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REPORTTOSHAREHOLDERSYearendedDecember31,2020
MANAGEMENT'SDISCUSSIONANDANALYSIS
TableofContents
1.AboutPembina ....................................................................................................................................................................... 3
2.Financial&OperatingOverview ............................................................................................................................................ 4
3.SegmentResults ..................................................................................................................................................................... 8
4.Liquidity&CapitalResources ................................................................................................................................................. 22
5.CapitalInvestments ................................................................................................................................................................ 27
6.Dividends ................................................................................................................................................................................ 28
7.SelectedQuarterlyInformation ............................................................................................................................................. 29
8.SelectedEquityAccountedInvesteeInformation ................................................................................................................. 31
9.Other ...................................................................................................................................................................................... 32
10.AccountingPolicies&Estimates .......................................................................................................................................... 36
11.RiskFactors ........................................................................................................................................................................... 42
12.Non-GAAPMeasures ............................................................................................................................................................ 62
13.Abbreviations ....................................................................................................................................................................... 65
14.Forward-LookingStatements&Information ....................................................................................................................... 66
BasisofPresentation
ThefollowingrestatedManagement'sDiscussionandAnalysis("MD&A")ofthefinancialandoperatingresultsofPembina
PipelineCorporation("Pembina"orthe"Company")isdatedFebruary25,2021,andissupplementaryto,andshouldberead
inconjunctionwith,Pembina'srestatedauditedconsolidatedfinancialstatementsasatandfortheyearendedDecember31,
2020("ConsolidatedFinancialStatements"),whichwerefiledonSEDARonNovember18,2021.
ThisMD&AsupersedesandreplacestheoriginalManagement'sDiscussionandAnalysisofthefinancialandoperatingresults
ofPembinadatedFebruary25,2021fortheyearendedDecember31,2020,whichwasfiledonSEDARonFebruary25,2021
(the"OriginalMD&A").
TheCompanyhasrestatedcertainfinancialinformationoftheCompanyfortheyearsendedDecember31,2020,2019and
2018,toaddresstherestatementofrevenueandcostofgoodssoldforsuchperiodsinconnectionwiththeCompany's
accountingtreatmentofcertaincontractswithinitsmarketingbusinessand,inconnectiontherewith,theCompanyhas
restatedandrefiledonthedatehereoftheCompany'sConsolidatedFinancialStatements.Inconnectionwiththeforegoing,
thisMD&AreflectstherestatedrevenueandcostofgoodssoldfiguresfortheyearsendedDecember31,2020and2019with
noimpacttoearnings,cashflowsorfinancialposition.See"RestatementofRevenueandCostofGoodsSold"inthisMD&A
andNote3oftheConsolidatedFinancialStatementsformoredetail.
PembinaPipelineCorporation2020AnnualReport1
OtherthantherestatedrevenueandcostofgoodssoldfiguresfortheyearsendedDecember31,2020and2019andrelated
disclosuresinrespectoftherestatementofsuchfigures,thisMD&Adoesnot,anddoesnotpurportto,updateorrestatethe
informationintheOriginalMD&AorreflectanyeventsthatoccurredafterthedateoftheOriginalMD&A.
TheConsolidatedFinancialStatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards
("IFRS")asissuedbytheInternationalAccountingStandardsBoard,usingtheaccountingpoliciesdescribedinNote5ofthe
ConsolidatedFinancialStatements.AlldollaramountscontainedinthisMD&AareexpressedinCanadiandollarsunless
otherwisenoted.ForfurtherdetailsonPembinaandPembina'ssignificantassets,includingdefinitionsforcapitalizedterms
usedhereinandnototherwisedefined,refertoPembina'srestatedannualinformationform("AIF")fortheyearended
December31,2020.AdditionalinformationaboutPembinafiledwithCanadianandU.S.securitiescommissions,including
quarterlyandannualreports,annualinformationforms(filedwiththeU.S.SecuritiesandExchangeCommission(the"SEC")
underForm40-F)andmanagementinformationcirculars,canbefoundonlineatwww.sedar.com,www.sec.govandthrough
Pembina'swebsiteatwww.pembina.com.
Abbreviations
ForalistofabbreviationsthatmaybeusedinthisMD&A,refertotheAbbreviationssectionofthisMD&A.
Non-GAAPFinancialMeasures
Pembinahasidentifiedcertainfinancialperformancemeasuresthatmanagementbelievesprovidemeaningfulinformationin
assessingPembina'sunderlyingperformance.Readersarecautionedthatthesemeasuresdonothaveastandardizedmeaning
prescribedbyIFRSandthereforemaynotbecomparabletosimilarmeasurespresentedbyotherentities.Refertothe"Non-
GAAPMeasures"sectionofthisMD&Aforalistanddescription,includingreconciliationstothemostdirectlycomparable
GAAPmeasures,ofsuchnon-GAAPmeasures.
RiskFactorsandForward-LookingInformation
Managementhasidentifiedtheprimaryriskfactorsthatcouldhaveamaterialimpactonthefinancialresultsandoperations
ofPembina.Suchriskfactorsaredescribedinthe"RiskFactors"sectionofthisMD&AandarealsoincludedinPembina'sAIF.
TheCompany'sfinancialandoperationalperformanceispotentiallyaffectedbyanumberoffactors,including,butnotlimited
to,thefactorsdescribedwithinthe"Forward-LookingStatements&Information"sectionofthisMD&A.ThisMD&Acontains
forward-lookingstatementsbasedonPembina'scurrentexpectations,estimates,projectionsandassumptions.This
informationisprovidedtoassistreadersinunderstandingtheCompany'sfutureplansandexpectationsandmaynotbe
appropriateforotherpurposes.
2PembinaPipelineCorporation2020AnnualReport
1.ABOUTPEMBINAPembinaisaleadingtransportationandmidstreamserviceproviderthathasbeenservingNorthAmerica'senergyindustryfor
morethan65years.Pembinaownsanintegratedsystemofpipelinesthattransportvarioushydrocarbonliquidsandnatural
gasproductsproducedprimarilyinwesternCanada.TheCompanyalsoownsgasgatheringandprocessingfacilities;anoiland
naturalgasliquidsinfrastructureandlogisticsbusiness;andisgrowinganexportterminalsbusiness.Pembina'sintegrated
assetsandcommercialoperationsalongthemajorityofthehydrocarbonvaluechainallowittoofferafullspectrumof
midstreamandmarketingservicestotheenergysector.Pembinaiscommittedtoidentifyingadditionalopportunitiesto
connecthydrocarbonproductiontonewdemandlocationsthroughthedevelopmentofinfrastructurethatwouldextend
Pembina'sserviceofferingevenfurtheralongthehydrocarbonvaluechain.Thesenewdevelopmentswillcontributeto
ensuringthathydrocarbonsproducedintheWesternCanadianSedimentaryBasinandtheotherbasinswherePembina
operatescanreachthehighestvaluemarketsthroughouttheworld.
PurposeofPembina:
Tobetheleaderindeliveringintegratedinfrastructuresolutionsconnectingglobalmarkets;
• Customerschooseusfirstforreliableandvalue-addedservices;
• Investorsreceivesustainableindustry-leadingtotalreturns;
• Employeessaywearethe'employerofchoice'andvalueoursafe,respectful,collaborativeandfairworkculture;and
• Communitieswelcomeusandrecognizethenetpositiveimpactofoursocialandenvironmentalcommitment.
OngoingImpactoftheCOVID-19Pandemic
InMarch2020,theWorldHealthOrganizationdeclaredtheglobaloutbreakofthenovelcoronavirus("COVID-19")a
pandemic.Inresponse,manygovernmentsimposedrestrictionsonindividualsandbusinesses,resultinginasignificant
slowdownoftheglobaleconomy.Whiletheserestrictionshavebeenrelaxedincertainjurisdictions,aresurgenceof
COVID-19cases(includingcasesresultingfromvariantsoftheCOVID-19virus)incertaingeographicareasandtheriskthat
thiscouldoccurinotherareashascausedgovernmentsincertainjurisdictionstosustainand,insomecases,re-impose
restrictions.Inaddition,whilevaccinesarebeginningtobedistributed,thereisongoinguncertaintyastothetiming,levelof
adoption,durationofefficacyandoveralleffectivenessofthevaccine,includingagainstvariantsoftheCOVID-19virus.Asa
result,thereremainssignificantuncertaintyastotheextentanddurationoftheglobaleconomicslowdown.Theglobal
economicslowdownhasled,andmaycontinuetolead,tosignificantoperationaldisruptionofbusinessesandtheir
workforces,asignificantincreaseineconomicuncertaintyandadecreaseindemandforcrudeoil,naturalgas,NGLandother
commodities.
Pembina'sgreatestassetsareitspeopleandtherelationshipswithitscustomers,investorsandthecommunitiesinwhichit
hasapresence.Pembinawillcontinuetokeepitsemployeesandstakeholderstopofmindandsupportedwhilenavigating
throughtheseevents.Pembinawilladjustitsresponseasneededandwillcontinuetobasedecisionsonrecommendations
frompublichealthexperts,ongoingevaluationofglobalenergypricesandtheimpactonPembinaanditscustomers'
businesses.
TheimpactsoftheCOVID-19pandemichavebeenassessedthroughouttheMD&Aand,wherematerial,additionaldisclosure
hasbeenprovidedtoindicatethepotentialimpactstheCOVID-19pandemicmayhaveonPembinaanditsresultsof
operations.
PembinaPipelineCorporation2020AnnualReport3
2.FINANCIAL&OPERATINGOVERVIEWConsolidatedFinancialOverviewfortheThreeMonthsEndedDecember31
ResultsofOperations
($millions,exceptwherenoted) 2020(3) 2019(3) Change %Change
Infrastructureandotherservicesrevenue 798 662 136 21
Productsalesrevenue 882 1,006 (124) (12)
TotalRevenue 1,680 1,668 12 1
Netrevenue(1) 954 837 117 14
Adjustedgrossprofit(5) 561 605 (44) (7)
Grossprofit 247 605 (358) (59)
Earnings(loss) (1,216) 150 (1,366) (911)
Earnings(loss)percommonshare–basicanddiluted(dollars) (2.28) 0.22 (2.50) (1,136)
Cashflowfromoperatingactivities 766 728 38 5
Cashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 1.39 1.41 (0.02) (1)
Adjustedcashflowfromoperatingactivities(1) 603 576 27 5
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 1.10 1.11 (0.01) (1)
Capitalinvestments 161 429 (268) (62)
AdjustedEBITDA(1) 866 787 79 10
Totalvolume(mboe/d)(2) 3,614 3,577 37 1
ChangeinEarnings($millions)(3)(4)
(1,216)
150 73
(5)(113)
36
(1,790) (13)
446
EarningsQ42019
Pipelinesgrossprofit
Facilitiesgrossprofit
Marketing&NewVenturesadjusted
grossprofit
Corporate,G&Aandother
Impairments Currenttax
expense
Deferredtax
expense
Earnings(loss)
Q42020
ResultsOverview
Resultsinthefourthquarterof2020werepositivelyimpactedbyhighergrossprofitinPipelines,duetothecontributionfrom
theassetsacquiredintheKinderAcquisition,combinedwithimprovingvolumesandloweroperatingexpensesforthe
conventionalpipelineassets.Facilitiesgrossprofitremainedconsistentduringthefourthquarterof2020asDuvernayIIand
EmpressInfrastructurecameintoservice,inNovember2019andOctober2020respectively,offsetbylowercapitalfeesatthe
ResthavenfacilityandtheCutbankComplex.Marketing&NewVenturesresultsstartedtoshowsignsofimprovementand
PembinamonetizedaportionofNGLstoragepositionsbuiltupduringthesecondandthirdquartersof2020;however,this
wasoffsetbyunrealizedlossesoncommodity-relatedderivativesandlowercrudemargins.General&administrativeand
otherexpensesdecreasedduetolowerincentiveandacquisitionrelatedcosts.Pembinarecognized$2.1billion($1.6billion
netoftax)(2019:$300million)inimpairmentsduringthefourthquarterof2020,whichresultedina$1.2billionlossandan
associateddeferredtaxrecoveryforthefourthquarterof2020.Seethe"Impairments"sectionforfurtherdetails.Excluding
impairmentsandtheassociateddeferredtaxrecovery,earningsforthefourthquarterof2020wouldhavebeen$338million.
4PembinaPipelineCorporation2020AnnualReport
ChangesinResultsfortheThreeMonthsEndedDecember31Infrastructureandotherservicesrevenue
▲ $136millionincreaseinrevenueduetorevenuecontributedbytheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisitionandrevenueassociatedwithDuvernayIIandEmpressInfrastructurebeingplacedintoservice,inNovember2019andOctober2020respectively,combinedwithhigherdeferredrevenuerecognizedinPipelines,partiallyoffsetbylowercapitalfeesinFacilities.
Productsalesrevenue ▼ $124milliondecrease($30milliondecreasenetofcostofgoodssold),largelyduetotheimpactoftheCOVID-19pandemiconmarketconditionsresultinginlowercrudeoilpriceswhichalsocompressedmarginsanddecreasedcrudeactivities,partiallyoffsetbyhighermarketedNGLvolumesasPembinamonetizedaportionofpreviouslybuiltupstoragepositions.
Costofgoodssold ▲ $105milliondecrease,largelyduetolowercrudeoilpricesandcrudeoilactivities,partiallyoffsetbyhigherNGLmarketpricesandincreasedmarketedNGLvolumesasPembinamonetizedaportionofpreviouslybuiltupstoragepositions.
Operatingexpenses ▼ $24millionincrease,largelyduetohigherlabourcosts,repairsandmaintenancecostsandpropertytaxesdrivenbygrowthinPembina'sbusinessfollowingtheKinderAcquisition,partiallyoffsetbylowerreclamationcostsontheconventionalpipelineassets,combinedwithaloweraveragepowerpoolpricepartiallyoffsettinghigherconsumption.
Depreciationandamortizationincludedinoperations
▼ $41millionincrease,primarilyduetogrowthinPembina'sassetbasefollowingtheKinderAcquisitionandadditionalassetsbeingplacedintoservice.
Shareofprofit(loss)fromequityaccountedinvestees-operations
▼ $19milliondecreaselargelyduetoanarrowerAECO-ChicagonaturalgaspricedifferentialandlowerNGLmargins,alsoresultedinalowercontributionsfromAuxSableandAlliance.
Realizedloss(gain)oncommodity-relatedderivatives
▼ $14millionnegativevariance,duetohigherNGLmarketpricescreatingalossforNGL-basedderivativessettledduringtheperiod.
Unrealizedlossoncommodity-relatedderivatives
▼ $63millionnegativevariance,primarilyduetotherecoveryintheforwardpriceofpropane,butaneandcrudeoilduringthefourthquarterof2020,combinedwithadecreaseintheforwardpriceofnaturalgas.
General&administrativeandother
▲ $36milliondecrease,largelyduetolowerincentivecostsfollowingthedeclineinPembina'sshareprice,combinedwithloweracquisition-relatedcosts.
Impairments(4) ▼ Pembinarecognizedtotalimpairmentsof$2.1billion($1.6billionnetoftax)(2019:$300million),associatedwithitsinvestmentsinRuby,CKPCandtheassetsassociatedwithJordanCove.Seethe"Impairments"sectionforfurtherdetails.
Netfinancecosts ● Consistentwiththepriorperiod.Higherinterestexpenseassociatedwithhigheraveragedebtlevelsandinterestexpenseassociatedwithleaseslargelyoffsetgainsonnon-commodity-relatedderivativefinancialinstrumentsandforeignexchangegains.
Currenttaxexpense ▼ $13millionincrease,primarilyduetotaxableincomegeneratedfromtheassetsacquiredintheKinderAcquisition.
Deferredtaxrecovery ▲ $446millionincrease,largelyduetothedeferredtaxrecoveryontheimpairmentexpensediscussedabove.
Earnings(loss) ▼ $1.4billiondecrease,duetothefactorsdiscussedabove.
Cashflowfromoperatingactivities
▲ $38millionincrease,primarilydrivenbyanincreaseinoperatingresultsafteradjustingfornon-cashitems,largelyattributabletotheassetsacquiredintheKinderAcquisition,and$19milliondecreaseintaxespaid,partiallyoffsetbya$22millionincreaseinnetinterestpaid,$24millionchangeinnon-cashworkingcapitaland$14milliondecreaseindistributionsfromequityaccountedinvestees.
Adjustedcashflowfromoperatingactivities(1)
▲ $27millionincrease,largelyduetothesameitemsimpactingcashflowfromoperatingactivities,discussedabove,netofthe$24millionchangeinnon-cashworkingcapital,partiallyoffsetbyhighercurrenttaxexpense.
AdjustedEBITDA(1) ▲ $79millionincrease,largelyduetothe$93millioncontributionfromtheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisition,combinedwithhigherdeferredrevenuesrecognizedonthePeacePipelinesystemandthePhaseVIExpansioncomingintoservice,partiallyoffsetbylowermarginsoncrudeoilsalesinthemarketingbusinessasaresultofthelowercrudeoilpricesduringthefourthquarterof2020andlowercontributionfromAllianceduetoanarrowerAECO-Chicagonaturalgaspricedifferential,whichresultedinlowerrevenues.IncludedinadjustedEBITDAis$174million(2019:$196million)relatedtoequityaccountedinvestees.
Totalvolume(mboe/d)(2) ▲ 37mboe/dincrease,duetothecontributionsfromtheCochinPipelineacquiredintheKinderAcquisition,combinedwithhigherdeferredrevenuevolumesrecognizedonthePeacePipelinesystem,aswellasthePhaseVIExpansionandDuvernayIIcomingintoservice,partiallyoffsetbylowerinterruptiblevolumesontheDraytonValleyPipeline,PeacePipelinesystemandVeresenMidstream,duetomarketconditionsrelatedtotheCOVID-19pandemic,combinedwithlowervolumesattheYoungerfacilityfollowingastagedrestartafterregularlyscheduledmaintenanceinSeptember2020.Revenuevolumesinclude315mboe/d(2019:368mboe/d)relatedtoequityaccountedinvestees.
▲ Increase; ▼ Decrease;or ● Noimpact; toearnings,adjustedEBITDA,cashflowfromoperations,adjustedcashflowfromoperatingactivitiesortotalvolumes.
(1) Refertothe"Non-GAAPMeasures"section.(2) Totalrevenuevolumes.Seethe"Abbreviations"sectionfordefinition.MarketedNGLvolumesareexcludedfromvolumestoavoiddoublecounting.Refertothe"Marketing
&NewVentures"sectionforfurtherinformation.(3) 2020periodandcomparative2019periodhavebeenrestated.See"VoluntaryChangeinAccountingPolicy","RestatementofRevenueandCostofGoodsSold"andNote3to
theConsolidatedFinancialStatements.(4) Impairmentsincludeimpairmentexpenseof$1.8billionandimpairmentinshareofprofitfromequityaccountedinvesteesof$314million.(5) Adjustedgrossprofitrepresentsgrossprofitexcludingimpairmentinshareofprofitfromequityaccountedinvestees.SeeNote22totheConsolidatedFinancialStatements
forfurtherdetails.
PembinaPipelineCorporation2020AnnualReport5
ConsolidatedFinancialOverviewforthe12MonthsEndedDecember31
ResultsofOperations
($millions,exceptwherenoted) 2020(3) 2019(3) Change %Change
Infrastructureandotherservicesrevenue 2,997 2,426 571 24
Productsalesrevenue 2,956 3,946 (990) (25)
Revenue 5,953 6,372 (419) (7)
Netrevenue(1) 3,444 3,120 324 10
Adjustedgrossprofit 2,322 2,442 (120) (5)
Grossprofit 2,008 2,442 (434) (18)
Earnings(loss) (316) 1,507 (1,823) (121)
Earnings(loss)percommonshare–basic(dollars) (0.86) 2.69 (3.55) (132)
Earnings(loss)percommonshare–diluted(dollars) (0.86) 2.68 (3.54) (132)
Cashflowfromoperatingactivities 2,252 2,532 (280) (11)
Cashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 4.10 4.94 (0.84) (17)
Adjustedcashflowfromoperatingactivities(1) 2,289 2,234 55 2
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 4.16 4.36 (0.20) (5)
Capitalinvestments 1,029 1,645 (616) (37)
AdjustedEBITDA(1) 3,281 3,061 220 7
Totalvolume(mboe/d)(2) 3,500 3,451 49 1
ChangeinEarnings($millions)(3)
(316)
1,507
196 30
(349)
86
(1,790)(131) (30)
165
Earnings2019
Pipelinesgrossprofit
Facilitiesgrossprofit
Marketing&NewVenturesadjusted
grossprofit
Corporate,G&Aandother
Impairments Netfinancecosts
Currenttax
expense
Deferredtax
expense
Earnings(loss)2020
ResultsOverview
Resultsfor2020werepositivelyimpactedbyhighergrossprofitinbothPipelinesandFacilitiesprimarilyasaresultofthe
assetsacquiredintheKinderAcquisition,combinedwithloweroperatingexpensesinPipelines.Offsettingtheresultsfrom
PipelinesandFacilities,Marketing&NewVentureswasnegativelyimpactedbylowermarginsoncrudeoilandNGLsales,a
lowercontributionfromAuxSableasaresultoflowerNGLmarginsandanarrowerAECO-Chicagonaturalgasprice
differentialandhigherunrealizedlossesoncommodity-relatedderivatives.General&administrativeexpensesdecreasedin
2020,largelyduetolowerincentivecosts,whileotherexpensesdecreasedastheresultoftherecognitionofotherincome
associatedwiththeCanadianEmergencyWageSubsidy.Netfinancecostsincreasedduetohigherinterestexpense,drivenby
higheraveragedebtlevels,andforeignexchangelossesontherepaymentofU.S.dollardenominateddebt.Pembinaalso
recognized$2.1billion($1.6billionnetoftax)(2019:$300million)innon-cashimpairmentsduringthefourthquarterof2020,
whichresultedinanassociateddeferredtaxrecovery.Excludingimpairmentsandtheassociateddeferredtaxrecovery,
earningsfortheyearwouldhavebeen$1.2billion.
6PembinaPipelineCorporation2020AnnualReport
ChangesinResultsforthe12MonthsEndedDecember31Infrastructureandotherservicesrevenue
▲ $571millionincreaseinrevenueduetorevenuecontributedbytheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisition,partiallyoffsetbylowerinterruptiblevolumesinPipelinesandlowercapitalfeesinFacilities,largelyduetoreducedenergydemandasaresultoftheongoingCOVID-19pandemic.
Productsalesrevenue ▼ $990milliondecrease($246milliondecreasenetofcostofgoodssold),largelyduetoweakerglobalenergydemandthroughoutmostof2020,duetotheCOVID-19pandemic,andtheresultingdecreaseinpricesforcrudeoilandpropane.Additionally,theimpactoftheCOVID-19pandemiconmarketconditionscompressedmarginsanddecreasedcrudeactivities,whilelowerfracspreadsimpactedNGLmargins,combinedwitha$33millionarbitrationawardpaymentreceivedduringthefirstquarterof2019.
Costofgoodssold ▲ $743milliondecrease,duetolowercrudeoilpricesandlowercrudeactivitiesasaresultoftheCOVID-19pandemic.
Operatingexpenses ▼ $110millionincrease,largelyduetohigherlabourcosts,repairsandmaintenancecostsandpropertytax,asaresultofthelargerassetbasefollowingtheKinderAcquisition,partiallyoffsetbylowerreclamationcostsontheconventionalpipelineassetsandalowerpowerpoolpricethatpartiallyoffsetincreasedconsumptionduetothelargerassetbase.
Depreciationandamortizationincludedinoperations
▼ $191millionincrease,primarilyduetogrowthinPembina'sassetbasefollowingtheKinderAcquisitionandadditionalassetsbeingplacedintoservice.
Shareofprofit(loss)fromequityaccountedinvestees-operations
▼ $93milliondecreaselargelyduetolowerNGLmarginsandthenarrowerAECO-Chicagonaturalgaspricedifferential,resultinginalowercontributionsfromAuxSableandAlliance.
Realizedgainoncommodity-relatedderivatives
▲ $21millionincrease,duetolowermarketpricesintheperiodcreatingagainforcrudeandNGL-basedderivativessettledduring2020.
Unrealizedlossoncommodity-relatedderivatives
▼ $71millionnegativevariance,primarilyduetoadditionalcontractsaddedandmaturingduringtheyear,combinedwithanincreaseintheforwardpriceofpropane.
General&administrativeandother
▲ $83milliondecrease,largelyduetolowerincentivecosts,drivenbythedeclineinglobalequitymarketswhichimpactedPembina'sshareprice,combinedwith$39millioninotherincomeassociatedwiththeCanadianEmergencyWageSubsidy,whichwerepartiallyoffsetbyacquisition-relatedcosts.
Impairments(4) ▼ Pembinarecognizedtotalimpairmentsof$2.1billion($1.6billionnetoftax)(2019:$300million),associatedwithitsinvestmentsinRuby,CKPCandtheassetsassociatedwithJordanCove.Seethe"Impairments"sectionforfurtherdetails.
Netfinancecosts ▼ $131millionincrease,primarilydrivenbyadditionalinterestexpenseassociatedwithhigheraveragedebtlevels,combinedwithanincreaseinforeignexchangelossesontherepaymentofU.S.dollardenominateddebtandincreasedinterestexpenserelatedtoleases.
Currenttaxexpense ▼ $30millionincrease,astaxableincomegeneratedfromtheassetsacquiredintheKinderAcquisitionandthetaximpactoftheCanadianEmergencyWageSubsidywaspartiallyoffsetbydecreasedtaxableincomefromotherPembinaentities.
Deferredtaxrecovery ▲ $165millionincrease,largelyduetotherecoveryontheimpairmentexpensediscussedabove,partiallyoffsetbytheenactmentofAlberta'sBill3inJuneof2019,whichreducedtheAlbertacorporatetaxratefrom12to8percentandresultedinadeferredtaxrecoveryduring2019.
Earnings(loss) ▼ $1.8billiondecrease,duetothefactorsdiscussedabove.
Cashflowfromoperatingactivities
▼ $280milliondecrease,primarilydrivenbythe$199millionchangeinnon-cashworkingcapital,$154millionincreaseintaxespaid,asPembinamadethefinalpaymentof2019taxesand2020installments,$116milliondecreaseindistributionsfromequityaccountedinvesteesand$114millionincreaseinnetinterestpaid,partiallyoffsetbytheincreaseinoperatingresultsafteradjustingfornon-cashitems.
Adjustedcashflowfromoperatingactivities(1)
▲ $55millionincrease,largelyduetothesamefactorsimpactingcashflowfromoperatingactivities,discussedabove,netofthechangeinnon-cashworkingcapital,increaseintaxespaidand$43millionloweraccruedshare-basedpayments,partiallyoffsetbythe$27millionincreaseinpreferredsharedividendsfollowingtheKinderAcquisition.
AdjustedEBITDA(1) ▲ $220millionincrease,primarilyduetothe$405millioncontributionfromtheCochinPipeline,EdmontonTerminalsandVancouverWharvesacquiredintheKinderAcquisition,combinedwiththePhaseVIExpansioncomingintoserviceinJune2020,DuvernayIIcomingintoserviceinNovember2019,loweroperatingexpensesontheconventionalpipelineassets,lowergeneral&administrativeandotherexpensesandrealizedgainsoncommodityrelatedderivatives,discussedabove.Theseincreaseswerepartiallyoffsetbylowermarginsoncrudeoilandpropanesalesinthemarketingbusinessasaresultoflowerpricesforcrudeoilandlowerfracspreadsduring2020,asaresultoftheCOVID-19pandemic,andlowercontributionfromAuxSable,duetolowerNGLmargins,andAllianceduetothenarrowerAECO-Chicagonaturalgaspricedifferential.IncludedinadjustedEBITDAis$681million(2019:$802million)relatedtoequityaccountedinvestees.
Totalvolume(mboe/d)(2) ▲ 49mboe/dincrease,duetothecontributionsfromtheCochinPipelineacquiredintheKinderAcquisition,combinedDuvernayIIcomingintoservice,partiallyoffsetbylowerinterruptiblevolumesontheDraytonValleyPipelineandPeacePipelinesystem,duetomarketconditions,combinedwithlowervolumesattheYoungerfacilityfollowingastagedrestartafterregularlyscheduledmaintenanceinSeptember2020.Revenuevolumesinclude312mboe/d(2019:332mboe/d)relatedtoequityaccountedinvestees.
▲ Increase; ▼ Decrease;or ● Noimpact; toearnings,adjustedEBITDA,cashflowfromoperations,adjustedcashflowfromoperatingactivitiesortotalvolumes.
(1) Refertothe"Non-GAAPMeasures"section.(2) Totalrevenuevolumes.Seethe"Abbreviations"sectionfordefinition.MarketedNGLvolumesareexcludedfromvolumestoavoiddoublecounting.Refertothe"Marketing
&NewVentures"sectionforfurtherinformation.(3) 2020periodandcomparative2019periodhavebeenrestated.See"VoluntaryChangeinAccountingPolicy","RestatementofRevenueandCostofGoodsSold"andNote3to
theConsolidatedFinancialStatements.(4) Impairmentsincludeimpairmentexpenseof$1.8billionandimpairmentinshareofprofitfromequityaccountedinvesteesof$314million.
PembinaPipelineCorporation2020AnnualReport7
3.SEGMENTRESULTSBusinessOverview
ThePipelinesDivisionprovidescustomerswithpipelinetransportation,terminalling,storageandrailservicesinkeymarket
hubsinCanadaandtheUnitedStatesforcrudeoil,condensate,naturalgasliquidsandnaturalgas.Thedivisionincludes
pipelinetransportationcapacityofapproximately3.1mmboe/d(1)andabovegroundstorageofapproximately11mmbbls(1)
withinitsconventional,oilsandsandheavyoil,andtransmissionassets.Theconventionalassetsincludestrategicallylocated
pipelinesandterminallinghubsthatgatherandtransportlightandmediumcrudeoils,condensateandnaturalgasliquids
fromwesternAlbertaandnortheastBritishColumbiatotheEdmonton,Albertaareaforfurtherprocessingortransportation
ondownstreampipelines.TheoilsandsandheavyoilassetstransportheavyandsyntheticcrudeoilproducedwithinAlberta
totheEdmontonareaandofferassociatedstorage,terminallingandrailservices.Thetransmissionassetstransportnatural
gas,ethaneandcondensatethroughoutCanadaandtheUnitedStatesonlonghaulpipelineslinkingvariouskeymarkethubs.
Inaddition,thePipelinesDivisionassetsprovidelinkagesbetweenPembina'supstreamanddownstreamassetsacrossNorth
America,enablingintegratedcustomerserviceofferings.Together,theseassetssupplyproductfromhydrocarbonproducing
regionstorefineries,fractionatorsandmarkethubsinAlberta,BritishColumbia,IllinoisandCalifornia,aswellasotherregions
throughoutNorthAmerica.
TheFacilitiesDivisionincludesinfrastructurethatprovidesPembina'scustomerswithnaturalgas,condensateandNGL
services.Pembina'snaturalgasgatheringandprocessingassetsarestrategicallypositionedinactive,liquids-richareasofthe
WCSBandWillistonBasinandareintegratedwiththeCompany'sotherbusinesses.Pembinaprovidessweetandsourgas
gathering,compression,condensatestabilization,andbothshallowcutanddeepcutgasprocessingserviceswithatotal
capacityofapproximately6bcf/d(2)foritscustomers.CondensateandNGLextractedatvirtuallyallCanadian-basedfacilities
haveaccesstotransportationonPembina'spipelines.Inaddition,allNGLtransportedalongtheAlliancePipelineare
extractedthroughthePembinaoperatedChannahonFacilityattheterminus.TheFacilitiesDivisionincludesapproximately
354mbpd(2)ofNGLfractionation,21mmbbls(1)ofcavernstorageandassociatedpipelineandrailterminallingfacilitiesandthe
CompanyiscurrentlyconstructingaliquefiedpropaneexportfacilityonCanada'sWestCoast.Thesefacilitiesarefully
integratedwiththeCompany'sotherdivisions,providingcustomerswiththeabilitytoaccessacomprehensivesuiteof
servicestoenhancethevalueoftheirhydrocarbons.Inaddition,PembinaownsabulkmarineexportterminalinVancouver,
BritishColumbia.
TheMarketing&NewVenturesDivisionstrivestomaximizethevalueofhydrocarbonliquidsandnaturalgasoriginatinginthe
basinswheretheCompanyoperates.Pembinaseekstocreatenewmarkets,andfurtherenhanceexistingmarkets,tosupport
boththeCompany'sanditscustomers'overallbusinessinterests.Inparticular,Pembinaseekstoidentifyopportunitiesto
connecthydrocarbonproductiontonewdemandlocationsthroughthedevelopmentofinfrastructure.Pembinastrivesto
increaseproducernetbacksandproductdemandtoimprovetheoverallcompetitivenessofthebasinswheretheCompany
operates.WithintheMarketing&NewVenturesDivision,Pembinaundertakesvalue-addedcommoditymarketingactivities
includingbuyingandsellingproducts(naturalgas,ethane,propane,butane,condensateandcrudeoil),commodityarbitrage,
andoptimizingstorageopportunities.ThemarketingbusinessentersintocontractsforcapacityonbothPembina'sandthird-
partyinfrastructure,handlesproprietaryandcustomervolumesandaggregatesproductionforonwardsale.
(1) Netcapacity;excludesprojectsunderdevelopment.(2) Netcapacity.IncludesAuxSablecapacity.ThefinancialandoperationalresultsforAuxSableareincludedintheMarketing&NewVenturesDivision;excludesprojectsunder
development.
8PembinaPipelineCorporation2020AnnualReport
FinancialandOperationalOverviewbyDivision
3MonthsEndedDecember31
2020 2019
($millions,exceptwherenoted) Volumes(1)GrossProfit
(Loss)
AdjustedGrossProfit
AdjustedEBITDA(2) Volumes(1) GrossProfit(4)
AdjustedEBITDA(2)
Pipelines 2,730 419 419 577 2,667 346 467
Facilities 884 165 165 255 910 170 254
Marketing&NewVentures(3) — (334) (20) 75 — 93 120
Corporate — (3) (3) (41) — (4) (54)
Total 3,614 247 561 866 3,577 605 787
12MonthsEndedDecember31
2020 2019
($millions,exceptwherenoted) Volumes(1)GrossProfit
(Loss)
AdjustedGrossProfit
AdjustedEBITDA(2) Volumes(1) GrossProfit(4)
AdjustedEBITDA(2)
Pipelines 2,623 1,578 1,578 2,208 2,566 1,382 1,854
Facilities 877 688 688 1,012 885 658 955
Marketing&NewVentures(3) — (257) 57 193 — 406 423
Corporate — (1) (1) (132) — (4) (171)
Total 3,500 2,008 2,322 3,281 3,451 2,442 3,061(1) VolumesforPipelinesandFacilitiesarerevenuevolumes,whicharephysicalvolumesplusvolumesrecognizedfromtake-or-paycommitments.Volumesarestatedinmboe/
d,withnaturalgasvolumesconvertedtomboe/dfromMMcf/data6:1ratio.(2) Refertothe"Non-GAAPMeasures"section.(3) MarketedNGLvolumesareexcludedfromvolumestoavoiddoublecounting.Refertothe"Marketing&NewVentures"sectionforfurtherinformation.(4) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
PembinaPipelineCorporation2020AnnualReport9
Pipelines
FinancialOverviewfortheThreeMonthsEndedDecember31ResultsofOperations
($millions,exceptwherenoted) 2020 2019(4) Change %Change
Conventionalrevenue(1) 372 354 18 5
Transmissionrevenue(1) 119 60 59 98
OilSandsrevenue(1) 112 73 39 53
Pipelinesrevenue(1) 603 487 116 24
Operatingexpenses(1) 136 137 (1) (1)
Shareofprofitfromequityaccountedinvestees 54 62 (8) (13)
Depreciationandamortizationincludedinoperations 102 66 36 55
Grossprofit 419 346 73 21
AdjustedEBITDA(2) 577 467 110 24
Volumes(mboe/d)(3) 2,730 2,667 63 2
Distributionsfromequityaccountedinvestees 80 80 — —
ChangeinResults
Conventionalrevenue(1) ▲ Increaseprimarilyduetohigherdeferredrevenuerecognizedinthefourthquarterof2020onthePeacePipelinesystem,combinedwiththePhaseVIExpansioncomingintoserviceduringJune2020,partiallyoffsetbylowerinterruptiblevolumesonDraytonValleyPipelineandPeacePipelinesystem,duetocurrentmarketconditions.
Transmissionrevenue(1) ▲ IncreaselargelyduetothecontributionfromtheCochinPipelinefollowingtheKinderAcquisition.
OilSandsrevenue(1) ▲ IncreaseprimarilyduetothecontributionfromtheEdmontonTerminalsfollowingtheKinderAcquisition.
Operatingexpenses(1) ● Consistentwithpriorperiod.IncreaseduetohigheroperatingexpensesassociatedwiththeCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition,whichwasoffsetbylowerreclamationcostsfortheconventionalpipelineassets.
Shareofprofitfromequityaccountedinvestees
▼ DecreaselargelyduetolowerinterruptiblerevenuesontheAlliancePipeline,drivenbyanarrowerAECO-Chicagonaturalgaspricedifferential.
Depreciationandamortizationincludedinoperations
▼ IncreaseindepreciationduetothelargerassetbaseasaresultoftheadditionoftheassetsacquiredintheKinderAcquisition.
Distributionsfromequityaccountedinvestees
● $51million(2019:$50million)fromAllianceand$29million(2019:$30million)fromRuby.
Volumes(mboe/d)(3) ▲ IncreaseprimarilyduetohigherrevenuevolumesontheCochinPipelineandthePeacePipelinesystem,bothdiscussedabove,partiallyoffsetbylowerinterruptiblevolumesontheRubyPipeline,DraytonValleyPipelineandPeacePipelinesystem,duetomarketconditions.Revenuevolumesinclude139mboe/d(2019:134mboe/d)relatedtoAllianceand101mboe/d(2019:146mboe/d)relatedtoRuby.
AdjustedEBITDA(2) ▲ IncreaseduetohigherrevenueassociatedwiththeCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition,combinedwithhigherdeferredrevenuesrecognizedonthePeacePipelinesystemandthePhaseVIExpansioncomingintoservice,partiallyoffsetbyaslightlylowercontributionfromAllianceduetothenarrowerAECO-Chicagonaturalgaspricedifferential.IncludedinadjustedEBITDAis$70million(2019:$76million)relatedtoAllianceand$45million(2019:$52million)relatedtoRuby.
ChangeinAdjustedEBITDA($millions)(2)
577
46718
59
39 19
(16)
AdjustedEBITDAQ42019
Conventionalrevenue
Transmissionrevenue
OilSandsrevenue
Operatingexpenses
G&Aandother
AdjustedEBITDAfromequityaccountedinvestees
AdjustedEBITDAQ42020
(1) Includesinter-segmenttransactions.SeeNote22oftheConsolidatedFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.(4) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
10PembinaPipelineCorporation2020AnnualReport
FinancialOverviewforthe12MonthsEndedDecember31ResultsofOperations
($millions,exceptwherenoted) 2020 2019(4) Change %Change
Conventionalrevenue(1) 1,323 1,314 9 1
Transmissionrevenue(1) 461 189 272 144
OilSandsrevenue(1) 467 284 183 64
Totalrevenue(1) 2,251 1,787 464 26
Operatingexpenses(1) 498 436 62 14
Shareofprofitfromequityaccountedinvestees 227 274 (47) (17)
Depreciationandamortizationincludedinoperations 402 243 159 65
Grossprofit 1,578 1,382 196 14
AdjustedEBITDA(2) 2,208 1,854 354 19
Volumes(mboe/d)(3) 2,623 2,566 57 2
Distributionsfromequityaccountedinvestees 339 390 (51) (13)
ChangeinResults
Conventionalrevenue(1) ● Consistentwithpriorperiod.Increasesindeferredrevenuerecognizedinthefourthquarterof2020onthePeacePipelinesystem,additionalrevenueontheNEBCPipelinesystemandthePhaseVIExpansioncomingintoserviceduringJune2020,werelargelyoffsetbylowerinterruptiblerevenuevolumesontheDraytonValleyPipelineandPeacePipelinesystem,duetomarketconditionsrelatedtotheCOVID-19pandemic.
Transmissionrevenue(1) ▲ IncreaselargelyduetothecontributionfromtheCochinPipelinefollowingtheKinderAcquisition.
OilSandsrevenue(1) ▲ IncreaseprimarilyduetocontributionfromtheEdmontonTerminalsfollowingtheKinderAcquisition,partiallyoffsetbytherecognitionof$22millionindeferredvariablerevenueinthesecondquarterof2019.
Operatingexpenses(1) ▼ IncreaseprimarilyduetotheadditionaloperatingexpensesassociatedwiththeCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition,partiallyoffsetbylowerreclamationandpowercostsfortheconventionalpipelineassets.
Shareofprofitfromequityaccountedinvestees
▼ DecreaselargelyduetolowerinterruptiblevolumesandrevenuesontheAlliancePipeline,drivenbyanarrowerAECO-Chicagonaturalgaspricedifferential.
Depreciationandamortizationincludedinoperations
▼ Increaseindepreciationduetothelargerassetbase,primarilyasaresultoftheassetsacquiredintheKinderAcquisition.
Distributionsfromequityaccountedinvestees
▼ $217million(2019:$268million)fromAllianceand$122million(2019:$121million)fromRuby.ThedecreaseindistributionsfromAlliancewaslargelyduetothesamefactorsimpactingshareofprofitfromequityaccountedinvesteesdiscussedabove.
Volumes(mboe/d)(3) ▲ IncreaseprimarilyduetothecontributionfromtheCochinPipelinefollowingtheKinderAcquisition,partiallyoffsetbylowerinterruptiblevolumesontheDraytonValleyPipeline,PeacePipelinesystemandtheAlliancePipeline,discussedabove.Revenuevolumesinclude130mboe/d(2019:141mboe/d)relatedtoAllianceand103mboe/d(2019:103mboe/d)relatedtoRuby.
AdjustedEBITDA(2) ▲ IncreaseduetothecontributionfromtheCochinPipelineandEdmontonTerminalsfollowingtheKinderAcquisition,combinedwiththePhaseVIExpansioncomingintoserviceandloweroperatingexpensesontheconventionalpipelineassets,partiallyoffsetbyalowercontributionfromAlliance,duetothenarrowerAECO-Chicagonaturalgaspricedifferential.IncludedinadjustedEBITDAis$274million(2019:$328million)relatedtoAllianceand$188million(2019:$202million)relatedtoRuby.
ChangeinAdjustedEBITDA($millions)(2)
2,208
1,854 9
272
183
(62)
20
(68)
AdjustedEBITDA2019
Conventionalrevenue
Transmissionrevenue
OilSandsrevenue
Operatingexpenses
G&Aandother
AdjustedEBITDAfromequityaccountedinvestees
AdjustedEBITDA2020
(1) Includesinter-segmenttransactions.SeeNote22oftheConsolidatedFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.(4) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
PembinaPipelineCorporation2020AnnualReport11
FinancialandOperationalOverview
3MonthsEndedDecember31 12MonthsEndedDecember31
2020 2019 2020 2019
($millions,exceptwherenoted) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit(3)
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit(3)
AdjustedEBITDA(2)
Pipelines
Conventional 993 254 295 958 216 253 898 892 1,055 910 850 993
Transmission 684 116 205 646 97 173 670 470 828 591 388 684
OilSands 1,053 49 77 1,063 33 41 1,055 216 325 1,065 144 177
Total 2,730 419 577 2,667 346 467 2,623 1,578 2,208 2,566 1,382 1,854(1) Revenuevolumesinmboe/d.Seethe"Abbreviations"sectionfordefinition.(2) Refertothe"Non-GAAPMeasures"section.(3) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
Projects&NewDevelopments(1)
Pipelinescontinuestofocusontheexecutionofvarioussystemexpansions.Theprojectsinthefollowingtablewererecently
placedintoserviceandimpactPipelinesresults.
SignificantProjects In-serviceDate
PhaseVIExpansion June2020
WapitiCondensateLateral March2020
NEBCMontneyInfrastructure February2020
Aspreviouslyannouncedduringthequarter,Pembinare-activateditsPhaseVIIExpansionofthePeacePipeline("PhaseVII").
ThecapitalcostestimateforPhaseVIIhasbeenrevisedlower,byapproximately$175million,to$775million,reflectinga
reimaginingoftheprojecttooptimizethescopewithcustomers'currentdevelopmentplansandtransportation
requirements.TheinitialcapacityofPhaseVIIhasbeenreducedfromtheprevious240,000bpd,to160,000bpd,however,
theabilitytoquicklyandefficientlyreturntheprojecttoitsoriginalcapacityhasbeenretained.Thelowercapitalcostreflects
fewerpumpstations,aswellasadditionalsavingsachievedthroughvalueengineeringandanoptimizedconstructionand
procurementstrategy.
Duringthefourthquarter,PembinarecognizedanimpairmentonitsinvestmentinRuby.Theimpairmentwastheresultof
upcomingcontractexpirationsandprevailinginterruptibletariffrates,alongwithRockiesbasinfundamentals,andthe
ongoinguncertaintywithrespecttoJordanCove,whichwouldultimatelybeexpectedtoutilizecapacityontheRubyPipeline.
Whilethenear-termfundamentalsoftheassetpresentchallenges,Pembinacontinuestohaveaconstructivelonger-term
viewofRuby'svalue,giventhescarcityvalueoflargediameterpipelinesandRubyPipeline'sroleinprovidingreliableenergy
supplytotheCaliforniamarket.Furthermore,RubyPipelineisacarbon-neutralpipelineandresponsiblesourceofnaturalgas
supplytothePacificNorthwestregion.
12PembinaPipelineCorporation2020AnnualReport
ThefollowingoutlinestheprojectsandnewdevelopmentswithinPipelines:
PhaseVIIExpansion
CapitalBudget:$775million In-serviceDate:Firsthalfof2023 Status:Ontime,trendingonbudget
Thisexpansionisexpectedtoaddapproximately160mbpdofincrementalcapacityupstreamofFoxCreek,accessingcapacityavailableonthepipelinesdownstreamofFoxCreek.Includedintheexpansionisa20-inch,approximately220kmpipelineintheLaGlace-Valleyview-FoxCreekcorridor,andtwonewpumpstationsorterminalupgrades,betweenLaGlaceandEdmonton,Alberta.
Aspreviouslyannounced,inresponsetotheCOVID-19pandemic,theresultingeconomicslowdownanddecreaseddemand
forcrudeoilandNGL,Pembinamadethedecisiontodefersomeofitspreviouslyannouncedexpansionprojectsincludingthe
PhaseVIIIExpansionandthePhaseIXExpansion.Whilethesetwoprojectsremaindeferred,theinitialcontractssupporting
theprojectsarestillinplaceandthereremainstrongindicationsofinterestforincrementalcapacity.Valueengineeringwork
isongoingandgivenstrongcustomerinterest,Pembinaexpectstomakeadecisioninthesecondhalfof2021tore-activate
theseprojects.
PhaseVIIIExpansion Status:Deferred
Thisexpansionwillinclude10-inchand16-inchpipelinesintheGordondaletoLaGlacecorridoraswellassixnewpumpstationsorterminalupgradeslocatedbetweenGordondaleandFoxCreek.
ThecarryingvalueoftheprojectatDecember31,2020was$40million.
PhaseIXExpansion Status:Deferred
Thisexpansionwillinclude6-inchand16-inchpipelinesdebottleneckingthecorridornorthofGordondaleaswellasupgradesatonepumpstation.Inaddition,thisexpansionwillseeexistingpipelines,whicharecurrentlybatching,convertedtosingleproductlines.
ThecarryingvalueoftheprojectatDecember31,2020was$3million.(1) ForfurtherdetailsonPembina'ssignificantassets,includingdefinitionsforcapitalizedtermsusedhereinthatarenototherwisedefined,refertoPembina'sAIFfortheyear
endedDecember31,2020filedatwww.sedar.com(filedwiththeU.S.SecuritiesandExchangeCommissionatwww.sec.govunderForm40-F)andonPembina'swebsiteatwww.pembina.com.
PembinaPipelineCorporation2020AnnualReport13
Facilities
FinancialOverviewfortheThreeMonthsEndedDecember31ResultsofOperations
($millions,exceptwherenoted) 2020 2019(4) Change %Change
GasServicesnetrevenue(1)(2) 147 152 (5) (3)
NGLServicesnetrevenue(1)(2) 175 133 42 32
Facilitiesnetrevenue(1)(2) 322 285 37 13
Operatingexpenses(1) 111 80 31 39
Shareofprofitfromequityaccountedinvestees 14 14 — —
Unrealizedlossoncommodity-relatedderivativefinancialinstruments 10 — 10 100
Depreciationandamortizationincludedinoperations 50 49 1 2
Grossprofit 165 170 (5) (3)
AdjustedEBITDA(2) 255 254 1 —
Volumes(mboe/d)(3) 884 910 (26) (3)
Distributionsfromequityaccountedinvestees 25 21 4 19
ChangesinResults
GasServicesnetrevenue(1)(2) ● Consistentwiththepriorperiod.IncreasedrevenueassociatedwithDuvernayIIbeingplacedintoserviceinNovember2019,combinedwiththeEmpressinfrastructurebeingplacedintoserviceinOctober2020,offsetlowerrevenuesattheResthavenfacilityandtheCutbankComplexduetolowercapitalfees,andlowervolumesattheYoungerfacilityduetoastagedrestartfollowingregularlyscheduledmaintenanceinSeptember2020.
NGLServicesnetrevenue(1)(2) ▲ IncreaseprimarilyduetorevenuesfromtheVancouverWharvesfollowingtheKinderAcquisition,combinedwithhigheroperatingexpenserecoveriesattheRedwaterComplex.
Operatingexpenses(1) ▼ IncreaselargelyduetooperatingexpensesassociatedwithVancouverWharves,followingtheKinderAcquisition,combinedwithhigherpowerandfuelcostsattheRedwaterComplexthatarerecoveredaspartofrevenue.
Shareofprofitfromequityaccountedinvestees
● Consistentwiththepriorperiod.
Depreciationandamortizationincludedinoperations
● Consistentwiththepriorperiod.
Distributionsfromequityaccountedinvestees
● $25million(2019:$20million)fromVeresenMidstreamandnil(2019:$1million)fromFortCorp.
Volumes(mboe/d)(3) ▼ DecreaseprimarilyduetolowervolumesattheYoungerfacility,discussedabove,combinedwithlowervolumesatVeresenMidstreamduetomarketconditions,partiallyoffsetbyincrementalvolumesassociatedwithDuvernayIIbeingplacedintoserviceinNovember2019.Revenuevolumesinclude75mboe/d(2019:88mboe/d)relatedtoVeresenMidstream.
AdjustedEBITDA(2) ● Consistentwiththepriorperiod.TheincreasedcontributionfromVancouverWharvesfollowingtheKinderAcquisition,DuvernayIIandtheEmpressinfrastructurebeingplacedintoservice,werelargelyoffsetbylowerrevenueattheResthavenfacilityandCutbankComplexandlowervolumesattheYoungerfacility,discussedabove.IncludedinadjustedEBITDAis$42million(2019:$48million)relatedtoVeresenMidstream.
