Good morning, and welcome to Keyera's 2022 Investor Day. My name's Dan Cuthbertson. I'm the Director of Investor Relations for Keyera. We're very pleased to share the materials that our team has put together for you today. Over the next hour or so, we'll be diving deeper into the content of this morning's news release. Here's the agenda for the event. As we usually do at Keyera, we'll kick off the meeting with a safety moment. That will be shared by Joanna Williams, General Manager of Safety and Operational Excellence. Following that, our President and CEO, Dean Setoguchi, will set the stage with our vision and strategy. Then, members of our senior leadership team will run through the components of our strategy. After some closing remarks, Dean will open up the floor to Q&A.
For analysts wishing to participate in the Q&A, there's an option on your screen to ask questions. Click the link, and a concierge will enable you to pose your question. I'll also note that we will post a more detailed online version of the presentation once today's event has concluded. Before we begin, I would like to remind everyone about the risks associated with forward-looking statements which are contained on this slide, and non-GAAP measures included in this presentation, which are all summarized on this slide. Now it's my pleasure to invite Joanna Williams to the stage to share a safety moment with us.
Thanks for that, Dan. Let me take a moment to introduce myself. I'm a professional engineer with over 25 years of experience in sour gas processing and midstream. I have to say, my passion for safety really began early in my career, when I quickly realized, as a chemical engineer designing sour gas plants, any little mistake that I make could result in someone getting seriously injured or worse. As an engineer, I've always loved numbers and data, and I quickly learned in my career to appreciate data-driven, risk-based decision-making. Then I started working at the operating facilities. I went out to the sour gas plants, I went out to the field, and I realized this wasn't just a numbers game. Every number translates to a person, a coworker, a friend, a father, a sister. Any number higher than zero is unacceptable when it comes to safety.
Let me just take a moment to speak to safety at Keyera. It all starts with safety. I was thrilled to join Keyera, where our leadership is committed to the goal of No. 1 in safety performance, and more importantly, where our culture is rooted in engage and care. Our people at Keyera want to do the right thing, the right way every time. We have all committed to our guiding philosophy that because of me, no one ever gets hurt at a Keyera workplace. We recognize that we are not best in class, but we have a vision. We have a safety vision which includes process safety, and with strategy and tactics that are going to get us there. When I speak to our leaders and our frontline workers, it never fails to amaze me at how committed every person at Keyera is to doing better.
We have a cultural shift to make. Let me just take a moment to define what I mean when I say culture. There are many definitions out there, but the one that I like the best, it's just the way we do things around here. To get to where we need to go, how will we know we are succeeding? When we can look around and just say, "Safety is the way that we do everything here." We are set up for success with our health and safety management system that is rooted in operational excellence, driving our continuous improvement. Each small change we make adds up to big impacts. Now, since safety begins with each of us, I would like to share a safety tip with you today that you can use to help protect yourself and your loved ones. We all carry a smartphone around.
There is a feature on your smartphone that I wanna highlight today. Have you ever thought about what might happen if you were in a bad fall, a car accident, or some other emergency situation that rendered you unable to communicate with your responders? Well, that's where ICE, In Case of Emergency, comes in handy. Go ahead, take your phone out. Take the moment to maybe just save your life in the future. You can access ICE via your lock screen or via your phone settings. There, you can enter in your emergency contacts and important medical information. This is going to allow rescue workers, police, doctors to check your cell phone and reach out to your emergency contacts or access that important medical information to give you timely care that might just one day save your life or save the life of a loved one.
Thank you for your time today, and please let me welcome next to the stage our President and CEO, Dean Setoguchi. Thank you.
Thanks, Joanna, and good morning, everyone. Thanks for joining us today. My name is Dean Setoguchi, and I'm the President and CEO of Keyera. I'd like to take this opportunity to acknowledge that we're speaking from the traditional territories of the people of the Treaty 7 region in Southern Alberta. This includes the Blackfoot Confederacy, comprising the Siksika, Piikani, and Kainai First Nations, as well as the Tsuut'ina First Nation, the Stoney Nakoda, including the Chiniki, Bearspaw, and Wesley First Nations. The City of Calgary is also home to the Métis Nation of Alberta, Region 3.
I'm gonna start with a few opening remarks to provide a broader context for what we'll be covering today. After that, you'll hear more detail from the rest of our team. Speaking personally, when I think about the work that we do here at Keyera, the things that I'm passionate about is the way in which we can have an impact that improves people's lives. You can't have rising living standards without energy.
I also care deeply about the planet, and I think about my children and future grandchildren and wanna make sure that we supply this energy in a way that's sustainable for their futures too. This brings me to our mission of connecting energy for life. Obviously, the world is in a lot of turmoil right now. The events in Ukraine have raised issues about energy supply in Europe, and the importance of having a reliable, secure supply of energy has never been greater. Meanwhile, the majority of the world's population who are in developing countries rightly aspire to what they see in developed nations. We need to supply their energy in ways which minimize the environmental impact. What we're already doing at Keyera and plan to do in the future can play a role in this. On to our vision.
We've always said that we don't necessarily wanna be the largest, but we wanna be the very best at what we do. This means no one gets hurt. A safe company is a reliable company. That reliability ties into customer recognition. We've always been a customer-focused company, and we wanna be the preferred service provider. If you're good at safety and are customer-focused, that translates to value for shareholders. This, along with a focus on returns and growing DCF and dividends per share, will provide best-in-class total shareholder returns. At the highest level, the underlying theme of today is that we're positioned to generate strong returns for decades to come. The reasoning which underpins this is underlined in three key messages. Firstly, our base business is resilient and strong. Demand for responsibly produced hydrocarbons from Canada will be an essential part of the future global energy mix.
My second key message is that we can deliver on visible growth. We can enhance the profitability of our base business, and you'll be hearing more about that from Jarrod. We also have projects that are already underway, including KAPS, that'll further enhance our integrated value chain. Thirdly, we have a unique ability to create a very strong energy transition business. Demand for lower carbon, responsibly produced energy has never been stronger. We are in a unique position to leverage our existing platform and provide low-carbon services. We can manage the pace of this investment, which will be driven by demand and economics. I'm gonna start by talking about some of our main achievements since our last Investor Day back in 2019.
As you'll see from the slide, there's a broader list, and you'll be able to read all about them in the published version of the presentation deck. Today, I'll speak to a few. Firstly, we recognize that we're not yet best in class in safety and reliability, but we've taken a significant step forward, and that's demonstrated by our 2021 TRIF, which was 0.55, down from 0.82 the year before. We've delivered strong financial performance and demonstrated discipline throughout the very uncertain period of the COVID pandemic. You can see that our DCF per share grew by about 9.5% from 2019 to 2021. Our conservative balance sheet was 2.4x net debt to EBITDA at the end of last year, and we maintained our dividend, and our payout ratio was around 60%.
We also cut our DRIP in 2020, eliminating any future dilution. At our last Investor Day, we rolled out our optimization plan. Our goals were to improve our operating margin, which we did by CAD 15 million, and to also get our G&P utilization up to 65%, and we're there. We see further opportunity to fill more of our white space in the future. Lastly, on the ESG front, over the 2017-2020 timeframe, we've reduced our emissions by 15% and our emissions intensity by 35%. We've also issued our climate and sustainability reports, and going forward, we've recently published our future emissions intensity reduction targets. Moving on to what's new today, I wanna focus on a few key items.
Firstly, we'll provide an update on KAPS. We're going to be sharing with you a rich inventory of future growth opportunities across our integrated value chain. Finally, in the longer term, we have a vision for a low-carbon hub strategy in Alberta's industrial heartland. We'll be sharing some examples of how we look for strategic partnerships to create the most efficient solutions for industry. Eileen will cover the other items in her section. For a long time, we've been all about adding value for our shareholders. You can see in this chart the history of our DCF per share growth, which has a CAGR of 8%. It's important to note the resilience of our performance through significant market events. The financial crisis back in 2008, the commodity price collapse, and most recently, the COVID pandemic.
Throughout that time, we've consistently managed our balance sheet at or below our 2.5x-3x net debt to EBITDA target ratio. What you'll hear today is how we'll deliver DCF growth and shareholder value well into the future. With the stable DCF that we've delivered, we've also returned a lot of capital to our shareholders in the form of the dividend. I think this shows great discipline in the execution of our strategy, and it's something that we've always believed in dating back to our public origins as a trust. I'd also like to point out that once again, through a lot of market turbulence and recently during the pandemic, our payout ratio has remained in the conservative range of 60% of DCF over the past two years. On to our strategy.
The strategy that will enable us to continue this trajectory of growing DCF and dividends is anchored in four pillars. Before I start, I want to emphasize that everything starts with safety. ESG leadership. Nancy will speak to this later. Our company has always been a high-integrity company. We strive to do the right things for the right reasons. This aligns with many of the principles of ESG. We have always sought to treat our stakeholders with respect, and we are committed to continuing to improve in all elements of our environmental, social, and governance performance. Focus on financial discipline. Eileen will speak to this pillar. We've always taken a rather conservative approach to our financial management, and that has served us well. That includes our debt and payout ratios and also the return of capital in the form of dividends.
We're also spending special focus on our disciplined capital investments and maximizing returns. Jarrod will be speaking to driving the competitiveness of our assets. Part of the bedrock of our business is an unrelenting focus on cost, reliability, customer service, leveraging our integrated platform, and increasing margins. We also have opportunities to add capacity in areas where we have a competitive advantage. Finally, we're going to show you today, more than ever before, the value of our integration, which is only gonna be enhanced with the future projects that we have in store. Jamie will be covering the approach to enhancing our integrated value chain, one of the key differentiators that makes us unique in our basin.
