Okay, folks. Good afternoon, ladies and gentlemen. Thank you for all coming today. Welcome to the Annual General Meeting for Pembina Pipeline. My name is Randy Findlay.
I am the Chairman of the Board of Directors of Pembina and I will preside over this meeting today. With me on the podium today, Mick Doolinger, our CEO and President and Chris Sherman, Vice President and General Counsel and Corporate Secretary. In the audience today are a number of representative of Pembina's executive management team, employees and external advisors. Would the executives in attendance today please stand? Thank you.
Fine looking bunch. At this time, I'd like to introduce you to other members of the Board of Directors in attendance today. Anne Marie Ainsworth, if you just stand quickly, Doug Arnell, Lauren Gordon, Maureen Howe, Gord Kerr, David Legraley, Bob Michalevsky, Leslie O'Donohue, Bruce Rubin, Jeff Smith. Henry Sykes, the other member of the Board is unable to be with us today. The meeting will now come to order.
I appoint Chris Sherman to act as secretary of the meeting and the representatives of Computer Trust Company represent here today Conor Doyle and Filon Omotaku to act as scrutineers. Will the secretary please table the notice and proof of mailing of the notice of the meeting?
Even an affidavit from Computershare Trust Company of Canada indicating that the notice of meeting, information circular and form of proxy were mailed to shareholders of record as at March 16, 2018. In addition, I have an affidavit from Computershare Trust Company of Canada confirming the mailing of the 2017 audited financial statements to shareholders on March 6, 2018. I can also advise that the notice of this meeting and related materials were provided to the directors, officers and auditors of the company.
Thank you, Chris. I direct that these affidavits together with the copies of the documents mailed to the shareholders be kept by the secretary with the minutes of this meeting. The reading of the notice of the meeting will be dispensed with. The corporation's bylaws provide that business may be transacted at a meeting if there is a quorum present. I have been advised by Computershare that a quorum is present.
Accordingly, I declare that this meeting is regularly called and properly constituted for the transaction of business. We will start with the formal part of the meeting and then after its termination, Mick will be making a short presentation on Pembina's activities and will answer questions at that time. I requested that certain shareholders or proxy holders move and second motions proposed at this meeting. This is not intended to limit discussion or to suggest that other shareholders are not welcome to move or second motions. Registered shareholders and proxy holders should feel free to initiate discussion on any motion.
However, I would ask that you hold questions or comments not related to the formal part of this meeting to the question period at the end, which Mick will be handling. If you have a question, please identify yourself and whether or not you are a shareholder or a proxy holder. I will remind you of the 3 minute rule that we will be enforcing, which is for individual questions for 3 minutes. And the reason for this is to allow time for all shareholders to ask questions if they wish. All registered shareholders who have not already submitted proxies and proxy holders were provided with forms or ballots for their use in connection with the votes to be conducted at this meeting when they registered with the scrutineers before entering the meeting.
If you are a registered shareholder and have not completed a proxy or a proxy holder and have not yet received ballots, would you please raise your hand so that the scrutineers can provide you with the appropriate ballots? Is there anybody needing ballots today? I don't see any hands up looking for ballots. All right. That's good.
We get to go to a shorter version. So the first item of business is the presentation of the financial statements for the fiscal year ended December 31, 2017. These statements, including the auditor's report, have been mailed to all registered shareholders and to beneficial shareholders who requested these materials. Extra copies are also available at this meeting. Kimberly Payne, Leontyne Atkins, Richard Whiteley and Kristin Carskalen of KPMG LLP, Pembina's auditors are in attendance and are available to answer any questions following the formal part of this meeting.
The next item of business is the election of Directors of Pembina to hold office until the next annual meeting until their successors are duly elected or appointed. Before I get to the election of the Directors, I would like to mention one long serving Director, Lauren Gordon, who is not standing for election this year. Lauren served for more than 20 years as a Director, including 17 years as Chairman of the Board from 19 97 to 2014 and was the President and CEO of Pembina Resources prior to that. Pembina has benefited greatly from Lorne's experience, his wisdom, his wise counsel and throughout its history as a public company. We wish him all the best in his retirement and Lauren you will be missed.
A number of the directors of Pembina to be elected this meeting have been fixed at 12. Pembina's information circular sets forth management's proposed 12 director nominees. Each of the nominees remains qualified and has consented to his or her nomination as Director here today. Would the Secretary please read the names of the 12 persons who have been nominated by management?
The management nominees are as follows Randall J. Finley Ann Marie N. Ainsworth Douglas J. Arnall, Michael H. Stilger, Maureen A.
Howe, Gordon J. Kerr, David M. B. Legreele, Robert B. Micoleski, Leslie A.
O'Donohue, Bruce D. Rubin, Geoffrey T. Smith and Henry W. Sykes.
All of the Director nominees other than Mr. Dilger are independent and all of the directors currently sit on our Board. 3 of the nominated directors, Mr. Arnell, Ms. Howe and Mr.
Sykes are former directors of Veresen and joined our Board in October 2017 when the acquisition of Veresen closed. I'd like to say a few words about each of the nominees as you will see they bring a diversity of skills and experience to our Board. First off, Ms. Ainsworth resides in the U. S.
And serves on the Board of several public companies. Prior to that, she was President and CEO of Oil Tanking Partners. She had a long and distinguished career with Shell and Sonoco, in management and executive positions. She joined our Board in October 2014. Mr.
Arnall has served on our Board since October 2017. He is the President and CEO of Helm Energy Advisors, which provides advisory services to the global energy business. Mr. Arnall has held various executive positions and has extensive experience in the LNG sector. He is also a Director of Methanex Corporation.
Ms. Has served on our Board since October 2017. She currently serves as Director of Timber West Forest Corp, the Insurance Corporation of British Columbia and the Canadian Securities Institute Research Foundation. And she is the Chairperson of the University of BC's Hagar and North Centre For Financial Research. Previously, she was Managing Director at RBC Capital Markets.
Mr. Kerr was President and CEO of Enerplus Corporation until 2013 and is past Chair of the Canadian Association of Petroleum Producers. Is currently a member of the Management Advisory Council for the Haskayne School of Business at the University of Calgary. He was first appointed to the Board in January 2015. Mr.