ChangeinAdjustedEBITDA($millions)(2)
255254
(5)
42
(31) (5)
AdjustedEBITDAQ42019
GasServices
netrevenue
NGLServices
netrevenue
Operatingexpenses
AdjustedEBITDAfromequityaccounted
investees
AdjustedEBITDAQ42020
(1) Includesinter-segmenttransactions.SeeNote22oftheConsolidatedFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.(4) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
14PembinaPipelineCorporation2020AnnualReport
FinancialOverviewforthe12MonthsEndedDecember31ResultsofOperations
($millions,exceptwherenoted) 2020 2019(4) Change %Change
GasServicesnetrevenue(1)(2) 571 588 (17) (3)
NGLServicesnetrevenue(1)(2) 649 529 120 23
Facilitiesnetrevenue(1)(2) 1,220 1,117 103 9
Operatingexpenses(1) 392 344 48 14
Shareofprofitfromequityaccountedinvestees 55 51 4 8
Unrealizedgainoncommodity-relatedderivativefinancialinstruments (4) — (4) 100
Depreciationandamortizationincludedinoperations 199 166 33 20
Grossprofit 688 658 30 5
AdjustedEBITDA(2) 1,012 955 57 6
Volumes(mboe/d)(3) 877 885 (8) (1)
Distributionsfromequityaccountedinvestees 101 101 — —
ChangesinResults
GasServicesnetrevenue(1)(2) ▼ DecreaseduetolowercapitalfeesattheResthavenfacilityandtheCutbankComplex,combinedwithlowervolumesattheYoungerfacility,duetoregularlyscheduledmaintenanceduringSeptember2020andlowergasfeedstockavailability,partiallyoffsetbyDuvernayIIbeingplacedintoserviceinNovember2019andincreasedprocessingdaysatKakwaRiverduetoaturnaroundin2019.
NGLServicesnetrevenue(1)(2) ▲ IncreaseprimarilyduetoadditionalrevenuesfromtheVancouverWharvesfollowingtheKinderAcquisition,combinedwithhigheroperatingexpenserecoveriesattheRedwaterComplexandtheRedwaterCo-generationfacilitygoingintoserviceinMarch2019.
Operatingexpenses(1) ▼ IncreaselargelyduetotheadditionoftheVancouverWharvesfollowingtheKinderAcquisition,combinedwithDuvernayIIandtheDuvernaySourTreatmentFacilitiesgoingintoservice,partiallyoffsetbylowerpowercostsastheYoungerfacilitywasshutdownforregularlyscheduledmaintenanceduringthethirdquarterof2020.
Shareofprofitfromequityaccountedinvestees
● Consistentwiththepriorperiod.
Depreciationandamortizationincludedinoperations
▼ IncreaseindepreciationduetothelargerassetbaseasaresultoftheadditionoftheassetsacquiredintheKinderAcquisitionandDuvernayIIandtheDuvernaySourTreatmentFacilitiesgoingintoservice.
Distributionsfromequityaccountedinvestees
● $97million(2019:$96million)fromVeresenMidstreamand$4million(2019:$5million)fromFortCorp.
Volumes(mboe/d)(3) ● Consistentwiththepriorperiod.LowerrevenuevolumesattheYoungerfacilityduetoregularlyscheduledmaintenanceandlowergasfeedstockavailability,combinedwithlowerrevenuevolumesatVeresenMidstream,asaresultofdeferreddrillingandcompletionsbyakeycustomer,duetoCOVID-19restrictions,werelargelyoffsetbyrevenuevolumesassociatedwithDuvernayIIbeingplacedintoserviceinNovember2019.Revenuevolumesinclude79mboe/d(2019:88mboe/d)relatedtoVeresenMidstream.
AdjustedEBITDA(2) ▲ IncreaseprimarilyduetoadditionalcontributionfromDuvernayIIbeingplacedintoserviceinNovember2019,andtheRedwaterCo-generationfacilitybeingplacedintoserviceinMarch2019,combinedwithlowergeneral&administrativeexpense,asaresultoflowerlong-termincentivecosts.IncludedinadjustedEBITDAis$174million(2019:$182million)relatedtoVeresenMidstream.
ChangeinAdjustedEBITDA($millions)(2)
1,012
955
(17)
120
(48)
8
(6)
AdjustedEBITDA2019
GasServices
netrevenue
NGLServices
netrevenue
Operatingexpenses
G&Aandother
AdjustedEBITDAfromequityaccountedinvestees
AdjustedEBITDA2020
(1) Includesinter-segmenttransactions.SeeNote22oftheConsolidatedFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.(4) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
PembinaPipelineCorporation2020AnnualReport15
FinancialandOperationalOverview
3MonthsEndedDecember31 12MonthsEndedDecember31
2020 2019 2020 2019
($millions,exceptwherenoted) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit(3)
AdjustedEBITDA(2) Volumes(1)
GrossProfit
AdjustedEBITDA(2) Volumes(1)
GrossProfit(3)
AdjustedEBITDA(2)
Facilities
GasServices 673 74 138 690 90 146 667 344 558 678 339 551
NGLServices 211 91 117 220 80 108 210 344 454 207 319 404
Total 884 165 255 910 170 254 877 688 1,012 885 658 955(1) Revenuevolumesinmboe/d,withnaturalgasvolumesconvertedtomboe/dfromMMcf/data6:1ratio.Seethe"Abbreviations"sectionfordefinition.(2) Refertothe"Non-GAAPMeasures"section.(3) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
Projects&NewDevelopments(1)
Facilitiescontinuestobuild-outitsnaturalgasandNGLprocessingandfractionationassetstoservicecustomerdemand.The
projectsinthefollowingtablewererecentlyplacedintoserviceandimpactFacilitiesresults.
SignificantProjects In-serviceDate
DuvernayIII November2020
EmpressInfrastructure October2020
DuvernaySourTreatmentFacilities March2020
DuvernayII November2019
RedwaterCo-generationFacility March2019
Duringthequarter,PembinacompletedthestartupofnewfractionationandterminallingfacilitiesattheEmpressfacility.
Thisprojectwasplacedintoserviceontimeandonbudget.Thesenewassetsaddapproximately30,000bpdofpropane-plus
fractionationcapacityandenablePembinatooptimizepropanemarketingfromthefacilitybetweeneasternandwestern
markets.
Duringthequarter,PembinacompletedthestartupofDuvernayIII,whichincludesa100MMcf/dsweetgas,shallowcut
processingtrain;20,000bpdofinletcondensatestabilization;andotherassociatedinfrastructure.Theprojectwasplaced
intoserviceontimeandunderbudget.
Aspreviouslyannouncedduringthequarter,Pembinare-activateditsEmpressCo-generationFacility.ThisistheCompany's
secondco-generationprojectfollowingtheverysuccessfuldevelopmentofaco-generationfacilityattheRedwaterComplex.
Aspreviouslyannouncedduringthequarter,Pembinahasacquiredanadditional11.25percentinterestinthePembina
EmpressExtractionPlant,ofwhichPembinacurrentlyisthemajorityownerandoperator.TheacquisitionprovidesPembina
with135MMcf/dofincrementalethane-plusextractioncapacityattheEmpressfacility.
16PembinaPipelineCorporation2020AnnualReport
ThefollowingoutlinestheprojectsandnewdevelopmentswithinFacilities:
PrinceRupertTerminal
CapitalBudget:$250million In-serviceDate:Firstquarterof2021 Status:Delayed,overbudget
ThePrinceRupertTerminalislocatedonWatsonIsland,BritishColumbiaandisexpectedtohaveapermittedcapacityofapproximately25mbpdofpropane.ThepropanesupplywillbesourcedprimarilyfromtheCompany'sRedwaterComplex.Marine,rail,sphere,andmechanicalconstructionisnearingcompletion,electricalconstructionandcommissioningactivitiesareinprogress.
HytheDevelopments
CapitalBudget(2):$240million In-serviceDate:Firstquarterof2021 Status:Ontime,onbudget
Pembinaandits45percentownedjointventure,VeresenMidstream,havecompletedconstructionofnaturalgasgatheringandprocessinginfrastructureinthePipestoneMontneyregionandareawaitingathird-partytie-in.Theinfrastructureconsistsofanexpansionofupto125MMcf/d(56MMcf/dnettoPembina)ofsourgasprocessingatVeresenMidstream'sexistingHytheFacilityandanew,approximately60km,12-inchsourgaspipeline,tobeownedbyVeresenMidstreamandconstructedbyPembina.Inaddition,VeresenMidstreamwillfundandownacompressorstation,builtandoperatedbyNuVistaEnergyLtd.Pembinawillownandconstructvariousotherlaterals.
EmpressCo-generationFacility
CapitalBudget:$120million In-serviceDate(3):Firstquarterof2023 Status:Ontime,onbudget
TheEmpressCo-generationFacilitywillusenaturalgastogenerateupto45megawattsofelectricalpower,therebyreducingoveralloperatingcostsbyprovidingpowerandheattotheexistingEmpressNGLExtractionFacility.Allthepowerwillbeconsumedonsite,therebysupplyingapproximately90percentofthesite'spowerrequirements.Further,thisprojectwillcontributetoannualgreenhousegasemissionreductionsattheEmpressNGLExtractionFacilitythroughtheutilizationoftheco-generationwasteheatandthelow-emissionpowergenerated.
Aspreviouslyannounced,inresponsetotheCOVID-19pandemic,theresultingeconomicslowdownanddecreaseddemand
forcrudeoilandNGL,Pembinamadethedecisiontodefersomeofitspreviouslyannouncedexpansionprojects,includingthe
PrinceRupertTerminalExpansion.
PrinceRupertTerminalExpansion Status:Deferred
ThePrinceRupertTerminalExpansionwillincreasetheexportcapacityoftheterminal.Engineeringoftheexpansioniswelladvanced,andPembinaexpectstomakeafinalinvestmentdecisioninthesecondhalfof2021.
ThecarryingvalueoftheprojectatDecember31,2020was$10million.(1) ForfurtherdetailsonPembina'ssignificantassets,includingdefinitionsforcapitalizedtermsusedhereinthatarenototherwisedefined,refertoPembina'sAIFfiledat
www.sedar.com(filedwiththeU.S.SecuritiesandExchangeCommissionatwww.sec.govunderForm40-F)andonPembina'swebsiteatwww.pembina.com.(2) NettoPembina.(3) Subjecttoenvironmentalandregulatoryapprovals.Seethe"Forward-LookingStatements&Information"section.
PembinaPipelineCorporation2020AnnualReport17
Marketing&NewVentures
FinancialOverviewfortheThreeMonthsEndedDecember31ResultsofOperations
($millions,exceptwherenoted) 2020(4) 2019(4) Change %Change
Marketingrevenue(1) 882 1,006 (124) (12)
Costofgoodssold(1) 809 903 (94) (10)
Netrevenue(1)(2) 73 103 (30) (29)
Shareofprofitfromequityaccountedinvestees-operations 2 13 (11) (85)
Realizedloss(gain)oncommodity-relatedderivativefinancialinstruments 6 (8) (14) 175
Unrealizedlossoncommodity-relatedderivativefinancialinstruments 76 23 (53) (230)
Depreciationandamortizationincludedinoperations 13 8 5 63
Adjustedgrossprofit (20) 93 (113) (122)
AdjustedEBITDA(2) 75 120 (45) (38)
Volumes(mboe/d)(3) 207 190 17 9
Distributionsfromequityaccountedinvestees 4 22 (18) (82)
ChangeinResults
Netrevenue(1)(2) ▼ DecreaselargelyduetotheimpactoftheCOVID-19pandemiconmarketconditionsresultinginlowercrudeoilprices,compressedmarginsanddecreasedcrudeactivities,partiallyoffsetbyhighermarketedNGLvolumesasPembinamonetizedaportionofstoragepositionsbuiltupduringthesecondandthirdquartersof2020.
Shareofprofitfromequityaccountedinvestees-operations
▼ DecreaselargelyduetolowerrevenuesatAuxSableasaresultoflowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential.
Realizedloss(gain)oncommodity-relatedderivatives
▼ RealizedlossduetohigherNGLmarketpricescreatingalossforNGL-basedderivativessettledduringtheperiod.
Unrealizedlossoncommodity-relatedderivatives
▼ Unrealizedlossoncommodity-relatedderivativesprimarilyduetotherecoveryintheforwardpriceofpropane,butaneandcrudeoilduringthefourthquarterof2020,combinedwithadecreaseintheforwardpriceofnaturalgas.
Depreciationandamortizationincludedinoperations
● Consistentwiththepriorperiod.
Distributionsfromequityaccountedinvestees
▼ DecreaseduetothelowerrevenuesatAuxSableasaresultoflowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential.
Volumes(mboe/d)(3) ▲ MarketedNGLvolumesincreasedasPembinamonetizedaportionofthestoragepositionsthatwerebuiltupduringthesecondandthirdquartersof2020whencommoditypriceswerelower,combinedwithincreasedvolumesatAuxSableduetohigherethanesales.Revenuevolumesincludes37mboe/d(2019:32mboe/d)relatedtoAuxSable.
AdjustedEBITDA(2) ▼ Decreaselargelyduetolowermarginsoncrudeoilsalesasaresultofthelowercrudeoilpricesduringthefourthquarterof2020duetotheimpactoftheCOVID-19pandemic,combinedwitharealizedlossoncommodity-relatedderivativesduetohigherNGLmarketprices.IncludedinadjustedEBITDAis$13million(2019:$18million)relatedtoAuxSable.
ChangeinAdjustedEBITDA($millions)(2)
75
120
(30)
(14)
3
(4)
AdjustedEBITDAQ42019
NetRevenue Realizedloss(gain)oncommodity-
relatedderivatives
G&Aandother
AdjustedEBITDAfromequityaccounted
investees
AdjustedEBITDAQ42020
(1) Includesinter-segmenttransactions.SeeNote22oftheConsolidatedFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) MarketedNGLvolumes.Seethe"Abbreviations"sectionfordefinition.(4) 2020periodandcomparative2019periodhavebeenrestated.See"RestatementofRevenueandCostofGoodsSold"andNote3totheConsolidatedFinancialStatements.
18PembinaPipelineCorporation2020AnnualReport
FinancialOverviewforthe12MonthsEndedDecember31ResultsofOperations
($millions,exceptwherenoted) 2020(5) 2019(5) Change %Change
Marketingrevenue(1) 2,956 3,946 (990) (25)
Costofgoodssold(1) 2,815 3,559 (744) (21)
Netrevenue(1)(2) 141 387 (246) (64)
Shareofprofitfromequityaccountedinvestees-operations — 50 (50) (100)
Realizedgainoncommodity-relatedderivativefinancialinstruments (54) (33) 21 (64)
Unrealizedlossoncommodity-relatedderivativefinancialinstruments 88 13 (75) (577)
Depreciationandamortizationincludedinoperations 50 51 (1) (2)
Adjustedgrossprofit 57 406 (349) (86)
AdjustedEBITDA(2) 193 423 (230) (54)
Volumes(mboe/d)(3) 182 189 (7) (4)
Distributionsfromequityaccountedinvestees 19 84 (65) (77)
ChangeinResults
Netrevenue(1)(2) ▼ Decreaselargelyduetoloweraveragecrudeoilandpropanepricesduring2020,primarilyasaresultoftheCOVID-19pandemicandtheresultingdecreaseinglobalenergydemand.Marketconditionsalsocompressedmarginsanddecreasedcrudeactivities,whilelowerfracspreadsimpactedNGLmargins,combinedwitha$33millionarbitrationawardpaymentreceivedduringthefirstquarterof2019.
Shareofprofitfromequityaccountedinvestees-operations
▼ DecreaselargelyduetolowerrevenuesatAuxSableasaresultoflowerNGLmarginsandanarrowerAECO-Chicagonaturalgaspricedifferential,partiallyoffsetbyloweroperatingandgeneralandadministrativeexpenses.
Realizedgainoncommodity-relatedderivatives
▲ IncreaseduetoloweraveragemarketpricescreatingagainforcrudeandNGL-basedderivativessettledduringtheyear.
Unrealizedlossoncommodity-relatedderivatives
▼ Unrealizedlossprimarilyduetoadditionalcontractsaddedandmaturingduringtheyear,combinedwithanincreaseintheforwardpriceofpropane.
Depreciationandamortizationincludedinoperations
● Consistentwiththepriorperiod.
Distributionsfromequityaccountedinvestees
▼ DecreaselargelyduetothelowermarginsatAuxSable,discussedabove.
Volumes(mboe/d)(3) ● Consistentwiththepriorperiod.NGLstoragepositionsbuiltupduringthesecondandthirdquartersof2020whencommoditypriceswereatthelowestlevelswerelargelyoffsetbyhighermarketedNGLvolumesduringthefourthquarterandincreasedethanevolumesatAuxSable.Revenuevolumesincludes37mboe/d(2019:33mboe/d)relatedtoAuxSable.
AdjustedEBITDA(2) ▼ Decreaselargelyduetolowermarginsoncrudeoilandpropanesalesasaresultoflowercrudeoil,propanepricesandfracspreadsduring2020,combinedwithalowercontributionfromAuxSableduetolowerNGLmarginsandthenarrowerAECO-Chicagonaturalgaspricedifferential,partiallyoffsetbyhigherrealizedgainsoncommodity-relatedderivativesandlowerG&Aandotherduetocostsavinginitiatives.IncludedinadjustedEBITDAis$27million(2019:$74million)relatedtoAuxSable.
ChangeinAdjustedEBITDA($millions)(2)(4)
193
423
(213)
21 9
(47)
AdjustedEBITDA2019
NetRevenueincluding
adjustments
Realizedgainoncommodity-
relatedderivatives
G&Aandother
AdjustedEBITDAfromequityaccounted
investees
AdjustedEBITDA2020
(1) Includesinter-segmenttransactions.SeeNote22oftheConsolidatedFinancialStatements.(2) Refertothe"Non-GAAPMeasures"section.(3) MarketedNGLvolumes.Seethe"Abbreviations"sectionfordefinition.(4) Netrevenueexcludesthepositivearbitrationawardpaymentof$33million.(5) 2020periodandcomparative2019periodhavebeenrestated.See"RestatementofRevenueandCostofGoodsSold"andNote3totheConsolidatedFinancialStatements.
PembinaPipelineCorporation2020AnnualReport19
FinancialandOperationalOverview
3MonthsEndedDecember31 12MonthsEndedDecember31
2020 2019 2020 2019
($millions,exceptwherenoted) Volumes(1)
GrossProfit(Loss)
AdjustedEBITDA(2) Volumes(1)
GrossProfit(Loss)
AdjustedEBITDA(2) Volumes(1)
GrossProfit(Loss)
AdjustedEBITDA(2) Volumes(1)
GrossProfit(Loss)
AdjustedEBITDA(2)
Marketing&NewVentures
Marketing 207 (17) 78 190 96 127 182 57 205 189 407 440
NewVentures(3) — (317) (3) — (3) (7) — (314) (12) — (1) (17)
Total 207 (334) 75 190 93 120 182 (257) 193 189 406 423(1) MarketedNGLvolumesinmboe/d.Seethe"Abbreviations"sectionfordefinition.(2) Refertothe"Non-GAAPMeasures"section.(3) AllNewVenturesprojectshavenotyetcommencedoperationsandthereforehavenovolumes.
Projects&NewDevelopments(1)
ThefollowingoutlinestheprojectsandnewdevelopmentswithinMarketing&NewVentures:
CKPC
Aspreviouslyannounced,Pembina,alongwithitsjointventurepartner,havesuspendedindefinitelytheexecutionofthe
integratedpropanedehydration("PDH")plantandpolypropyleneupgradingfacility("PDH/PPFacility").WhilePembina
continuestobelieveinthestrategicrationaleofthisproject,thisdecisionreflectsthesignificantrisksarisingfromtheongoing
COVID-19pandemic,mostnotablywithrespecttocostsunderthelumpsumcontractforconstructionofthePDHplant,which
remainsunderaforcemajeurecondition.CKPCisworkingthroughaprocesstomanage,deferorcancelexistingagreements
with,amongothers,thelump-sumconsortium,lenders,andtechnologylicensors,inordertominimizetheneedforadditional
capitalcontributions.CKPCwillcontinuetotakeactiontosafeguarditsexistinginvestmentassociatedwithlong-lead
equipmentandintellectualproperty.AsaresultoftheprojectsuspensionPembinarecognizedanimpairmentonits
investmentduringthefourthquarter.TheCompanyremainscommittedtoitsglobalmarketaccessstrategyandhelpingto
ensurethathydrocarbonsproducedintheWCSB,andtheotherbasinswheretheCompanyoperates,canreachthehighest
valuemarketsthroughouttheworld.Weremainequallycommittedtosupportingfurtherdevelopmentofthepetrochemical
industryinAlbertaandareideallypositionedtodosoastheleadingtransporterofethaneintheprovinceofAlberta.
JordanCove
Inlightofcurrentregulatoryandpoliticaluncertainty,PembinarecognizedanimpairmentonitsinvestmentinJordanCove
andisevaluatingthepathforward.TheCompanycontinuestobelieveinthestrategicrationaleofJordanCove,whichwould
bethefirstU.S.westcoastLNGfacilityandwouldbenefitfromadvantagedaccesstoAsianmarkets.Additionally,theproject
wouldbringsignificanteconomicbenefitstoOregonandcontributetoreducingglobalgreenhousegasemissionsbydisplacing
theuseofcoalglobally.
(1) ForfurtherdetailsonPembina'ssignificantassets,includingdefinitionsforcapitalizedtermsusedhereinthatarenototherwisedefined,refertoPembina'sAIFfortheyearendedDecember31,2020filedatwww.sedar.com(filedwiththeU.S.SecuritiesandExchangeCommissionatwww.sec.govunderForm40-F)andonPembina'swebsiteatwww.pembina.com.
20PembinaPipelineCorporation2020AnnualReport
Impairments
PembinarecognizedthefollowingimpairmentsfortheyearendedDecember31,2020:
($millions)Property,Plant&
EquipmentEquityAccounted
Investees OtherTotalImpairment
Expense
JordanCove 344 — 5 349
InvestmentinRuby — 1,257 139 1,396
InvestmentinCKPC — 323 (2) 321
Other 13 11 — 24
Totalimpairments 357 1,591 142 2,090
Recognizedthroughimpairmentinshareofprofitfromequityaccountedinvestees 314
Recognizedasimpairmentexpense 1,776
Total 2,090
Incometaximpact 535
Impairmentsnetoftax 1,555
JordanCove
InDecember2020,asaresultofincreasedregulatoryandpoliticaluncertainty,Pembinarecognizedanimpairmentonthe
assetsassociatedwithJordanCove.Theimpairmentchargeof$349million($258millionnetoftax)includesallpreviously
capitalizedamountsrelatedtoJordanCove,exceptforlandwitharecoverablecarryingamountof$21millionwhich
approximatesitsfairvalue.
Ruby
InDecember2020,Pembinarecognizedanimpairmentforthefullamountofitsconvertible,cumulativepreferredinterestin
Ruby($1.3billion)anditsassociatedrelatedpartyadvance($139million).Thetotalimpairmentchargeof$1.4billion
($1.0billionnetoftax)wastheresultofanassessmenttriggeredbyupcomingcontractexpirationsinmid-2021withexisting
tariffrateswellinexcessofprevailinginterruptibletariffrates,alongwithdecliningRockiesbasinfundamentalsandreduced
futurevolumesresultingfromtheuncertaintywithJordanCove.
CKPC
OnDecember14,2020,Pembinaannouncedthatit,alongwithitsjointventurepartnerinCKPC,wouldbeindefinitely
suspendingexecutionoftheintegratedPDH/PPFacilityproject.Thesuspensionistheresultofthesignificantrisksarising
fromtheongoingCOVID-19pandemic,mostnotablywithrespecttocostsunderthelumpsumcontractforconstructionof
thePDHplant,whichremainsunderaforcemajeurecondition.Asaresultofthesuspension,Pembinarecognizedan
impairmentforthefullamountofitsinvestmentinCKPC,resultinginatotalimpairmentchargeof$323million($252million
netoftax)whichincludesPembina'sshareofCKPC'slossresultingfromanimpairmentchargerecognizedinthejointventure
of$314millionplusanincrementalimpairmentoftheremaininginvestmentvalue.
PembinaPipelineCorporation2020AnnualReport21
4.LIQUIDITY&CAPITALRESOURCESAvailableSourcesofLiquidity
($millions) 2020 2019
Workingcapital(1)(4) (792) (460)
Variableratedebt(2)(3)
Bankdebt 1,534 2,100
Variableratedebtswappedtofixed (318) —
Totalvariableratedebtoutstanding(weightedaverageinterestrateof1.6%(2019:3.3%)) 1,216 2,100
Fixedratedebt(2)
Seniorunsecurednotes — 273
Seniorunsecuredmedium-termnotes 9,300 7,800
Variableratedebtswappedtofixed 318 —
Totalfixedratedebtoutstanding(weightedaverageinterestrateof3.9%(2019:4.0%)) 9,618 8,073
Totaldebtoutstanding 10,834 10,173
Cashandunutilizeddebtfacilities 2,685 1,040
AsatDecember31
(1) AsatDecember31,2020,workingcapitalincluded$600million(December31,2019:$74million)associatedwiththecurrentportionofloansandborrowings.(2) Facevalue.(3) IncludesU.S.$250millionvariableratedebtoutstandingatDecember31,2020(December31,2019:$454million).(4) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNotes3and4totheConsolidatedFinancialStatements.
Pembinacurrentlyanticipatesitscashflowfromoperatingactivities,themajorityofwhichisderivedfromfee-based
contracts,willbemorethansufficienttomeetitsoperatingobligations,tofunditsdividendandtofunditscapital
investment.Pembinaexpectstosourcefundsrequiredfordebtmaturitiesfromcash,itscreditfacilitiesandbyaccessingthe
capitalmarkets,asrequired.Basedonitssuccessfulaccesstofinancinginthecapitalmarketsoverthepastseveralyears,
Pembinaexpectstocontinuetohaveaccesstoadditionalfundsasrequired.However,dependingonthedurationandseverity
oftheCOVID-19pandemic,thecontinuedslowdownoftheglobaleconomyandthedecreaseindemandforcrudeoil,
Pembina'sabilitytoaccessfinancinginthecapitalmarketscouldbeadverselyimpacted.Referto"RiskFactors–Ongoing
ImpactoftheCOVID-19Pandemic"belowand"RiskFactors–GeneralRiskFactors–AdditionalFinancingandCapital
Resources"inPembina'sMD&AandNote27totheConsolidatedFinancialStatementsformoreinformation.Management
continuestomonitorthesituationandremainssatisfiedthattheleverageemployedinPembina'scapitalstructureis
sufficientandappropriategiventhecharacteristicsandoperationsoftheunderlyingassetbase.
ManagementmayadjustPembina'scapitalstructureasaresultofchangesineconomicconditionsortheriskcharacteristics
oftheunderlyingassets.TomaintainormodifyPembina'scapitalstructureinthefuture,Pembinamayrenegotiatedebt
terms,repayexistingdebt,seeknewborrowings,issueadditionalequityorhybridsecuritiesand/orrepurchaseshares.
22PembinaPipelineCorporation2020AnnualReport
AsatDecember31,2020,Pembina'screditfacilitiesconsistedof:anunsecured$2.5billion(December31,2019:$2.5billion)
revolvingcreditfacility,whichincludesa$750million(December31,2019:$750million)accordionfeatureandmaturesin
May2024;anunsecured$500million(December31,2019:$500million)non-revolvingtermloan,whichmaturesinAugust
2022;anunsecured$800million(December31,2019:nil)revolvingcreditfacility,whichmaturesinApril2022;anunsecured
U.S.$250million(December31,2019:nil)non-revolvingtermloan,whichmaturesinMay2025andanoperatingfacilityof
$20million(December31,2019:$20million)whichmaturesinMay2021andistypicallyrenewedonanannualbasis
(collectively,the"CreditFacilities").TherearenorepaymentsdueoverthetermoftheCreditFacilities.AsatDecember31,
2020,Pembinahad$2.7billion(December31,2019:$1.0billion)ofcashandunutilizeddebtfacilities.AsatDecember31,
2020,Pembinahadloansandborrowings(excludingdeferredfinancingcosts)of$10.8billion(December31,2019:$10.2
billion).Pembinaisrequiredtomeetcertainspecificandcustomaryaffirmativeandnegativefinancialcovenantsunderits
medium-termnotesandtheCreditFacilities,includingarequirementtomaintaincertainfinancialratios.See"Liquidity&
CapitalResources–Covenants"belowformoreinformation.Pembinaisalsosubjecttocustomaryrestrictionsonits
operationsandactivitiesunderitsmedium-termnotesandCreditFacilities,includingrestrictionsonthegrantingofsecurity,
incurringindebtednessandthesaleofitsassets.
FinancingActivity
OnJanuary10,2020,Pembinaclosedanofferingof$1.0billionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedinthreetranches,consistingof$250millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-
termnotes,series10,havingafixedcouponof4.02percentperannum,payablesemi-annuallyandmaturingonMarch27,
2028;$500millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-termnotes,series11,havingafixed
couponof4.75percentperannum,payablesemi-annuallyandmaturingonMarch26,2048;and$250millionissuedthrough
are-openingofPembina'sseniorunsecuredmedium-termnotes,series12,havingafixedcouponof3.62percentperannum,
payablesemi-annuallyandmaturingonApril3,2029.
OnApril6,2020,Pembinaenteredintoanunsecured$800millionrevolvingcreditfacilitywithcertainexistinglenders,which
providedadditionalliquidityandflexibilityinPembina'scapitalstructureinlightofcurrentmarketconditions.Theunsecured
revolvingcreditfacilitymaturesApril3,2022.Theothertermsandconditionsofthecreditfacility,includingfinancial
covenants,aresubstantiallysimilartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
OnMay7,2020,PembinaenteredintoanunsecuredU.S.$250millionnon-revolvingtermloanwithaglobalbank,which
providedadditionalliquidityandflexibilityinPembina'scapitalstructureinlightofcurrentmarketconditions.Thetermloan
maturesMay7,2025.Theothertermsandconditionsofthecreditfacility,includingfinancialcovenants,aresubstantially
similartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
OnMay28,2020,Pembinaclosedanofferingof$500millionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedintwotranches,consistingoftheissuanceof$400millioninseniorunsecuredmedium-termnotes,series16,
havingafixedcouponof4.76percentperannum,payablesemi-annually,andmaturingonMay28,2050and$100million
issuedthroughare-openingofPembina'sseniorunsecuredmedium-termnotes,series7,havingafixedcouponof3.71
percentperannum,payablesemi-annuallyandmaturingonAugust11,2026.
OnJuly10,2020,Pembina's$200millionseniorunsecurednotes,seriesC,werefullyrepaidthroughanearlyredemption,of
whichnoticewasprovidedtoholdersonJune5,2020.Theseniorunsecurednotes,seriesC,wereoriginallysettomaturein
September2021.
Subsequenttoyear-end,onJanuary25,2021,Pembinaclosedanofferingof$600millionoffixed-to-fixedratesubordinated
notes,series1(the"SubordinatedNotes,Series1").TheSubordinatedNotes,Series1haveafixedcouponof4.80percentper
annum,payablesemi-annually,andmatureonJanuary25,2081.Pembinaexpectstousethenetproceedsoftheofferingto
fundtheredemptionofitsoutstandingCumulativeRedeemableMinimumRateResetClassAPreferredShares,Series11and
Series13,torepayotheroutstandingindebtedness,aswellasforgeneralcorporatepurposes.
PembinaPipelineCorporation2020AnnualReport23
Covenants
Pembina'sfinancialcovenantsundernoteindenturegoverningitsmedium-termnotesandtheagreementsgoverningthe
CreditFacilitiesincludethefollowing:
DebtInstrument FinancialCovenant(1) Ratio RatioasatDecember31,2020
Seniorunsecuredmedium-termnotes FundedDebttoCapitalization Maximum0.70 0.42
CreditFacilitiesDebttoCapital Maximum0.65 0.42
EBITDAtoSeniorInterestCoverage Minimum2.5:1.0 7.4(1) Termsasdefinedinrelevantagreements.
PembinawasincompliancewithallcovenantsunderitsnoteindentureandagreementsgoverningitsCreditFacilitiesasat
December31,2020(December31,2019:incompliance).
CreditRisk
Pembinacontinuestoactivelymonitorandreassessthecreditworthinessofitscounterparties.Theslowdownoftheglobal
economyanddecreaseindemandforcrudeoilandothercommoditiesasaresultoftheongoingCOVID-19pandemic
increasesPembina'scounterpartyrisk,asithasthepotentialtonegativelyimpactthefinancialpositionofPembina's
customers'andrelatedparties'andtheiraccesstocredit,capitalmarketsandothersourcesofliquidity.Themajorityof
Pembina'screditexposureistoinvestmentgradeorsplit-investmentgradecounterparties.Pembinaassessesall
counterpartiesduringtheon-boardingprocessandactivelymonitorscreditlimitsandexposureacrossthebusiness.Financial
assurancestomitigateandreduceriskmayincludeguarantees,lettersofcreditandcash.Lettersofcredittotaling$130
million(December31,2019:$90million)wereheldasatDecember31,2020,primarilyinrespectofcustomertrade
receivables.
OutstandingShareData
Issuedandoutstanding(thousands)(1) February19,2021
Commonshares 549,951
Stockoptions 21,650
Stockoptionsexercisable 10,418
ClassA,Series1Preferredshares 10,000
ClassA,Series3Preferredshares 6,000
ClassA,Series5Preferredshares 10,000
ClassA,Series7Preferredshares 10,000
ClassA,Series9Preferredshares 9,000
ClassA,Series11Preferredshares 6,800
ClassA,Series13Preferredshares 10,000
ClassA,Series15Preferredshares 8,000
ClassA,Series17Preferredshares 6,000
ClassA,Series19Preferredshares 8,000
ClassA,Series21Preferredshares 16,000
ClassA,Series23Preferredshares 12,000
ClassA,Series25Preferredshares 10,000(1) Pembinaissued600,000Series2021-AClassAPreferredsharestotheComputershareTrustCompanyofCanada,tobeheldintrusttosatisfyitsobligationunderthe
SubordinatedNoteIndenture,inconnectionwiththeissuanceoftheSubordinatedNotes,Series1.
24PembinaPipelineCorporation2020AnnualReport
CreditRatings
ThefollowinginformationwithrespecttoPembina'screditratingsisprovidedassuchinformationrelatestoPembina's
financingcostsandliquidity.Specifically,creditratingsaffectPembina'sabilitytoobtainshort-termandlong-termfinancing
andthecostofsuchfinancing.AreductioninthecurrentratingsonPembina'sdebtbyitsratingagencies,particularlya
downgradebelowinvestment-graderatings,couldadverselyaffectPembina'scostoffinancinganditsaccesstosourcesof
liquidityandcapital.Inaddition,changesincreditratingsandtheassociatedcostsmayaffectPembina'sabilitytoenterinto
normalcoursederivativeorhedgingtransactions.Creditratingsareintendedtoprovideinvestorswithanindependent
measureofcreditqualityofanyissuesofsecurities.Thecreditratingsassignedbytheratingagenciesarenot
recommendationstopurchase,holdorsellthesecurities,nordothecreditratingscommentonmarketpriceorsuitabilityfor
aparticularinvestor.Anycreditratingmaynotremainineffectforagivenperiodoftimeormayberevisedorwithdrawn
entirelybyaratingagencyinthefutureif,initsjudgment,circumstancessowarrant.
Pembinatargetsstrong'BBB'creditratings.DBRSLimited("DBRS")hasassignedadebtratingof'BBB'toPembina'ssenior
unsecurednotesandseniorunsecuredmedium-termnotes,adebtratingof'BB+'totheSubordinatedNotes,Series1,anda
ratingof'Pfd-3'toeachissuedseriesofPembina'sClassAPreferredShares,otherthantheClassAPreferredShares,Series
2021-A(the"Series2021-APreferredShares").
Thelong-termcorporatecreditratingassignedbyS&PGlobalRatings("S&P"),adivisionofTheMcGraw-HillCompanies,on
Pembinais'BBB'.S&Phasalsoassignedadebtratingof'BBB'toPembina'sseniorunsecurednotesandseniorunsecured
medium-termnotes,adebtratingof'BB'totheSubordinatedNotes,Series1,andaratingof'P-3(High)'toeachissuedseries
ofPembina'sClassAPreferredShares,otherthantheSeries2021-APreferredShares.DBRSandS&PaffirmedPembina's
creditratingsduringthesecondquarterof2020.
PembinaPipelineCorporation2020AnnualReport25
ContractualObligationsandOff-BalanceSheetArrangements
ContractualObligations
PembinahadthefollowingcontractualobligationsoutstandingatDecember31,2020:
ContractualObligations(1) PaymentsDueByPeriod
($millions) Total Lessthan1year 1–3years 3–5years After5years
Leases(2) 1,064 131 217 174 542
Loansandborrowings(3) 16,275 1,058 2,262 2,708 10,247
Constructioncommitments(4) 1,208 523 149 43 493
Other 569 112 145 75 237
Totalcontractualobligations 19,116 1,824 2,773 3,000 11,519(1) Pembinaentersintoproductpurchaseagreementsandpowerpurchaseagreementstosecuresupplyforfutureoperations.PurchasepricesofbothNGLandpowerare
dependentoncurrentmarketprices.VolumesandpricesforNGLandpowercontractscannotbereasonablydetermined,andtherefore,anamounthasnotbeenincludedinthecontractualobligationsschedule.Productpurchaseagreementsrangefromoneto9yearsandinvolvethepurchaseofNGLproductsfromproducers.Assumingproductisavailable,Pembinahassecuredbetween35and175mbpdofNGLeachyearuptoandincluding2029.Powerpurchaseagreementsrangefromoneto24yearsandinvolvethepurchaseofpowerfromelectricalserviceproviders.Pembinahassecuredupto80megawattsperdayeachyearuptoandincluding2044.
(2) Includesterminals,rail,officespace,landandvehicleleases.(3) Excludingdeferredfinancingcosts.IncludinginterestpaymentsonPembina'sseniorunsecurednotes.(4) Excludingsignificantprojectsthatareawaitingregulatoryapproval,projectswhichPembinaisnotcommittedtoconstruct,andprojectsthatareexecutedbyequity
accountedinvestees.
Off-BalanceSheetArrangements
Pembinadoesnothaveanyoff-balancesheetarrangementsthathave,orarereasonablylikelytohave,acurrentorfuture
effectonPembina'sfinancialcondition,resultsofoperations,liquidityorcapitalinvestments.
LettersofCredit
Pembinahasprovidedlettersofcredittovariousthirdpartiesinthenormalcourseofconductingbusiness.Thelettersof
creditincludefinancialguaranteestocounterpartiesforregulatoryrequirements,engineeringandconstructionservices,
utilitiesandproductpurchasesandsales.Thelettersofcredithavenothadandarenotexpectedtohaveamaterialimpacton
Pembina'sfinancialposition,earnings,liquidityorcapitalresources.AsatDecember31,2020,Pembinahad$91million
(December31,2019:$103million)inlettersofcreditissued.
26PembinaPipelineCorporation2020AnnualReport
5.CAPITALINVESTMENTSCapitalInvested
3MonthsEndedDecember31 12MonthsEndedDecember31
($millions) 2020 2019 2020 2019
Pipelines 76 254 587 892
Facilities 75 143 370 569
Marketing&NewVentures 4 22 38 157
Corporateandotherprojects 6 10 34 27
Totalcapitalinvested 161 429 1,029 1,645
In2020,capitalinvestmentsinPipelinescontinuedtobeprimarilyrelatedtoPembina'ssystemexpansionprojects.In2020,
capitalinvestmentsinFacilitieswerelargelyrelatedtocontinuedconstructiononDuvernay,EmpressExpansionandthe
PrinceRupertTerminal.CapitalinvestmentsinMarketing&NewVenturesinboth2020and2019wereprimarilyrelatedto
JordanCove.
ContributionstoEquityAccountedInvestees
3MonthsEndedDecember31 12MonthsEndedDecember31
($millions) 2020 2019 2020 2019
Alliance — 13 — 13
AuxSable — 1 3 4
VeresenMidstream — 23 69 73
CKPC — 83 152 173
Total — 120 224 263
ContributionsmadetoCKPCduring2020and2019wererelatedtothedevelopmentofthePDH/PPFacility,combinedwitha
parentalguaranteeonCKPC'srevolvingcreditfacilityprovidedbyPembinaduringthefirstquarterof2020,discussedfurther
inthe"FinancingActivitiesforEquityAccountedInvestees"sectionbelow.ContributionstoCKPCdecreasedduring2020,
comparedto2019,followingPembina'sannouncementinthefirstquarterof2020thatithaddeferredcapitalspendingon
thePDH/PPFacility.Inthefourthquarterof2020,Pembinaannouncedthatit,alongwithitsjointventurepartnerinCKPC,
wouldbesuspendingexecutionofthePDH/PPFacilityprojectindefinitely.
ContributionsmadetoVeresenMidstreamduringboth2020and2019werelargelyrelatedtoconstructionoftheHythe
Developments.Seethe"Projects&NewDevelopments"forFacilitiesforfurtherdetailsontheHytheDevelopments.
PembinaPipelineCorporation2020AnnualReport27
6.DIVIDENDSCommonShareDividends
Commonsharedividendsarepayableif,as,andwhendeclaredbyPembina'sBoardofDirectors.Theamountandfrequency
ofdividendsdeclaredandpayableisatthediscretionofPembina'sBoardofDirectors,whichconsidersearnings,cashflow,
capitalrequirements,thefinancialconditionofPembinaandotherrelevantfactorswhenmakingitsdividenddetermination.
PreferredShareDividends
OtherthaninrespectoftheSeries2021-APreferredShares,theholdersofPembina'sClassAPreferredSharesareentitledto
receivefixedcumulativedividends.DividendsontheSeries1,3,5,7,9,11,13and21ClassAPreferredSharesarepayable
quarterlyonthefirstdayofMarch,June,SeptemberandDecember,if,asandwhendeclaredbytheBoardofDirectorsof
Pembina.DividendsontheSeries15,17and19ClassAPreferredSharesarepayableonthelastdayofMarch,June,
SeptemberandDecemberineachyear,if,asandwhendeclaredbytheBoardofDirectorsofPembina.Dividendsonthe
Series23and25ClassAPreferredSharesarepayableonthe15thdayofFebruary,May,AugustandNovemberineachyear,if,
asandwhendeclaredbytheBoardofDirectorsofPembina.
DividendsarenotpayableontheSeries2021-AClassAPreferredShares,norshallanydividendsaccumulateoraccrue,prior
todeliverytotheholdersoftheSubordinatedNotes,Series1followingtheoccurrenceofcertainbankruptcyorinsolvency
eventsinrespectofPembina.Thereafter,dividendsontheSeries2021-AClassAPreferredSharesarepayableonthe25thday
ofJanuaryandJulyineachyear,if,asandwhendeclaredbytheBoardofDirectors.
OnJune1,2020,PembinaannouncedthatitdidnotintendtoexerciseitsrighttoredeemtheeightmillionCumulative
RedeemableRateResetClassAPreferredShares,Series19(the"Series19ClassAPreferredShares")outstandingonJune30,
2020.TheannualdividendratefortheSeries19ClassAPreferredSharesforthefive-yearperiodfromandincludingJune30,
2020to,butexcluding,June30,2025is4.684percent.
OnNovember2,2020,PembinaannouncedthatitdidnotintendtoexerciseitsrighttoredeemtheninemillionCumulative
RedeemableRateResetClassAPreferredShares,Series9(the"Series9ClassAPreferredShares")outstandingonDecember
1,2020.TheannualdividendratefortheSeries9ClassAPreferredforthefive-yearperiodfromandincludingDecember1,
2020to,butexcluding,December1,2025is4.302percent.
Subsequenttotheendoftheyear,onJanuary25,2021,Pembinaannounceditintendstoredeemallofthe6.8millionissued
andoutstandingCumulativeRedeemableMinimumRateResetClassAPreferredShares,Series11(the"Series11ClassA
PreferredShares")onMarch1,2021foraredemptionpriceequalto$25.00perSeries11ClassAPreferredShare,lessanytax
requiredtobedeductedorwithheldbytheCompany.
28PembinaPipelineCorporation2020AnnualReport
7.SELECTEDQUARTERLYINFORMATIONSelectedQuarterlyOperatingInformation
(mboe/d) 2020 2019
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Volumes(1)(2)
Pipelines
ConventionalPipelines 993 863 834 902 958 908 895 880
TransmissionPipelines 684 661 668 668 646 594 558 563
OilSandsPipelines 1,053 1,056 1,053 1,059 1,063 1,068 1,065 1,064
Facilities
GasServices 673 657 658 678 690 672 668 682
NGLServices 211 214 214 201 220 194 198 214
Total 3,614 3,451 3,427 3,508 3,577 3,436 3,384 3,403(1) Revenuevolumes.Seethe"Abbreviations"sectionfordefinition.(2) IncludesPembina'sproportionateshareofvolumesfromequityaccountedinvestees.
DeferredTake-or-payRevenue
($millions) 2020 2019
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Pipelines
Openingbalance 42 45 22 8 17 23 19 7
Revenuedeferred 52 66 53 40 31 27 27 36
Revenuerecognized (91) (69) (30) (26) (40) (33) (23) (24)
Endingtake-or-paycontractliabilitybalance 3 42 45 22 8 17 23 19
Facilities
Openingbalance — 2 1 — — — 1 2
Revenuedeferred — 1 1 1 — — 2 —
Revenuerecognized — (3) — — — — (3) (1)
Endingtake-or-paycontractliabilitybalance — — 2 1 — — — 1
QuarterlySegmentedAdjustedEBITDA($millions)(1)
773 765736
787 830789 796
866
Pipeline Facilities Marketing&NewVentures
Q119 Q219 Q319 Q419 Q120 Q220 Q320 Q420
(1)Refertothe"Non-GAAPMeasures"section.
PembinaPipelineCorporation2020AnnualReport29
QuarterlyFinancialInformation
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Revenue 1,680 1,496 1,229 1,548 1,668 1,492 1,563 1,649
Netrevenue(1) 954 849 776 865 837 751 758 774
Operatingexpenses 201 178 154 179 177 151 134 140
Realizedloss(gain)oncommodity-relatedderivativefinancialinstruments 6 (7) (36) (17) (8) (5) (1) (19)
Shareofprofit(loss)fromequityaccountedinvestees (244) 62 66 84 89 90 98 97
Grossprofit 247 568 460 733 605 615 631 590
Earnings(loss) (1,216) 323 258 319 150 373 667 317
Earnings(loss)percommonshare–basicanddiluted(dollars) (2.28) 0.51 0.40 0.51 0.22 0.67 1.23 0.56
Cashflowfromoperatingactivities 766 434 642 410 728 535 661 608
Cashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 1.39 0.78 1.17 0.75 1.41 1.05 1.29 1.20
Adjustedcashflowfromoperatingactivities(1) 603 524 586 576 576 530 550 578
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars)(1) 1.10 0.95 1.07 1.05 1.11 1.04 1.08 1.14
Commonsharesoutstanding(millions):
Weightedaverage–basic 550 550 550 549 518 512 511 509
Weightedaverage–diluted 550 550 550 549 519 513 513 511
Endofperiod 550 550 550 550 548 512 511 510
Commonsharedividendsdeclared 346 346 347 346 314 307 302 290
Dividendspercommonshare 0.63 0.63 0.63 0.63 0.60 0.60 0.59 0.57
Preferredsharedividendsdeclared 38 38 37 38 34 31 30 31
Capitalinvestments 161 174 211 483 429 421 434 361
Contributionstoequityaccountedinvestees — 28 2 194 120 25 28 90
Distributionsfromequityaccountedinvestees 109 111 116 123 123 142 140 170
AdjustedEBITDA(1) 866 796 789 830 787 736 765 773
($millions,exceptwherenoted) 2020(2) 2019(2)
(1) Refertothe"Non-GAAPMeasures"section.(2) 2020periodandcomparative2019periodhavebeenrestated.See"VoluntaryChangeinAccountingPolicy","RestatementofRevenueandCostofGoodsSold"andNote3to
theConsolidatedFinancialStatements.Therestatementreducesrevenueandcostofgoodssoldforallquarterlycomparativeperiods,includingQ32020:$73million,Q22020:$39million,Q12020:$123million,Q42019:$86million,Q32019:$208million,Q22019:$245million,andQ12019:$319million.
Duringtheperiodsinthetableabove,Pembina'sfinancialandoperatingresultswereimpactedbythefollowingfactorsand
trends:
• ImpairmentsrecognizedonPembina'sinterestsinRuby,CKPCandtheassetsassociatedwithJordanCoveinthefourth
quarterof2020andthepartialimpairmentofPembina'sinterestinRubyinthefourthquarterof2019;
• TheKinderAcquisition,whichwascompletedonDecember16,2019;
• TheCOVID-19pandemicandtheresultingdecreaseindemandforcommodities,whichledtoasignificantdeclinein
globalenergyprices,resultinginareductionincapitalspendingbudgetsbyPembinaanditscustomers;
• ThenarrowingoftheAECO-Chicagonaturalgaspricedifferential;
• IncreasedproductioninkeyoperatingareasandresourceplayswithintheWCSB,includingtheDeepBasin,Montneyand
Duvernay,priortotheonsetoftheCOVID-19pandemic;
• Newlarge-scalegrowthprojectsacrossPembina'sbusinessbeingplacedintoservice;
• Volatilityincommoditymarketpricesimpactingmarginswithinthemarketingbusiness,partiallymitigatedthrough
Pembina'sriskmanagementprogram;
• AdecreaseintheAlbertacorporatetaxratefrom12to8percentfollowingtheenactmentofBill3inJune2019;
• Highernetfinancecostsimpactingearningsassociatedwithdebtrelatedtofinancingacquisitions,growthprojectsand
volatilityinforeignexchangerates;and
• IncreasedcommonandpreferredsharesoutstandingandcorrespondingdividendsduetotheKinderAcquisition.
30PembinaPipelineCorporation2020AnnualReport
8.SELECTEDEQUITYACCOUNTEDINVESTEEINFORMATIONLoansandBorrowingsofEquityAccountedInvestees
Underequityaccounting,theassetsandliabilitiesofaninvestmentarenetintoasinglelineitemintheconsolidated
statementoffinancialposition,"InvestmentsinEquityAccountedInvestees".Toassistreaders'understandingandtoevaluate
thecapitalizationofPembina'sinvestments,loansandborrowingsassociatedwithinvestmentsinequityaccountedinvestees
arepresentedbelowbasedonPembina'sproportionateownershipinsuchinvestments,asatDecember31,2020.Inaddition,
certainoftheequityaccountedinvesteeshaveborrowingarrangementswithanamortizationstructure,therebynecessitating
periodicrepaymentsofprincipal.TheserepaymentsoccurpriortothedistributionofresidualcashflowtoPembina.Theloans
andborrowingsandamortizationschedulesarepresentedbelowandclassifiedbythedivisioninwhichtheresultsforthe
investmentarereported.Pleaserefertothe"Abbreviations"sectionforasummaryofPembina'sinvestmentsinequity
accountedinvesteesandthedivisioninwhichtheirresultsarereported.
AsatDecember31
($millions)(1) 2020 2019
Pipelines 926 1,057
Facilities 1,200 1,150
Total 2,126 2,207(1) BalancesreflectPembina'sownershippercentageoftheoutstandingbalancefacevalue.
