Good afternoon. Still a few seats here for women that are standing in the back that would like to sit down, so at least a dozen. My name is Jim Bertram. I'm the Chair of the Board of Directors of Keyera Corp. On behalf of the board and management, it's my pleasure to welcome you to our 2019 annual general meeting. We are very pleased that so many of you are able to join us here in Calgary, also warm welcome to those joining us via the webcast. As it is now 2:00 or slightly thereafter, I will call the meeting to order. Joining me today at the podium is David Smith, Director and our President and CEO. I will be acting as Chair for the meeting, David will be acting as the Secretary.
Before we begin the formal part of the meeting, I would like to take this opportunity to introduce the members of the Board of Directors and the management team who are here with us today and thank them for their hard work and dedication to Keyera. If each of you would stand and be recognized as I say your name. From our Board of Directors, we have Doug Haughey, who's our Independent Lead Director. Gianna Manes, Don Nelson, Tom O'Connor, Charlene Ripley, Bill Stedman, Janet Woodruff, and Michael Norris, who was unable to attend today in person. Bill, Mr. Stedman, is not standing for re-election this year. I would like to take a moment and thank him for his contribution to Keyera. Bill has played a very important role in the history and evolution of Keyera, having served as a Director since 2003 when we went public.
In fact, Bill would be our first independent Director that Dave and I went on our knees to beg to join. Bill, thank you. Bill's wisdom, perspective, and insight around the boardroom table have been very valuable. On behalf of everyone at Keyera, employees who you mentored and to board members, we wish you and extend our sincere thank you and wish you well. Bill, you will be missed. From our management team, we have David, as I mentioned, who's our President and CEO. Steven Kroeker, Senior Vice President and Chief Financial Officer. Brad Lock, Senior Vice President, Chief Operating Officer. Dean Setoguchi, Senior Vice President, Chief Commercial Officer. Mike Freeman, Vice President, Commercial Strategy and Liquids Business. Brian Martin, Vice President of Business Development, Liquids Infrastructure. Jan Kostuch, Vice President, Human Resources and Corporate Services. Eileen Marikar, Vice President, Finance. Rick Koshman, Vice President, Corporate Development.
Jarrod Beztilny, Vice President, Operations, Gathering and Processing. Jamie Urquhart, Vice President of Marketing. Kelly Hill, Vice President, Information Technology. John Hunszinger, Vice President, Operations, Liquids, Infrastructure, Graham Balzun , Vice President of Operations, Liquids, are both unable to be here today in person. Before I move, I'd like to make note that Mike Freeman will be retiring shortly. I'd like to personally, along with the other members of the board and management, thank Mike for his incredible work here over the last, I'm going to say 18 years, I'm guessing, Mike.
21.
21. Okay. Time flies. Mike was our vice president of marketing and made an incredible difference to this company. Was one of our I always call him one of my enigmas but maybe one of the best leaders we ever had in our officer team. I know his people are going to miss him and, Mike, we're going to miss you, but we know you're not going to be far away, so congratulations. Keyera's achievements and our ongoing pursuit of our vision to be a North American leader in delivering midstream energy solutions would not be possible without our employees. We are very proud of their commitment to provide safe, reliable, cost-effective services. I know there are a number of employees in the room, and I'd ask those to stand to be recognized that are already standing. Thank you for your hard work.
We have a number of items on our agenda today. Once we have concluded the formal business of the meeting, we will bring the AGM to a close, and I will invite David to the podium for a management presentation, followed by a question and answer session. Following the question and answer session, you're all invited to stay for light refreshments in the reception area. With those introductory remarks, we can now turn to the formal part of the meeting. Connor Doyle and Erica Rao of Computershare Trust Company of Canada, Keyera's register and transfer agents, are in attendance today, and I appoint them to act as scrutineers for the meeting. This meeting has been called as an annual meeting of the shareholders of Keyera Corp.
to deal with the items of business specified in the notice of the meeting and accompanying information circular, which was mailed April 10th, 2019, to all shareholders of record on March 25th, 2019. A copy of the notice and the circular has been filed on SEDAR, and all the documents concerning the calling of this meeting will be filed with the official records of the corporation following the meeting. Based on the preliminary scrutineers report on attendance, both in person and represented by proxy at the meeting, I confirm that a quorum is present. Our agenda for the afternoon includes the following items. One, receiving the financial statements for the fiscal period ended December 31st, 2018, along with the accompanying records of the auditors, all of which were filed on SEDAR and delivered to those shareholders who requested them. We also have copies available here in the meeting.