Legrale is a Corporate Director who serves on the Boards of Equitable Group Inc. And Woodland Biofuels. He was a Senior Executive at National Bank Financial for 12 years and has extensive experience in the financial services industry. He has been on our Board since 2010. Mr.
Mikileski was Pembina's CEO from January 2000 until December 2013. He also sits on the Board of several other public companies and he's been on our Board since 2000. Ms. O'Donohue is the Executive Vice President, Chief Strategy and Corporate Development Officer at Nutrien Limited. She has served on our Board since 2008.
Mr. Rubin has served on our Board since May 2017. He resides in the U. S. And is an independent businessman.
He has over 38 years of experience in the energy, refining and petrochemical sectors. Mr. Rubin has held various executive positions with Sunoco Chemicals and Braskem America. Mr. Smith is an independent businessman and Corporate Director with experience in oil and gas operations, finance, mergers and acquisition and governance, human resources and health and safety.
He has served on our Board since 2012. Mr. Sykes served on our Board since 2017. Currently serves as a Director of several private companies and is a past Chair of the Arts Commons in Calgary and the Arctic Institute of North America. Previously, he was the President and CEO and Director of MGM Energy Corp, President of ConocoPhillips Canada and an executive with Gulf Canada Resources.
We will proceed with the election. Are there any further nominations? If there are no further nominations, I declare the nominations closed. Do we have a second or 2 of that? Can we propose that?
So moved. Thank you. And a seconder? I second the motion. Thank you.
Is there any discussion?
Yes. Hello, Randy. It's Marika Knipschier. I'm a proxy holder for my company. And for the minority shareholders who don't own all that many shares, I am going to say we are making strides, folks.
According to Page 52, I am very pleased to say, if my calculations are correct, that from last year going forward to this year, hold your seats, this is a biggie. We are getting our directors who are going to be costing us 1 quarter of 1% less the coming year than they did this year. So we're moving in the right direction, except for Mr. Finley, who's my favorite director. Of course, he's getting the greatest increase of all, even though the whole bunch of them are giving us 1 quarter of 1% less.
Mr. Finley is getting 3.4% more by the looks of it. Other than that, I would like to find out why it is that we still need to have 2 directors that we are paying in American dollars. We are a Canadian company. I understand their expertise is wonderful and good and all that wonderful stupendous stuff.
But we're Canadian and if our money isn't good enough for them, maybe we should find Canadians. That's number 1. I also would like to find out why we still need to have directors such as Ms. Howe, who are on 4 other boards, which I find is splitting her efforts too thinly. And I would also like to find out why we have Mr.
Sykes, who if you read the little fine print was on a Board that led its way into bankruptcy, as it says on Page 20. Seems to be a theme. I think you were on the same situation with SpyGlass, weren't you, Randy? So I'd like to get answers to that. I realize that our minority votes make no hell of a bean because you guys have got them all.
But the fact is we have to tow the line and get you guys to tow the line as well.
Thank you.
I'm anticipating your answers.
I'm trying to go through all of the questions that you asked. Let's deal with U. S. Directors. We find it as we expand our operations and look around the world, we need to have more diversity, geographic diversity.
And yes, we pay them and we compensate them in U. S. Dollars because that's where they live. That's and that's what they deal with. We think that's only fair.
And to be honest, to attract good directors, you have to and if there are if their alternatives are to be paid in U. S. Dollars by U. S. Corporations, then we have to be competitive.
Your question about give me another one of your questions.
I asked why is it we are accepting a Director, Mr. Sykes, who has led another company into the bankruptcy proceeding? Yes.
Oftentimes directors join companies and try to save them from bankruptcy and sometimes it doesn't work. So sometimes they're there when the company goes bankrupt. And also you're required to disclose your association with the company for over a year previously. So he may not have actually been on the Board when the company went into bankruptcy, but because he was there a prior year, then he that's disclosed. Another question about Ms.
Howe sitting on various boards. She's a professional director. She has time to do that. We check that with her. She brings a wide variety of experience.
We believe that directors who sit on other boards bring that additional knowledge to our board and help us make better decisions.
Are the dollars that we are seeing in the circular for these two people that we're paying in American dollars, are they the Canadian equivalent dollars in the circular or are they the American dollars that we're seeing? I
don't know. I don't know. Scott, any ideas? Tracy?
I'm hard of hearing. I have 2 implants. You'll have to speak a little louder down there.
Sorry. They've been converted to Canadian.
Converted to Canadian. Okay. As I say, I don't find that acceptable because there are other boards that do have Americans on them and I don't believe they get paid in American dollars. So that's my point. But hallelujah, we've got 1 quarter of 1% less that we're going to be paying you guys.
Let's keep that trend going. Thank you.
Thank you. Is there any further discussion? If not, in accordance with our majority voting policy for director elections, the scrutineers will tabulate their votes received in favor of each director individually, but the scrutineers collect. So we don't have any ballots, so we're not doing. That.
The next item of business is the appointment of the auditors for Pembina. May I have a motion that the firm of KPMG, Alberta be appointed auditors of Pembina until the next annual meeting or until a successor is appointed and that their remuneration and the scope of their audit to be fixed by Pembina's Board upon recommendation of its audit committee. So moved. Thank you. Thank you.
Is there any discussion on the motion for the appointment of the auditors? None? All right. All in favor, signify by raising your right hand. Contrary, if any, the motion is carried.
The next item in business at this meeting is the approval of Pembina's approach to executive compensation as more fully disclosed in Pembina's information circular. In order to be passed, the non binding resolution must be approved by majority of the votes cast by Pembina shareholders present in person or represented by proxy at this meeting. At this time, I would ask to have a motion to conduct a vote of Pembina's shareholders to approve Pembina's approach to each executive compensation set forth in Pembina's Circular.
Mr. Chairman, I move that the resolution approving Pembina's approach to executive compensation, all is more particularly described in Pembina's information circular, be approved and authorized by Pembina shareholders as a non binding resolution of Pembina shareholders.
I second the motion.