In the same way that telecommunication companies can offer a bundle of services for their customers, we similarly are one of only two companies that can provide a fully integrated, very efficient bundling of services for our customers. As you'll see, KAPS is a great example of how we're integrating our asset base. I wanna take a step back and just spend a couple of minutes looking at the macro context in which our strategy will be delivered. Building on my first key message that our base business will remain strong and in high demand for decades to come. The graph on the left is from the EIA, but any credible third-party forecast for global energy demand will look very similar. Renewables will absolutely grow, but all other sources of energy will be required to fulfill world demand, particularly natural gas.
One of the greatest opportunities the world has to reduce carbon is to replace coal with natural gas. The increase in demand will be particularly driven by the developing world, where there's high population density, and they are seeking affordable, reliable, and portable energy sources, which will also favor propane and butane. There has also been a lot of investment in infrastructure to distribute base hydrocarbons. This will be a system that will be difficult to replace for a long time. Natural gas liquids are at the core of our business, and everything that I've talked about on this slide shows a bright future. Now moving closer to home, it's logical for Canada to help supply the growing global need for energy.
We have world-scale reserves right here in Western Canada. As you can see on the chart on the bottom left, these can be produced at a very competitive supply cost. This includes the Montney, Duvernay, Deep Basin, and Cardium, all areas where our infrastructure is strategically positioned. Our basin is gaining access to high-value markets that Canada has been missing, for oil and natural gas and NGLs too. This is what drives future growth as shown on the bottom right. In a world where there's increased interest in what lies upstream of people's purchase decisions, there will be unrelenting pressure on hydrocarbon-based fuels to improve their ESG performance. There's been a paradigm shift, and this is not going to change. This is another reason why Canada is a logical supplier of energy to the world. Canada ranks amongst the best in all three aspects of ESG.
On top of that, as a company and as an industry, we are committed to get better. An example of that is the Oil Sands Pathways to Net Zero. We also have a well-established framework of regulations and carbon taxes here in Canada. Simply put, if Canada produces less energy, it will be met by less responsible sources. This means that we are well-placed to see increased demand for the fuels that we produce in a way that addresses the world's changing expectations. As a lead-in to my second key message, which is that we have visible near and long-term growth. Canadian producers, our customers, have never been stronger, and that's because commodity prices have been depressed for a long time. It's really forced our producers to be very cost-efficient. Now, with rising commodity prices, they're more profitable than ever.
We are poised to benefit from this increased activity. As you can see on the chart, they're set to generate a lot of free cash flow, shown by the tall, dark blue bars. Quickly repay debt, shown by the orange line approaching zero next year. They're anticipated to increase CapEx, shown by the light blue bars. This means that they're able to return cash to shareholders and also grow production. You can see the implications for expected strong supply growth from the Montney and Duvernay in the graph to the right side, where supply is expected to increase by about 20% through the period to 2025. Not only will there be a supply push, but we also expect a demand pull for NGLs.
This is because of increasing export capacity, expanding petrochemical demand, increased use of solvents for the oil sands, and the potential sanctioning of Dow's net-zero ethane cracker. All that being said, Keyera has the assets and expertise to manage increasing NGL supply and provide flexibility to access the highest value markets for NGL spec products. There'll also be increased demand for our condensate services, and that's because of continued demand from the oil sands with the expansion of Line 3 and also TMX at the end of next year, also increasing domestic supply. We stand to benefit from the volume growth with our significant storage capabilities and extensive pipeline connectivity to both receive and deliver condensate to the oil sands. This is why KAPS is the missing link in our value chain.
It connects our Montney G&P business, along with all the other third-party facilities, to our highly profitable frac, storage, logistics, and marketing business. When a molecule of energy flows through our system, we charge a fee as it touches each segment of our business. Once this project is complete, it'll meet strong customer demand for competitive alternative. It'll be one of only two integrated pipeline solutions for NGLs from the Montney Duvernay. It's a basin asset with high barriers to entry. We're also working on an opportunity which we refer to as Zone 4. This would connect KAPS to the B.C. border and to a B.C. liquids gathering system so that we could capture volumes along the entire Montney fairway in both Alberta and B.C. It is clear to us that we see great long-term value in NGLs.
It aligns with our core expertise, and it remains a strategic area of focus. KAPS will also support our objective to add stable long-term cash flows and support future dividend growth. You'll also hear today about visible opportunities to enhance the profitability from our existing asset base, opportunities to grow capacity, and also extend our value chain. This fits well with our strategy of a carefully paced self-funded model, while also meeting our rigorous capital allocation criteria. Pulling all of this together, you're going to hear more today about how we have clear visibility to deliver on future EBITDA growth with no external equity funding. It all starts with enhancing the profitability of our base and complementing it with future projects. Eileen will speak more to this later.
For the longer term, I'll move on to my third key message about how we have the unique ability to leverage our existing platform and create a strong energy transition business. This energy transition is happening within a paradigm shift of the world's expectations about the need for lower carbon products. We fully recognize in the near term that there's a lot of focus on energy security, but that's not gonna change the direction or the momentum towards a lower carbon future. This is being driven by a number of factors, including world population growth, government commitments to reduce emissions, and a rising interest in ESG and other factors. We can already see demand in the industrial heartland where Keyera is well-positioned. Alberta refiners have announced plans to produce low carbon products. LNG Canada will be the lowest carbon facility of its kind in the world.
Dow is working on the world's first net zero ethane cracker. Foreign companies are also expressing interest in developing low carbon forms of energy, and that's because of our abundant availability of feedstock, a favorable business environment, and opportunities to apply CCS technology. We can create these low carbon solutions competitively right here in Alberta, and Keyera is positioned to help enable that. We are very well-positioned to keep pace with energy transition, and we can do it when it makes economic sense as the market for low carbon fuels evolves. We have the unique ability and opportunity to create a competitive environment with a really efficient industry solutions. This is why we're already working with companies like Shell, who have carbon sequestration expertise along with hydrogen production. We have a complementary pipeline capable of distributing hydrogen along the industrial heartland.
The next step beyond that is that all these low carbon businesses are going to need low carbon feedstock. We will need to reduce our emissions across our entire integrated value chain to fulfill this demand. We can leverage off of our existing infrastructure and be at the front end of this emerging opportunity. Jamie will speak more to this later. Now to wrap up, we are positioned to generate strong returns for decades to come. The reasons are we have a strong existing base that is very resilient and will continue to be in high demand for a very long time. We can demonstrate future growth, and we're doing this by driving efficiencies of our existing assets and bringing on new projects like KAPS. We have all of the makings of what it will take to build a very strong energy transition business.
We can leverage our existing asset base and work with companies like Shell to create low carbon opportunities. I'll now pass it over to Nancy, who will take us through our approach to demonstrating ESG leadership.
Thank you, Dean. Good morning, everyone, and thank you for joining us. My name is Nancy Brennan, and I'm the Senior Vice President of Sustainability, External Affairs and General Counsel at Keyera. While I'm formally trained as a lawyer, I've been fortunate to enjoy a wide variety of roles during my 20+ year career, which prior to joining Keyera, has predominantly been on the E&P side of the business. I joined the company in 2019, not long before our last investor day. Since that time, it has been a real privilege to work alongside this very dynamic senior executive team and to have a portfolio that has enabled me to collaborate with the deep bench of talent we have in the company.
It is this collaborative and innovative spirit that has been integral to our progress to date and will enable us to capitalize on the exciting opportunities that we see ahead. As Dean has articulated, demonstrating ESG leadership is a key strategic pillar for Keyera. Our recent ESG journey is the natural evolution of Keyera's long-standing commitment to living its values, which include integrity, accountability, and caring for people and our planet. With a renewed focus on sharing our story, today I will discuss the proactive steps we are taking to enhance the long-term resiliency of our business. I will focus on three main points, which will explain our progress to date and also give you some insight into how we intend to move forward into the future. First, we take an intentional, principles-based approach to ESG.
This is reflected in our progress so far, which has consisted of thoughtful and incremental action. Second, our approach has been purposefully designed to establish the solid foundation and the credibility we believe is necessary to proactively identify risk and to capture the opportunities that we believe are ahead. Third, now more than ever, we know that to be resilient, we must be open and responsive to the perspectives of our many stakeholders. This means continuing to listen and to build capacity to evolve our approach. We are very proud of the progress that we have made, and we are very excited about the opportunities we see ahead for Keyera. Jamie will speak to these opportunities in greater detail in his presentation. Let's start with those guiding principles. In 2020, our management team and the board formalized the principles that would guide our approach to ESG going forward.
These principles are: maintain our strong corporate governance, prioritize our emissions management, provide transparent and decision-useful disclosure, and focus on effective stakeholder engagement. It was against this backdrop that in 2020, we undertook an independent stakeholder engagement exercise to seek candid feedback and to identify the most material ESG issues to us and to our stakeholders. This process resulted in the identification of our six ESG priorities, which is shown here. With our guiding principles and our six ESG priorities in place, we were able to proceed with alignment and with clarity as to our next steps. Since 2020, we have moved quickly to both share our story and to advance our ESG efforts. In late 2020, we released our first ESG report, which featured our six ESG priorities and discussed our anticipated role in the energy transition.
In the same year, our board added ESG-aligned performance metrics to our annual incentive program, which is used to determine the annual bonus awards for all our employees, including our senior executive team. Last year, we released our first climate report, which included new GHG emissions reduction targets. Also last year, we took proactive steps to integrate ESG considerations into our core decision-making processes. This included our capital investment process, our stage-gate project delivery system, as well as our enterprise risk management framework. Most recently, in 2022, our board took steps to align its corporate governance structure through the creation of a new Governance and Sustainability Committee. Looking forward, you can expect to see our next ESG report later this year, which will provide an update on our progress against our six ESG priorities.
