Welcome to Pembina's 2019 Investor Day. I'm Cameron Golade, Pembina's Vice President of Capital Markets. We've got an exciting 2.5 hour presentation for you today. We'll leave some time for question and answers at the end. Just a short safety message, I think most of you probably came up through the stairs when you came in this morning.
If there is an alarm, that's where we'll evacuate out through the front of the building. Washrooms are just around the corner behind me here. So please do take a break if needed. We will take a break around 10 a. M, a short 10 minute break and then reconvene and finish the rest
of the presentation. I'd like
to take the opportunity to introduce some of the Pembina personnel in the building today. First off, if I can have members of Pembina's executive team stand and wave so you can see who they are. We're also fortunate to have members of Pembina's Board in attendance today. If you could please stand for a moment and wave. Thank you very much.
And also, I'd like to take the opportunity to thank our Investor Relations team, good stand for a moment as well, for the wonderful work that they did pulling this all together. There's a ton of heavy lifting here. So thank you very much to our team. And finally, thank you to the King Edward for hosting us with a beautiful room, a wonderful breakfast service this morning and a great day. So not to delay any longer, the format that we're going to do today is something slightly different.
It's still going to focus on much of the business and are centered around the divisions that we have. But what we often find in our investor meetings is many of the same kind of consistent questions from our investor base. And so what we've tried to do is turn this presentation around a little bit and put those questions right up there that we get consistently and answer them through the presentation. So you'll see our team go through those. Our pipeline division, our facilities division, our new venture division and the finance update also.
So without further delay, I'll pass it off to Vic.
Good morning, fellow investors. Welcome to our Investor Day. We're excited about the format, as Cam says. Last year, we unveiled our strategy to bring hydrocarbons to global markets. The year before was Vericin.
The year before, that was our guardrails and our intent to enter the petrochemical business. And this year, we're catching up and going to have a long Q and A today essentially. There is forward looking information in the deck. They're our best estimates, but they are estimates and not promises. Also, we have non GAAP measures, so a lot of non accounting measures included in the presentation today.
Here's our list of presenters. Myself, Jared, Jason and Stu are going to take you through quite a bit of detail on the various divisions, and Scott will take you through financial aspects of our business. So highlights since last Investor Day, I always like to do kind of is what we said a year ago, and here we are now. We worked 7,000,000 safe hours last year, which was incredible. And if you think about the they weren't just the kind of hours where you're doing the same thing that you did the year before.
They were kind of hours where you were building and commissioning new equipment. We had amongst the coldest 5 or 6 week stretch in February in the history of Alberta, And some people were assets were going down, and we set production records during that time. So hats off. I don't know if you know what it's like. You probably do when you're in -thirty five temperatures, and I can barely get to my car without feeling sorry for myself, and we had people doing a great job safely outdoors.
Operational, almost 2,500,000 barrels a day of throughput through our pipelines, and we're sneaking up close to 1,000,000 barrels a day of throughput equivalents a day of throughput on our facilities. We put $1,000,000,000 of assets into service safely on time, on budget, and we have another $700,000,000 of growth projects scheduled for this year. We raised $800,000,000 We were oversubscribed on every time we went to market. Our balance sheet is in terrific shape, amongst the best shape in the industry. And we hit our year 1 synergy targets on the Veresen acquisition, which we completed in October, but really fully integrated through the year, was a great success.
And we secured $5,000,000,000 A lot of meetings I had with you folks was what are you guys going to do next? Do you have enough growth? And the answer is yes. I mean, this it's $1,000,000,000 to $2,000,000 a year of growth. That's the rate at which we would like to grow at because it doesn't require any more dilution.
We put up almost $5,000,000,000 of projects, and a lot of what you'll see today is around capital allocation and some of the things that are forthcoming. And I think the message is we believe we can keep doing over the next number of years what we have been doing in the past. And you can read for yourself a lot of the same stuff, more plants, cogeneration, pipelines, storage, but also some new stuff, the main event being the petrochemical facility, which we have 50% interest in. And we increased our dividend recently 5%. We wanted to grow our dividend at a very sustainable rate, and we think that from time to time, we may be able to bump it up twice in 1 year with a catalyst transaction or something that gives us immediate accretion.
So the kind of cent a year is very reliable, and then from time to time, we think we can double down on that. So what you see is what you get. That's really the message here. So just stepping back, the purpose of our company. We believe our company has 4 equally important purposes,
customers. So we want to
be chosen first by customers for safe, reliable, value added service. We want you folks in the room to say Pembina is a good investment. It's a core holding. And the way to do that is to keep putting up numbers predictably, consistently, year after year. We want our employees to say we are the employer of choice, and we want to leave communities with a net positive benefit.
So we want to leave communities in better shape than we find them. And that's something we've been doing, and we've been doing it well for a long period of time, and it's how we stay off out of the newspaper. We're building thousands of kilometers of pipe every year. We manage to stay out of the newspaper. So in summary, we want to be able to continue to deliver integrated value added services to connect our pipelines, our customers' geology to global markets.
So we look forward what's next for Pembina. We're going to keep finding where the best prices are in the world and fill in between that location and what we have today, we're going to fill that gap over time. So I'll start with a little bit deeper dive on employees and communities, and then I'm going to quickly go through some customer and investor slides, but the deeper dive is going to come from my colleagues. So just to orient you, in 2010, we had about 400 employees. We ended the year last year with about 2,200, and we project to be about 2,400, 2,500 at the end of this year.
So over the decade, it's about a 4 5 fold increase in staff. Externally, we've been recognized as one of Canada's top 100 Employers, 1 of Alberta's Top 75 Employers and Recently by Globe and Mail as one of the best places to work for young people. It actually makes me feel kind of hip that young people like to work at Pembina. Safety stats, we continue to have a very strong record of safety. You can see compared to our energy pipeline peers, we're having about half the incidents that our peer group has on average.
And last year, you'll recall, I reported that our driving was average, and average isn't good enough at Temena. And so we have improved those stats quite dramatically year over year, and our challenge will be to keep them as good as they currently are. I would say 2018 was the hardest working year in the dominant history for our employees, and they rose to the opportunity, but there was great change between the global strategy. We reorganized. You'll remember last year, we talked about reorganizing and then taking a $10,000,000,000 bite that diversified us into numerous joint ventures, which we had limited experience with and really gave us a U.
S. Footprint. And we had to digest lots of field operations, which we also or remote office locations, I should say, that was new to us. So we had a very hard working year, and again, our employees rose to the occasion. Communities.
Draw your attention to the graph in the middle here. This is our ramp up in community investment. So you can see it's absolutely dramatic. And we set out a few years ago to get to what we understood to be top decile performance, which is reinvesting 0.1% of our EBITDA in communities, and we're well on our way to doing that. And what's not shown on here is that most of that incremental investment is in the field, in areas where we operate, and we empower our districts to tell us how we should invest this money to make have the greatest impact in their communities.
And that is just it's working astonishingly well. Our priorities are community building, wellness, education, safety and environment, and we have a community investment group that focuses on those priorities. So we're aspiring to reinvest $10,000,000 this year. The other headline a couple other headlines here is our $4,000,000 contribution to United Way. That's almost sneaking up on $2,000 per employee, which is outstanding, unprecedented, and we're very proud of it.
Also, Breakfast Clubs of Canada were a huge sponsor countrywide, and we'll hear more about that later today. This was our 1st year that we published a sustainability report for Pembina. And really what it was, was just writing down all the things we did. We collected the information, our community investment, what we do for employees, what we do for the environment. And it was a number of years in the making because we kind of have a unique business mix of assets and things we do, services we provide.
So we wanted to get some solid comparative information. We aggregated all that, and the report is written, not surprisingly, from the context of the purpose of our company with the four main purposes across the bottom. We think of it as a matrix, but it is early days for us. We're assessing what that information means to us and how we can improve, and that's really our commitment to be back here reporting on what we're doing to improve sustainability at our company. So this will become a regular feature of our report to you here.
Customers and investors, we'll start again with the geology. And the original cash registers for our company were the Deep Basin, the Cardium, and that's really what the company grew around for many years for the 1st 45 years or so. And then more recently, we are developing huge shale resources. The numbers are a bit too small here, but Montney, 160 years of current production oil sands, 300 years Duvernay, 400 years. So our traditional cash registers, I mentioned, there's still decades of production there on the Cardium and in Deep Basin.
But the shale, reserve life. And the beauty of that is there's our pipes right on top of that prolific geology. So if we maintain our pipelines the way we have been maintaining them, they can last 100 years. And we sit on top of this great, great resource that it's location, location, location. And so that's our conventional pipelines.
Oil sands, we started in 'one, and we have a very strong oil sands footprint, largely synthetic crude oil lines, refined oil. And then in 2017, of course, the Veresen acquisition, which really grew our gas business and diversified us internationally with the Alliance Pipeline, of course, continuing down to Shanahan and Ruby, taking gas from the Rockies to Malin. We added eggs, and we had Vantage. And so that's now called our transmission business unit, and we have a huge I think we have about 18,000 kilometers of pipe, so in serving many basins. So that's really what is now our pipeline division.
Numerous plants, of course, we started out in the Cut Bank area, grew from there. We added the Saturn complex. We added West Haven. And in 2012, we added Empress and Younger up in the Taylor area. And in 2017, with the Verison acquisition, we added about 1 Bcf a day of processing up in the Montney.
We did really have that strong Montney processing footprint, and now we do. So we have a world class processing business. Fractionation started at Redwater and grew from there. I've got a slide to show you the capacities coming up, so I won't belabor those. But essentially, we've successfully downward vertically integrated behind our pipes.
And then of course, in 2017, with Veresen, we added the fractionation down in Aux Sable and we had it in Sarnia. And then our new ventures, taking product to global markets, Our Prince Rupert facility, Stu's or Jared, I think, has a bunch of good pictures on that, And we announced FID early this year on our petrochemical venture. So that's taking product to new markets and adding value to those products, which cruises back to our customers. The Pembina store, so it started with production, ended with consumption, and we've been filling in the blanks since 1955. It's our 60, 50 year in business this year.
And not exclusively, but the thrust of our company for 45 years ending in the 2000 time frame was oil and condensate gathering. We consider this a value chain with field terminals, truck terminals, starting off first with the crude lines, the conventional pipeline business, adding the heavy oil lines in 1, and then some of the terminaling. We added crude oil marketing in 2,005. In 2,009, we jumped to the gas side. We started processing liquids or processing gas, taking more liquids out and becoming our own customer on the pipe.
And I believe we're our own largest customer now on the pipelines for natural gas liquids. And then 2012 was really the 2nd leg on the stool being the NGL business. We acquired Providence and expanded that business aggressively in a very positive time to do that. And then in 2017, through the acquisition of Veresen, we got that 3rd leg on the stool being the gas business. And so we've got now 3 legged stool, and we can provide all the services that a producer needs to get their hydrocarbons to market.
And we did kind of a landmark deal with NuVista. It was the first deal where we provided them everything, gas to Chicago, NGL extraction, fractionation, marketing, processing, sour processing, condensate handling. So we are starting to do deals like that. So it's very exciting, and I think it provides evidence that adding that third gas leg to the stool was a wise thing to do. And then what's coming next, of course, is hopefully Jordan Cove, commodity NGL exports and value added services to NGL business, starting with the polypropylene plant.
So priorities. Number 1, protect the franchise, provide safe, reliable, cost effective operations, fill existing capacity. The most money we're going to make is to keep our assets full, and the team will show you our utilizations are second to none in industry, optimize the existing asset base, renew expiring contracts and focus keep focusing on all stakeholders. Read everybody well because in the end, you need everyone. And when you read in the paper about a company that's faltering, it's always one of those 4 stakeholder groups that's not been properly taken care of.
So we want to focus equally on those. So after we protect it, that's job 1. It's what we do every day first. We look to enhance. So a couple of slogans that we kick around in our office is, let's focus on getting better, not just bigger.
Is this going to be accretive? Is this going to make our whole business more valuable? Or is this just another asset? Grow within our strategic investment criteria, I'll put those up on the Board next. And a great focus for our team and our board members this past year has been capital allocation because it might be hard to believe, but we actually have more projects and opportunities than we've ever had, We're spending more time on capital allocation than we ever have and which projects are we going to do.
And then extending and linking to the existing asset base, where do we have advantages, lasting advantages, and that's where we need to invest. And then thirdly, we want to get the hydrocarbons to world markets. So that will enhance our customer netbacks. That will enhance the value of our existing asset base. It will diversify our markets.
It will diversify our customer set. And where can we turn our biggest disadvantage, which being the furthest away from the East Coast of the United States? That's our biggest disadvantage in Western Canada. How can we turn that into our biggest advantage, which is being closest to Asia? So that's we're trying to turn that around.
But we're not the furthest away. We're the closest, and you'll see a lot of that thrust today. The guardrails, Scott's going to go into more details on where we sit, but the slide I just went through, we do that within this set of rules. That's our commitment to our Board and to all of you that we're not going to do any of that other stuff, global market stuff, if it doesn't fit within our guardrails, and we are well positioned to maintain this promise. Strategic investment criteria.
So what does Pembina look for when we acquire an asset? Is it a good deal? And all these other things I'm going to fill in help define whether it's a good deal. We don't have hard and fast hurdle rates for the gas processing business or pipelines or whatever, it's business judgment. We have an investment committee.
It's a diverse group of people, and we weigh the merits of one project versus another. And we bring decades of business judgment into every decision. So we look for longevity. Is this going to be an annuity? Our job is to build annuities, highly predictable cash flow streams that will last a long time that will underpin our dividend.