Thank you. You've heard the motion. Is there any discussion?
Yes.
I'm back. Okay. Insofar as executive compensation, I take a look at Page 59 and I see that you're starting to show us things the way I look at things. And it looks like Mr. Dilger is getting a 19% raise.
But what you're failing to show us is that from 2015 to 2017 that overall picture, you got a 51.69% increase. It's not just 2019 over the last couple of years, 50% increase. How many people here get a 50% increase in a couple in 2 years? I bet you none of you do. And I bet you none of you get paid $5,000,000 either.
On top of which, I mean, I love the man. He's a nice man. He's a good looking CEO. But I only wish I was wife and had her expense account.
That should be worth a couple of million right there.
Like I said, I just wish I was his wife and had her expense account. However, I don't see why on top of paying in this huge amount of money, why out of his own pocket he can't put for his own retirement aside, why we also have to put a pension aside. That to me is egregious, totally egregious. I mean, like I say, most of us don't have $5,000,000 in the bank and this is what he's getting every year. So there's got to be a reversal on this.
I am sorry. And I don't care if you're telling me everybody else is doing it. Just because every idiot is going to the railroad trestle and jumping off of it into the river does not mean we have to follow. Thank you. And that being said, we since we're giving them all these increases along with Mr.
Burrows, who got a 57.3% increase over the last 2 years, which is even more egregious, even though here it says 25% for 1 year. In 2014, our stock price was $43.03 and today it was $43 and change. So we're at the same place we were 4 years ago and yet we're giving these people all these increases. Not acceptable. Thank you.
All right. I don't think there was a question there, was there? No, if there's a question, I'll answer it, but I think it was a statement. So thank you. All
right.
So we're is there any other discussion on the compensation for the executive management? No, it's not. We'll just take a I'm just going to take a short minute here to converse with the Corporate Secretary. On
Well, Mr. Finley is busy there. I'd just like to make a comment that based on Pembina's outstanding results in 2017 and the Q1 of 2018, I think that the executive is worth every penny that they're making because where else are you going to find that kind of growth in a company? You should just be thankful that we're lucky enough to have these people.
Thank you. Any other comments? No. All right. We don't have ballots and so all the proxies have been in.
And the motion to approve executive compensation has been approved by 94.6 percent of the votes cast. And also just to go back, because we didn't ballot on the election of the directors, we look to the proxy votes on that and all of the directors were elected by a substantial votes for their continuing as directors or being elected as directors. Okay. As there is no further business to be considered at the meeting, One more thing, right?
It's my understanding that only those who have actually got proxies are allowed to speak at the actual meeting. So I don't believe there's that many people who actually have proxies because they give most of them to you people. I'd like to find out if this gentleman who came up to the mic whether he has an actual proxy to speak or whether he's just a shareholder. Then I would motion that that man's comments be stricken from the formal meeting as he had no right to come up and speak. Thank you.
If you're familiar with the minutes, we don't record individual comments at the meeting anyways. Thank you for pointing that out. Okay. Is there any other further business? So then if there's not, I would consider a motion to terminate this meeting.
I move this meeting be terminated.
Thank you. Is there a seconder?
I second the motion.
Thank you. All those in favor, signify by raising your right hand. Carried. I declare the formal portion of this meeting terminated and thank you all for attending. You can now look to the more exciting part.
Mick will explain what's gone on in the last year and some of the things we're looking forward to. So I've heard the story. It's a very good story and I'm sure you'll all want to hear it. So thank you very much.
I'm going to come down here if I can. Can everyone see me? While we have a break here, maybe the people who are standing at the back, there's lots of seats here. You want to come up, I think you'll be more comfortable. To Well, years ago when I joined Pembina, I guess that was 14 years ago, Bob and I used to go on field trips every year.
And I remember, Bob, you and I talking, saying, one of these years, we're going to have to go out to the field or have an AGM when there's bad news. And so 14 years later, I'm pleased to announce that we have had no bad news and I've got the greatest job in the world. Our future is truly bright. I have to declare that some of the things I'll be saying are forward looking in nature. There are things we believe will happen, but there are no guarantees.
They're based on estimates and other predictive information. So it's our hope, it's our belief, but it is not a promise. 27 highlights. First of all, I want to thank all of our customers over the last number of years. I'm so pleased commodity prices are improving for at least the liquids based customers.
I know it's tough out there for the gas people, but amazing resilience. We went through a bunch of bad years and we had no bankruptcies and you consider the price of commodities what's happened. It's just a real accomplishment by our customer producers to get through that and nice to see that they're making money again. We put $5,000,000,000 into service for those customers with another $1,200,000,000 on the way. So a great deal of service being provided.
To our investors, thank you for your support. Every time we go to the market, we're way oversubscribed. It's a great vote of confidence and we've met with all of our major shareholders in the last 90 days or so and they're all staying invested. And I hope with the consecutive great quarters we're putting out that we hope that trend and we expect that trend will continue and thank you for supporting us. Last year, we did achieve the highest total return in our peer group and we were pleased to provide a dividend increase of about 12%.
So we are giving the shareholders nice raises as well. To our employees, let's start with our directors and Lauren. Lauren, thank you. Every time we're going to walk into the Lauren Gordon boardroom, which is our big boardroom, we'll think of you and everything that you've taught us. Lauren was been on Pembina's board and predecessor boards, he said last night since 1975.
Is that correct, Lauren? Think about that. Where were you in 1975? He was already a Board member. So it's just absolutely fantastic.
And yes, we'll miss you, Lorne, but we'll remember all the lessons that you've taught us when we're in the Lauren Gordon Born Group. And to our Board members, this is a terrific Board. We are a team. It's a harmonious team. It's a collaborative team.
And we've really figured each other out. We know what the board needs and they know what we need. And so our meetings like our meetings over the last 2 days are really a bunch of people trying to make circumstances better for all the stakeholders of Pembina. And it's a talented team and it's a skilled team to help us with our growing future, which includes some new industries that we're entering. And to my immediate officer group, what a great bunch of people we have there and I'll speak of each of them here in the next coming slides.