We have been pleased to see that our approach has been recognized by the market and other external stakeholders. In particular, our ESG scores with key third-party rating agencies have continued to improve since 2018. It should be noted that the ratings shown here do not include our 2021 activities, including our climate report and new GHG emission reduction targets. We look forward to seeing a continuation of this upward trend in our ratings later this year. In February of this year, however, we were pleased to be recognized by Scotiabank for having the best year-over-year improvement in ESG score in Canada of any sector, according to their scoring framework. Having walked you through our progress to date, I will now turn to how we are performing and the recent actions that we've taken in respect of each of the E, S, and G factors.
Let's start with the G. First and foremost, we believe it all starts with good governance. Keyera has a long and proud history of strong corporate governance. Excluding our CEO, all of our directors are independent. Average tenure is approximately six years, which reflects our board's commitment to ongoing renewal and ensuring a fresh perspective. From a diversity perspective, approximately 33% or more of our independent directors have been female since 2017. Our board has also been actively engaged at each step of our ESG journey. In 2022, this included the appointment of our new governance and sustainability committee, which will be responsible for monitoring our corporate governance practices, the advancement of our ESG priorities, as well as overseeing our stakeholder engagement process. A key element of good corporate governance is to ensure that our executive pay practices align with the interests of our shareholders.
Keyera has always been committed to pay for performance. In the past nine years, we have held an annual say on pay vote, which has been approved on average by 98% of shares voted at our annual shareholder meeting. This focus is also demonstrated by compensation for our CEO, which in 2021 consisted 85% of performance-based elements. In addition to our core financial metric, which is DCF per share, our annual bonus program also includes key safety, environmental, and operational performance metrics that are aligned with our ESG focus. I will now touch briefly on our social performance. Safety is at the core of everything we do. Nothing is more important to Keyera than the health and safety of the people and our communities. In the past five years, we have reduced our TRIF alone by 50%. Jarrod will speak in more detail about our safety approach.
Our people and our culture are the foundation of our ability to deliver strong business outcomes. Our people-focused culture is reflected in our corporate values, which include an expressed commitment to diversity and inclusion. As you can see, we have a highly diverse senior executive team, and this year we have made meaningful strides to increase the diversity among our next-level leaders. Our efforts to intentionally engage and collaborate with Indigenous peoples has increased significantly with our KAPS pipeline. Since the inception of the project, we have engaged and collaborated with 22 different Indigenous communities. Working with our Indigenous neighbors, we have been able to incorporate traditional knowledge into the project, including to determine pipeline routing and to avoid sensitive areas. From an economic inclusion perspective, approximately 17% of construction spent to date has been completed by Indigenous-owned or affiliated businesses.
While we have made some progress, we know we have more listening and learning to do. That's why we are actively working on building our internal capacity to continue to enhance the effectiveness of our collaboration with our Indigenous and other stakeholders. In 2022, we also updated our community investment program, which is now focused on three areas, environmental innovation, Indigenous reconciliation, and community resiliency. Through collaboration, our programs, and our investment, we seek to contribute to the overall health and resiliency of the people and communities connected to our activities. Moving finally now to the E. Last year, we released our climate report. The focal point of the report was the release of new targets to reduce our GHG intensity by 25% by the year 2025 and 50% by the year 2035. This is relative to 2019 levels.
These targets enable what we call our parallel path to energy transition. Our 2025 target is designed to build internal momentum to achieve our longer-term 2035 target. This first path consists of leveraging our past success in reducing our emissions to continue to decarbonize and enhance the efficiency of our base operations. This not only reduces our emissions, it also reduces our operating costs and associated risks. Some other opportunities we're currently exploring include continued optimization, investing in technology, and supporting renewables. This includes the use of solar power, which by the end of this year will supply approximately 10% of our power needs. We also continue to evaluate our use of carbon capture technologies, including acid gas injection, which we're already using at six of our G&P facilities.
Since we first started using acid gas injection in 1996, we have sequestered over 1 million tons of carbon dioxide. This is roughly equivalent to the emissions of 325,000 passenger vehicles. Our second path, or our 2035 target, reflects our commitment to participate in economic opportunities arising from the energy transition. This includes offering our customers lower carbon fuels, fuel feedstocks, and solvents. We are also actively investigating enabling carbon capture and storage for ourselves and our customers, as well as the longer term uses of hydrogen. This is reflected in our recently announced strategic collaboration that Jamie will speak to in greater detail in his presentation. To recap, while we are very proud of our progress to date, we know the journey ahead requires us to continue to actively listen and evolve our approach.
In particular, we must continue to take a principles-based approach to ESG. This allows us to adapt to changing circumstances and expectations. This approach is reflected in our most recent climate report and our emission reduction targets. It will also be reflected in our upcoming ESG report. We must also leverage the strong foundation we've established to proactively identify risk and capture the opportunities we know are ahead. We will achieve this by continuing to integrate ESG considerations into our core decision-making and enterprise risk management frameworks, as well as the focused oversight of our new board governance and sustainability committee. Last, we must continue to focus on building our capacity to actively listen and respond to the needs and perspectives of our many stakeholders.
We'll achieve this by continuing to engage directly and also continuing to build our capacity to listen and collaborate with Indigenous peoples and our other stakeholders. Thank you, everyone. I will now turn the presentation over to our CFO, Eileen Marikar, who will discuss our strong financial discipline. Thank you.
Thank you, Nancy. Good morning, everyone. My name is Eileen Marikar, and I am Keyera's Chief Financial Officer. I am a CPA, CA by profession and have been with the company for 17 years. I grew up in Edmonton and started my career there. In 2005, when the oil and gas industry was booming, and so too was the city of Calgary, I took a job with Keyera as the Manager of External Reporting. At the time, Keyera was very small and not very well known. My intention was to get some oil and gas experience, stay for two to three years, and then move on. Well, that didn't happen because throughout those years I was given significant opportunities to continue to develop my career in various roles.
It has been amazing to see how we have grown, evolved, and modernized our thinking as a company throughout the years. As Dean talked about earlier, strong financial discipline is something that has been part of Keyera's DNA since the very beginning. Today, as we look at the ever-changing world around us, this has never been more important. We are focused on three key principles. One, maintaining that long history of financial strength. Two, ensuring strong capital investment discipline. And finally, three, generating cash returns for our shareholders. Through the rest of the presentation, I will run through in more detail each of these three key principles. Okay, so let's start with maintaining our financial strength. On this slide, you can see our financial framework that guides our capital allocation decisions.
While many of you are familiar with this, I thought it's important to highlight a few key pieces, starting with leverage and the balance sheet. Based on our business mix today, we like to keep our leverage in the 2.5x-3x range, as calculated by our bank covenant and excludes our hybrid debt. This range leaves us with ample room to ensure we are protecting our investment-grade credit ratings through the various cycles. For 2021, we ended the year with leverage that was even lower than our target. Next, let's move to return on invested capital. Our target is to generate an after-tax corporate return on invested capital of more than 12%. We hold ourselves to a higher return target relative to our peers because of the size of our Marketing segment.
That said, we generate superior returns because of our integrated value chain, which includes the premium cash flows consistently delivered by our Marketing business. For 2021, our after-tax corporate return on invested capital was 14%, exceeding our target. When it comes to stability of cash flow, our goal is to generate more than 75% of our realized margin from fee-for-service business. For 2021, we were below this target at 69%. In a few minutes, I'll run through our investment criteria that shows how we think about improving stability of cash flow. It's not just about fee-for-service, but as we make new investments, we're looking at how we continue to underpin with higher proportion of take-or-pay contracts. Based on this financial framework, let's take a look at how we expect to do over the next few years.
We expect to generate an adjusted EBITDA annual growth rate of between 6%-7%. That's largely based on sanctioned projects shown on the left side of the slide. This growth rate assumes a flat marketing contribution in 2025 relative to 2022. What this means is that the EBITDA growth is coming from our fee-for-service businesses as we see incremental margin from KAPS as well as volume growth at both the Wapiti and Pipestone gas plants. By growing our margins on EBITDA, this reinforces our ability to sustainably return capital to shareholders over the long term. Next, let's look at cash flow stability. This graph shows that with incremental EBITDA from KAPS, we expect to achieve our goal of more than 75% fee-for-service margin.
This assumes contribution from our marketing segment is within our new base guidance, that I'll talk to you in a few minutes. More importantly, each KAPS contract has a 75% take-or-pay commitment, contributing to that overall goal of improving stability of cash flow. Finally, the balance sheet. We have a history of maintaining low leverage well within our targeted range of 2.5x-3x . This year, we expect our leverage to increase outside of this range temporarily. The key reasons for this, funding of our KAPS project and the AEF turnaround in the second half of the year that reduces margin and increases maintenance capital expenditures. As we move into 2023, KAPS begins to generate cash flow and we reduce capital spending. We expect to bring the leverage within our target range.
To recap, we've talked about our first principle, which is the framework that guides our financial strength, and we've looked at how we expect to do over the next few years. Now let's turn to our second principle, which is to ensure we have strong capital investment discipline for the long term. In order to do so, we must have a rigorous investment criteria. Step one of the criteria is to ensure that the project or investment fits well within our four strategic pillars. Step two, the investment is then scored against three key criteria. One, returns. One measure is the 10%-15% return on capital. Two, stability of cash flow. Projects with higher take-or-pay, longer duration contracts with strong counterparties will score better. Three, ESG factors. A project that is low carbon, low emissions will score higher.
We also think about how the project or investment contributes to ours as well as our customers' collective emission reduction targets. Finally, step three, we make an assessment of our capabilities to ensure we can deliver the project to expectation. The key factors we actively manage are safety as a key priority, then cost, schedule, and ensuring the project is smoothly transitioned to operations. Using this criteria, our KAPS project fits well within these parameters as it significantly improves the competitiveness of our business. It improves the stability of our cash flow because of the high take-or-pay levels within each contract. We expect to generate the required returns before considering any downstream benefits, and it fits well within our emission reduction targets.