No motion is required on this matter. Two, the appointment of Deloitte LLP as auditors of Keyera Corp. for the ensuing year. This motion is being conducted by ballot and requires a simple majority. Three, electing the directors of Keyera Corp. The directors are elected individually by ballot in accordance with Keyera's majority voting policy. Finally, four, considering a non-binding advisory resolution with respect to Keyera's approach to executive compensation. This motion is also being conducted by ballot, and while it is non-binding, the result will be taken into consideration as appropriate in making future decisions with respect to executive compensation. All items of business are described in detail in the notice of the meeting and the accompanying information circular. As we move through the items of business, please refer to the information circular for full text of each resolution.
For those attending in person, we'll also be showing the resolution on the screen at the front of the room. We also have extra copies of the information circular available here, so if anyone in attendance would like a copy, would you please raise your hand? In order to move the business of the meeting along in a timely manner, a number of proxy holders, all of whom are Keyera employees, have volunteered to move or second the items of business. We will announce the results of the votes at the conclusion of the meeting. With that, I declare this meeting to be properly constituted for transaction of business. Any shareholder or proxy holder with a question on a specific item of business is welcome to ask it when that item of business is considered.
If you wish to make a general comment or ask a question not directly related to the matter under discussion, please raise it during the general question and answer session after the management presentation. When asking a question or making or seconding a motion, please state your full name and use the microphones that have been provided so that everyone here at the meeting and those listening to the webcast can hear the question or motion. Unless there is any objection, we will dispense with the reading of the minutes of last year's annual meeting. First item of business, 2018 financial statements. We can now turn to the first item of business, which is to receive the financial statements and the auditors report for the year ended December 31st, 2018. The board of directors, on advice of the audit committee, has approved the financial statements.
Are there any questions about the financial statements? No motion is required, seeing that there are no further questions, we will move on to the next item of business, which is the appointment of the auditors. Deloitte LLP have been Keyera's auditors since inception, the board of directors, on advice from the audit committee, recommends their reappointment. May I have a motion that Deloitte LLP be appointed auditors of Keyera Corp. to hold office until the close of the next annual meeting of shareholders or until their successors are appointed?
Christy St. James, I'm a proxy holder, I so move.
Thank you.
My name is Kurt Couture. I am a proxy holder, and I second that motion.
You have heard the motion, which has been seconded. Is there any discussion on this motion? This vote will be conducted by ballot. If you are a proxy holder and did not submit your ballot on this motion when you entered the meeting but wish to do so now, please raise your hand and the scrutineers will collect your ballot. The next order of business is the election of directors of Keyera Corp. The number of directors to be elected at the meeting today has been set at nine. I now open the meeting to nominations.
My name is John McGunigal. I am a proxy holder, and I nominate the following individuals to hold office until Keyera's next annual meeting or until their successors are elected or appointed: Jim Bertram, Douglas Haughey, Gianna Manes, Donald Nelson, Michael Norris, Tom O'Connor, Charlene Ripley, David Smith, and Janet Woodruff.
Are there any further nominations? There being no further nominations, I declare the nominations closed. As the number of nominees is the same as the number of directors to be elected, may I have a motion in respect of the individual election of each of the nominees?
My name is Kristen Rogest. I am a proxy holder. I so move. My name is Lori McFarland. I am a proxy holder. I second the motion.
Thank you. You have heard the motion, which has been seconded. Is there any discussion on the motion? Shareholders are entitled to vote individually for each director in accordance with Keyera's majority voting policy. The voting is by ballot. If there are any proxy holders who have not yet submitted a ballot and wish to do so now, please raise your hand for the scrutineer. The next item of business is the advisory resolution of Keyera's approach to executive compensation. May I have a motion that the advisory resolution on Keyera's approach to executive compensation, as more particularly described in the information circular, be accepted?
My name is Carter Lederhos. I'm a proxy holder. I so move.
My name is Laura Purcell. I am a proxy holder, and I second the motion. Thank you. You've heard the motion, which has been seconded. Is there any further discussion on the motion? This vote will also be conducted by ballot. If you are a proxy holder and did not submit your ballot on this motion when you entered the meeting but wish to do so now, please raise your hand and the scrutineers will collect your ballot. That is the final item of our agenda today. The voting results have been tabulated by the scrutineers, and I'm pleased to announce the following results. With respect to the appointment of Deloitte LLP as the auditors of Keyera Corp, I confirm the motion is carried. At this time, I'd like to introduce Mandeep Singh and Michael Monachello. Please, could you stand? Thank you.