And underneath our senior officers, we have the next wave of VPs that have just demonstrated they're up for it. And so we have tremendous bench strength, succession planning and as some of the senior officers get drawn across the world for new projects, rest assured there's people in behind that can take care of things as if we were still there. So and special welcome to Verison people, to Verison Board members. This is their first AGM when they're on board. And I think it's been about a year since we announced the combination.
It's been terrific. We are performing at or above expectations on the Veriskin assets and collectively. They make us more valuable and vice versa. And they are adding value. They're teaching us the North American Gas business and we're learning about LNG and we're already a very high functioning team.
There's no dysfunction. For those that were paying attention, we closed the transaction in October. And by the end of the year, only 3 months later, we were fully integrated stats here, I've got a stat on And some of the stats here, I've got a stat on safety. We maintain our tremendous safety record even through all the change. And we've been named top 100 employer this year for the 1st year in many years as a top 70 employer.
So as Lawrence said last night, if our employees take care of Pembina, then we will take care of our employees and that's the Pembina way. Communities, we've invested $4,000,000 We expect that investment to double over the next number of years. We're trying to target 0.5% of EBITDA, which based on the projections you'll see should get that up to about $10,000,000 annually that we're reinvesting in communities and we're really very proud of that, including our multimillion dollar United Way contribution. So we're in business for all the stakeholders. That's our purpose, not just one.
When companies fail to take care of 1 of the stakeholders, they have problems. So we are paying attention to all the stakeholders. Some highlights and they are highlights. It's all good, contrasting 2017 to 2016. And these are per share numbers.
You see sometimes companies put up, oh, we made this much more money, but how much did you make per share? And ultimately, yes, share price may not go up linear in line with cash flow per share or EBITDA per share, but it eventually does. A share is worth its ability to pay dividends over the long run. And when you keep raising the dividend, the share price will fall despite short term headwinds. The share price always follows its ability to pay dividends.
And you can see our operating margin per share, adjusted EBITDA per share, earnings per share, adjusted cash flow per share, all up about 30% over last year. So that's the long term leading indicator of where our share price should go. So we're not too distressed that our share price didn't go up year over year, but it will. This is how shares are valued. Just a brief history of how our company evolved to kind of blanket Western Canada and eventually North America.
Start out with the geology. The original cash registers for Pembina were Swan Hills, they were Drayton Valley, later on the oil sands and then shale happened, the Montney, the Duvernay, the Williston and the resource is astounding that we have underneath our asset base. We could literally double production if we had suitable egress out of Western Canada for our production. And even though we're thousands of miles away from consuming centers, we're still competitive. That's how good the geology is.
So we just need a couple of bright spots, an LNG approval, a pipeline to move forward and honest and I think there'll be hope restored to the sector and we will start to see the oil producers in the sector and the infrastructure companies in the sector will start to track commodity prices much better. So these are enormous resources, 100 of years of earning potential underneath. There's our pipeline system. It's not a bad location. It's like having an an apartment in downtown New York.
It's location, location, location and our assets are on top of some of the best geology in the world. Those pipelines in green are conventional pipeline system, in yellow our oil sands pipeline system. And one or another of our commodities is always working. Sometimes it's oil, used to be heavy oil, sometimes it's gas, sometimes it's NGLs, but something's always working. And what's good about our asset base is we have assets in each commodity type.
There's our gas plants in that we had from Pembina, the green plants, our fractionator, Canada's largest fractionation complex. There's the Veresen assets we acquired. So you can see the red line is lines pipeline sits right on top of actually disappears under piece we share right away. So huge synergy And then the gas plants in the Montney right here, oops, sorry about that. Right here, we really didn't participate in processing in the Montney and now we do.
I think we have the best processing assets in the whole Montney. And so we're ideally situated with what we call the Pembina store to provide the services that producers need. Some producers want processing plants, some don't, some want pipe, some want fractionation and we'll talk more about some of the new products coming to the Pembina store soon. And we zoom out and yes, now we're a North American company, about 15% of our cash flow coming from U. S.
Sources. And last but not least at all is our investment in Ruby, which brings us into a new basin, the Rockies basin around Opal Hub. And the dotted line here is our aspiration to build a pipeline to our proposed Jordan Cove site, which will bring Rockies and Western Canadian Gas to the world. It's kind of frustrating. I heard AECO was well under $1 today.
I don't know what if anybody could tell me what it is trading at today, but there's about a $10 difference between AECO and prices in Tokyo. So pretty frustrating to be a producer in Western Canada when your product is worth 10 times as much somewhere else in the world and you can't get it there. So we're trying to play a role in closing that gap. I'm going to give you the same history by the customer services that we provide. And so production, consumption and here's how we build the space in over time.
So of course, we started out our roots were a pipeline company. What is now our conventional pipeline business unit is the old, the original Pembina. And now it's still our largest business unit, but there's a lot of other commerce going on outside of conventional pipeline. So when we looked at it, we said, man, we're we've got great pipeline assets, but how can we fill them up? And we started to market around our assets.
We got into oil sands. We built terminals to aggregate more product to start to fill up our pipelines from an oil perspective. Then we added gas processing, because when you take gas out of the ground, if you make it very cold, you get more liquids extracted. So we said, if we own these gas plants and we can chill the process more, we can get more liquids out and then we can fill up spare capacity we have in our pipelines. And so we did that.
And now we're actually our largest owned customer. I think we have 100,000 barrels a day coming out of plants we own that is the customer of our pipeline business. So that strategy worked out very well. And then in 2012, we said, where does all that NGL go once it's on our pipe? Well, it gets fractionated.
And so we first thought about entering fractionation on our own and then we realized, man, this stuff is really hard and you need a lot of storage and it's complex and interconnectivity and it's going to cost us a lot more to get into this than we thought and it's a lot more complex and it's going to take time we don't have. And so we combined with Provident Energy and we added the storage. I'll show you a slide later on storage. We've got a lot of storage. We have a lot of fractionation now.