A recent example of putting this investment criteria to work is related to the potential Pipestone capacity expansion shown at the top of the graph. This project would essentially unlock 25%-30% of additional capacity for CAD 35 million-CAD 40 million of capital. The majority of this capacity has already been contracted under long-term agreements, 10+ years, with a high proportion of take-or-pay and a return on capital that exceeds 15%. This project is subject to a final sanction decision. While this is a small project, it's an example of how we are looking at new investments and generating long-term value. The projects shaded in light blue are unsanctioned or potential projects, many of which Jamie will speak to in his section.
Based on our outlook today, we think it makes sense to spend approximately CAD 300 million in each of 2024 and 2025 to fund high-quality projects that meet our financial framework. Next, I wanna turn to our Marketing segment because this business has consistently delivered premium cash flows that contribute to our corporate return on invested capital. Over the past three years, the Marketing business has delivered close to CAD 1 billion in realized margin that has helped to fund our infrastructure investments, including KAPS. These cash flows are underpinned by a prudent risk management program and access to our infrastructure assets, including storage, rail, pipelines, and terminals that provide us with the flexibility to be able to move the physical product to the highest value markets throughout North America. With that, I'm excited to announce our new base Marketing guidance.
The new range is between CAD 250 million and CAD 280 million, relevant for the years 2023 to 2025. This is up from CAD 180 million-CAD 220 million. What's changed? The key factors that led to the higher base guidance are the marketing team's successful efforts in unlocking value, particularly for iso-octane, as new markets have been captured that garner higher premiums and reduce transportation costs. We have also added new assets in the U.S., Galena Park and the Wildhorse Terminal, and improved commodity prices. We have assumed WTI to be in the U.S. $65-$75 range based on the forward curve. For 2022, our realized margin guidance is also between CAD 250 million-CAD 280 million, which reflects the six-week turnaround at AEF. The other key assumptions are noted on the slide.
To recap again, we have talked about our financial framework and our commitment to strong capital investment discipline. This now brings us to our third objective, generating cash returns for our shareholders. From this slide, you can see that we have a long history of growing distributable cash flow on a per share basis. Investing in assets that improve our competitiveness and strengthen our existing value chain will result in strong returns and continued cash flow growth. As Dean noted earlier, we also have a long history of steadily growing the dividend. We view the current dividend as nondiscretionary, and it's covered by our fee-for-service cash flow, or in other words, it is not dependent on the Marketing cash flows. Our Marketing business does, however, help to fund high-quality infrastructure investments, which in turn help us grow cash flow per share.
The way we think about growing the dividend is, one, grow distributable cash flow on a per share basis, and second, maintain a payout ratio within the 50%-70% range to ensure the dividend is sustainable and can withstand the various cycles, just like it did during the onset of the pandemic in 2020. To summarize, our capital allocation priorities. 2022, simple, fund CapEx. 2023, bring our debt back into our conservative target range, and that will mean reduced capital spending this year. 2024 and 2025, it will be a balance of priorities between returning cash to our shareholders and growth capital, all with the mindset of maximizing shareholder value for the long term. To close, a recap of our three key principles. One, maintain the long history of financial strength by adhering to our financial framework.
Two, ensure we have strong capital investment discipline through a more rigorous criteria. Finally, by doing these things well, we can generate cash returns for our shareholders. Now I'm gonna turn it over to Jarrod to talk about our next strategic pillar, driving competitiveness of our assets.
Thanks, Eileen, and good morning, everyone. I'll start with a bit about myself since I'm new to my current role, though I'm not new to Keyera. I've been here since 2004, starting in business development, then progressing through various operations leadership roles in both our Liquids Infrastructure and Gathering and Processing segments, spending 13 of my 18 years in the field where I became our first field-based vice president. I've had a connection with every asset in our fleet and going way back, I actually began my career in the energy industry as an engineering co-op student at our Fort Saskatchewan fractionation and storage facility. We're here to maximize value for our customers by offering a full range of services and access to high-value markets. To do that competitively, we need to be the most efficient operator.
Today, I'll speak to how we can improve our returns by increasing our competitiveness of our assets across our entire suite. We will do this by operating safely, driving high reliability and ensuring effective cost management, maximizing returns from our asset base, and investing in technology and operational efficiency. Before I go any further, I wanna talk about why safety is so foundational at Keyera. Joanna talked about the cultural shift that we're undertaking, and that is supported by these four pillars. Accountability means taking ownership at all levels for our personal safety and the safety of those around us. Everyone needs to be able to say, "Because of me, no one ever gets hurt at a Keyera workplace." We must be unwavering and diligent in applying procedures for our critical tasks where consequences can be serious. We will explicitly mandate non-negotiable safety expectations to reduce risk and prevent incidents.
Leaders must be engaged and participate with frontline workers to create opportunities for open safety dialogue. It all starts with safety. We made good progress in 2021 and have more to do, and we are on our journey to be number one in safety. I believe that a safe plant is a reliable plant, and a reliable plant is a safe plant, which feeds directly into our focus on reliability. Operational excellence is the management system that defines how we operate. It is critical in driving high reliability so we can provide better service for our customers. Our focus areas here include greater standardization across facility designs and processes, leveraging technology for improved data gathering to measure and optimize asset performance, learning from past experiences to always get better and consistent performance, taking deliberate steps to do the right thing the right way every time.
That is the hallmark of operational excellence. In 2021, we were very intentional about how we addressed reliability concerns at some of our key assets. An independent assessment was completed at Wapiti, and third-party reviews of our maintenance programs at Alberta EnviroFuels and Rimbey were undertaken. We saw meaningful results from these efforts. AEF achieved record annual production, which, coupled with improved reliability at Wapiti, allowed our assets to deliver an incremental CAD 45 million in EBITDA in 2021 over 2020. We still have more to do in this regard to meet the expectations of our customers, and we're excited to continue applying these learnings to all areas of our business. Cost management is a very important focus area for us and one that's even more relevant in today's environment of increasing inflationary pressures. I'll point you to some of our highlights.
For maintenance, this includes a deliberate focus on upfront work planning and scheduling for more efficient use of our maintenance resources and leveraging data to optimize turnaround intervals, ultimately transitioning from time-based inspections to risk-based inspections. On the resource and labor side, we're looking to leverage people and technology to drive efficiencies. We've done this by centralizing resources where we have several assets in a geographic area and expanding use of process simulators to better train our operators and build competencies. To manage our utility costs, we've taken a portfolio approach, which in addition to reduction opportunities, includes a variety of purchase agreements and hedges. Later this year, we'll begin sourcing about 10% of our power needs from a third-party solar service provider. Increasingly, we're looking at introducing more vertical integration by producing our own power, which we already do at our Cynthia, Wapiti, and Rimbey plants.
Managing the compliance cost of emissions is becoming increasingly important and will be over the long term. At the asset level, we're looking at modernization of equipment, optimizing fuel consumption, and where possible, supplementing with low-carbon power alternatives. Capital projects make up a significant component of our spend, and quality project development and execution leads to better results. Improvements in this area include a greater focus on front-end loading, leveraging third-party expertise to gain assurance on the strength of our execution plans, and enhancing our business readiness process to ensure smooth transitions from construction to operation, lastly maturing our supply chain management processes to leverage our scale and build relationships with major suppliers to more effectively manage spend on both existing assets and new projects. Moving to my second key message, the next few slides will focus on how we'll utilize our existing asset base to its maximum earning potential.
We operate a fully integrated value chain for natural gas and natural gas liquids from wellhead to end customer and have multiple margin growth opportunities across this value chain. These fall into two buckets, the first of which are opportunities centered on driving higher utilization of available capacity to maximize operating leverage. We are a volume-driven business, so higher utilization leads to lower per unit operating costs and better emissions intensity. These initiatives drive stronger returns, typically for little incremental spend. Some examples on this slide are significant available capacity within our G&P segment, existing storage capacity, and new capacity coming online shortly. During the turnaround at Alberta EnviroFuels later this year, we'll take the opportunity to debottleneck that facility, creating approximately 5% additional capacity. In the second bucket are those growth investments that leverage the existing asset footprint to enhance our ability to generate returns.
The most obvious example of this is the KAPS project. Dean already spoke about the strategic importance of this asset. It captures liquid volumes from one of the highest growth areas in North America, and points them directly at our hubs in Edmonton and Fort Saskatchewan. As those volumes work their way down our value chain, they unlock even further growth opportunities, such as the potential for new fractionation at KFS, additional storage and terminaling, new opportunities to connect commodities to rail or opportunities to provide services to the petrochemical sector. Let's walk through some of these opportunities in both buckets in more detail. Starting with our G&P segment, in the South, we successfully completed our optimization program last year. This meant shutting down less efficient assets and redirecting those volumes to our most efficient assets.
As a result, we increased utilization in this region from 50% to over 65%, which has led to a decrease in emissions of 12% and an increase in operating margin of approximately CAD 15 million per year. These assets are now among the most utilized when compared to their peers in their areas. This is driving higher customer netbacks, which allows our assets to attract even more volumes. After years of declines, we're seeing volumes in this region level out, and our assets are well-positioned. We're encouraged by growth in select areas as lands switch hands to new entrants that see these areas as core to their business. There's still more that can be done here to bring about better returns, as our optimization program was just the first step in making our Southern assets more competitive.
Moving now to the North region, this is a key growth area for us because it sits on some of the best geology in North America, capturing volumes from the Montney and Duvernay and connecting them into KAPS. We have strong operating leverage available at Wapiti and Simonette, and we're focused on filling both those plants and are again excited as lands in the area change hands and activity increases. The bigger growth story in the North is the potential expansion of the Pipestone plant that Eileen spoke to earlier. I'll remind you this type of investment is a bolt-on investment that provides an efficient use of capital compared to greenfield projects. Before we go into growth opportunities in our Liquids Infrastructure business, it's important to note just how competitively advantaged this business already is.