We are trying to build we're in the business of building annuities. So does it have that? Do we have the expertise? Sometimes we do. Sometimes we don't.
Sometimes we need to partner with the Kuwaitis in petrochemicals because they've been doing it a long time and they've got a lot of plants. We don't have the expertise. We joint venture. We don't love joint ventures, but sometimes you have to joint venture to get the required expertise. Will we make money shoulder to shoulder for decades?
Will we have structural alignment? Or does one person make all the money upfront and the other person doesn't? We need to be shoulder to shoulder structurally aligned throughout the life of a joint venture or through the life of a customer relationship. Do we bring scale and resource intensity? So we've divested of our full service terminals, of our trucking business because they don't have the scale or resource intensity to meet our criteria anymore.
Too many people, too small of investment, too much going on, too much risk. So we want to have very large, happily intense, profitable businesses. Scarcity. Scarce things are worth more, so we focus on scarcity. Is this a service that we can provide better that no one else can?
That's what's going to attract people to our value chain. So if you kind of think about our history, when we bought Provident, fractionation was a scarce resource, so we were able to build multiple fractionation, example of understanding scarcity. Customer profitability. This gets back to alignment. We don't want to make deals with customers where either they make all the money or we make all the money or we take turns.
It doesn't work. Eventually, if your customers don't make money, you will not make money. So we look at the quality of the geology very intensely underneath our customers' land and make sure they make money as well. If we we have turned lots of business down primarily because we don't like the geology. Even creditworthy people we know could pay, we turn it down if we don't like the geology.
Integration potential, can we stream molecules? Can we entice molecules to follow our value chain down to get to better markets? Once you get critical mass of hydrocarbons, like we had critical mass of propane, we can supply a world scale polypropylene plant. We're the only ones that can do that in the basin. We've got 65,000, 70000 barrels a day of propane.
So we can backstop our export terminal, backstop our petrochemical facility, critical mass integration potential. Chemical facility, critical mass integration potential. Does this diversify us? Diversification is another word for risk management. If we have very diverse cash flow streams, our company will be worth more.
Is the risk manageable? How much commodity price risk do we want to take? Is this insurable? What's the operating cost risk? Things like that.
We spend a lot of time looking at risk. Can we finance it? What can we finance? Does it preserve or enhance our reputation? And can we provide market access?
So this is the collage, the big sieve, do we see which projects go through? Spent a lot of time with our investment committee. Every time someone puts up an investment for consideration, they have a ranking of these things, a qualitative discussion on all these risk items. Capital allocation. So these are kind of in order of importance to us.
First of all, preserving the dividend. We want to always make sure that, that dividend is safe, and Scott will show you that we are our dividend is payable well within our fee for service cash flow stream. Next, capital investment acquisitions, the whole capital allocation scenario. And how we think about capital allocation is we need to think longer term capital allocation, not just what's profitable today. So when you do your first ever petrochemical infrastructure project, you're not going to ring the bell.
I mean, it's not going to be an outstanding investment because it's new and you don't have the economies of scale yet. You can't leverage. Same with your first LNG project. You're not going to ring the bell on return. When you follow on, though, for your next one, and you've got, for example, if we were, knock on wood, fortunate with Jordan Cove and got it done, the expansion is extremely profitable.
And so we're we need to build those new platforms that's how Pembina is going to grow in the future. When we are $10,000,000,000 growing at 5% to 10% a year, a lot easier than when you're $50,000,000,000 growing at 5% to 10% a year. And so you need projects in the future
that are going to matter
to your story. So we try to weigh off building platforms of the future with enhancing profitability, optimizing profitability today. And so we're not necessarily just lunging at the stuff that's right in front of our nose that's the most profitable. We are trying to weigh that capital allocation so we can sit in front of you 5 years from now and still be growing at the same percentage and raising and compounding that dividend every year. Debt repayment, we've got the great balance sheet now.
So debt we will repay debt, but it's kind of our 3rd priority and last, share repurchases. We don't see ourselves repurchasing shares. When we do our 10 year plan, we show it that way just because 10 years out, you can't predict all the projects we're doing, but we don't see that as the use of capital for us. It's kind of a last resort. So track record, we talked a bunch of years ago about the wallet cash.
Well, it sure showed up, right? Right here and just boom, that's all per share of growth. So we're really, really proud of that. And kind of our cash on cash return dropped a little bit through the build out, and then we had the tough commodity cycle, now our utilization is increasing, and our return on capital is increasing along with it. So we had a couple of tough years through the build.
Our credit metrics were stretched, but we had a great relationship with the rating agencies. They understood that we had a highly contracted business and to build things on time and on budget. So they stuck with us, and now we're in a position of strength.
Lastly,
one of the subtle things about Pembina's business that people don't realize is that if you kind of look at our traditional businesses, and these are businesses that tend to thrive when commodity prices are great, building gas plants, building pipelines. That all happens, and it happens fast when prices are good. But what we've done over the last few years is we've built another part of our business that actually does well when prices are low. For example, our petrochemical business, propane is the biggest cost. So when propane is low, we'll make way more money in petrochemicals.
So we have we're building some businesses that create a shock absorber for when prices are lower and that can thrive and grow in a low commodity price environment. And so we're creating some natural hedges. We're also creating some hedges just by exporting products outside of North America or our aspiration to do that where there's better markets. Even if you think about Alliance where you're going to the Chicago market, you don't have AECO Economics of Chicago Economics. So we're in the gas business, but we're in the best part of the gas business where our customers get a lot higher netback pricing.
So we do have this natural hedging going on with our capital allocation. With that, I think,
Good morning, everyone. Jared Sproat, Senior Vice President, Chief Operating Officer, Facilities. I unfortunately got the short straw and I get to educate over a couple of slides some of the challenges that we see in Western Canada with respect to our business. Over here on the left hand side, we got kind of our lowest value product on the left is our natural gas and our oil on the right. And what you have here is BCF of production and all of the pipeline takeaway out of the basin.
As Mick mentioned, the majority of these pipelines, except for the local demand, they are taking products out of Western Canada, taking them bringing them east to satisfy that market. As we all know, the Marcellus and the solution gas from the Permian is backing a lot of that out. And you can see that as production is climbing over time, the 2 new expansions that are going to take supply out of the basin are obviously going west with the recent announcement of LNG Canada and the coastal gasoline pipeline that will connect that resource heading west. Over here on the right hand side, you have oil production in the red line, 1,000 millions of barrels of production. And the black is the rail.
And you can see that right now, we are constrained. I think most people are aware of that. And rail is taking that product to market. So there are some challenges, but there are a little glimmers of hope out here once we get the Line Tree replacement, Trans Mountain and some other projects that come into service to support the basin. The condensate.
Condensate is the only product in Western Canada that we're actually short on. Right now, it's about 180,000 barrels a day that's imported from the United States into Canada to satisfy that demand. And that's basically comes up through Southern Lights and Cochin and you can see the delta between production today and required supply. And what that really means is that Pembina and the Peace Pipeline system having a network of pipelines that reaches all the way up into Northeast BC, As our customers are drilling for more and more condensate, we're slowly backing out more and more supply coming in from the United States. As more and more people are drilling wells to fill LNG Canada Phase 1, LNG Canada Phase 2, there's obviously associated condensate that will come with that.
So Jason and the pipeline division are extremely well positioned to capture a lot of that growth in the future and back out current imports. Now the natural gas liquids. There's a couple of subtleties here that I want to talk about. So obviously, I talked about lots of gas leaving the basin, but what you have to remember is there's a lot of energy in the gas that is being exported today. So I'll talk about them going in from the C2 molecule to the C3 to the C4.
The C2 molecule, we basically we have 2 purchasers of C2 in the province in Western Canada that create polyethylene, Nova and Dow. So that market is extremely well satisfied for local demand and basically the production. But what you can see is that there is a significant amount of C2 that leaves the province every day, right. That's what our government recognized, the previous government and the new government recognized that there is enough supply in Western Canada to be able to finance a new Inu Cracker, right. So that's super exciting.
And Pembina is obviously in a great position. We have 6.1 Bcf of extraction facilities. We can help our customers take that C2 out in Canada instead of sending it in the gas stream and to supply a new cracker. Moving on to the right hand side, you got your propane supply. So there's your local demand in red once again.
So you can see that we are long by about 100,000 barrels. And that's what's driving really Stu's business to go out there and find new markets, our PDHPP, our C3 export terminal, other C3 export terminals. There's enough propane out there to satisfy all these new projects. Incremental to that, you can see there's a significant amount of propane that leaves in the gas stream every day that could still be captured in Western Canada for more value add type opportunities like our PDH. Moving down into the butane, very similar story.
And once again, this is probably the child that's been getting the least attention. We solved kind of the C1 problem with LNG. We're still importing condensate. The C3 has got a lot of attention with some of the 4 big projects, 2 of them being ours, Prince Rupert and our PDHPP. But this is the next one that we're working on.
There's a lot of upgrading, minor refining that can be done to the butane molecule and to take those molecules to refineries, new markets and new demand. And we're in great shape to we have access to all of that butane. We have the knowledge to build that infrastructure to convert those barrels into new more higher value add product. So what's that all mean? So not as exciting as the basketball game on Sunday, but definitely a lot of challenges in our business, but we feel that we have significant footprint, we're in the right areas, we have the expertise, we have the great operating, high reliability and safety knowledge to be able to take this challenge and turn it into an opportunity, right.
Jason and I's job is to focus on our base business, our facilities division and our pipelines division, provide high value services to our customers. And then Stu is going to talk a lot about how do we take these challenges and even expand more on them and to continue to grow our enterprise. So that leads into the Facilities division. As Cam mentioned, we're going to talk a little bit about the most common questions we get when we're meeting with folks like yourselves. So I'll just get right into it.
So how is the Facilities division performing? Very quickly, I'll just give everyone a quick overview. Mick did this already. Facilities Division basically is made up of gas processing facilities, gas plants, fractionation facilities, underground storage and rail is kind of the 4 big buckets that make up the division. And they are spread out all the way from up there in Port St.
John, all the way down out to the Sarnia, Ontario and our Chicago, our Shanahan, Illinois facility that is at the end of the terminus of the Alliance pipeline. So 2018 in the NGL Services business, that's basically your frac, rail and underground storage and your gas processing business. We set record revenue volumes in 20 18 as we continue to grow those businesses. With record revenue volumes, that equated to record EBITDA for both of those businesses in 2018, as you can see down here. Over on the right hand side, we're extremely proud of our operations staff, the work they do not only in the pipelines division, but also the facilities division.
These are extremely high reliabilities for facilities. And I will note that these do include our regularly scheduled maintenance. We have a very high level of integrity that we put into these facilities, so they can operate for the next 50, 100 years, as Nick mentioned. And the gas processing business, we had a 30 day every 4 years, we have take the Empress facility down to do routine maintenance on that and that's included in these numbers. So great job by all the guys and gals out in the field who operate these facilities for Jason and I and all of you.
Question 2, with low ACO gas pricing, how does that affect our business? Well, mix last slide, he talked about how high prices, people are drilling more gassier weighted production, which requires new gas plants. On low pricing, people are utilizing a portion of our business, the gas extraction, liquids extraction. So what we have up here in the top right is basically all of our districts, our complexes and you have utilization here on the Y1 access and our facilities on the right. The ones in dark gray, those are our extraction facilities.
So those are secondary processing. That gas would meet TransCanada spec or it would meet Align spec, it could go right onto the pipe. But what we do is just we take that gas, take it down to about a minus 110 Celsius, extract all those liquids that I showed you that are going out of the gas stream and we do that for our customers. And obviously, when AECO is low and there's still an arb there to make money on your propanes and butanes, we're seeing that we're having extreme high utilization on our extraction plants and also on our base facilities. Those are the more of the processing of the raw production.
When you move down and you just look at our average extraction utilization of the extraction facilities, it's been around 90% since Q1 2017, regardless of the price of AECO. You can see here was when we had Empress down in Q2 of 2018. But regardless of the price, when it goes low, we still have extremely high utilization because of that incremental value you get from taking those C3, C4 molecules out of the value chain. Obviously, with extreme high utilization, our customers like that. We're open access.
We bring lots of customers into our facilities. With high utilization, the OpEx gets spread over multiple units and our customers obviously like the very low OpEx portion of our business. How, what do we think about our gathering and processing business? You're going to hear this a lot. We're focused on getting better and not just getting bigger.
We've talked about this a little bit in the past, but I thought it'd be really good to illustrate. Back in 2014, the gas processing business, the geological formations that it serviced was 100% Cretaceous. If you think of the Cretaceous formation, that's about 75% to 80% gas weighted with low condensate and low NGL recoveries. And our business, we did about 25,000 barrels a day of production of liquids out of those facilities. And you can see it was primarily the C2 molecule.
Obviously, the C2 molecule is also at the lower end of the value chain. Fast forward to 2018, you can see the distribution now that we've diversified our business. So when you see Pembina make an announcement of where we're going to be building new facilities and or entering an acquisition, you know that it's we're taking this consideration into the geological resource. Where do we want to be? How do we want to diversify after looking at all of the various potential price outcomes?