With respect to the election of directors, all the directors nominees have been elected with a majority of the votes cast. Could all the directors please stand as well? Ladies and gentlemen, please join me in welcoming your 2019 Board of Directors. Thank you very much, and congratulations. I look very forward to working with each one of you over the course of the next year. I'm also pleased to report that the advisory resolution on executive compensation was approved and that this motion is therefore also carried. For those interested in additional details with respect to the number of votes cast, Keyera will be filing its report on voting results on SEDAR. Alternatively, you may request particulars from Computershare after this meeting. That concludes the scheduled business of the meeting. On behalf of Keyera, I would like to thank you for attending our AGM.
As there are no other business, I hereby declare the meeting terminated. I would now like to invite David to the podium for the management presentation and question and answer session. I look forward to you joining us after the presentation for some light refreshments in the foyer. Once again, thank you for attending.
Thank you, Jim. Thank you, Jim. Welcome to everyone joining us today for Keyera's annual meeting, whether you are here in person or online through our webcast. Before I begin the presentation, I would like to remind everyone about the risk associated with the forward-looking statements and non-GAAP measures included in this presentation. I may talk about the future a little bit. 2018 was a milestone year for Keyera, marking our 20th anniversary as an independent company. While it was an incredibly busy year for us, we did take time to celebrate our accomplishments and this exciting milestone, two decades of taking care of business. We are proud of our track record and have built a strong foundation upon which to pursue our vision of being the North American leader in delivering midstream energy solutions.
As we continue to execute our business strategy, we know the importance of anticipating trends and opportunities, being responsive to our stakeholders, effectively deploying capital, and delivering safe, efficient, and cost-effective services for our industry. Since our initial public offering, we have been committed to delivering value for our shareholders. I am pleased to say that we have delivered a total shareholder return of 19% compounded annually since 2003. We have established an integrated business which connects upstream molecules to downstream markets. Our team brings a level of expertise and customer service that is unparalleled in industry. We pride ourselves on being responsible stewards of capital. Our priorities remain the same: Focus on finding solutions for our customers and ensure safe and reliable operations. Our commitment to our dividend and cash flow growth is a testament to the financial strength of our integrated business.
Although our industry continued to face challenges in 2018, Keyera achieved record financial results. Net earnings per share, distributable cash flow per share, and dividends per share all set new records in 2018. This strong performance was driven by our core fee-for-service businesses and growing contributions from our capital projects that have come into service over the last few years. Our 2018 results were driven by strong financial and operational performance across our three business segments. We handled record volumes at our Simonette gas plant, our Fort Saskatchewan fractionation facility, and through our condensate system, demonstrating growing demand for our services. In addition, we carried out the largest capital investment program in our history, investing approximately CAD 1.3 billion in growth capital projects and acquisitions. Our facilities and gathering systems are complex. Most of our plants operate 24 hours a day, seven days a week.
Safety is a priority for us every day. I am proud to say that we had zero employee lost time incidents in 2018. Our business is based on providing essential services to oil and gas producers, which allows us to create value in fluctuating market conditions. We have been through a number of business cycles, particularly over the last decade. We remain committed to generating long-term shareholder value through disciplined capital allocation. With confidence in our business outlook, we maintained our dividends track record, increasing our dividend per share by 7% in 2018, marking 15 years of sustained dividend increases. Since our initial public offering in 2003, we have delivered per share cash dividend growth of 8% compounded annually, per share cash flow growth of 12% compounded annually, and total shareholder return of 19% compounded annually.
If you invested CAD 100 in Keyera in 2003, it is now worth over CAD 1,600. I am proud of Keyera's conservative management approach, which has served us well through the economic peaks and valleys of the last two decades. After a record year in 2018, Keyera's midstream services remain in high demand. We are well-positioned to deliver a strong year ahead. Just a few moments ago, we released our first quarter results for 2019. We achieved record gross natural gas processing volumes. Our fractionation units operated above nameplate capacity at our Fort Saskatchewan facility. We did experience an unplanned outage at our AEF facility in Edmonton during February. As a result, our first quarter results were lower than we anticipated. We delivered net earnings of CAD 34 million, adjusted EBITDA of CAD 164 million and distributable cash flow of CAD 0.51 per share.
In 2019, Keyera is well-positioned to deliver another year of strong financial performance as we are completing a number of new growth capital projects. Market fundamentals support higher fractionation fees and higher isooctane margins for the remainder of the year. We recently completed the first phase of the Wapiti gas plant, which I'll talk about more in a moment. This is an exciting achievement as it kicks off the next phase of our cash flow growth. With our strong balance sheet, we intend to continue to invest in our future for the benefit of our shareholders. In 2018, we invested approximately CAD 1.3 billion in growth capital projects and acquisitions. In 2019, we plan to invest between CAD 800 million and CAD 900 million, mainly focused on expanding our footprint in the liquids-rich Montney area of northwestern Alberta.