These assets in the Heartland are well-connected to each other and to key outlets and markets that have been built up over decades and would be nearly impossible for a new entrant to replicate. As a result, our strongest returns come from this segment. These are franchise assets that command meaningful market shares in each of their respective markets, which you can see reflected in the pie charts at the bottom of this slide. In our fractionation business, strong connectivity to key markets gives us a solid advantage. It provides customers with premier downstream access for their products. With more than 17 million barrels of capacity, our cavern storage is unmatched. Again, our connectivity to key outlets and inlets provides certainty of supply and operational flexibility that our customers need.
Our Alberta EnviroFuels facility is the single biggest consumer of butane in Western Canada, and because we have this asset, we can leverage our integrated network, including our logistics expertise and downstream market access to maximize returns. Our condensate system touches 70% of all diluent supplied to the oil sands, very significant. This is because we're connected to all major oil sands receipt and delivery points. We offer flexibility for our customers to access 5 million barrels of storage, and we're in the main trading hub for diluent. These are competitive advantages that we want to further entrench. Here's some food for thought. What if we could offer all the services you see on this slide, which represent about 40% of our margin today in a no-carbon or low-carbon way? Jamie will speak more about that later on.
When we look at increasing the competitiveness of our Liquids Infrastructure segment, the four franchise assets on this slide are the ones that we focus on first, and there are several projects on the horizon that can have meaningful impact. Our fractionators at KFS have had consistently high utilization for several years, which shows the value of our downstream service offerings and access to high-value markets. We have space for additional frac and are actively engaged with our customers to try and make that happen. We continue to build out our cavern storage position. We have our 18th cavern at KFS scheduled to come online later this year, and work on cavern 19 can be restarted when the timing is right. We also have significant salt rights associated with our 1,300 acres of land adjacent to our Josephburg site.
At Alberta EnviroFuels, we've greatly improved our reliability in the last year, and this fall, we'll complete a maintenance turnaround that will ensure that continued reliability, as well as completing work to increase capacity by approximately 5%. KAPS will connect directly into our industry-leading condensate system in 2023 and provide benefits for all these franchise assets. I wanna reinforce the importance of KAPS. This project will be instrumental in fueling our growth opportunities, particularly in the Heartland. It really was the missing link in our value chain to allow us to be even more creative in offering solutions to our customers. This is a basin asset that will enhance the competitiveness of our core asset base for decades to come. In a few minutes, Jamie will open his section with an overview of how we're doing on the commercial aspects of KAPS.
In closing, I wanna note again just how well-positioned we are to improve returns by increasing the competitiveness of our asset base. To bring it back to my opening comments, to be the most efficient operator and offer customers a full range of services and market access so we can maximize value, we will focus on safety, reliability, and effective cost management, maximizing the utilization of our existing assets and making the investments required to increase competitiveness for the long term. I'll now invite Jamie to the stage to discuss how we can further strengthen and grow our integrated value chain. Thank you.
Thanks, Jarrod, and good morning, everyone. My name is Jamie Urquhart. I've been with Keyera for 17 years and have held a variety of leadership roles over the years, including leading Keyera's corporate development, business development, operations, and marketing teams. Currently, I'm Keyera's Chief Commercial Officer. A little known fact about myself is that I started my career in the electric power generation industry, and at one point was the chief operating officer of a renewable power company. As a result, I have a passion for renewable power. However, I do believe that low carbon fuels will play a key role in keeping the lights on for many years to come. I'm going to focus my presentation on three key areas this morning. My first two Keyera key focus areas fall under the heading acquire and construct high barrier to entry assets as shown on the right.
First, to supplement Jarrod's presentation, I will update the contracting progress for our KAPS project. This update includes progress on contracting discussions necessary to sanction our proposed Zone 4 extension from Pipestone to Gordondale. Second, illustrate that the volume growth through KAPS unlocks economic investment opportunities in our downstream assets. The best example of this is the construction of a proposed third fractionation train at Keyera Fort Saskatchewan or KFS. Oh, sorry. Let's get started by discussing our KAPS project, its ability to generate strong returns, plus create a platform for Keyera's future distributable cash flow per share growth. The chart on the right illustrates forecast condensate and NGL mix growth over the next few years. We've been busy engaging with customers, resulting in more volume commitments to KAPS.
Examples of our recent success include an existing founding shipper increasing its volumes commitment, a new shipper committing volumes behind Keyera's Pipestone gas plant. Plus, we expect to have definitive agreements executed shortly for the majority of the volumes necessary to satisfy our rate of return requirements, and thus sanction Zone 4. We continue to anticipate sanction of Zone 4 to occur in 2023. As a reminder, Zone 4 volumes will be transported the entire length of the pipeline, thus providing maximum incremental fee revenue to the project. I would like to remind everybody that our noted Zone 1 through 3 return expectation does not include operating margin resulting from increased utilization of Keyera's existing downstream assets. My second key message is that incremental KAPS volumes unlocks economic investment opportunities in our downstream assets.
The best example to illustrate this opportunity is the potential sanctioning of a fractionation expansion at our Fort Saskatchewan asset. As illustrated on the right-hand side of the slide, frac demand growth is forecast to outpace existing frac capacity. Frac III is best positioned to allow us to accommodate the forecast demand growth while maintaining or growing our proportionate market share. Keyera's current frac capacity is highly utilized as a result of KFS's superior connectivity to each of the propane, butane, and condensate markets. In addition, we'll be able to expand our frac capacity at KFS utilizing existing storage capabilities. Finally, we have available land on our KFS site to cost-effectively facilitate this expansion. We have focused over the past couple years on finding higher value markets for the specification products we create.
Although not directly tied to my three key messages, I thought I would share a couple of examples of recent focus to enhance and extend our integrated assets to access high-value markets. One impactful example is accessing higher value markets for our iso-octane sales. As Eileen identified during her discussion, this has enabled us, in part, to increase our marketing guidance moving forward. Increased operating margin has resulted by developing new iso-octane sales relationships with refineries in the U.S. Midwest and Rockies regions. These new sales were historically made to export markets out of the Gulf of Mexico. The benefit is twofold. The volatility of the octane premiums received in these new markets is reduced, and the transportation cost to service these markets is lowered.
Next, an example of an opportunity that we believe will create meaningful upside opportunity for butane and propane in the future is supplying solvents to the oil sands. This will create opportunity for collecting a fee to safely and reliably transport solvents to our oil sands customers. The use of solvents will also be a component of the oil sands producers need to reduce their absolute CO2 emissions while being able to cost-effectively increase their production. Moving on to my third key message. We are well-positioned to execute a low-carbon hub strategy in the industrial heartland. Our view is that Western Canada can and will play an important role in Canada and the world's transition to a low-carbon economy.
The takeaways from this slide are twofold. As shown on the left, various forms of carbon emission abatement are forecast to be implemented over the coming decades to meet the world's carbon emission reduction targets. Alberta is well-positioned to compete for the development of the majority of these technologies. Alberta's unique combination of access to low-priced natural gas, suitable CO2 storage geology, existing infrastructure, world-class operating expertise, plus access to world markets make it a preferred location for low carbon development. Alberta contributes over 35% of Canada's total CO2 emissions. In addition, the graphic on the right illustrates the high concentration of large CO2 emitters in Alberta located in the Industrial Heartland area.
Recognizing that the Industrial Heartland provides an attractive environment to pursue energy transition opportunities, our existing land position plus existing pipeline infrastructure between Fort Saskatchewan and Edmonton enables us to provide a competitive fulsome energy transition service offering similar to that shown on the schematic on the right. We believe that our unique ability to either deliver low-carbon hydrogen to the front end of our or others' processes or capture, transport, and store CO2 off the back end of our and others' processes will differentiate our service offering in this region. The focal point of our low-carbon hub strategy is our Josephburg lands, as shown on the right. Our lands are uniquely positioned to build a cost-competitive energy transition midstream business anchored by agreements with strong strategic counterparties. It's important to touch on what makes our location so valuable and unique.
The majority of industry's key product pipelines either run adjacent or through our lands. It would be cost-prohibitive from other land locations to replicate this connectivity. CO2 transportation and storage capabilities should be readily accessible to our lands. Based on access to CO2 storage, low carbon hydrogen manufacturing will be enabled on our lands or in close proximity. Finally, access to both railroads to ensure our customers have access to the highest value markets for their low carbon fuels. It is because of these unique characteristics that we've been able to work with large industrial players to enable the support services necessary to pursue our energy transition strategy. Having the assets and the land is one thing. What differentiates us is another. As we previously announced, we've entered into a strategic relationship with Shell.
This relationship aligns with the vision of our low-carbon hub strategy to decarbonize our own assets and also help decarbonize the assets of other industry participants. It also aligns with Shell's vision to integrate its Scotford Refinery complex into its own energy transition strategy. We envision the benefit of our collaboration may include transportation and storage of CO2 to Shell's proposed Polaris CCS hub, including sequestration of CO2 from Keyera's facilities, low carbon hydrogen manufacturing and distribution opportunities, low carbon power offtake agreements, and finally, access to both major rail lines for transportation of low carbon fuels to high-value North American and world markets. We are excited to advance these opportunities with Shell in the months and years to come. Our vision of a low-carbon hub not only provides services to our customers, but it also enables us to decarbonize our own assets in the Heartland.
