. Accordingly, there are 10 directors nominated for election at the meeting. Information about each of our director nominees is provided at pages 17 through 23 of the information circular. Shareholders have the ability to vote for or against each individual director nominee. In accordance with the advanced notice provisions of our bylaws, the only persons nominated to stand for election at this meeting are the director nominees set forth in our management information circular. As there are no further nominations, I declare the nominations closed. May I please have a motion on this item? My name is Michael Reed. I'm a shareholder and I move that each of James Bertram, Doug Hagee, Blair Gortzen, John Amanes, Don Nelson, Michael Norris, Thomas O'Connor, Charlene Ripley, David Smith and Janet Woodruff be hereby elected directors of Keyera Corp. To hold office until the next annual meeting of shareholders or until their respective successors have been appointed. My name is Jennifer Lam. I am a shareholder and I second the motion. Thank you, Jennifer. Mr. Chairman, I can confirm that we've received no on the election of directors. Shareholders and proxy holders are invited to submit their vote now if you've not already done so. If you have already voted or sent in a proxy, there is no need to do anything unless you wish to change your vote at this time. The next item of business involves the appointment of Deloitte LLP chartered accountants as the corporation's independent auditors for the upcoming year. The Board of Directors recommends the appointment of Deloitte LLP as auditor. May I please have a motion on this matter? My name is Michael Reed. I'm a shareholder, and I move that Deloitte LLP Chartered Accountants be appointed auditors of the corporation to hold office until the next Annual General Meeting of Shareholders of the corporation, etcetera, enumeration and shall be affixed by the Board of Directors. My name is Jennifer Lam. I am a shareholder, and I second the motion. Thank you, Jennifer. Mr. Chairman, I confirm we have received no questions on the appointment of auditors. Shareholders and proxy holders may submit their vote now if you've not already done so. If you've already voted or sent in a proxy, you need not take any action unless you wish to change your vote. The next item of business is a resolution to affirm and approve our shareholder rights plan. The rights plan was last approved by shareholders at our May 9, 2017 Annual Meeting of Shareholders. The rights plan must be approved by shareholders every 3 years. The full text of the resolution is set out at Page 15 of the information circular. The Board of Directors recommends that shareholders vote in favor of this resolution. May I please have a motion on this matter? My name is Michael Reed. I am a shareholder, and I move that the ordinary resolution set out at Page 15 of the management information circular regarding the reaffirmation and approval of a corporation shareholder rights plan be approved. My name is Jennifer Lam. I am a shareholder and I second the motion. Thank you, Jennifer. Mr. Chairman, I confirm that we have received no questions on this item. Shareholders and proxy holders are invited to submit your vote now if you have not already done so. If you have already voted or sent in your proxy, there is no need to do anything unless you wish to change your vote at this time. The last item of business is an advisory vote on the corporation's approach to executive compensation, commonly referred to as a say on pay vote. The full text of this advisory resolution is set out at Page 16 of our management information circular. I will now ask for a motion on this matter. My name is Michael Reed. I'm a shareholder and I move that the ordinary resolution set out at Page 16 of the Management Information with respect to the corporation's approach to executive compensation be approved. My name is Jennifer Lam. I am a shareholder and I second the motion. Thank you, Jennifer. Mr. Chairman, I confirm we have received no questions on this item. We invite shareholders and proxy holders to submit their vote now if you have not already done so. As this is the last item of business before the meeting, for those who have not voted on all resolutions, we encourage you to do so now. Mr. Chairman, I can confirm that the shareholders have now had an opportunity to vote. Thank you, Nancy. Thank you, everyone, for your participation. As everyone has now had an opportunity to vote, I now declare the voting polls for the meeting to be closed. Nancy, I would ask that you now please read the preliminary voting results for the meeting. Nancy? Thank you, Tim. I've received the scrutineers report and report that the preliminary voting results are as follows. Each of the 10 nominated directors have been elected with an average support of over 99%. Deloitte LLP have been duly appointed as the corporation's auditors for the upcoming year with average support of over 92%. The Shareholders' Rights Plan resolution has duly been approved with average support of over 99%. Finally, the sale on pay advisory resolution has been duly approved with support over 98%. Final voting results will be filed on our website as well as SEDAR as soon as possible following the meeting. I will now call upon Jim to conclude the business portion of the meeting. Thank you, Nancy. As that concludes the formal business of the meeting, I now declare the formal business portion of the meeting to be terminated. I will now turn the meeting over to Keyera's CEO, David Smith, who will provide a brief management presentation. David's presentation will be followed by a question and answer session to address general questions submitted during the meeting. You may continue to submit questions using the online platform until conclusion of the Q and A portion of this meeting. David? Thank you, Jim. Good afternoon and welcome to everyone joining us today. Given these difficult times, we feel fortunate that we are able to connect with you all from the comfort and safety of your own homes. I would like to take this moment to recognize all of the essential workers in our communities, like the health care professionals, grocery store employees, truck drivers, transit operators, first responders and the staff and volunteers at the many non profit agencies providing food and shelter for the less fortunate in our communities. And I would like to thank Keyera's employees too, as essential service providers, for doing their part in providing the energy Canadians rely on to heat our homes, deliver our groceries and