And you can see how we've grown our business and diversified it, but also we're going to be up to 200,000 barrels of liquids, right, that are pretty much all tied to the Peace Pipeline system and or the Vantage system, etcetera. So really leveraging the diversification with more liquids feeding ultimately piece pipe into our fractionators onto railcars, etcetera. And then Mick also mentioned this, we want to go into areas where we're either going to buy or build new, so we can keep spending capital, right, and keep that annuity and keep growing that resource. On every one of these areas, you can see that we've been growing it subsequently after we made the entry. And one of the largest investments was that $100,000,000 gas plant we built just outside of the town of Fox Creek and that's led to significant growth go forward.
So what does West Coast LNG mean for Pembina? This map sheet over here on the left hand side, I'll bring everyone's attention right here. This is the North Montney mainline. This is the ground bridge lateral that has typically gone from west to east and then bringing gas down into the United States. This is the kickoff point for Coastal GasLink right here.
Just 25 kilometers straight to the East, Pembina has our networking interest of gas processing is about 1 Bcf of processing, just a few kilometers away from the kickoff point of LNG Canada. In addition to that, we have a piece pipeline, goes all throughout this entire area. So we're well positioned to support a lot of the customers in this area for incremental gas processing as LNG Canada becomes a reality. And obviously, with more gas that's required to be processed, there's always liquids that come off of that. We have a great liquids transportation network and fractionation network.
So we should be able to benefit from that. How do we see the Duvernay play continuing future growth of Pembina? You may recall, I think it was 2016, we entered the Duvernay with our very first gas plant. There is a lot of gas processing in this area. We were able to work out a deal with Shell, where Shell became a working interest owner in the very first gas plant here.
That came on to operation. And you know, Shell has a fairly large land base in Blue. Subsequent to that, we signed a 20 year area of dedication deal with Chevron and Kufpec for their 230,000 acres in Orange. And what that really has meant is that very first initial investment of $100,000,000 that we did for Shell, we really leveraged that expertise off and we have built this. For reference, those of you who have been had the luxury of being out to the plant, that is the very first 100,000,000 a day gas plant right there.
There's Duvernay II sitting right beside it. Duvernay III will be right here. And this is all the subsequent infrastructure that Chevron and Cupcake have called for, inlet separation, condensate stabilization, sour, minor sour processing for their gas. And you can see all of Chevron's pipelines are coming into one central area. We've taken this essentially from 40,000 BOE a day, which is a fairly large company, I would say, for production, and we're going to be at about 150,000 BOE a day of total processing, of which a significant amount of that is the condensate growth.
Just to put this into perspective, this is two pieces of the flare stack. It's 28 feet in diameter. It's going to come out in 5 chunks. It's going to be 300 feet tall, just to put this entire area into perspective. It's a good hour walk
around there.
So happy to take somebody out there sometime if you ever make it. Increased demand for fractionation services. I get this question a lot. Obviously, with Jason continuing to have built more and more pipelines and more and more gas coming on, liquids are being extracted. Our fracs are becoming they're getting fairly full.
So this is frac utilization, actual volumes. We expect by Q4, we'll be at about 90% physical throughput through the facility. You may recall that RFS2 and RFS3 and RFS1 are highly contracted to almost 100%. So these are customers ramping up their volumes as pipeline constraints are taken care of, etcetera. So we are currently evaluating 2 potential growth projects.
We go with RFS-four, which is an additional C3 plus frac in that Redwater area where we have storage today, we have rail today, etcetera? Or do we look at doing an alternative? Now that Stew has been successful in getting C3 plus export off the West Coast of Canada, we're evaluating potentially going up north. To set the reference here, this is the town of Fort St. John, here's Dawson Creek and here's the rail line, CN's rail line that goes west, basically down to Prince George and back up to Prince Rupert.
Today, Pembina has a fractionation facility up here at Taylor, where we rail those barrels, some of those barrels to the west right from here. So Pembina's advantage of what we could do here is we could build a clone of RFS III up north, right, where you basically have crossroads between Peace Pipeline and rail. Now that we have a C3 export terminal that will be on stream late next year, we can set up taking those barrels and shipping them all the way down to Redwater, putting them on a train and going all the way back, it's about a 500 kilometer distance in savings. We're looking at potentially doing that here. You can see our various and midstream facilities here, our younger facilities.
So we have a lot of potential and synergies here by taking our operations that are already in the area. We have the building expertise. We have the great relationship with CN and we feel that we can provide an excellent customer service package up here in Northeast BC versus the alternative of taking it in. One of the benefits to that is if we take 55,000 barrels of NGLs off the pipe, Jason immediately downstream, that's going to be one of his cheapest expansions. He can go resell that capacity, which is in high demand immediately downstream to that fractionation complex.
We have folks obviously that want more fractionation complex and maybe they would prefer their barrels to be in Redwater. We can also go resell that fractionation capacity and continue to grow those two businesses. So that's very exciting. And question 7, Mick talked about this, but why was the height expansion so important for Pembina? This was, I got to say, pretty proud of the team.
The collaboration that took place with respect to the 4 different entities that we have a joint working interest in was tremendous. We provided the customer the natural gas gathering, the natural gas egress on sorry, the expansion of the Hyatt gas plant, transportation of their propane plus on the Peace Pipeline, natural gas transmission alliance, fractionation services for their C3 plus in the Redwater complex and then NGL extraction and fractionation at Aux Sable. Pembina owns some of these entities 100% and we're a joint interest working owner in some of those other entities, but just the collaboration that provide the customer with that full suite of services for every molecule that they produced. That was one of the goals that we promised the board when we bought Baricen that we'd be able to provide that customer service to our customers and we actually did it in the same calendar year. So we're pretty proud of that.
And with all that excitement, I'm going to hand it over to Jason.
Thanks, Jared. I'm Jason June. I'm the SVP and COO of the pipelines division. I'm little jealous of Jared. He gets to put up a lot of nice pictures of his facilities and show how they grow and pictures of pipelines aren't that exciting.
They're really just grassy fields. So, I won't have as many pictures as Jared does. As we move forward, the first item that we're addressing is an update of the assets in pipeline division and how they're performing. So the first set of assets that Pembina has obviously is the conventional pipelines. These pipelines are the origin of Pembina and they transport crude oil condensate and NGL to local markets.
So the Peace Pipeline, Drayton Valley System and Brasil Pipeline Systems are in there. We also have the oil sands pipelines, which transport synthetic oil from the Syncrude and Horizon mines as well as heavy oil from the Nipissippi development as well as some light oil on the Swan Hill system. And then the transmission pipelines, which Mick alluded to, we acquired in 2017 with the Barison acquisition, which transport natural gas down into the Chicago market on the Alliance Pipeline. The Ruby Pipeline transports products from the Rockies Basin and then we have the AIGS pipeline system, which transports the C2 into the cracker complexes in Joffre and Fort Saskatchewan. So I think the key takeaway from this slide is that regardless of what commodity is in vogue at any particular time, the pipelines division is actually set to capture value.
So if the oil sands production comes back in and oil prices are high, our oil sands, our pipelines are there to take away product. On the NGL and condensate side of the business. We've obviously seen the incredible growth in demand on the Peace Pipeline system and as well on natural gas takeaway. If natural gas prices soar, we get to take advantage of that as well. So how the asset has been performing?
You can see on the right hand side of the graph, the conventional pipeline systems have grown their volume from 2017 by about 200,000 barrels a day. Oil sands, as we expect, is very consistent. The slight drop in production you're seeing there is a reduction in volumes on the interruptible basis on the Swan Hills and the Nipissippi pipelines and then the transmission business unit, which includes the Ruby and Alliance pipelines, very consistent and highly reliable production. On an EBITDA basis, conventional, again, we've seen substantial growth in the EBITDA setting a record in 2018 at 900,000,000 dollars of EBITDA. Oil Sands, consistent with which is what we expect, consistently delivering about $150,000,000 in EBITDA.
And then the transmission business unit, that's the difference between 2017 2018 is obviously 2017 was the stub year because we acquired those assets. Similar to what Jared spoke about in the Facilities division, the reliability of our assets is something we're very proud of. You can see we're at above 98.5 percent reliability in all of our business units. And these reliability numbers, similar to what Jared has talked about, include outages that we have planned. So they're not just unplanned outages.
So if you think about the fact that we've been going through expansion on the Peace Pipeline system, we have to take outages to be able to tie in these new facilities and pipelines, and those numbers are actually included in these outage numbers. So we're very proud of that. In terms of revenue volumes, you can see we've had a consistent march up on revenue volumes since 2013. 2016 to 2017, obviously, is the big jump and that includes the acquisition of the Verastin assets as well as the implementation of the Phase III expansion on Peace Pipeline. When you look at 2018 versus 2019 Q1, some might ask why are those volumes flat?
And really, the answer to that is, it's really accounting noise. So we generally see very strong Q4 volumes on all of our pipelines as producers try to exit the year with the maximum volume they can. But in the Q1 of 2019 versus last quarter 2018, what you really see is us taking in the deferral volumes or makeup rights that producers have. So we try to predict how much volume producers are going to produce in the beginning of the year and at the end of the year, we recognize all the volume makeup rights that they have. So you tend to see Q4 being high and Q4 coming in a little bit lower or sorry, Q1 coming in a little bit lower.
But what we have seen throughout Q1 is physical volumes have been consistently growing throughout the Q1 week by week. So the next question is, can you remind me what the recent pipeline expansions included? So on the conventional pipeline systems, we've obviously been expanding since about 2013. So you can see our Phase 1 and 2 expansions were smaller expansions. And then the Phase 3 expansion was really our biggest expansion on our pipeline systems to date, which really increased our capacity to about 1,000,000 barrels a day at the time.
And since then, we've increased further to about 1,200,000 barrels a day through the Phase IV and V expansion, which came into service in Q4 of 2018. Sorry, pardon me. So now I'll just quickly walk you through phase by phase of our expansion projects. Phase 1 and 2 were really the first phases of expansion on Keyes' pipeline. That was really our first foray into expansion of our assets, and we spent about $800,000,000 and really what those were, we're adding pump stations on the Peace and Northern Pipeline piece of pipe.
We added a 24 inches pipeline from NMAO into Redwater that really allowed us to take all the NGLs that were coming out of the market and take those to the fractionation facilities that we are building in Redwater. Phase 3, obviously, is the biggest pipeline expansion we've undertaken to date and that included the 24 16 inches pipelines between Fox Creek and Namayo and then it also included some pipelines to the west of Fox Creek that went all the way out to the Wapiti pipelines. Those were 16 inches pipelines. Phase 4 was power up of our Fox Creek to Edmonton pipeline system. So we added some more pump stations on Phase 4.
And so when you think about the pipeline expansions we've done up to this point, Phase 4 from Phase 1 to Phase 4 were really about market egress. It's how do we get the product to market. From that point forward, we started moving into expanding the pipeline to the west of Fox Creek. So, Phase 5 was adding another 16 inches pipeline between Latour and Fox Creek, which allowed us to bring more product into Fox Creek to deliver to market. Phase 5 or sorry, pardon me, Phase 6 again was further to the west.
We're adding pipelines out in the La Grosse and Wapiti area. Phase 7 is really taking a new 20 inches pipeline from La Gles into the Fox Creek area and debottlenecking the rest of our pipeline system in the deep basin in southern, the southern loop of the pipeline system, taking the condensate off there so that we can get all the condensate to market in Fox Creek. West of Fox Creek. To the west of Fox Creek. So when you think about what's really key about these pipeline expansions, if you look at the time that these pipelines were in expansion, when you started when you build a major pipeline system from the market all the way out to the gathering areas, it took us 43 months actually from start to finish to bring that Phase 3 expansion into service.
And then since then, you can see our expansions have been getting quicker and quicker as we just add smaller segments of pipe to be able to access the capacity that we've added up to that point. So if you're entering the market and trying to get a pipeline into service quickly, you're talking about a 4 year sort of build out to be able to do that. How has the Peace pipeline contracting profile changed through various phases of expansion? So back when we talk about Phase 1 and 2, we actually saw the peak of our contracted volumes in 2017. You can see that we added volume through our Phase 3 expansion that pushed that peak out into 2019 and so on through Phase 4, 5, 6 and 7 to the point where we have about 1,000,000 barrels a day under contract and now our peak volume is out in 2022.
I think what's key to think about when you think about that 2022 peak, it's a peak, but it's not a triangle. It's actually a peak with a very slow decline. So those volumes start to come off in 2022, but they don't come off rapidly. So we have a very stable profile out into about 2025, '26. What would the Phase IX expansion of Peace Pipeline mean for Pembina and its customers?
So, Phase 9 is really about, again, accessing the capacity that we've already added on Peace Pipeline. And really, when you think about what Jared talked about earlier, what the LNG opportunity brings to Pembina, for the pipeline division, it really brings access to BC with Phase IX, we're really going through the process of with Phase IX, we're really going through the process of segregating all the products on our pipeline system. We've essentially, through Phase 8, got our LVPs and our HVPs on separate pipelines. But through Phase 9, what we'll really be doing is having complete product segregation, so condensate in 1 pipe, C3 plus C2 plus and crude oil, all in separate pipelines. So what does that really do for us?
It reduces the amount of batching that we have to do, which allows us to increase the utilization of our pipelines. We think through the elimination of batching and through some optimization of our facilities, we can increase our capacity by about 10% without any capital investments on the pipeline system. We reduce the cycling on the pipeline, which reduces the life of the pipeline. So when you're batching, you're starting and stopping and causing a lot of stress on your pipe. You're reducing the contamination of the product, which obviously has some value impact to your customers.