Building off of our expertise and customer relationships, our strategy enables us to transition a significant portion of our core assets to manufacture low-carbon products when it makes economic sense to do so. We will use cogeneration as the platform to execute this strategy at Alberta EnviroFuels and KFS. Simply put, as North American and world demand for low-carbon products materialize, our low-carbon hub strategy has the potential to create a long runway of economic investment opportunities to fuel our future growth. To summarize, Keyera is well-positioned to realize meaningful growth by strengthening our integrated value chain. We are focused in three areas to do so. Contract incremental volume commitments on KAPS, including sanction Zone 4. Incremental KAPS volumes will enable economic investment opportunities built off of our existing asset base.
Finally, progress a low-carbon hub strategy to position us to be able to pursue economic investment opportunities to decarbonize our existing asset base and offer competitive fee-for-service offerings to enable third-party customers' energy transition requirements. I'll now turn things back over to Dean for some concluding comments.
Thanks, Jamie. In closing, I'll leave you again with my three key messages. Our base business will remain strong. The types of energy that we move through our integrated system will be in demand for a long time. You heard from Jarrod all of the things that we are doing to enhance the profitability of our base business. We have visible growth with new projects, including KAPS, that will help drive the growth in EBITDA and DCF that Eileen spoke to. As Jamie just described, we have unique advantages to leverage our existing asset base. That will allow us to keep pace with energy transition as it makes economic sense. Overarching all of this is the focus on long-term risk management through the alignment with our stakeholders. That is what our ESG program that Nancy spoke to will deliver.
On behalf of Keyera's board of directors and our management team, I'd like to take this opportunity to especially thank our employees who have demonstrated exceptional care and dedication throughout the pandemic. Also, our stakeholders and our shareholders for your continued support. We'll now take a brief pause to set up for the Q&A session. Thank you for joining us today.
Thank you, everybody. This is Dan Cuthbertson speaking. I'll be moderating the Q&A portion of the session. Looks like first up, we've got a question from Robert Hope from Scotiabank. Please go ahead, Robert.
Yes. Good morning, everyone. I just wanna get a sense on how you're thinking about the allocation of capital. It looks like 2023 will be a bit of a lighter year in terms of capital spend. Is that being driven by, you know, the need to fix the balance sheet, or is it just the pace of the projects? Maybe, I guess, you know, the second part of the question would be, you know, if you do some non-core asset sales to strengthen the balance sheet, could you accelerate some of the growth projects if you do see demand for them?
Good morning, Rob. I'll just turn that over to Eileen.
Thanks, Robert. From a capital allocation perspective, yeah, absolutely. The top priority is to bring the net debt to EBITDA back into our targeted range. That remains the priority. To answer your question, yeah, we do see some modest, you know, capital spending in 2023, but I do think that based on the projects we see on the horizon, that really most of that we can pace it. A lot of that really begins to ramp up more in 2024, assuming they are sanctioned. With regards to your second question, you know, sale of non-core assets, again, you know, when we talk about our net debt to EBITDA coming down back into the targeted range, that's just happens on its own as we start to see that EBITDA come back.
We see the, you know, the KAPS incremental margin, and then now we're also through the AEF outage this year. Again, it's not something we have to do, but non-core sales are always just a good part of business, so it's something that's always part of our strategy.
All right. Thank you for that. Then maybe just some thoughts on, you know, the second half of KAPS. You know, your partners in Pembina and Keyera have stated that they're looking to potentially sell that stake there. You know, how are you thinking about, you know, potentially acquiring that? Do you need that, or is the view that you're happy with 50% and you're gonna get all the downstream benefits?
Yeah, Rob, we've been getting asked that question a lot lately. You know, obviously, KAPS is a great project for us. It integrates our upstream G&P business with our downstream frac storage, logistics, and marketing business. What's really important to note is that we own 50% of it, and we have operatorship. That means that we drive this project from a commercial, operational, and engineering construction perspective. You know, we believe that you know, we have what we need. It's not a must-have to have the other 50%. We're certainly good at working with other partners.
I guess from us overall, I mean, it's not that we wouldn't consider it, but it would have to fulfill all of our financial priorities that you heard from Eileen earlier, and also be accretive for our shareholders. Anyway, it's not a must-have, but we'll just apply our rigorous capital allocation criteria to that and any other acquisition that we would consider.
All right. That's it for me. Thank you.
Thank you, Robert. Next up, we have Linda Ezergailis from TD. Go ahead, Linda.
Thank you. Good morning. I apologize if some of my questions might have been covered. I had a few tech glitches, as many of you can appreciate. Maybe just thinking about your energy transition and the pace. Obviously, there's some constraints around, you know, policy, technology, et cetera. I'm wondering how you think about Keyera's ability to potentially accelerate the opportunities and mitigate some of the potential challenges by considering new partnerships or acquisitions, whether it be to gain new capabilities, new platforms enabling certain technologies or operations, enter new geographies, have new relationships, et cetera. Would that be a lever potentially, and under what conditions might you trigger that?
Hi. Good morning, Linda, and great question. That's a lot to ask. You know, overall, you know, again, we see that energy transition and the demand for the downstream demand for low carbon products is happening. What we wanna do is leverage off of our existing expertise and our asset base. We think our most significant advantage is in the Industrial Heartland, where, as you know, we have a tremendous footprint already, largely anchored by our AEF and our KFS facilities, but we also have a number of other facilities and a lot of people and talent in that area already. You know, we're always trying to look for the most efficient solutions for industry. We're always looking for win-win opportunities. We've done a number of those types of partnerships already.
Shell is just a great example of how they're already demonstrated a lot of expertise at carbon sequestration, and also they have proprietary technology with the manufacture of hydrogen. It's just one example of how we think we can leverage off of some of their expertise with ours and our infrastructure. Again, we have a pipeline capable of distributing hydrogen along the industrial heartland from Fort Saskatchewan down to Edmonton. We have cavern storage expertise, which could come into play for a larger sort of a hydrogen hub development. We have good logistics expertise to export those types of products. Again, you know, Shell's one example, but we think there's other opportunities to partner with other companies that have complementary expertise that we could leverage together.
Jamie, is there anything you wanna add? Yeah.
No, I think that's pretty much sums it up.
Okay. Yeah.
Thank you.
Just as a follow-up maybe, when you think about maximizing netbacks for your customers and maybe your marketing business, just wondering what sort of opportunities might exist in terms of value chain extension into petrochemical investments, maybe new investments in end markets, as you've done had some toeholds established already, and your thoughts on exports off the West Coast and how geopolitics might inform and evolve some of your thoughts around that.
Yeah. I mean, first of all, with respect to exports overall, as you would've heard earlier, we really believe that Canada should be the supplier of energy to the world, and energy security is more important than ever. I mean, I think everyone knew the risk exists, but when you see the situation in Ukraine and overall in Europe, it underscores the real importance of having that energy security. You know what? I think the ESG theme is always gonna continue to grow, and we should care where our energy is produced and how it's produced, and we should be very proud of what we do in Canada. I really believe that Canada should be a growing supplier to the world for energy.
You know, when you think about sort of overall netbacks for customers, our system, we've always tried to provide a lot of flexibility for our customers, so they can access highest value markets. We think some of that high-value market is gonna continue to develop in the Fort Saskatchewan area in the industrial heartland, where we think there'll be more petrochemical developments, and also low carbon fuels. We don't wanna totally step out of the box. We think that a lot of our existing expertise and assets in the area that can help leverage and enable that type of development. Again, that a lot of that includes our pipelines, our rail logistics capabilities.
You know, we have truck offloads at a number of our facilities in that area. Cavern storage is really big. Above ground, below ground storage, I should say. We have a lot of integrated facilities in the area, so we wanna help enable it, but we don't wanna overstep where we're actually building petrochemical facilities 'cause that's not our core expertise. Jamie, is there anything else you wanna add?
No, I think you nailed it.
Okay.
Thank you.
Thank you very much, Linda. Next up is Robert Catellier from CIBC. Go ahead, Robert.
Thank you, and good morning, everyone, and thank you for today's presentation, especially the focus on safety. You've spent, I think, the majority of the presentation really on the liquids business unit and energy transition. Before I delve into those a bit, can you just provide a baseline expectation of what you're expecting for the Gathering and Processing volume growth in your EBITDA guidance, notably the 6%-7% CAGR?
Yeah. You know, first of all, you know, we're very optimistic with what we see in our G&P business, both in the north, our assets there are very well situated. Also in the south, where we're starting to see increasing volumes. Maybe I'll just turn that over to Jamie, and he can speak to that further.
Well, I guess first I'd like to fully understand the question, Robert. Is it what we expect from our G&P business with respect to the contribution to our CAGR that we communicated?
Yeah, really what fundamentals and growth rate do you see in the G&P business that contributes to that 6%-7% growth rate?
Right. Well, you know, we can't get into necessarily specifics with respect to relative contributions of our business with respect to that communicated growth rate. But as Dean said, you know, fundamentally, you know, a lot of very positive developments with respect to all suite of commodities that we deal with. And certainly, our assets we view having the ability to be able to take deeper cuts, you know, of natural gas and ultimately get natural gas liquids. And the demand not only in North American soil but worldwide is certainly a differentiator in our minds. The fundamentals around natural gas and NGLs, to be a little bit repetitive, really do speak to an expectation that we're gonna start to or continue to see increased utilization within our Gathering and Processing assets.
You know, I think over the coming months, we expect to see some continued growth in that segment of our business.
Yeah, Robert, maybe if I can just add, I really want to emphasize that we see a lot of growth in our basin over the next five years. Again, you know, I think people forget about just how much market access that's either been built or is getting built now, and specifically with natural gas, again, you look at the coal to gas switching in Alberta, more export capacity into the U.S., and then LNG off the West Coast. I think there's a lot more demand beyond the first two trains, which is two BCF of demand. When you add it all up, it translates to growth. A lot of that's gonna happen in the Deep Basin and also the Montney, where we're well situated. We are a volume-based business, so as the volume.