operate our hospitals. Before I continue, I would like to remind everyone about the risks associated with the forward looking statements and non GAAP measures included in this presentation. I want to begin by acknowledging what a truly unprecedented time we are in. Keyera, like most other organizations, continues to face the adversities related to the COVID-nineteen global pandemic, along with the uncertainties caused by low global oil prices. We are focusing on what we can control and taking prudent steps to address the short term challenges and enhance the long term success of the company and our customers. In response to COVID-nineteen, our first priority is the health and safety of our employees, customers and communities. Employees are working from home if they can. At our facilities, we have measures in place to help limit the potential spread of the virus, and we have contingency plans in place to ensure we can continue to operate safely and reliably. From the onset, we established teams to manage all aspects of our business and navigate this health crisis, focusing on the health and wellness of our people, business continuity, customer service and facility operations. We are now in the 2nd month of pandemic lockdowns. Our office staff are working remotely. We have deferred non essential projects and maintenance at our sites, increased cleaning and distancing protocols, and reduced and segregated staff working at our facilities to ensure safe and reliable operations. I am proud of the diligence and decisiveness of the Keyera team to ensure the safety of all of our people. I continue to see Keyera's values of health and safety, teamwork and responsibility and accountability at the forefront of our response. We recognize that this is a challenging time for many in the communities where we operate, and we have made contributions to many local agencies and organizations that are helping address food scarcity, accommodations and the needs of frontline workers. We believe our strong financial position helps to ensure the stability and continuity of the business during this unprecedented economic situation. We have a strong balance sheet, low leverage, 2 investment grade credit ratings, no meaningful long term debt maturities in the next 5 years, and almost all of our $1,500,000,000 committed credit facility available to draw on. We are being attentive to our customers' needs and their challenges. We recognize that we provide an essential service to our customers and are working with them to develop solutions that are mutually beneficial. We also recognize that we play a critical role in delivering energy to Canadians and many others around the world. At Keyera, our mission is connecting energy for life, connecting producers and consumers of energy responsibly, efficiently and safely, and contributing to an improved quality of life for everyone. Despite these uncertain times, Keyera's long term strategy remains unchanged. Our vision is to be the North American leader in delivering energy infrastructure solutions. Being the leader doesn't mean that we need to be the biggest or that we need to be in every energy related business. What it means is that we strive to set the standard to be the best at the energy infrastructure businesses where we choose to compete. We deliver excellence through operating safely and reliably, serving our customers, collaborating with our partners, respecting our neighbors and delivering value for our shareholders. I want to also emphasize that we are in the business for the long term. When we look at our people decisions, our maintenance decisions, our investment decisions and our focus on operational excellence, We do all of that based on the assumption that we will be operating our businesses and our facilities for decades into the future. The world needs more Canadian energy. At Keyera, we are proud of our role in delivering the energy the world needs safely, reliably and responsibly now and in the future. Our values are at the core of our mission and vision. At this time, our focus on health, safety and environment could not be more pertinent. No one was able to predict or prepare for the coronavirus and the devastating effect it would have across Canada and the world. We pride ourselves on our teamwork, and this is what has enabled us to quickly establish a pandemic response strategy focused on the health and safety of our employees and the reliability of our operations and services. These values and our dedicated team of employees are what enable Keyera to respond prudently and decisively to the new economic realities we are facing. And they are also what will position Keyera to grow as the industry recovers. We have long been proud of our growth and success. But when I reflect back on the history of our company, what I am most proud of is our team. Every day, they continue to show their dedication to our values, to our customers and to our operational excellence program, doing the right thing the right way every time. I truly believe that we have built the best team in the business, and I am proud that Keyera was once again named a top employer in Alberta and in Canada for 2020. Caring for people and our planet has always been part of how Keyera does business, and in 2019, we were recognized for our environment, social and governance practices. We were rated as an outperformer by Sustainalytics, and MSCI increased our ESG rating to an A. Although our industry continues to face challenges, Keyera achieved record financial results in 2019, reflecting the strength and quality of our fee for service businesses as well as growing contributions from our capital investments over the last few years. Adjusted EBITDA and net earnings per share both set new records in 2019, and in August, we increased our dividend per share by 7%. This was Keyera's 17th consecutive dividend increase since our initial public offering in 2,003. We also achieved some important performance milestones in safety and reliability in 2019, and we continue to position Keyera for long term success. We completed another expansion of our Simonette gas plant, making Simonette our largest gas processing facility. And we commissioned the first phase of our new Wapiti gas plant in a region of exciting growth for our industry. Just a few moments ago, we released our financial results for the Q1 of 2020. We delivered record adjusted EBITDA of $327,000,000 in the quarter, record distributable cash flow of $1.16 per share and net earnings of $0.39 per share. These results were largely driven by our Liquids Infrastructure and