We reduced the amount of storage that we require. So we have a lot of storage on our pipelines that allows us to use it for some other opportunities. And then, of course, one of the real key advantages is when you think about the pipeline from Fox Creek to Edmonton, we have 4 segregated pipelines there. We don't have to loop an entire segment of pipe now to gain access to capacity, we can actually partially loop pipeline segments and it will actually give us incremental capacity. So you could do a 25% loop and get about 25% more capacity on that pipeline segment.
So that's a really key advantage. And then again, as well on our laterals, because they don't have to tie into pump stations, we can actually make direct tie ins to our pipelines to be able to quickly and cheaply access laterals for our produce. Question 12, what is Pembina's competitive advantage in conventional pipeline? So we've talked about some of them through the Phase IX expansion, but one of the biggest advantages that Pembina has is the Pembina store. So when you come to Pembina, you're really coming to a one stop shop.
You can get your gas processing, gas egress, you can get your fractionation, pipeline transportation. The other thing that we do is align our outages across all of our assets. So if you think about not only from a scheduling perspective, if Pembina does your gas processing, transportation and fractionation, obviously, Pembina is aligning that. Whenever we do our maintenance, we work together to make sure that the outages are all aligned, so you don't have a distinct outage on each of your assets. But the other thing that you get as an advantage is, if our pipe if one of our assets doesn't isn't in service, so let's say our pipeline goes down for whatever reason, you don't actually have to pay your take or pay on your gas processing or your fractionation facility.
So if you think if you were on a 3rd party pipeline and that went down, you'd still end up paying take or pay on the gas plant and the fractionation facilities. When you're with Pembina all the way through the value chain, you don't have to do that. So it reduces your risk. Obviously, with all the expansion we've been doing on Peace Pipeline, now it doesn't matter what product you find or where you find it. You can put it on the pipeline and transport it to before you start before you start drilling it and producing it.
And so from that perspective, when you're coming on to M and S pipelines, it doesn't matter. If it's crude, we can take it. If it's condensate, we can take it. Because we have such a long history, we have allowed our customers to have receipt point transfers, so they can move their production around to mitigate their take or pay. All of our infrastructure is already in place.
So we've built out our communication networks. We've built out all our offices. We can continue to expand our pipeline without any back any supporting infrastructure requirements. Obviously, our history in the community, very positive. Strong relationships with regulators.
I think our Phase 7 project is going along extremely well. We're hopeful that we'll be able to beat our schedule on that project. And then one of the other real key advantages we have is because we've been expanding our assets so long, we know what it costs to do it. So when we go out and make a deal with the customer, it's a fixed fee. We take all the capital cost risk, which we don't view as very risky, because we've been doing this for so long.
So the customer knows what they're going to pay and we're comfortable with the return that we're going to make. And as I pointed out on the previous slide, we can add significant capacity on a focused and timely basis to be able to give our customers access to market. The other key advantage that Pembina has is we have connectivity on the downstream end of our pipelines to virtually everywhere you want to take your product. So if you look at CDH, you can see that CDH, which is up here, can actually access, access, Polaris, Keyera, Norlite, Cold Lake and FSPL pipeline systems. We access all the fractionators in the Fort Saskatchewan market.
And then if you think about our crude oil facilities, we also can access all the different crude oil export pipelines and refineries in the Edmonton area. So can we get an update on the Alliance expansion is question 13. So the alliance expansion, as you know, we went through the process of running an open season on our Canadian pipeline system. At the time, it didn't seem like the market was in the right place for that. So now, we've turned our attention to the Bakken.
We think there's a really strong opportunity in the Bakken to be able to do an expansion on the Alliance Pipeline system. One of the key challenges in the Bakken is they're flaring about 20% of their gas. Well, first, I'll focus on the Alliance Pipeline specifically. The reliability and utilization on the Alliance Pipeline is extremely high. So we think that we have a very strong service offering for our customers and we actually access the Chicago market, which gives a premium netback to our customers.
But when you think about why the opportunity in the Bakken is so exciting from an alliance perspective, it's because the Bakken production is really driven by crude oil. So crude oil is the key value driver in the Bakken and then the NGLs and the gas export are really sort of you can look at them as a cost. So, but when we look at the opportunity, we actually are able to increase the netback for both NGLs and gas takeaway in the Bakken because we're accessing that Chicago market. If you look at what the challenge for the Bakken producers is right now, about 20% of the gas that they produce is currently flared. It's either flared in the field because they can't get it to a processing facility or it's flared at the processing facility because they don't have egress.
So if you think of the opportunity there, they're actually getting no value for that gas. They're just flaring it today. So if you put it onto the Alliance pipeline, deliver it to the Shanahan fractionator and gas processing facility, they'll be able to actually generate revenue off of something that they were just burning historically. So that 19% of production, when you think about 2.6 Bcf of gas being processed today in the Bakken, it's about a $500,000,000 a day opportunity in gas. And so when we look at the Alliance expansion, we think there's an opportunity to do about a 400,000,000 a day expansion out of the Bakken, which will obviously pair up with Jared's Shanahan facility and be able to provide service to Bakken area producers.
I'll turn it over to
Dan.
So we are cruising along this morning, going to break a little bit earlier than we planned to. So I'd like to take a 15 minute break, let everybody get up and have a chance to get a refreshment. Just a reminder to those on our webcast, at the conclusion of the formal presentation today, we'll have a Q and A session, and you can send in your questions through the portal on the Q and A for an opportunity to ask them to the team here. So thank you very much and we'll reconvene at 10 o'clock.
Good morning, everyone. My name is Stu Taylor. I'm the Senior Vice President of Marketing, New Ventures and Pembina's Corporate Development Officer. I'm going to start today with talking a bit about marketing and then move into the New Ventures slide. So again, the first question, can you provide an overview of the marketing business and how it's performing?
I thought it was important to talk, first of all, a bit of what is marketing's mandate within Pembina. Our mandate is to leverage our existing assets and our scale to create new markets and exploit existing markets to drive utilization and optimization of Pembina's businesses. So in briefest of summary, marketing is there in support of the businesses that Jared and Jason just talked about. Mick presented this slide and again, I think it's a slide, how does marketing fit within this slide that, again, Mick presented? So we believe that marketing has a key role in to protect the franchise.
We have the ability to add additional service offerings to our customers. We can enhance the franchise. We can strengthen the Pembina store with a more comprehensive and integrated solutions. And finally, access to global markets. We have the ability to look at projects, we can look at the constraints, we can look at the market challenges that people are facing, and we can propose or lead with market driven projects that will access these global markets in the future.
We believe that it's important for if Pembina is in the business of serving, getting projects products to market, being active in the market allows us to gain market knowledge and how our infrastructure fits within the marketplace. We can look at how we can assist our customers with their profitability and we can identify future projects. Those opportunities and those future projects, I think, such as our PDHPP and our propane export terminal on the West Coast. How did we do in 2018? Marketing had a very good year.
On a volume basis, we were about equal on our marketed volumes of 2017 to 2018. On rail volumes, our rail volumes increased. We increased our ability to load unit trains out of the Redwater facility. And on an adjusted EBITDA basis, we had a substantial increase from 2017 to 2018. Again, a large part of this was the full year contribution from our the Aux Sable asset.
Mick talked about balance and diversification. I think one of the key items from the marketing perspective is our adjusted EBITDA is essentially split. We get half of our EBITDA from crude marketing opportunities and the other half from NGL opportunities. Question, what are the key drivers of the financial results within marketing? Marketing generates margin in several ways from fractionation spreads in Aux Sable and our Facilities division, which Jared spoke of, to locational opportunities, the ability to optimize our pipeline, our rail and truck logistics using our storage to buffer constraints between supply, egress and demand requirements, and we often take low risk arbitrage opportunities provided by price volatility.
A few examples of the factors that can impact our results are shown on the slide. Again, I'm going to get this direction wrong, but on the far right is indices for different grades of crude, shows the trend for the last few years. The slide in the middle is our propane inventory levels of the last 5 years. We track all of these indices very closely. And then the final one on the right hand side, on the left hand side is the fractionation spreads of the graph.
With so many variables creating opportunities in marketing, this helps smooth the impact of any specific circumstance. Marketing strives to continue to diversify both geographical markets, supply sources, building a frac in the Empress area divergence at Empress is again a diversification and finally pricing indices. As we look at AECO versus the Chicago market, Conway versus Henry Hub pricing, we continue at Mont Belvieu pricing, we continue to look at diversifying along all the commodities and along all the indices. How will Pembina's propane exposure change over time? Pembina diversifies downstream markets and our benchmark exposure.
As shown on the slide, this is a comparison of where we were with our propane sales and where we're going in the future. And again, as Mick mentioned, we continuously look to diversify and we continue to look for balance. And so when we look at our exposure, our propane sales, as we get our PDH and our export terminal up and running, our we were once fifty-fifty North American markets, Canadian markets, eventually will be a third, a third, a third, essentially the ability to export those products or have it consumed by the petrochemical industry. A very nice exposure ratio, we think that creates balance and some things can go right, but you're protected from large negative swings. Again, our benchmark indices, I've talked about that already previously, but we've added again a petrochemical indices, the ability to send propane from our Redwater fractionation facility through 200 meters of pipe to our PDH, we've got we will now have a petrochemical, Edmonton petrochemical industry for our propane barrels.
What advantage does your rail operations provide you? Obviously, as you can see, we've loaded a tremendous amount of railcars over the last few years. 2018, we had 50,000 barrels a day of product moved by rail. We managed we loaded 26,000 railcars in 2018. And with our increased capability at the Redwater facility, we expect that to grow dramatically in 2019.
This is, I think, one of the things that separates Pembina from many other marketing shops. We focus a lot. We talk about being experts in service providing. Our ability, our logistics capability is to track to load railcars, to track where they are, to minimize railcar storage and to get those back and loaded as quickly as possible. This is we operate the largest rail yard in Canada as a non railway facility and it gives us this advantage to load product.
We sent railcars to 300 destinations in 2018. How does New Ventures fit into the rest of the Pembina business? So as we go along here, essentially, we're looking at commodity by commodity and what is the current market condition. As you look at natural gas and what's already been described by my previous colleagues is we're oversupplied in many of the products. These are limitations, but also is an opportunity for new infrastructure development.
Kevin has already talked about, as we look at the natural gas oversupply, where are we going? We continue to look at our Jordan Cove LNG opportunity. We're continuing to explore additional LNG opportunities, while at the same time, we just completed and brought on stream a cogeneration facility to consume gas at our Redwater site. On the ethane side, again, it's balanced. But as Jared pointed out, we have an overabundance of C2 that's being consumed for only gas value.
Pembina continues to look at ethane cracking as a possible demand for future ethane barrels. On the propane side, we've made a lot of progress again with PDHPP, the petrochemical push to consume propane. We obviously at the same time have the export terminal as well. When we look at butane, again, it's another product that was in balance for the most part, but again, there's extra butane in the gas stream. Again, there are solutions that could be available for the butane molecule.
We're evaluating those and hope to come up with some additional solutions in the future, partial refining, partial upgrading, petrochemical opportunities. Faunusate, again, Jared explained, it's probably the one product in Western Canada that is undersupplied. Again, it's we look at what we can do with those barrels. You can export those barrels. You can do other things as far as product delivery.
But right now, this is essentially being consumed in the oil sands as a diluent. All of these opportunities and all this oversupplied situation leads to additional opportunities. Mick mentioned that we have this natural arbitrage of when the products are undervalued, if they become great feedstocks for few other industries. So why is Pembina developing its LPG terminals? We have again an overabundance of propane.
We continue to look at how to get that product to market. We can improve our producers' netbacks if we can get them additional pricing. Our LPG export terminal is a 25,000 barrel a day niche opportunity. We think as we've looked, we can load these load smaller sized ships and get to premium markets on the West Coast of North America, particularly down into Mexico and Central America, but we also can see opportunities that they could be attractive from a shipping perspective if we had to go all the way to Asia. This is our propane pricing graph.
As you can see, the products, Latin America and Far East Asia have essentially for the last few years equalized. And again, I think that's a sign of global the global commodity, the pricing is equal. And then you see Edmonton propane pricing. And you have and we expect this to continue on a go forward basis with the vast resource that we have, but also with all the expansions that are taking place that there will always be this arbitrage opportunity between the Edmonton pricing and again, Latin American pricing. And again, our export terminal, smaller sized ships that can deliver into smaller terminals with less demand, requiring less storage on-site for that terminal to be there.
So Latin America and Central America, Mexico, Central America are very, very attractive markets. Again, I'll briefly describe our propane export terminal, the Prince Rupert Terminal. It's in the New Ventures slide, but Jared's group has been building this facility. We're very proud of where we're at. Again, 25,000 barrels a day.
We're on land, Watson Island that was owned by the City of Prince Rupert. The site had an existing dock, had some existing infrastructure. We're particularly proud. This is an abandoned pulp and paper mill, a very large environmental issue for the City of Prince Rupert and for the province of British Columbia. We've cleaned it up dramatically as part of this process and we'll continue to do so.
And we're excited to get this up in operation here in the next few months. I will try to use the pointer. So this is our site. Up in here, we're building some storage tanks, essentially spheres. This will be this is all new rail.
This will be our ladder tracks with our rail unloading facilities here. So the trains will come in. We have the ability to bring in unit train size. That's probably large for this facility at this point in time, but we can bring in substantial loads of propane unload it from the Spears, and when the ships pull up these handysize vessels, 150,000 barrels per vessel, We'll be able to load those in 3 or 4 days and then ship them down to the various markets. Pierre put lots of slides in.