AmortizationScheduleofLoansandBorrowingsofEquityAccountedInvestees
12MonthsEnded
($millions)(1)December31,
2020 2021 2022 2023 2024 2025+
Pipelines 153 114 590 62 67 93
Facilities — 12 36 36 1,116 —
Total 153 126 626 98 1,183 93(1) BalancesreflectPembina'sownershippercentageoftheoutstandingbalancefacevalue.
FinancingActivitiesforEquityAccountedInvestees
OnDecember31,2020,CKPCprovidednoticetocancelitsU.S.$1.7billiontermfacilityanditsU.S.$150millionrevolving
creditfacility.Asaresult,Pembinaacceleratedtherecognitionofthepreviouslyrecordedfinancialguaranteeliability.
OnApril27,2020,Rubyfullyrepaidits364-daytermloan.Concurrenttorepayment,Rubyenteredintoanewamortizing
termloanthatmaturesonMarch31,2021.AtDecember31,2020,U.S.$32million(U.S.$16millionnettoPembina)
remainedoutstanding.
CommitmentstoEquityAccountedInvestees
Pembinahascommitmentstoprovidecontributionstocertainequityaccountedinvesteesbasedonannualbudgetsapproved
bythejointventurepartners.
CreditRiskforEquityAccountedInvestees
AtDecember31,2020,Pembina'svariousequityaccountedinvesteesheldlettersofcredittotaling$105million(December
31,2019:$84million)primarilyinrespectofcustomertradereceivables.
PembinaPipelineCorporation2020AnnualReport31
9.OTHER
SelectedAnnualFinancialInformation
($millions,exceptwherenoted) 2020(1) 2019(1) 2018(1)
Revenue 5,953 6,372 6,125
Earnings(loss) (316) 1,507 1,297
Percommonshare-basic(dollars) (0.86) 2.69 2.32
Percommonshare-diluted(dollars) (0.86) 2.68 2.32
Totalassets 31,416 32,755 26,811
Long-termfinancialliabilities(2) 11,695 11,493 7,949
Commonsharedividendsdeclared($pershare) 2.52 2.36 2.24
Preferredsharedividendsdeclared 151 126 122(1) 2020andcomparative2019and2018periodshavebeenrestated.See"VoluntaryChangeinAccountingPolicy","RestatementofRevenueandCostofGoodsSold"andNotes
3and4totheConsolidatedFinancialStatements.(2) Includeslong-termloansandborrowings,long-termconvertibledebentures,whichmaturedonDecember31,2018,long-termderivativefinancialinstruments,contract
liabilities,provisionsandemployeebenefits,share-basedpayments,taxespayableandotherliabilities.
Seethe"QuarterlyFinancialInformation"sectionforthefactorsimpactingyearsendedDecember31,2020and2019.
Increasesinrevenues,earningsandearningspercommonshare(basicanddiluted)between2018and2019werelargelydue
toasignificantdeferredtaxrecoveryfollowingthereductionintheAlbertacorporateincometaxratefrom12percentto
eightpercent,andresultsfromnewassetsgoingintoservice,offsetbyapartialimpairmentinPembina'sinvestmentinRuby.
Increasesintotalassetsandlong-termfinancialliabilitiesfrom2018to2019werelargelyduetoadditionalassetsandloans
andborrowingsassociatedwiththeKinderAcquisition.
RelatedPartyTransactions
Pembinaentersintotransactionswithrelatedpartiesinthenormalcourseofbusiness.Thesetransactionsprimarilyinclude
contractingcapacityfromandadvancingfundstoequityaccountedinvestees,andprovidingmanagement,administrative,
operationalandworkforcerelatedservicestovariousaffiliatesonacostrecoverybasis.Theseservicesareprovidedunder
separateconsultingservicesagreements.Formoreinformationonthesetransactions,refertoNote30totheConsolidated
FinancialStatements.
RiskManagement
HedgeofNetInvestmentinForeignOperations
OnMay7,2020,PembinadesignatedtheU.S.$250millionnon-revolvingtermloanitenteredintoasahedgeofthe
Company'snetinvestmentinU.S.functionalcurrencyforeignoperations.Foreignexchangegainsandlossesonthe
designateddebtarerecognizedinthecurrencytranslationreserveinaccumulatedothercomprehensiveincome.
InterestRateRisk-CashFlowHedge
OnMay8,2020,Pembinadesignatedfinancialderivativecontractsthatfixtheinterestrateon$250millionofvariablerate
debtascashflowhedginginstruments.Unrealizedgains(losses)onderivativesindesignatedcashflowhedgingrelationships
arerecognizedinthecashflowhedgereserveinaccumulatedothercomprehensiveincome,withrealizedgains(losses)being
reclassifiedtonetfinancecosts.
FormoreinformationonthesetransactionsandPembina'sderivativeinstruments,refertoNote27totheConsolidated
FinancialStatements.
32PembinaPipelineCorporation2020AnnualReport
PensionLiability
Pembinamaintainsdefinedcontributionplansanddefinedbenefitpensionplansforemployeesandretirees.Thedefined
benefitplansincludeafundedregisteredplanforallqualifiedemployeesandanunfundedsupplementalretirementplanfor
thoseemployeesaffectedbytheCanadaRevenueAgencymaximumpensionlimits.Attheendof2020,thepensionplans
carriedanetobligationof$44million(2019:$35million).AtDecember31,2020,planobligationsamountedto$296million
(2019:$266million)comparedtoplanassetsof$252million(2019:$231million).In2020,thepensionplans'expensewas
$20million(2019:$15million).Pembina'scontributionstothepensionplanstotaled$23millionin2020(2019:$20million).
EffectiveJanuary1,2021,Pembinarevisedtheeligibilityrequirementsforthedefinedbenefitplan.Employeeswithanage
plusyearsofserviceof40atJanuary1,2021willremaineligibleforthedefinedbenefitplan,whentheirageplusyearsof
servicereaches50.Allotheremployeeswillremaininthedefinedcontributionplan.
PembinaPipelineCorporation2020AnnualReport33
DisclosureControlsandProceduresandInternalControloverFinancialReporting
DisclosureControlsandProcedures
Pembinamaintainsdisclosurecontrolsandprocedures("DC&P")designedtoprovidereasonableassurancethatinformation
requiredtobedisclosedinPembina'sannualfilings,interimfilingsandotherreportsfiledorsubmittedbyitundersecurities
lawsisrecorded,processed,summarizedandreportedaccuratelyandinthetimeperiodsspecifiedundersuchsecuritieslaws,
andincludecontrolsandproceduresdesignedtoensuresuchinformationisaccumulatedandcommunicatedtoPembina's
management,includingitscertifyingofficers,asappropriatetoallowtimelydecisionsregardingrequireddisclosure.Asat
December312020,anevaluationoftheeffectivenessofthedesignandoperationofPembina'sDC&P,asdefinedinNational
Instrument52-109CertificationofDisclosureinIssuer'sAnnualandInterimFilings("NI52-109")andRule13a–15(e)and
15(d)–15(e)undertheUnitedStatesSecuritiesExchangeActof1934,asamended(the"ExchangeAct"),wascarriedoutby
management,includingthePresidentandChiefExecutiveOfficer("CEO")andtheSeniorVicePresidentandChiefFinancial
Officer("CFO").Basedontheevaluation,theCEOandCFOhaveconcludedthatthedesignandoperationofPembina'sDC&P
werenoteffectiveasatthatdateasaresultofthematerialweaknessdescribedbelow.
Management'sAnnualReportonInternalControloverFinancialReporting
Pembinamaintainsinternalcontroloverfinancialreporting("ICFR")whichisdesignedtoprovidereasonableassurance
regardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordance
withIFRS,andincludepoliciesandproceduresthat:(a)pertaintothemaintenanceofrecordsthatinreasonabledetail
accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsofPembina;(b)aredesignedtoprovidereasonable
assurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewithIFRS,
andthatreceiptsandexpendituresofPembinaarebeingmadeonlyinaccordancewithauthorizationsofmanagementand
directorsofPembina;and(c)aredesignedtoprovidereasonableassuranceregardingpreventionortimelydetectionof
unauthorizedacquisition,useordispositionofPembina'sassetsthatcouldhaveamaterialeffectonPembina'sfinancial
statements.ManagementisresponsibleforestablishingandmaintainingDC&PandICFR,asdefinedinNI52-109andRule13a
–15(e)and15(d)–15(e)undertheExchangeAct.
UnderthesupervisionandwiththeparticipationofourCEOandourCFO,managementhasconductedanevaluationofthe
effectivenessofourICFR,asatDecember31,2020basedontheframeworksetforthinInternalControl–Integrated
Frameworkissuedin2013bytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.Amaterialweakness
isadeficiency,oracombinationofdeficiencies,inICFR,suchthatthereisareasonablepossibilitythatamaterial
misstatementoftheannualfinancialstatements,orinterimfinancialstatements,willnotbepreventedordetectedona
timelybasis.Basedonitsevaluationunderthisframework,managementconcludedthat,asatDecember31,2020,the
Companyhasidentifieda"materialweakness"relatedtocontrolsovercontractassessmentinitsMarketingbusiness.
Specifically,wedidnothavecontrolstoidentifyallcontractswhereanaccountingassessmentwasrequiredandasaresult
lackedanalysisofallrelevantcontracttermsrequiredtomaketheassessmentintheMarketingbusiness.Becauseofthe
deficiency,theCompanypresentedrevenueandcostofgoodssoldforcertaincrudecontractsinMarketingandNew
Venturesonagrossbasisthatshouldhavebeenrecordedonanetbasis.Managementhasrestatedrevenueandcostof
goodssoldfortheyearsendedDecember31,2020andDecember31,2019withnoimpactonearnings,cashflowsor
financialposition.RefertoNote3totheConsolidatedFinancialStatementsfordetailsoftherestatement.
34PembinaPipelineCorporation2020AnnualReport
RemediationofMaterialWeakness
Thecontroldeficiencydescribedabovewasdetectedbymanagementduringthethirdquarterof2021priortothefilingof
Pembina'sinterimfinancialstatementsforthethreeandninemonthsendedSeptember30,2021.TheCompanyhas
prioritizedtheremediationofthematerialweaknessdescribedaboveandisworkingundertheoversightoftheAudit
Committeetoresolvetheissue.
Specificactionstoremediatethismaterialweaknessincludethefollowing:
i. Revisionoftheprocessofidentifyingcontractstoconsultwithinternalexpertstoassistintheevaluationoftechnical
accountingmatters;and
ii. Enhancecontractanalysis,includingrevisionoftheprocessusedtoassessaccountingimplicationsforcomplex
contracts.
AstheconclusionregardingthematerialweaknessinICFRwasreachedinlateOctober2021,Pembinahasnothadadequate
timetoimplementandevaluatethecontrolsandproceduresdescribedabove,aslimitedcomplexandmaterialtransactions
requiringanapplicationoftheforegoingremediationactionshaveoccurredinthisperiod.Pembinahas,therefore,nothad
adequatetimeoropportunitytoapplyitsproposedremediationactionstoevidencetheremediationofthematerial
weaknessdescribedaboveandthematerialweaknesswillcontinuetobeaddressedthroughouttheremainderof2021.
ChangesinInternalControloverFinancialReporting
PembinapreviouslyexcludedbusinessprocessesacquiredthroughtheKinderAcquisitiononDecember16,2019,fromthe
Company'sevaluationofinternalcontroloverfinancialreportingaspermittedbyapplicablesecuritieslawsinCanadaandthe
UnitedStates.EffectiveMay1,2020,PembinacompletedtheintegrationoftheKinderAcquisitionintoitsexistingenterprise
resourceplanning("ERP")system.AsaresultoftheERPsystemintegration,certainprocessessupportingPembina'sICFRfor
theKinderAcquisitionchangedinthesecondquarterof2020.TheCompanycompletedtheevaluationofICFRoftheKinder
Acquisitioninthefourthquarterof2020andtheoverallcontrolsandprocedureswefollowinestablishingICFRwerenot
significantlyimpacted.
OtherthantheKinderAcquisitionandthematerialweaknessdescribedabove,therehasbeennochangeinPembina'sICFR
thatoccurredduringtheyearendedDecember31,2020thathasmateriallyaffected,orarereasonablylikelytomaterially
affect,Pembina'sinternalcontroloverfinancialreporting.
PembinaPipelineCorporation2020AnnualReport35
10.ACCOUNTINGPOLICIES&ESTIMATESChangesinAccountingPolicies&Restatement
Voluntarychangeinaccountingpolicy
Pembinare-assesseditspolicyforthemeasurementofitsdecommissioningprovision.Previously,Pembina's
decommissioningprovisionwasmeasuredatthepresentvalueoftheexpectedcoststosettletheobligationsusingarisk-free
interestratebasedontheGovernmentofCanada'sbenchmarklong-termbondyield.EffectiveDecember31,2020,Pembina
electedtochangeitspolicyforthemeasurementofitsdecommissioningobligationstoutilizeacredit-adjustedrisk-free
interestrate.Asaresultofthischangeinpolicy,Pembina'sdecommissioningprovisionisnowmeasuredusingarisk-free
interestratebasedontheGovernmentofCanada'sbenchmarklong-termbondyield,adjustedforPembina'screditrisk.The
useofacredit-adjustedrisk-freerateresultsinreliableandmorerelevantinformationforthereadersoftheCompany's
ConsolidatedFinancialStatementsasthismethodologyresultsinamoreaccuraterepresentationofthevalueatwhichsuch
liabilitiescouldbetransferredtoathirdparty,providesabetterindicationoftheriskassociatedwithsuchobligations,and
increasesthecomparabilityofPembina'sfinancialstatementstothoseofitspeers.
Managementhasappliedthechangeinaccountingpolicyretrospectively.TheConsolidatedFinancialStatementshavebeen
restatedtoreflectadjustmentsmadeasaresultofthischangeinaccountingpolicy.Thefollowingtablespresenttheimpacts
ofthechangeinaccountingpolicyfordecommissioningprovisionstothestatementoffinancialposition,thestatementof
earnings(loss)andcomprehensiveincome(loss),andthestatementofcashflows,foreachofthelineitemsaffected.
i. ImpactsontheConsolidatedStatementsofFinancialPosition
Asat December31,2020 December31,2019 January1,2019
($millions) Policychange Policychange Policychange
Assets
Property,plantandequipment (546) (372) (304)
Investmentsinequityaccountedinvestees 24 20 15
Right-of-useassets (51) (39) —
Advancestorelatedpartiesandotherassets (7) (7) (7)
Totalassets (580) (398) (296)
Liabilities
Decommissioningprovision (734) (527) (411)
Deferredtaxliabilities 37 31 32
Totalliabilities (697) (496) (379)
Equity
Deficit 117 98 83
TotalequityattributabletoShareholders 117 98 83
AreconciliationforeachofthelineitemsaffectedintherestatedConsolidatedStatementsofFinancialPositionispresented
inNote4oftheConsolidatedFinancialStatements.
36PembinaPipelineCorporation2020AnnualReport
ii. ReconciliationoftheConsolidatedStatementsofEarnings(Loss)andComprehensiveIncome(Loss)
FortheyearsendedDecember31
($millions,exceptpershareamounts)
2020 2019
PolicychangePreviouslyreported Policychange Restated
Costofsales (18) 5,187 (4) 5,183
Shareofprofitfromequityaccountedinvestees 4 370 5 375
Grossprofit 22 2,433 9 2,442
Netfinancecosts (3) 294 (5) 289
Earnings(loss)beforeincometax 25 1,528 14 1,542
Deferredtax(recovery)expense 6 (174) (1) (175)
Earnings(loss)attributabletoshareholders 19 1,492 15 1,507
Totalcomprehensiveincome(loss)attributabletoshareholders 19 1,273 15 1,288
Earnings(loss)attributabletocommonshareholders,netofpreferredsharedividends 19 1,361 15 1,376
Earnings(loss)percommonshare-basic 0.04 2.66 0.03 2.69
Earnings(loss)percommonshare-diluted 0.04 2.65 0.03 2.68
iii. ReconciliationoftheConsolidatedStatementofCashFlows
FortheyearsendedDecember31
($millions)
2020 2019
PolicychangePreviouslyreported Policychange Restated
Earnings(loss) 19 1,492 15 1,507
Shareofprofitfromequityaccountedinvestees (4) (370) (5) (375)
Adjustmentsfordepreciationandamortization (18) 511 (4) 507
Adjustmentsfornetfinancecosts (3) 294 (5) 289
Adjustmentsforincometaxexpense 6 36 (1) 35
Cashflowfromoperatingactivities — 2,532 — 2,532
Restatementofrevenueandcostofgoodssold
Duringthethirdquarterof2021,PembinaidentifiedcertaincontracttypesthatwererecordedincorrectlywithinMarketing&
NewVentures.Revenueandcostofgoodssoldassociatedwiththecontractswererecordedonagrossbasisbutshouldhave
beenrecordedonanetbasis.Asaresult,Pembinarestatedits2020ConsolidatedStatementsofEarnings(Loss)and
ComprehensiveIncome(Loss)andtheassociatedcomparativeperiodsbydecreasingrevenueandcostofgoodssold,withno
impacttoearnings,cashflowsorfinancialposition.
i. ReconciliationoftheConsolidatedStatementsofEarnings(Loss)andComprehensiveIncome(Loss)
FortheyearsendedDecember31
($millions,exceptpershareamounts)
2020 2019
Previouslyreported
Restatementadjustment Restated
Previouslyreported
Restatementadjustment Restated
Revenue 6,202 (249) 5,953 7,230 (858) 6,372
Costofsales 4,132 (249) 3,883 5,183 (858) 4,325
Grossprofit 2,008 — 2,008 2,442 — 2,442
Earnings(loss)percommonshare-basic 0.86 — 0.86 2.69 — 2.69
Earnings(loss)percommonshare-diluted 0.86 — 0.86 2.68 — 2.68
PembinaPipelineCorporation2020AnnualReport37
NewStandardsandInterpretationsNotYetAdopted
TheInternationalAccountingStandardsBoardhaveissuedastandardandamendmentstoexistingstandardsthatare
effectiveforperiodsonorafterJanuary1,2021,withearlyapplicationpermitted.Assessmentoftheimpactsofthese
standardsisongoing,however,nomaterialimpactsonPembina'sConsolidatedFinancialStatementshavebeenidentified.
• InterbankOfferedRates("IBOR")Reform-Phase2(AmendmentstoIFRS9,IFRS7,andIFRS16);
• Property,PlantandEquipment:ProceedsbeforeIntendedUse(AmendmentstoIAS16);
• OnerousContracts-CostofFulfillingaContract(AmendmentstoIAS37);
• UpdatingaReferencetotheConceptualFramework(AmendmentstoIFRS3);
• AnnualImprovementstoIFRSStandards2018-2020;
• ClassificationofLiabilitiesasCurrentorNon-Current(AmendmentstoIAS1);and
• IFRS17:InsuranceContracts.
CriticalAccountingJudgmentsandEstimates
ThepreparationoftheConsolidatedFinancialStatementsinconformitywithIFRSrequiresmanagementtomakejudgments,
estimatesandassumptionsthatarebasedonthefactsandcircumstancesandestimatesatthedateoftheConsolidated
FinancialStatementsandaffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,income
andexpenses.Actualresultsmaydifferfromtheseestimates.
Judgments,estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesare
recognizedintheperiodinwhichtheestimatesarerevisedandinanyfutureperiodsaffected.
OngoingImpactoftheCOVID-19Pandemic
FollowingtheWorldHealthOrganizationdeclaringtheCOVID-19outbreaktobeapandemic,manygovernmentshave
imposedrestrictionsonindividualsandbusinesses,resultinginasignificantslowdownoftheglobaleconomy.Whilethese
restrictionshavebeenrelaxedincertainjurisdictions,aresurgenceofCOVID-19cases(includingcasesresultingfromvariants
oftheCOVID-19virus)incertaingeographicareasandtheriskthatthiscouldoccurinotherareashascausedgovernmentsin
certainjurisdictionstosustainand,insomecases,re-imposerestrictions.Inaddition,whilevaccinesarebeginningtobe
distributed,thereisongoinguncertaintyastothetiming,levelofadoption,durationofefficacyandoveralleffectivenessof
thevaccine,includingagainstvariantsoftheCOVID-19virus.Asaresult,thereremainssignificantuncertaintyastotheextent
anddurationoftheglobaleconomicslowdown.Thisuncertaintyhascreatedvolatilityinassetandcommodityprices,
currencyexchangeratesandamarkeddeclineinlong-terminterestrates.Inaddition,theresultingdecreaseindemandfor
crudeoilhasresultedinadeclineinglobalcrudeoilprices.Managementappliedjudgmentandwillcontinuetoassessthe
situationindeterminingtheimpactofthesignificantuncertaintiescreatedbytheseeventsandconditionsonthecarrying
amountsofassetsandliabilitiesintheConsolidatedFinancialStatements.
38PembinaPipelineCorporation2020AnnualReport
ThefollowingjudgmentandestimationuncertaintiesarethosemanagementconsidersmaterialtotheConsolidatedFinancial
Statements:
Judgments
(i)BusinessCombinations
Businesscombinationsareaccountedforusingtheacquisitionmethodofaccounting.Thedeterminationoffairvalueoften
requiresmanagementtomakejudgmentsaboutfuturepossibleevents.Theassumptionswithrespecttoleaseidentification,
classificationandmeasurement,thefairvalueofpropertyplantandequipment,intangibleassets,decommissioning
provisionsandcontractliabilitiesacquired,aswellasthedeterminationofdeferredtaxes,generallyrequirethemost
judgment.
(ii)DepreciationandAmortization
Depreciationandamortizationofproperty,plantandequipmentandintangibleassetsarebasedonmanagement'sjudgment
ofthemostappropriatemethodtoreflectthepatternofanasset'sfutureeconomicbenefitexpectedtobeconsumedby
Pembina.Amongotherfactors,thesejudgmentsarebasedonindustrystandardsandhistoricalexperience.
(iii)Impairment
Assessmentofimpairmentofnon-financialassetsisbasedonmanagement'sjudgmentofwhetherornoteventsorchangesin
circumstancesindicatethatthecarryingvalueofanasset,investment,cashgeneratingunit("CGU")orgroupofCGUsexceeds
itsrecoverableamount.ThedeterminationofaCGUisbasedonmanagement'sjudgmentandisanassessmentofthe
smallestgroupofassetsthatgeneratecashinflowsindependentlyofotherassets.Inaddition,managementappliesjudgment
toassigngoodwillacquiredaspartofabusinesscombinationtotheCGUorgroupofCGUsthatisexpectedtobenefitfrom
thesynergiesofthebusinesscombinationforpurposesofimpairmenttesting.Whenanimpairmenttestisperformed,the
carryingvalueofaCGUorgroupofCGUsiscomparedtoitsrecoverableamount,definedasthegreateroffairvaluelesscosts
ofdisposalandvalueinuse.Assuch,theassetcompositionofaCGUorgroupofCGUsdirectlyimpactsboththecarrying
valueandrecoverabilityoftheassetsincludedtherein.
(iv)AssessmentofJointControlOverJointArrangements
ThedeterminationofjointcontrolrequiresjudgmentabouttheinfluencePembinahasoverthefinancialandoperating
decisionsofanarrangementandtheextentofthebenefitsitobtainsbasedonthefactsandcircumstancesofthe
arrangementduringthereportingperiod.Jointcontrolexistswhendecisionsabouttherelevantactivitiesrequirethe
unanimousconsentofthepartiesthatcontrolthearrangementcollectively.Ownershippercentagealonemaynotbea
determinantofjointcontrol.
(v)PatternofRevenueRecognition
Thepatternofrevenuerecognitionisimpactedbymanagement'sjudgmentsastothenatureofPembina'sperformance
obligations,theamountofconsiderationallocatedtoperformanceobligationsthatarenotsoldonastand-alonebasis,the
valuationofmaterialrightsandthetimingofwhenthoseperformanceobligationshavebeensatisfied.
PembinaPipelineCorporation2020AnnualReport39
(vi)Leases
Managementappliesjudgmenttodeterminewhetheracontractis,orcontains,aleasefrombothalesseeandlessor
perspective.Thisassessmentisbasedonwhetherthecontractconveysarighttocontroltheuseofanidentifiedassetfora
periodoftimeinexchangeforconsideration.Keyjudgmentsincludewhetheracontractidentifiesanasset(orportionofan
asset),whetherthelesseeobtainssubstantiallyalltheeconomicbenefitsoftheassetoverthecontracttermandwhetherthe
lesseehastherighttodirecttheasset'suse.Judgmentisalsoappliedindeterminingtherateusedtodiscountthelease
payments.
Estimates
(i)BusinessCombinations
Estimatesoffuturecashflows,forecastprices,interestrates,discountrates,cost,marketvaluesandusefullivesaremadein
determiningthefairvalueofassetsacquiredandliabilitiesassumed.Changesinanyoftheassumptionsorestimatesusedin
determiningthefairvalueofacquiredassetsandliabilitiescouldimpacttheamountsassignedtoassets,liabilities,intangible
assets,goodwillanddeferredtaxesinthepurchasepriceequation.Futureearningscanbeaffectedasaresultofchangesin
futuredepreciationandamortization,assetorgoodwillimpairment.
(ii)ProvisionsandContingencies
Managementusesjudgmentindeterminingthelikelihoodofrealizationofcontingentassetsandliabilitiestodeterminethe
outcomeofcontingencies.Provisionsrecognizedarebasedonmanagement'sbestestimateofthetiming,scopeandamount
ofexpectedfuturecashoutflowstosettletheobligation.
Basedonthelong-termnatureofthedecommissioningprovision,themostsignificantuncertaintiesinestimatingthe
provisionarethedeterminationofwhetherapresentobligationexists,thediscountandinflationratesused,thecoststhat
willbeincurredandthetimingofwhenthesecostswilloccur.
(iii)DeferredTaxes
Thecalculationofthedeferredtaxassetorliabilityisbasedonassumptionsaboutthetimingofmanytaxableeventsandthe
enactedorsubstantivelyenactedratesanticipatedtobeapplicabletoincomeintheyearsinwhichtemporarydifferencesare
expectedtoberealizedorreversed.Deferredincometaxassetsarerecognizedtotheextentthatitisprobablethatthe
deductibletemporarydifferenceswillberecoverableinfutureperiods.Theassessmentoffuturerecoverabilityinvolves
significantestimatestobemadebymanagement.
(iv)DepreciationandAmortization
Estimatedusefullivesofproperty,plantandequipmentandintangibleassetsarebasedonmanagement'sassumptionsand
estimatesofthephysicalusefullivesoftheassets,theeconomiclives,whichmaybeassociatedwiththereservelivesand
commoditytypeoftheproductionarea,inadditiontotheestimatedresidualvalue.
(v)ImpairmentofNon-FinancialAssets
IndeterminingtherecoverableamountofaCGU,agroupofCGUsoranindividualasset,managementusesitsbestestimates
offuturecashflows,andassessesdiscountratestoreflectmanagement'sbestestimateofaratethatreflectsacurrent
marketassessmentofthetimevalueofmoneyandthespecificrisksassociatedwiththeunderlyingassetsandcashflows.
40PembinaPipelineCorporation2020AnnualReport
(vi)ImpairmentofFinancialAssets
Themeasurementoffinancialassetscarriedatamortizedcostincludesmanagement'sestimatesregardingtheexpected
creditlossesthatwillberealizedonthesefinancialassets.
(vii)RevenuefromContractswithCustomers
Inestimatingthecontractvalue,managementmakesassessmentsastowhethervariableconsiderationisconstrainedornot
reasonablyestimable,suchthatanamountorportionofanamountcannotbeincludedintheestimateofthecontractvalue.
Management'sestimatesofthelikelihoodofacustomer'sabilitytouseoutstandingmake-uprightsmayimpactthetimingof
revenuerecognition.Inaddition,indeterminingtheamountofconsiderationtobeallocatedtoperformanceobligationsthat
arenotsoldonastand-alonebasis,managementestimatesthestand-alonesellingpriceofeachperformanceobligation
underthecontract,takingintoconsiderationthelocationandvolumeofgoodsorservicesbeingprovided,themarket
environment,andcustomerspecificconsiderations.
(viii)FairValueofFinancialInstruments
ForLevel2valuedfinancialinstruments,managementmakesassumptionsandestimatesvaluebasedonobservableinputs
suchasquotedforwardprices,timevalueandvolatilityfactors.ForLevel3valuedfinancialinstruments,managementuses
estimatesoffinancialforecasts,expectedcashflowsandriskadjusteddiscountratestomeasurefairvalue.
(ix)EmployeeBenefitObligations
AnactuarialvaluationispreparedtomeasurePembina'snetemployeebenefitobligationsusingmanagement'sbest
estimateswithrespecttolongevity,discountandinflationrates,compensationincreases,marketreturnsonplanassets,
retirementandterminationrates.
(x)Leases
Inmeasuringitsleaseliabilities,managementmakesassessmentsofthestand-alonesellingpricesofeachleaseandnon-lease
componentforthepurposesofallocatingconsiderationtoeachcomponent.Managementappliesitsbestestimatewith
respecttothelikelihoodofrenewal,extensionandterminationoptionexerciseindeterminingtheleaseterm.
PembinaPipelineCorporation2020AnnualReport41
11.RISKFACTORS
Pembina'svaluepropositionisbasedonbalancingeconomicbenefitagainstrisk.Whereappropriate,Pembinawillseekto
reducerisk.Pembinacontinuallyworkstomitigatetheimpactofriskstoitsbusinessbyidentifyingallsignificantriskssothat
theycanbeappropriatelymanaged.Toassistwithidentifyingandmanagingrisk,Pembinahasimplementedacomprehensive
RiskManagementProgram.TherisksthatmayaffectthebusinessandoperationofPembinaanditsoperatingsubsidiariesare
describedatahighlevelwithinthisMD&AandmorefullywithinPembina'sAIF,anelectroniccopyofwhichisavailableat
www.pembina.comoronPembina'sSEDARprofileatwww.sedar.comandwhichisfiledunderForm40-FonPembina's
EDGARprofileatwww.sec.gov.Further,additionaldiscussionaboutcounterpartyrisk,marketrisk,liquidityriskandadditional
informationonfinancialriskmanagementcanbefoundinNote27oftheConsolidatedFinancialStatements.
OngoingImpactoftheCOVID-19Pandemic
COVID-19RelatedImpacts
Pembina'sbusinessandoperationshavebeenandmaycontinuetobemateriallyadverselyaffectedbytheCOVID-19
pandemic,includingongoinguncertaintywithrespecttotheextentanddurationofthepandemic.TheongoingCOVID-19
pandemicandactionsthathave,andmaybe,takenbygovernmentalauthoritiesinresponsetheretohasresulted,andmay
continuetoresultin,amongotherthings:anoverallslowdownintheglobaleconomy;adecreaseinglobalenergydemand;
increasedvolatilityinfinancialandcommoditymarkets;disruptionstoglobalsupplychains;labourshortages;significant
impactstotheworkforce;reductionsintradevolumes;temporaryoperationalrestrictionsandrestrictionsongatheringsof
individuals,aswellasshelter-in-placedeclarationsandquarantineorders;businessclosuresandtravelbans;politicaland
economicinstability;andcivilunrest.TherecentresurgenceoftheCOVID-19virusandtherecentspreadofnewvariants
thereofincertaingeographicareas,includingcertainareasinwhichPembinaoperates,andthepossibilitythataresurgence
oftheCOVID-19virusorthespreadofsuchneworothervariantsormutationsthereofmayoccurinotherareas,hasresulted
inthere-impositionofcertainoftheforegoingrestrictions,andmayresultinfurtherrestrictions,bygovernmentalauthorities
incertainjurisdictions,includingcertainjurisdictionsinwhichPembinaoperates.Thisfurtherincreasestheriskand
uncertaintyastotheextentanddurationoftheCOVID-19pandemicanditsultimateimpactoftheglobaleconomyandother
itemsnotedabove.
TheriskstoPembinaoftheongoingCOVID-19pandemicinclude,amongotherthings:riskstothehealthandsafetyof
Pembina'semployees;aslowdownortemporarysuspensionofoperationsincertaingeographiclocationsinwhichPembina
operates;delaysinthecompletion,ordeferral,ofPembina'sgrowthandexpansionprojects;andsupplychaindisruptions,all
oranyofwhichcouldmateriallyadverselyimpactPembina'sbusinessoperationsandfinancialresults.Pembinahasalready
deferredcertaingrowthprojectsasaresultoftheCOVID-19pandemicandtheassociateddeclineinglobalenergydemand
andtheresultingdecreaseincommoditypricesduring2020.
ThefullextentandimpactoftheCOVID-19pandemiccontinuestobeunknownatthistimeandthedegreetowhichitmay
impactPembina'sbusinessoperationsandfinancialresultswilldependonfuturedevelopments,whicharehighlyuncertain
andcannotbepredictedwithanydegreeofcertainty,including:theduration,severityandgeographicspreadoftheCOVID-19
virusandvariantsandmutationsthereof,includinginrespectoftherecentresurgenceofthevirusandtherecentspreadof
newvariantsthereofincertaingeographicareas,includingcertainareasinwhichPembinaoperates;furtheractionsthatmay
betakenbygovernmentalauthorities,includinginrespectoftravelrestrictionsandbusinessdisruptions;theeffectiveness
andtimingofactionstakentocontainandtreattheCOVID-19virusandvariantsandmutationsthereof,includingthevaccines
developedinresponsethereto;andhowquicklyandtowhatextentnormaleconomicandoperatingconditionscanresume.
42PembinaPipelineCorporation2020AnnualReport
ImpactonGeneralRisks
DependingontheextentanddurationoftheCOVID-19pandemic,itmayalsohavetheeffectofheighteningmanyofthe
otherrisksdescribedherein,includingtherisksrelatingtoPembina'sexposuretocommodityprices;thesuccessful
completionofPembina'sgrowthandexpansionprojects,includingtheexpectedreturnoninvestmentthereof;Pembina's
abilitytomaintainitscreditratings;restrictedaccesstocapitalandincreasedborrowingcosts;Pembina'sabilitytopay
dividendsandserviceobligationsunderitsdebtsecuritiesandotherdebtobligations;andotherwisecomplyingwiththe
covenantscontainedintheagreementsthatgovernPembina'sexistingindebtedness.
RisksInherentinPembina'sBusiness
CommodityPriceRisk
Pembina'sbusinessisexposedtocommoditypricevolatilityandasubstantialdeclineinthepricesofthesecommoditiescould
adverselyaffectitsfinancialresults.
CertainofthetransportationcontractsortollingarrangementswithrespecttoPembina'spipelineassetsdonotincludetake-
or-paycommitmentsfromcrudeoilandgasproducersand,asaresult,Pembinaisexposedtovolumeriskwithrespectto
thoseassets.AdecreaseinvolumestransportedcandirectlyandadverselyaffectPembina'srevenuesandearnings.The
demandfor,andutilizationof,Pembina'spipelineassetsmaybeimpactedbyfactorssuchaschangingmarketfundamentals,
capacitybottlenecks,operationalincidents,regulatoryrestrictions,systemmaintenance,weatherandincreasedcompetition.
Marketfundamentals,suchascommoditypricesandpricedifferentials,naturalgasandgasolineconsumption,alternative
energysourcesandglobalsupplydisruptionsoutsideofPembina’scontrolcanimpactboththesupplyofanddemandforthe
commoditiestransportedonPembina'spipelines.See"ReserveReplacement,ThroughputandProductDemand"below.
Pembina'sMarketingbusinessincludesactivitiesrelatedtoproductstorage,terminalling,andhubservices.Theseactivities
exposePembinatocertainrisksrelatingtofluctuationsincommoditypricesand,asaresult,Pembinamayexperience
volatilityinrevenueandimpairmentsrelatedtothebookvalueofstoredproductwithrespecttotheseactivities.Primarily,
Pembinaentersintocontractstopurchaseandsellcrudeoil,condensate,NGLandnaturalgasatfloatingmarketprices;asa
result,thepricesofproductsthataremarketedbyPembinaaresubjecttovolatilityasaresultoffactorssuchasseasonal
demandchanges,extremeweatherconditions(theseverityofwhichcouldincreaseduetoclimatechange),marketinventory
levels,generaleconomicconditions,changesincrudeoilmarketsandotherfactors.Pembinamanagesitsriskexposureby
balancingpurchasesandsalestosecurelessvolatilemargins.NotwithstandingPembina'smanagementofpriceandquality
risk,marketingmarginsforcommoditiescanvaryandhavevariedsignificantlyfromperiodtoperiodinthepast.This
variabilitycouldhaveanadverseeffectontheresultsofPembina'sMarketingbusinessanditsoverallresultsofoperations.To
assistinreducingthisinherentvariabilityinitsMarketingbusiness,Pembinahasinvested,andwillcontinuetoinvest,in
assetsthathaveafee-basedrevenuecomponent.
PembinaisalsoexposedtopotentialpricedeclinesanddecreasingfracspreadsbetweenthetimePembinapurchasesNGL
feedstockandsellsNGLproducts.FracspreadisthedifferencebetweentherevenuefromthesaleofNGLifremovedfroma
gasstreamandthevaluesuchNGLwouldhavehadifleftinthegasstreamandsoldatnaturalgasprices.Fracspreadscan
changesignificantlyfromperiodtoperioddependingontherelationshipbetweenNGLandnaturalgasprices(the"frac
spreadratio"),absolutecommodityprices,transportdifferentialsandchangesintheCanadiantoU.S.dollarexchangerate.In
additiontothefracspreadratiochanges,thereisalsoadifferentialbetweenNGLproductpricesandcrudeoilpriceswhich
canchangemarginsrealizedformidstreamproducts.Theamountofprofitorlossmadeontheextractionportionofthe
businesswillgenerallyincreaseordecreasewithfracspreads.Thisexposurecouldresultinvariabilityofcashflowgenerated
bytheMarketingbusiness,whichcouldaffectPembinaandthecashdividendsthatPembinaisabletodistribute.
PembinaPipelineCorporation2020AnnualReport43
TheCompanyutilizesfinancialderivativeinstrumentsaspartofitsoverallriskmanagementstrategytoassistinmanagingthe
exposuretocommodityprice,interestrate,costofpowerandforeignexchangerisks.Asanexampleofcommodityprice
mitigation,theCompanyactivelyfixesaportionofitsexposuretofractionationmarginsthroughtheuseofderivative
financialinstruments.Additionally,Pembina'sMarketingbusinessisalsoexposedtovariabilityinquality,timeandlocation
differentialsforvariousproducts,andfinancialinstrumentsmaybeusedtooffsettheCompany'sexposurestothese
differentials.TheCompanydoesnottradefinancialinstrumentsforspeculativepurposes.Commoditypricefluctuationsand
volatilitycanalsoimpactproduceractivityandthroughputinPembina'sinfrastructure,whichisdiscussedinmoredetail
below.
FormoreinformationwithrespecttoPembina'sfinancialinstrumentsandfinancialriskmanagementprogram,seeNote27to
Pembina'sConsolidatedFinancialStatements,whichnoteisincorporatedbyreferenceherein.
RegulationandLegislation
LegislationinAlbertaandBritishColumbiaexiststoensurethatproducershavefairandreasonableopportunitiestoproduce,
processandmarkettheirreserves.RegulatoryauthoritiesinAlbertaandBritishColumbiamaydeclaretheoperatorofa
pipelineacommoncarrierofcrudeoil,NGLornaturalgasand,assuch,mustnotdiscriminatebetweenproducerswhoseek
accesstothepipeline.Regulatoryauthoritiesmayalsoestablishconditionsunderwhichthecarriermustacceptandcarry
product,includingthetariffsthatmaybecharged.Producersandshippersmayalsoapplytotheappropriateregulatory
authoritiesforareviewoftariffs,andsuchtariffsmaythenberegulatedifitisproventhatthetariffsarenotjustand
reasonable.Thepotentialfordirectregulationoftariffs,whileconsideredremotebyPembina,couldresultintarifflevelsthat
arelessadvantageoustoPembinaandcouldimpairtheeconomicoperationofsuchregulatedpipelinesystems.
TheAERistheprimaryregulatorybodythatoverseesPembina'sAlberta-issuedenergypermits,withsomeminorexceptions.
CertainofPembina'ssubsidiariesownpipelinesinBritishColumbia,whichareregulatedbytheBCOGCandtheBCUC,and
pipelinesthatcrossprovincialorinternationalboundaries,whichareregulatedbytheCERand/ortheFERCandPHMSA.
CertainofPembina'soperationsandexpansionprojectsaresubjecttoadditionalregulations,andasPembina'soperations
expandthroughoutCanadaandNorthAmerica,Pembinamayberequiredtocomplywiththerequirementsofadditional
regulatorsandlegislativebodies,includingtheImpactAssessmentAgencyofCanada,theBCEAO,theOntarioMinistryof
NaturalResourcesandForestry,theSaskatchewanMinistryofEnergyandResourcesandThePetroleumBranchofManitoba
MineralResourcesunderManitobaAgricultureandResourceDevelopment.
44PembinaPipelineCorporation2020AnnualReport
IntheU.S.,FERCregulatesinterstatenaturalgaspipelinesandthetransportationofcrudeoil,NGLandrefinedproductsin
interstatecommerce.UndertheNGA,FERCregulatestheconstruction,extension,andabandonmentofinterstatenaturalgas
pipelinesandthetolls,termsandconditionsofserviceandotheraspectsofthebusinessofinterstatenaturalgaspipelines.
Interstatenaturalgaspipelinestolls,termsandconditionsofservicearefiledatFERCandpubliclyavailable.Underthe
InterstateCommerceAct,FERCregulatesthetolls,termsandconditionsofthetransportationininterstatecommerceofcrude
oil,NGLsandrefinedproducts.PipelinesafetyisregulatedbythePHMSA,whichsetsstandardsforthedesign,construction,
pressuretesting,operationandmaintenance,corrosioncontrol,trainingandqualificationofpersonnel,accidentreporting
andrecordkeeping.TheOfficeofPipelineSafety,withinthePHMSA,inspectsandenforcesthepipelinesafetyregulations
acrosstheU.S.Allregulationsandenvironmental,safetyandeconomiccomplianceobligationsaresubjecttochangeatthe
initiativeofFERC,PHMSAorotherUnitedStatesFederalagencieswithjurisdictionoveraspectsoftheoperationsofpipelines,
includingenvironmental,economicandsafetyregulations.ChangesbyFERCinitsregulationsorpoliciescouldadversely
impactPembina'snaturalgaspipelines,makingtheconstruction,extensionorexpansionofsuchpipelinesmorecostly,
causingdelayinthepermittingofsuchprojectsorimpactingthelikelihoodofsuccessofcompletionofsuchprojects.
Similarly,changesinFERC'sregulationsorpoliciescouldadverselyimpactthetollsthatPembina'sFERCregulatedpipelines
areabletochargeandhowsuchpipelinesdobusiness,whethersuchpipelinesareregaledbyFERCpursuanttotheNGAor
theICA.Pembinacontinuallymonitorsexistingandchangingregulationsinalljurisdictionsinwhichitcurrentlyoperates,or
intowhichitmayexpandinthefuture,andthepotentialimplicationstoitsoperations;however,Pembinacannotpredict
futureregulatorychanges,andanysuchcomplianceandregulatorychangesinanyoneormultiplejurisdictionscouldhavea
materialadverseimpactonPembina,itsfinancialresultsanditsShareholders.
In2019,thefederalgovernmentoverhauledtheenvironmentalassessmentandfederalenergyregulationregimeinCanada.
TheNationalEnergyBoard("NEB")andNEBActwerereplacedbytheCERandtheCanadianEnergyRegulatorAct("CERAct").
Similarly,theCanadianEnvironmentalAssessmentAct,2012(Canada)("CEAA")wasreplacedbytheImpactAssessmentAct
(Canada)("IAA")andtheCanadianEnvironmentalAssessmentAgencywasreplacedbythenewIAAastheauthority
responsibleforconductingallfederalimpactassessments(formerly"environmentalassessments")forcertaindesignated
projectsundertheIAA,unlessreferredtoareviewpanel.Thelistofdesignatedprojectswhicharesubjecttomandatory
assessmentundertheIAAissimilartothelistundertheCEAA;however,thelengthofnewpipelinesforwhichanimpact
assessmentisrequiredhasbeenincreasedfrom40kmto75km.TheproposedIAAalsocontainsabroaderproject
assessmentprocessthanundertheCEAAandprovidesforenhancedconsultationwithgroupsthatmaybeaffectedby
proposedprojects,whilealsoexpandingthescopeoffactorsandconsiderationsthatneedtobetakenintoaccountunderthe
projectassessmentprocess.TheCERcontinuestooverseeapprovedfederal,interprovincialandinternationalenergyprojects
inamannersimilartotheformerregimeundertheNEB,withnewprojectsbeingreferredtoareviewpanelundertheIAA.On
July16,2020,thefederalgovernmentpublishedtheStrategicAssessmentofClimateChange("SACC")undertheprovisions
forsuchassessmentsintheIAA.TheSACCimposesthenewrequirementsregardingGHGemissionsplanningonprojects
subjecttotheIAA.
Atthispoint,whilefewprojectshavebeensubjecttothenewfederalimpactassessmentregime,Pembinacontinuesto
activelymonitordevelopmentsinthisarea.Totheextentthesechangeslengthenthereviewtimelineforprojectsorexpand
thescopeofthematterstobeconsidered,thenewregimecouldmateriallyimpacttheamountoftimeandcapitalresources
requiredbyPembinatoseekandobtainapprovaltoconstructandoperateinternationalorinterprovincialpipelinesorother
projectsdesignatedpursuanttotheIAAprojectlistorministerialdesignationpowersundertheIAA.Thenewregimecould
thereforemateriallyanddirectlyimpactPembina'sbusinessandfinancialresults,andcouldindirectlyaffectPembina's
businessandfinancialresultsbyimpactingthefinancialconditionandgrowthprojectsofitscustomersand,ultimately,
productionlevelsandthroughputonPembina'spipelinesandinitsfacilities.
Pembina'sbusinessandfinancialconditionmayalsobeinfluencedbyfederalandforeignlegislationaffecting,inparticular,
foreigninvestment,throughlegislationsuchastheCompetitionAct(Canada),theInvestmentCanadaAct(Canada)and
equivalentlegislationinforeignjurisdictions.
PembinaPipelineCorporation2020AnnualReport45
Therecanbenoassurancethatchangestoincometaxlaws,regulatoryandenvironmentallawsorpoliciesandgovernment
incentiveprogramsrelatingtothepipelineorcrudeoilandnaturalgasindustrywillnotadverselyaffectPembinaorthevalue
ofitssecurities.
OperationalRisks
Operationalrisksinclude,butarenotlimitedto:pipelineleaks;thebreakdownorfailureofequipment,pipelinesandfacilities,
informationsystemsorprocesses;thecompromiseofinformationandcontrolsystems;theperformanceofequipmentat
levelsbelowthoseoriginallyintended(whetherduetomisuse,unexpecteddegradationordesign,constructionor
manufacturingdefects);releasesattruckterminalsandhubs;releasesassociatedwiththeloadingandunloadingof
potentiallyharmfulsubstancesontorailcarsandtrucks;adverseseaconditions(includingstormsandrisingsealevels)and
releasesorspillsfromshippingvesselsloadedatPembina'smarineterminal;failuretomaintainadequatesuppliesofspare
parts;operatorerror;labourdisputes;disputeswithinterconnectedfacilitiesandcarriers;operationaldisruptionsor
apportionmentonthird-partysystemsorrefineries,whichmaypreventthefullutilizationofPembina'sfacilitiesandpipelines;
andcatastrophicevents,including,butnotlimitedto,thoserelatedtoclimatechangeandextremeweatherevents,including
fires,floodsandothernaturaldisasters,explosions,trainderailments,earthquakes,widespreadepidemicsorpandemic
outbreaks,actsofcivilprotestordisobedience,terrorismorsabotage,andothersimilarevents,manyofwhicharebeyond
thecontrolofPembinaandallofwhichcouldresultinoperationaldisruptions,damagetoassets,relatedreleasesorother
environmentalissues,anddelaysinconstruction,labourandmaterials.Pembinamayalsobeexposedfromtimetotimeto
additionaloperationalrisksnotstatedintheimmediatelyprecedingsentence.Inaddition,theconsequencesofany
operationalincident(includingasaresultofadverseseaconditions)atVancouverWharvesorinvolvingavesselreceiving
productsfromVancouverWharves,maybeevenmoresignificantasaresultofthecomplexitiesinvolvedinaddressingleaks
andreleasesoccurringintheoceanoralongcoastlinesand/ortherepairofmarineterminals.Anyleaks,releasesorother
incidentsinvolvingsuchvessels,orothersimilaroperatorsalongtheWestCoast,couldresultinsignificantharmtothe
environment,curtailmentof,ordisruptionsofand/ordelaysin,offshoreshippingactivityintheaffectedareas,including
Pembina'sabilitytoeffectivelycarryonoperationsatVancouverWharves.Theoccurrenceorcontinuanceofanyofthe
foregoingeventscouldincreasethecostofoperatingPembina'sassetsorreducerevenue,therebyimpactingearnings.
Additionally,facilitiesandpipelinesarereliantonelectricalpowerfortheiroperations.Afailureordisruptionwithinthelocal
orregionalelectricalpowersupplyordistributionortransmissionsystemscouldsignificantlyaffectongoingoperations.
Further,asignificantincreaseinthecostofpowerorfuelcouldhaveamateriallynegativeeffectonthelevelofprofitrealized
incaseswheretherelevantcontractsdonotprovideforrecoveryofsuchcosts.Inthelong-term,constraintsonnatural
resourcedevelopmentcouldbeimpactedbyclimatechangeinitiativesorpolicies,resultinginadditionaloperationalcosts,
delaysorrestrictions.
Pembinaiscommittedtopreservingcustomerandshareholdervaluebyproactivelymanagingoperationalriskthroughsafe
andreliableoperations.Seniormanagersareresponsibleforthesupervisionofoperationalriskbyensuringappropriate
policies,proceduresandsystemsareinplacewithintheirbusinessunitsandinternalcontrolsareoperatingefficiently.
Pembinaalsohasanextensiveprogramtomanagepipelinesystemintegrity,whichincludesthedevelopmentanduseofin-
lineinspectiontoolsandvariousotherleakdetectiontechnologies.Pembina'smaintenance,excavationandrepairprograms
arefocusedonriskmitigationand,assuch,resourcesaredirectedtotheareasofgreatestbenefitandinfrastructureis
replacedorrepairedasrequired.Pembinacarriesinsurancecoveragewithrespecttosome,butnotall,casualtyoccurrences
inamountscustomaryforsimilarbusinessoperations,whichcoveragemaynotbesufficienttocompensateforallcasualty
occurrences.Inaddition,PembinahasacomprehensiveSecurityManagementProgramdesignedtoreducesecurity-related
risks.