We have distribution, one of Canada's largest rail facilities and I think thousands of railcars. So we filled in that natural gas liquids value chain as it were alongside the original Pembina crude value chain. And the service we were missing was natural gas because product comes out of the ground, sometimes it's gas, sometimes it's NGL, sometimes it's crude, sometimes it's condensate, but we couldn't provide gas service. And that's really what led us to combining with Veresen was to offer natural gas services through Alliance Pipeline and the Shanahan plant. And so now we can offer all the services that producers require.
So there's nothing they can't buy in the Pembina store to get their hydrocarbons to market. And our aspiration is to add even another step into our value chain to get get that natural gas that isn't getting a fair price in Western Canada to the rest of the world. So that's our aspiration with Jordan Cove and we're optimistic we can get that done. We would like to turn propane into polypropylene. The value of propane as polypropylene is worth about 7 times as much.
So we think our producer customers have a lot of interest, vested interest in alignment with seeing that value added service coming on. So we are pursuing polypropylene in Western Canada. We are pursuing propane exports. We're currently constructing a plant or an export terminal in Prince Rupert. So we're doing all that we can to get Canadian hydrocarbons to the world where they're worth more.
And we're doing everything we can and so are our partners, infrastructure partners, whether it's TransCanada on Keystone XL or Enbridge on Line 3 or Kinder Morgan. We're all trying to do the same thing and it's vitally important for our sector and our Canadian economy that we connect to global markets because it's costing the country 1,000,000,000 and 1,000,000,000 of dollars a year. And it eventually will result in a lower standard of living and less competitive economy if we're unable to do that. So that's really the journey from a customer service perspective. So we will be able to go to a customer and take their gas and turn it into polypropylene someday or take their gas and ship it to Tokyo or their propane and ship it to Korea.
So it's getting pretty exciting. Effective Jan 1, we unfolded our new unveiled our new structure. And the structure really 2 sides, operating side, services side of our company and we've broken our operating side into pipelines, not surprisingly pipelines go with the pipelines and the facilities go with the facilities. So in our pipeline division, we have our conventional pipeline business, the legacy original Pembina business, the oil sands businesses that we the pipelines that we started to acquire effective 2,001 and most recently what we call transmission pipelines. And that's by and large the Veresen pipes, Alliance Ruby, Pacific Gas Connector, that dotted line that I showed you going from Malin Hub to Jordan Cove that will be in transmission business unit, but also some of the assets that Pembina had Vantage and of course another Veresen asset AG.
So transmission is launched. They are developing operating capability very rapidly and good thing because we're taking over operatorship of eggs and we've taken over operatorship of the Vantage system and they need to gear up for Pacific Gas Connector once that becomes real. So that's off and running. In our gathering and processing, it's the legacy Pembina processing business is Verus and Midstream. So that's the joint venture business.
And of course, our fractionation complex and Jared is leading that. Jason is leading the pipeline business and Stu is leading our commodity business. So we put all our commodity businesses together and we're already seeing added value on railcar optimization and hedging and other things like that. So that seems to be playing out very well. But hats off to all the people in marketing.
They've undergone pretty much the most change over the last 6 months. But I see they're reemerging very powerfully and full of ideas. And Stu, of course, looks after Jordan Cove and petrochemical business and it's a lot of work. We don't see him that much anymore. He's always on an airplane.
Scott is our Chief Financial Officer and carefully steward us through all the many changes over the last 6 months and it's been a tremendous success and we have unparalleled access to capital and shareholder relations. Paul is looking after our corporate services team. We have phenomenal back office people, accounting, IT, procurement, just absolutely great groups. And you see all the results, but you don't see all the hard work in behind getting approvals these days which falls under Harry, like you never see our name in the press. Why is that?
We're building thousands of kilometers of pipe because we have very, very talented external affairs people. So this is our new leadership team and it's a real privilege to work with them. So here's our growth of all our pipelines. It started out kind of pre-ninety seven with the original Pembina system, 550,000 barrels a day. It was about half full back then.
And then we kind of went on a journey of growth, accretive growth. And it started in oil sands because when I started at Pembina in 2005, I was a Vice President of Business Development and I mainly worked on oil sands pipes. And we grew the company quite rapidly just building out oil sands. And then the shale happened, NGL started to happen, condensate started to happen. And then we really started to grow the conventional business again, the Phase 1, 2, 3 assets.
Most recently, we put Phase 3, which was our largest ever project into service middle of 2007, and that's been just a tremendous success and filling even faster than we anticipated. And then egg advantage 2014 to 2017. Then we combined with Vericin and really got that gas leg to our stool, which is working out very well. We're looking at expanding lines right now. So kind of a phase growth on the gas side.
And then as we look forward, we announced Phase 6 today and there will be a 7 and 8. I don't know exactly when and how they're going to look, but there's just a lot of momentum in the basin again with higher particularly condensate prices. So we're at about 3,000,000 barrels. So remember where we started about half full, about 300,000 is a 10 fold increase since 1997. So it's a pretty amazing story, a story that was unimaginable 10, 15 years ago for us, unimaginable.
And here we are, more to come. Processing, similar story. We were not in the processing business until 2009. We did a modest acquisition of the Cut Bank complex, an asset that was familiar to many of us and has grown. I think we're about a Bcf a day at Cut Bank alone now.
And the expansions and then we got Younger and Empress through the Provident acquisition, added a bunch of plants. Most of these were greenfield and then we merged with Veresen, got a real big bump on our net share of the Veresen midstream processing capacity and of course half a box able. So we're at about 6,000,000,000 cubic feet a day, which makes us the largest processor. So kind of in less than 10 years, we've gone from not being in the business to the largest player in the business. And that's really what we try to do is we'll test out a business, we've tested out Cut Bank, we like the business and then we commit ourselves to it.
Fractionation, same thing. 2012, we were not in the business. We acquired Provident and then we went on a rapid growth spurt, which some of which we foresaw. I'm always trying to be honest, it takes skill, but it takes luck. So what led us to Provident was skill and filling up the pipeline with the processing strategy that was scaled, but the shales that was locked, that supersized everything.
And so that's the locked part, but it's good to have some of that too. So now with our recently announced Empress expansion, we're going to be over 300,000 barrels a day. It's clearly again the largest fractionation owner in Canada. Storage almost 14,000,000 barrels of storage. That's a lot of storage.