He's pretty proud of his pictures. Again, our facility, the birth, and we took out a lot of dirt and cleaned this all up. But this site was very much challenged environmentally. And as I mentioned, we cleaned it up dramatically. Looks very nice right now.
You can see the spears coming out of the ground. They've been in that process for about 12 months at this point and a close-up picture. Again, CN mainline comes through, enters onto Ridley Island. These will be all ladder tracks and our rail unloading facilities. Okay.
Moving on to our petrochemical business. Again, very similar answers. Why are we entering into petrochemical business? We have an overabundance of propane. We've seen that some time ago.
We started looking at what are the opportunities. Again, the growth in shale gas, we export largely 80% of our product was loaded onto a railcar and sent into the United States. The markets that you incur all that extra cost of loading and handling the product, you put on a railcar and you ship it and to an area that really doesn't need much of our propane anymore given their growth in their own production and their exports off of the U. S. Gulf Coast.
So we've seen this opportunity as a feedstock supplier that we could participate in the petrochemical business. The conversion of propane to polypropylene on purpose PDH to PP. We see a fully integrated solution where we're in control of the barrels entering and are participating in the market opportunity. And we've seen this as, again, an opportunity to PP in PP pricing, global PP pricing. The market for polypropylene, again, North America consumes a large part up to 7,000,000 tons per year.
Our facility will produce about 550,000 tons annually. We are looking to produce both homopolymers and copolymers. That is a unique differentiator. The impact in copolymers is a second reactor, a bit more cost, but it allows us to market into higher valued areas impacting co polymers, car bumpers, medical supplies, higher valued plastics, again, just as the name would describe, heat resistant, impact resistant markets that we believe are more valued than the straight home of polymer opportunity. A bit on the CKPC and who is the partnership.
Again, this is a fifty-fifty JV with PIC from Kuwait, a subsidiary of KPC. Again, when we started looking, this is a unique opportunity, and I think you look at it as Pembina supplying propane, the aggregator and supplier of propane, working with our customers and PIC, a petrochemical player, an existing petrochemical player looking to build a presence for marketing opportunities in North America. I think we've talked a lot about Pembina's capabilities, but I think it's important to point to one of our PIC colleagues, they actually have been in Canada for quite some time. They're JV partnered with Dow on the ME Global assets. They have a vast marketing expertise globally and are looking, as I said, to enter North America.
We found them to be a great partner. They brought a lot of experience. They brought a lot of international way to when we're looking at our engineering contracts. They are a large entity and with heavy buying power globally and that's helped us tremendously. What is all work?
And we've had the slide up, I think previously for you. Again, propane to polypropylene, this is the historical graph. You can see the red line representing Edmonton propane pricing, the gray line being North American polypropylene pricing and again the spread between those. The spread propane the value lift from propane to polypropylene, 6 to 7 times, dollars 1200 a tonne from $200 a tonne for the propane. Again, we see this as the volumes grow and the vast resource in North America and particularly Canada is that we're going to be long on propane for an extended period of time keeping the feedstock value low, but you can participate through this and get polypropylene uplift pricing.
That margin is substantial. And again, North America being a premium market and us being located and rail connected, and we've talked previously that often in North America, Western Canada is logistically disadvantaged from the markets. With the CN Rail infrastructure, we can produce our polypropylene and we're actually get haul it all the way to Eastern Canada. We can haul it into the Rust Belt of North America and we can compete on a rail basis every day all the way as far south Kansas City. Obviously, approach to this size requires great due diligence and project management.
We've developed a detailed project execution plan. We continuously look to de risk this project. From a capital cost basis, just some of the details. We have a Class 2 estimate at this point in time through detailed FEED. We did advanced FEED on that.
We are pursuing and we're in the process right now on this project. We're out for bid for our EPC lump sum turnkey response. Those should be received in August, and we would be looking to award in the October time frame. We are getting detailed questions. We're getting great response.
The RFP packages were large and detailed. The questions coming back are numerous and detailed, which gives us encouragement that the EPC firms are truly engaged and excited about the opportunity to provide the lump sum bid. We talked about propane price. Pembina has the ability to aggregate propane. We continue to talk to our producers.
We're trying to stay here. We're working within our guardrails. I think one of the unique aspects, we talked about getting 50 percent of our polypropylene EBITDA secured by fee for service. And we mentioned back in February that we were already at 40%. And so the team worked hard to get there.
We have a few years to learn service, but I will say that upon announcement in February of proceeding with the PDHPP facility, We've had numerous responses from customers who again are looking to diversify away from propane pricing Edmonton propane pricing and are looking to come through and basically deliver propane, incur the costs on a fee for service basis and receive the marketed PP value. So we're totally confident we will get to a 50% target. I think we could go beyond that if our customers choose. And again, this is a value offering. We're picking select customers to come through that entire value chain, someone who goes through our gas plants, through our pipes, through our fracs and again then through this petrochemical opportunity.
Pierre put up a slide again, a bit redundant, but we believe we are on the C2 molecule, we believe Pembina is in the best position of everyone to be the petrochemical feedstock provider on a go forward basis. Jarrah pointed out that there's a vast amount over 100,000 barrels a day of C2 that is left in the gas and burnt for only gas value. The Alberta government, both the current and prior governments were very supportive of looking to diversify larger into additional petrochemical opportunities, largely in the C2 molecule space, additional cracking, additional straddle and fractionation facilities. We have a view that the PDHPP facilities and the Fort Saskatchewan area, petrochemicals are largely built in hubs. So we expect Fort Saskatchewan area or the Joffrey area to be where this new cracker or where this new opportunity will likely be built.
Again, we have multiple pipelines, multiple sources, and again, LNG. Again, similar to our propane, we have a vast resource. We believe the gas value in AECO pricing on a go forward Station 2 pricing is going to be constrained for a long period of time. And for the basin to be to show and continue to grow, we need that gas molecule to carry a bit more of the economic burden. And how can you do that is to get it to different markets.
LNG is one of those opportunities along with the cogeneration. We're excited about our Jordan Cove project. We continue to make some progress there. We believe LNG fits perfectly within our guardrails. We can you can get long term fee for service type contracts with exceptional credit rating on the other side of that deal.
It creates a new platform for growth for us to continue to pursue. And as you add value to that gas molecule, it will develop into additional gas plants. And again, with those plants will come additional liquids and fractionation. So, fits very well. It's a platform we understand.
It's very similar to what we do today. And again, from a logistics perspective, you think about our ability on a railcar in that size. When you get into the LNG space, though a little bit different from shipping, but it again is all logistics and managing cargoes. Nothing's changed from our last probably conversation. We continue to monitor global LNG demand, doesn't make sense.
Everything points to dramatic growth in LNG, 45% increase required by 2,040 for natural gas demand. This will largely be Asian based. So anything on the West Coast of North America, Jordan Cove, LNG Canada and future LNG plants are best located to serve. It's 8 shipping days, 16 days round trip. You can get your car was there as compared to coming out of the U.
S. Gulf Coast, which grows to 27 days one direction, that's if you can get through the Panama Canal, which we believe is exceptionally tight and is not going to get any less congested on a go forward basis. China is a major player in the LNG space. China is growing dramatically. The conversion from coal to natural gas consumption, dramatic increase that we always see with the recent announcements and the trade challenges that are going on right now.
I'm asked often, does that concern you? We have some years. I think cooler heads will prevail in the trade wars and at some point we'll be talking. We continue to have conversations your my left is essentially Aiko and it's the Aiko strip and JKM pricing, that's Japanese landed pricing. You can see on the graph, historically, there was a blowout.
So obviously, the Fukushima nuclear disaster in Japan, LNG prices spiked up $14,000,000 $15,000,000 $16 in MMBtu. There's been since that time, the nukes have come back on, some of them come back on. There's been growth in global LNG deliveries. But on a go forward basis, what you see there is essentially from AECO, the red line to the JKM pricing line is you have about a $9 gap. And again, where that says is and it's widening, it's hard to see on the graph, but the gap is actually widening.
So you have a landed price of around $9 not counting your gas price, about $6.50 of costs. Again, that competes we believe Jordan Cove competes very favorably in that $6.50 environment and as that widens to $8.50 $9 again, West Coast, Canada, United States LNG opportunities can compete on a global basis. A brief update on Jordan Cove. Want to start with, so what's the positives? We did receive, it's an ongoing challenge and I always start that if this was easy, it would have been done already because it makes so much sense.
We did receive our draft EIS from FERC and we are expecting to move through that process. We're expecting the final FERC certificate in January 2020. We did progress our commercial conversations with our off takers. We were negotiating we have a capacity of 7,500,000 tons. We were negotiating in an amount of 11,000,000 tonnes.
We were doing detailed conversations. We are we progressed towards binding agreements until we put pause on that, but we made tremendous progress. We are continuing to have conversations with our commercial counterparts on how to continue to move the project forward. They want to continue to have, pardon me, conversations about the commercial arrangements that they have with us. And so they haven't been deterred.
It's always a challenge to keep them engaged, but they're very interested. They see the logic of Jordan Cove as well. What's outstanding on a go forward? Obviously, we need to get that FERC certificate. The critical one is the next line there is we need 2 Oregon State permits.
We did receive yesterday some good news. We did receive confirmation from the Department of Land Conservation and Development that our application, our CCMA, our Coastal Zone Management application was deemed complete and would move through the consistency review, which will be completed in October. Couple of weeks ago, we did receive a denial on our 401 certificate, that is the water quality from DEQ. You can look at it there's a couple of points that I think I'd like to make. Firstly, the DEQ was in a jam from a regulatory process perspective.
They felt they needed to come out early. We thought and believe still today that they didn't have to make a decision until September. But due to some regulatory circumstance, they felt they had to get a decision out in May, which put us in a bind. We actually had filed information to them on April 30. So obviously, they didn't get a chance to read our final submission of information.
So they denied our application on purposes of regulatory. They didn't want to be the project to be they wanted to rule. They didn't want it to be deemed a positive. So, they took a position. But at the same time, they did provide us and they told us they were going to do this, a bit of a road map.
It's not easy, it's challenging, but we now have in our possession what is required of us to be successful in the water quality permitting. There's a lot of work that we've already submitted. There's work that they yet haven't read. There's work that we can undertake in the next few months to secure that permit. And then there's a bit of an education process with them, we believe as well to look at what and how you go about building a pipeline.
Appreciate that Oregon doesn't get very many LNG projects or pipelines to regulate on. And so we've inundated them with technical information and we're playing a bit of catch up on that. But again, we think we can be there. Failing that, there are still remains other tools available to us and we're gathering and evaluating that information. Pursuing other LNG opportunities, again, I want to start answering this question.
So I'm a geologist, so I always get a kick out of these some numbers and facts for you. Canada has 1200 Tcf of remaining resource. It's at the and that's recoverable at today's current technology. That gives us actually 300 years of resource life. And Mick showed you some, the 500 and 160, 300 years of resource life that if we at current consumption rates, we need to get it out of the ground and we can serve and be a valuable global player with these products.
We believe that if Canada, if the Western Canadian Sedimentary Basin could increase its production by 8 Bcf a day. So again, some of the numbers were about 15, 16, 17 Bcf a day. If we can increase by 8, up to 25 and then if you can make 2 Bcf a day available to markets you're currently serving perhaps in Western Canada and in Eastern Canada, 10 Bcf a day is the equivalent of 60,000,000 tons of LNG opportunity. LNG Canada, 14,000,000 tons growing potentially up 26,000,000 on an expansion, other opportunities, 60,000,000 tons by 10 Bcf a day, again, drawing down this vast resource, we believe there's opportunity for 2, 3, 4 more Canadian LNG opportunities on the West Coast, a challenge obviously from a regulatory perspective, a challenge from the pipelining aspects to get it there, but the resources there, the opportunities there. And we are seeing, I think, LNG Canada, a glimmer of hope.
There is a regulatory process that works. It takes time. You have to be part of the entire process and committed and dedicated to that. But again, we have such a vast resource. It won't take much to have 3 or 4 LNG Canada size or smaller size numerous smaller size opportunities.
Technology is changing, floating LNG can compete on a cost basis with Gulf of Mexico brownfield expansions. And again, our shipping distance and our feedstock pricing makes us an exceptionally attractive opportunity.
Hello, everyone. I'm Scott Burrows, Pembina's SVP and Chief Financial Officer here. I'm going to start by talking about our strong financial position. So the first question is how are you going to finance your growth? And really, I'm going to talk about this in 3 different pieces.
First, at a high level, our overall approach to financing second, the actual projects that we're financing and then thirdly, a little more tactical about the actual financing plan. So we'll start with the guardrails. We always start with the guardrails. That's really what it comes down to when we think about how we're approaching the growth and how we're going to finance it. We've been showing these guardrails now for over 4 years.
And every now and again at our strategy session, we spend time talking about them and thinking about do they need to change, do they need to be updated or adapted to the current environment. And at the end of the day, we always come back to the fact that they've served us well. We think they'll continue to serve us well. And as you can see, they've been relatively consistent with no changes over the last 4 years. Because we've shown them for so many years, I'm not going to go through them in detail and go through a page on each one.
I'm just going to kind of touch on them at a high level. But at the highest level, what I would point out is if you look at where we're forecasting 2019 to be, every metric is up, and it's been consistently up every year as we move from 2015 to today. So it's a great position to be in. So just on the first financial guardrail, maintaining at least 80% fee based contribution of our EBITDA, you can see that we're currently tracking to about 86% in 2019. I think it's important to point out that it's not just about the growth in the percent going from 77% to 86% because, of course, our EBITDA has grown substantially.