46PembinaPipelineCorporation2020AnnualReport
CompletionandTimingofExpansionProjects
ThesuccessfulcompletionofPembina'sgrowthandexpansionprojectsisdependentonanumberoffactorsoutsideof
Pembina'scontrol,includingtheimpactofgeneraleconomic,businessandmarketconditions,availabilityofcapitalonterms
andratesacceptabletoPembina,receiptofregulatoryapprovals,reachinglong-termcommercialarrangementswith
customersinrespectofcertainportionsoftheexpansions,constructionschedules,commissioningdifficultiesordelaysand
coststhatmaychangedependingonsupply,demandand/orinflation,labour,materialsandequipmentavailability,
contractornon-performance,actsofcivilprotestordisobedience,terrorismorsabotage,weatherconditions,costof
engineeringservices,andchangeingovernmentsthatgrantedtherequisiteregulatoryapprovals.Thereisnocertainty,nor
canPembinaprovideanyassurance,thatnecessaryregulatoryapprovalswillbereceivedontermsthatmaintaintheexpected
returnoninvestmentassociatedwithaspecificproject,oratall,orthatsatisfactorycommercialarrangementswith
customerswillbeenteredintoonatimelybasis,oratall,orthatthirdpartieswillcomplywithcontractualobligationsina
timelymanner.Factorssuchasspecialinterestgroupopposition,Indigenous,landownerandotherstakeholderconsultation
requirements,civilprotestordisobedience,changesinshippersupport,andchangestothelegislativeorregulatory
frameworkcouldallhaveanimpactonmeetingcontractualandregulatorymilestones.Asaresult,thecostestimatesand
completiondatesforPembina'smajorprojectsmaychangeduringdifferentstagesoftheproject.Earlystageprojectsface
additionalchallenges,includingsecuringleases,easements,rights-of-way,permitsand/orlicensesfromlandownersor
governmentalauthoritiesallowingaccessforsuchpurposes,aswellasIndigenousconsultationrequirements.Accordingly,
actualcostsandconstructionschedulesmayvaryfrominitialestimatesandthesedifferencescanbesignificant,andcertain
projectsmaynotproceedasplanned,oratall.Further,thereisariskthatmaintenancewillberequiredmoreoftenthan
currentlyplannedorthatsignificantmaintenancecapitalprojectscouldarisethatwerenotpreviouslyanticipated.
UndermostofPembina'sconstructionandoperatingagreements,theCompanyisobligatedtoconstructthefacilitiesand
pipelinesregardlessofdelaysandcostincreasesandPembinabearstheriskforanycostoverruns.Futureagreements
enteredintowithcustomerswithrespecttoexpansionsmaycontainsimilarconditions.WhilePembinaisnotcurrentlyaware
ofanysignificantundisclosedcostoverrunswithrespecttoitscurrentprojectsatthedatehereof,anysuchcostoverrunsmay
adverselyaffecttheeconomicsofparticularprojects,aswellasPembina'sbusinessoperationsandfinancialresults,andcould
reducePembina'sexpectedreturnoninvestmentwhich,inturn,couldreducethelevelofcashavailablefordividendsandto
serviceobligationsunderPembina'sdebtsecuritiesandotherdebtobligations.
PossibleFailuretoRealizeAnticipatedBenefitsofCorporateStrategy
Pembinaevaluatesthevaluepropositionforexpansionprojects,newacquisitionsanddivestituresonanongoingbasis.
Planningandinvestmentanalysisishighlydependentonaccurateforecastingassumptionsand,totheextentthatthese
assumptionsdonotmaterialize,financialperformancemaybelowerormorevolatilethanexpected.Volatilityinthe
economy,changeincostestimates,failuretoobtainregulatoryapprovalsandpermits,projectscopingandriskassessment
couldresultinalossinprofitsforPembina.Aspartofitsongoingstrategy,Pembinamaycompleteacquisitionsofassetsor
otherentitiesinthefuture.Achievingthebenefitsofcompletedandfutureacquisitionsdepends,inpart,onsuccessfully
consolidatingfunctionsandintegratingoperations,proceduresandpersonnelinatimelyandefficientmanner,aswellas
Pembina'sabilitytorealizetheanticipatedgrowthopportunitiesandsynergiesfromcombiningtheacquiredbusinessesand
operationswiththoseofPembina.Inparticular,largescaleacquisitionsmayinvolvesignificantpricingandintegrationrisk.
Theintegrationofacquiredbusinessesandentitiesrequiresthededicationofsubstantialmanagementeffort,timeand
resources,whichmaydivertmanagement'sfocusandresourcesfromotherstrategicopportunitiesandfromoperational
mattersduringthisprocess.Theintegrationprocessmayalsoresultinthelossofkeyemployeesandthedisruptionof
ongoingbusiness,customerandemployeerelationships,whichmayadverselyaffectPembina'sabilitytoachievethe
anticipatedbenefitsofanyacquisitions.AcquisitionsmayalsoexposePembinatoadditionalrisks,includingrisksrelatingto
entryintomarketsorbusinessesinwhichPembinahaslittleornodirectpriorexperience,increasedcreditrisksthroughthe
assumptionofadditionaldebt,costsandcontingentliabilitiesandexposuretoliabilitiesoftheacquiredbusinessorassets.
PembinaPipelineCorporation2020AnnualReport47
Aspartitsvaluepropositionevaluation,Pembinamayalsodesiretodivestassetstooptimizeitsoperationsandfinancial
performance.Pembinamay,however,beunabletosellcertainassetsor,ifPembinaisabletosellcertainassets,itmaynot
receivetheoptimalordesiredamountofproceedsfromsuchassetsales.Additionally,thetimingtocloseanyassetsales
couldbesignificantlydifferentthanPembina'sexpectedtimeline.
See"GeneralRiskFactors–AdditionalFinancingandCapitalResources"below.
JointOwnershipandThird-PartyOperators
CertainofPembina'sassetsarejointlyownedandaregovernedbypartnershiporshareholderagreementsenteredintowith
third-parties.Asaresult,certaindecisionsrelatingtotheseassetsrequiretheapprovalofasimplemajorityoftheowners,
whileothersrequireunanimousapprovaloftheowners.Inaddition,certainoftheseassetsareoperatedbyunrelatedthird-
partyentities.Thesuccessoftheseassetsis,tosomeextent,dependentontheeffectivenessofthebusinessrelationshipand
decision-makingamongPembinaandtheotherjointowner(s)andtheexpertiseandabilityofanythird-partyoperatorsto
operateandmaintaintheassets.WhilePembinabelievesthatthereareprudentgovernanceandothercontractualrightsin
place,therecanbenoassurancethatPembinawillnotencounterdisputeswithjointownersorthatassetsoperatedbythird
partiesmaynotperformasexpected.Sucheventscouldimpactoperationsorcashflowsoftheseassetsorcausethemtonot
operateasPembinaexpectswhich,inturn,couldhaveanegativeimpactonPembina'sbusinessoperationsandfinancial
results,andcouldreducePembina'sexpectedreturnoninvestment,therebyreducingthelevelofcashavailablefordividends
andtoserviceobligationsunderPembina'sdebtsecuritiesandotherdebtobligations.
ReserveReplacement,ThroughputandProductDemand
Pembina'spipelinerevenueisbasedonavarietyoftollingarrangements,includingfee-for-service,cost-of-serviceagreements
andmarket‑basedtolls.Asaresult,certainpipelinerevenueisheavilydependentuponthroughputlevelsofcrudeoil,condensate,NGLandnaturalgas.Futurethroughputoncrudeoil,NGLandnaturalgaspipelinesandreplacementofoiland
gasreservesintheserviceareaswillbedependentupontheactivitiesofproducersoperatinginthoseareasastheyrelateto
exploitingtheirexistingreservebasesandexploringforanddevelopingadditionalreserves,andtechnologicalimprovements
leadingtoincreasedrecoveryrates.Similarly,thevolumesofnaturalgasprocessedthroughPembina'sgasprocessingassets
dependsontheproductionofnaturalgasintheareasservicedbythegasprocessingbusinessandassociatedpipelines.
Withoutreserveadditions,orexpansionoftheserviceareas,volumesonsuchpipelinesandinsuchfacilitieswoulddecline
overtimeasreservesaredepleted.Asoilandgasreservesaredepleted,productioncostsmayincreaserelativetothevalue
oftheremainingreservesinplace,causingproducerstoshut-inproductionorseekoutlowercostalternativesfor
transportation.If,asaresult,theleveloftollscollectedbyPembinadecreases,cashflowavailablefordividendsto
ShareholdersandtoserviceobligationsunderPembina'sdebtsecuritiesandPembina'sotherdebtobligationscouldbe
adverselyaffected.
Overthelong-term,theabilityandwillingnessofshipperstocontinueproductionwillalsodepend,inpart,onthelevelof
demandandpricesforcrudeoil,condensate,NGLandnaturalgasinthemarketsservedbythecrudeoil,NGLandnaturalgas
pipelinesandgasprocessingandgatheringinfrastructureinwhichPembinahasaninterest.Producersmayshut-inproduction
atlowerproductpricesorhigherproductioncosts.
Globaleconomiceventsmaycontinuetohaveasubstantialimpactonthepricesofcrudeoil,condensate,NGLandnatural
gas.Pembinacannotpredicttheimpactoffuturesupply/demandoreconomicconditions,fuelconservationmeasures,
alternativefuelrequirements,governmentalregulationortechnologicaladvancesinfuelefficiencyandenergygenerationin
theenergyandpetrochemicalindustriesorfuturedemandforandpricesofnaturalgas,crudeoil,condensateandNGL.A
lowercommoditypriceenvironmentwillgenerallyreducedrillingactivityand,asaresult,thedemandformidstream
infrastructurecoulddecline.ProducersintheareasservicedbyPembinamaynotbesuccessfulinexploringforand
developingadditionalreservesorachievingtechnologicalimprovementstoincreaserecoveryratesandlowerproduction
costsduringperiodsoflowercommodityprices,whichmayalsoreducedemandformidstreaminfrastructure.
48PembinaPipelineCorporation2020AnnualReport
Futurepricesofthesehydrocarbonsaredeterminedbysupplyanddemandfactors,includingweatherandgeneraleconomic
conditionsaswellaseconomic,politicalandotherconditionsinothercrudeoilandnaturalgasregions,allofwhichare
beyondPembina'scontrol.Therateandtimingofproductionfromprovennaturalgasreservestiedintogasplantsisatthe
discretionofproducersandissubjecttoregulatoryconstraints.Producershavenoobligationtoproducefromtheirnatural
gasreserves,whichmeansproductionvolumesareatthediscretionofproducers.Lowerproductionvolumesmayincrease
thecompetitionfornaturalgassupplyatgasprocessingplants,whichcouldresultinhighershrinkagepremiumsbeingpaidto
naturalgasproducers.Inaddition,lowerproductionvolumesmayleadtolessdemandforpipelinesandprocessingcapacity
andcouldadverselyimpactPembina'sabilitytore-contractonfavourabletermswithshippersascurrentagreementsexpire.
Pembina'sgasprocessingassetsareconnectedtovariousthird-partytrunklinesystems.Operationaldisruptionsor
apportionmentonthosethird-partysystemsmaypreventthefullutilizationofPembina'sgasprocessingassets,whichmay
haveanadverseeffectonPembina'sbusiness.
Competition
Pembinacompeteswithotherpipeline,midstream,marketingandgasprocessing,fractionationandhandling/storageservice
providersinitsserviceareasaswellasothertransportersofcrudeoil,NGLandnaturalgas.Theintroductionofcompeting
transportationalternativesintoPembina'sserviceareascouldlimitPembina'sabilitytoadjusttollsasitmaydeemnecessary
andcouldresultinthereductionofthroughputinPembina'spipelines.Additionally,potentialpricingdifferentialsonthe
componentsofNGLmayresultinthesecomponentsbeingtransportedbycompetinggaspipelines.Pembinaisdeterminedto
meet,andbelievesthatitispreparedfor,theseexistingandpotentialcompetitivepressures,includingthroughagreements
whichprovideforareasofdedicationoverthegeographicareasinwhichPembina'spipelineinfrastructureislocated.
Pembinaalsocompeteswithotherbusinessesforgrowthandbusinessopportunities,includingcompetitionrelatedto
potentialgreenfielddevelopmentopportunities,whichcouldimpactitsabilitytogrowthroughacquisitionsand
developmentsandcouldimpactearningsandcashflowavailabletopaydividendsandtoserviceobligationsunderPembina's
debtsecuritiesandotherdebtobligations.
RelianceonPrincipalCustomers
Pembinasellsservicesandproductstolargecustomerswithinitsareaofoperationsandreliesonseveralsignificant
customerstopurchaseproductfortheMarketingbusiness.Ifforanyreasonthesepartiesareunabletoperformtheir
obligationsunderthevariousagreementswithPembina,therevenueanddividendsoftheCompanyandtheoperationsof
Pembinacouldbenegativelyimpacted.See"GeneralRiskFactors–CounterpartyCreditRisk"below.
CustomerContracts
ThroughputonPembina'spipelinesisgovernedbytransportationcontractsortollingarrangementswithvariouscrudeoiland
naturalgasproducers.Pembinaispartytonumerouscontractsofvaryingdurationsinrespectofitsgasgathering,processing
andfractionationfacilitiesaswellasitsterminallingandstorageservices.Anydefaultbycounterpartiesundersuchcontracts
oranyexpirationorearlyterminationofsuchcontractsortollingarrangementswithoutrenewalorreplacement,provided
thatsuchcontractsarematerialtoPembina'sbusinessandoperations,mayhaveanadverseeffectonPembina'sbusinessand
resultsfromoperationsandthereisnoguaranteethatanyofthecontractsthatPembinacurrentlyhasinplacewillbe
renewedattheendoftheirterm,includingontermsfavourabletoPembina,orreplacedwithothercontractsintheeventof
earlytermination.Further,somecontractsassociatedwiththeservicesdescribedabovearecomprisedofamixtureoffirm
andnon-firmcommitments.TherevenuethatPembinaearnsonnon-firmorfirmcommitmentswithouttake-or-payserviceis
dependentonthevolumeofcrudeoil,condensate,NGLandnaturalgasproducedbyproducersintherelevantgeographic
areas.Accordingly,lowerproductionvolumesintheseareas,includingforreasonssuchaslowcommodityprices,mayhave
anadverseeffectonPembina'srevenue.
PembinaPipelineCorporation2020AnnualReport49
RisksRelatingtoLeasesandRightsofWayAccess
CertainPembinafacilitiesandassociatedinfrastructurearelocatedonlandsleasedorlicensedfromthirdpartiesthatmustbe
renewedfromtimetotime.FailuretorenewtheleasesorlicensesontermsacceptabletoPembinacouldsignificantlyreduce
theoperationsofsuchfacilitiesandcouldresultinrelateddecommissioningcostsforPembina,pursuanttothetermsofsuch
leasesorlicenses.Successfuldevelopmentofnewpipelinesorextensionstoexistingpipelinesdependsinpartonsecuring
leases,easements,rights-of-way,permitsand/orlicensesfromlandownersorgovernmentalauthoritiesallowingaccessfor
suchpurposes.Theprocessofsecuringrights-of-wayorsimilaraccessisbecomingmorecomplex,particularlyinmoredensely
populated,environmentallysensitiveandotherareas.Theinabilitytosecuresuchrights-of-wayorsimilaraccesscouldhave
anadverseeffectonPembina'soperationsandfinancialresults.
Reputation
Reputationalriskisthepotentialriskthatmarket-orcompany-specificevents,orotherfactors,couldresultinthe
deteriorationofPembina'sreputationwithkeystakeholders.Pembina'sbusinessandoperations,projectsandgrowth
opportunitiesrequireustohavestrongrelationshipswithkeystakeholders,includinglocalcommunities,Indigenous
communitiesandothergroupsdirectlyimpactedbytheCompany'sactivities,aswellasgovernmentsandgovernment
agencies.
ThepotentialfordeteriorationofPembina'sreputationexistsinmanybusinessdecisions,whichmaynegativelyimpact
Pembina'sbusinessandthevalueofitssecurities.Reputationalriskcannotbemanagedinisolationfromotherformsofrisk.
Credit,market,operational,insurance,liquidity,regulatoryandlegal,andtechnologyrisks,amongothers,mustallbe
managedeffectivelytosafeguardPembina'sreputation.Pembina'sreputationcouldalsobeimpactedbytheactionsand
activitiesofothercompaniesoperatingintheenergyindustry,particularlyotherenergyinfrastructureproviders,overwhich
Pembinahasnocontrol.Inparticular,Pembina'sreputationcouldbeimpactedbynegativepublicityrelatedtopipeline
incidents,expansionplansornewprojectsorduetooppositionfromciviliansororganizationsopposedtoenergy,oilsands
andpipelinedevelopmentand,particularly,withshipmentofproductionfromoilsandsregions.Further,Pembina's
reputationcouldbenegativelyimpactedbychangingpublicattitudestowardsclimatechangeandtheperceivedcauses
thereof,overwhichtheCompanyhasnocontrol.Negativeimpactsresultingfromacompromisedreputation,whethercaused
byPembina’sactionsorotherwise,couldincluderevenueloss,reductionincustomerbase,delaysinobtainingregulatory
approvalswithrespecttogrowthprojects,reducedaccesstocapitalordecreasedvalueofPembina'ssecuritiesandreduced
insurancecapacityandcoverage.
EnvironmentalCostsandLiabilities
Pembina'soperations,facilitiesandpetroleumproductshipmentsaresubjecttoextensivenational,regionalandlocal
environmental,healthandsafetylawsandregulationsgoverning,amongotherthings,dischargestoair,landandwater,the
handlingandstorageofpetroleumproductsandhazardousmaterials,wastedisposal,theprotectionofemployeehealth,
safetyandtheenvironment,andtheinvestigationandremediationofcontamination.Pembina'sfacilitiesmayexperience
incidents,malfunctionsorotherunplannedeventsthatmayresultinspillsoremissionsand/orresultinpersonalinjury,fines,
penalties,othersanctionsorpropertydamage.Pembinamayalsoincurliabilityforenvironmentalcontaminationassociated
withpastandpresentactivitiesandproperties.
50PembinaPipelineCorporation2020AnnualReport
Pembina'sfacilitiesandpipelinesmustmaintainanumberofenvironmentalandotherpermitsfromvariousgovernmental
authoritiesinordertooperate,andthesefacilitiesaresubjecttoinspectionfromtimetotime.Failuretomaintaincompliance
withtheserequirementscouldresultinoperationalinterruptions,finesorpenalties,ortheneedtoinstalladditionalpollution
controltechnology.Licensesandpermitsmustberenewedfromtimetotimeandthereisnoguaranteethatalicenseor
permitwillberenewedonthesameorsimilarconditionsasitwasinitiallygranted.TherecanbenoassurancethatPembina
willbeabletoobtainalllicenses,permits,registrations,approvalsandauthorizationsthatmayberequiredtoconduct
operationsthatitmaywishtoundertake.Further,ifatanytimeregulatoryauthoritiesdeemanyofPembina'spipelinesor
facilitiesunsafeornotincompliancewithapplicablelaws,theymayordersuchfacilitiestobeshutdown.Certainsignificant
environmentallegislativeinitiativesthatmaymateriallyimpactPembina'sbusinessandfinancialresultsandconditionsare
outlinedbelow.
OnDecember11,2020,thefederalgovernmentannounced"AHealthyEnvironmentandaHealthyEconomy"("NewFederal
ClimatePlan"),whichaimstoexceedthefederalgovernment'sprevious2030targetfornationalGHGemissionsreductions
andtosetCanadaonatracktonet-zeroGHGemissionsby2050.Theupstreamoilandgasindustryisexpectedtocontribute
asignificantamountofthereductionneededtoachievethesegoals.TheNewFederalClimatePlanimplementsanumberof
specificmeasuresdescribedbelow,butisalsoexpectedtoaffectthedecision-makingofallfederalgovernmentbodies,
includingfederalregulators,consistentwith,forinstance,theapplicationoftheSACCtoprojectssubjecttotheIAA,as
describedabove.
Thefederalgovernmentmandatedapan-Canadiancarbonpricebeginningat$20pertonnein2019,risingby$10pertonne
peryearto$50pertonnein2022.PursuanttotheNewFederalClimatePlan,past2022thepriceoncarbonwillriseby$15a
yearto$170in2030.TheGreenhouseGasPollutionPricingAct("GGPPA")introducesacarbonpricingregimeonthose
provincesthatfailtoimposeadequateprovincialcarbonpricingmeasures.TheNewFederalClimatePlanindicatesthefederal
governmentwillreviewthestandardforadequacyofprovincialcarbonpricingmeasuresundertheGGPPA.Thismayresultin
theGGPPAapplyingmorebroadlytotheprovincesandterritories.In2020,theAlbertaCourtofAppealfoundtheGGPPA
unconstitutional,adecisionwhichfollowedtwounsuccessfulconstitutionalchallengesoftheGGPPAbySaskatchewanand
Ontarioin2019.TheAlberta,Saskatchewan,andOntarioconstitutionalchallengeswereappealedtotheSupremeCourtof
Canada,whichheardthecasein2020buthas,atthistime,yettoreleaseadecision.Manitobahasalsoinitiatedachallenge
totheGGPPAinFederalCourt.TheresultsofthechallengestotheGGPPAcouldsignificantlyimpacthowGHGemissionsare
regulatedthroughoutCanadaincludingintheprovincesdiscussedbelow.
ThefederalRegulationsRespectingReductionintheReleaseofMethaneandCertainVolatileOrganicCompounds(Upstream
OilandGasSector)("FederalMethaneRegulations"),whichrequirereductionoffugitiveandventedgasemissionsfromthe
upstreamoilandgassector,cameintoforceonJanuary1,2020.AccordingtotheNewFederalClimatePlan,thefederal
governmentwillreportontheeffectivenessoftheFederalMethaneRegulationsin2021andthestringencyoftheFederal
MethaneRegulationsisexpectedtobeincreasedin2025,ifnotsooner.TheFederalMethaneRegulationsmayimpose
additionalcostsontheoperationsofPembinaandPembina'scustomers.
ThefederalgovernmentisalsodevelopingaCleanFuelStandardthatwillrequireallproducersandimportersofliquidfossil
fuelsinCanadatoreduceoroffsetthecarbonintensityofthefuelstheyproduceorimport.Thefinalversionofthe
regulationsimplementingtheCleanFuelStandardisexpectedinlate2021.Pembinawillcontinuetomonitorthe
developmentofregulationsonliquidfossilfuels.ThepotentialcostsandbenefitsoftheCleanFuelStandardtoPembinaand
itscustomersarecontinuingtobeassessed.
Albertaonlypartiallysatisfiesfederalrequirementswithrespecttocarbonpricingandissubjecttothefederalfuelcharge
pursuanttotheGGPPAasofJanuary1,2020.Thefuelchargewas$20pertonneonJanuary1,2020androseto$30per
tonneonApril1,2020.
PembinaPipelineCorporation2020AnnualReport51
TheTechnologyInnovationandEmissionsReduction("TIER")RegulationreplacedtheCarbonCompetitivenessIncentive
Regulation("CCIR")asAlberta'soutput-basedemissionallocationsforlargefacilityemittersonJanuary1,2020.TheTIER
continuestofacilitateemissionsreductionsrelativetofacilitiesthatemitted100,000tonnesofGHGsormorein2016orany
subsequentyear.ForfacilitieswhicharesubjecttotheTIER,itreplacesthefederaloutput-basedcarbonpriceincludedinthe
GGPPA.PembinahasthreenaturalgasprocessingfacilitiessubjecttotheTIER.Atpresent,theoperationalandfinancial
impactsareminimalandareanticipatedtonotchangesubstantiallyoverthenextfewyears.Asmorefacilitiesexpandand
increaseproduction,itisanticipatedthatadditionalfacilitieswillbecomesubjecttotheTIER.Thepotentialcostsandbenefits
toPembinaofthosefacilitiesundertheTIERarecontinuingtobeassessed.
Byanequivalencyagreementwiththefederalgovernment,whichcameintoforceOctober26,2020,theFederalMethane
RegulationsdonotcurrentlyapplyinAlberta.TheapplicationoftheFederalMethaneRegulationsinAlbertamaychangein
2023orearlierasthefederalgovernmentworkstomeetitsdesiredgasemissionsreductiontargets.TheMethaneEmission
ReductionRegulationcameintoforceinAlbertaonJanuary1,2020,and,alongwithcertainAERDirectives,imposeslargely
thesameconstraintsastheFederalMethaneRegulations.
TheGovernmentofAlberta,initsclimatechangelegislationandguidelines,haslegislatedanoverallcaponoilsandsGHG
emissions.Thelegislatedemissionscaponoilsandsoperationshasbeensettoamaximumof100megatonnesinanyyear.
Oilsandsoperationscurrentlyemitapproximately70megatonnesperyear.Thislegislatedcapmaylimitoilsandsproduction
growthinthefuture.
SimilarpolicyreviewsonclimatechangeareongoinginBritishColumbia,Saskatchewan,ManitobaandOntario.Subjecttothe
outcomeofthechallengestotheGGPPAnotedabove,thecarbonpricingregimeintheGGPPAcurrentlyappliestodifferent
degreesinSaskatchewan,ManitobaandOntario.BritishColumbiahasaseparatecarbonpricingregimeinplacewithacarbon
pricelevellargelyequivalenttothatintheGGPPA.TheFederalMethaneRegulationsapplyinOntarioandManitobabutnot
currently,byequivalencyagreementssimilartothatineffectinAlberta,inBritishColumbiaorSaskatchewan.Ontarioalso
madesubstantialamendmentstotheOntarioEnvironmentalAssessmentActonJuly21,2020.Theimpactofthese
amendmentshasyettobedetermined.
Throughactiveparticipationwithindustryassociationsanddirectengagementwithregulatorybodies,Pembinawillcontinue
tomonitorandassessformaterialimpactstoPembina'sbusinessasregulationsandpoliciescontinuetobedeveloped.
WhilePembinabelievesitscurrentoperationsareincompliancewithallapplicableenvironmental,healthandsafetylaws,
therecanbenoassurancethatsubstantialcostsorliabilitieswillnotbeincurredasaresultofnon-compliancewithsuchlaws.
Moreover,itispossiblethatotherdevelopments,suchaschangesinenvironmental,healthandsafetylaws,regulationsand
enforcementpoliciesthereunder,includingwithrespecttoclimatechange,claimsfordamagestopersonsorproperty
resultingfromPembina'soperations,andthediscoveryofpre-existingenvironmentalliabilitiesinrelationtoPembina's
existingorfuturepropertiesoroperations,couldresultinsignificantcostsandliabilitiestoPembina.IfPembinaisnotableto
recovertheresultingcostsorincreasedcoststhroughinsuranceorincreasedtolls,cashflowavailabletopaydividendsto
ShareholdersandtoserviceobligationsunderPembina'sdebtsecuritiesandPembina'sotherdebtobligationscouldbe
adverselyaffected.
Changesinenvironmental,healthandsafetyregulationsandlegislation,includingwithrespecttoclimatechange,mayalso
impactPembina'scustomersandcouldresultincrudeoilandnaturalgasdevelopmentandproductionbecoming
uneconomical,whichwouldimpactthroughputandrevenueonPembina'ssystemsandinitsfacilities.
See"ReserveReplacement,ThroughputandProductDemand"above.
52PembinaPipelineCorporation2020AnnualReport
WhilePembinamaintainsinsurancefordamagecausedbyseepageorpollutionfromitspipelinesorfacilitiesinanamountit
considersprudentandinaccordancewithindustrystandards,certainprovisionsofsuchinsurancemaylimittheavailability
thereofinrespectofcertainoccurrencesunlesstheyarediscoveredwithinfixedtimeperiods,whichtypicallyrangefrom
72hoursto30days.AlthoughPembinabelievesithasadequatepipelinemonitoringsystemsinplacetomonitorfora
significantspillofproduct,ifPembinaisunawareofaproblemorisunabletolocatetheproblemwithintherelevanttime
period,insurancecoveragemaylapseandmaynotbeavailable.
AbandonmentCosts
Pembinaisresponsibleforcompliancewithallapplicablelawsandregulationsregardingthedismantling,decommissioning,
environmental,reclamationandremediationactivitiesonabandonmentofitspipelinesystemsandotherassetsattheendof
theireconomiclife,andtheseabandonmentcostsmaybesubstantial.Anaccountingprovisionismadefortheestimatedcost
ofsiterestorationandiscapitalizedintherelevantassetcategory.Aprovisionisrecognizedif,asaresultofapastevent,
Pembinahasapresentlegalorconstructiveobligationthatcanbeestimatedreliably,anditisprobablethatanoutflowof
economicbenefitswillberequiredtosettletheobligation.Pembina'sestimatesofthecostsofsuchabandonmentor
decommissioningcouldbemateriallydifferentthantheactualcostsincurred.FormoreinformationwithrespecttoPembina's
estimatednetpresentvalueofdecommissioningobligations,seeNote18totheConsolidatedFinancialStatements,which
noteisincorporatedbyreferenceherein.
Theproceedsfromthedispositionofcertainassets,includinginrespectofcertainpipelinesystemsandlinefill,maybe
availabletooffsetabandonmentcosts.Pembinamay,inthefuture,determineitprudentorberequiredbyapplicablelawsor
regulationstoestablishandfundadditionalreclamationfundstoprovideforpaymentoffutureabandonmentcosts.Such
reservescoulddecreasecashflowavailabletopayfordividendstoShareholdersandtoserviceobligationsunderPembina's
debtsecuritiesandPembina'sotherdebtobligations.
Tothebestofitsknowledge,PembinahascompliedwithCERrequirementsonitswholly-ownedCER-regulatedpipelinesfor
abandonmentfundingandhascompletedthecompliance-basedfilingsthatarerequiredundertheapplicableCERrulesand
regulationsregardingtheabandonmentofitspipelinesystemsandassets.PembinaalsohasownershipinCER-regulated
pipelinesincludinginrespectoftheAlliancePipeline,theTupperpipelinesandtheKerrobertpipeline,whichareoperatedby
orwithitsjointventurepartners.Pembinaandthejointventurepartnerineachcaseareresponsiblefortheabandonment
fundingandthesubmissionoftheCER-compliancebasedfilingsforthoseCER-regulatedpipelines.Pembinawillcontinueto
monitoranyregulatorychangespriortothenextfive-yearreviewandwillcompletetheannualreportingasrequiredbythe
CER.
OperatingandCapitalCosts
TheoperatingandcapitalcostsofPembina'sassetsmayvaryconsiderablyfromcurrentandforecastedvaluesandratesand
representsignificantcomponentsofthecostofprovidingservice.Ingeneral,asequipmentages,costsassociatedwithsuch
equipmentmayincreaseovertime.Inaddition,operatingandcapitalcostsmayincreaseasaresultofanumberoffactors
beyondPembina'scontrol,includinggeneraleconomic,businessandmarketconditionsandsupply,demandand/orinflation
inrespectofrequiredgoodsand/orservices.Dividendsmaybereducedifsignificantincreasesinoperatingorcapitalcostsare
incurredandthismayalsoimpacttheabilityofPembinatoserviceobligationsunderitsdebtsecuritiesandotherdebt
obligations.
Althoughcertainoperatingcostsarerecapturedthroughthetollschargedonnaturalgasvolumesprocessedandcrudeoiland
NGLtransported,respectively,totheextentsuchtollsescalate,producersmayseeklowercostalternativesorstop
productionoftheircrudeoiland/ornaturalgas.
PembinaPipelineCorporation2020AnnualReport53
RisksRelatingtoNGLbyRail
Pembina'soperationsincluderailloading,offloadingandterminallingfacilities.Pembinareliesonrailroadsandtrucksto
distributeitsproductsforcustomersandtotransportrawmaterialstoitsprocessingfacilities.Costsforenvironmental
damage,damagetopropertyand/orpersonalinjuryintheeventofarailwayincidentinvolvinghydrocarbonshavethe
potentialtobesignificant.Atthistime,theRailwaySafetyAct(Canada),whichgovernstheoperationofrailwayequipment,
doesnotcontemplateregulatoryenforcementproceedingsagainstshippers,butconsignorsandshippersmaybesubjectto
regulatoryproceedingsundertheTransportationofDangerousGoodsAct(Canada),whichspecifiestheobligationsof
shipperstoidentifyandclassifydangerousgoods,selectappropriateequipmentandprepareshippingdocumentation.While
theCanadaTransportationActwasamendedin2015toprecluderailwaycompaniesfromshiftingliabilityforthird-party
claimstoshippersbytariffpublicationalone,majorCanadianrailwayshaveadoptedstandardcontractprovisionsdesignedto
implementsuchashift.UndervariousenvironmentalstatutesinbothCanadaandtheU.S.,Pembinacouldbeheld
responsibleforenvironmentaldamagecausedbyhydrocarbonsloadedatitsfacilitiesorbeingcarriedonitsleasedrailcars.
Pembinapartiallymitigatesthisriskbysecuringinsurancecoverage,butsuchinsurancecoveragemaynotbeadequateinthe
eventofanincident.
RailwayincidentsinCanadaandtheU.S.havepromptedregulatorybodiestoinitiatereviewsoftransportationrulesand
publishvariousdirectives.RegulatorsinCanadaandtheU.S.havebeguntophase-inmorestringentengineeringstandardsfor
tankcarsusedtomovehydrocarbonproducts,whichrequireallNorthAmericantankcarscarryingcrudeoilorethanoltobe
retrofittedandalltankcarscarryingflammableliquidstobecompliantinaccordancewiththerequiredregulatorytimelines.
Inaddition,in2020,theGovernmentofCanadadirectedindustrytoreviewandupdatetherulesregardingthetransportation
ofcrudeoilandliquefiedpetroleumgas.Whilemostlegislativeandregulatorychangesapplydirectlytorailwaycompanies,
costsassociatedwithretrofittinglocomotivesandrailcars,implementingsafetysystems,increasedinspectionandreporting
requirementsmaybeindirectlypassedontoPembinathroughincreasedfreightratesandcarleasingcosts.Inaddition,
regulatorsinCanadaandtheU.S.haveimplementedchangesthatimposeobligationsdirectlyonconsignorsandshippers,
suchasPembina,relatingtothecertificationofproduct,equipmentproceduresandemergencyresponseprocedures.
IntheeventthatPembinaisultimatelyheldliableforanydamagesresultingfromitsactivitiesrelatingtotransportingNGLby
rail,forwhichinsuranceisnotavailable,orincreasedcostsorobligationsareimposedonPembinaasaresultofnew
regulations,thiscouldhaveanimpactonPembina'sbusiness,operationsandprospectsandcouldimpactearningsandcash
flowavailabletopaydividendsandtoserviceobligationsunderPembina'sdebtsecuritiesandotherdebtobligations.
RiskFactorsRelatingtotheSecuritiesofPembina
DilutionofShareholders
Pembinaisauthorizedtoissue,amongotherclassesofshares,anunlimitednumberofCommonSharesforconsiderationon
termsandconditionsasestablishedbytheBoardofDirectorswithouttheapprovalofShareholdersincertaininstances.
ExistingShareholdershavenopre-emptiverightsinconnectionwithsuchfurtherissuances.AnyissuanceofCommonShares
mayhaveadilutiveeffectonexistingShareholders.
54PembinaPipelineCorporation2020AnnualReport
RiskFactorsRelatingtotheActivitiesofPembinaandtheOwnershipofSecurities
ThefollowingisalistofcertainriskfactorsrelatingtotheactivitiesofPembinaandtheownershipofitssecurities:
• thelevelofPembina'sindebtednessfromtimetotimecouldimpairPembina'sabilitytoobtainadditionalfinancing
onatimelybasistotakeadvantageofbusinessopportunitiesthatmayarise,whichmayhaveanadverseeffecton
thevalueofPembina'ssecurities;
• theuncertaintyoffuturedividendpaymentsbyPembinaandthelevelthereof,asPembina'sdividendpolicyandthe
fundsavailableforthepaymentofdividendsfromtimetotimewillbedependentupon,amongotherthings,
operatingcashflowgeneratedbyPembinaanditssubsidiaries,financialrequirementsforPembina'soperations,the
executionofitsgrowthstrategyandthesatisfactionofsolvencytestsimposedbytheABCAforthedeclarationand
paymentofdividends;
• Pembinamaymakefutureacquisitionsormayenterintofinancingsorothertransactionsinvolvingtheissuanceof
securitiesofPembinawhichmaybedilutivetotheholdersofPembina'ssecurities;
• theinabilityofPembinatomanagegrowtheffectively,andrealizetheanticipatedgrowthopportunitiesfrom
acquisitionsandnewprojects,couldhaveanadverseimpactonPembina'sbusiness,operationsandprospects,which
mayalsohaveanadverseeffectonthevalueofPembina'ssecurities;and
• themarketvalueoftheCommonSharesmaydeterioratemateriallyifPembinaisunabletomeetitscashdividend
targetsormakecashdividendsinthefuture.
MarketValueofCommonSharesandOtherSecurities
PembinacannotpredictatwhatpricetheCommonShares,ClassAPreferredSharesorothersecuritiesissuedbyPembinawill
tradeinthefuture.CommonShares,ClassAPreferredSharesandothersecuritiesofPembinawillnotnecessarilytradeat
valuesdeterminedsolelybyreferencetotheunderlyingvalueofPembina'sassets.Oneofthefactorsthatmayinfluencethe
marketpriceoftheCommonSharesandtheClassAPreferredSharesistheannualdividendyieldofsuchsecurities.An
increaseininterestratesmayleadholdersand/orpurchasersofCommonSharesorClassAPreferredSharestodemanda
higherannualdividendyield,whichcouldadverselyaffectthemarketpriceoftheCommonSharesorClassAPreferred
Shares.Inaddition,themarketpriceforCommonSharesandtheClassAPreferredSharesmaybeaffectedbyannouncements
ofnewdevelopments,changesinPembina'soperatingresults,failuretomeetanalysts'expectations,changesincredit
ratings,changesingeneralmarketconditions,fluctuationsinthemarketforequityordebtsecuritiesandotherfactors
beyondthecontrolofPembina.
Shareholdersareencouragedtoobtainindependentlegal,taxandinvestmentadvicewithrespecttotheholdingof
CommonSharesorClassAPreferredSharesandothersecuritiesissuedbyPembina.
GeneralRiskFactors
HealthandSafety
TheoperationofPembina'sbusinessissubjecttohazardsofgathering,processing,transporting,fractionating,storingand
marketinghydrocarbonproducts.Suchhazardsinclude,butarenotlimitedto:blowouts;fires;explosions;gaseousleaks,
includingsournaturalgas;migrationofharmfulsubstances;oilspills;corrosion;andactsofvandalismandterrorism.These
hazardsmayinterruptoperations,impactPembina'sreputation,causelossoflifeorpersonalinjurytotheCompany'sworkers
orcontractors,resultinlossofordamagetoequipment,property,informationtechnologysystems,relateddataandcontrol
systemsorcauseenvironmentaldamagethatmayincludepollutingwater,landorair.Further,severaloftheCompany's
pipelinesystemsandrelatedassetsareoperatedincloseproximitytopopulatedareasandamajorincidentcouldresultin
injuryorlossoflifetomembersofthepublic.Apublicsafetyincidentcouldalsoresultinreputationaldamagetothe
Company,materialrepaircostsorincreasedcostsofoperatingandinsuringPembina'sassets.
PembinaPipelineCorporation2020AnnualReport55
AdditionalFinancingandCapitalResources
ThetimingandamountofPembina'scapitalexpendituresandcontributionstoequityaccountedinvestees,andtheabilityof
Pembinatorepayorrefinanceexistingdebtasitbecomesdue,directlyaffectstheamountofcashavailableforPembinato
paydividends.Futureacquisitions,expansionsofPembina'sassets,othercapitalexpendituresandtherepaymentor
refinancingofexistingdebtasitbecomesduemaybefinancedfromsourcessuchascashgeneratedfromoperations,the
issuanceofadditionalCommonShares,ClassAPreferredSharesorothersecurities(includingdebtsecurities)ofPembinaand
borrowings.Dividendsmaybereduced,oreveneliminated,attimeswhensignificantcapitalorotherexpendituresaremade.
TherecanbenoassurancethatsufficientcapitalwillbeavailableontermsacceptabletoPembina,oratall,tomake
additionalinvestments,fundfutureexpansionsormakeotherrequiredcapitalexpenditures.Duringperiodsofweaknessin
theglobaleconomy,andinparticularthecommodity-relatedindustrysectors,Pembinamayexperiencerestrictedaccessto
capitalandincreasedborrowingcosts.TheabilityofPembinatoraisecapitaldependson,amongotherfactors,theoverall
stateofcapitalmarkets,Pembina'screditrating,investordemandforinvestmentsintheenergyindustryanddemandfor
Pembina'ssecurities.Totheextentthatexternalsourcesofcapital,includingtheissuanceofadditionalCommonShares,Class
APreferredSharesorothersecuritiesortheavailabilityofadditionalcreditfacilities,becomelimitedorunavailableon
acceptableterms,oratall,duetocreditmarketconditionsorotherwise,theabilityofPembinatomakethenecessarycapital
investmentstomaintainorexpanditsoperations,torepayoutstandingdebtortoinvestinassets,asthecasemaybe,maybe
impaired.TotheextentPembinaisrequiredtouseoperatingcashflowtofinancecapitalexpendituresoracquisitionsorto
repayexistingdebtasitbecomesdue,thelevelofdividendspayablemaybereduced.
CounterpartyCreditRisk
CounterpartycreditriskrepresentsthefinanciallossPembinamayexperienceifacounterpartytoafinancialinstrumentor
commercialagreementfailstomeetitscontractualobligationstoPembinainaccordancewiththetermsandconditionsof
suchinstrumentsoragreementswithPembina.CounterpartycreditriskarisesprimarilyfromPembina'sshort-term
investments,tradeandotherreceivables,advancestorelatedpartiesandfromcounterpartiestoitsderivativefinancial
instruments.
Pembinacontinuestocloselymonitorandreassessthecreditworthinessofitscounterparties,includingfinancialinstitutions.
Pembinamayreduceormitigateitsexposuretocertaincounterpartieswhereitisdeemedwarrantedandpermittedunder
contractualterms.Pembinamanagescounterpartycreditriskthroughestablishedcreditmanagementtechniques,including
conductingcomprehensivefinancialandotherassessmentsonallnewcounterpartiesandregularreviewsofexisting
counterpartiestoestablishandmonitorcounterparties'creditworthiness,setexposurelimits,monitorexposuretothese
limitsandseektoobtainfinancialassuranceswherewarrantedandpermittedundercontractualterms.Pembinautilizes
varioussourcesoffinancial,creditandbusinessinformationinassessingthecreditworthinessofacounterparty,including
externalcreditratings,whereavailable,and,inothercases,detailedfinancialstatementanalysisinordertogeneratean
internalcreditratingbasedonquantitativeandqualitativefactors.Theestablishmentofcounterpartyexposurelimitsis
governedbyaBoard-designatedcounterpartyexposurelimitmatrixwhichrepresentsthemaximumdollaramountsof
counterpartyexposurebydebtratingthatcanbeapprovedforaparticularcounterparty.
Financialassurancesfromcounterpartiesmayincludeguarantees,lettersofcreditandcash.AsatDecember31,2020,letters
ofcredittotalingapproximately$130million(December31,2019:$90million)wereheldprimarilyinrespectofcustomer
tradereceivables.
Pembinahastypicallycollecteditsreceivablesinfull.AtDecember31,2020,approximately94percent(December31,2019:
95percent)ofreceivableswerecurrent.Pembinahasagenerallienandacontinuingandfirstprioritysecurityinterestin,and
asecuredchargeon,allofashipper'spetroleumproductsinitscustody.Theriskofnon-collectionisconsideredtobelowand
nomaterialimpairmentoftradeandotherreceivableshasbeenmadeasofthedatehereof.
56PembinaPipelineCorporation2020AnnualReport
Pembinamonitorsandmanagesitsconcentrationofcounterpartycreditriskonanongoingbasis.Pembinaalsoevaluates
counterpartyriskfromtheperspectiveoffutureexposurewithexistingornewcounterpartiesthatsupportfuturecapital
expansionprojects.Pembinabelievesthesemeasuresareprudentandallowforeffectivemanagementofitscounterparty
creditriskbutthereisnocertaintythattheywillprotectPembinaagainstallmateriallosses.Aspartofitsongoingoperations,
Pembinamustbalanceitsmarketandcounterpartycreditriskswhenmakingbusinessdecisions.
DebtService
AsatDecember31,2020,Pembinahadexposuretofloatinginterestratesonapproximately$1.2billion(2019:$2.1billion)in
debt.Certainborrowingswhichoccurunderfloatingrateshavebeenswappedtofixedratesusingderivativefinancial
instruments.
Variationsininterestratesandscheduledprincipalrepayments,ifrequiredunderthetermsofPembina'sbankingagreements
couldresultinsignificantchangesintheamountsrequiredtobeappliedtodebtservicebeforepaymentofanydividends.
CertaincovenantsintheCompany'sagreementswithitslendersmayalsolimitcertainpaymentsanddividendspaidby
Pembina.
Pembinaanditssubsidiariesarepermittedtoborrowfundstofinancethepurchaseofpipelinesandotherenergy
infrastructureassets,tofundcapitalexpendituresorotherfinancialobligationsorexpendituresinrespectofsuchassetsand
forworkingcapitalpurposes.Amountspaidinrespectofinterestandprincipalondebtincurredinrespectofthoseassets
reducetheamountofcashflowavailablefordividendsonCommonShares.Pembinaisalsorequiredtomeetcertainfinancial
covenantsundertheCreditFacilitiesandissubjecttocustomaryrestrictionsonitsoperationsandactivities,including
restrictionsonthegrantingofsecurity,incurringindebtednessandthesaleofitsassets.
ThelendersunderPembina'sCreditFacilitieshavebeenprovidedwithguaranteesandsubordinationagreements.IfPembina
becomesunabletopayitsdebtservicechargesorotherwisecommitsaneventofdefault,paymentstothelendersunderits
CreditFacilitieswillrankinprioritytodividends.
AlthoughPembinabelievesitsexistingCreditFacilitiesaresufficientforitsimmediateliquidityrequirements,therecanbeno
assurancethattheamountavailablethereunderwillbeadequateforthefuturefinancialobligationsofPembinaorthat
additionalfundswillbeabletobeobtainedontermsacceptabletoPembina,oratall.
CreditRatings
RatingagenciesregularlyevaluatePembinaandbasetheirratingsofPembina'slong-termandshort-termdebtandClassA
PreferredSharesonanumberoffactors.ThesefactorsincludePembina'sfinancialstrengthaswellasfactorsnotentirely
withinPembina'scontrol,includingconditionsaffectingtheindustryinwhichPembinaoperatesgenerallyandthewiderstate
oftheeconomy.TherecanbenoassurancethatoneormoreofPembina'screditratingswillnotbedowngraded.Acredit
ratingdowngradecouldalsolimitPembina’saccesstodebtandpreferredsharemarkets.
Pembina'sborrowingcostsandabilitytoraisefundsaredirectlyimpactedbyitscreditratings.Creditratingsmaybe
importanttosuppliersorcounterpartieswhentheyseektoengageincertaintransactionswithPembina.Acreditrating
downgrademayimpairPembina'sabilitytoenterintoarrangementswithsuppliersorcounterparties,engageincertain
transactions,limitPembina'saccesstoprivateandpubliccreditmarketsorincreasethecostsofborrowingunderitsexisting
CreditFacilities.AcreditratingdowngradecouldalsolimitPembina'saccesstodebtandpreferredsharemarkets.
PembinaPipelineCorporation2020AnnualReport57
RelianceonManagement,KeyIndividualsandaSkilledWorkforce
PembinaisdependentonseniormanagementanddirectorsoftheCompanyinrespectofthegovernance,administrationand
managementofallmattersrelatingtoPembinaanditsoperationsandadministration.Thelossoftheservicesofkey
individualscouldhaveadetrimentaleffectonPembina.Inaddition,Pembina'soperationsrequiretheretentionand
recruitmentofaskilledworkforce,includingengineers,technicalpersonnelandotherprofessionals.Pembinacompeteswith
othercompaniesintheenergyindustryforthisskilledworkforce.IftheCompanyisunabletoretaincurrentemployeesand/
orrecruitnewemployeesorcomparableskill,knowledgeandexperience,Pembina'sbusinessandoperationscouldbe
negativelyimpacted.Thecostsassociatedwithretainingandrecruitingkeyindividualsandaskilledworkforcecouldadversely
affectPembina'sbusinessopportunitiesandfinancialresultsandthereisnoassurancethatPembinawillcontinuetoattract
andretainallpersonnelnecessaryforthedevelopmentandoperationofitsbusiness.
IndigenousLandClaimsandConsultationObligations
IndigenouspeoplehaveclaimedtitleandrightstoaconsiderableportionofthelandsinwesternCanada.Thesuccessful
assertionofIndigenoustitleorotherIndigenousrightsclaimsmayhaveanadverseeffectonwesternCanadiancrudeoiland
naturalgasproductionoroilsandsdevelopmentandmayresultinreduceddemandforPembina'sassetsandinfrastructure
thatservicethoseareas,whichcouldhaveamaterialadverseeffectonPembina'sbusinessandoperations.
InCanada,thefederalandprovincialgovernments(the"Crown")haveadutytoconsultand,whenappropriate,
accommodateIndigenouspeoplewhentheinterestsoftheIndigenouspeoplesmaybeaffectedbyaCrownactionor
decision.CrownactionsincludethedecisiontoissuearegulatoryapprovalrelatingtoactivitiesthatmayimpactIndigenous
rights,interestsorlands.TheCrownmayrelyonstepsundertakenbyaregulatoryagencytofulfillitsdutytoconsultand
accommodateinwholeorinpart.Therefore,theprocessesestablishedbyregulatorybodies,suchastheAER,theBCOGC,the
BCEAOandtheCER,oftenincludeanassessmentofIndigenousrightsclaimsandconsultationobligations.WhiletheCrown
holdsultimateresponsibilityforensuringconsultationisadequate,thisissueisoftenamajoraspectofregulatorypermitting
processes.Ifaregulatorybody,ortheCrownitself,determinesthatthedutytoconsulthasnotbeenappropriatelydischarged
relativetotheissuanceofregulatoryapprovalsrequiredbyPembina,theissuanceofsuchapprovalsmaybedelayedor
denied,therebyimpactingPembina'sCanadianoperations.
Asdescribedin"RegulationandLegislation"above,theCERAct,IAA,andassociatedamendmentstotheFisheriesAct
(Canada)andtheCanadianNavigableWatersAct(Canada)replacedpreviousapplicableregimesin2019.Anumberofthe
federalregulatoryprocessamendmentspertaintotheparticipationofIndigenousgroupsandtheprotectionofIndigenous
andtreatyrights.Thenewlegislationgenerallycodifiesexistinglawandpracticewithrespecttothesematters.Forexample,
decisionmakersarenowexpresslyrequiredtoconsidertheeffects(positiveornegative)ofaproposedprojecton
constitutionally-protectedIndigenousrights,aswellasIndigenouspeoplesthemselves,andensurethatconsultationis
undertakenduringtheplanningphaseofimpactassessmentprocesses.Thenewlegislationalsocreatesalargerrolefor
Indigenousgoverningbodiesintheimpactassessmentprocess(enablingthedelegationofcertainaspectsoftheimpact
assessmentprocesstosuchgroups)andrequiresdecisionmakerstoconsiderIndigenoustraditionalknowledgeincertain
cases.