As we see more growth in our basin, we expect to see increased volumes through our gas plants. Again, the discussions that we're having with our customers are sort of aligned with that view. In some of our plants, as utilization increases, it also probably creates an opportunity to increase our per unit margins as well. I think those are two reasons why we feel more optimistic over the next several years of our G&P business.
Great. That's helpful. This next question is really a follow-up to Linda's line of questioning. Yeah, I'd like to understand a little bit more how you feel Keyera's positioned with respect to supplying some of the petrochemical projects. You know, you've touched on the Dow ethylene cracker, and I think you indicated you don't really have an appetite for investing in a cracker itself, but there are other types of infrastructure you can supply. Even though these are longer-dated projects, can you characterize what you're seeing as the potential upside, either on the amount of capital you could spend or the contribution these types of initiatives can make to the business over the longer term?
I think it would be probably premature to speculate what that could be. If you look at the map that was shown earlier, you can just see how well our assets are positioned in areas of development. You know, Dow is just one example, where they are situated between our KFS site and our Josephburg site. They're sandwiched in between, and then we have also our big 1,300 acres of developed land to the north of that. We already have. We'll have 10 pipes that run between KFS right through Dow to our other side of our property at Josephburg.
Those pipes, we can transport a number of products, including hydrogen and CO2 through them. I mean, that's what they're rated for, in addition to a variety of spec products. Are we already positioned to be able to help supply services, for example, for Dow? Absolutely. It's too premature to say, you know, what that might look like or what, you know, but we're very well positioned. We think that'll be part of our future once you start looking at 2025 and beyond.
Yeah, I appreciate it. It's a little bit early to have a full grasp on it, but it seems almost inevitable that you'll benefit to some degree. Final question from me before I pass it on. Just with the rapid rise in inflation, you know, does that change how you look at pricing strategy and maybe look to include more flow-through of operating cost in any new commercial agreements you might strike?
Yeah, I mean, that's a good question, Rob, absolutely. You know, as the capacity starts to fill up and obviously the commodity price environment is much stronger, so I think the types of contracts that we can do today are gonna be much different than what we would have done a year or year and a half ago in the middle of the pandemic. So we do think there's more opportunities to structure our contracts to reduce our exposure to cost. We are seeing some inflation, but I think our team has done a remarkable job in terms of managing that exposure. You know, definitely.
You know what, I should say a lot of our contracts already have flow-through provision, where we do flow through the cost to our customer. Where we have fixed fees, a lot of those contracts have escalator provisions in them as well. You know, we are already protected in a number of ways, but certainly it's front of mind as we look at new contracts going forward.
Thank you very much.
Okay, thanks for those answers. I'll turn it over.
Thank you, Robert. Moving on now to Robert Kwan from RBC. Go ahead, Robert.
That's great. Good morning. You've talked about seeking a higher degree of long-term take-or-pay contracting. Just as you think about going into sanctioning a new project, can you elaborate what higher degree means? You know, is it a percentage threshold that you're looking for? Possibly just a framework where you wanna make sure that you're meeting your return target via take-or-pay and anything that's variable really just drives upside to the return.
Yeah. Good morning, Robert. That's a great question. You know, overall, we look at our risk adjusted returns, and you know, we want to make sure that most, if not all of it, gets us into our base threshold range, that 10%-15% return on capital, unlevered. Yeah, we are trying to target to get into that range. It's not to say that we wouldn't sanction a project that would be slightly below that, but it would have to have a tremendous amount of upside, that we would have clear visibility to. You know, it's just part of our overall discipline and how we're allocating capital today.
You know, the projects that we're looking at now and looking to sanction in the future, we think that, you know, we should be able to meet those investment criteria going forward.
Great. If I can turn to a question on guidance. Previously, the base guidance range was described as being something akin to a T90 type range, high likelihood of exceeding that, and frankly, that's exactly what the company's done in recent years by a significant margin. Just to make sure, you did note that this new range you have a high degree of confidence in, would you be approaching it in a very kind of similar apples to apples with respect to conservatism as the old base range?
I just wanna confirm, that's for Marketing you're speaking to. Is that right? Or-
Yeah. Marketing. Exactly.
Yeah. Eileen, do you wanna speak to that?
Sure. Thanks, Robert. Yeah. Again, it's based on a high degree of confidence, just like the old guidance was as well. I think, you know, overall, we just see a higher. There are just many factors that go into the marketing business. I think overall, the marketing team has done a great job in unlocking value, especially for iso-octane. There are many factors. But overall, you know, this is what we believe we can deliver over the next three years.
Just with that for Galena Park and Wildhorse, and particularly for Wildhorse, would you still have a high degree of confidence in that range if we don't see any improvement in either of those businesses?
Yes.
Okay. Perfect. If I can just finish with one last question just on the growth CapEx, as you go further out, the CAD 300 million number. Can you just talk about if you're spending CAD 300 million, you know, is that in your plan self-funded, it keeps leverage in your targeted range? And I guess just using your 10%-15% return targets, that only drives about 3%-4% EBITDA growth. So is that the messaging where the long-term growth rate shakes out, or do you see a lot of other just general improvements in the business that can get you closer to that 6%-7% that you're putting forward?
Yeah. Well, one thing to note, sorry, is that the 6%-7% is already based on sanctioned projects, very much so. That's the, you know, extra volumes at Pipestone as well as Wapiti and KAPS already coming online. I think that's where the 6%-7% is coming from. The CAD 300 million, as you said, is what we can do, you know, what we feel makes sense based on the projects that we see and the spacing. That's what we believe we can fund on an equity self-funding basis. I think what's really important to note is that the 10%-15%, one, we're targeting toward the higher end of that, but it doesn't include the downstream benefits. That's what gets us that extra value, right?
We're just looking at an infrastructure project at that 10%-15%, but there's all the additional benefits, and that's the value of that integrated value chain.
Longer term, so kind of past this range, you still think you can grow at that 6%-7%, spending the CAD 300 million and getting the downstream benefits then?
It's part of the whole integrated value chain. There's gonna be the infrastructure returns, but on top of that, the marketing piece, which is so, you know, critical to the overall value chain.
That's great. Thank you.
Just maybe to add to your question, though, it does involve the growth rate does involve some growth from investments that we've already made. Wapiti would be an example where we don't feel like Wapiti is at its peak EBITDA kinda generation. You know, that'd be one example where we think there's gonna be continued growth there. Projects like you know what we're doing at Pipestone are very strong returns 'cause we're just tweaking a brownfield facility or doing a brownfield sort of expansion. You know, I think we have opportunities to sort of perform above or invest above our 10%-15% range, but we're also filling some of what we have already.
Yeah.
Great. Thank you very much.
Yeah.
Thank you very much, Robert. I'll now turn it over to Ben Pham from BMO. Go ahead.
Okay, thanks. Good morning, everybody. I may just start off on KAPS, a more specific question. I'm not sure I missed it. What percentage do you have contracted on KAPS? And what's up with the costs trending higher, are you able to tweak your tolls? I know in the first round you couldn't, but is there ability to revise tolls?
Yeah, good morning, Ben. Maybe to your second question first, that we you know, our tolls have to be competitive. We don't have provisions to change the fee structures that we've already contracted with existing shippers for the cost. Overall, we still believe that this is you know, gonna be a very strong project from a return perspective, not only just for KAPS but also what it does for our whole downstream business, KFS, storage, logistics, marketing. To your first question, sorry, what was the first question again? Oh, on overall re-contracting. You know what?
Our policy is not to update our sort of percentage contracting on a regular basis. I do want to emphasize what we said earlier, is that we are very optimistic about where we're sitting today and the discussions we're having with our producers. Again, it's just the overall macro view of what we see in terms of growth in our basin. A lot of that growth is gonna be in the Montney. We're one of only two fully integrated systems that can deliver NGLs into the frac storage complex at Fort Saskatchewan. You know, on top of that, our producers have never been stronger. As you saw in the graphs, they're quickly paying down debt.
They have a lot of free cash flow to return capital to their investors, and they also have the opportunity to grow. What that's translated to is we've added more contracts from existing producers and also new producers along zones 1-3. We're also very encouraged about the prospect of sanctioning Zone 4 later this year. The same reason why there was a need, an industry need for competition and a competitive alternative for an NGL transportation solution in Alberta, that same need exists in B.C. You know, as you heard from Jamie earlier, we expect in the near term to have the majority of contracted volume to sanction that project here very shortly, and also expect a sanctioning decision later this year.
Great. Thanks for that, Dean. Maybe my second question on the KKR transaction recently, curious your thoughts on implications for the industry for Keyera. You did mention capital recycling on the Q4 call. Would you ever be interested in creating a similar structure such as this and a bit of financial engineering and return of capital or accelerating the return of capital?
I'm not sure I fully understand the question, sorry.
Just thoughts on the KKR.
Well, first of all, over on the KKR, you know, Pembina announcement, they've both been public about their intentions to sell the other 50%. As I said earlier, you know, we already have the operatorship. From a commercial, operational, and engineering construction perspective, we drive the project. You know, when we think about the other half, we'll work with whoever the partner is. You know, would we consider to buy the other half? You know, we consider a lot of different acquisition opportunities, but it has to fit within our financial priorities that Eileen laid out, and also just overall rigorous capital allocation criteria.
You know, I guess that's about all I can say about it, but it's not a must-have.
Maybe the second part of that question was really just seeing that transaction. It seems like there's a private equity interest in the midstream sector.
Right.
What they're willing to pay.
Right.
I'm tying it with what you said about capital recycling on the last call. Would you be more specifically, you carve out assets, whether it's KAPS or gas processing, and you bring in a private equity partner, you lever up the entity, you get the cash out of that.
Oh.