So if you look at the absolute numbers that underlie this, we see fee for service EBITDA in 2019 of roughly $2,500,000,000 compared to $750,000,000 where we were in 2015, so almost a 2 30% increase in our fee based EBITDA growth. In fact, if you go down one level to take or pay, the take or pay underlying our business, call it $1,800,000,000 is almost the exact same EBITDA we had in 2017. So just a substantial growth of the underlying EBITDA, both from a take or pay and a fee for service perspective. Secondly sorry, and just lastly on the first one, really this is how we think about risk and reward, and we think this is one of the key ones that drive the underlying value for Pembina. 2, have a payout ratio of less than 100% of our fee based distributable cash flow.
When we set this goal in 2015, we were at about 135%. Our goal was to get to sub-one 100% in 2018, and we're proud to report that we're almost 76%. So just again, a substantial growth in the underlying fee for service EBITDA, which has driven down that fee for service payout ratio. When you look at it from an absolute payout ratio perspective, we've also taken it from roughly 72% down to 57%. I'll spend more time on this in a couple of slides and just what that means in terms of retaining cash and being able to fund the growth in the future.
Next, Guardrail, 75% credit exposure from investment grade and secured counterparties. It's great to have fee for service and take or pay revenue, but if your customers ultimately can't pay the bills, that's not a good thing. So we focus on, as Stu said, mainly the geology of the customers, but we also focus on the credit perspective as well. And you can see that that's increased slightly, which is a challenge. I mean, if you think about where we were in 2015 to today, there's been substantially more downgrades across the universe than there's been upgrades.
So that's a stat that we're pretty proud of. And then obviously maintain our strong BBB credit rating. Right now, we're sitting about 21% FFO to debt depending on which agency you map to, that's actually could be considered in the BBB plus category. But we do have a pretty substantial growth profile ahead of us. So we'll talk a little bit about how that metric will change over the coming years.
So solid financing plan always starts with a great balance sheet. And what we have here is, on the left hand side, how our current credit metrics stack up against our internal targets. You can see on a debt to EBITDA basis, we're slightly below the low end of our target range. On an FFO to debt basis, we're tracking right up at the high end of the range and then on the debt to capitalization, again, below it. So versus our internal metrics tracking extremely well, part of that is because if you look at the outperformance of the business in 2018, we free cash flowed more than we were expecting.
So we always talk about our fifty-fifty debt equity. If you actually go back from 2012 to today, we're actually more about 50 4%, 55% equity. That's for two reasons. 1, the underlying business just outperformed. And secondly, we were building in some buffer as we go into what I'll call kind of the next wave of growth that we'll talk about here in a second.
Then obviously, we always look at it versus our peers as well. We really manage the business to the left hand side, but we often get asked about our balance sheet versus our peers. And what I like to say is, I don't think we're under levered. I think we're rightly levered and everyone else is dealing with other issues. And that's one
of the important factors when
we think about our funding plan. We can think about our funding plan in the context of the growth that's ahead of us and how we fund it versus distractions like asset sales or should I put my DRIP on or not. We don't have distractions to fix our balance sheet. We can focus on just growing the business. Just wanted to orient everybody because obviously after the acquisition of Arison, we did take on some joint ventures.
And so when we think about debt, we think about it from a proportionally consolidated basis. So we start with Pembina's on balance sheet debt of roughly $7,500,000,000 We do have roughly $2,500,000,000 down at our subsidiary levels to get you to total debt of about $10,000,000,000 When you look at 2018 EBITDA, again, proportionally consolidated EBITDA of 2,800,000,000 dollars got us to a debt to EBITDA metric of 3.5 times. When we think about the balance sheet, we think about avoiding falling under the rating agencies threshold. So when we go into these large capital programs, we think about coming into it from a position of strength because we know as we build through it, the credit metrics will weaken because obviously you're spending a lot of capital and you don't have the associated EBITDA. So we want to make sure that in those peak leverage years where we have spent all the money, but we don't quite have the EBITDA in service yet, that we're still above the threshold because nothing is worse than getting behind those thresholds and making a bunch of promises to the rating agencies that you're going to get back above them.
It can be really challenging and it puts a lot of strain on the company, on the balance sheet and on your financing plan. So we manage it pretty carefully. You can see in 2019, we will creep up slightly from 2018 and really that's just a function of close to a $2,000,000,000 capital program this year with projects that don't really come online to the middle of 2020. Then we'll see some incremental capital between the middle of 2020 and 23 when CKPC comes online. But in both of those cases, you see the leverage slightly move up and then come back in line when the EBITDA associated with those projects come on.
As Mick pointed out, a common question we got asked at last year's Investor Day around this time is how are you going to grow and what are you going to do next? On the left hand side, we had that slide in our Investor Day last year, right hand side is this year. So between Investor Day last year and this year, we've put $1,000,000,000 of capital into service. We've moved $3,500,000,000 from, call it, the uncommitted and value chain extension into the secured bucket. We've backfilled a bunch of capital and in fact, grown the uncommitted budget bucket to $4,000,000,000 And then of course, under value chain extension, we still have Jordan Cove.
I think as you've heard today from Jarrett and Stu, we see really long runway here in terms of growth opportunities. We didn't want to write it down and we typically don't put our Blue Sky projects on these slides because they're just not at a stage yet where we're willing to talk about them in too much detail. But if we were to write down all the things we're working on that value chain extension bucket, it would be pretty substantially larger. But focusing in more on just the actual secured projects, as we've talked about a couple of times today, we have about $5,500,000,000 of projects coming online between now and the middle of 2023. I think the real takeaway from this slide, if you look at all the projects, most of the projects don't come online until, call it, late 2020 to early 2021.
And that's why I was highlighting that we will see in 2019 some of the credit metrics move up slightly from $3,500,000,000 to $3,700,000,000 because we do have a pretty substantial capital program between now and the middle of 2021. Post 2021, most of the capital remaining really is to fund our petrochemical joint venture. So what does that all mean in terms of the actual funding plan? So again, it starts with the commitment to the guardrails. Generally speaking, we look at the fifty-fifty debt equity over the long run.
We ensure ample liquidity and flexibility. And what that really means is we spend a lot of time talking internally, talking to investors and talking to our Board about pitfalls or mistakes people have made when it comes to financing plans. We focus on having a lot of liquidity. Again, we don't want to be in a situation where we have to rely on the capital markets necessarily because we all know that those can dry up and access to capital can be tough at times. We plan, we run a lot of different scenarios.
We find often people don't plan for project delays. They don't plan for cost overruns. Their models assume everything goes right. And as we know, everything doesn't always go right. And what we've found is you start to then get in a vicious cycle in terms of overhangs or reliance on the capital markets.
We spend a lot of time making sure that we have a lot of flexibility in the financing plan. And of course, we're focused on limiting dilution. When we think about the capital plan, we can fund it solely through debt and cash flow after dividends. We really only think about incremental equity in the context of acquisitions, just because they're so large, you can finance them with immediate accretion. But from an organic growth profile, as you can see on the right hand side between now and the middle of 2020 3, not only can we fund it internally, but we actually have excess cash flow to be able to add incremental projects and not have to think about external equity.
The question 20, how do you see 2019 shaping up? We put out the EBITDA guidance with our quarterly report. Really, this was just a revision. I wouldn't call this an increase. This is just a technical revision to account for IFRS 16.
As we said in the quarter, we'll see an uplift of roughly $56,000,000 for the year. So we took our guidance from $2,800,000,000 to $3,000,000,000 to $2,850,000,000 to $3,050,000,000 And then we did update our capital expenditure, what our forecast is for 2019. Really, this was driven by the fact that since we published the original budget, we've announced Peace Phase 8, incremental spending at the Duvernay Complex, incremental US50 $1,000,000 at Jordan Cove and then some incremental JV contributions in advances, really that's to fund the Hyatt program as well. So with all those put together, we have increased the CapEx budget from roughly $1,650,000,000 to $2,000,000,000 for the year. Now just a little color on the budget because we do get a lot of questions in terms of the 2019 guidance.
What I'll say is, we have seen some headwinds and tailwinds on the margin. Obviously, none of them have been material enough for us to revisit that guidance range. But from a tailwinds perspective, the FX rate is certainly helping us. Back when we set the budget in November, we've seen the Canadian dollar weaken. As I said on the conference call, we have about 20% to 25 percent of our revenue coming from the U.
S. Dollars. So that's been a bit of a tailwind. We've also, as Jared pointed out, seen increased utilization across the fractionation complex. So that's helpful from 2 fold, 1, incremental revenue from the actual processing, but secondly, that's giving us incremental liquids to market as well.
From a headwinds perspective, I think NGL pricing, it's everyone can see it's been pretty modest throughout the year and down from when we set the budget. We're seeing especially weakness across the butane landscape. So that's a bit of drag on overall earnings. And then we have seen conventional volumes lag where we were currently budgeting slightly, ever so slightly. So a couple of tailwinds, a couple of headwinds, but again, nothing material, and we're still comfortable with the overall EBITDA guidance range for the year.
And what that means in terms of a per share, so when we look at 2019, we're forecasting between $5.60 to $6 a share. So at the low end of that range, it's essentially flat to 2018. And on the upper end of that range, it's about a 7% increase. I'd just make a couple of comments here. 1, obviously, 2018 benefited from a very, very strong NGL and marketing year.
If you recall, we raised our guidance twice last year, and that was almost solely on the back of some of the marketing results. So had that been a normal marketing year, you would have seen a more steady increase from 2017 into 2019. And when we look at 2019, really what we're seeing there is roughly about a 15% to 20% increase overall from our facilities and our pipeline division. So our fee for service with new projects coming online and higher utilization. And then we're seeing that offset roughly by about a 20 percent reduction in the marketing business.
So those 2 are roughly offsetting each other, which is why you see a somewhat modest If we think about the dividend, first of all, it's all about sustainability. If we think about the dividend, 1st of all, it's all about sustainability. We don't want to be in a position to have ever cut the dividend. Pembina in Pembina's history, the dividend has never been cut and certainly this management team doesn't want it to be on their watch either. So we're really focused on the sustainability of that dividend.
That obviously starts with the guardrail and making sure that, that fee for service is really well protected from our fee for service and take or pay revenue. And then we also think about it in the context of retaining cash. And if you look at the history of the company, this obviously only goes back to 2,009, kind of 2009 to 2011, almost 100 percent payout ratio. And again, that was no commodity exposure, highly contracted, no significant growth profile. So there really was no need to retain cash.
It was really dividend or share buybacks and the company chose to pay it out as a dividend. 2012, we had a bit of a shift in thinking for two reasons. Number 1, we acquired Provident, so we took on some incremental commodity exposure. And secondly, we obviously were starting to build out the platform and needed to retain some of that cash flow. So that's really when our thinking started changing around retaining incremental cash flow.
And then we were so successful with the capital program, we decided to allow the cash flow per share to grow at an increased rate over the dividend. And as you can see today, that's what's driven the payout ratio from essentially 100 percent down to, call it, 55% to 60% overall and taken retained cash flow from essentially 0 up to somewhere in the neighborhood of $700,000,000 to $900,000,000 a year on this graph. So when we think about the dividend and go forward context, as we sit here today with the $5,500,000,000 ahead of us, largely brand new capital, we haven't spent much of that to date. I think we're comfortable guiding towards a dividend increase that's roughly in line with the historical rate. So roughly that $0.01 per share per month, somewhere in the neighborhood of 5% to 6% per year and then mix it every now and again, every couple of years, we may look to do a second increase.
But in the short term, we're really focused on that roughly 5% to 6%. With that, I'll turn it over to Mick.
Least to say we're looks like we'll be on time. It's a 5 year snapshot of what we've done against the broader market. Growth rate, as Scott said, been in the 4% to 5% range, but we doubled up when we had the Veresen Catalyst transaction. And as Scott said, also projecting more in line with historic increases. But again, if we have some kind of catalyst event, we can certainly have the capability with a 57% payout ratio to move that.
For the accountants in the room, EPS, pretty respectable EPS growth over the last 5 years. And our dividend yield is, from an investor perspective, favorable, but one might also say that our share price is too low based on the graph. Historically, if you invested $100 in our company in 2009, you now have $4.70 in your bank account. It's a pretty good story. Compared to a basket of our peers, you would have $2.40 in your bank account now.
So almost a 2 to 1 outperform of the sector at large. And the number I like the most is we are 18% compounded over that time. As I mentioned in my opening remarks, we are 13% from this time last year. But when you take a longer term view, it's been 18% over 10 years. So not 18% over a year or 2.
It's a very it's been a very predictable and resilient story. Value proposition, we're diverse. We're integrated. We're getting more integrated. Our assets are on top of fantastic geology.
We have great systems. We're expanding those systems faster. We're providing greater flexibility and our cost per barrel of expansion is dropping all the time on top of world class geology. We've got growth. Scott showed you the cascade of how we're turning possible projects into probable projects, into secured projects.
That's been doing that for a long period of time. We don't expect it to change. Perhaps the opposite, we have a greater capital allocation challenge in front of us now than we've had. Large scale growth and value chain expansion projects, so doing more of what we have been doing, but also building the platforms of the future. Organically, we can grow based on our reinvested cash flow, which is an equity.