It's one of the things that makes our business excellent because it's just a great shock absorber. When you have storage, you can deal with outages and other problems. You can store product today if it's worth more tomorrow and sell it tomorrow and make money. So storage is a great asset for us. And we may be now the largest in Canada, I'm not sure, with the recent additions
of the
3 new caverns and Bristol, I'll have to check that stat. And diversification, that's the other thing. It's not just that our cash flow per share has gone up. It's gotten less risky. So how do you make cash flow less risky?
You diversify your broker tells you diversify your portfolio. Well, that's what we've done. So we've got EBITDA coming in, operating margin coming in from different businesses, pipeline, storage, marketing. And we have our revenues come from different hydrocarbons about a third gas, 3rd NGL, 3rd crude condensate. So as I said, always 1 commodity is working, usually 2, sometimes all 3 work and that's when it gets really exciting.
So nicely diversified across commodities. Currency, we've upped our U. S. Exposure about doubled it through Veresen. They have the Aux Sable plant.
They've got Ruby Pipe. They've got Alliance US. And so we are getting diversified into the U. S. And it opens up, it teaches us how the U.
S. Market works and in a very risk measured way. So we're learning about the U. S. And that probably will result in us growing in on state side.
And then lastly, our counterparty credit. We have very high quality customers and counterparty. So we don't have to worry about getting paid. When you build a gas plant or a pipeline, it takes you 10 years for you to get your money back. You really do need high quality credit counterparties.
Otherwise, you never make your money back. And so we pay a lot of attention to that. So really great diversification. So when you put it all together, we made a bold assertion in 2015 that we could double our EBITDA and we were able to do that. And we sit now kind of back then about $1,000,000,000 of EBITDA and in our guidance is $2.55 to $2.75 So that is a double and that's awesome, but we also doubled it per share.
So just apples to apples, our stock price is to me is well undervalued considering the EBITDA per share that we are creating now. And that's what we're most proud of here in terms of our financial results. Our financial guardrails, we started to communicate with our Board and with our investors around what kind of company did we want and how would we evaluate new opportunities. So we came up with this language around guardrail. So we have a lot of rope as management provided we stay within these guardrails.
And so every time we talk about something new, Jordan Cove or petrochemicals, rest assured that those projects have to fit our guardrails. Our guardrails are not going to fit the projects. And so that's I think given our shareholders, our investors a lot of confidence that anything we do is going to fall within a framework that meets the objectives of Pembina's investors. And those guardrails are really pretty straightforward. At least 80% of our the money we make is going to come from highly predictable fee based businesses.
In a different way, 20% or less is going to be dependent on commodity prices. So we've gone in 2015. We were a little like these were aspirational guardrails when we set them. They weren't like in the bag. We had to work towards these.
So we were at 77% in 2015 and now we're at 87%, So we So we wanted to make sure that our dividend was paid, could be paid solely from our fee based income stream. Said a different way, we didn't want our dividend having to pay our dividend out of the commodity exposed businesses. So when Scott and I go to bed at night, we're not worried about paying the dividend because it's being paid from highly reliable income streams. Credit exposure, I talked about credit exposure. We have highly creditworthy counterparties and a very strong balance sheet.
We're on the strong end of BBB and that affords us the opportunity to get very cost effective, borrow money very cost effectively. And as I said earlier, we have great access to capital. So these new projects that we're talking about, we have every confidence in the world that when we put them on the books that we can finance them. And this is a different slice of our fee based business. So you contrast 2015, we had only about 44% of our cash flow came from really reliable long term sources.
Now about 70% to 71% is from 10 year contract 10 year contracts where we have high reliability on where that cash is coming from. Back in 2015, about 33% was fee based, but it was short term fee based. So yes, you knew how much you're going to get paid. You just didn't know how long you're going to get paid that amount. And now that's down to 16%.
So we've really done a big conversion from fee based business with not a lot of term to highly reliable term. And the last two slices are commodity exposed. So we went about from 23% commodity exposed down to about 13%. And really we the way to think about that is we didn't really grow our commodity exposed businesses. We grew all our other businesses.
So we kind of diversified out of that. And we still love our commodity businesses. Right now, they're just killing it and we're making lots of money. So it is a lot of fun. But we don't need to rely on that cash flow to pay the ever growing dividend that we're putting out.
Our funding plan, we're self funding. So with all these projects that we're talking about, we can pay for them out of cash flow and by borrowing money. So we don't have the dividend reinvestment plan. We don't need to issue equity. And so what that means for our shareholders is they're not getting diluted anymore.
So that's a great place to be, to be in a self funding model. And even with some of the monster initiatives that we see out in the horizon, there's a decent chance we won't need to raise equity even to build world scale assets. So we're sitting in a very, very good position. What's next? I mean, we've got about $20,000,000,000 still of unsecured growth.
That's a tremendous prize. And it comes from our existing businesses, our processing, fractionation, pipelines, marketing and from our new ventures. So a different way to think about Pembina is with this new venture slice, if we're successful, we have kind of 2 halves of our business. The original business makes more money when prices are high. The value added parts actually make more money when commodity prices are low.
For example, polypropylene. Polypropylene uses propane as a feedstock. It's the major cost. So when propane is low, maybe our marketing businesses make less money, but our polypropylene business is going to make a lot more money. So the new ventures often can make more money in low commodity prices.
So we're kind of becoming a unique company that can make money when prices are high or money when prices are low. And so that's kind of the real strategic brainstorm along with adding customer service and exposing our producers to ways to make money when commodities are low, our shareholders get the same benefits. So we're adding a new level altogether of diversification. Why does Pembina win so much business? Why are we successful?
Why do our customers come and buy things in the Pembina store? Well, you'll see by my analogies why we call it the store and you'll see this is what the grocery store does. If you offer multiple services, multiple products, you might get a discount. We have processing fractionation pipelines, C2 +ipline, C3+, Crude Oil, Condensate. So there's a huge variety.
We're using up a lot of shelf space in the store. So you might just buy one of those things. If you increase your volume, we'll give you a discount. If you subscribe for more services, we'll give you a discount. A lot of our new contracts are structured so that if you use our whole value chain, if any part of the value chain has an outage, you don't pay for any of it.