We maintain a disciplined approach when investing and expect our capital program to earn an annual rate of return on capital of between 10% and 15%. In the past few weeks, Keyera's new Wapiti gas plant has been commissioned and is now generating incremental cash flow, signifying the next phase of growth for Keyera. The North Wapiti Pipeline System, phase 2 of the Wapiti gas plant, the Simonette gas plant expansion, and the new Pipestone gas plant are all currently under construction and will continue to add to this growth as they are completed over the next two years. We are also completing the Wildhorse terminal in Cushing, Oklahoma, which will build on our logistics and commercial expertise to generate attractive returns from storage and blending.
With phase 1 of the Wapiti gas plant operational, we are now focused on completion of the North Wapiti Pipeline System, expected to be in service later this year, along with the execution of Wapiti phase 2, which is expected to be operational by the middle of next year. The Simonette gas plant continues to achieve new record processing volumes, and we are expanding the processing capacity of the plant yet again to 450 million cubic feet per day. We bought this facility in 2010 when it was processing only about 50 million cubic feet per day of raw gas. By the end of this year, Simonette will be our largest gas processing plant. In addition to this plant expansion, we have a number of other investment projects underway at Simonette to enhance operations.
Solidifying our strong position in the liquids-rich Montney development of northwestern Alberta, we are working with Encana to develop the Pipestone plant west of Grande Prairie. The Pipestone development includes a liquids hub with condensate handling capacity of 14,000 barrels per day, which was completed in September of 2018. The gas plant will have 200 million cubic feet per day of sour gas processing capacity and 24,000 barrels per day of condensate handling capacity and is scheduled for completion in 2021. We recently contracted additional capacity at Pipestone with a new customer and have now contracted 100% of the phase 1 capacity. Keyera's industry-leading condensate system continues to be a very valuable contributor to Keyera's success. In December, we handled record volumes through the system and demand continues to grow. To meet this growing demand, we continue to expand and enhance the capabilities of the network.
In 2018, we completed the South Grand Rapids pipeline, which increases the capacity to flow condensate between Edmonton and Fort Saskatchewan. Our marketing business generates cash flows by effectively utilizing Keyera's storage, fractionation, and transportation capabilities to move ethane, propane, butane, condensate, and isooctane to markets across North America. Isooctane, a premium gasoline additive, has become the largest contributor to our marketing results. It is produced at our Alberta EnviroFuels facility and shows the value of Keyera's integrated value chain. We take butane, a low-value commodity produced in Western Canada, and convert it to a high-value product, much of which is exported to the U.S. Today, we are very pleased to announce that we are proceeding with the development of the Key Access Pipeline System, a project that lays the foundation for Keyera's growth beyond 2021.
We have partnered with SemGroup and KKR to develop this highly desired NGL and condensate gathering system. The pipeline system is expected to be in service in the first half of 2022, and will transport NGL and condensate from the liquids-rich Montney and Duvernay developments in northwestern Alberta, with initial connections into Keyera's fractionation assets and condensate system at Fort Saskatchewan. The project is anchored by several long-term agreements averaging 14 years in length with high take-or-pay commitments, as well as specific facility and area dedications. The customer base is broad and includes investment-grade counterparties. KAPS, as we're calling it, is expected to provide Keyera with secure, long-term fee-for-service revenues and strong project returns.
KAPS provides Keyera with an important link between its Wapiti, Simonette, and Pipestone gas plants in northwestern Alberta and its strong liquids infrastructure network at Fort Saskatchewan, and it creates a platform for numerous future growth opportunities. Keyera continues to maintain a conservative balance sheet with a net debt-to-EBITDA ratio of three times and a payout ratio of 62% over the last 12 months. With this strong financial position, we expect to fund the remaining portion of our capital program, including KAPS, without issuing discrete new common equity apart from the existing dividend reinvestment plan. Our business wouldn't be what it is today without the dedication and commitment of our team, many of whom are in the room today. We were honored to be named a top employer in Canada in 2019 for the second year in a row, and a top Alberta employer for the eighth consecutive year.
These awards reflect our commitment to a safe and healthy workplace, to extraordinary customer service, and to a culture of integrity, trust, and teamwork. I am very proud of the entire Keyera team. I'm also proud of how our company and our employees support the communities where we operate. We have established long-term partnerships with groups that help to develop safe, vibrant, and thriving communities across Alberta. We supported over 150 charitable organizations in Alberta in 2018. I believe that our people are the best in the industry, and their commitments shine not only in our workplace, but in the communities where we operate. You can find them volunteering in classrooms, coaching a hockey team, or cleaning up trails and parks. In 2018, Keyera employees donated over 8,200 hours volunteering in their communities.