ThefederalgovernmentisadvancingchangestotherecognitionofIndigenousrightsacrossCanada.Aspartoftheseefforts,
onDecember3,2020,thefederalgovernmentintroduced2020BillC-15,theUnitedNationsDeclarationontheRightsof
IndigenousPeoples("UNDRIP")Act.ThepurposeofthelegislationistoaffirmtheapplicationoftheUNDRIPinCanadianlaw,
butthepracticaleffectsofthelegislationareyettobedeterminedasitwillonlyrequirethegovernmenttoprepareand
implementanactionplanforthisapplication,andannuallyreportonitsprogress.Pembinawillcontinuetomonitorand
assesstheimpactsBillC-15andotherfederalgovernmentinitiativesonIndigenousrightsmayhaveonitsbusinessas
legislationand/orpoliciescontinuetobedeveloped.
58PembinaPipelineCorporation2020AnnualReport
In2018,theBritishColumbiagovernmentenactedthe2018EnvironmentalAssessmentAct(the"EAAct")aspartofits
commitmenttorevitalizeenvironmentalassessmentintheprovinceandfacilitateitscommitmenttoimplementingthe
UNDRIP.TheEAActcameintoforceinlate2019.TheEAActisdesignedasa"consent-based"environmentalassessment
modelandisintendedtosupportreconciliationwithIndigenouspeoplesandtheimplementationoftheUNDRIP.The
legislationrequirestheBCEAOtoseekparticipatingIndigenousgroups'consentwithrespectto,amongotherthings,the
decisiontoissueanenvironmentalassessmentcertificatetoagivenproject.WhiletheEAActdoesnotstrictlyrequire
consentinmostcases,thelegislationcreatessignificantnewparticipationopportunitiesforparticipatingIndigenousgroups
duringthecourseofenvironmentalassessments,whichmayincreasethetimerequiredtoobtainregulatoryapprovalsand
therebyimpactPembina'soperationsinBritishColumbia.In2019,BritishColumbiaenacteditsownlegislation,the
DeclarationontheRightsofIndigenousPeoplesAct("DRIPA")toimplementUNDRIP,whichisstructurallysimilartothe
federalBillC-15.TheDRIPAfurtherprovidestheBritishColumbiagovernmentwiththeabilitytoenterintojointdecision-
makingagreementswithIndigenousgovernments.Pembinacontinuestoactivelymonitorthedevelopmentoftheregulations
requiredtofacilitatetheimplementationoftheEAActandtheDRIPA.
PotentialConflictsofInterest
ShareholdersandothersecurityholdersofPembinaaredependentonseniormanagementandthedirectorsofPembinafor
thegovernance,administrationandmanagementofPembina.CertaindirectorsandofficersofPembinamaybedirectorsor
officersofentitiesincompetitiontoPembinaormaybedirectorsorofficersofcertainentitiesinwhichPembinaholdsan
equityinvestmentin.Assuch,certaindirectorsorofficersofPembinamayencounterconflictsofinterestinthe
administrationoftheirdutieswithrespecttoPembina.Pembinamitigatesthisriskbyrequiringdirectorsandofficersto
disclosetheexistenceofpotentialconflictsinaccordancewithPembina'sCodeofEthicsandinaccordancewiththeABCA.
Litigation
Inthecourseoftheirbusiness,Pembinaanditsvarioussubsidiariesandaffiliatesmaybesubjecttolawsuitsandotherclaims,
includingwithrespecttoPembina'sgrowthorexpansionprojects.Defenceandsettlementcostsassociatedwithsuchlawsuits
andclaimsmaybesubstantial,evenwithrespecttolawsuitsandclaimsthathavenomerit.Duetotheinherentuncertaintyof
thelitigationprocess,theresolutionofanyparticularlegalorotherproceedingmayhaveamaterialadverseeffectonthe
financialpositionoroperatingresultsofPembina.
ChangesinTaxLegislation
TaxlegislationthatPembinaissubjecttomaybeamended(ortheinterpretationofsuchlegislationmaychange),
retroactivelyorprospectively,resultingintaxconsequencesthatmateriallydifferfromthosecontemplatedbyPembinainthe
jurisdictionsinwhichPembinahasoperations,whichmaycreateariskofnon-complianceandre-assessment.WhilePembina
believesthatitstaxfilingpositionsareappropriateandsupportable,itispossiblethatgoverningtaxauthoritiesmay:(i)
amendtaxlegislation(oritsinterpretationofsuchlegislationmaychange),or(ii)successfullychallengePembina's
interpretationoftaxlegislation,eitherofwhichcouldexposePembinatoadditionaltaxliabilitiesandmayaffectPembina's
estimateofcurrentandfutureincometaxesandcouldhaveanadverseeffectonthefinancialconditionandprospectsof
PembinaandthedistributablecashflowavailabletopaydividendsandtoserviceobligationsunderPembina'sdebtsecurities
andotherdebtobligations.
ForeignExchangeRisk
Pembina'scashflows,namelyaportionofitscommodity-relatedcashflows,certaincashflowsfromU.S.-basedinfrastructure
assets,anddistributionsfromU.S.-basedinvestmentsinequityaccountedinvestees,aresubjecttocurrencyrisk,arisingfrom
thedenominationofspecificcashflowsinU.S.dollars.Additionally,aportionofPembina'scapitalexpenditures,and
contributionsorloanstoPembina'sU.S.-basedinvestmentsinequityaccountedinvestees,maybedenominatedinU.S.
dollars.Pembinamonitors,assesses,andrespondstotheseforeigncurrencyrisksusinganactiveriskmanagementprogram,
whichmayincludetheexchangeofforeigncurrencyfordomesticcurrencyatafixedrate.
PembinaPipelineCorporation2020AnnualReport59
CyberSecurity
Pembina'sinfrastructure,technologiesanddataarebecomingincreasinglyintegrated.Suchintegrationcreatesariskthatthe
failureofonesystemcouldleadtofailureofothersystemswhichmayalsohaveanimpactontheCompany'sphysicalassets
anditsabilitytosafelyoperatesuchassets.Furthermore,Pembinaanditsthird-partyvendorscollectandstoresensitivedata
intheordinarycourseofbusiness,includingpersonalidentificationinformationofemployeesaswellasproprietarybusiness
informationandthatoftheCompany'scustomers,suppliers,investorsandotherstakeholders.Thereisanincreasingriskofa
cyber-attacktargetingtheindustryandanybreachinthesecurityorfailureofPembina'sinformationtechnologycouldresult
inoperationaloutages,delays,damagetoassetsortheenvironment,reputationalharm,lostprofits,lostdataandother
adverseoutcomesforwhichPembinacouldbeheldliable,allofwhichcouldadverselyaffectPembina'sreputation,business,
operationsorfinancialresults.Asaresultofacyber-attackorsecuritybreach,Pembinacouldalsobeliableunderlawsthat
protecttheprivacyofpersonalinformationorsubjecttoregulatorypenalties.
PoliticalUncertainty
RecentpoliticalandsocialeventsanddecisionsmadeinCanada,theU.S.andelsewhere,includingchangestofederal,
provincial,stateormunicipalgovernmentsinCanadaandtheU.S.,have,andcancontinuetocreatefutureuncertaintyon
globalfinancialandeconomicmarkets.ThisuncertaintymayimpacttheenergyindustryinCanadaandmayhaveanadverse
effectonPembina'sbusinessandfinancialresults.
RisksRelatingtoBreachofConfidentiality
Pembinaregularlyentersintoconfidentialityagreementswiththirdpartiespriortothedisclosureofanyconfidential
informationwhendiscussingpotentialbusinessrelationshipsorothertransactions.Breachesofconfidentialitycouldput
Pembinaatcompetitiveriskandmaycausesignificantdamagetoitsbusiness.Thereisnoassurancethat,intheeventofa
breachofconfidentiality,Pembinawillbeabletoobtainequitableremediesfromacourtofcompetentjurisdictioninatimely
manner,ifatall,inordertopreventormitigateanydamagetoitsbusinessthatsuchabreachofconfidentialitymaycause.
ConcentrationofAssetsintheWesternCanadianSedimentaryBasin
ThemajorityofPembina'sassetsareconcentratedintheWCSB,whichleavesthecompanyexposedtotheeconomic
conditionsofthatarea.Pembinamitigatesthisriskthroughadiversityofbusinessactivitieswithintheareaandbyowning
andoperatingassetsintheU.S.
RisksRelatedtoClimateChange
RisksRelatingtoChangingInvestorSentimentintheOilandGasIndustry
Anumberoffactors,includingtheconcernsoftheeffectsoftheuseoffossilfuelsonclimatechange,concernsoftheimpact
ofoilandgasoperationsontheenvironment,concernsofenvironmentaldamagerelatingtospillsofpetroleumproducts
duringtransportationandconcernsofIndigenousrights,haveaffectedcertaininvestors'sentimentstowardsinvestinginthe
oilandgasindustry.Asaresultoftheseconcerns,someinstitutional,retailandpublicinvestorshaveannouncedthattheyare
nolongerwillingtofundorinvestinoilandgaspropertiesorcompaniesand/orarereducingtheamountofsuchinvestments
overtime.Inaddition,certaininstitutionalinvestorsarerequestingthatissuersdevelopandimplementmorerobustsocial,
environmentalandgovernancepoliciesandpractices.Developingandimplementingsuchpoliciesandpracticescaninvolve
significantcostsandrequireasignificanttimecommitmentfromPembina'sBoardofDirectors,managementandemployees.
Failuretoimplementthepoliciesandpracticesasrequestedbyinstitutionalinvestorsmayresultinsuchinvestorsreducing
theirinvestmentinPembinaornotinvestinginPembinaatall.Anyreductionintheinvestorbaseinterestedorwillingto
investintheoilandgasindustryand,morespecifically,PembinamayresultinlimitsonPembina'sabilitytoaccesscapital,
increasestothecostofcapital,adowngradeinPembina'screditratingsandoutlooks,andadecreaseinthepriceandliquidity
ofPembina'ssecuritiesevenifPembina'soperatingresults,underlyingassetvaluesorprospectshavenotchanged.
Additionally,thesefactors,aswellasotherrelatedfactors,maycauseadecreaseinthevalueofanassetwhichmayresultin
animpairmentcharge.
60PembinaPipelineCorporation2020AnnualReport
EnergyMarketTransition
Changingconsumerpreferences,newtechnologies,governmentregulationorotherexternalfactorsmayresultinarapid
transitionfromfossil-basedsourcesofenergy,includingenergyderivedfromcrudeoilandnaturalgas,torenewableand
otheralternativesourcesofenergy.Thismayleadtolowerglobaldemandforcrudeoilandnaturalgasandrelated
commoditiesand,inturn,mayleadtolowerpricesforcrudeoil,naturalgasandNGLandrelatedcommodities.Thiscould
negativelyimpacttheCompany'sproducingcustomersandleadtolessdemandforPembina'sservices,whichcould
negativelyimpacttherevenuetheCompanyreceivesfrom,andthevalueof,itspipeline,facilitiesandotherinfrastructure
assets.
Inaddition,Pembinamayinvestinopportunitiesrelatedtoanenergytransition,whichmayinvolveinvestmentsin
businesses,operationsorassetsrelatingtorenewableorotheralternativeformsofenergy.Suchinvestmentsmayinvolve
certainrisksanduncertaintiesinadditiontothoseidentifiedhereininrespectofPembina'sexistingbusinesses,operations
andassets,includingtheobligationtocomplywithadditionalregulatoryandotherlegalrequirementsassociatedwithsuch
businesses,operationsorassetsandthepotentialrequirementforadditionalsourcesofcapitaltomake,developand/or
maintainsuchinvestmentsandPembina'sabilitytoaccesssuchsourcesofcapital.IntheeventPembinaweretocomplete
suchinvestments,therecanbenoguaranteethatPembinawillrealizeareturnonthoseinvestmentsorbusinesses,
operationsorassetsthatissimilartothereturnsitreceivesinrespectofitsexistingbusiness,operationsandassetsorthat
wouldoffsetanylossinrevenuefrom,orthevalueof,theCompany'sexistingpipeline,facilitiesandotherinfrastructure
assetsresultingfromtheimpactofthepotentialenergytransition.Asaresult,anysuchinvestmentcouldreducethelevelof
cashavailablefordividendsandtoserviceobligationsunderPembina'sdebtsecuritiesandotherdebtobligationsandmay
alsonegativelyimpactthetradingpriceofPembina'ssecurities.
RisksRelatingtoWeatherConditions
Weatherconditions(includingthoseassociatedwithclimatechange)canaffectthedemandforandpriceofnaturalgasand
NGL.Asaresult,changesinweatherpatternsmayaffectPembina'sgasprocessingbusiness.Forexample,colderwinter
temperaturesgenerallyincreasedemandfornaturalgasandNGLusedforheatingwhichtendstoresultinincreased
throughputvolumeontheAlliancePipelineandattheCompany'sgasprocessingfacilitiesandhigherpricesintheprocessing
andstoragebusinesses.Pembinahascapacitytohandleanysuchincreasedvolumeofthroughputandstorageatitsfacilities
tomeetchangesinseasonaldemand;however,atanygiventime,processingandstoragecapacityisfinite.
Weatherconditions(includingthoseassociatedwithclimatechange)mayimpactPembina'sabilitytocompletecapital
projects,repairsorfacilityturnaroundsontime,potentiallyresultingindelaysandincreasedcosts.Weathermayalsoaffect
accesstoPembina'sfacilities,andtheoperationsandprojectsofPembina'scustomersorshippers,whichmayimpactthe
supplyand/ordemandforPembina'sservices.Withrespecttoconstructionactivities,inareaswhereconstructioncanbe
conductedinnon-wintermonths,Pembinaattemptstoscheduleitsconstructiontimetablessoastominimizepotentialdelays
duetocoldwinterweather.
Changesand/orextremevariabilityinweatherpatterns,aswellasincreasesinthefrequencyofextremeweatherevents,
suchasfloods,cyclones,hurricanes,droughtsandforestfires,increasesthepotentialriskforPembina'sassets,including
operationaldisruptions,transportationdifficulties,supplychaindisruptions,employeesafetyincidents,anddamagetoassets,
whichmayresultinlowerrevenues,highercostsorprojectdelays.
PembinaPipelineCorporation2020AnnualReport61
12.NON-GAAPMEASURESThroughoutthisMD&A,PembinahasusedthefollowingtermsthatarenotdefinedbyGAAPbutareusedbymanagementto
evaluatetheperformanceofPembinaanditsbusinesses.Sincenon-GAAPmeasuresdonothaveastandardizedmeaning
prescribedbyIFRSandarethereforeunlikelytobecomparabletosimilarmeasurespresentedbyothercompanies,applicable
securitiesregulationsrequirethatnon-GAAPmeasuresbeclearlydefined,qualifiedandreconciledtothemostdirectly
comparableGAAPmeasure.Thesenon-GAAPmeasuresarecalculatedanddisclosedonaconsistentbasisfromperiodto
period.
Theintentofnon-GAAPmeasuresistoprovideadditionalusefulinformationwithrespecttoPembina'soperationaland
financialperformancetoinvestorsandanalysts,thoughthemeasuresdonothaveanystandardizedmeaningunderIFRS.The
measuresshouldnot,therefore,beconsideredinisolationorusedinsubstituteformeasuresofperformancepreparedin
accordancewithIFRS.Otherissuersmaycalculatethesenon-GAAPmeasuresdifferentlyorusedifferentnon-GAAPmeasures.
Investorsshouldbecautionedthatnetrevenue,adjustedEBITDA,adjustedEBITDApercommonshare,adjustedcashflow
fromoperatingactivities,cashflowfromoperatingactivitiespercommonshare,andadjustedcashflowfromoperating
activitiespercommonshareshouldnotbeconstruedasalternativestorevenue,earnings,cashflowfromoperatingactivities,
grossprofitorothermeasuresoffinancialresultsdeterminedinaccordancewithGAAPasindicatorsofPembina's
performance.
Non-GAAPProportionateConsolidationofInvestmentsinEquityAccountedInvesteesResults
InaccordancewithIFRS,Pembina'sjointlycontrolledinvestmentsareaccountedforusingequityaccounting.Underequity
accounting,theassetsandliabilitiesoftheinvestmentarepresentednetinasinglelineitemintheConsolidatedStatementof
FinancialPosition,"InvestmentsinEquityAccountedInvestees".Netearningsfrominvestmentsinequityaccountedinvestees
arerecognizedinasinglelineitemintheConsolidatedStatementofEarningsandComprehensiveIncome"ShareofProfit
fromEquityAccountedInvestees".Cashcontributionsanddistributionsfrominvestmentsinequityaccountedinvestees
representPembina'ssharepaidandreceivedintheperiodtoandfromtheinvestmentsinequityaccountedinvestees.
Toassistinunderstandingandevaluatingtheperformanceoftheseinvestments,PembinaissupplementingtheIFRS
disclosurewithnon-GAAPproportionateconsolidationofPembina'sinterestintheinvestmentsinequityaccounted
investees.Pembina'sproportionateinterestinequityaccountedinvesteeshasbeenincludedinadjustedEBITDA.
NetRevenue
Netrevenueisanon-GAAPfinancialmeasurewhichisdefinedastotalrevenuelesscostofgoodssoldincludingproduct
purchases.Managementbelievesthatnetrevenueprovidesinvestorswithasinglemeasuretoindicatethemarginonsales
beforenon-productoperatingexpensesthatiscomparablebetweenperiods.Managementutilizesnetrevenuetocompare
consecutiveresults,inMarketing&NewVenturesandFacilities,toaggregaterevenuegeneratedbyeachoftheCompany's
divisionsandtosetcomparableobjectives.
3MonthsEndedDecember31
Pipelines FacilitiesMarketing&
NewVentures(1)
Corporate&Inter-segmentEliminations Total(1)($millions)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Revenue 603 487 326 287 882 1,006 (131) (112) 1,680 1,668
Costofgoodssold,includingproductpurchases — — 4 2 809 903 (87) (74) 726 831
Netrevenue 603 487 322 285 73 103 (44) (38) 954 837(1) 2020periodandcomparative2019periodhavebeenrestated.See"RestatementofRevenueandCostofGoodsSold"andNote3totheConsolidatedFinancialStatements.
62PembinaPipelineCorporation2020AnnualReport
12MonthsEndedDecember31
Pipelines FacilitiesMarketing&
NewVentures(1)
Corporate&Inter-segmentEliminations Total(1)($millions)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Revenue 2,251 1,787 1,231 1,121 2,956 3,946 (485) (482) 5,953 6,372
Costofgoodssold,includingproductpurchases — — 11 4 2,815 3,559 (317) (311) 2,509 3,252
Netrevenue 2,251 1,787 1,220 1,117 141 387 (168) (171) 3,444 3,120(1) 2020periodandcomparative2019periodhavebeenrestated.See"RestatementofRevenueandCostofGoodsSold"andNote3totheConsolidatedFinancialStatements.
AdjustedEarningsBeforeInterest,Taxes,DepreciationandAmortization("AdjustedEBITDA")
AdjustedEBITDAisanon-GAAPmeasureandiscalculatedasearningsfortheyearbeforenetfinancecosts,incometaxes,
depreciationandamortization(includedinoperationsandgeneralandadministrativeexpense)andunrealizedgainsorlosses
oncommodity-relatedderivativefinancialinstruments.Theexclusionofunrealizedgainsorlossesoncommodity-related
derivativefinancialinstrumentseliminatesthenon-cashimpactofsuchgainsorlosses.
AdjustedEBITDAalsoincludesadjustmentstoearningsforlosses(gains)ondisposalofassets,transactioncostsincurredin
respectofacquisitions,impairmentchargesorreversalsinrespectofgoodwill,intangibleassets,investmentsinequity
accountedinvesteesandproperty,plantandequipment,certainnon-cashprovisionsandotheramountsnotreflectiveof
ongoingoperations.Theadjustmentsmadetoearningsarealsomadetoshareofprofitfrominvestmentsinequityaccounted
investees.Inaddition,Pembina'sproportionateshareofresultsfrominvestmentsinequityaccountedinvesteeswitha
preferredinterestispresentedinAdjustedEBITDAasa50percentcommoninterest.Theseadditionaladjustmentsaremade
toexcludevariousnon-cashandotheritemsthatarenotreflectiveofongoingoperations.
ManagementbelievesthatAdjustedEBITDAprovidesusefulinformationtoinvestorsasitisanimportantindicatorofan
issuer'sabilitytogenerateliquiditythroughcashflowfromoperatingactivitiesandequityaccountedinvestees.Management
alsobelievesthatAdjustedEBITDAprovidesanindicatorofoperatingincomegeneratedfromcapitalinvested,whichincludes
operationalfinanceincomefromlessorleasearrangements.AdjustedEBITDAisalsousedbyinvestorsandanalystsfor
assessingfinancialperformanceandforthepurposeofvaluinganissuer,includingcalculatingfinancialandleverageratios.
ManagementutilizesAdjustedEBITDAtosetobjectivesandasakeyperformanceindicatoroftheCompany'ssuccess.
PembinapresentsAdjustedEBITDAasmanagementbelievesitisameasurefrequentlyusedbyanalysts,investorsandother
stakeholdersinevaluatingtheCompany'sfinancialperformance.
3MonthsEndedDecember31
Pipelines FacilitiesMarketing&NewVentures
Corporate&Inter-segmentEliminations Total($millions,exceptpershareamounts)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Earnings(loss)beforeincometax(1) (992) 31 143 163 (684) 94 (114) (136) (1,647) 152
Adjustmentstoshareofprofitfromequityaccountedinvesteesandother(1) 60 68 32 37 28 2 — — 120 107
Netfinancecosts(1) 7 1 8 5 (15) (8) 59 60 59 58
Depreciationandamortization(1) 102 66 50 49 13 8 15 15 180 138
Unrealizedlossoncommodity-relatedderivativefinancialinstruments — — 10 — 76 23 — — 86 23
CanadianEmergencyWageSubsidy — — — — — — (2) — (2) —
(Gain)lossondisposalofassets (1) 1 — — 1 — (1) (2) (1) (1)
Transactioncostsincurredinrespectofacquisitions — — — — — — 2 10 2 10
Impairmentchargesandnon-cashprovisions 1,401 300 12 — 656 1 — (1) 2,069 300
AdjustedEBITDA 577 467 255 254 75 120 (41) (54) 866 787
AdjustedEBITDApercommonshare–basic(dollars) 1.57 1.52(1) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
PembinaPipelineCorporation2020AnnualReport63
12MonthsEndedDecember31
Pipelines FacilitiesMarketing&NewVentures
Corporate&Inter-segmentEliminations Total($millions,exceptpershareamounts)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Earnings(loss)beforeincometax(1) 128 1,043 642 623 (646) 376 (540) (500) (416) 1,542
Adjustmentstoshareofprofitfromequityaccountedinvesteesandother(1) 240 261 135 145 43 21 — — 418 427
Netfinancecosts(1) 31 6 24 21 (13) (8) 378 270 420 289
Depreciationandamortization(1) 402 243 199 166 50 51 49 47 700 507
Unrealized(gain)lossoncommodity-relatedderivativefinancialinstruments — — (4) — 88 13 — — 84 13
Arbitrationawardpayment — — — — — (33) — — — (33)
CanadianEmergencyWageSubsidy — — — — — — (39) — (39) —
COVID-19restructuring 3 — 2 — 1 — 4 — 10 —
Loss(gain)ondisposalofassets — 1 1 — 1 — (2) — — 1
Transactioncostsincurredinrespectofacquisitions — — — — — — 18 12 18 12
Impairmentchargesandnon-cashprovisions 1,404 300 13 — 669 3 — — 2,086 303
AdjustedEBITDA 2,208 1,854 1,012 955 193 423 (132) (171) 3,281 3,061
AdjustedEBITDApercommonshare–basic(dollars) 5.97 5.97(1) Comparative2019periodhasbeenrestated.See"VoluntaryChangeinAccountingPolicy"andNote3totheConsolidatedFinancialStatements.
AdjustedCashFlowfromOperatingActivities,CashFlowfromOperatingActivitiesperCommonShare
andAdjustedCashFlowfromOperatingActivitiesperCommonShare
Adjustedcashflowfromoperatingactivitiesisanon-GAAPmeasurewhichisdefinedascashflowfromoperatingactivities
adjustingforthechangeinnon-cashoperatingworkingcapital,adjustingforcurrenttaxandshare-basedpaymentexpenses,
anddeductingpreferredsharedividendspaid.Adjustedcashflowfromoperatingactivitiesdeductspreferredsharedividends
paidbecausetheyarenotattributabletocommonshareholders.Thecalculationhasbeenmodifiedtoincludecurrenttaxand
share-basedpaymentexpenseasitallowsmanagementtobetterassesstheobligationsdiscussedbelow.Management
believesthatadjustedcashflowfromoperatingactivitiesprovidescomparableinformationtoinvestorsforassessingfinancial
performanceduringeachreportingperiod.Managementutilizesadjustedcashflowfromoperatingactivitiestosetobjectives
andasakeyperformanceindicatoroftheCompany'sabilitytomeetinterestobligations,dividendpaymentsandother
commitments.Percommonshareamountsarecalculatedbydividingcashflowfromoperatingactivities,oradjustedcash
flowfromoperatingactivities,asapplicable,bytheweightedaveragenumberofcommonsharesoutstanding.
3MonthsEndedDecember31
12MonthsEndedDecember31
($millions,exceptpershareamounts) 2020 2019 2020 2019
Cashflowfromoperatingactivities 766 728 2,252 2,532
Cashflowfromoperatingactivitiespercommonshare–basic(dollars) 1.39 1.41 4.10 4.94
Add(deduct):
Changeinnon-cashoperatingworkingcapital (75) (99) 93 (106)
Currenttaxexpense (45) (32) (240) (210)
Taxespaid,netofforeignexchange 7 23 296 141
Accruedshare-basedpayments (13) (13) (7) (50)
Share-basedpayments — — 45 50
Preferredsharedividendspaid (37) (31) (150) (123)
Adjustedcashflowfromoperatingactivities 603 576 2,289 2,234
Adjustedcashflowfromoperatingactivitiespercommonshare–basic(dollars) 1.10 1.11 4.16 4.36
64PembinaPipelineCorporation2020AnnualReport
13.ABBREVIATIONSThefollowingisalistofabbreviationsthatmaybeusedinthisMD&A:
Other
AECO AlbertaEnergyCompanybenchmarkpricefornaturalgas
B.C. BritishColumbia
GAAP Canadiangenerallyacceptedaccountingprinciples
IFRS InternationalFinancialReportingStandards
LNG Liquefiednaturalgas
LPG Liquefiedpetroleumgas
NGL Naturalgasliquids
U.S. UnitedStates
WCSB WesternCanadianSedimentaryBasin
Deepcut Ethane-pluscapacityextractiongasprocessingcapabilities
Shallowcut Sweetgasprocessingwithpropaneand/orcondensate-plusextractioncapabilities
KinderAcquisition Pembina'sacquisitionofKinderMorganCanadaLimitedandtheU.S.portionoftheCochinPipelinesystemonDecember16,2019
Volumes VolumesforPipelinesandFacilitiesarerevenuevolumes,definedasphysicalvolumesplusvolumesrecognizedfromtake-or-paycommitments.VolumesforMarketing&NewVenturesaremarketedNGLvolumes.Volumesarestatedinmboe/d,withnaturalgasvolumesconvertedtomboe/dfromMMcf/data6:1ratio.
Measurement Regulators&Acts
bpd barrelsperday ABCA BusinessCorporationsAct(Alberta)
mbbls thousandsofbarrels AER AlbertaEnergyRegulator
mbpd thousandsofbarrelsperday BCEAO BritishColumbiaEnvironmentalAssessmentOffice
mmbpd millionsofbarrelsperday BCOGC BritishColumbiaOilandGasCommission
mmbbls millionsofbarrels BCUC BritishColumbiaUtilitiesCommission
mboe/d thousandsofbarrelsofoilequivalentperday CER CanadianEnergyRegulator
mmboe/d millionsofbarrelsofoilequivalentperday FERC UnitedStatesFederalEnergyRegulatoryCommission
MMcf/d millionsofcubicfeetperday ICA InterstateCommerceActof1887(UnitedStates)
bcf/d billionsofcubicfeetperday NEB NationalEnergyBoard
km kilometer NGA NaturalGasActof1938(UnitedStates)
PHMSA PipelineandHazardousMaterialSafetyAdministration
InvestmentsinEquityAccountedInvestees
Pipelines:
Alliance 50percentinterestinbothAlliancePipelineLimitedPartnershipandAlliancePipelineL.P.
Ruby 50percentconvertible,cumulativepreferredinterestintheRubyPipelineHoldingCompanyL.L.C.
Facilities:
VeresenMidstream 45percentinterestinVeresenMidstreamLimitedPartnership,whichownsassetsinwesternCanadaservingtheMontneygeologicalplayinnorthwesternAlbertaandnortheasternB.C.includinggasprocessingplantsandgasgatheringpipelinesandcompression
FortCorp 50percentinterestinFortSaskatchewanEthyleneStorageLimitedPartnershipandFortSaskatchewanEthyleneCorporation
Marketing&NewVentures:
AuxSable AnownershipinterestinAuxSable(approximately42.7percentinAuxSableU.S.and50percentinAuxSableCanada),whichincludesanNGLfractionationfacilityandgasprocessingcapacitynearChicago,IllinoisandothernaturalgasandNGLprocessingfacilities,logisticsanddistributionassetsintheU.S.andCanada,aswellastransportationcontractsonAlliance
CKPC 50percentinterestinthePDH/PPFacility
ReadersarereferredtotheAIFdatedFebruary25,2021onwww.sedar.comforadditionaldescriptions.
PembinaPipelineCorporation2020AnnualReport65
14.FORWARD-LOOKINGSTATEMENTS&INFORMATION
IntheinterestofprovidingPembina'ssecurityholdersandpotentialinvestorswithinformationregardingPembina,includingmanagement'sassessmentoftheCompany'sfutureplansandoperations,certainstatementscontainedinthisMD&Aconstituteforward-lookingstatementsorforward-lookinginformation(collectively,"forward-lookingstatements").Forward-lookingstatementsaretypicallyidentifiedbywordssuchas"anticipate","continue","estimate","expect","may","will","project","should","could","would","believe","plan","intend","design","target","undertake","view","indicate","maintain","explore","entail","schedule","objective","strategy","likely","potential","outlook","aim","purpose","goal"andsimilarexpressionssuggestingfutureeventsorfutureperformance.
Bytheirnature,suchforward-lookingstatementsinvolveknownandunknownrisks,uncertaintiesandotherfactorsthatmaycauseactualresultsoreventstodiffermateriallyfromthoseanticipatedinsuchforward-lookingstatements.Pembinabelievestheexpectationsreflectedinthoseforward-lookingstatementsarereasonablebutnoassurancecanbegiventhattheseexpectationswillprovetobecorrectandsuchforward-lookingstatementsincludedinthisMD&Ashouldnotbeundulyreliedupon.Theseforward-lookingstatementsspeakonlyasofthedateoftheMD&A.
Inparticular,thisMD&Acontainsforward-lookingstatementspertainingtothefollowing:
• thepotentialimpactsoftheCOVID-19pandemiconPembina,andPembina'sresponsethereto;
• futurelevelsandsustainabilityofcashdividendsthatPembinaintendstopaytoitsshareholders,thedividendpaymentdate;
• planning,construction,locations,capitalexpenditureestimates,schedules,regulatoryandenvironmentalapplicationsandanticipatedapprovals,expectedcapacity,incrementalvolumes,completionandin-servicedates,rights,sourcesofproduct,activities,benefitsandoperationswithrespecttonewconstructionof,orexpansionsonexisting,pipelines,systems,gasservicesfacilities,processingandfractionationfacilities,terminalling,storageandhubfacilitiesandotherfacilitiesorenergyinfrastructure,aswellastheimpactofPembina'snewprojectsonitsfuturefinancialperformance;
• pipeline,processing,fractionationandstoragefacilityandsystemoperationsandthroughputlevels;
• treatmentundergovernmentalregulatoryregimesinCanadaandtheU.S.,includingtaxesandtaxregimes,environmentalandgreenhousegasregulationsandrelatedabandonmentandreclamationobligations,andIndigenous,landownerandotherstakeholderconsultationrequirements;
• Pembina'sstrategyandthedevelopmentandexpectedtimingofnewbusinessinitiativesandgrowthopportunitiesandtheimpactthereof;
• increasedthroughputpotential,processingcapacityandfractionationcapacityduetoincreasedoilandgasindustryactivityandnewconnectionsandotherinitiativesonPembina'spipelinesandPembina'sfacilities;
• expectedfuturecashflowsandthesufficiencythereof,financialstrength,sourcesofandaccesstofundsatattractiverates,futurecontractualobligations,futurefinancingoptions,futurerenewalofcreditfacilities,availabilityofcapitalforcapitalprojectsandcontributionstoinvestmentsinequityaccountedinvestees,operatingobligationsanddividendsandtheuseofproceedsfromfinancings;
• Pembina'scapitalstructure,includingthesufficiencyoftheamountofleverageemployedthereinandfutureactionsthatmaybetakenwithrespectthereto;
• Pembina'sexpectationsregardingthecreditworthinessofitscounterparties;• Pembina'sexpectationsregardinginvolvementofpartnersonJordanCove;• currentratingstargetsonPembina'sdebtandthelikelihoodofadowngradebelow
investment-graderatings;• tollsandtariffsandprocessing,transportation,fractionation,storageandservices
commitmentsandcontracts;• operatingrisks(includingtheamountoffutureliabilitiesrelatedtopipelinesspills
andotherenvironmentalincidents)andrelatedinsurancecoverageandinspectionandintegrityprograms;
• expectationsregardingPembina'sNGLstoragepositionsanditsintentionswithrespectthereto;
• theexpecteddemandfor,andpricesandinventorylevelsof,crudeoilandotherpetroleumproducts,includingNGL;and
• theimpactofcurrentmarketconditionsonPembina.
VariousfactorsorassumptionsaretypicallyappliedbyPembinaindrawingconclusionsormakingtheforecasts,projections,predictionsorestimationssetoutinforward-lookingstatementsbasedoninformationcurrentlyavailabletoPembina.Thesefactorsandassumptionsinclude,butarenotlimitedto:
• oilandgasindustryexplorationanddevelopmentactivitylevelsandthegeographicregionofsuchactivity;
• thesuccessofPembina'soperations;• prevailingcommodityprices,interestratesandexchangerates;• theabilityofPembinatomaintaincurrentcreditratings;• theavailabilityofcapitaltofundfuturecapitalrequirementsrelatingtoexisting
assetsandprojects;• expectationsregardingPembina'spensionplan;• futureoperatingcostsincludinggeotechnicalandintegritycostsbeingconsistent
withhistoricalcosts;• oilandgasindustrycompensationlevelsremainingconsistent;
• inrespectofcurrentdevelopments,expansions,plannedcapitalexpenditures,completiondatesandcapacityexpectations:thatthirdpartieswillprovideanynecessarysupport;thatanythird-partyprojectsrelatingtogrowthprojectswillbesanctionedandcompletedasexpected;thatanyrequiredcommercialagreementscanbereached;thatallrequiredregulatoryandenvironmentalapprovalscanbeobtainedonthenecessarytermsinatimelymanner;thatcounterpartieswillcomplywithcontractsinatimelymanner;thattherearenounforeseeneventspreventingtheperformanceofcontractsorthecompletionoftherelevantfacilities,andthattherearenounforeseenmaterialcostsrelatingtothefacilitieswhicharenotrecoverablefromcustomers;
• inrespectofthestabilityofPembina'sdividends:prevailingcommodityprices,marginsandexchangerates;thatPembina'sfutureresultsofoperationswillbeconsistentwithpastperformanceandmanagementexpectationsinrelationthereto;thecontinuedavailabilityofcapitalatattractivepricestofundfuturecapitalrequirementsrelatingtoexistingassetsandprojects,includingbutnotlimitedtofuturecapitalexpendituresrelatingtoexpansion,upgradesandmaintenanceshutdowns;thesuccessofgrowthprojects;futureoperatingcosts;thatcounterpartiestomaterialagreementswillcontinuetoperforminatimelymanner;thattherearenounforeseeneventspreventingtheperformanceofcontracts;andthattherearenounforeseenmaterialconstructionorothercostsrelatedtocurrentgrowthprojectsorcurrentoperations;
• prevailingregulatory,taxandenvironmentallawsandregulationsandtaxpoolutilization;and
• theamountoffutureliabilitiesrelatingtolawsuitsandenvironmentalincidentsandtheavailabilityofcoverageunderPembina'sinsurancepolicies(includinginrespectofPembina'sbusinessinterruptioninsurancepolicy).
TheactualresultsofPembinacoulddiffermateriallyfromthoseanticipatedintheseforward-lookingstatementsasaresultofthematerialriskfactorssetforthbelow:
• theregulatoryenvironmentanddecisionsandIndigenousandlandownerconsultationrequirements;
• theimpactofcompetitiveentitiesandpricing;• labourandmaterialshortages;• relianceonthirdpartiestosuccessfullyoperateandmaintaincertainassets;• relianceonkeyrelationships,jointventurepartners,andagreementsandthe
outcomeofstakeholderengagement;• thestrengthandoperationsoftheoilandnaturalgasproductionindustryand
relatedcommodityprices;• non-performanceordefaultbycounterpartiestoagreementswhichPembinaorone
ormoreofitssubsidiarieshasenteredintoinrespectofitsbusiness;• actionsbyjointventurepartnersorotherpartnerswhichholdinterestsincertainof
Pembina'sassets;• actionsbygovernmentalorregulatoryauthoritiesincludingchangesintaxlawsand
treatment,changesinroyaltyrates,climatechangeinitiativesorpoliciesorincreasedenvironmentalregulation;
• fluctuationsinoperatingresults;• adversegeneraleconomicandmarketconditionsinCanada,NorthAmericaand
elsewhere,includingchanges,orprolongedweakness,asapplicable,ininterestrates,foreigncurrencyexchangerates,commodityprices,supply/demandtrendsandoverallindustryactivitylevels;
• risksrelatingtothecurrentandpotentialadverseimpactsoftheCOVID-19pandemic;
• constraintson,ortheunavailabilityofadequateinfrastructure;• thepoliticalenvironment,inNorthAmericaandelsewhere,andpublicopinion;• abilitytoaccessvarioussourcesofdebtandequitycapital;• changesincreditratings;• technologyandsecurityrisks;• naturalcatastrophes;and• theotherfactorsdiscussedunder"RiskFactors"hereinandinPembina'sMD&Aand
AIFfortheyearendedDecember31,2020,whichareavailableatwww.sedar.com,www.sec.govandthroughPembina'swebsiteatwww.pembina.com.
Thesefactorsshouldnotbeconstruedasexhaustive.Unlessrequiredbylaw,Pembinadoesnotundertakeanyobligationtopubliclyupdateorreviseanyforward-lookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.Anyforward-lookingstatementscontainedhereinareexpresslyqualifiedbythiscautionarystatement.
66PembinaPipelineCorporation2020AnnualReport
MANAGEMENT'SREPORT
TheauditedconsolidatedfinancialstatementsofPembinaPipelineCorporation(the"Company"or"Pembina")arethe
responsibilityofPembina'smanagement.ThefinancialstatementshavebeenpreparedinaccordancewithInternational
FinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoard,usingmanagement'sbestestimates
andjudgments,whereappropriate.
Managementisresponsibleforthereliabilityandintegrityofthefinancialstatements,thenotestothefinancialstatements
andotherfinancialinformationcontainedinthisreport.Inthepreparationofthesefinancialstatements,estimatesare
sometimesnecessarybecauseaprecisedeterminationofcertainassetsandliabilitiesisdependentonfutureevents.
Managementbelievessuchestimateshavebeenbasedoncarefuljudgmentsandhavebeenproperlyreflectedinthe
accompanyingfinancialstatements.
Management'sAssessmentofInternalControloverFinancialReporting
Pembinamaintainsinternalcontroloverfinancialreporting("ICFR")whichisdesignedtoprovidereasonableassurance
regardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordance
withIFRS,andincludepoliciesandproceduresthat:(a)pertaintothemaintenanceofrecordsthatinreasonabledetail
accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsofPembina;(b)aredesignedtoprovidereasonable
assurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewithIFRS,
andthatreceiptsandexpendituresofPembinaarebeingmadeonlyinaccordancewithauthorizationsofmanagementand
directorsofPembina;and(c)aredesignedtoprovidereasonableassuranceregardingpreventionortimelydetectionof
unauthorizedacquisition,useordispositionofPembina'sassetsthatcouldhaveamaterialeffectonPembina'sfinancial
statements.Managementisresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures("DC&P")and
ICFR,asdefinedinNationalInstrument52-109CertificationofDisclosureinIssuers'AnnualandInterimFilingsandRule13a–
15(e)and15(d)–15(e)undertheUnitedStatesSecuritiesExchangeActof1934.
UnderthesupervisionandwiththeparticipationoftheChiefExecutiveOfficer("CEO")andtheChiefFinancialOfficer("CFO"),
managementhasdesignedinternalcontroloverfinancialreportingbasedontheframeworksetforthinInternalControl–
IntegratedFrameworkissuedin2013bytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.Amaterial
weaknessisadeficiency,oracombinationofdeficiencies,inICFR,suchthatthereisareasonablepossibilitythatamaterial
misstatementoftheannualfinancialstatements,orinterimfinancialstatements,willnotbepreventedordetectedona
timelybasis.
Duetoitsinherentlimitations,internalcontroloverfinancialreportingisnotintendedtoprovideabsoluteassurancethata
misstatementofPembina'sfinancialstatementswouldbepreventedordetected.Further,theevaluationoftheeffectiveness
ofinternalcontroloverfinancialreportingwasmadeasataspecificdate,andcontinuedeffectivenessinfutureperiodsis
subjecttotherisksthatcontrolsmaybecomeinadequate.
TheBoardofDirectorsofPembina(the"Board")isresponsibleforensuringmanagementfulfillsitsresponsibilitiesfor
financialreportingandinternalcontrol.TheBoardisassistedinexercisingitsresponsibilitiesthroughtheAuditCommittee,
whichconsistsoffivenon-managementdirectors.TheAuditCommitteemeetsperiodicallywithmanagementandtheinternal
andexternalauditorstosatisfyitselfthatmanagement'sresponsibilitiesareproperlydischarged,toreviewthefinancial
statementsandtorecommendapprovalofthefinancialstatementstotheBoard.
KPMGLLP,theindependentauditors,haveauditedPembina'sconsolidatedfinancialstatementsandtheeffectivenessof
internalcontroloverfinancialreportingasofDecember31,2020inaccordancewiththestandardsofthePublicCompany
AccountingOversightBoard(UnitedStates).TheindependentauditorshavefullandunrestrictedaccesstotheAudit
Committeetodiscusstheirauditandtheirrelatedfindings.
PembinaPipelineCorporation2020AnnualReport67
AsatDecember31,2020,theCompanyhasidentifieda"materialweakness"relatedtocontrolsovercontractassessmentin
itsMarketingbusiness.Specifically,theCompanydidnothavecontrolstoidentifyallcontractswhereanaccounting
assessmentwasrequiredandasaresultlackedanalysisofallrelevantcontracttermsrequiredtomaketheassessmentinthe
Marketingbusiness.Becauseofthedeficiency,theCompanypresentedrevenueandcostofgoodssoldforcertaincrude
contractsintheMarketingandNewVenturesDivisiononagrossbasisthatshouldhavebeenrecordedonanetbasis.
ManagementhasrestatedrevenueandcostofgoodssoldfortheyearsendedDecember31,2020andDecember31,2019
withnoimpactonearnings,cashflowsorfinancialposition.RefertoNote3intheseconsolidatedfinancialstatementsfor
detailsoftherestatement.
RemediationofMaterialWeakness
Thecontroldeficiencydescribedabovewasdetectedbymanagementduringthethirdquarterof2021priortothefilingof
Pembina'sinterimfinancialstatementsforthethreeandninemonthsendedSeptember30,2021.TheCompanyhas
prioritizedtheremediationofthematerialweaknessdescribedaboveandisworkingundertheoversightoftheAudit
Committeetoresolvetheissue.
Specificactionstoremediatethismaterialweaknessincludethefollowing:
i. Revisionoftheprocessofidentifyingcontractstoconsultwithinternalexpertstoassistintheevaluationoftechnical
accountingmatters;and
ii. Enhancecontractanalysis,includingrevisionoftheprocessusedtoassessaccountingimplicationsforcomplex
contracts.
AstheconclusionregardingthematerialweaknessinICFRwasreachedinlateOctober2021,Pembinahasnothadadequate
timetoimplementandevaluatethecontrolsandproceduresdescribedabove,aslimitedcomplexandmaterialtransactions
requiringanapplicationoftheforegoingremediationactionshaveoccurredinthisperiod.Pembinahas,therefore,nothad
adequatetimeoropportunitytoapplyitsproposedremediationactionstoevidencetheremediationofthematerial
weaknessdescribedaboveandthematerialweaknesswillcontinuetobeaddressedthroughouttheremainderof2021.
ChangesinInternalControloverFinancialReporting
PembinapreviouslyexcludedbusinessprocessesacquiredthroughtheKinderAcquisitiononDecember16,2019,fromthe
Company'sevaluationofinternalcontroloverfinancialreportingaspermittedbyapplicablesecuritieslawsinCanadaandthe
UnitedStates.EffectiveMay1,2020,PembinacompletedtheintegrationoftheKinderAcquisitionintoitsexistingenterprise
resourceplanning("ERP")system.AsaresultoftheERPsystemintegration,certainprocessessupportingPembina'sICFRfor
theKinderAcquisitionchangedinthesecondquarterof2020.TheCompanycompletedtheevaluationofICFRoftheKinder
Acquisitioninthefourthquarterof2020andtheoverallcontrolsandprocedureswefollowinestablishingICFRwerenot
significantlyimpacted.
OtherthantheKinderAcquisitionandthematerialweaknessdescribedabove,therehasbeennochangeinPembina'sICFR
thatoccurredduringtheyearendedDecember31,2020thathasmateriallyaffected,orarereasonablylikelytomaterially
affect,Pembina'sinternalcontroloverfinancialreporting.
"M.H.Dilger"M.H.DilgerPresidentandChiefExecutiveOfficer
"J.ScottBurrows"J.ScottBurrowsSeniorVicePresidentandChiefFinancialOfficer
November18,2021
68PembinaPipelineCorporation2020AnnualReport
REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
TotheShareholdersandBoardofDirectorsofPembinaPipelineCorporation
OpinionontheConsolidatedFinancialStatements
WehaveauditedtheaccompanyingconsolidatedstatementsoffinancialpositionofPembinaPipelineCorporationand
subsidiaries(the"Company")asofDecember31,2020and2019,therelatedconsolidatedstatementsofearnings(loss)and
comprehensiveincome(loss),changesinequity,andcashflowsforeachoftheyearsthenended,andtherelatednotes
(collectively,theconsolidatedfinancialstatements).Inouropinion,theconsolidatedfinancialstatementspresentfairly,inall
materialrespects,thefinancialpositionoftheCompanyasofDecember31,2020and2019,anditsfinancialperformanceand
itscashflowsfortheyearsthenended,inconformitywithInternationalFinancialReportingStandardsasissuedbythe
InternationalAccountingStandardsBoard.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates)
(PCAOB),theCompany'sinternalcontroloverfinancialreportingasofDecember31,2020,basedoncriteriaestablishedin
InternalControl–IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadway
Commission,andourreportdatedNovember18,2021expressedanadverseopinionontheeffectivenessoftheCompany's
internalcontroloverfinancialreporting.
ChangeinAccountingPrinciple
AsdiscussedinNote3totheconsolidatedfinancialstatements,theCompanyhaselectedtochangeitsmethodofaccounting
fordecommissioningobligationsasatDecember31,2020andincludedthepresentationofthestatementoffinancialposition
asofJanuary1,2019.
CorrectionofaMisstatement
AsdiscussedinNote3totheconsolidatedfinancialstatements,the2020and2019financialstatementshavebeenrestatedto
correctamisstatement.
BasisforOpinion
TheseconsolidatedfinancialstatementsaretheresponsibilityoftheCompany'smanagement.Ourresponsibilityistoexpress
anopinionontheseconsolidatedfinancialstatementsbasedonouraudits.Weareapublicaccountingfirmregisteredwith
thePCAOBandarerequiredtobeindependentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecurities
lawsandtheapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.
WeconductedourauditsinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperform
theaudittoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsarefreeofmaterial
misstatement,whetherduetoerrororfraud.Ourauditsincludedperformingprocedurestoassesstherisksofmaterial
misstatementoftheconsolidatedfinancialstatements,whetherduetoerrororfraud,andperformingproceduresthat
respondtothoserisks.Suchproceduresincludedexamining,onatestbasis,evidenceregardingtheamountsanddisclosures
intheconsolidatedfinancialstatements.Ourauditsalsoincludedevaluatingtheaccountingprinciplesusedandsignificant
estimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.We
believethatourauditsprovideareasonablebasisforouropinion.
PembinaPipelineCorporation2020AnnualReport69
CriticalAuditMatter
Thecriticalauditmattercommunicatedbelowisamatterarisingfromthecurrentperiodauditoftheconsolidatedfinancial
statementsthatwascommunicatedorrequiredtobecommunicatedtotheauditcommitteeandthat:(1)relatestoaccounts
ordisclosuresthatarematerialtotheconsolidatedfinancialstatementsand(2)involvedourespeciallychallenging,
subjective,orcomplexjudgments.Thecommunicationofacriticalauditmatterdoesnotalterinanywayouropiniononthe
consolidatedfinancialstatements,takenasawhole,andwearenot,bycommunicatingthecriticalauditmatterbelow,
providingaseparateopiniononthecriticalauditmatterorontheaccountsordisclosurestowhichitrelates.
Goodwillimpairment
AsdiscussedinNote11totheconsolidatedfinancialstatements,thegoodwillbalanceasofDecember31,2020was$4,694
million.Forthepurposeoftheimpairmenttest,goodwillhasbeenallocatedtotheCompany'soperatingsegmentswhich
representsthelowestlevelwithintheCompanyatwhichthegoodwillismonitoredformanagementpurposes.Asdiscussedin
Note5totheconsolidatedfinancialstatements,theCompanyperformsgoodwillimpairmenttestingonanannualbasisand
whenevereventsorchangesincircumstancesindicatethatthecarryingvalueofanoperatingsegmentexceedsits
recoverableamount.Therecoverableamountsweredeterminedusingafairvaluelesscostsofdisposalapproachwhichis
basedonadiscountedcashflowmodel.
Weidentifiedtheassessmentofthegoodwillimpairmentasacriticalauditmatter.Ahighdegreeofsubjectiveauditor
judgmentwasrequiredtoevaluatethesignificantrevenueassumptionssuchascontractedvolumesandrates,projected
commodityvolumesandpricing,andgrowthrates("forecastedcashflowassumptions")anddiscountratesusedinthe
discountedcashflowmodel.ChangestothoseassumptionscouldhavehadasignificantimpactontheCompany'sassessment
oftherecoverableamountoftheoperatingsegments.