Marketing segments. As we look forward, our financial priorities will continue to guide and support our long term business strategy. These include preserving our financial flexibility through maintaining our investment grade credit ratings, keeping our net debt to adjusted EBITDA ratio between 2.5x and 3x over time, and maintaining a conservative long term dividend payout ratio. We continue to be disciplined with our capital allocation. We have a target of 75% of our realized margin coming from fee for service businesses and between 10% return on the growth capital we invest. With these financial priorities guiding our decisions, Cara has developed a strong and resilient business model, backed by a strong financial position, dedicated team, commitment to safety and investments that support disciplined growth. We provide essential infrastructure services to our customers and to Canadians. We are proud of Keyera's history of delivering steady dividend growth to our shareholders. Since our initial public offering in 2003, we have grown our per share dividend at a compound annual growth rate of approximately 8%, and that includes a 7% dividend increase in 2019. Keyera's financial discipline and healthy balance sheet provide us with financial flexibility. In the past, this has allowed us to prudently fund our growth opportunities. In today's environment, this is allowing us to weather the storm. We have a low net debt to EBITDA ratio of 2.2x as at March 31, 2020. We have a conservative payout ratio of 55% for the last 12 months. We have 2 investment grade credit ratings. We have minimal long term debt maturities over the next 5 years. And we have a $1,500,000,000 line of credit, of which only $70,000,000 was drawn as of March 31. In short, we have excellent financial strength, liquidity, and flexibility. With our resilient business and strong financial position, we remain confident in our long term outlook. We continue to progress our growth capital investment program. In 2020, we expect to invest between $475,000,000 $525,000,000 to complete a number of important projects currently underway. We recently completed construction of Phase 2 of the Wapiti gas plant, which we expect to commission in the Q4. Construction of the new Pipestone gas plant is progressing ahead of schedule, and the plant is now expected to be operational this fall. And our new WildHorse crude oil storage and blending terminal in Cushing, Oklahoma is nearing completion. With high demand for storage capacity, we look forward to bringing this terminal into service this fall as well. In response to the challenging economic environment and uncertain industry conditions, we made the decision last month to defer the construction of the CAPS pipeline CAPS pipeline system for approximately 1 year. We plan to complete the regulatory process in 2020, positioning the project for construction activities in the second half of twenty twenty one. The project remains highly desired by industry. For producers, CAHPS will provide an additional transportation solution for condensate and natural gas liquids from the liquids rich Monty developments in northwestern Alberta, connecting to our liquids infrastructure hub at Fort Saskatchewan. For Keyera, CAPS will further integrate our upstream and downstream operations, establishing a platform for future growth opportunities. Thanks to the support of our CAPS customers, all transportation agreements have been amended to align with the deferral, and we look forward to having this pipeline in service in 2023. For the past 2 decades, Keyera has proudly supported the communities where we live and work. In 2019, we contributed over $1,000,000 to the communities where we operate, and we focused our support around 4 key areas: youth and education, environment, health and wellness, and community enhancement. Our community investment includes our annual commitment to match employee contributions to our annual United Way campaign and our long standing support for STARS Air Ambulance. We have also made a multiyear financial pledge to the Peter Lougheed Leadership College at the University of Alberta in memory of our former Chairman. Right now, with the outbreak of COVID-nineteen, the most pressing need is support for health and wellness. That's why we committed $50,000 to a variety of organizations to help address food scarcity, housing and support for our frontline workers in the communities where we operate, in Canada and in the United States. In addition, we donated $50,000 to the United Way's Community Response Fund to support community agencies across Alberta. As part of our commitment to volunteering, we provide employees with 2 paid days off to volunteer with agencies that are meaningful to them. And I am proud to say that the Keyera team spent over 8,400 hours volunteering in 2019. We are navigating unprecedented times as an organization. COVID-nineteen presents challenges that we have never faced before. The safety of our people and communities remains our top priority. We will continue to be diligent in monitoring the current economic environment, focusing on the safety of our people and maintaining operational excellence. As always, we will strive for disciplined capital allocation, successful project execution, providing unparalleled customer service, maintaining a strong balance sheet, continuing effective risk management, improving the environment, enhancing profitability and steadily growing our dividend. On behalf of Keyera's Board of Directors and management team, I would like to thank our employees, customers, shareholders and other stakeholders for your continued support. Our team is committed to weathering this storm and positioning for a strong long term future. Thank you, Dave. We will now open up the question and answer session to address questions submitted by the online platform during this meeting. Nancy, can you please read any questions that have been submitted during the meeting? Thank you, Jim. I can confirm that we've received no questions via the online platform. Thank you, Nancy. I will call upon David to respond to any I guess, he won't respond to any more questions because there weren't any. To end this meeting, because there are no questions, this concludes our question and answer period. On behalf of the Board and Management of Keyera, I wish to thank you for your participation today and for your continued support of Keyera. Wish you all the best and hope that each of you and your loved ones stays healthy and safe during these unprecedented and challenging times. This concludes the meeting.