Since 2003, Keyera has been committed to operating safely, providing unparalleled customer service, finding opportunities to expand and enhance our network, all while delivering strong returns to our shareholders. One of our primary focuses since 2016 has been the implementation of operational excellence across our organization, implementing consistency in our operations and business practices to reduce risk every day. We are also committed to improving our environmental and sustainability performance across our operations, and we have reduced our greenhouse gas emissions intensity 28% since 2016. Our people emphasize teamwork, integrity, safety, and customer service in everything we do and we are proud of the results that we have delivered since our inception. I am very excited about the opportunities that we have ahead of us as a team, and I know we have the team to execute them safely and successfully.
On behalf of Keyera's executive management team, I would like to thank you all for joining us today at our annual meeting. At this time, I would like to open the floor to any questions from the audience. Please raise your hand and wait for a microphone before asking your question so those listening online can hear it. I have a question right here.
Can you explain how you've managed to reduce the greenhouse gas emissions by, what you said, around 28%?
I don't have all of the details here at my fingertips, but it's a combination of creating greater efficiencies through our facilities, greater throughput. That reduces the amount of energy that's required on a per-unit basis. We've implemented practices to make the rotating equipment at our facilities more efficient and fewer emissions. Those are a couple of examples of the kinds of steps that we've taken throughout our network to reduce the emissions intensity. We haven't necessarily reduced the overall emissions at each facility, but we've reduced the emissions on a per-unit-of-production basis. Can you wait for a microphone, please?
Partially of that gentleman's question, too. The carbon tax that we currently face or what we paid last year, do you have any number on that at all?
I'm sorry?
Do you have an idea of what our carbon tax levy was or paid in 2018?
I'd have to get back to you with the actual number. I know it's gone up a little bit over the last few years. I think with the proposed changes in the regime with the new government, we expect it will go down somewhat.
One more question. The Base Line Terminal that we have with KML or Kinder Morgan, as you well know, do we have access to their line to Burnaby?
Indirectly, we have access to the Trans Mountain Pipeline to Burnaby, yes. The tanks that we have at our Alberta EnviroFuels site, as you point out, it's a 50-50 joint venture with Kinder Morgan. Those are directly connected into the Kinder Morgan terminal in East Edmonton, which in turn is connected to the Trans Mountain Pipeline. Our customers at that storage facility can access the Trans Mountain Pipeline, yes.
You're saying we could ship liquids to Burnaby and sell there?
Our customers could ship liquids to Burnaby.
Thank you. Could I have one more question, please? We own and operate a plant at Nevis. Is that a profitable plant?
Nevis is in a part of the basin, as many of you are aware, where we've seen very limited drilling activity over the course of the last number of years. As a result, the throughput has been steadily declining at that facility. I would describe it today as being a marginal operation. It's not generating very much cash flow. It's not losing a lot of cash flow either at this stage.
I realize working there, it's a very old plant. Are we stuck with demolishing or taking that thing down?
Keyera has provided for the end-of-life cost associated with every one of our facilities in the reclamation liability that's represented on our balance sheet. Yes, we are faced with end-of-life costs at Nevis like we are with all of our other facilities, the cost is fully captured in the liability as it's represented on our balance sheet.
One last question. You talked about the Alberta EnviroFuels facility in Edmonton or in Strathcona. You indicated, too, that it has problems or it had problems in the first quarter of 2019. Is that being rectified, or what do you see for 2019 for that plant?
The Alberta EnviroFuels facility is a facility that manufactures isooctane, which is a high-quality gasoline additive. We had an outage in February that lasted for 17 days. Unfortunately, it's at a time when demand for premium gasoline is ramping up, so we lost some margin associated with that lost production. The issue that we had with the plant was quickly isolated and repaired. It's just that the timeframe, because of the complexity of the facility, there's a fair bit of time involved in shutting it down and then restarting it when you have a repair like that. To answer your question, as we look forward right now, we're quite confident that the plant will operate at its nameplate capacity. Our next scheduled turnaround for that facility is in the fall of 2020. Thank you. Are there any other questions?
Well, I think seeing no more hands, what I would mention is that if you do have any further questions, please do not hesitate to contact us. You can contact either Lavonne Zdunich or Calvin from our investor relations team, and their contact information is on the back of the quarterly report that we released today. I hope those here with us today in the room will be able to join us for some light refreshments in the lobby. Once again, thank you all for coming.