Thefollowingaretheprimaryproceduresweperformedtoaddressthiscriticalauditmatter.Weevaluatedthedesignand
testedtheoperatingeffectivenessofcertaininternalcontrolsrelatedtothecriticalauditmatter,includingcontrolsrelatedto
forecastedcashflowassumptionsandthediscountratesusedinthedeterminationoftherecoverableamounts.Weevaluated
theCompany'sprojectedcommoditypricingassumptionsbycomparingtopubliclyavailableforwardpricecurves.We
comparedtheCompany'shistoricalforecastedresults,includingcontractedvolumesandrates,andprojectedcommodity
volumes,toactualresultstoassesstheCompany'sabilitytoaccuratelyforecastandtoassessthelong-termgrowthrates.We
evaluatedtheCompany'sforecastedcashflowassumptionsbycomparingthemtoactualresults.Inaddition,weinvolveda
valuationprofessionalwithspecializedskillsandknowledge,whoassistedin:
• testingtherecoverableamountforeachoperatingsegmentusingtheoperatingsegment'sforecastedcashflow
assumptionsanddiscountrate,andcomparingtheresulttotheCompany'scalculatedrecoverableamounts
• evaluatingthediscountratesusedinthevaluationforeachoperatingsegmentbycomparingtheinputsagainstpublicly
availablemarketdataforcomparableentitiesandassessingtheresultingdiscountrates
• evaluatingthehistoricalandforecastedcashflowmultiplesimpliedinthevaluationforeachoperatingsegmentby
comparingthemagainstpubliclyavailablehistoricalandforecastedcashflowmultiplesforcomparableentities.
CharteredProfessionalAccountants
WehaveservedastheCompany'sauditorsince1997.
Calgary,CanadaNovember18,2021
70PembinaPipelineCorporation2020AnnualReport
REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
TotheShareholdersandBoardofDirectorsofPembinaPipelineCorporation
OpiniononInternalControlOverFinancialReporting
WehaveauditedPembinaPipelineCorporation’s(andsubsidiaries')(the"Company")internalcontroloverfinancialreporting
asofDecember31,2020,basedoncriteriaestablishedinInternalControl-IntegratedFramework(2013)issuedbythe
CommitteeofSponsoringOrganizationsoftheTreadwayCommission.Inouropinion,becauseoftheeffectofthematerial
weakness,describedbelow,ontheachievementoftheobjectivesofthecontrolcriteria,theCompanyhasnotmaintained
effectiveinternalcontroloverfinancialreportingasofDecember31,2020,basedoncriteriaestablishedinInternalControl-
IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates)
(PCAOB),theconsolidatedstatementsoffinancialpositionoftheCompanyasofDecember31,2020and2019,therelated
consolidatedstatementsofearnings(loss)andcomprehensiveincome(loss),changesinequity,andcashflowsfortheyears
thenended,andtherelatednotes(collectively,theconsolidatedfinancialstatements),andourreportdatedNovember18,
2021expressedanunqualifiedopiniononthoseconsolidatedfinancialstatements.
Amaterialweaknessisadeficiency,oracombinationofdeficiencies,ininternalcontroloverfinancialreporting,suchthat
thereisareasonablepossibilitythatamaterialmisstatementofthecompany’sannualorinterimfinancialstatementswillnot
bepreventedordetectedonatimelybasis.Amaterialweaknessrelatedtocontrolsovercontractassessmentinthe
Marketingbusinesshasbeenidentifiedandincludedinmanagement'sassessment.Specifically,theCompanydidnothave
controlstoidentifyallcontractswhereanaccountingassessmentwasrequiredandasaresultlackedanalysisofallrelevant
contracttermsrequiredtomaketheassessmentintheMarketingbusiness.Thematerialweaknesswasconsideredin
determiningthenature,timing,andextentofaudittestsappliedinourauditofthe2020consolidatedfinancialstatements,
andthisreportdoesnotaffectourreportonthoseconsolidatedfinancialstatements.
BasisforOpinion
TheCompany'smanagementisresponsibleformaintainingeffectiveinternalcontroloverfinancialreportingandforits
assessmentoftheeffectivenessofinternalcontroloverfinancialreporting,includedintheaccompanyingManagement's
AnnualReportonInternalControloverFinancialReportingincludedinManagement'sDiscussionandAnalysis.Our
responsibilityistoexpressanopinionontheCompany'sinternalcontroloverfinancialreportingbasedonouraudit.Wearea
publicaccountingfirmregisteredwiththePCAOBandarerequiredtobeindependentwithrespecttotheCompanyin
accordancewiththeU.S.federalsecuritieslawsandtheapplicablerulesandregulationsoftheSecuritiesandExchange
CommissionandthePCAOB.
WeconductedourauditinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperform
theaudittoobtainreasonableassuranceaboutwhethereffectiveinternalcontroloverfinancialreportingwasmaintainedin
allmaterialrespects.Ourauditofinternalcontroloverfinancialreportingincludedobtaininganunderstandingofinternal
controloverfinancialreporting,assessingtheriskthatamaterialweaknessexists,andtestingandevaluatingthedesignand
operatingeffectivenessofinternalcontrolbasedontheassessedrisk.Ourauditalsoincludedperformingsuchother
proceduresasweconsiderednecessaryinthecircumstances.Webelievethatourauditprovidesareasonablebasisforour
opinion.
PembinaPipelineCorporation2020AnnualReport71
DefinitionandLimitationsofInternalControlOverFinancialReporting
Acompany'sinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthe
reliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerally
acceptedaccountingprinciples.Acompany'sinternalcontroloverfinancialreportingincludesthosepoliciesandprocedures
that(1)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsand
dispositionsoftheassetsofthecompany;(2)providereasonableassurancethattransactionsarerecordedasnecessaryto
permitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatreceiptsand
expendituresofthecompanyarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsofthe
company;and(3)providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,use,or
dispositionofthecompany'sassetsthatcouldhaveamaterialeffectonthefinancialstatements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,
projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequate
becauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
CharteredProfessionalAccountants
Calgary,CanadaNovember18,2021
72PembinaPipelineCorporation2020AnnualReport
CONSOLIDATEDSTATEMENTSOFFINANCIALPOSITION
December31, January1,
Asat December31, 2019 2019
($millions) 2020 (RestatedNote4) (RestatedNote4)
AssetsCurrentassets
Cashandcashequivalents 81 129 157
Tradereceivablesandother(Note8) 662 694 605
Inventory(Note9) 221 126 198
Derivativefinancialinstruments(Note27) 25 40 54
989 989 1,014
Non-currentassets
Property,plantandequipment(Note10) 18,549 18,362 14,408
Intangibleassetsandgoodwill(Note11) 6,340 6,444 4,409
Investmentsinequityaccountedinvestees(Note12) 4,377 5,974 6,383
Right-of-useassets(Note16) 651 691 427
Financeleasereceivable(Note16) 138 145 —
Deferredtaxassets(Note14) 322 — —
Advancestorelatedpartiesandotherassets(Note30) 50 150 170
30,427 31,766 25,797
Totalassets 31,416 32,755 26,811
LiabilitiesandequityCurrentliabilities
Tradepayablesandother(Note15) 780 1,005 796
Loansandborrowings(Note17) 600 74 472
Dividendspayable 115 110 97
Leaseliabilities 99 112 64
Contractliabilities(Note20) 62 39 37
Taxespayable 56 103 67
Derivativefinancialinstruments(Note27) 69 6 6
1,781 1,449 1,539
Non-currentliabilities
Loansandborrowings(Note17) 10,276 10,078 7,046
Leaseliabilities 675 707 416
Decommissioningprovision(Note18) 348 337 158
Contractliabilities(Note20) 230 192 131
Deferredtaxliabilities(Note14) 2,925 2,945 2,814
Otherliabilities 166 179 198
14,620 14,438 10,763
Totalliabilities 16,401 15,887 12,302
Equity
Attributabletoshareholders 14,955 16,808 14,449
Attributabletonon-controllinginterest 60 60 60
Totalequity 15,015 16,868 14,509
Totalliabilitiesandequity 31,416 32,755 26,811
Seeaccompanyingnotestotheconsolidatedfinancialstatements
ApprovedonbehalfoftheBoardofDirectors:
"GordonJ.Kerr"GordonJ.KerrDirector
"RandallJ.Findlay"RandallJ.FindlayDirector
PembinaPipelineCorporation2020AnnualReport73
CONSOLIDATEDSTATEMENTSOFEARNINGS(LOSS)ANDCOMPREHENSIVEINCOME(LOSS)
FortheyearsendedDecember31 2020 2019
($millions,exceptpershareamounts) (RestatedNote3) (RestatedNote3)Revenue(Note20) 5,953 6,372
Costofsales(Note22) 3,883 4,325
Loss(gain)oncommodity-relatedderivativefinancialinstruments(Note27) 30 (20)
Shareofprofitfromequityaccountedinvestees-operations(Note12) 282 375
Impairmentinshareofprofitfromequityaccountedinvestees(Note12) (314) —
Grossprofit 2,008 2,442
Generalandadministrative 246 296
Other(income)expense (18) 15
Impairmentexpense(Note13) 1,776 300
Resultsfromoperatingactivities 4 1,831
Netfinancecosts(Note21) 420 289
Earnings(loss)beforeincometax (416) 1,542
Currenttaxexpense(Note14) 240 210
Deferredtaxrecovery(Note14) (340) (175)
Incometax(recovery)expense(Note14) (100) 35
Earnings(loss) (316) 1,507
Othercomprehensiveincome(loss),netoftax(Note26&27)
Exchangelossontranslationofforeignoperations (117) (213)
Impactofhedgingactivities 31 —
Re-measurementofdefinedbenefitliability(Note24) (10) (6)
Totalcomprehensiveincome(loss)attributabletoshareholders (412) 1,288
Earnings(loss)attributabletocommonshareholders,netofpreferredsharedividends(Note23) (476) 1,376
Earnings(loss)percommonshare–basic(dollars)(Note23) (0.86) 2.69
Earnings(loss)percommonshare–diluted(dollars)(Note23) (0.86) 2.68
Weightedaveragenumberofcommonshares(millions)
Basic(Note23) 550 512
Diluted(Note23) 550 514
Seeaccompanyingnotestotheconsolidatedfinancialstatements
74PembinaPipelineCorporation2020AnnualReport
CONSOLIDATEDSTATEMENTSOFCHANGESINEQUITY
AttributabletoShareholdersoftheCompany TotalEquity
(RestatedNote4)($millions)
CommonShareCapital
PreferredShareCapital
Deficit(RestatedNote4) AOCI(1)
Total(RestatedNote4)
Non-Controlling
Interest
December31,2019 15,539 2,956 (1,785) 98 16,808 60 16,868
Totalcomprehensive(loss)income
Loss — — (316) — (316) — (316)
Othercomprehensiveloss(Note26) — — — (96) (96) — (96)
Totalcomprehensiveloss — — (316) (96) (412) — (412)
TransactionswithshareholdersoftheCompany
PartVI.1taxonpreferredshares(Note19) — (10) — — (10) — (10)
Share-basedpaymenttransactions(Note19) 105 — — — 105 — 105
Dividendsdeclared–common(Note19) — — (1,385) — (1,385) — (1,385)
Dividendsdeclared–preferred(Note19) — — (151) — (151) — (151)
TotaltransactionswithshareholdersoftheCompany 105 (10) (1,536) — (1,441) — (1,441)
December31,2020 15,644 2,946 (3,637) 2 14,955 60 15,015
OpeningvalueJanuary1,2019 13,662 2,423 (1,953) 317 14,449 60 14,509
Totalcomprehensiveincome
Earnings — — 1,507 — 1,507 — 1,507
Othercomprehensiveincome
Exchangelossontranslationofforeignoperations — — — (213) (213) — (213)
Remeasurementsofdefinedbenefitliability,netoftax(Note24) — — — (6) (6) — (6)
Totalcomprehensiveincome — — 1,507 (219) 1,288 — 1,288
TransactionswithshareholdersoftheCompany
Commonsharesissued,netofissuecosts(Note19) 1,710 — — — 1,710 — 1,710
Preferredsharesissued,netofissuecosts(Note19) — 533 — — 533 — 533
Share-basedpaymenttransactions(Note19) 167 — — — 167 — 167
Dividendsdeclared–common(Note19) — — (1,213) — (1,213) — (1,213)
Dividendsdeclared–preferred(Note19) — — (126) — (126) — (126)
TotaltransactionswithshareholdersoftheCompany 1,877 533 (1,339) — 1,071 — 1,071
December31,2019 15,539 2,956 (1,785) 98 16,808 60 16,868(1) AccumulatedOtherComprehensiveIncome("AOCI").
Seeaccompanyingnotestotheconsolidatedfinancialstatements
PembinaPipelineCorporation2020AnnualReport75
CONSOLIDATEDSTATEMENTSOFCASHFLOWS
FortheyearsendedDecember31 2019
($millions) 2020 (RestatedNote3)
Cashprovidedby(usedin)
Operatingactivities
Earnings(loss) (316) 1,507
Adjustmentsfor:
Shareofprofitfromequityaccountedinvestees-operations(Note12) (282) (375)
Impairmentinshareofprofitfromequityaccountedinvestees(Note12) 314 —
Distributionsfromequityaccountedinvestees(Note12) 459 575
Depreciationandamortization 700 507
Impairmentexpense(Note13) 1,776 300
Unrealizedlossoncommodity-relatedderivativefinancialinstruments(Note27) 84 13
Netfinancecosts(Note21) 420 289
Netinterestpaid(Note21) (383) (269)
Incometax(recovery)expense(Note14) (100) 35
Taxespaid (295) (141)
Share-basedcompensationexpense(Note25) 28 66
Share-basedcompensationpayment (45) (50)
Netchangeincontractliabilities (1) (30)
Other (14) (1)
Changeinnon-cashoperatingworkingcapital (93) 106
Cashflowfromoperatingactivities 2,252 2,532
Financingactivities
Bankborrowingsandissuanceofdebt(Note17) 1,581 2,153
Repaymentofloansandborrowings (2,421) (1,866)
Repaymentofleaseliability (94) (68)
Issuanceofmedium-termnotes(Note17) 1,578 2,318
Issuecostsandfinancingfees (11) (14)
Exerciseofstockoptions 88 151
Dividendspaid (1,530) (1,323)
Cashflow(usedin)providedbyfinancingactivities (809) 1,351
Investingactivities
Capitalexpenditures (1,029) (1,645)
Contributionstoequityaccountedinvestees(Note12) (202) (206)
Acquisitions(Note7) — (2,009)
Receiptoffinanceleasepayments 9 —
Interestpaidduringconstruction(Note21) (46) (42)
Advancestorelatedparties (32) (63)
Changesinnon-cashinvestingworkingcapitalandother (183) 55
Cashflowusedininvestingactivities (1,483) (3,910)
Changeincashandcashequivalents (40) (27)
Effectofmovementinexchangeratesoncashheld (8) (1)
Cashandcashequivalents,beginningofperiod 129 157
Cashandcashequivalents,endofperiod 81 129
Seeaccompanyingnotestotheconsolidatedfinancialstatements
76PembinaPipelineCorporation2020AnnualReport
NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS
1.REPORTINGENTITY
PembinaPipelineCorporation("Pembina"orthe"Company")isaCalgary-based,leadingtransportationandmidstream
serviceproviderservingNorthAmerica'senergyindustry.Theconsolidatedfinancialstatementsincludetheaccountsof
Pembina,itssubsidiarycompanies,partnershipsandanyinvestmentsinassociatesandjointarrangementsasatandforthe
yearendedDecember31,2020.
Pembinaownsanintegratedsystemofpipelinesthattransportvarioushydrocarbonliquidsandnaturalgasproducts
producedprimarilyinwesternCanada.Pembinaalsoownsgasgatheringandprocessingfacilitiesandanoilandnaturalgas
liquidsinfrastructure,storageandlogisticsbusiness;andisgrowinganexportterminalsbusiness.Pembina'sintegratedassets
andcommercialoperationsalongthemajorityofthehydrocarbonvaluechainallowittoofferafullspectrumofmidstream
andmarketingservicestotheenergysector.
2.BASISOFPREPARATION
a.BasisofMeasurementandStatementofCompliance
Theconsolidatedfinancialstatementshavebeenpreparedonahistoricalcostbasiswithsomeexceptions,asdetailedinthe
accountingpoliciessetoutbelowinaccordancewithInternationalFinancialReportingStandards("IFRS"),asissuedbythe
InternationalAccountingStandardsBoard("IASB").ExceptforthechangesdescribedinNote3,theseaccountingpolicieshave
beenappliedconsistentlyforallperiodspresentedintheseconsolidatedfinancialstatements.
Certaininsignificantcomparativeamountshavebeenreclassifiedtoconformtothepresentationadoptedinthecurrentyear.
TheseconsolidatedfinancialstatementswereauthorizedforissuebyPembina'sBoardofDirectorsonNovember18,2021.
b.FunctionalandPresentationCurrency
TheconsolidatedfinancialstatementsarepresentedinCanadiandollars.AllfinancialinformationpresentedinCanadian
dollarshasbeendisclosedinmillions,exceptwherenoted.Theassetsandliabilitiesofsubsidiaries,andinvestmentsinequity
accountedinvestees,whosefunctionalcurrenciesareotherthanCanadiandollarsaretranslatedintoCanadiandollarsatthe
foreignexchangerateatthebalancesheetdate,whilerevenuesandexpensesofsuchsubsidiariesaretranslatedusing
averagemonthlyforeignexchangerates,whichapproximatetheforeignexchangeratesonthedatesofthetransactions.
Foreignexchangedifferencesarisingontranslationofsubsidiariesandinvestmentsinequityaccountedinvesteeswitha
functionalcurrencyotherthantheCanadiandollarareincludedinothercomprehensiveincome.
c.UseofEstimatesandJudgments
ThepreparationoftheConsolidatedFinancialStatementsinconformitywithIFRSrequiresmanagementtomakejudgments,
estimatesandassumptionsthatarebasedonthefactsandcircumstancesandestimatesatthedateoftheConsolidated
FinancialStatementsandaffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,income
andexpenses.Actualresultsmaydifferfromtheseestimates.
Judgments,estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesare
recognizedintheperiodinwhichtheestimatesarerevisedandinanyfutureperiodsaffected.
PembinaPipelineCorporation2020AnnualReport77
OngoingImpactoftheCOVID-19Pandemic
FollowingtheWorldHealthOrganizationdeclaringtheCOVID-19outbreaktobeapandemic,manygovernmentshave
imposedrestrictionsonindividualsandbusinesses,resultinginasignificantslowdownoftheglobaleconomy.Whilethese
restrictionshavebeenrelaxedincertainjurisdictions,aresurgenceofCOVID-19cases(includingcasesresultingfromvariants
oftheCOVID-19virus)incertaingeographicareasandtheriskthatthiscouldoccurinotherareashascausedgovernmentsin
certainjurisdictionstosustainand,insomecases,re-imposerestrictions.Inaddition,whilevaccinesarebeginningtobe
distributed,thereisongoinguncertaintyastothetiming,levelofadoption,durationofefficacyandoveralleffectivenessof
thevaccine,includingagainstvariantsoftheCOVID-19virus.Asaresult,thereremainssignificantuncertaintyastotheextent
anddurationoftheglobaleconomicslowdown.Thisuncertaintyhascreatedvolatilityinassetandcommodityprices,
currencyexchangeratesandamarkeddeclineinlong-terminterestrates.Inaddition,theresultingdecreaseindemandfor
crudeoilhasresultedinadeclineinglobalcrudeoilprices.Managementappliedjudgmentandwillcontinuetoassessthe
situationindeterminingtheimpactofthesignificantuncertaintiescreatedbytheseeventsandconditionsonthecarrying
amountsofassetsandliabilitiesintheConsolidatedFinancialStatements.
ThefollowingjudgmentandestimationuncertaintiesarethosemanagementconsidersmaterialtotheConsolidatedFinancial
Statements:
Judgments
(i)BusinessCombinations
Businesscombinationsareaccountedforusingtheacquisitionmethodofaccounting.Thedeterminationoffairvalueoften
requiresmanagementtomakejudgmentsaboutfuturepossibleevents.Theassumptionswithrespecttoleaseidentification,
classificationandmeasurement,thefairvalueofpropertyplantandequipment,intangibleassets,decommissioning
provisionsandcontractliabilitiesacquired,aswellasthedeterminationofdeferredtaxes,generallyrequirethemost
judgment.
(ii)DepreciationandAmortization
Depreciationandamortizationofproperty,plantandequipmentandintangibleassetsarebasedonmanagement'sjudgment
ofthemostappropriatemethodtoreflectthepatternofanasset'sfutureeconomicbenefitexpectedtobeconsumedby
Pembina.Amongotherfactors,thesejudgmentsarebasedonindustrystandardsandhistoricalexperience.
(iii)Impairment
Assessmentofimpairmentofnon-financialassetsisbasedonmanagement'sjudgmentofwhetherornoteventsorchangesin
circumstancesindicatethatthecarryingvalueofanasset,investment,cashgeneratingunit("CGU")orgroupofCGUsexceeds
itsrecoverableamount.ThedeterminationofaCGUisbasedonmanagement'sjudgmentandisanassessmentofthe
smallestgroupofassetsthatgeneratecashinflowsindependentlyofotherassets.Inaddition,managementappliesjudgment
toassigngoodwillacquiredaspartofabusinesscombinationtotheCGUorgroupofCGUsthatisexpectedtobenefitfrom
thesynergiesofthebusinesscombinationforpurposesofimpairmenttesting.Whenanimpairmenttestisperformed,the
carryingvalueofaCGUorgroupofCGUsiscomparedtoitsrecoverableamount,definedasthegreateroffairvaluelesscosts
ofdisposalandvalueinuse.Assuch,theassetcompositionofaCGUorgroupofCGUsdirectlyimpactsboththecarrying
valueandrecoverabilityoftheassetsincludedtherein.
(iv)AssessmentofJointControlOverJointArrangements
ThedeterminationofjointcontrolrequiresjudgmentabouttheinfluencePembinahasoverthefinancialandoperating
decisionsofanarrangementandtheextentofthebenefitsitobtainsbasedonthefactsandcircumstancesofthe
arrangementduringthereportingperiod.Jointcontrolexistswhendecisionsabouttherelevantactivitiesrequirethe
unanimousconsentofthepartiesthatcontrolthearrangementcollectively.Ownershippercentagealonemaynotbea
determinantofjointcontrol.
78PembinaPipelineCorporation2020AnnualReport
(v)PatternofRevenueRecognition
Thepatternofrevenuerecognitionisimpactedbymanagement'sjudgmentsastothenatureofPembina'sperformance
obligations,theamountofconsiderationallocatedtoperformanceobligationsthatarenotsoldonastand-alonebasis,the
valuationofmaterialrightsandthetimingofwhenthoseperformanceobligationshavebeensatisfied.
(vi)Leases
Managementappliesjudgmenttodeterminewhetheracontractis,orcontains,aleasefrombothalesseeandlessor
perspective.Thisassessmentisbasedonwhetherthecontractconveysarighttocontroltheuseofanidentifiedassetfora
periodoftimeinexchangeforconsideration.Keyjudgmentsincludewhetheracontractidentifiesanasset(orportionofan
asset),whetherthelesseeobtainssubstantiallyalltheeconomicbenefitsoftheassetoverthecontracttermandwhetherthe
lesseehastherighttodirecttheasset'suse.Judgmentisalsoappliedindeterminingtherateusedtodiscountthelease
payments.
Estimates
(i)BusinessCombinations
Estimatesoffuturecashflows,forecastprices,interestrates,discountrates,cost,marketvaluesandusefullivesaremadein
determiningthefairvalueofassetsacquiredandliabilitiesassumed.Changesinanyoftheassumptionsorestimatesusedin
determiningthefairvalueofacquiredassetsandliabilitiescouldimpacttheamountsassignedtoassets,liabilities,intangible
assets,goodwillanddeferredtaxesinthepurchasepriceequation.Futureearningscanbeaffectedasaresultofchangesin
futuredepreciationandamortization,assetorgoodwillimpairment.
(ii)ProvisionsandContingencies
Managementusesjudgmentindeterminingthelikelihoodofrealizationofcontingentassetsandliabilitiestodeterminethe
outcomeofcontingencies.Provisionsrecognizedarebasedonmanagement'sbestestimateofthetiming,scopeandamount
ofexpectedfuturecashoutflowstosettletheobligation.
Basedonthelong-termnatureofthedecommissioningprovision,themostsignificantuncertaintiesinestimatingthe
provisionarethedeterminationofwhetherapresentobligationexists,thediscountandinflationratesused,thecoststhat
willbeincurredandthetimingofwhenthesecostswilloccur.
(iii)DeferredTaxes
Thecalculationofthedeferredtaxassetorliabilityisbasedonassumptionsaboutthetimingofmanytaxableeventsandthe
enactedorsubstantivelyenactedratesanticipatedtobeapplicabletoincomeintheyearsinwhichtemporarydifferencesare
expectedtoberealizedorreversed.Deferredincometaxassetsarerecognizedtotheextentthatitisprobablethatthe
deductibletemporarydifferenceswillberecoverableinfutureperiods.Theassessmentoffuturerecoverabilityinvolves
significantestimatestobemadebymanagement.
(iv)DepreciationandAmortization
Estimatedusefullivesofproperty,plantandequipmentandintangibleassetsarebasedonmanagement'sassumptionsand
estimatesofthephysicalusefullivesoftheassets,theeconomiclives,whichmaybeassociatedwiththereservelivesand
commoditytypeoftheproductionarea,inadditiontotheestimatedresidualvalue.
(v)ImpairmentofNon-FinancialAssets
IndeterminingtherecoverableamountofaCGU,agroupofCGUsoranindividualasset,managementusesitsbestestimates
offuturecashflows,andassessesdiscountratestoreflectmanagement'sbestestimateofaratethatreflectsacurrent
marketassessmentofthetimevalueofmoneyandthespecificrisksassociatedwiththeunderlyingassetsandcashflows.
PembinaPipelineCorporation2020AnnualReport79
(vi)ImpairmentofFinancialAssets
Themeasurementoffinancialassetscarriedatamortizedcostincludesmanagement'sestimatesregardingtheexpected
creditlossesthatwillberealizedonthesefinancialassets.
(vii)RevenuefromContractswithCustomers
Inestimatingthecontractvalue,managementmakesassessmentsastowhethervariableconsiderationisconstrainedornot
reasonablyestimable,suchthatanamountorportionofanamountcannotbeincludedintheestimateofthecontractvalue.
Management'sestimatesofthelikelihoodofacustomer'sabilitytouseoutstandingmake-uprightsmayimpactthetimingof
revenuerecognition.Inaddition,indeterminingtheamountofconsiderationtobeallocatedtoperformanceobligationsthat
arenotsoldonastand-alonebasis,managementestimatesthestand-alonesellingpriceofeachperformanceobligation
underthecontract,takingintoconsiderationthelocationandvolumeofgoodsorservicesbeingprovided,themarket
environment,andcustomerspecificconsiderations.
(viii)FairValueofFinancialInstruments
ForLevel2valuedfinancialinstruments,managementmakesassumptionsandestimatesvaluebasedonobservableinputs
suchasquotedforwardprices,timevalueandvolatilityfactors.ForLevel3valuedfinancialinstruments,managementuses
estimatesoffinancialforecasts,expectedcashflowsandriskadjusteddiscountratestomeasurefairvalue.
(ix)EmployeeBenefitObligations
AnactuarialvaluationispreparedtomeasurePembina'snetemployeebenefitobligationsusingmanagement'sbest
estimateswithrespecttolongevity,discountandinflationrates,compensationincreases,marketreturnsonplanassets,
retirementandterminationrates.
(x)Leases
Inmeasuringitsleaseliabilities,managementmakesassessmentsofthestand-alonesellingpricesofeachleaseandnon-lease
componentforthepurposesofallocatingconsiderationtoeachcomponent.Managementappliesitsbestestimatewith
respecttothelikelihoodofrenewal,extensionandterminationoptionexerciseindeterminingtheleaseterm.
3.CHANGESINACCOUNTINGPOLICIES&RESTATEMENT
Voluntarychangeinaccountingpolicy
Pembinare-assesseditspolicyforthemeasurementofitsdecommissioningprovision.Previously,Pembina's
decommissioningprovisionwasmeasuredatthepresentvalueoftheexpectedcoststosettletheobligationsusingarisk-free
interestratebasedontheGovernmentofCanada'sbenchmarklong-termbondyield.EffectiveDecember31,2020,Pembina
electedtochangeitspolicyforthemeasurementofitsdecommissioningobligationstoutilizeacredit-adjustedrisk-free
interestrate.Asaresultofthischangeinpolicy,Pembina'sdecommissioningprovisionisnowmeasuredusingarisk-free
interestratebasedontheGovernmentofCanada'sbenchmarklong-termbondyield,adjustedforPembina'screditrisk.The
useofacredit-adjustedrisk-freerateresultsinreliableandmorerelevantinformationforthereadersoftheCompany's
ConsolidatedFinancialStatementsasthismethodologyresultsinamoreaccuraterepresentationofthevalueatwhichsuch
liabilitiescouldbetransferredtoathirdparty,providesabetterindicationoftheriskassociatedwithsuchobligations,and
increasesthecomparabilityofPembina'sfinancialstatementstothoseofitspeers.
Managementhasappliedthechangeinaccountingpolicyretrospectively.TheConsolidatedFinancialStatementshavebeen
restatedtoreflectadjustmentsmadeasaresultofthischangeinaccountingpolicy.Thefollowingtablespresenttheimpacts
ofthechangeinaccountingpolicyfordecommissioningprovisionstothestatementoffinancialposition,thestatementof
earnings(loss)andcomprehensiveincome(loss),andthestatementofcashflows,foreachofthelineitemsaffected.
80PembinaPipelineCorporation2020AnnualReport
i. ImpactsontheConsolidatedStatementsofFinancialPosition
Asat December31,2020 December31,2019 January1,2019
($millions) Policychange Policychange Policychange
Assets
Property,plantandequipment (546) (372) (304)
Investmentsinequityaccountedinvestees 24 20 15
Right-of-useassets (51) (39) —
Advancestorelatedpartiesandotherassets (7) (7) (7)
Totalassets (580) (398) (296)
Liabilities
Decommissioningprovision (734) (527) (411)
Deferredtaxliabilities 37 31 32
Totalliabilities (697) (496) (379)
Equity
Deficit 117 98 83
TotalequityattributabletoShareholders 117 98 83
AreconciliationforeachofthelineitemsaffectedintherestatedConsolidatedStatementsofFinancialPositionispresented
inNote4.
ii. ReconciliationoftheConsolidatedStatementsofEarnings(Loss)andComprehensiveIncome(Loss)
FortheyearsendedDecember31
($millions,exceptpershareamounts)
2020 2019
PolicychangePreviouslyreported Policychange Restated
Costofsales (18) 5,187 (4) 5,183
Shareofprofitfromequityaccountedinvestees 4 370 5 375
Grossprofit 22 2,433 9 2,442
Netfinancecosts (3) 294 (5) 289
Earnings(loss)beforeincometax 25 1,528 14 1,542
Deferredtax(recovery)expense 6 (174) (1) (175)
Earnings(loss)attributabletoshareholders 19 1,492 15 1,507
Totalcomprehensiveincome(loss)attributabletoshareholders 19 1,273 15 1,288
Earnings(loss)attributabletocommonshareholders,netofpreferredsharedividends 19 1,361 15 1,376
Earnings(loss)percommonshare-basic 0.04 2.66 0.03 2.69
Earnings(loss)percommonshare-diluted 0.04 2.65 0.03 2.68
iii. ReconciliationoftheConsolidatedStatementofCashFlows
FortheyearsendedDecember31
($millions)
2020 2019
PolicychangePreviouslyreported Policychange Restated
Earnings(loss) 19 1,492 15 1,507
Shareofprofitfromequityaccountedinvestees (4) (370) (5) (375)
Adjustmentsfordepreciationandamortization (18) 511 (4) 507
Adjustmentsfornetfinancecosts (3) 294 (5) 289
Adjustmentsforincometaxexpense 6 36 (1) 35
Cashflowfromoperatingactivities — 2,532 — 2,532
PembinaPipelineCorporation2020AnnualReport81
Restatementofrevenueandcostofgoodssold
Duringthethirdquarterof2021,PembinaidentifiedcertaincontracttypesthatwererecordedincorrectlywithinMarketing&
NewVentures.Revenueandcostofgoodssoldassociatedwiththecontractswererecordedonagrossbasisbutshouldhave
beenrecordedonanetbasis.Asaresult,Pembinarestatedits2020ConsolidatedStatementsofEarnings(Loss)and
ComprehensiveIncome(Loss)andtheassociatedcomparativeperiodsbydecreasingrevenueandcostofgoodssold,withno
impacttoearnings,cashflowsorfinancialposition.
i. ReconciliationoftheConsolidatedStatementsofEarnings(Loss)andComprehensiveIncome(Loss)
FortheyearsendedDecember31
($millions,exceptpershareamounts)
2020 2019
Previouslyreported
Restatementadjustment Restated
Previouslyreported
Restatementadjustment Restated
Revenue 6,202 (249) 5,953 7,230 (858) 6,372
Costofsales 4,132 (249) 3,883 5,183 (858) 4,325
Grossprofit 2,008 — 2,008 2,442 — 2,442
Earnings(loss)percommonshare-basic 0.86 — 0.86 2.69 — 2.69
Earnings(loss)percommonshare-diluted 0.86 — 0.86 2.68 — 2.68
4.CONSOLIDATEDRESTATEMENTOFCOMPARATIVEPERIODSTATEMENTOFFINANCIALPOSITION
ThefollowingtablepresentsthecombinedimpactontheCompany'sConsolidatedStatementofFinancialPositionofthe
changeinaccountingpolicyfordecommissioningprovisionspresentedinNote3,andtheacquisitionadjustmentsrelatedto
thefinalizationofthepurchasepriceallocationpresentedinNote7.
December31,2019 January1,2019
Accounting Accounting
policychange Acquisition policychange
Asat Previously adjustments adjustments Previously adjustments
($millions) reported (Note3) (Note7) Restated reported (Note3) Restated
Assets
Tradereceivablesandother 692 — 2 694 605 — 605
Property,plantandequipment 18,775 (372) (41) 18,362 14,712 (304) 14,408
Intangibleassetsandgoodwill 6,429 — 15 6,444 4,409 — 4,409
Investmentsinequityaccountedinvestees 5,954 20 — 5,974 6,368 15 6,383
Right-of-useassets 822 (39) (92) 691 427 — 427
Financeleasereceivable 29 — 116 145 — — —
Advancestorelatedpartiesandotherassets 157 (7) — 150 177 (7) 170
Totalassets 33,153 (398) — 32,755 27,107 (296) 26,811
Liabilities
Tradepayablesandother 1,013 — (8) 1,005 796 — 796
Decommissioningprovision 864 (527) — 337 569 (411) 158
Deferredtaxliabilities 2,906 31 8 2,945 2,782 32 2,814
Totalliabilities 16,383 (496) — 15,887 12,681 (379) 12,302
Equity
Deficit (1,883) 98 — (1,785) (2,036) 83 (1,953)
Totalequity 16,770 98 — 16,868 14,426 83 14,509
82PembinaPipelineCorporation2020AnnualReport
5.SIGNIFICANTACCOUNTINGPOLICIES
TheaccountingpoliciesassetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheseConsolidated
FinancialStatements.
a.BasisofConsolidation
i)BusinessCombinations
Pembinameasuresgoodwillasthefairvalueoftheconsiderationtransferredincludingtherecognizedamountofanynon-
controllinginterestintheacquiree,lessthefairvalueoftheidentifiableassetsacquiredandliabilitiesassumed,allmeasured
asoftheacquisitiondate.Whentheexcessisnegative,abargainpurchasegainisrecognizedimmediatelyinearnings.
Non-controllinginterestsrepresentexistingoutsideownedequityinterestsinanacquiredsubsidiary.Thenon-controlling
interestswererecognizedatfairvalueontheacquisitiondateandarepresentedasaseparatecomponentofequity.The
equityinterestsbearconditionalnon-discretionarydistributionsandwillcontinuetobeheldasanon-controllinginterestin
equityattheiracquisitiondatefairvalueuntilderecognition,eitherwhentheconditionsaremetforreclassificationfrom
equitytofinancialliabilities,orwhentheequityinterestsarecancelledoronalossofcontroloftherelevantsubsidiary.
Transactioncosts,otherthanthoseassociatedwiththeissueofdebtorequitysecurities,thatPembinaincursinconnection
withabusinesscombinationareexpensedasincurred.
ii)Subsidiaries
Subsidiariesareentities,includingunincorporatedentitiessuchaspartnerships,controlledbyPembina.Thefinancialresults
ofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedatethatcontrolcommencesuntilthedatethat
controlceases.TheaccountingpoliciesofsubsidiariesarealignedwiththepoliciesadoptedbyPembina.
ChangesinPembina'sownershipinterestinsubsidiariesthatdonotresultinalossofcontrolareaccountedforasequity
transactions.Noadjustmentsaremadetogoodwillandnogainorlossisrecognizedinearnings.
iii)JointArrangements
JointarrangementsrepresentactivitieswherePembinahasjointcontrolestablishedbyacontractualagreement.Jointcontrol
requiresunanimousconsentfortherelevantfinancialandoperationaldecisions.Ajointarrangementiseitherajoint
operation,wherebythepartieshaverightstotheassetsandobligationsfortheliabilities,orajointventure,wherebythe
partieshaverightstothenetassets.
Forajointoperation,theconsolidatedfinancialstatementsincludePembina'sproportionateshareoftheassets,liabilities,
revenues,expensesandcashflowsofthearrangementwithitemsofasimilarnatureonaline-by-linebasis,fromthedate
thatjointcontrolcommencesuntilthedatethatjointcontrolceases.
Jointventuresareaccountedforusingtheequitymethodofaccountingandareinitiallyrecognizedatcost,orfairvalueif
acquiredaspartofabusinesscombination.Jointventuresareadjustedthereafterforthepost-acquisitionchangeinthe
Company'sshareoftheequityaccountedinvestment'snetassets.Pembina'sconsolidatedfinancialstatementsincludeits
shareoftheequityaccountedinvestment'sprofitorlossandothercomprehensiveincome,orincomeequaltopreferred
distributionsforcertainpreferredshareinterestsinequityaccountedinvestees,untilthedatethatjointcontrolceases.When
Pembina'sshareoflossesexceedsitsinterestinanequityaccountedinvestee,thecarryingamountofthatinterest,including
anylong-terminvestments,isreducedtonil,andtherecognitionoffurtherlossesisdiscontinuedexcepttotheextentthat
Pembinahasanobligationorhasmadepaymentsonbehalfoftheinvestee.Distributionsfromandcontributionsto
investmentsinequityaccountedinvesteesarerecognizedwhenreceivedorpaid.
AcquisitionofanincrementalownershipinajointarrangementwherePembinamaintainsjointcontrolisrecordedatcostor
fairvalueifacquiredaspartofabusinesscombination.WherePembinahasapartialdisposal,includingadeemeddisposal,of
ajointarrangementandmaintainsjointcontrol,theresultinggainsorlossesarerecordedinearningsatthetimeofdisposal.
PembinaPipelineCorporation2020AnnualReport83
iv)TransactionsEliminatedonConsolidation
Balancesandtransactions,andanyrevenueandexpensesarisingfromtransactionwithorbetweensubsidiariesare
eliminatedinpreparingtheconsolidatedfinancialstatements.Gainsarisingfromtransactionswithinvestmentsinequity
accountedinvesteesareeliminatedagainsttheinvestmenttotheextentofPembina'sinterestintheinvestee.Lossesare
eliminatedinthesamewayasunrealizedgains,butonlytotheextentthatthereisnoevidenceofimpairment.
v)ForeignCurrency
TransactionsinforeigncurrenciesaretranslatedtoPembina'sfunctionalcurrencyatexchangeratesatthedatesofthe
transactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthereportingdateareretranslatedto
Pembina'sfunctionalcurrencyattheexchangerateatthatdate,withexchangedifferencesrecognizedinearnings.
Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthataremeasuredatfairvalueareretranslatedtothe
functionalcurrencyattheexchangerateatthedatethatthefairvaluewasdetermined.Non-monetaryitemsthatare
measuredathistoricalcostinaforeigncurrencyaretranslatedusingtheexchangerateatthedateofthetransaction.
Theassetsandliabilitiesofsubsidiaries,andinvestmentsinequityaccountedinvestees,whosefunctionalcurrenciesareother
thanCanadiandollarsaretranslatedintoCanadiandollarsattheforeignexchangerateatthebalancesheetdate,while
revenuesandexpensesofsuchsubsidiariesaretranslatedusingaveragemonthlyforeignexchangerates,whichapproximate
theforeignexchangeratesonthedatesofthetransactions.Foreignexchangedifferencesarisingontranslationofsubsidiaries
andinvestmentsinequityaccountedinvesteeswithafunctionalcurrencyotherthantheCanadiandollarareincludedinother
comprehensiveincome.
b.CashandCashEquivalents
Cashandcashequivalentscomprisecashbalances,calldepositsandshort-terminvestmentswithoriginalmaturitiesofninety
daysorless,andareusedbyPembinainthemanagementofitsshort-termcommitments.
c.Inventories
Inventoriesaremeasuredatthelowerofcostandnetrealizablevalueandconsistprimarilyofcrudeoil,naturalgasliquids
("NGL")andspareparts.Thecostofinventoriesisdeterminedusingtheweightedaveragecostingmethodandincludesdirect
purchasecostsandwhenapplicable,costsofproduction,extraction,fractionation,andtransportation.Netrealizablevalueis
theestimatedsellingpriceintheordinarycourseofbusinesslesstheestimatedsellingcosts.Allchangesinthevalueof
inventoriesarereflectedinearnings.
d.FinancialInstruments
Financialassetsandliabilitiesareoffsetandthenetamountpresentedintheconsolidatedstatementoffinancialposition
when,andonlywhen,Pembinahasalegalrighttooffsettheamountsandintendseithertosettleonanetbasisortorealize
theassetandsettletheliabilitysimultaneously.
i)Non-DerivativeFinancialAssets
Pembinainitiallyrecognizesloans,receivables,advancestorelatedpartiesanddepositsonthedatethattheyareoriginated.
AllotherfinancialassetsarerecognizedonthetradedateatwhichPembinabecomesapartytothecontractualprovisionsof
theinstrument.
Pembinaderecognizesafinancialassetwhenthecontractualrightstothecashflowsfromtheassetexpire,orittransfersthe
rightstoreceivethecontractualcashflowsonthefinancialassetinatransactioninwhichsubstantiallyalltherisksand
rewardsofownershipofthefinancialassetaretransferred.Anyinterestintransferredfinancialassetsthatiscreatedor
retainedbyPembinaisrecognizedasaseparateassetorliability.Onderecognition,thedifferencebetweenthecarrying
amountofthefinancialassetandtheconsiderationreceivedisrecognizedinearnings.
84PembinaPipelineCorporation2020AnnualReport
Pembinaclassifiesnon-derivativefinancialassetsintothefollowingcategories:
FinancialAssetsatAmortizedCost
Afinancialassetisclassifiedinthiscategoryiftheassetisheldwithinabusinessmodelwhoseobjectiveistocollect
contractualcashflowsonspecifieddatesthataresolelypaymentsofprincipalandinterest.Atinitialrecognition,financial
assetsatamortizedcostarerecognizedatfairvalueplusdirectlyattributabletransactioncosts.Subsequenttoinitial
recognition,thesefinancialassetsarerecordedatamortizedcostusingtheeffectiveinterestmethodlessanyimpairmentloss
allowances.
FinancialAssetsatFairValueThroughOtherComprehensiveIncome
Afinancialassetisclassifiedinthiscategoryiftheassetisheldwithinabusinessmodelwhoseobjectiveismetbyboth
collectingcontractualcashflowsandsellingfinancialassets.Pembinadidnothaveanyfinancialassetsclassifiedasfairvalue
throughothercomprehensiveincomeduringtheyearscoveredinthesefinancialstatements.
FinancialAssetsatFairValueThroughEarnings
Afinancialassetisclassifiedinthiscategoryifitisnotclassifiedasafinancialassetatamortizedcostorafinancialassetatfair
valuethroughothercomprehensiveincome,oritisanequityinstrumentdesignatedassuchoninitialrecognition.Atinitial
recognition,andsubsequently,thesefinancialassetsarerecognizedatfairvalue.
ii)Non-DerivativeFinancialLiabilities
PembinainitiallyrecognizesfinancialliabilitiesonthetradedateatwhichPembinabecomesapartytothecontractual
provisionsoftheinstrument.
Non-derivativefinancialliabilitiesarerecognizedinitiallyatfairvalueplusanydirectlyattributabletransactioncosts.
Subsequenttoinitialrecognitionthesefinancialliabilitiesaremeasuredatamortizedcostusingtheeffectiveinterestmethod.
Pembinaderecognizesafinancialliabilitywhenitscontractualobligationsaredischarged,cancelledorexpire.On
derecognition,thedifferencebetweenthecarryingvalueoftheliabilityandtheconsiderationpaid,includinganynon-cash
assetstransferredorliabilitiesassumed,isrecognizedinearnings.
Pembinarecordsamodificationorexchangeofanexistingliabilityasaderecognitionofthefinancialliabilityifthetermsare
substantiallydifferent,resultinginadifferenceofmorethan10percentwhencomparingthepresentvalueoftheremaining
cashflowsoftheexistingliabilitytothepresentvalueofthediscountedcashflowsunderthenewtermsusingtheoriginal
effectiveinterestrate.
Ifamodificationtoanexistingliabilitycausesarevisiontotheestimatedpaymentsoftheliabilitybutisnottreatedasa
derecognition,Pembinaadjuststhegrosscarryingamountoftheliabilitytothepresentvalueoftheestimatedcontractual
cashflowsusingtheinstrument’soriginaleffectiveinterestrate,withthedifferencerecordedinearnings.
Pembina'snon-derivativefinancialliabilitiesarecomprisedofthefollowing:bankoverdrafts,tradepayablesandaccrued
liabilities,taxespayable,dividendspayable,loansandborrowings,leaseliabilitiesandotherliabilities.
BankoverdraftsthatarerepayableondemandandformanintegralpartofPembina'scashmanagementareincludedasa
componentofcashandcashequivalentsforthepurposeoftheconsolidatedstatementsofcashflows.
iii)CommonShareCapital
Commonsharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofcommonsharesandshare
optionsarerecognizedasadeductionfromequity,netofanytaxeffects.
PembinaPipelineCorporation2020AnnualReport85
iv)PreferredShareCapital
Preferredsharesareclassifiedasequitybecausetheybeardiscretionarydividendsanddonotcontainanyobligationsto
delivercashorotherfinancialassets.DiscretionarydividendsarerecognizedasequitydistributionsonapprovalbyPembina's
BoardofDirectors.Incrementalcostsdirectlyattributabletotheissueofpreferredsharesarerecognizedasadeductionfrom
equity,netofanytaxeffects.
v)DerivativeFinancialInstrumentsandHedgeAccounting
Pembinaholdsderivativefinancialinstrumentstomanageitsinterestrate,commodity,powercostsandforeignexchangerisk
exposures.Derivativesarerecognizedinitiallyatfairvalue.Subsequenttoinitialrecognition,derivativesaremeasuredatfair
valuewithchangesrecognizedimmediatelyinearnings,unlesshedgeaccountingisapplied.
Pembinaapplieshedgeaccountingtocertainfinancialinstrumentsthatqualifyforandaredesignatedforhedgeaccounting
treatment.Atinceptionofadesignatedhedgingrelationship,formaldocumentationispreparedandincludestherisk
managementobjectiveandstrategyforundertakingthehedge,identificationofthehedgeditemandthehedginginstrument,
thenatureoftheriskbeinghedgedandhowPembinawillassessthehedginginstrument'seffectivenessinoffsettingthe
exposuretochangesinthehedgeditem.
Forderivativesthataredesignatedandqualifiedcashflowhedges,theeffectiveportionofchangesinfairvalueis
accumulatedinothercomprehensiveincome.Theamountaccumulatedisreclassifiedtoearningsinthesameperiodor
periodsduringwhichthehedgedexpectedfuturecashflowsoccur.Anyineffectiveportionofchangesinfairvalueofhedges
arerecordedinearnings.
Fornon-derivativefinancialliabilitiesdesignatedashedginginstrumentsinahedgeofthenetinvestmentinforeign
operations,theeffectiveportionofforeignexchangegainsandlossesarisingontranslationofthefinancialliabilityis
recognizedinothercomprehensiveincome.Anyineffectiveportionoftheforeignexchangegainsandlossesarisingfromthe
translationofthefinancialliabilityisrecognizedimmediatelyinearnings.Theamountaccumulatedinothercomprehensive
incomeisreclassifiedtoearningsondisposaloftheforeignoperation.
Hedgeaccountingisdiscontinuedprospectivelywhenthehedgingrelationshipnolongerqualifiesforhedgeaccountingorthe
hedginginstrumentissoldorterminated.
e.Property,PlantandEquipment
i)RecognitionandMeasurement
Itemsofproperty,plantandequipmentaremeasuredinitiallyatcost,unlesstheyareacquiredaspartofabusiness
combinationinwhichcasetheyareinitiallymeasuredatfairvalue.Thereafter,property,plantandequipmentarerecorded
netofaccumulateddepreciationandaccumulatedimpairmentlosses.
Costincludesexpendituresthataredirectlyattributabletotheacquisitionoftheasset.Thecostofself-constructedassets
includesthecostofmaterialsanddirectlabour,anyothercostsdirectlyattributabletobringingtheassetstoaworking
conditionfortheirintendeduse,estimateddecommissioningprovisionsandborrowingcostsonqualifyingassets.
Costmayalsoincludeanygainorlossrealizedonforeigncurrencytransactionsdirectlyattributabletothepurchaseor
constructionofproperty,plantandequipment.Purchasedsoftwarethatisintegraltothefunctionalityoftherelated
equipmentiscapitalizedaspartofthatequipment.
Whenpartsofanitemofproperty,plantandequipmenthavedifferentusefullives,theyareaccountedforasseparate
componentsofproperty,plantandequipment.
Thegainorlossondisposalofanitemofproperty,plantandequipmentisdeterminedbycomparingtheproceedsfrom
disposalwiththecarryingamountofproperty,plantandequipment,andisrecognizedinearnings.
86PembinaPipelineCorporation2020AnnualReport
ii)SubsequentCosts
Thecostofreplacingapartofanitemofproperty,plantandequipmentisrecognizedinthecarryingamountoftheitemifit
isprobablethatthefutureeconomicbenefitsembodiedwithinthepartwillflowtoPembina,anditscostcanbemeasured
reliably.Thecarryingamountofthereplacedpartisderecognizedandrecordedasdepreciationexpense.Thecostof
maintenanceandrepairexpensesoftheproperty,plantandequipmentarerecognizedinearningsasincurred.
iii)Depreciation
Depreciationisbasedonthecostofanassetlessitsresidualvalue.Significantcomponentsofindividualassetsareassessed
andifacomponenthasausefullifethatisdifferentfromtheremainderoftheasset,thatcomponentisdepreciated
separately.Landandlinefillarenotdepreciated.
Depreciationisrecognizedinearningsoveranasset'susefullifeonastraightlineordecliningbalancebasis,whichmost
closelyreflectstheexpectedpatternofconsumptionofthefutureeconomicbenefitsembodiedintheasset.Anasset'suseful
lifeisdeterminedasthelowerofitsphysicallifeandeconomiclife.Depreciationcommencesonceanassetisavailablefor
use.
Depreciationmethods,usefullivesandresidualvaluesarereviewedannuallyandadjustedifappropriate.
f.IntangibleAssets
i)Goodwill
Goodwillthatarisesuponacquisitionsisincludedinintangibleassetsandgoodwill.SeeNote5(a)(i)forthepolicyon
measurementofgoodwillatinitialrecognition.