So if you get your gathering from company A, your pipeline for company B, your fractionation for company C and your marketing for company D, you're paying for 3 out of those 4 services if one's down. If you sign up with Pembina, you're only paying for the services when they all work. So that's a big thing. We have what we call step up rights. So let's say you're a producer and you're in a new field, a new reservoir, you don't really know how it's going to work out.
You're pretty sure you're going to get 1,000 barrels a day, but you might get 2. With Pembina, we can say, we'll sign up for the 1,000 and we'll give you a right to step up for the 2,000. So we can bracket their outcomes. They don't have to sign up for 2,000 and find out later they only need 1. But we give them a lot of embedded flexibility.
We give them rights to expand. And we give we have, as I said, that big shock absorber with storage so that if something goes down, if we have a downstream outage, they can keep producing and go to storage for a while. So that's a huge benefit. And with the new ventures, we can get LNG done and Prince Rupert and polypropylene. It's a whole new section to the store that people can shop in and the feedback on those services are very positive for us.
And there's our employee stakeholders. So we've gone from 430 employees in 2010. We had about 1500 at the end of last year. And by 2019, I think we'll have about 2,000 employees is my guess on the way over here. So we've grown dramatically, created, I think, a lot of great jobs.
And we really do have something special going on, I think, at our company. Others are noticing, and we're getting some accolades. Our safety record, our promise to each other is we stay safe and we work very, very hard on safety and our recordable injury rates are as low as anybody's, if not lower and our driving record is tremendous. We talked a little bit about community involvement. We donated or invested $4,000,000 in communities, 4,000 hours of volunteer work, dollars 3,400,000 in the United Way.
We are partnering with Breakfast Clubs of Canada for breakfast programs in the areas that we operate in. And we're really going to pick this up over the next year or 2. We have full time people working on how to invest our money and get the same kind of leverage and returns that we get in our operating businesses in our community investments as well. Investors, we've more than doubled the energy index returns over the last number of years. I do think the sector is poised for some tailwinds, get some egress announced.
And I think money and confidence will return to the basin. And there's a lot of deep value, in my opinion, in the basin right now. We just have to unearth it. So our value proposition, visible growth within the guardrail. So yes, we're doing some different things.
But you look back at our evolution when we were just a pipeline company gathering and processing seems scary. And now it just seems second nature. And maybe to some investors, LNG seems scary, but in 3 or 4 or 5 years, hopefully, that will look like second nature. We will grow. We'll grow within the guardrails.
We have some company changing opportunities in front of us that we think we can capitalize on. So it'll just create more and more opportunities. We are self funded. Our growth is can be funded through cash flow and through borrowing. So we don't see a lot of dilution in the future.
I talked about fee for service assets. We could support our dividend and grow our dividend out of the fee stream without reliance on commodity prices. Conservative balance sheet, BBB, strong BBB balance sheet and conservative payout ratio. And our purpose is for all the benefit of all the stakeholders and not just one of the stakeholders. So we're taking a very long term view on Pembina's purpose.
So with that, thank you for your attention. I'd love to take any questions you might have.
My name is Emil Shribney. I'm a shareholder and a proxy holder.
Well done.
Thanks very much, Mick, for a very comprehensive presentation. I'd like to know the percentage of business related to the diluent and condensate. The reason that I'm asking this question is that a number of oil companies now are engaged in shipping bitumen without diluent or experimenting with it or they're about to use this pellet method. I don't know whether this is still in the experimental stage. However, should I be concerned that we need to have a plan B regarding the condensate?
And the other question I have that's unrelated, but how are we doing on the Jordan Cove approval?
Sure. Yes, I do believe the pellet method. It does look interesting, but I think it is kind of experimental still. You saw last year the railways get really backed up. Farmers couldn't move their grain is a real issue.
And the railways are not going to be able to handle the kind of volumes that we're talking about. And it's not really economic in the long term to ship crude by rail comparatively. It's about 3 times as expensive in most circumstances. I'm sure there are exceptions to that. But we do forecast condensate demand growing.
And in our basins, a lot of growth is condensate, you're perceptive in realizing that. But what many people don't know is we still import about half the condensate that we utilize in the oil sands. We import it from the U. S. So long before we'd have to worry about where our incremental supply is coming from, the imports would be displaced.
So you saw, for example, how growth in gas volumes in the consuming areas, right, in the Marcellus has pushed out Canadian gas. Condensate local condensate growth will push out imports. And so we could double our Alberta condensate production before we'd have displaced all the imports. So we see a real nice fairway for condensate growth for at least the next 5 years.
What are we supposed to do if we don't get any of these pipelines through? We're forced to ship by rail, are we not?
Yes. And yes, there will be incremental shipments, but it will really hurt our country if we can't grow egress. We're seeing curtailments now. It manifests itself in low gas prices and low WCS pricing. What happens when you have more production than egress, prices go down and it's costing I think the last estimate I saw was about $20,000,000,000 a year, the lack of egress.
So that people don't people they think about billings and they don't know what that means. What it means is we're not going to be able to pay for health care and proper education and your kids are going to have to move away to work in some other province or land. And
it's a
serious thing and it's happening today. Your second question around Jordan Cove, we are working towards the approvals. As you know, we submitted last September, and there's an active dialogue of Q and A with the FERC, but it's too early to say when we're going to hear from that. But we have a lot of confidence. We've been really getting to know that project well.
And we were always confident it would work. But now that we I think the world has a consensus that we're not going to have enough LNG in the 2023 to 2025 timeframe and prices are starting to reflect that. We have quite a bit of confidence that there'll be a home for Western Canadian and Rockies Gas at Jordan Cove.
Thank you very much.
Hi, Mick. If I'm staring at you, it's because my hearing is really going and I'm having to read lips. So I'd like to find out in regard to the problems that we're having with pipelines. I know that it's affecting the economy a lot. We send 46 $1,000,000,000 that's with a B from Alberta to Ottawa, yet our pretty boy picture seeking, whatever you want to call them, hasn't really done a lot to help us and neither have the people to the West.