Sorry, would you be more... It could sound like it's more smaller asset sales from my interpretation, but-
Yeah.
Post that KKR deal, are you more willing to consider something maybe more meaningful? Was really the second part of that question I had.
Yeah. Overall, I mean, we're trying to get more focused on our largest facilities. I mean, we're trying to consider the size that Keyera's at and where we're gonna drive our company in terms of the future, and making sure that we're focusing on the most meaningful parts of our business and assets. We'll always consider different alternatives with the intention of adding value for our shareholders. That's our number one focus overall. You know, would we consider opportunities to partner with others if it meant we can invest in higher value projects, opportunities that make us more competitive, you know, provide our overall better service, make us more efficient?
Absolutely, we consider a lot of different types of opportunities, but the basis always has to tie back to adding value for our shareholders.
That's great. Thanks for the presentation. Thank you.
Thank you very much, Ben. Next up we have Matt Taylor from Tudor, Pickering. Go ahead, Matt.
Hey, everyone. Thanks for taking my questions here. I wanted to start first maybe, Dean, on your new investment criteria. I'm wondering, maybe just provide context if this criteria is in place a couple years ago with investments like Wildhorse, Galena Park, and even maybe approaching KAPS. Would you do that a bit differently or is it a matter of the backdrop and environment you were dealing with, you know, a couple years ago as opposed to what you're seeing today, where you're a year away from bringing KAPS in service and you know you have line of sight to downstream long-term contracted assets?
Yeah, that's a very good question, Matt. I'm curious why you didn't turn on your video. Maybe you're sitting in your shorts today, but.
Yeah, Dean, you don't wanna see me today.
No, that's a good question. I think that we invested in some projects that we definitely wouldn't invest in today. We wanna be a lot more focused. Part of it is that we see a lot more clarity, too, in Western Canada in terms of growth that didn't exist three years ago. I think it also the fact that we're sorta self-funded drives a lot more discipline in making sure that absolutely every dollar counts. I mean, we've always tried to do it, but I think it adds just another layer of discipline to make sure that happens. What it means today is that we have a lot of opportunities, but they get filtered and high-graded a lot.
The number of projects that actually move forward, you know, are our absolute best ones. You know, specifically with respect to KAPS, we just think that this is a project that makes our company a lot more valuable overall. To have that fully integrated system right from the Montney all the way down, you know, through our Liquids Infrastructure and Marketing business, we think it's gonna pay a lot of dividends and drive a lot of growth in all parts of our business in the future as well.
Great. Thanks for that, Dean. I wanted to finish off. It's a two-part question. First, now that those. Assuming that the KKR deal closes and those Energy Transfer volumes, you know, move into different operatorship, can you talk strategically how those volumes and that customer base and that part of the basin was included in your capex guidance? I guess the second question to that, as you're thinking about Zone 4, it pushes up beyond where your existing G&P asset base is today. Should investors be thinking about, you know, customers are gonna grow into that expansion, or you might do some M&A to help secure volumes on the upside, or would it be diverting volumes from the competing transportation system?
I think that what's important to note for both of your questions, Matt, is that this is like a basin asset, so the volumes don't have to come from our gas plants. In fact, a lot of the volumes are gonna come from third-party gas plants that we're gonna tie into. You know, whether that's in zones 1-3, whether it's you know, the ETCs, you know, gas plants or other third-party gas plants or in Zone 4, we can compete with them just like our competitor can. That's a great thing about having a basin asset. We feel pretty good about you know, again, the discussions that we're having with producers.
Again, a lot of those are outside of facilities that aren't owned by Keyera on the G&P side.
Okay. Thanks for taking my questions.
Yeah. Thanks, Matt.
Thank you very much, Matt. The last question is coming from Pat Kenny from National Bank Financial. Go ahead, Pat.
Thanks, and good morning. Appreciate the presentation. On the CCS front, I know you're focused on the opportunity here with Shell in the Edmonton, Fort Saskatchewan region. Just given Entropy's announcement yesterday reaffirming the economic viability of post-combustion projects in the field at CAD 40 a ton, curious where Keyera is at in terms of developing and implementing similar technology across your G&P portfolio, either on your own or via partnership?
Yeah. Yeah, Patrick, good morning. We are looking at different types of technology. We're not sort of a technology company where we would try to go and develop our own proprietary technology necessarily, but we think this is an opportunity, though, where we can leverage off of someone else's expertise. We think it's great that companies like Entropy are, you know, have some technology, and I know others have different technologies as well that are advancing. We're just evaluating what would be best for our facilities and the most economic. You know, when the right one emerges, we will, you know, we'll announce it and move forward.
We fully believe that the carbon tax regime will continue to increase. That will make projects like that more economic overall. Jamie, I don't know if you wanna add anything on that.
Yeah. Dean, thanks. You know, Pat, I think the one thing I would say and leverage off of what Dean said is we have identified assets that are well suited for the carbon capture technology in our suite of assets. And that we're really being deliberate and patient with respect to making sure that technologies are proven before we actually implement them at our facilities. You know, such that we're gonna allow our shareholders to see the maximum value of that potential.
Got it. Thanks.
Patrick, and maybe just to get a little more specific, we do actually think there's an opportunity at some of our gas plants. Six of our gas plants have acid gas injection. You know, we're looking at ways where we can capture more carbon and minimize the amount of capital costs associated with making that happen. If you can use some of your existing downhole sequestration assets that we have already in place, that would require the least amount of capital. We see some opportunities there, but it's still too early to speak in any further detail about it.
Right. I guess as you maybe think about the commercial construct here, I mean, let's just take the Shell Polaris partnership. Just with respect to fee-for-service, whether or not you envision marketing or trading any carbon credits, maybe you can also speak to what return thresholds you might be willing to accept on this type of investment moving forward, just relative to your legacy business, again, just given the qualitative or ESG benefits related to the investment in the Shell partnership.
Yeah, I mean, I think it's too premature to get into a lot of detail of commercially how that's all gonna work. I mean, we have a lot of work. First of all, we have to see if Shell's awarded the pore space rights in the Industrial Heartland. You know, on top of that, you know, we have a long ways to go to actually work out a deal with Shell. You know, I think we're a ways away from that to be able to speak in any detail. What I would say, though, overall in the returns is that it has to be profitable for our investors.
You know, we wanna do great things, but our shareholders also need us to generate a return that drives our dividend growth. You know, we expect to generate returns within our thresholds on all of our investments.
Perfect. Maybe switching over to potentially sanctioning Zone 4 here on KAPS. I guess just related to the Frac III expansion, shooting for that 2025 in-service date, just wanted to confirm if, you know, the commercial contracts for Zone 4 effectively underpin the Frac III expansion. Also if you could maybe comment on how Zone 4 might set you up for other potential upstream infrastructure opportunities, perhaps more on the B.C. side of the border.
Yeah. Maybe I'll answer part of that, and I can turn it over to Jamie. We think that it'd be a great opportunity for us to sanction Zone 4. Again, we have to have the contracts to back it. You know, again, we're seeing a lot of momentum on that front. To have access to the entire B.C. Montney fairway and offer that competitive alternative with a brand-new pipe for our customers, we think that's great for industry. When we look at trends overall, especially in B.C., it's really being dominated now by a very few players. Really, the reason why midstream companies exist is that you're providing a solution for industry overall.
If a lot of the developments are really driven by one or two producers in any given area, you know, they might be better off just to build their own gas plants and then they can just feed their liquids into our system, you know, through KAPS, through our KFS storage, logistics and marketing business, you know, downstream. You know, overall, we don't feel like it's a must-have to invest in all the upstream G&P business. It's the basin assets that we're focused on.
Great. I know we're running a little late on time here, but just last one for me. On the self-funding front, maybe for Eileen. Shooting for that BBB mid credit rating, maybe you can just speak to the remaining capacity you might have on the balance sheet for preferred shares, hybrid debt, and whether or not you expect to utilize any of those levers to reach the leverage target and achieve the credit rating by the end of 2023.
Thanks, Pat. With regards to your first question, I think it was on the investment-grade credit rating. I think, you know, obviously, our goal is to get our S&P back to that BBB mid. The two factors, you know, that really influence that are improving competitiveness of your business and continuing to add that take-or-pay. That's where KAPS does significantly improve that picture. As we talked about, KAPS really does improve the competitiveness of our overall business. Those are the things that S&P in particular looks at. I think, you know, we have to continue to have those conversations with them to, you know, to have them see, you know, that long-term, you know, kinda confidence in the competitiveness for our business.
Now, I can't remember what the second question was again.
capacity for further, you know, preferred share-
Oh, right.
Hybrid debt structures.
Right. Based on our balance sheet today and our structure today, we are, you know, more or less tapped out on how much more hybrids or preferreds that we can do in order to get that preferential 50% equity treatment. Again, you know, stepping back, the CAD 300 million is really based on equity self-funding, but also what makes sense and the projects that we see on the horizon that we feel are more likely over the next few years.
Yeah. Maybe just to add on to what Eileen said. You know, you're asking about just getting our debt to EBITDA back in the 2.5x range, 2.5x-3x range. It's just based on our business, you know, the growth we see in our EBITDA. Keeping in mind that, you know, 2022 is a unique year with our four-year turnaround at AEF. We certainly think with the cash flow that we'll be generating, a lighter capital expenditure profile, that's what's really gonna drive our balance sheet into that 2.5x-3x range, not the issuance of other kind of securities.
That's great. Thanks a lot, everybody. Appreciate it.
Yeah, thank you.
Yeah.
Thank you very much, Pat. With that wraps up the Q&A session and also wraps up the Investor Day event. I just wanna thank everyone for taking the time to join with us today. The investor relations team at Keyera will be on standby for the rest of the day. Feel free to reach out in the coming days for any questions. Thank you very much.