We can borrow against that under using a responsible capitalization at $1,000,000,000 to $2,000,000,000 a year and that's really what's driving us as a self funded model. High fee per service growth, our stated minimum is 80, but we're much higher than that today. So we do have a lot of flexibility, not just in our balance sheet but also in our business mix. Scott showed you the balance sheet. It's amongst the strongest in the sector, and I think we're planning for the long run by being committed to all the stakeholders, and we can see talking to some people in the brakes what can happen if you forget a stakeholder, that can be a great challenge on your business.
So we are thinking long term, playing the long game with all stakeholders. So that concludes our formal presentation. Hopefully, you've got some questions. So maybe I believe the team is going to come up here and join me and look forward to your questions. Thank you.
Good morning. Jeremy Snett, JPMorgan. Questions that you guys had outlined there. Question 6 talked about the Northeast BC frac opportunity. Question 11 talked about possible Phase IX expansion.
Just wondering if these two initiatives could be related in some way or what degree of overlap do you see? And what advantages does your fully integrated value chain provide? What advantages does that give you in these type of expansions?
Hey, Jeremy, I'll start with the Northeast BC frac. So with the Prince Rupert terminal coming out of the ground like it is and that accessibility to rail C3 from Northeast BC versus sending it all the way down into Redwater. We see that as a true advantage, especially with our relationship with CN. One of the other things we're seeing in Northeast BC is not only is production going to ramp up due to potential LNG, specifically LNG Canada in the short term, Jason can talk a lot about there's a significant amount of oil that's being found up in that neighborhood. With that oil comes extremely rich solution gas.
That solution gas before it can get on to TransCanada, possibly go east or west, requires processing. With that comes off lots of NGLs. But that's really where our mindset, let's frac some of those barrels up north. We already do it today at Taylor. We have the expertise.
We have the operational, the offices. We have all of the infrastructure in place. And if we can take off of Peace Pipeline 55,000 barrels of NGLs off up in that Northeast neighborhood immediately downstream there, that's where Jason can go and sell, resell that pipeline capacity, which is in high demand right now up in that neighborhood. Jason, I'll let you add any more color there.
Yes. I think, Jared covered it. I guess the only thing I'd add is, by taking those barrels off, as Jared mentioned, we have the opportunity to add more volume to the system that might not be NGL. So whether it's crudes, condensates so we don't have to expand downstream of that take out point for that 55,000 barrels that we bring on. So huge upside potential.
If you're a Pembina customer, you don't want all your barrels in Redwater. You don't want them all at Rupert. You want to mix. And what good marketers do is they allocate volumes all over. So we do have incremental demand at Redwater, and we are going to move most likely some existing customers up to NEBC and then we can backfill at that location and it will give an existing customer the ability to swap or dedicate the barrels to the location of their choice and diversify their marketing stream at a very good cost because if you're in NEBC and you want to go off the West Coast, what's the point of shipping all the way to Redwater and reeling back?
But again, people are looking for that mix. The other advantage, of course, is you're connected to a world class NGL system. So there's any operational outage or we don't have enough barrels, we can backhaul those barrels. So for example, we can ship barrels the other direction to this new frac to fill it up and gives us a ton of operational and locational flexibility.
And then just a follow-up with the Alliance pipeline expansion. So I wonder if you could expand there why Bakken project is better than WCSB project? What led into that thinking? And what type of timeline could we see this project come into start to materialize?
Thanks, Jeremy. So the rationale for the Bakken versus the WCSB is really driven by fundamentals, right? The gas market in the WCSB is fairly weak, obviously. There's a number of opportunities for egress sort of coming out of the ground now in the WCSB, including Coastal GasLink, the North Montney mainline expansion, things like that. So we believe that the producers have pretty much extended themselves as much as they can in terms of making those commitments and some of those egress opportunities are becoming available for them over the near term.
The predominant difference in the Bakken is really they are constrained on a gas egress capacity, which is why they're flaring all that gas. And they're not getting any value whatsoever for the gas that they're flaring. So the opportunity there to improve the producer netbacks, get their NGLs and gas to the Chicago market where it gets a premium. In terms of timing, we're out now talking to producers in that area. We're hoping in 2019 to make a decision on the project.
All right. Thank you. Rob Hope, Scotiabank. Mick, in your opening remarks, you talked about how you're looking at platform investment. So on the LNG side slide, you mentioned some further investments there.
But on the petrochemical side, where do you envision Pembina's space there longer term? Are you looking at further multibillion dollar investments in kind of facilities similar to the PDH? Or is it more of we want to serve both sides of a 3rd party cracker or something along?
Well, I mean, you think about our position of strength, we have critical mass of ethane, propane, butane, condensate. And that's where our advantage comes from. If someone were to want to build a world scale polyethylene facility and know that it would be full for a long period of time, we're the only ones that can provide that critical mass. Just to reiterate, we don't view ourselves as being in the commodity chemical business. We view ourselves as being an infrastructure provider for the chemical business and that's the approach we would take.
We would have to have a partner or a format where we are a toller on a lot of that product. But our objective with petrochemicals is to create downstream value added markets for our customer and we'll do what we need to do, what we feel is the right thing to do for our shareholders. But any of those commodities where we have critical mass is where we're looking is really, as I said, where's the best market in the world, whether that's getting it there or transforming a product to get it there, that's what we're looking at in Stu's group.
And as a follow-up, in terms of the Northeast B. C. Fractionator, the 2 geographic areas there, would you be looking to either kind of make a hub at Taylor or would this be something connected to your VMLP? And if it is in the VMLP territory, just want to confirm that it wouldn't fall into that JV?
No, the JV has got its kind of a land area that it plays in and it's having success as evidenced by the new Vista deal. But in terms of liquids, egress, fractionation, extraction that we won't be doing that within VMLP. In terms of where this asset goes, I think Jared's got a couple of very good locations and they are made possible really by egress on the West Coast of propane.
Thanks. Rob Catellier, CIBC. Nick, you mentioned dividend growth rates, what we can expect and the possibility of some catalysts leading to extra growth, particularly you mentioned acquisitions. So I wondered if you can characterize how active Pembina is at looking at meaningful acquisitions and the acquisition environment? 2nd part of the question is how big of an organic growth project would be required to serve as a catalyst for an extra dividend bump?
Well, I'll deal with the second cash flow and the rating agencies remain confident in your ability to fund organic growth. That the catalyst would be most likely acquisitions, almost certainly acquisitions. Cam and his group constantly look at stuff and our phone rings a lot because of the balance sheet these guys have created and our capability to buy things and make them worth more than what the seller could. That's how we have a seller and a buyer. So I wouldn't say it's a frantic pace, but we look at a lot of stuff.
And we do see opportunities from time to time simply worth more to Pembina than to others.
Your business isn't highly NEB regulated, but of course, there's the prospect of Bill C-sixty nine. So how do you envision that impacting capital allocation strategy if it does pass in a form similar to what's being proposed?
Well, I testified in front of the Senate on Bill C C-sixty nine. So anybody who wants those notes, certainly, we can send them to you. I think the impact of Bill C-sixty nine will if it's unaltered, essentially will make major energy projects the risk reward profile on major energy projects, it will be offside. If you're NEB regulated, you're getting pretty modest returns to begin with and then you do add a long and uncertain timeline to that and certainty of approval, your expected net present value, your expected IRR just will fall below acceptable levels. And I think that will essentially drive infrastructure companies to invest in basins that are growing.
I mean, we have to follow, we have to invest in places that need our investment. And if we can't get product out of Western Canada, the question is, will Western Canada need infrastructure investment? I do believe I hope and I believe Bill C-sixty nine will have key amendments and hopefully it will be more debated further in as part of an election. That's my further hope. I'm not going to say it will prevent any future projects from happening, but I think your risk reward profile on the other side of the border starts to become more favorable.
Thank you.
Lynn Nazergail, TD Securities. This is a question for Scott. You have the good fortune right now of bumping up against kind of your $1,000,000,000 to $2,000,000,000 annual run rate of capital expenditures. I'm wondering, we're not even halfway through the year, if you see the potential for that growing above $2,000,000,000 And if it were either this year or next year, how might you think of that incremental source of financing as you kind of go out on the options that the cost of capital increases? Might you, at some point, if it's a really compelling project, seek forbearance from a rating agency?
Might you consider deferring some capital expenditures that have some discretion of timing, might you consider an ATM program or maybe even asset sales given what we're seeing transact to some private equity players, might actually become quite compelling from a valuation a value creation standpoint for shareholders?
Thanks for the question, Linda. As we sit here today based on where we are for the year, typically, I would say between 10% to 15% of our capital tends to slip into the following years. So if I was a betting man, I'd actually see that number probably come in slightly below the $2,000,000,000 that then increase over it. When I think about the capital program, that's why I talked a lot about ample liquidity because we don't think about it on a 1 year basis. We really think about it over the long term.
And as I said, we're in a position where over the last 5 years, we actually financed a little bit more on the equity side, 55% versus 45%. So to the extent we move through this year and if that capital did go up, you could see a scenario where maybe we're 55% debt this year, 45% equity, but we're really looking out over a 5 year program. So I don't think about it in 1 year isolations like that as long as you have the liquidity to be able to fund that incremental capital. And I can say definitively, we do have liquidity today. After our last bond offering, we're completely undrawn on our $2,500,000,000 credit facility.
We have about $300,000,000 to $400,000,000 of cash right now. So I feel very confident in actually having the liquidity. And then when I look out over the 5 year program, if some of it slips in to the following year, fine. If some of it accelerates, that's okay as well. To the extent that we win new projects, if you think about the timing these days, just with the amount of time from when you publicly announce something to you actually really get regulatory approval and start spending money, that actual capital expenditure is relatively low unless you're doing a Jordan Cove.
But
on some
of the more the organic gas plants, pipelines, it's a pretty small burn. So to the extent we win new projects in 2019, we really don't start spending money into kind of late 2020, early 2021. And if you look at the timing of the capital program, that's when a lot of the capital falls off and a bunch of the EBITDA comes online. So from that perspective, I feel comfortable about funding incremental organic projects.
Thank you. And just as a follow-up question, as you extend along the value chain and expand the scope of the type of hydrocarbons you work with, can you give us an update on your return hurdles for your various projects types of projects?
Yes. If you look back 5, 6, 7 years, we've exploited and built our company in either 6 to 8 multiple. You can do some brownfields at 4 or 5 times, some greenfields at 8 times, 9 times, acquisitions for the highest quality stuff here into the double digits. And when we kind of weight that all, we represent that we think we can grow at 8x. It's almost a bit arbitrary to put hurdle rates for a business unit, for example, because when you own 100% of the value chain, it doesn't really matter whether that profit manifests itself in a gas processing fee or a frac fee or Stu's making it on marketing.
So we like our investors to think about it as the integrated solution that we can exploit, proven as evidenced over 7 to 8 times.
Hi, guys. We've got a question coming in from the online audience. It's for Jarrett. Jarrod, can you confirm what products will flow through the Prince Rupert terminal when it starts up and then what possible expansions might look like?
Yes, you bet. Thanks, Scott. So the propane terminal is 100% propane at this point. We are so 25,000 barrels a day is what Phase 1 is at. We are doing the work.
It's early days, but on how we can properly expand that, as Stu showed in our pictures, it's we're not going to be overly constrained by the actual facility side. It's really the optimization on the logistics side of bringing in being more efficient with our shipping, and that's really where the advantage is to increasing that. And then the potential is a lot of these handysize ships, they have separate compartments. You can load separate products such as butane and propane in the same ship if Stu can find that magical marketing hotspot where someone wants
to buy both of those products. So propane initially.
Robert Kwan, RBC. When you look at the funding plan and you're showing $750,000,000 of excess cash and $1,000,000,000 to $2,000,000,000 you think you can self finance. If you see that CapEx though trending below $1,000,000,000 can you just talk about how you might see that excess cash being used? Do you look harder at acquisitions? Do you just look at delevering, especially during the multiyear CKPC build?
And then maybe the last part to that is, Nick, you talked about not being very keen on share buybacks and a lot of that's just project returns, which you might be building at 7 times versus your stock, say, at 11 or 12. Is it as simple as looking at that spread on the math? Or do you think about share buybacks as well as buying back or buying your future growth as well?
I'll take the first part of that question. Robert, I'm not trying to not answer your question, but a lot of that question highly depends on the status of Jordan Cove. And obviously, if we're making progress and we're continuing to invest and progressing that project or sub in one of the other ideas that we've been talking about here, then we're obviously that cash will go there won't be the $750,000,000 of excess cash that will be directed towards those projects. And as Mick put up the capital allocation slide, that's obviously our highest priority is investing in good solid businesses with good returns and good counterparties. So that's how we think about it.
To the extent that the growth dries up and we get asked that question a lot and we continue to find ways to grow the business. So we haven't actually had to have that discussion directly with the Board to say where are we putting that capital. We've had it at a high level. But every time, we think we have to make a decision around whether we're buying back shares or whether we're going to increase the dividend, we successfully win new projects, which goes into the business. So we really haven't got there yet.
When I think about it from a funding perspective, to the extent we do have excess cash flow, we don't have growth projects. Obviously, it goes back to the sustainability of the dividend, because we want to make sure that, that's sustainable. And then after that, we think about funding fifty-fifty. So why wouldn't you think about returning the capital fifty-fifty, I. E, maybe 50% of the cash flow goes to pay down debt and 50% goes to buy back shares.
That's just an idea we've talked about. That's kind of how we model it in the long range plan when we get to a point where we get through the growth projects. But I'm highly confident in my fellow colleagues continuing to win business with the platform that we have that we'll have the ability to reinvest it.