SubsequentMeasurement
Goodwillismeasuredatcostlessaccumulatedimpairmentlosses.
Inrespectofinvestmentsinequityaccountedinvestees,goodwillisincludedinthecarryingamountoftheinvestment,andan
impairmentlossonsuchaninvestmentisallocatedtotheinvestmentandnottoanyasset,includinggoodwill,thatformsthe
carryingamountoftheinvestmentinequityaccountedinvestee.
ii)OtherIntangibleAssets
OtherintangibleassetsacquiredindividuallybyPembinaareinitiallyrecognizedandmeasuredatcost,unlesstheyare
acquiredaspartofabusinesscombinationinwhichcasetheyareinitiallymeasuredatfairvalue.Thereafter,intangibleassets
withfiniteusefullivesarerecordednetofaccumulatedamortizationandaccumulatedimpairmentlosses.
iii)SubsequentExpenditures
Subsequentexpendituresarecapitalizedonlywhentheyincreasethefutureeconomicbenefitsembodiedinthespecificasset
towhichtheyrelate.Allotherexpendituresarerecognizedinearningsasincurred.
iv)Amortization
Amortizationisbasedonthecostofanassetlessitsresidualvalue.
Amortizationisrecognizedinearningsovertheestimatedusefullivesofintangibleassets,otherthangoodwill,fromthedate
thattheyareavailableforuse.Amortizationisincludedincostofsalesandgeneralandadministrativeexpense.
Amortizationmethods,usefullivesandresidualvaluesarereviewedannuallyandadjustedifappropriate.
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g.Leases
Aspecificassetisthesubjectofaleaseifthecontractconveystherighttocontroltheuseofthatidentifiedassetforaperiod
oftimeinexchangeforconsideration.Thisdeterminationismadeatinceptionofacontract,andisreassessedwhenthe
termsandconditionsofthecontractareamended.
Atinceptionoronreassessmentofacontractthatcontainsaleasecomponent,Pembinaallocatescontractconsiderationto
theleaseandnon-leasecomponentsonthebasisoftheirrelativestand-aloneprices.Theconsiderationallocatedtothelease
componentsisrecognizedinaccordancewiththepoliciesforlesseeandlessorleases,asdescribedbelow.Theconsideration
allocatedtonon-leasecomponentsisrecognizedinaccordancewithitsnature.
i)Lessee
Leasedassetsarerecognizedasright-of-useassets,withcorrespondingleaseliabilitiesrecognizedonthestatementof
financialpositionattheleasecommencementdate.
Right-of-useassetsareinitiallyrecognizedatcost,whichcomprisestheinitialamountoftheleaseliabilityadjustedforany
leasepaymentsmadeatorbeforethecommencementdate,plusanyinitialdirectcostsincurredandanestimateofcoststo
dismantleandremovetheunderlyingassetandrestorethesiteofanunderlyingassettotheconditionrequiredbytheterms
ofthelease,lessanyleaseincentivesreceived.Right-of-useassetsrecognizedasaresultofbusinesscombinationareinitially
measuredinthesamemanner,plusanadjustmenttoreflectfavourableorunfavourableleasetermscomparedtomarket
terms.Right-of-useassetsaresubsequentlymeasuredatcostlessanyaccumulateddepreciationandaccumulated
impairmentlosses,adjustedforremeasurementsoftheleaseliability.Theright-of-useassetisdepreciatedoverthelesserof
theasset'susefullifeandtheleasetermonastraight-linebasis.
Theleaseliabilityisinitiallymeasuredatthepresentvalueoftheleasepayments,discountedusingtheinterestrateimplicitin
theleaseifreadilydeterminable,orataratePembinawouldberequiredtopaytoborrowoverasimilartermwithasimilar
securitytoobtainanassetofasimilarvaluetotheright-of-useasset.Leasepaymentsinanoptionalrenewalperiodare
includedintheleaseliabilityifPembinaisreasonablycertaintoexercisesuchoption.Theleaseliabilityissubsequently
increasedbyinterestexpenseontheleaseliabilityanddecreasedbyleasepaymentsmade.Interestexpenseisrecordedin
earningsatanamountthatrepresentsaconstantperiodicrateofinterestontheremainingbalanceoftheleaseliability.
Theleaseliabilityisremeasuredwhenthereisachangeinfutureleasepaymentsarisingfromachangeinanindexorrate,a
changeintheestimatedguaranteedresidualvaluetobepaid,orachangeintheassessmentofwhetherapurchaseoption,
extensionoptionorterminationoptionisreasonablycertaintobeexercised.Acorrespondingadjustmentismadetotheright
ofuseassetwhenaliabilityisremeasured,ortheadjustmentisrecordedinearningsiftherightofuseassethasbeen
reducedtozero.
Pembinahaselectedtoapplytherecognitionexemptionsforshort-termandlowvalueleases.Pembinarecognizeslease
paymentsassociatedwiththeseleasesasanexpenseonastraight-linebasisovertheleaseterm.
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ii)Lessor
Lessorleasesareclassifiedaseitheroperatingleasesorfinanceleasesaccordingtothesubstanceofthecontract.Leases
transferringsubstantiallyalloftherisksincidentaltoassetownershipareclassifiedasfinanceleases,whileallotherleasesare
classifiedasoperatingleases.Subleasesareclassifiedaseitheroperatingorfinanceleasesinreferencetotheright-of-use
assetarisingfromtheheadlease.
Assetsunderfinanceleasearerecognizedinfinanceleasereceivablesatthevalueofthenetinvestmentinthelease.Thenet
investmentintheleaseismeasuredatthenetpresentvalueofthefutureleasepaymentsandtheunguaranteedresidual
valuesoftheunderlyingassets,discountedusingtheinterestrateimplicitinthelease.Financeincomeisrecognizedoverthe
leaseterminapatternreflectingaconsistentrateofreturnonthefinanceleasereceivable.Financeleaseincomegenerated
fromphysicalassetsinthenormalcourseofoperationsisrecordedasacomponentofrevenue.Allotherfinanceleaseincome
isrecordedinnetfinancecosts.
Leasepaymentsfromoperatingleasesarerecognizedinrevenueoneitherastraight-linebasisorasystematicbasis
representativeofthepatternofeconomicbenefittransfer.
h.Impairment
i)Non-DerivativeFinancialAssets
Impairmentoffinancialassetscarriedatamortizedcostisassessedusingthelifetimeexpectedcreditlossofthefinancial
assetatinitialrecognitionandthroughoutthelifeofthefinancialasset,exceptwherecreditriskhasnotincreased
significantlysinceinitialrecognition,inwhichcaseimpairmentisassessedatthe12monthexpectedcreditlossofthe
financialassetatthereportingdate.
Impairmentlossesarerecognizedinearningsandreflectedasareductionintherelatedfinancialasset.
ii)Non-FinancialAssets
ThecarryingamountsofPembina'snon-financialassets,otherthan:inventory,assetsarisingfromemployeebenefitsand
deferredtaxassets,arereviewedateachreportingdatetodeterminewhetherthereisanyindicationofimpairment.Ifany
suchindicationexists,theasset'srecoverableamountisestimated.
Forgoodwillandintangibleassetsthathaveindefiniteusefullivesorthatarenotyetavailableforuse,therecoverable
amountisestimatedannuallyinconnectionwiththeannualgoodwillimpairmenttest.
Forthepurposeofimpairmenttesting,assetsthatcannotbetestedindividuallyaregroupedtogetherintoCGUs,thesmallest
groupofassetsthatgeneratescashinflowsfromcontinuingusethatarelargelyindependentofthecashinflowsofother
assets.CGUsmayincorporateintegratedassetsfrommultipleoperatingsegments.Forthepurposeofgoodwillimpairment
testing,CGUsareaggregatedtotheoperatingsegmentlevel,whichreflectsthelowestlevelatwhichgoodwillismonitored
formanagementpurposes.GoodwillacquiredinabusinesscombinationisallocatedtoCGUsorgroupsofCGUsthatare
expectedtobenefitfromthesynergiesofthecombination.
Animpairmentlossisrecognizedifthecarryingamountofanasset,CGUorgroupofCGUsexceedsitsestimatedrecoverable
amount.
Therecoverableamountofanasset,CGUorgroupofCGUsisthegreaterofitsvalueinuseanditsfairvaluelesscostsof
disposal.Inassessingtherecoverableamount,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusinga
discountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset,CGUor
groupofCGUs.
PembinaPipelineCorporation2020AnnualReport89
Pembina'scorporateassetsdonotgenerateseparatecashinflowsandareutilizedbymorethanoneCGU.Corporateassets
areallocatedtoCGUsonareasonableandconsistentbasisandtestedforimpairmentaspartofthetestingoftheCGUto
whichthecorporateassetisallocated.Ifthereisanindicationthatacorporateassetmaybeimpaired,thentherecoverable
amountisdeterminedfortheCGUtowhichthecorporateassethasbeenallocated.
Impairmentlossesarerecognizedinearnings.ImpairmentlossesrecognizedinrespectofaCGU(groupofCGUs)areallocated
firsttoreducethecarryingamountofanygoodwillallocatedtotheCGU(groupofCGUs),andthentoreducethecarrying
amountsoftheotherassetsintheCGU(groupofCGUs)onaproratabasis.
Animpairmentlossinrespectofgoodwillisnotreversed.Inrespectofotherassets,impairmentlossesrecognizedinprior
periodsareassessedateachreportingdateforanyindicationsthatthelosshasdecreasedornolongerexists.Animpairment
lossisreversediftherehasbeenachangeintheestimatesusedtodeterminetherecoverableamount.Animpairmentlossis
reversedonlytotheextentthattheasset'scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeen
determined,netofdepreciationoramortization,ifnoimpairmentlosshadbeenrecognized.
Goodwillthatformspartofthecarryingamountofaninvestmentinanequityaccountedinvesteeisnotrecognized
separately,andthereforeisnottestedforimpairmentseparately.Instead,theentireamountoftheinvestmentistestedfor
impairmentasasingleassetwhenthereisobjectiveevidencethattheequityaccountedinvesteemaybeimpaired,unlessthe
equityaccountedinvesteedoesnotgeneratecashflowsthatarelargelyindependentofthosefromotherassetsoftheentity
inwhichcaseitiscombinedinaCGUwiththerelatedassets.
i.EmployeeBenefits
i)DefinedContributionPlans
Adefinedcontributionplanisapost-employmentbenefitplanunderwhichanentitypaysfixedcontributionsintoaseparate
entityandwillhavenolegalorconstructiveobligationtopayfurtheramounts.Obligationsforcontributionstodefined
contributionpensionplansarerecognizedasanemployeebenefitexpenseinearningsintheperiodsduringwhichservices
arerenderedbyemployees.Prepaidcontributionsarerecognizedasanassettotheextentthatacashrefundorareduction
infuturepaymentsisavailable.
ii)DefinedBenefitPensionPlans
Adefinedbenefitpensionplanisapost-employmentbenefitplanotherthanadefinedcontributionplan.Pembina'snet
obligationinrespectofdefinedbenefitpensionplansiscalculatedseparatelyforeachplanbyestimatingtheamountof
futurebenefitthatemployeeshaveearnedinreturnfortheirserviceinthecurrentandpriorperiods,discountedto
determineitspresentvalue,lessthefairvalueofanyplanassets.Thediscountrateusedtodeterminethepresentvalueis
establishedbyreferencingmarketyieldsonhigh-qualitycorporatebondsonthemeasurementdatewithcashflowsthat
matchthetimingandamountofexpectedbenefits.
Thecalculationisperformed,ataminimum,everythreeyearsbyaqualifiedactuaryusingtheactuarialcostmethod.When
thecalculationresultsinabenefittoPembina,therecognizedassetislimitedtothepresentvalueofeconomicbenefits
availableintheformoffutureexpensespayablefromtheplan,anyfuturerefundsfromtheplanorreductionsinfuture
contributionstotheplan.Tocalculatethepresentvalueofeconomicbenefits,considerationisgiventoanyminimumfunding
requirementsthatapplytoanyplaninPembina.AneconomicbenefitisavailabletoPembinaifitisrealizableduringthelife
oftheplanoronsettlementoftheplanliabilities.
Whenthebenefitsofaplanareimproved,theportionoftheincreasedbenefitrelatingtopastservicebyemployeesis
recognizedinearningsimmediately.
Pembinarecognizesallactuarialgainsandlossesarisingfromdefinedbenefitplansinothercomprehensiveincomeand
expensesrelatedtodefinedbenefitplansinearnings.
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Pembinarecognizesgainsorlossesontheterminationorsettlementofadefinedbenefitplanwhentheterminationor
settlementoccurs.Thegainorlossonterminationcomprisesanyresultingchangeinthefairvalueofplanassets,changein
thepresentvalueofdefinedbenefitobligationandanyrelatedactuarialgainsorlossesandpastservicecostthathadnot
previouslybeenrecognized.
iii)Short-TermEmployeeBenefits
Short-termemployeebenefitobligationsaremeasuredonanundiscountedbasisandareexpensedastherelatedserviceis
provided.
AliabilityisrecognizedfortheamountexpectedtobepaidifPembinahasapresentlegalorconstructiveobligationtopay
thisamountasaresultofpastserviceprovidedbytheemployee,andtheobligationcanbeestimatedreliably.
iv)Share-BasedPaymentTransactions
Forequitysettledshare-basedpaymentplans,thefairvalueoftheshare-basedpaymentatgrantdateisrecognizedasan
expense,withacorrespondingincreaseinequity,overtheperiodthattheemployeesunconditionallybecomeentitledtothe
awards.Theamountrecognizedasanexpenseisadjustedtoreflectthenumberofawardsforwhichtherelatedserviceand
non-marketvestingconditionsareexpectedtobemet,suchthattheamountultimatelyrecognizedasanexpenseisbasedon
thenumberofawardsthatmeettherelatedserviceconditionsatthevestingdate.
Forcashsettledshare-basedpaymentplans,thefairvalueoftheamountpayabletoemployeesisrecognizedasanexpense
withacorrespondingincreaseinliabilities,overtheperiodthattheemployeesunconditionallybecomeentitledtopayment.
Theliabilityisremeasuredateachreportingdateandatsettlementdate.Anychangesinthefairvalueoftheliabilityare
recognizedasanexpenseinearnings.
j.Provisions
Aprovisionisrecognizedif,asaresultofapastevent,Pembinahasapresentlegalorconstructiveobligationthatcanbe
estimatedreliably,anditisprobablethatanoutflowofeconomicresourceswillberequiredtosettletheobligation.
Provisionsaremeasuredateachreportingdatebasedonthebestestimateofthesettlementamount.Wheretheeffectofthe
timevalueofmoneyismaterial,provisionsarediscountedatapre-taxratethatreflectscurrentmarketassessmentsofthe
timevalueofmoneyandtherisksspecifictotheliability.Theunwindingofthediscountrateisrecognizedasaccretionin
financecosts.
i)DecommissioningProvision
Pembina'sactivitiesgiverisetocertaindismantling,decommissioning,environmentalreclamationandremediation
obligationsattheendofanasset'seconomiclife.Aprovisionismadefortheestimatedcostofsiterestorationandcapitalized
aspartofthecostoftheunderlyingassettowhichtheprovisionrelates.
Decommissioningobligationsaremeasuredatthepresentvalue,basedonacredit-adjustedrisk-freerate,ofmanagement's
bestestimateofwhatisreasonablyexpectedtobeincurredtosettletheobligationattheendofanasset'seconomiclife.
Subsequenttotheinitialmeasurement,theobligationisadjustedattheendofeachperiodtoreflectthepassageoftime,
changesinthecredit-adjustedrisk-freerateandchangesintheestimatedfuturecashflowsunderlyingtheobligation.The
increaseintheprovisionduetothepassageoftimeisrecognizedasaccretioninfinancecostswhereasincreasesordecreases
duetochangesintheestimatedfuturecashflowsorcreditadjustedrisk-freerateareaddedtoordeductedfromthecostof
therelatedasset.
Decommissioningobligationsassumedinabusinesscombinationareinitiallyrecordedatfairvalueandremeasuredusinga
credit-adjustedrisk-freeratesubsequenttoacquisition.Thisremeasurementisaddedtoordeductedfromthecostofthe
relatedasset.
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k.Revenue
i)Take-or-Pay
Pembinaprovidestransportation,gasprocessing,fractionation,terminalling,andstorageservicesundertake-or-pay
contracts.Inatake-or-paycontract,Pembinaisentitledtoaminimumfeeforthefirmservicepromisedtoacustomerover
thecontractperiod,regardlessofactualvolumestransported,processed,terminalled,orstored.Thisminimumfeecanbe
representedasasetfeeforanannualminimumvolume,oranannualminimumrevenuerequirement.Inaddition,these
contractsmayincludevariableconsiderationforoperatingcoststhatareflowthroughtothecustomer.
Pembinasatisfiesitsperformanceobligationsandrecognizesrevenueforservicesundertake-or-paycommitmentswhen
volumesaretransported,processed,terminalled,orstored.Make-uprightsmayarisewhenacustomerdoesnotfulfilltheir
minimumvolumecommitmentinacertainperiod,butisallowedtousethedeliveryofpastorfuturevolumestomeetthis
commitment.Thesemake-uprightsaresubjecttoexpiryandhavevaryingconditionsassociatedwiththem.Whencontract
termsallowacustomertoexercisetheirmake-uprightsusingfirmvolumecommitments,revenueisnotrecognizeduntil
thesemake-uprightsareused,expire,ormanagementdeterminesthatitisremotethattheywillbeutilized.IfPembinabillsa
customerforunusedserviceinanearlierperiodandthecustomerutilizesavailablemake-uprights,Pembinarecordsarefund
liabilityfortheamounttobereturnedtothecustomerthroughanannualadjustmentprocess.Forcontractswherenomake-
uprightsexist,revenueisrecognizedtotake-or-paylevelsoncePembinahasanenforceablerighttopaymentforthetake-or-
payvolumes.Make-uprightsgenerallyexpirewithinacontractyear,andamajorityoftherelatedcontractyearsfollowthe
calendaryear.
Whencustomersaretransporting,processing,terminalling,orstoringvolumesbelowtheirtake-or-paycommitmentsearlyin
acontractyear,andthecustomerhastherighttoexercisemakeuprightsagainstfuturefirmvolumecommitments,the
timingofrevenuerecognitionmaynotbeeventhroughouttheyear.WherePembinahasarighttoinvoicetotake-or-pay
levelsthroughoutthecontractyear,revenueisdeferredandacontractliabilityisrecordedforthevolumesinvoicedthatwere
notutilizedbythecustomer.Oncethecustomerhasuseditsmake-uprightsoritisdeterminedtoberemotethatacustomer
willusethem,thepreviouslydeferredrevenueisrecognized.Intheseinstances,therewillbeadeferralofrevenueinearly
quartersoftheyear,withsubsequentrecognitionoccurringinlaterquartersalthoughthereisnoimpactoncashflows.
Forcertainarrangementswherethecustomerdoesnothavemake-uprights,wherethemake-uprightshavebeen
determinedtobeinsignificant,andforcostofserviceagreements,revenueisrecognizedusingthepracticalexpedientto
recognizerevenueinanamountequaltoPembina'srighttoinvoice.Forthesearrangements,theconsiderationPembinais
entitledtoinvoiceineachperiodisrepresentativeofthevalueprovidedtothecustomer.
Whenup-frontpaymentsornon-cashconsiderationisreceivedinexchangeforfutureservicestobeperformed,revenueis
deferredasacontractliabilityandrecognizedovertheperiodtheperformanceobligationisexpectedtobesatisfied.Non-
cashconsiderationismeasuredatthefairvalueofthenon-cashconsiderationreceived.
ii)Fee-for-Service
Fee-for-servicerevenueincludesfirmcontractedrevenuethatisnotsubjecttotake-or-paycommitmentsandinterruptible
revenue.Pembinasatisfiesitsperformanceobligationsfortransportation,gasprocessing,fractionation,terminalling,and
storageasvolumesofproductaretransported,processed,orstored.Revenueisbasedonacontractedfeeandconsideration
isvariablewithrespecttovolumes.PaymentisdueinthemonthfollowingPembina'sprovisionofservice.
iii)ProductSales
Pembinasatisfiesitsperformanceobligationonproductsalesatthetimelegaltitletotheproductistransferredtothe
customer.Certaincommoditybuy/sellarrangementswherecontroloftheproducthasnottransferredtoPembinaare
recognizedonanetbasis.
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Forproductsales,revenueisrecognizedusingthepracticalexpedienttorecognizerevenueinanamountequaltoPembina's
righttoinvoiceastheconsiderationPembinaisentitledtoinvoiceineachperiodisrepresentativeofthevalueprovidedto
thecustomer.
l.GovernmentGrants
GovernmentgrantsarerecognizedinearningsasotherincomeonasystematicbasisovertheperiodsinwhichPembina
recognizesexpensesfortherelatedcostsforwhichthegrantisintendedtocompensate.Governmentgrantsarerecognized
onlywhenthereisreasonableassurancethatPembinawillcomplywiththeconditionsattachedtothegrant,andthegrant
willbereceived.Governmentgrantsreceivedduring2020associatedwiththeCanadianEmergencyWageSubsidy("CEWS")
wererecognizedinotherincome.
m.FinanceIncomeandFinanceCosts
Financeincomecomprisesinterestincomeonfundsdepositedandinvested,financeleasereceivables,advancestorelated
parties,gainsonnon-commodity-relatedderivativesmeasuredatfairvaluethroughearningsandforeignexchangegains.
Interestincomeisrecognizedasitaccruesinearnings,usingtheeffectiveinterestratemethod.
Financecostscompriseinterestexpenseonloansandborrowingsandleaseliabilities,accretiononprovisions,losseson
disposalofavailableforsalefinancialassets,lossesonnon-commodity-relatedderivativesandforeignexchangelosses.
Borrowingcoststhatarenotdirectlyattributabletotheacquisitionorconstructionofaqualifyingassetarerecognizedin
earningsusingtheeffectiveinterestratemethod.
n.IncomeTax
Incometaxexpensecomprisescurrentanddeferredtax.Currentanddeferredtaxesarerecognizedinearningsexcepttothe
extentthattheyrelatetoabusinesscombination,oritemsarerecognizeddirectlyinequityorinothercomprehensive
income.
Currenttaxistheexpectedtaxpayableorreceivableonthetaxableincomeorlossfortheperiod,usingtaxratesenactedor
substantivelyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.
Deferredtaxisrecognizedinrespectoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesfor
financialreportingpurposesandtheamountsusedfortaxationpurposes.Deferredtaxisnotrecognizedfor:
• temporarydifferencesontheinitialrecognitionofassetsorliabilitiesinatransactionthatisnotabusinesscombination
andthataffectsneitheraccountingnortaxableearnings;
• temporarydifferencesrelatingtoinvestmentsinsubsidiariesandjointarrangementstotheextentthatitisprobablethat
theywillnotreverseintheforeseeablefuture;and
• taxabletemporarydifferencesarisingontheinitialrecognitionofgoodwill.
ThemeasurementofdeferredtaxreflectsthetaxconsequencesthatwouldfollowthemannerinwhichPembinaexpects,at
theendofthereportingperiod,torecoverorsettlethecarryingamountofitsassetsandliabilities.
Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtotemporarydifferenceswhentheyreverse,based
onthelawsthathavebeenenactedorsubstantivelyenactedbythereportingdate.
Deferredtaxassetsandliabilitiesareoffsetonlyifthereisalegallyenforceablerighttooffset,andtheyrelatetoincometaxes
leviedbythesametaxationauthorityoneither:i)thesametaxableentity;orii)differenttaxentitieswheretheintentisto
settlecurrenttaxliabilitiesandassetsonanetbasis,orwheretaxliabilitiesandassetswillberealizedsimultaneouslyineach
futureperiod.
PembinaPipelineCorporation2020AnnualReport93
Adeferredtaxassetisrecognizedforunusedtaxlosses,taxcreditsanddeductibletemporarydifferences,totheextentthatit
isprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheycanbeutilized.Deferredtaxassetsarereviewedat
eachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealized.
Indeterminingtheamountofcurrentanddeferredtax,Pembinatakesintoaccountincometaxexposuresandwhether
additionaltaxesandinterestmaybedue.Thisassessmentreliesonestimatesandassumptionsandmayinvolveaseriesof
judgmentsaboutfutureevents.NewinformationmaybecomeavailablethatcausesPembinatochangeitsjudgment
regardingtheadequacyofexistingtaxliabilities,suchchangestotaxliabilitieswillimpacttaxexpenseintheperiodthatsuch
adeterminationismade.
o.EarningsPerCommonShare
Pembinapresentsbasicanddilutedearningspercommonshare("EPS")dataforitscommonshares.BasicEPSiscalculatedby
dividingtheearningsattributabletocommonshareholdersofPembinabytheweightedaveragenumberofcommonshares
outstandingduringtheperiod.Tocalculateearningsattributabletocommonshareholders,earningsareadjustedfor
accumulatedpreferreddividends.DilutedEPSisdeterminedbyadjustingtheearningsattributabletocommonshareholders
andtheweightedaveragenumberofcommonsharesoutstanding,fortheeffectsofallpotentiallydilutivecommonshares,
whichcompriseshareoptionsgrantedtoemployees.Onlyoutstandingshareoptionsthatwillhaveadilutiveeffectare
includedinfullydilutedcalculations.
Thedilutiveeffectofshareoptionsisdeterminedwherebyoutstandingshareoptionsattheendoftheperiodareassumedto
havebeenconvertedatthebeginningoftheperiodoratthetimeissuedifissuedduringtheyear.Amountschargedto
earningsrelatingtotheoutstandingshareoptionsareaddedbacktoearningsforthedilutedcalculations.Thesharesissued
uponconversionareincludedinthedenominatorofpersharebasiccalculationsforthedateofissue.
p.SegmentReporting
AnoperatingsegmentisacomponentofPembinathatengagesinbusinessactivitiesfromwhichitmayearnrevenuesand
incurexpenses,includingrevenuesandexpensesthatrelatetotransactionswithanyoftheCompany'sothercomponents.All
operatingsegments'operatingresultsarereviewedregularlybyPembina'sChiefExecutiveOfficer("CEO"),ChiefFinancial
Officer("CFO")andotherSeniorVicePresidents("SVPs")tomakedecisionsaboutresourcestobeallocatedtothesegment
andassessitsperformance,andforwhichdiscretefinancialinformationisavailable.
SegmentresultsthatarereportedtotheCEO,CFOandotherSVPsincludeitemsdirectlyattributabletoasegmentaswellas
thosethatcanbeallocatedonareasonablebasis.
q.NewStandardsandInterpretationsNotYetAdopted
TheInternationalAccountingStandardsBoardhaveissuedastandardandamendmentstoexistingstandardsthatare
effectiveforperiodsonorafterJanuary1,2021,withearlyapplicationpermitted.Assessmentoftheimpactsofthese
standardsisongoing,however,nomaterialimpactsonPembina'sConsolidatedFinancialStatementshavebeenidentified.
• InterbankOfferedRates("IBOR")Reform-Phase2(AmendmentstoIFRS9,IFRS7,andIFRS16);
• Property,PlantandEquipment:ProceedsbeforeIntendedUse(AmendmentstoIAS16);
• OnerousContracts-CostofFulfillingaContract(AmendmentstoIAS37);
• UpdatingaReferencetotheConceptualFramework(AmendmentstoIFRS3);
• AnnualImprovementstoIFRSStandards2018-2020;
• ClassificationofLiabilitiesasCurrentorNon-Current(AmendmentstoIAS1);and
• IFRS17:InsuranceContracts.
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6.DETERMINATIONOFFAIRVALUES
AnumberofPembina'saccountingpoliciesanddisclosuresrequirethedeterminationoffairvalue,forbothfinancialandnon-
financialassetsandliabilities.Whenmeasuringfairvalue,Pembinausesobservablemarketdatatotheextentpossible.Fair
valuemeasurementsarecategorizedintolevelsinafairvaluehierarchybasedonthedegreetowhichinputsareobservable
andsignificant.
Level1:Unadjustedquotedpricesareavailableinactivemarketsforidenticalassetsorliabilitiesasthereportingdate.
Level2:InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly
(i.e.asprices)orindirectly(i.e.derivedfromprices).
Level3:Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).Level3valuations
useunobservableinputs,suchasafinancialforecastdevelopedusingtheentity'sowndataforexpectedcashflowsandrisk
adjusteddiscountrates,tomeasurefairvaluetotheextentthatrelevantobservableinputsarenotavailable.The
unobservableinputsreflecttheassumptionsthatmarketparticipantswouldusewhenpricingtheassetorliability,including
assumptionsaboutrisk.Indevelopingunobservableinputs,theentity'sowndataisusedandadjustedforreasonably
availableinformationthatwouldbeusedbyothermarketparticipants.
OngoingImpactoftheCOVID-19Pandemic
Measuringfairvaluesusingsignificantunobservableinputshasbecomemorechallenginginthecurrentenvironment,where
eventsandconditionsrelatedtotheCOVID-19pandemicaredrivingsignificantdisruptionofbusinessoperationsanda
significantincreaseineconomicuncertainty.Managementapplieditsjudgmentindeterminingtheimpactofthesignificant
uncertaintiescreatedbytheseeventsandconditionsontheassessedfairvaluesofassetsandliabilitiesintheseconsolidated
financialstatements.
Fairvalueshavebeendeterminedformeasurementand/ordisclosurepurposesbasedonthefollowingmethods.When
applicable,furtherinformationabouttheassumptionsmadeindeterminingfairvaluesisdisclosedinthenotesspecifictothat
assetorliability.
i)Property,PlantandEquipment
Thefairvalueofproperty,plantandequipmentrecognizedasaresultofabusinesscombinationortransferredfroma
customerisbasedonmarketvalueswhenavailable,incomeapproachanddepreciatedreplacementcostwhenappropriate.
Depreciatedreplacementcostreflectsadjustmentsforphysicaldeteriorationaswellasfunctionalandeconomic
obsolescence.
Whentherecoverablevalueofanitemofproperty,plantandequipmentisestimatedforimpairmentpurposes,fairvalueis
determinedusingcomparablemarkettransactionsifavailable,orusingacombinationofinternalandexternalestimatesof
thevaluethattheassetscouldbesoldforinanorderlymanner.
ii)EquityInvestments
WhentherecoverablevalueoftheCompany'sequityinvestmentsisestimatedforimpairmentpurposes,fairvalueis
determinedusingcomparablemarkettransactionsifavailable,orusingestimatesofthediscountedcashflowsamarket
participantwouldexpecttoderivefromtheuseandeventualsaleoftheinvestments.
iii)IntangibleAssets
Thefairvalueofintangibleassetsacquiredinabusinesscombinationisdeterminedbyanactivemarketvalueorusingthe
multi-periodexcessearningsmethod,wherebythesubjectassetisvaluedafterdeductingafairreturnonallotherassetsthat
arepartofcreatingtherelatedcashflows.
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iv)Derivatives
Fairvalueofderivativesareestimatedbyreferencetoindependentmonthlyforwardprices,interestrateyieldcurves,and
currencyratesatthereportingdates.
Fairvaluesreflectthecreditriskoftheinstrumentandincludeadjustmentstotakeaccountofthecreditriskofthecompany,
entityandcounterpartywhenappropriate.
v)Non-DerivativeFinancialAssetsandLiabilities
Thefairvalueofnon-derivativefinancialassetsandliabilitiesisdeterminedoninitialrecognition,onarecurringbasis,orfor
disclosurepurposes.Fairvaluesoffinancialassetsatamortizedcostarecalculatedbasedonthepresentvalueofestimated
futureprincipalandinterestcashflows,discountedatthemarketrateofinterestatthereportingdate.Fairvaluesoffinancial
assetsheldatfairvaluearecalculatedusingaprobability-weightedincomeapproachbasedoncurrentmarketexpectations
forfuturecashflows.Forotherfinancialliabilitieswheremarketratesarenotreadilyavailable,ariskadjustedmarketrateis
usedwhichincorporatesthenatureoftheinstrumentaswellastheriskassociatedwiththeunderlyingcashpayments.
vi)DecommissioningProvision
Thefairvalueofdecommissioningobligationsassumedaspartofabusinesscombinationaremeasuredasthepresentvalue
ofmanagement'sbestestimateofwhatisreasonablyexpectedtobeincurredtosettletheobligationattheendofanasset's
economiclife.Theobligationisdiscountedusingariskadjustedratecorrespondingtotheunderlyingassetstowhichthe
obligationrelates.
vii)Share-BasedCompensationTransactions
ThefairvalueofemployeeshareoptionsismeasuredusingtheBlack-Scholesformulaongrantdate.Measurementinputs
includesharepriceonmeasurementdate,exercisepriceoftheinstrument,expectedvolatility(basedonweightedaverage
historicvolatilityadjustedforchangesexpectedduetopubliclyavailableinformation),weightedaverageexpectedlifeofthe
instruments(basedonhistoricalexperienceandgeneraloptionholderbehaviour),expecteddividends,expectedforfeitures
andtherisk-freeinterestrate(basedongovernmentbonds).Serviceandnon-marketperformanceconditionsattachedtothe
transactionsarenottakenintoaccountindeterminingfairvalue.
Thefairvalueofthelong-termshareunitawardincentiveplanandassociateddistributionunitsaremeasuredbasedonthe
volume-weightedaveragepricefor20daysendingatthereportingdateofPembina'sshares.
96PembinaPipelineCorporation2020AnnualReport
7.ACQUISITION
OnDecember16,2019,PembinaacquiredalloftheissuedandoutstandingsharesofKinderMorganCanadaLimited("Kinder
MorganCanada")bywayofaplanofarrangementandtheU.S.portionoftheCochinPipelinesystem(collectively,the
"KinderAcquisition")fortotalconsiderationof$4.3billion.
DuringtheyearendedDecember31,2020,Pembinacontinuedtoobtainandverifyinformationrequiredtodeterminethe
fairvalueofcertainassetsandliabilitiesandtheamountofdeferredincometaxesarisingontheirrecognition.Pembina
adjustedthepurchasepriceallocationtoreflectupdatedassumptionsfortheidentificationandclassificationofleasesandthe
verificationofinformationsupportingthevaluationofcertainassets,provisionsandliabilities.
Thepurchasepriceallocationisbasedonassessedfairvalues,includingadjustmentsdeterminedduringtheyearended
December31,2020isasfollows:
AsatDecember16,2019
($millions) PreviouslyReported Adjustments Restated
Purchasepriceconsideration
Commonshares 1,710 — 1,710
Cash(netofcashacquired) 2,009 — 2,009
Preferredshares 536 — 536
4,255 — 4,255
Currentassets 68 2 70
Property,plantandequipment 2,660 (41) 2,619
Intangibleassets 1,254 — 1,254
Right-of-useassets 348 (92) 256
Financeleasereceivable — 116 116
Goodwill 809 15 824
Otherassets 9 — 9
Currentliabilities (124) 8 (116)
Deferredtaxliabilities (281) (8) (289)
Decommissioningprovision (74) — (74)
Leaseliability (348) — (348)
Otherliabilities (66) — (66)
4,255 — 4,255
8.TRADERECEIVABLESANDOTHER
AsatDecember31 2019
($millions) 2020 (RestatedNote4)
Tradereceivablesfromcustomers 578 575
Otherreceivables 60 94
Prepayments 24 25
Totaltradereceivablesandother 662 694
9.INVENTORY
AsatDecember31
($millions) 2020 2019
CrudeoilandNGL 127 42
Materials,suppliesandother 94 84
Totalinventory 221 126
PembinaPipelineCorporation2020AnnualReport97
10.PROPERTY,PLANTANDEQUIPMENT
($millions)Landand
LandRights PipelinesFacilitiesandEquipment
CavernStorageand
OtherAssetsUnder
Construction(1) Total
Cost
BalanceatDecember31,2018(RestatedNote4) 340 7,174 6,807 1,478 939 16,738
ReclassificationonadoptionofIFRS16 — — — (44) — (44)
Additionsandtransfers 32 215 691 203 534 1,675
Acquisition(Note7) 70 1,434 772 315 28 2,619
Changeindecommissioningprovision — (13) 98 (3) — 82
Foreignexchangeadjustments (2) (17) (4) — (11) (34)
Disposalsandother — (3) (31) (12) 3 (43)
BalanceatDecember31,2019(RestatedNote4) 440 8,790 8,333 1,937 1,493 20,993
Additionsandtransfers 8 454 622 57 (40) 1,101
Impairment(Note13) (17) — — — (340) (357)
Changeindecommissioningprovision — (10) (17) 16 — (11)
Foreignexchangeadjustments (2) (18) (9) (1) (7) (37)
Disposalsandother — (10) (22) (16) 3 (45)
BalanceatDecember31,2020 429 9,206 8,907 1,993 1,109 21,644
Depreciation
BalanceatDecember31,2018(RestatedNote4) 12 1,223 827 250 — 2,312
ReclassificationonadoptionofIFRS16 — — — (26) — (26)
Depreciation 4 155 174 59 — 392
Disposalsandother — (13) (34) — — (47)
BalanceatDecember31,2019(RestatedNote4) 16 1,365 967 283 — 2,631
Depreciation 5 187 156 135 — 483
Disposalsandother — (5) (5) (9) — (19)
BalanceatDecember31,2020 21 1,547 1,118 409 — 3,095
Carryingamounts
BalanceatDecember31,2019(RestatedNote4) 424 7,425 7,366 1,654 1,493 18,362
BalanceatDecember31,2020 408 7,659 7,789 1,584 1,109 18,549
Assetssubjecttooperatingleases
BalanceatDecember31,2019(RestatedNote4) 9 295 542 191 — 1,037
BalanceatDecember31,2020 8 301 537 185 — 1,031(1) Includescapitalizedborrowingcosts.
Property,PlantandEquipmentUnderConstruction
FortheyearendedDecember31,2020,includedinadditionsandtransfersarecapitalizedborrowingcostsrelatedtothe
constructionofnewpipelinesorfacilitiesamountingto$46million(2019:$42million),withcapitalizationratesrangingfrom
3.63percentto3.91percent(2019:3.91percentto4.05percent).
Depreciation
Pipelineassetsaredepreciatedusingthestraight-linemethodoverthreeto75yearswiththemajorityofassetsdepreciated
over40years.Facilitiesandequipmentaredepreciatedusingthestraight-linemethodoverthreeto75yearswiththe
majorityofassetsdepreciatedover40years.Cavernstorageandotherassetsaredepreciatedusingthestraight-linemethod
overthreeto40yearswiththemajorityofassetsdepreciatedover40years.Theseratesareestablishedtodepreciate
remainingnetbookvalueovertheshorteroftheirusefullivesoreconomiclives.
98PembinaPipelineCorporation2020AnnualReport
11.INTANGIBLEASSETSANDGOODWILL
IntangibleAssets
($millions) Goodwill
PurchaseandSale
ContractsandOther
CustomerRelationships Total
TotalGoodwill&Intangible
Assets
Cost
BalanceatDecember31,2018 3,878 227 639 866 4,744
Additionsandother — 13 — 13 13
Acquisition(Note7) 824 — 1,254 1,254 2,078
Foreignexchangeadjustments (3) — (12) (12) (15)
BalanceatDecember31,2019(RestatedNote4) 4,699 240 1,881 2,121 6,820
Additionsandother — 22 — 22 22
Foreignexchangeadjustments (5) (1) (12) (13) (18)
BalanceatDecember31,2020 4,694 261 1,869 2,130 6,824
Amortization
BalanceatDecember31,2018 — 164 171 335 335
Amortization — 10 31 41 41
BalanceatDecember31,2019 — 174 202 376 376
Amortization — 6 102 108 108
BalanceatDecember31,2020 — 180 304 484 484
Carryingamounts
BalanceatDecember31,2019(RestatedNote4) 4,699 66 1,679 1,745 6,444
BalanceatDecember31,2020 4,694 81 1,565 1,646 6,340
Intangibleassetshaveafiniteusefullifeandareamortizedusingthestraight-linemethodover7to40years.
Theaggregatecarryingamountofgoodwillallocatedtoeachoperatingsegmentisasfollows:
AsatDecember31
20202019
(RestatedNote4)($millions)
Pipelines 2,713 2,718
Facilities 541 541
Marketing&NewVentures 1,440 1,440
Totalgoodwill 4,694 4,699
PembinaPipelineCorporation2020AnnualReport99
GoodwillImpairmentTesting
Forthepurposeofimpairmenttesting,goodwillisallocatedtoPembina'soperatingsegmentswhichrepresentthelowest
levelwithinPembinaatwhichgoodwillismonitoredformanagementpurposes.Consistentwithprioryear,impairment
testingforgoodwillisperformedinthefourthquarter.
Therecoverableamountwasdeterminedusingafairvaluelesscostsofdisposalapproachbydiscountingeachoperating
segment'sexpectedfuturecashflows(Level3).Thekeyassumptionsthatinfluencethecalculationoftherecoverable
amountsinclude:
• Cashflowsforthefirstfiveyearsareprojectedbasedonpastexperience,actualoperatingresultsandthebusinessplan
approvedbymanagement.CashflowsforPipelinesandFacilitiesincorporateassumptionsregardingcontractedvolumes
andrates,whicharebasedonmarketexpectations.Inaddition,revenueandcostofproductprojectionsforMarketing&
NewVenturesincorporateassumptionsregardingcommodityvolumesandpricing,whicharesensitivetochangesinthe
commoditypriceenvironment.
• Cashflowsfortheremainingyearsoftheusefullivesoftheassetswithineachoperatingsegmentareextrapolatedfor
periodsupto75years(2019:75years)usingalong-termgrowthrate,exceptwherecontracted,long-termcashflows
indicatethatnogrowthrateshouldbeappliedoraspecificreductionincashflowswasmoreappropriate.
• After-taxdiscountrateswereappliedindeterminingtherecoverableamountofoperatingsegments.Discountrateswere
estimatedbasedonpastexperience,theriskfreerateandaveragecostofdebt,targeteddebttoequityratio,inadditionto
estimatesofthespecificoperatingsegment'sequityriskpremium,sizepremium,projectionriskandbetas.
Foreachoperatingsegment,keyassumptionsanddiscountratesensitivityarepresentedbelow:
OperatingSegments
2020
Pipelines FacilitiesMarketing&New
Ventures(Percent)
Keyassumptionsused
After-taxdiscountrate 5.9 5.9 10.1
Long-termgrowthrate 0.6 0.8 1.8
Incrementalchangeinratesthatwouldresultincarryingvalueequaltorecoverableamount
Increaseinafter-taxdiscountrate 2.7 3.2 1.6
100PembinaPipelineCorporation2020AnnualReport
12.INVESTMENTSINEQUITYACCOUNTEDINVESTEES
OwnershipInterestatDecember31(percent)
ShareofProfit(Loss)fromEquityInvestments
InvestmentinEquityAccountedInvesteesatDecember3112MonthsEndedDecember31
($millions) 2020 2019 20202019
(RestatedNote3) 20202019
(RestatedNote4)
Alliance 50 50 105 153 2,498 2,638
AuxSable 42.7-50 42.7-50 — 51 401 426
Ruby(1) — — 122 120 — 1,273
VeresenMidstream 45 45.3 50 49 1,374 1,350
CKPC(2) 50 50 (314) (1) — 171
Other 50-75 50-75 5 3 104 116
(32) 375 4,377 5,974(1) Pembinaownsa50percentconvertible,cumulativepreferredinterestinRuby.(2) Includes$314million(2019:nil)ofimpairmentinshareofprofitfromequityaccountedinvestees.
Investmentsinequityaccountedinvesteesincludetheunamortizedexcessofthepurchasepriceovertheunderlyingnetbook
valueoftheinvestee'sassetsandliabilitiesatthepurchasedate,whichiscomprisedof$98million(2019:$98million)
Goodwill,$2.8billion(2019:$2.9billion)inproperty,plantandequipmentandintangiblesand$33millioninlong-termdebt
(2019:$42million).
PembinahasU.S.$1.3billioninInvestmentsinEquityAccountedInvesteesthatisheldbyentitieswhosefunctionalcurrency
istheU.S.dollar.TheresultingforeignexchangelossfortheyearendedDecember31,2020of$51million(2019:$169million
loss)hasbeenincludedinOtherComprehensiveIncome.
InDecember2020,Pembinarecognizedimpairmentonits50percentconvertible,cumulativepreferredinterestinRubyand
withinitsinvestmentinCKPC.RefertoNote13forfurtherinformationonimpairments.
DistributionsandContributions
ThefollowingtablesummarizesdistributionsfromandcontributionstoPembina'sinvestmentsinequityaccountedinvestees:
FortheyearsendedDecember31 Distributions Contributions
($millions) 2020 2019 2020 2019
Alliance 217 268 — 13
AuxSable 19 84 3 4
Ruby 122 121 — —
VeresenMidstream 97 96 69 73
CKPC — — 152 173
Other 4 6 — —
Total 459 575 224 263
DistributionsreceivedfromequityinvestmentsareincludedinoperatingactivitiesintheConsolidatedStatementofCash
Flows.DistributionsfromAllianceandVeresenMidstreamaresubjecttosatisfyingcertainfinancingconditionsincludinga
minimumdebtservicecoverageratiorequirement.
ContributionsmadetoinvestmentsinequityaccountedinvesteesareincludedininvestingactivitiesintheConsolidated
StatementofCashFlows.Contributionsfor2020includea$22millionnon-cashfinancialguaranteeliabilityassociatedwith
CKPC'screditfacilityand2019contributionsincludetheconversionof$57millioninrelatedpartyadvancestoCKPCinto
equitycontributions.
PembinaPipelineCorporation2020AnnualReport101
FinancingActivities
OnDecember31,2020,CKPCprovidednoticetocancelitsU.S.$1.7billiontermfacilityanditsU.S.$150millionrevolving
creditfacility.Asaresult,Pembinaacceleratedtherecognitionofthepreviouslyrecordedfinancialguaranteeliability.
OnApril27,2020,Rubyfullyrepaidits364-daytermloan.Concurrenttorepayment,Rubyenteredintoanewamortizing
termloanthatmaturesonMarch31,2021.AtDecember31,2020,U.S.$32million(U.S.$16millionnettoPembina)
remainedoutstanding.
SummarizedFinancialInformation
FinancialinformationforPembina'sequityaccountedinvestees(presentedat100percent)ispresentedinthefollowing
tablesandispreparedunderthefinancialreportingframeworkadoptedbyeachequityaccountedinvestee(U.S.GAAPexcept
forCKPC).Differencesbetweentheequityaccountedinvestee'searning(loss)andearnings(loss)attributabletoPembina
relatetothedifferentaccountingstandardsappliedandamortizationoftheexcessofthepurchasepriceovertheunderlying
netbookvalueoftheinvestee'sassetsandliabilitiesatthepurchasedate,withtheexceptionofRubywhichPembinaownsa
50percentconvertible,cumulativepreferredinterestandrecognizesitsshareofearningsbasedonitsdistribution.
Alliance
FortheyearsendedDecember31
($millions) 2020 2019
EarningsandComprehensiveIncome
Revenue 840 965
Expenses (296) (262)
Depreciationandamortization (141) (108)
Financecostsandother(1)(2) (61) (58)
Earnings 342 537
EarningsattributabletoPembina 105 153(1) Includesinterestincomeof$2million(2019:$4million).(2) Includesinterestexpenseof$66million(2019:$81million).
AsatDecember31
($millions) 2020 2019
StatementsofFinancialPosition
Currentassets(1) 122 132
Non-currentassets 1,816 1,944
Currentliabilities(2) 206 21
Non-currentliabilities(3) 1,121 1,147(1) Includescashandcashequivalentsof$25million(2019:$29million).(2) Includestrade,otherpayablesandprovisionsof$71million(2019:$77million).(3) Includestrade,otherpayablesandprovisionsof$128million(2019:$106million).
102PembinaPipelineCorporation2020AnnualReport
AuxSable
FortheyearsendedDecember31
($millions) 2020 2019
EarningsandComprehensiveIncome
Revenue 1,059 1,028
Expenses (1,019) (868)
Depreciationandamortization (49) (55)
Earnings(loss) (9) 105
EarningsattributabletoPembina — 51
AsatDecember31
($millions) 2020 2019
StatementsofFinancialPosition
Currentassets(1) 162 153
Non-currentassets 757 816
Currentliabilities(2) 107 105
Non-currentliabilities(3) 155 148(1) Includescashandcashequivalentsof$50million(2019:$20million).(2) Includestrade,otherpayablesandprovisionsof$103million(2019:$98million).(3) Includestrade,otherpayablesandprovisionsof$5million(2019:$5million).
Ruby
FortheyearsendedDecember31
($millions) 2020 2019
EarningsandComprehensiveIncome
Revenue 432 453
Expenses (29) (19)
Depreciationandamortization (143) (142)
Impairment (2,953) —
Financecostsandother(1) (130) (117)
Earnings(loss) (2,823) 175
EarningsattributabletoPembina 122 120(1) Includesinterestexpenseof$104million(2019:$90million).
AsatDecember31
($millions) 2020 2019
StatementsofFinancialPosition
Currentassets(1) 50 93
Non-currentassets 688 3,705
Currentliabilities(2) 77 177
Non-currentliabilities(3) 928 1,003(1) Includescashandcashequivalentsof$6million(2019:$38million).(2) Includestrade,otherpayablesandprovisionsof$2million(2019:$3million).(3) Includestrade,otherpayablesandprovisionsof$278million(2019:$223million).
PembinaPipelineCorporation2020AnnualReport103
VeresenMidstream
FortheyearsendedDecember31
($millions) 2020 2019
EarningsandComprehensiveIncome
Revenue 561 615
Expenses (177) (213)
Depreciationandamortization (173) (165)
Financecostsandother(1) (84) (111)
Earnings 127 126
EarningsattributabletoPembina 50 49(1) Includesinterestexpenseof$80million(2019:$109million).
AsatDecember31
($millions) 2020 2019
StatementsofFinancialPosition
Currentassets(1) 167 166
Non-currentassets 4,658 4,501
Currentliabilities(2) 109 106
Non-currentliabilities(3) 2,681 2,593(1) Includescashandcashequivalentsofnil(2019:$3million).(2) Includestrade,otherpayablesandprovisionsof$80million(2019:$106million).(3) Includestrade,otherpayablesandprovisionsof$46million(2019:$43million).
CKPC
FortheyearsendedDecember31
($millions) 2020 2019
Earnings(Loss)andComprehensiveIncome(Loss)
Expenses (4) (4)
Impairment (589) —
Financecosts(1) (33) 4
Earnings(loss) (626) —
Earnings(loss)attributabletoPembina (314) (1)(1) Includesinterestincomeof$1million(2019:$1million).
AsatDecember31
($millions) 2020 2019
StatementsofFinancialPosition
Currentassets(1) 83 246
Non-currentassets — 283
Currentliabilities(2) 99 188
Non-currentliabilities(3) 11 12(1) Includescashandcashequivalentsof$75million(2019:$118million).(2) Includestrade,otherpayablesandprovisionsof$99million(2019:$76million).(3) Includestrade,otherpayablesandprovisionsof$11million(2019:nil).
104PembinaPipelineCorporation2020AnnualReport
Other
FortheyearsendedDecember31
($millions) 2020 2019
EarningsandComprehensiveIncome
Revenue 51 52
Expenses (16) (16)
Depreciationandamortization (16) (16)
Financecostsandother(1) (5) (4)
Earnings 14 16
EarningsattributabletoPembina 5 3(1) Includesinterestexpenseof$2million(2019:$3million).