In fact, I think they're even being the worst hindrance that we've got to getting the economy really rolling in Canada. So I'm wondering how is all of this affecting us with Pembina and what are you able to do about it?
Well, first, I think we should send you to those town halls. Maybe that would help. It's going to back us up eventually, right? I mean, we still have running room, as I said, in condensate because we have imports. And our NGL moves by railcar and we're facilitating new homes for NGLs with our propane export.
So I think the NGL pictures well within hand. We have an alliance expansion announced, so we think we can get gas out of the province. It's really the oil bottleneck. And it's I don't know what more Kinder Morgan could have done. They spent 4 years consulting.
They had the federal government on-site. They had the then provincial government on-site. It was fully and lawfully approved with all the right regulators. Most of the First Nations were on-site. I mean, they couldn't have done anything else.
And I just think it hurts the credibility and the competitiveness of our country that we can't get projects that are lawfully approved underway. So if you are investor in Europe or in the United States and you're looking at Canada saying, man, I wonder if they're going to follow their laws. Like how much confidence does that give you? So the feds are saying the right things and I think it's time for action there now. And I do believe in the fullness of time these oil pipes will progress.
But we just need to do whatever we personally can to make sure that happens.
Bill Manalek, a beneficial shareholder. I know there's a lot of uncertainty over the next 5 years, but I'm assuming, you can correct me if I'm wrong, that you have a 5 year base case plan. So I was wondering under that plan, in the 5th year, what you see for profits and that's not
a good item to look at from your point
of view. Maybe you could provide something useful for me.
Yes. What I can only do that tackle me. So we can't provide that kind of, but we do tackle me. So we can provide that kind of, but we do see a lot of running room. We see that's why it took some time to talk about the competitiveness of the geology and how our assets are situated.
We think the future is very bright. And I think it can get extremely bright if we can get these commodities to the world that need them. North American crude demand might stay pretty flat. Gas demand is going to go up. But worldwide crude and gas demand is going to keep on going, because people around the world want the same standard of living that we have.
So they want gas, they want oil. And we need to get it to those markets because that's where it's going to be worth a lot. So when people ask me a question like this, I always say, if you look at a company's past, it's a pretty good indicator of how they will do in the future. And we've been able to grow our cash flow per share by 8% to 10%. That means, in theory, your dividend should be able to go up 6% to 8% in the forecast period.
And that means your share price, if ever it was perfect world, your share price would go up 6% to 8% in the forecast period. Don't know if that's going to happen. The world is a funny place. It depends on interest rate, politics, governments, policy, regulation. There are so many moving parts.
But we think we're very well situated to keep doing what we have been doing.
I want to I'd rather have a specific answer. I know. But I want to thank you for this meeting and your presentation because it's much, much better than the one I was at this morning. Thank you very much.
And it didn't give us the double talk at the one I was at yesterday. So thanks, Mick.
You're welcome. We won't ask for names. Any other questions?
Nick, the future looks really bright. If I wasn't a shareholder, I'm Derek Fenty, I'm a retiree and a shareholder, I'm not a proxy holder. And please don't strike what I'm saying for minutes.
But
I see programs on TV. They talk to wealth managers and fund managers and somebody will ask about Pembina. Well, it's an infrastructure company and you get lumped in and infrastructure companies, they're not being able to build things these days. I don't know, Cummins has built a lot in the last 4 years, 5 years.
And
then bond rates go up and 10 year bond rates. What about PEMMA? Well, all those interest dividend paying companies, they're not they're all going to go down. And you look at your guardrails and you look at the results, I think should speak for themselves. In very tough times in the last 3 years, Pembina has been able have phenomenal results, record results year after year.
Why is that message not getting out enough to improve
the share price? Yes,
it's a great question. I think about it at least once a day, maybe once an hour actually. At times when there are there's news events and markets are not discerning. For example, with the problems with Trans Mountain, people lose confidence in a basin. And when they lose confidence in a basin, say you're a mutual fund manager in New York and you're looking and saying, man, those Canadians, they can't even follow their own laws and then Western Canadian Select drops, can't get gas out of Alberta.
So prices are low. They just I don't have any comps. So they sell. And the things they sell are liquid, right? The shares you can sell are the ones that have liquidity, and they're generally the largest holding.
So we're one of those companies that when there's tide selling, you just get sold. And after the tide is over, the companies that perform, I think they get picked up again. So I would say there's been some missteps of our peers. So we get lumped in with our peers. There's been some missteps by governments.
We get lumped in with that. A lot of what comes out of Western Canada is heavy crude, it's WCS and prices are discounted. People that mutual fund manager in New York, he may not be discerning and say, Pembina doesn't even transport virtually any WCS, right? Our oil sands pipelines transport synthetic crude oil, which is worth as much as sweet oil. And we transport NGLs.
So we don't even move WCS really, but we get lumped in with that. And then you just keep putting out the results. And my boss told me just keep putting out the results and people will notice. We're a top 100 employee. Communities phone us to thank us.
They invite us into their communities. Customers phone us and we don't have to have the checkered suits and run around trying to find business. We get return business. So you just keep putting up the numbers and people will notice. And over time, a stock should be worth its ability to pay dividends.
And last year, we increased 12%, so far this year 6% and our payout ratio is actually going down, not up. So I think in the fullness of time, that will work itself out.
Thank you for the increase in dividends. I really appreciate that as do most people here. But do you see any way to toss off the carcasses of all those other infrastructure companies and rise above talk to the fund managers, face to face.
I know you go to
conferences and we've talked to
all the major investors annually. And I'm pleased to say, as far as I know, all of our major investors are still with us. They see the value. And I think the analysts, I don't know what our consensus is, maybe someone can tell me, I didn't look after today's call, but it was around $50 last time I called. So a lot of people think that we have a pretty good company and we're going to keep doing what we're doing.
And over time, it's been a pretty good story. I think our compounded returns 15% or 17% over 10 years. So not a lot of people are getting those kind of returns in our portfolio and that's why I own so many shares.
Thank
you.
All right. I bet we have some wine and beer and soft drinks outside. So why don't you all join us outside and we can have the celebration.