And you guys have outlined today a number of 1,000,000,000 of dollars of new opportunities. I think some are quite probable. And we've just never gotten close to that layer of share buybacks. Would we go shopping? Perhaps.
But again, our slogan now is get better, not just bigger. And does this acquisition make our entire asset base more valuable or is it just an acquisition onto itself? And if it's just the latter, it's probably just not going to make it through that strategic investment criteria that we outlined.
I can just finish with future opportunities. You have the new ventures discussion and within the petrochemical complex where you might or might not be involved, I think the feedstock side makes a lot of sense as you think about your pipeline and storage assets. But how do you think about petrochemical facilities or additional petrochemical facilities over and above CKPC? Do you see is there some sort of guardrail associated with how much of the mix you want, whether that's just from the near term, how you project the story. But even as you think about the post contractual business, you're taking price and volume risk at those facilities and commodity chemical
companies tend to trade
at, call it, 6, 7 times EBITDA. So not
Spot on. Again, I try to characterize this as an infrastructure provider to a commodity chemical business. So it starts with moving our ethane, propane, butane and we have the critical mass to supply and or construct. I mean, we have a lot of embedded ethane DF at RFS III. There's tons of ethane in alliance.
There's tons of ethane up in the Duvernay propane. So we can to the extent there's demand, we could deep cut number of Bcf a day pipeline or gas plants and create a ton of incremental product. 2nd, consider that when we bought proven, we got a lot of proprietary product. I think we inherited about 15,000 barrels a day of propane, for example. We inherited a lot of ethane that we own that's our molecule.
And so without even increasing our commodity exposure, transforming our proprietary ethane or propane into polyethylene or polypropylene, it doesn't actually expose more molecules. It's just taking a different risk on the same molecule. And in terms of volume risk, the there's when you have the supply, how much volume risk you're taking? You've got 65,000 barrels a day of propane supply and you're dedicating 11,000 barrels for your 1 half share of a CDHPP, that's not really much risk. You're not going to run out a product.
So we don't think of the volume risk that much, but you will see us contract that facility at least 50%. And when you that's Scott always will show you where we are in the guardrails and that's how we play. That's how we determine are we going to get fee for service for 50%, 60%, 70% based on where we are in those guardrails. And then consider almost every project you saw today other than the EDHPP is fee for service. Usually 75% take or pay, 100% take or pay, what have you, but they're all tenured long term fee for service contracts.
So in absence of PDHPP, we'd be heading for 90 or plus. So we've studied our mix very carefully of fee for service versus non fee for service non fee for service contracts, and we're quite happy that our investors like the kind of 4 to 1 mix of the Optima.
So just staying them within the 80% fee based guardrail or is there actually a business guardrail with respect to petchem versus rest of
the business? We went through this a number of years ago and our Board members would attest that the first time we built a non pipeline, we had a big discussion. Well, this isn't a pipeline. We said, well, what are the key things about pipeline we like, long tenured take or pay contracts with creditworthy counterparties, great geology backstopping and those guess what, those are all the same key tenants that our gas plants have and our fractionators. So we don't we're kind of agnostic on infrastructure type.
If it's integrated and we can have 1 plus 1 plus 1 equals 4 for agnostic to where we get those comps backstopped by great geology, great counterparties, and it doesn't really matter where they come from in the value of the company. So I said it many times, I'll say it one more time. We're an infrastructure provider to do the commodity chemicals. And so it doesn't really matter to us which part of the value chain it's in. Thank you.
Andrew Kuske, Credit Suisse. Mick, you mentioned your testimony in front of the Senate on C-sixty nine. What other efforts do you have underway from Pembina's perspective to really push forward energy in Canada and then the infrastructure associated with that?
Well, I mean, this is where we have most of our money invested. And one of the things we've taken on as a company is egress. I mean, there's 3 very capable companies, well, 2 now and the government providing oil egress. And we think they're doing a good job, and we don't see ourselves stepping in and trying to build better oil egress. But where we are leaders is in NGL.
And we're we got into gas through Jordan Cove a little early. It's obviously a little bit too large of a project for our company. But we've taken on playing our role in saving that basin. What's going to save that basin is getting your gas to Hawaii or Alaska or your NGLs, Mexico, where prices are multiples of where they are in the basin or gas through Jordan Cove to a $9 or $10 Tokyo market. So we are doing everything within our capability to bring netbacks back to our customers and of course, it benefits.
If we can get them to those higher value markets, they're going to phone us. They already do now, but this is just a complete game changer in terms of value added customer service.
Then maybe as a follow-up, just from a government relations standpoint, it's probably a volume on lessons learned in Oregon even just to date. But what are the takeaways on what's happened in the U. S. Say versus Canada, just from the experiences of government relations and what opportunities exist in places like say the Bakken for
instance? Well, I mean, I think my colleagues have shown you the Bakken looks very much open for business. The composition of the gas there is wonderful. It's got way more propane in it. Think about the solid environmental we'd be doing, taking $400,000,000 or $500,000,000 a day out of the atmosphere.
The GHGs there are mean that's multiples of what our company even including Jordan Cove and another LNG facility, multiples of GHGs coming out of the atmosphere going in. So there's just a ton of good reasons to transact there and they're open very much open for business. Oregon, in their defense, they haven't seen $1,000,000,000 projects, let alone $1,000,000,000 hydrocarbon projects. So we're overwhelming them a little bit. Their regulators aren't quite capable of this.
So we have to be patient. And one reason we push back our timing is let's let these guys react to something that's clearly overwhelming to them. We don't know how it's going to go there. It's still if you want my honest opinion, it's still fifty-fifty. But we're not betting the company on it.
I mean, we're we've brought our burn rate way down. It could well go down. Again, our customers are extremely supportive. They've stuck with us. They say this is a very important project.
The FERC is very cooperative. We are going to do what we need to do in Western Canada to enable West Coast LNG. We may participate directly in that, but if not, that's a lot of NGLs that have to come out and we're going to do our part. But the drill really is we have wonderful geology. And the only difference between Alberta and Texas is we don't have a coastline.
If we had a coastline, it would look a lot differently, but we don't. So we need to work with the federal and provincial governments or state governments in the case of Oregon to enable long term structural alignment for them to participate in this value add. And I think that the BC government realizes that at least with LNG that this is a very good thing for them and most of this gas is being found in British Columbia. So it's coming. It just takes years, not months.
And then just one final question. How has your knowledge of the U. S. Market really changed? And if you look back, say, 5 years ago, maybe the focus was about assets in the U.
S, but now it's more of a as a competitor to the volumes you're trying to move off the coast?
I would say our we've needed pitons to climb the learning curve. I mean, these guys speak Bakken now. They didn't speak Bakken, they do now. They know the customers. We've got Vantage coming out of there.
We've got Alliance, probably going to expand Alliance is my bet. We're starting to understand the Rockies, but they're all very calculated linking and expansions of where our position of strength is. So us jumping into the Permian, it's just not likely. What do we what advantage what lasting advantage would Pembina have by entering the Permian? I can think of 5 things that would make us unable to be competitive there, but I can't think of what our lasting advantage is.
Consider the opposite. The lasting advantage we have in WCSB, what the lasting advantage we could have in the Bakken and maybe in the Rockies with Jordan Cove and Ruby. But we'll eventually get to the Permian, I think, but it'll be when we can bring lasting that's not anything.
Jeremy Tonet, JPMorgan. You talked about dividend growth in terms of 5% to 6%, I think looking past 2019 is something that you're looking to ascribe to. I was just wondering ex Jordan Cove, obviously a big variable, can change things a lot. How do you see adjusted cash flow growing in that period? Is it in a similar range?
Or do you think you can achieve something better than that given kind of the organic growth portfolio you have on your plate?
I'll take that, Jeremy. Obviously, we don't give forward looking adjusted cash flow guidance. I mean, the way you can think about it is we've given you the slate of projects. We've given you roughly the EBITDA multiples that we funded them at, and we've given you our funding plan of fifty-fifty debt equity. So I think you can make some assumptions around that.
What we don't what you don't have is, I guess, the taxability of the company and that's going to change over time. You'll see that we are increasing, taxes are going up. So that's kind of when I think about the tailwinds for adjusted cash flow, we have pretty significant growth projects coming online. Funding is very reasonable. The one headwind against cash flow growth is just taxability.
But of course, as we continue to grow, we have incremental CCA pools. So that's about the best I can tell you on that question.
So maybe touching on some of the other points talked about before, our model spits out a number a little bit higher than 5% to 6%. If Jordan Cove doesn't come to fruition, if it does materialize, cash flow growth materialize faster, would you look to marry kind of dividend growth and cash flow growth at that point? Or are there kind of other considerations to think about?
Yes. So I mean, I
think in the scenario where we don't have Jordan Cove and we don't backfill the growth, I think, again, that goes to the question of increased dividend growth versus share buybacks. And I don't have a good answer for you right now, again, because it's not something that we have approval from our Board one way or the other to discuss. I think as we sit here today and we look at the various plans, we're modeling that 5% to 6% growth rate. If we don't have Jordan Cove and we're have a couple more years of growing dividends and growing cash flow, you could be a scenario where you had a pretty low payout ratio. So you do have some flexibility to increase the dividend, but it's always going to come back to the sustainability question.
Can we pay it out from our fee for service business? And what organic growth do we have? So those are the three things to think about. So is there the financial capability to potentially grow it faster? The answer to that is yes.
Have we made a decision around that? The answer is no.
I'll just add. I mean, in case it wasn't clear when Stu presented LNG or petrochemicals, We can probably only do 1 LNG project. We're involved in 4. So it's more about which ones we're not going to do. We turned down a petrochemical project in the last month.
We're working on another one. So sincerely, our capital allocation is the most challenging thing that we do. Running out of projects is not why these guys all look so tired.
And then maybe a last one if I could. You talked about protecting the franchise and you talked about the 4 stakeholders. And I was wondering if you could overlay that with Jordan Cove a bit more here and how what efforts you've taken here that might be different in the past for other projects and how you see that?
Yes. Jordan Cove is kind of unique for those that don't know what Oregon is like, but know Canada. It's kind of like British Columbia where the whole province less Vancouver embrace the oil and gas industry. And looking down at Oregon, the counties are by and large in favor. The First Nations are by and large in favor.
We've got about 80% of that right away locked up and we've only stopped I think we could have kept going. We've only stopped because we want to get our approvals figured out. And so it's kind of a dichotomy of complete grassroots support with a city that needs a little more time and education, similar to what Vancouver went through before they started to embrace LNG for the province. We think that will happen. The GHG story is compelling.
I mean, our customers are by and large going to displace coal. We just finished a study on that, that gas to coal displacement, that will offset half of Oregon's emissions, half of their emissions. So it's what true green would say no to that when they get jobs and tax base. The tax base is massive to the state. So we just have to get the right information to the citizens.
It's a huge learning curve. Harry is not here because he's working on this right now every day and we are taking ground, but there's some wins. As Stu said, we had unexpected win yesterday and an unexpected surprise 5 days earlier, but nothing in there has changed our view on timing yet.
Bob Maxwell, Sun Life. Maybe just as a follow on, could you maybe talk a little bit about the type of expertise that you'd want to see from a joint venture partner? And maybe at what point in the development cycle it makes sense to bring that partner into the project?
Well, that's you mean with pipelines, fracs, gas plants, we just finished a cogeneration plant ahead of time and under budget and we're looking to put cogen throughout our franchises. We got that. LNG, we would have partnered and we still will partner, but it's not necessarily for how to construct an LNG plant because we did get that expertise through the Verison acquisition. Operating, I mean, if we when we get a partner for Jordan Cove operating would be helpful. So we are looking at partners that bring more than cash or capital.
We're not really looking for a financial partner on Jordan Cove. We're looking for a strategic partner that can bring something. We don't have like a market, like operating capability, things like that. So that's what we're looking for in LNG. In petrochemicals, we have benefited pretty significantly from the Kuwaiti partnership.
They've built a number of these plants with different partners all over the world. So they have provided to us their key relationships. I think Scott, they provided a bunch of financing as well. And so it's just how do we get from here to high value markets? What do we need to do in between?
And do we have the expertise or not? But generally, don't love JVs, but with the right partner that we get paid, we create that structural alignment and they can work very well.
We continue to look. Our customers remain, as Mick already mentioned, the off takers remain very interested to be a partner in the Jordan Cove project. The scale and size, I think without the pause that we've taken at this point on some of the commercial conversations, we would have moved immediately into equity conversations with our off takers. Again, we believe commercial range is completed, further clarity on their regulatory process that we truly have something of value and something to discuss with all potential partners. I think Mick described it well.
We're not looking for strictly a financial partner. We're looking for strategics people in the business that can bring in expertise that will be 1 +1 equals 3 as we go forward.
That looks like the conclusion of the formal presentation. Thank you, everyone, in the room and on the webcast for your time this morning. I hope you found it interesting and informative. We're certainly excited about the prospects for Pembina going forward. We have lunch outside, so please do stick around and join us.
Lots of members of our executive team here, our Board and our Investor Relations team. For those of you who have 1 on 1 meetings set up for this afternoon, they're going to be in the rooms just across the open stairwell there, so you can make your way over there. And finally, if you've seen the wall maps posted around this room and outside here, We have made available copies of those just outside the room as you leave here. So please do take one with you. We don't want to take them back to Calgary with us.
So do grab one. We always get asked for them, and so we thought we'd bring a whole lot along for you. So thank you.