AsatDecember31
($millions) 2020 2019
StatementsofFinancialPosition
Currentassets(1) 6 8
Non-currentassets 117 131
Currentliabilities(2) 25 28
Non-currentliabilities(3) 64 84(1) Includescashandcashequivalentsof$1million(2019:$1million).(2) Includestrade,otherpayablesandprovisionsof$3million(2019:$4million).(3) Includestrade,otherpayablesandprovisionsof$1million(2019:$1million).
PembinaPipelineCorporation2020AnnualReport105
13.IMPAIRMENTS
ThefollowingtablesummarizesimpairmentsrecognizedfortheyearendedDecember31,2020:
($millions)Property,Plant&
Equipment(Note10)EquityAccounted
Investees(Note12) OtherTotalImpairment
Expense
JordanCove 344 — 5 349
InvestmentinRuby — 1,257 139 1,396
InvestmentinCKPC — 323 (2) 321
Other 13 11 — 24
Totalimpairments 357 1,591 142 2,090
Recognizedthroughimpairmentinshareofprofitfromequityaccountedinvestees 314
Recognizedasimpairmentexpense 1,776
Total 2,090
JordanCove
InDecember2020,asaresultofincreasedregulatoryandpoliticaluncertainty,Pembinarecognizedanimpairmentonthe
assetsassociatedwithJordanCove.Theimpairmentchargeof$349million($258millionnetoftax)includesallpreviously
capitalizedamountsrelatedtoJordanCove,exceptforlandwitharecoverablecarryingamountof$21millionwhich
approximatesitsfairvalue(Level3).
Ruby
InDecember2020,Pembinarecognizedanimpairmentforthefullamountofitsconvertible,cumulativepreferredinterestin
Ruby($1.3billion)anditsassociatedrelatedpartyadvance($139million).Thetotalimpairmentchargeof$1.4billion
($1.0billionnetoftax)wastheresultofanassessmenttriggeredbyupcomingcontractexpirationsinmid-2021withexisting
tariffrateswellinexcessofprevailinginterruptibletariffrates,alongwithdecliningRockiesbasinfundamentalsandreduced
futurevolumesresultingfromtheuncertaintywithJordanCove.TherecoverableamountofRubywasdeterminedusinga
valueinuseapproachbydiscountingexpectedcashflowsresultingfromPembina'sconvertible,cumulativepreferredshare
interest.Keyassumptionsthatinfluencedthecalculationoftherecoverableamountincludenofuturevolumesassociated
withJordanCove,incrementalfuturecontractedvolumesandtolls.Pembinaappliedadiscountrateof8percent(2019:8
percent)incalculatingtherecoverableamount,whichwasdeterminedusingcomparablepreferredshareyieldsadjustedfor
thespecificriskprofileoftheinvestment.
CKPC
OnDecember14,2020,Pembinaannouncedthatit,alongwithitsjointventurepartnerinCKPC,wouldbeindefinitely
suspendingexecutionoftheintegratedPDH/PPFacilityproject.Thesuspensionistheresultofthesignificantrisksarising
fromtheongoingCOVID-19pandemic,mostnotablywithrespecttocostsunderthelumpsumcontractforconstructionof
thePDHplant,whichremainsunderaforcemajeurecondition.Asaresultofthesuspension,Pembinarecognizedan
impairmentforthefullamountofitsinvestmentinCKPC,resultinginatotalimpairmentchargeof$323million($252million
netoftax)whichincludesPembina'sshareofCKPC'slossresultingfromanimpairmentchargerecognizedinthejointventure
of$314millionplusanincrementalimpairmentoftheremaininginvestmentvalue,basedonafairvaluelesscostsofdisposal
approachwhichdeterminedtherecoverableamountoftheinvestmenttobenil(Level3).
106PembinaPipelineCorporation2020AnnualReport
14.INCOMETAXES
Themovementsofthecomponentsofthedeferredtaxassetsanddeferredtaxliabilitiesareasfollows:
($millions)
BalanceatDecember31,
2019(RestatedNote4)
RecognizedinEarnings
(Loss)
RecognizedinOther
ComprehensiveIncome(Loss) Acquisition Equity Other
BalanceatDecember31,2020
Deferredincometaxassets
Derivativefinancialinstruments (13) 21 (4) — — — 4
Employeebenefits 9 (2) 4 — — — 11
Share-basedpayments 24 (10) — — — — 14
Provisions 79 4 — — — — 83
Benefitoflosscarryforwards 400 (125) — — — — 275
Otherdeductibletemporarydifferences 52 16 — — (2) — 66
Deferredincometaxliabilities
Property,plantandequipment 2,036 55 — — — — 2,091
Intangibleassets 263 (3) — — — — 260
Investmentsinequityaccountedinvestees 1,109 (417) — — — — 692
Taxablelimitedpartnershipincomedeferral 101 (103) — — — — (2)
Othertaxabletemporarydifferences (13) 32 — — — (4) 15
Totalnetdeferredtaxliabilities 2,945 (340) — — 2 (4) 2,603
($millions)
BalanceatDecember31,
2018(RestatedNote3)
RecognizedinEarnings
(Loss)
RecognizedinOther
ComprehensiveIncome(Loss) Acquisition Equity Other
BalanceatDecember31,2019
(RestatedNote4)
Deferredincometaxassets
Derivativefinancialinstruments (18) 5 — — — — (13)
Employeebenefits 9 (1) 1 — — — 9
Share-basedpayments 26 (2) — — — — 24
Provisions 46 16 — 17 — — 79
Benefitoflosscarryforwards 153 256 — 13 — (22) 400
Otherdeductibletemporarydifferences 67 (40) — 28 (3) — 52
Deferredincometaxliabilities
Property,plantandequipment 1,587 286 — 163 — 2,036
Intangibleassets 118 (14) — 159 — — 263
Investmentsinequityaccountedinvestees 1,263 (154) — — — — 1,109
Taxablelimitedpartnershipincomedeferral 122 (46) — 25 — — 101
Othertaxabletemporarydifferences 7 (13) — — (7) (13)
Totalnetdeferredtaxliabilities 2,814 (175) (1) 289 3 15 2,945
PembinaPipelineCorporation2020AnnualReport107
ReconciliationofEffectiveTaxRate
FortheyearsendedDecember31 2019
($millions,exceptasnoted) 2020 (RestatedNote3)
Earnings(loss)beforeincometax (416) 1,542
Canadianstatutorytaxrate(percent) 24.6 26.7
Incometaxatstatutoryrate (102) 412
Taxratechangesandforeignratedifferential (5) (349)
Changesinestimateandother (5) (35)
Permanentitems 12 7
Incometax(recovery)expense (100) 35
In2019,theenactmentofAlbertaBill3reducedcorporateincometaxratefrom12percentto8percentoverafour-year
periodwhichresultedinadeferredtaxrecoveryof$305million.Inthefourthquarterof2020,theAlbertagovernment
enactedBill35thatacceleratedtheAlbertacorporateincometaxratefrom10percentto8percenteffectiveJuly1,2020.
IncomeTaxExpense
FortheyearsendedDecember31 2019
($millions) 2020 (RestatedNote3)
Currenttaxexpense 240 210
Deferredtaxexpense
Originationandreversaloftemporarydifferences (485) 392
Taxratechangesondeferredtaxbalances 32 (345)
Decrease(increase)intaxlosscarryforward 113 (222)
Totaldeferredtax(recovery) (340) (175)
Totalincometax(recovery)expense (100) 35
DeferredTaxItemsRecoveredDirectlyinEquity
FortheyearsendedDecember31
($millions) 2020 2019
Shareissuecosts (2) (3)
Othercomprehensiveincome(loss):
Changeinfairvalueofnetinvestmenthedges(Note26) (4) —
Remeasurementsofdefinedbenefitliability(Note24) 4 1
Deferredtaxitemsrecovereddirectlyinequity (2) (2)
Pembinahastemporarydifferencesassociatedwithitsinvestmentsinsubsidiaries.AtDecember31,2020,Pembinahasnot
recordedadeferredtaxassetorliabilityforthesetemporarydifferences(2019:nil)asPembinacontrolsthetimingofthe
reversalanditisnotprobablethatthetemporarydifferenceswillreverseintheforeseeablefuture.
AtDecember31,2020,PembinahadU.S.$758million(2019:U.S.$1.1billion)ofU.S.taxlossesthatdonotexpireand$43
million(2019:$67million)ofCanadiantaxlossesthatwillexpireafter2037.Pembinahasdeterminedthatitisprobablethat
futuretaxableprofitswillbesufficienttoutilizetheselosses.
108PembinaPipelineCorporation2020AnnualReport
15.TRADEPAYABLESANDOTHER
AsatDecember31 2019
($millions) 2020 (RestatedNote4)
Tradepayables 434 717
Otherpayables&accruedliabilities 346 288
Totaltradepayablesandother 780 1,005
16.LEASES
LesseeLeases
Pembinaentersintoarrangementstosecureaccesstoassetsnecessaryforoperatingthebusiness.Leased(right-of-use)
assetsincludeterminals,rail,buildings,landandotherassets.Totalcashoutflowsrelatedtoleaseswere$131millionforthe
yearendedDecember31,2020(2019:$83million).
Right-of-UseAssets
($millions) Terminals Rail Buildings Land&Other Total
BalanceatJanuary1,2019(RestatedNote4) — 221 127 79 427
Additions(RestatedNote3) — 54 1 19 74
Acquisition(Note7) 225 — 7 24 256
Amortization — (37) (17) (12) (66)
BalanceatDecember31,2019(RestatedNote4) 225 238 118 110 691
Additions — 24 22 — 46
Amortization (12) (41) (19) (14) (86)
BalanceatDecember31,2020 213 221 121 96 651
LessorLeases
Pembinahasenteredintocontractsfortheuseofitsassetsthathaveresultedinleasetreatmentforaccountingpurposes.
Assetsunderoperatingleasesincludepipelines,terminalsandstoragetanksandcaverns.SeeNote10forcarryingvalueof
property,plantandequipmentunderoperatingleases.Assetsunderfinanceleasesincludeofficesub-leasesandterminal
assets.
MaturityofLeaseReceivables
AsatDecember31 2020 2019(RestatedNote4)
($millions) OperatingLeases FinanceLeases OperatingLeases FinanceLeases
Lessthanoneyear 146 23 168 23
Onetotwoyears 142 23 150 24
Twotothreeyears 139 22 145 23
Threetofouryears 121 22 139 22
Fourtofiveyears 109 22 124 22
Morethanfiveyears 874 224 983 246
Totalundiscountedleasereceipts 1,531 336 1,709 360
Unearnedfinanceincomeonleasereceipts (199) (215)
Discountedunguaranteedresidualvalue 8 7
Financeleasereceivable 145 152
Lesscurrentportion(1) (7) (7)
Totalnon-current 138 145(1) IncludedintradereceivablesandotherontheConsolidatedStatementofFinancialPosition.
PembinaPipelineCorporation2020AnnualReport109
17.LOANSANDBORROWINGS
ThisnoteprovidesinformationaboutthecontractualtermsofPembina'sinterest-bearingloansandborrowings,whichare
measuredatamortizedcost.
CarryingValue,TermsandConditions,andDebtMaturitySchedule
($millions)Authorizedat
December31,2020Nominal
InterestRateYearof
Maturity December31,2020 December31,2019
Seniorunsecuredcreditfacilities(1)(3)(4) 4,138 1.61(2) Various(1) 1,530 2,097
SeniorunsecurednotesseriesA — 5.57 2020 — 74
SeniorunsecurednotesseriesC — 5.58 2020 — 199
Seniorunsecuredmedium-termnotesseries1 250 4.89 2021 250 250
Seniorunsecuredmedium-termnotesseries2 450 3.77 2022 449 449
Seniorunsecuredmedium-termnotesseries3 450 4.75 2043 447 446
Seniorunsecuredmedium-termnotesseries4 600 4.81 2044 597 596
Seniorunsecuredmedium-termnotesseries5 450 3.54 2025 449 449
Seniorunsecuredmedium-termnotesseries6 500 4.24 2027 498 498
Seniorunsecuredmedium-termnotesseries7 600 3.71 2026 603 498
Seniorunsecuredmedium-termnotesseries8 650 2.99 2024 647 646
Seniorunsecuredmedium-termnotesseries9 550 4.74 2047 542 542
Seniorunsecuredmedium-termnotesseries10 650 4.02 2028 661 398
Seniorunsecuredmedium-termnotesseries11 800 4.75 2048 842 298
Seniorunsecuredmedium-termnotesseries12 650 3.62 2029 654 398
Seniorunsecuredmedium-termnotesseries13 700 4.54 2049 713 714
Seniorunsecuredmedium-termnotesseries14 600 2.56 2023 599 598
Seniorunsecuredmedium-termnotesseries15 600 3.31 2030 597 597
Seniorunsecuredmedium-termnotesseries16 400 4.67 2050 397 —
Seniorunsecuredmedium-termnotesseries3A 50 5.05 2022 51 52
Seniorunsecuredmedium-termnotesseries5A 350 3.43 2021 350 353
Totalinterestbearingliabilities 10,876 10,152
Lesscurrentportion (600) (74)
Totalnon-current 10,276 10,078
CarryingValue
(1) Pembina'sunsecuredcreditfacilitiesincludea$2.5billionrevolvingfacilitythatmaturesinMay2024,a$500millionnon-revolvingtermloanthatmaturesinAugust2022,a$800millionrevolvingfacilitythatmaturesinApril2022,aU.S.$250millionnon-revolvingtermloanthatmaturesinMay2025anda$20millionoperatingfacilitythatmaturesinMay2021,whichistypicallyrenewedonanannualbasis.
(2) ThenominalinterestrateistheweightedaverageofalldrawncreditfacilitiesbasedonPembina'screditratingatDecember31,2020.Borrowingsunderthecreditfacilitiesbearinterestatprime,Bankers'Acceptance,orLIBORrates,plusapplicablemargins.
(3) IncludesU.S.$250millionvariableratedebtoutstandingatDecember31,2020(December31,2019:U.S.$454million).(4) TheU.S.dollardenominatednon-revolvingtermloanisdesignatedasahedgeoftheCompany’snetinvestmentinselectedforeignoperationswithaU.S.dollarfunctional
currency.RefertoNote27forforeignexchangeriskmanagement.
OnJanuary10,2020,Pembinaclosedanofferingof$1.0billionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedinthreetranches,consistingof$250millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-
termnotes,series10,havingafixedcouponof4.02percentperannum,payablesemi-annuallyandmaturingonMarch27,
2028;$500millionissuedthroughare-openingofPembina'sseniorunsecuredmedium-termnotes,series11,havingafixed
couponof4.75percentperannum,payablesemi-annuallyandmaturingonMarch26,2048;and$250millionissuedthrough
are-openingofPembina'sseniorunsecuredmedium-termnotes,series12,havingafixedcouponof3.62percentperannum,
payablesemi-annuallyandmaturingonApril3,2029.
OnApril6,2020,Pembinaenteredintoanunsecured$800millionrevolvingcreditfacilitywithcertainexistinglenders,which
providedadditionalliquidityandflexibilityinPembina'scapitalstructureinlightofcurrentmarketconditions.Theunsecured
revolvingcreditfacilitymaturesApril3,2022.Theothertermsandconditionsofthecreditfacility,includingfinancial
covenants,aresubstantiallysimilartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
110PembinaPipelineCorporation2020AnnualReport
OnMay7,2020,PembinaenteredintoanunsecuredU.S.$250millionnon-revolvingtermloanwithaglobalbank,which
providedadditionalliquidityandflexibilityinPembina'scapitalstructureinlightofcurrentmarketconditions.Thetermloan
maturesMay7,2025.Theothertermsandconditionsofthecreditfacility,includingfinancialcovenants,aresubstantially
similartoPembina'sunsecured$2.5billionrevolvingcreditfacility.
OnMay28,2020,Pembinaclosedanofferingof$500millionofseniorunsecuredmedium-termnotes.Theofferingwas
conductedintwotranches,consistingoftheissuanceof$400millioninseniorunsecuredmedium-termnotes,series16,
havingafixedcouponof4.76percentperannum,payablesemi-annually,andmaturingonMay28,2050and$100million
issuedthroughare-openingofPembina'sseniorunsecuredmedium-termnotes,series7,havingafixedcouponof3.71
percentperannum,payablesemi-annuallyandmaturingonAugust11,2026.
OnJuly10,2020,Pembina's$200millionseniorunsecurednotes,seriesC,werefullyrepaidthroughanearlyredemption,of
whichnoticewasprovidedtoholdersonJune5,2020.Theseniorunsecurednotes,seriesC,wereoriginallysettomaturein
September2021.
Subsequenttoyear-end,onJanuary25,2021,Pembinaclosedanofferingof$600millionoffixed-to-fixedratesubordinated
notes,series1(the"SubordinatedNotes,Series1").TheSubordinatedNotes,Series1haveafixedcouponof4.80percentper
annum,payablesemi-annually,andmatureonJanuary25,2081.
Subsequenttoyear-end,onMarch25,2021,Pembinacancelledits$800millionrevolvingcreditfacility.Nobalancewas
outstandingonthecancellationdate.
Subsequenttoyear-end,onApril30,2021,Pembinaextendedthematuritydatesofitsrevolvingandoperatingcreditfacilities
toJune2026andMay2022,respectively.
FormoreinformationaboutPembina'sexposuretointerestrate,foreigncurrencyandliquidityrisk,seeNote27Financial
Instruments.
18.DECOMMISSIONINGPROVISION
ThedecommissioningprovisionreflectsthediscountedcashflowsexpectedtobeincurredtodecommissionPembina's
pipelinesystems,gasprocessingandfractionationplants,storageandterminallinghubs,includingestimatedenvironmental
reclamationandremediationcosts.Changesinthemeasurementofthedecommissioningprovisionareaddedto,ordeducted
from,thecostoftherelatedproperty,plantandequipmentorrightofuseasset.Whenare-measurementofthe
decommissioningprovisionrelatestoaretiredasset,theamountisrecordedinearnings(loss).
Theundiscountedcashflowsatthetimeofdecommissioningarecalculatedusinganestimatedtimingofeconomicoutflows
rangingfromoneto83years,withthemajorityestimatedat50years.Theestimatedeconomiclivesoftheunderlyingassets
formthebasisfordeterminingthetimingofeconomicoutflows.Pembinaappliedcredit-adjustedrisk-freeratesof3.3percent
to4.7percent(2019:3.3percentto4.7percent)andaninflationrateof1.8percent(2019:1.8percent).
($millions) 20202019
(RestatedNote4)
BalanceatJanuary1(2) 340 162
Unwindingofdiscountrate 15 9
Changeinrates — 90
Acquisition(Note7) — 74
Additions 11 8
Changeincostestimatesandother (16) (3)
Total 350 340
Lesscurrentportion(1) (2) (3)
BalanceatDecember31 348 337(1) IncludedintradepayablesandotherontheConsolidatedStatementofFinancialPosition.(2) January1,2019openingbalanceincludes$4millionrelatingtothecurrentportionoftheliabilitypreviouslyclassifiedastradepayablesandother.
PembinaPipelineCorporation2020AnnualReport111
19.SHARECAPITAL
Pembinaisauthorizedtoissueanunlimitednumberofcommonshares,withoutparvalue,254,850,850ClassApreferred
shares,issuableinseriesandanunlimitednumberofClassBpreferredshares.Theholdersofthecommonsharesareentitled
toreceivenoticeof,attendandvoteatanymeetingoftheshareholdersofPembina,receivedividendsdeclaredandsharein
theremainingpropertyofPembinaupondistributionoftheassetsofPembinaamongitsshareholdersforthepurposeof
winding-upitsaffairs.
CommonShareCapital
($millions,exceptasnoted)
NumberofCommonShares
(millions)Common
ShareCapital
BalanceatDecember31,2018 508 13,662
IssuedonAcquisition,netofissuecosts(Note7) 36 1,710
Share-basedpaymenttransactions 4 167
BalanceatDecember31,2019 548 15,539
Share-basedpaymenttransactions 2 105
BalanceatDecember31,2020 550 15,644
PreferredShareCapital
($millions,exceptasnoted)
NumberofPreferredShares
(millions)Preferred
ShareCapital
BalanceatDecember31,2018 100 2,423
ClassA,Series23PreferredsharesissuedonAcquisition,netofissuecosts(Note7) 12 293ClassA,Series25PreferredsharesissuedonAcquisition,netofissuecosts(Note7) 10 243
PartVI.1tax — (3)
BalanceatDecember31,2019 122 2,956
PartVI.1tax — (10)
BalanceatDecember31,2020 122 2,946
OnMarch1,2019,noneofthesixmillionCumulativeRedeemableRateResetClassAPreferredSeries3sharesoutstanding
wereconvertedintoCumulativeRedeemableFloatingRateClassAPreferredSeries4shares.
OnMarch31,2019,noneofthesixmillionCumulativeRedeemableRateResetClassAPreferredSeries17sharesoutstanding
wereconvertedintoCumulativeRedeemableFloatingRateClassAPreferredSeries18shares.
OnJune3,2019,noneofthe10millionCumulativeRedeemableRateResetClassAPreferredSeries5sharesoutstanding
wereconvertedintoCumulativeRedeemableFloatingRateClassAPreferredSeries6shares.
OnDecember2,2019,noneofthe10millionCumulativeRedeemableRateResetClassAPreferredSeries7shares
outstandingwereconvertedintoCumulativeRedeemableFloatingRateClassAPreferredSeries8shares.
OnDecember16,2019,inconnectionwiththeKinderAcquisition,theoutstandingpreferredsharesofKinderMorganCanada
wereexchangedforSeries23and25ClassApreferredshareswithsimilartermsandconditionsasthesharespreviously
issuedbyKinderMorganCanada.DividendsontheSeries23and25ClassApreferredshareswillcontinuetobepaidonthe
15thofFebruary,May,AugustandNovemberineachyear,if,asandwhendeclaredbytheBoardofDirectors.
OnJune15,2020,noneoftheeightmillionCumulativeRedeemableRateResetClassAPreferredSeries19sharesoutstanding
wereconvertedintoCumulativeRedeemableFloatingRateClassAPreferredSeries20shares.
OnNovember16,2020,noneoftheninemillionCumulativeRedeemableRateResetClassAPreferredSeries9shares
outstandingwereconvertedintoCumulativeRedeemableFloatingRateClassAPreferredSeries10shares.
112PembinaPipelineCorporation2020AnnualReport
Subsequenttoyearend,onJanuary25,2021inconjunctionwiththeofferingoftheSeries1SubordinatedNotes,Pembina
issued600,000Series2021-AClassAPreferredShares,toComputershareTrustCompanyofCanada,tobeheldintrustas
treasurysharestosatisfyPembina'sobligationsundertheindenturegoverningtheSeries1SubordinatedNotes.
Subsequenttoyearend,onMarch1,2021,Pembinaredeemedallofthe6.8millionissuedandoutstandingCumulative
RedeemableMinimumRateResetClassAPreferredShares,Series11foraredemptionpriceequalto$25.00perSeries11
ClassAPreferredShare.
Subsequenttoyearend,onJune1,2021,Pembinaredeemedallofthe10millionissuedandoutstandingCumulative
RedeemableMinimumRateResetClassAPreferredShares,Series13foraredemptionpriceequalto$25.00perSeries13
ClassAPreferredShare.
Dividends
ThefollowingdividendsweredeclaredbyPembina:
FortheyearsendedDecember31
($millions) 2020 2019
Commonshares
$2.52percommonshare(2019:$2.36) 1,385 1,213
Preferredshares
$1.23perSeries1preferredshare(2019:$1.23) 12 12
$1.12perSeries3preferredshare(2019:$1.13) 7 7
$1.14perSeries5preferredshare(2019:$1.19) 11 12
$1.10perSeries7preferredshare(2019:$1.12) 11 11
$1.18perSeries9preferredshare(2019:$1.19) 11 11
$1.44perSeries11preferredshare(2019:$1.44) 10 10
$1.44perSeries13preferredshare(2019:$1.44) 14 14
$1.12perSeries15preferredshare(2019:$1.12) 9 9
$1.21perSeries17preferredshare(2019:$1.22) 7 7
$1.21perSeries19preferredshare(2019:$1.25) 10 10
$1.23perSeries21preferredshare(2019:$1.23) 20 20
$1.31perSeries23preferredshare(2019:$0.16) 16 2
$1.30perSeries25preferredshare(2019:$0.16) 13 1
151 126
PembinaPipelineCorporation2020AnnualReport113
OnJanuary6,2021,PembinaannouncedthatitsBoardofDirectorshaddeclaredadividendof$0.21percommonshareinthe
totalamountof$115million,payableonFebruary12,2021toshareholdersofrecordonJanuary25,2021.
OnFebruary3,2021,PembinaannouncedthatitsBoardofDirectorshaddeclaredadividendof$0.21percommonsharein
thetotalamountof$115million,payableonMarch15,2021toshareholdersofrecordonFebruary25,2021.
Pembina'sBoardofDirectorsalsodeclaredquarterlydividendsforPembina'spreferredsharesonJanuary6,2021asoutlined
inthefollowingtable:
Series RecordDate PayableDate PerShareAmountDividendAmount
($millions)
Series1 February1,2021 March1,2021 $0.306625 3
Series3 February1,2021 March1,2021 $0.279875 2
Series5 February1,2021 March1,2021 $0.285813 3
Series7 February1,2021 March1,2021 $0.273750 3
Series9 February1,2021 March1,2021 $0.296875 3
Series11 February1,2021 March1,2021 $0.359375 2
Series13 February1,2021 March1,2021 $0.359375 4
Series15 March15,2021 March31,2021 $0.279000 2
Series17 March15,2021 March31,2021 $0.301313 2
Series19 March15,2021 March31,2021 $0.292750 2
Series21 February1,2021 March1,2021 $0.306250 5
Series23 February1,2021 February16,2021 $0.328125 4
Series25 February1,2021 February16,2021 $0.325000 3
38
20.REVENUE
Revenuehasbeendisaggregatedintocategoriestoreflecthowthenature,timinganduncertaintyofrevenueandcashflows
areaffectedbyeconomicfactors.
a. RevenueDisaggregation
2020 2019
FortheyearsendedDecember31
Pipelines Facilities
Marketing&New
Ventures Total Pipelines Facilities
Marketing&New
Ventures Total($millions)
Take-or-pay(1) 1,664 740 — 2,404 1,200 625 — 1,825
Fee-for-service(1) 295 117 — 412 387 117 — 504
Productsales(2)(3) — — 2,956 2,956 — 5 3,946 3,951
Revenuefromcontractswithcustomers 1,959 857 2,956 5,772 1,587 747 3,946 6,280
Operationalfinanceleaseincome 15 — — 15 — — — —
Fixedoperatingleaseincome 131 35 — 166 63 29 — 92
Totalexternalrevenue 2,105 892 2,956 5,953 1,650 776 3,946 6,372(1) Revenuerecognizedovertime.(2) Revenuerecognizedatapointintime.(3) 2020periodandcomparative2019periodhavebeenrestated.SeeNote3totheConsolidatedFinancialStatements.
114PembinaPipelineCorporation2020AnnualReport
b. ContractLiabilities
Significantchangesinthecontractliabilitiesbalancesduringtheperiodareasfollows:
2020 2019
FortheyearsendedDecember31
($millions) Take-or-Pay
OtherContractLiabilities
TotalContractLiabilities Take-or-Pay
OtherContractLiabilities
TotalContractLiabilities
Openingbalance 8 223 231 9 159 168
Additions(netintheperiod) 3 117 120 4 35 39
Acquisition(Note7) — — — — 77 77
Revenuerecognizedfromcontractliabilities(1) (8) (51) (59) (5) (48) (53)
Closingbalance 3 289 292 8 223 231
Lesscurrentportion(2) (3) (59) (62) (8) (31) (39)
Endingbalance — 230 230 — 192 192(1) Recognitionofrevenuerelatedtoperformanceobligationssatisfiedinthecurrentperiodthatwereincludedintheopeningbalanceofcontractliabilities.(2) AsatDecember31,2020,thebalanceincludes$3millionofcashcollectedundertake-or-paycontractswhichwillberecognizedwithinoneyearasthecustomerchoosesto
ship,process,orotherwiseforegotheassociatedservice.
ContractliabilitiesdepictPembina'sobligationtoperformservicesinthefutureforcashandnon-cashconsiderationwhich
hasbeenreceivedfromcustomers.Contractliabilitiesincludeup-frontpaymentsornon-cashconsiderationreceivedfrom
customersforfuturetransportation,processingandstorageservices.Contractliabilitiesalsoincludeconsiderationreceived
fromcustomersfortake-or-paycommitmentswherethecustomerhasamake-uprighttoshiporprocessfuturevolumes
underafirmcontract.Theseamountsarenon-refundableshouldthecustomernotuseitsmake-uprights.
Pembinadoesnothaveanycontractassets.Inallinstanceswheregoodsorserviceshavebeentransferredtoacustomerin
advanceofthereceiptofcustomerconsideration,Pembina'srighttoconsiderationisunconditionalandhasthereforebeen
presentedasareceivable.
PembinaPipelineCorporation2020AnnualReport115
c. RevenueAllocatedtoRemainingPerformanceObligations
Pembinaexpectstorecognizerevenueinfutureperiodsthatincludescurrentunsatisfiedremainingperformanceobligations
totaling$8.5billion(2019:$9.3billion).Overthenextfiveyears,thisremainingperformanceobligationwillberecognized
annuallyrangingfrom$1.1billion(2019:$1.1billion)decliningto$969million(2019:$983million).Subsequently,upto2039
(2019:2039),Pembinawillrecognizefrom$870million(2019:$977million)to$22million(2019:$13million)peryear.
Inpreparingtheabovefigures,Pembinahastakenthepracticalexpedienttoexcludecontractsthatarebeingaccountedfor
usingthepracticalexpedienttorecognizerevenueinanamountequaltoPembina'srighttoinvoice,aswellasthepractical
expedienttoexcludecontractsthathaveoriginalexpecteddurationsofoneyearorless.
Variableconsiderationrelatingtoflowthroughcostsarenotincludedintheamountspresented.Theseflowthroughcostsdo
notimpactnetincomeorcashflow,andduetothelong-termnatureofthecontractsthereissignificantuncertaintyin
estimatingtheseamounts.Inaddition,Pembinaexcludescontractedrevenueamountsforassetsnotyetin-serviceunless
bothBoardofDirectorsapprovalandregulatoryapprovalfortheassethasbeenobtained.
21.NETFINANCECOSTS
FortheyearsendedDecember31 2019
($millions) 2020 (RestatedNote3)
Interestexpenseonfinancialliabilitiesmeasuredatamortizedcost:
Loansandborrowings 362 291
Leases 39 17
Unwindingofdiscountrate 15 8
Gaininfairvalueofnon-commodity-relatedderivativefinancialinstruments (5) (4)
Foreignexchangelosses(gains)andother 9 (23)
Netfinancecosts 420 289
Netinterestpaidof$429million(2019:$311million)includesinterestpaidduringconstructionandcapitalizedof$46million
(2019:$42million).
116PembinaPipelineCorporation2020AnnualReport
22.OPERATINGSEGMENTS
Pembinadeterminesitsreportablesegmentsbasedonthenatureofoperationsandincludesthreeoperatingsegments:
Pipelines,FacilitiesandMarketing&NewVentures.
ThePipelinessegmentincludesconventional,oilsandsandtransmissionpipelinesystems,crudeoilstorageandterminalling
businessandrelatedinfrastructureservingvariousmarketsandbasinsacrossNorthAmerica.
TheFacilitiessegmentincludesprocessingandfractionationfacilitiesandrelatedinfrastructurethatprovidePembina's
customerswithnaturalgasandNGLservicesthatarehighlyintegratedwithPembina'sotherbusinessesandabulkmarine
terminalinthePortofVancouver,Canada.
TheMarketing&NewVenturessegmentundertakesvalue-addedcommoditymarketingactivitiesincludingbuyingandselling
productsandoptimizingstorageopportunities,bycontractingcapacityonPembina'sandvariousthird-partypipelinesand
utilizingPembina'srailfleetandraillogisticscapabilities.Marketingactivitiesalsoincludeidentifyingcommercial
opportunitiestofurtherdevelopotherPembinaassets.Pembina'sMarketingbusinessalsoincludesresultsfromAuxSable's
NGLextractionfacilitynearChicago,IllinoisandothernaturalgasandNGLprocessingfacilities,logisticsanddistribution
assetsintheUnitedStatesandCanada.
Thefinancialresultsoftheoperatingsegmentsareincludedbelow.Performanceismeasuredbasedonresultsfromoperating
activities,netofdepreciationandamortization,asincludedintheinternalmanagementreportsthatarereviewedby
Pembina'sChiefExecutiveOfficer,ChiefFinancialOfficerandotherSeniorVicePresidents.Theseresultsareusedtomeasure
performanceasmanagementbelievesthatsuchinformationisthemostrelevantinevaluatingresultsofcertainsegments
relativetootherentitiesthatoperatewithintheseindustries.Inter-segmenttransactionsarerecordedatmarketvalueand
eliminatedundercorporateandinter-segmenteliminations.
FortheyearendedDecember31,2020(RestatedNote3)
Pipelines(1) FacilitiesMarketing&
NewVentures(2)
Corporate&Inter-segmentEliminations Total($millions)
Revenuefromexternalcustomers 2,105 892 2,956 — 5,953
Inter-segmentrevenue 146 339 — (485) —
Totalrevenue(3) 2,251 1,231 2,956 (485) 5,953
Operatingexpenses(4) 498 392 — (178) 712
Costofgoodssold,includingproductpurchases — 11 2,815 (317) 2,509
Depreciationandamortizationincludedinoperations 402 199 50 11 662
Costofsales 900 602 2,865 (484) 3,883
Realizedgainoncommodity-relatedderivativefinancialinstruments — — (54) — (54)
Unrealized(gain)lossoncommodity-relatedderivativefinancialinstruments — (4) 88 — 84
Shareofprofitfromequityaccountedinvestees-operations 227 55 — — 282
Adjustedgrossprofit 1,578 688 57 (1) 2,322
Impairmentinshareofprofitfromequityaccountedinvestees — — (314) — (314)
Grossprofit(loss) 1,578 688 (257) (1) 2,008
Depreciationincludedingeneralandadministrative — — — 38 38
Othergeneralandadministrative(4) 24 10 28 146 208
Other(income)expense (1) 2 4 (23) (18)
Impairmentexpense 1,396 10 370 — 1,776
Reportablesegmentresultsfromoperatingactivities 159 666 (659) (162) 4
Netfinancecosts(income) 31 24 (13) 378 420
Reportablesegmentearnings(loss)beforetax 128 642 (646) (540) (416)
Capitalexpenditures 587 370 38 34 1,029
Contributionstoequityaccountedinvestees — 69 155 — 224
PembinaPipelineCorporation2020AnnualReport117
FortheyearendedDecember31,2019(RestatedNote3)
Pipelines(1) FacilitiesMarketing&
NewVentures(2)
Corporate&Inter-segmentEliminations Total($millions)
Revenuefromexternalcustomers 1,650 776 3,946 — 6,372
Inter-segmentrevenue 137 345 — (482) —
Totalrevenue(3) 1,787 1,121 3,946 (482) 6,372
Operatingexpenses(4) 436 344 — (178) 602
Costofgoodssold,includingproductpurchases — 4 3,559 (311) 3,252
Depreciationandamortizationincludedinoperations 243 166 51 11 471
Costofsales 679 514 3,610 (478) 4,325
Realizedgainoncommodity-relatedderivativefinancialinstruments — — (33) — (33)
Shareofprofitfromequityaccountedinvestees 274 51 50 — 375
Unrealizedlossoncommodity-relatedderivativefinancialinstruments — — 13 — 13
Grossprofit(loss) 1,382 658 406 (4) 2,442
Depreciationincludedingeneralandadministrative — — — 36 36
Othergeneralandadministrative(4) 30 14 35 181 260
Otherexpense 3 — 3 9 15
Impairmentexpense 300 — — — 300
Reportablesegmentresultsfromoperatingactivities 1,049 644 368 (230) 1,831
Netfinancecosts(income) 6 21 (8) 270 289
Reportablesegmentearnings(loss)beforetax 1,043 623 376 (500) 1,542
Capitalexpenditures 892 569 157 27 1,645
Contributionstoequityaccountedinvestees 13 73 177 — 263(1) Pipelinestransportationrevenueincludes$228million(2019:$33million)associatedwithU.S.pipelinerevenue.(2) Marketing&NewVenturesincludesrevenueof$143million(2019:$182million)associatedwithU.S.midstreamsales.(3) During2020,noonecustomeraccountedfor10percentormoreoftotalrevenuesreportedthroughoutallsegments.During2019,onecustomeraccountedfor10percentor
moreoftotalrevenueswith$718millionreportedthroughoutallsegments.(4) Pembinaincurred$370million(2019:$339million)ofemployeecosts,ofwhich$244million(2019:$182million)wasrecordedinoperatingexpensesand$126million(2019:
$157million)ingeneralandadministrativeexpenses.Employeecostsincludesalaries,benefitsandshare-basedcompensation.
GeographicalInformation
Non-CurrentAssets
FortheyearsendedDecember31 2019
($millions) 2020 (RestatedNote4)
Canada 26,504 26,222
UnitedStates 3,601 5,543
Totalnon-currentassets(1) 30,105 31,765(1) Excludesdeferredincometaxassets.
118PembinaPipelineCorporation2020AnnualReport
23.EARNINGS(LOSS)PERCOMMONSHARE
BasicEarnings(Loss)PerCommonShare
ThecalculationofbasiclosspercommonshareatDecember31,2020wasbasedonthelossattributabletocommon
shareholdersof$476million(2019:$1.4billion(1)earnings)andaweightedaveragenumberofcommonsharesoutstandingof
550million(2019:512million).
DilutedEarnings(Loss)PercommonShare
ThecalculationofdilutedlosspercommonshareatDecember31,2020wasbasedonlossattributabletocommon
shareholdersof$476million(2019:$1.4billion(1)earnings),andweightedaveragenumberofcommonsharesoutstanding
afteradjustmentfortheeffectsofalldilutivepotentialcommonsharesof550million(2019:514million).
Earnings(Loss)AttributabletoCommonShareholders
FortheyearsendedDecember31 2019
($millions) 2020 (RestatedNote3)
Earnings(loss) (316) 1,507
Dividendsonpreferredshares (148) (123)
Cumulativedividendsonpreferredshares,notyetdeclared (12) (8)
Basicanddilutedearnings(loss)attributabletocommonshareholders (476) 1,376
WeightedAverageNumberofCommonShares
2019
(Inmillionsofshares,exceptasnoted) 2020 (RestatedNote3)
IssuedcommonsharesatJanuary1 548 508
EffectofsharesissuedonAcquisition — 1
Effectofsharesissuedonexerciseofoptions 2 3
BasicweightedaveragenumberofcommonsharesatDecember31 550 512
Dilutiveeffectofshareoptionsonissue(1) — 2
DilutedweightedaveragenumberofcommonsharesatDecember31 550 514
Basicearnings(loss)percommonshare(dollars) (0.86) 2.69
Dilutedearnings(loss)percommonshare(dollars) (0.86) 2.68(1) TheaveragemarketvalueofPembina'ssharesforpurposesofcalculatingthedilutiveeffectofshareoptionsfortheyearendedDecember31,2019wasbasedonquoted
marketpricesfortheperiodduringwhichtheoptionswereoutstanding.
FortheyearendedDecember31,2020,277thousand(2019:nil)stockoptionswereexcludedfromthecalculationofdiluted
earnings(loss)percommonshareastheimpactoftheseoptionsareanti-dilutive.
PembinaPipelineCorporation2020AnnualReport119
24.PENSIONPLAN
AsatDecember31
($millions) 2020 2019
Registereddefinedbenefitnetobligation 26 19
Supplementaldefinedbenefitnetobligation 18 16
Netemployeebenefitobligations 44 35
Pembinamaintainsdefinedcontributionplansandnon-contributorydefinedbenefitpensionplanscoveringitsemployees.
Pembinacontributesfiveto10percentofanemployee'searningstothedefinedcontributionplanuntiltheemployee'sage
plusyearsofserviceequals50,atwhichtimetheybecomeeligibleforthedefinedbenefitplans.Pembinarecognized$12
millioninexpenseforthedefinedcontributionplanduringtheyear(2019:$11million).Thedefinedbenefitplansincludea
fundedregisteredplanforalleligibleemployeesandanunfundedsupplementalretirementplanforthoseemployeesaffected
bytheCanadaRevenueAgencymaximumpensionlimits.Thedefinedbenefitplansareadministeredbyseparatepension
fundsthatarelegallyseparatedfromPembina.Benefitsundertheplansarebasedonthelengthofserviceandtheannual
averagebestthreeyearsofearningsduringthelast10yearsofserviceoftheemployee.Benefitspaidoutoftheplansarenot
indexed.Pembinameasuresitsaccruedbenefitobligationsandthefairvalueofplanassetsforaccountingpurposesasat
December31ofeachyear.ThemostrecentactuarialfundingvaluationwasatDecember31,2019.Thedefinedbenefitplans
exposePembinatoactuarialriskssuchaslongevityrisk,interestraterisk,andmarket(investment)risk.
EffectiveJanuary1,2021,Pembinarevisedtheeligibilityrequirementsforthedefinedbenefitplan.Employeeswithanage
plusyearsofserviceof40atJanuary1,2021willremaineligibleforthedefinedbenefitplan,whentheirageplusyearsof
servicereaches50.Allotheremployeeswillremaininthedefinedcontributionplan.
DefinedBenefitObligations
AsatDecember31($millions)
2020 2019
RegisteredPlans
SupplementalPlan
RegisteredPlan
SupplementalPlan
Presentvalueofunfundedobligations — 18 — 16
Presentvalueoffundedobligations 278 — 250 —
Totalpresentvalueofobligations 278 18 250 16
Fairvalueofplanassets 252 — 231 —
Recognizedliabilityfordefinedbenefitobligations (26) (18) (19) (16)
Pembinafundsthedefinedbenefitobligationplansinaccordancewithgovernmentregulationsbycontributingtotrustfunds
administeredbyanindependenttrustee.Thefundsareinvestedprimarilyinequitiesandbonds.Definedbenefitplan
contributionstotaled$23millionfortheyearendedDecember31,2020(2019:$20million).
Pembinahasdeterminedthat,inaccordancewiththetermsandconditionsofthedefinedbenefitplans,andinaccordance
withstatutoryrequirementsoftheplans,thepresentvalueofrefundsorreductionsinfuturecontributionsisnotlowerthan
thebalanceofthetotalfairvalueoftheplanassetslessthetotalpresentvalueofobligations.Assuch,nodecreaseinthe
definedbenefitassetisnecessaryatDecember31,2020(December31,2019:nil).
RegisteredDefinedBenefitPensionPlanAssetsComprise
AsatDecember31
(Percent) 2020 2019
Equitysecurities 63 62
Debt 37 38
100 100
120PembinaPipelineCorporationAnnualReport2020
MovementinthePresentValueoftheDefinedBenefitPensionObligation
2020 2019
($millions)Registered
PlansSupplemental
PlanRegistered
PlanSupplemental
Plan
DefinedbenefitsobligationsatJanuary1 250 16 212 12
Benefitspaidbytheplan (28) (2) (12) —
Currentservicecosts 18 1 15 1
Interestexpense 8 1 8 —
Actuariallossesinothercomprehensiveincome 30 2 27 3
DefinedbenefitobligationsatDecember31 278 18 250 16
MovementinthePresentValueofRegisteredDefinedBenefitPensionPlanAssets
($millions) 2020 2019
FairvalueofplanassetsatJanuary1 231 193
Contributionspaidintotheplan 23 20
Benefitspaidbytheplan (28) (12)
Returnonplanassets 18 22
Interestincome 8 8
FairvalueofregisteredplanassetsatDecember31 252 231
ExpenseRecognitioninEarnings(Loss)
FortheyearsendedDecember31
($millions) 2020 2019
RegisteredPlan
Currentservicecosts 19 15
Interestonobligation 9 8
Interestonplanassets (8) (8)
20 15
Theexpenseisrecognizedinthefollowinglineitemsintheconsolidatedstatementofcomprehensiveincome:
FortheyearsendedDecember31
($millions) 2020 2019
RegisteredPlan
Operatingexpenses 10 7
Generalandadministrativeexpense 10 8
20 15
ExpenserecognizedfortheSupplementalPlanwaslessthan$2millionforeachoftheyearsendedDecember31,2020and
2019.
ActuarialGainsandLossesRecognizedinOtherComprehensiveIncome(Loss)
2020 2019
($millions)Registered
PlansSupplemental
Plan TotalRegistered
PlanSupplemental
Plan Total
BalanceatJanuary1 (33) (2) (35) (28) (1) (29)
Remeasurements:
Financialassumptions (13) (1) (14) (21) (1) (22)
Experienceadjustments (10) (1) (11) — — —
Returnonplanassetsexcludinginterestincome 15 — 15 16 — 16
Recognizedlossduringtheperiodaftertax (8) (2) (10) (5) (1) (6)
BalanceatDecember31 (41) (4) (45) (33) (2) (35)
PembinaPipelineCorporationAnnualReport2020121
Principalactuarialassumptionsused:
AsatDecember31
(weightedaveragepercent) 2020 2019
Discountrate 2.6 3.1
Futurepensionearningincreases 4.0 4.0
Assumptionsregardingfuturemortalityarebasedonpublishedstatisticsandmortalitytables.Thecurrentlongevities
underlyingthevaluesoftheliabilitiesinthedefinedplansareasfollows:
AsatDecember31
(years) 2020 2019
Longevityatage65forcurrentpensioners
Males 21.9 21.8
Females 24.3 24.2
Longevityatage65forcurrentmemberaged45
Males 22.9 22.8
Females 25.2 25.1
Thecalculationofthedefinedbenefitobligationissensitivetothediscountrate,compensationincreases,retirementsand
terminationratesassetoutabove.Achangeintheestimateddiscountrateof2.6percentby100basispointsat
December31,2020isconsideredreasonablypossibleinthenextfinancialyear.Anincreaseby100basispointswouldresult
ina$40millionadditiontotheobligationwhereas,adecreasewouldleadtoa$51millionreductiontotheobligation.
Pembinaexpectstocontribute$23milliontothedefinedbenefitplansin2021.
25.SHARE-BASEDPAYMENTS
AtDecember31,2020,Pembinahasthefollowingshare-basedpaymentarrangements:
ShareOptionPlan(Equity-Settled)
PembinahasashareoptionplanunderwhichemployeesareeligibletoreceiveoptionstopurchasesharesinPembina.
Long-TermShareUnitAwardIncentivePlan(Cash-Settled)
Pembinahasalong-termshareunitawardincentiveplan.Undertheshare-basedcompensationplan,awardsofrestricted
("RSU")andperformance("PSU")shareunitsaremadetoofficersandnon-officers.Theplanresultsinparticipantsreceiving
cashcompensationbasedonthevalueoftheunderlyingnotionalsharesgrantedundertheplan.Paymentsarebasedona
tradingvalueofPembina'scommonsharesplusnotionaldividendsandperformanceofPembina.
Pembinaalsohasadeferredshareunit("DSU")plan.UndertheDSUplan,directorsarerequiredtotakeatleast50percentof
totaldirectorcompensationasDSUs,untilsuchtimethattheyhavemetcertainshareownershipguidelines.ADSUisa
notionalsharethathasthesamevalueasonePembinacommonshare.ItsvaluechangeswithPembina'sshareprice.DSUsdo
nothavevotingrightsbuttheyaccruedividendsasadditionalDSUunits,atthesamerateasdividendspaidonPembina's
commonshares.DSUsarepaidoutwhenadirectorretiresfromtheboardandareredeemedforcashusingtheweighted
averageoftradingpriceofcommonsharesontheTorontoStockExchange("TSX")forthelastfivetradingdaysbeforethe
redemptiondate,multipliedbythenumberofDSUsthedirectorholds.
TermsandConditionsofShareOptionPlanandShareUnitAwardIncentivePlan
ShareOptionPlan
Shareoptionsvestone-thirdonthefirstanniversaryofthegrantdate,one-thirdonthesecondanniversaryofthegrantdate
andone-thirdonthethirdanniversaryofthegrantdateandhaveacontractuallifeofsevenyears.
122PembinaPipelineCorporationAnnualReport2020
Long-TermShareUnitAwardIncentivePlan(1)
GrantdateRSUs,PSUsandDSUstoOfficers,Non-Officers(2)andDirectors(thousandsofunits,exceptasnoted) PSUs(3) RSUs(3) DSUs Total
January1,2019 475 460 36 971
January1,2020 469 487 31 987(1) DistributionUnitsaregrantedinadditiontoRSUandPSUgrantsbasedonnotionalaccrueddividendsfromRSUandPSUgrantedbutnotpaid.(2) Non-OfficersdefinedasseniorselectedpositionswithinPembina.(3) Contractuallifeof3years.
PSUsvestonthethirdanniversaryofthegrantdate.RSUsvestone-thirdonthefirstanniversaryofthegrantdate,one-third
onthesecondanniversaryofthegrantdateandone-thirdonthethirdanniversaryofthegrantdate.Actualunitsawardedare
basedonthetradingvalueofthesharesandperformanceofPembina.
DisclosureofShareOptionPlan
Thenumberandweightedaverageexercisepricesofshareoptionsasfollows:
(thousandsofoptions,exceptasnoted) NumberofOptions
WeightedAverageExercisePrice
(dollars)
OutstandingatDecember31,2018 17,928 $42.12
Granted 5,470 $48.27
Exercised (3,979) $37.95
Forfeited (655) $45.29
Expired (180) $48.98
OutstandingatDecember31,2019 18,584 $44.65
Granted 7,316 $37.55
Exercised (2,188) $40.17
Forfeited (1,103) $44.86
Expired (833) $45.24
OutstandingatDecember31,2020 21,776 $42.68
AsofDecember31,2020,thefollowingoptionsareoutstanding:
(thousandsofoptions,exceptasnoted)ExercisePrice(dollars)
NumberOutstandingatDecember31,2020 OptionsExercisable
WeightedAverageRemainingLife
$26.83–$36.32 4,451 681 6.0
$36.33–$43.06 4,349 3,813 3.3
$43.07–$45.29 4,362 1,138 5.0
$45.30–$48.08 3,402 2,039 4.9
$48.09–$52.01 5,212 2,800 3.9
Total 21,776 10,471 4.6
Optionsareexercisedregularlythroughouttheyear.Therefore,theweightedaveragesharepriceduringtheyearof$49.79
(2019:$48.87)isrepresentativeoftheweightedaveragesharepriceatthedateofexercise.
PembinaPipelineCorporationAnnualReport2020123
Expectedvolatilityisestimatedbyconsideringhistoricaveragesharepricevolatility.Theweightedaverageinputsusedinthe
measurementofthefairvaluesatgrantdateofshareoptionsarethefollowing:
ShareOptionsGranted
FortheyearsendedDecember31
(dollars,exceptasnoted) 2020 2019
Weightedaverage
Fairvalueatgrantdate 3.82 4.12
Expectedvolatility(percent) 36.61 18.7
Expectedoptionlife(years) 3.67 3.67
Expectedannualdividendsperoption 2.52 2.36
Expectedforfeitures(percent) 6.9 6.6
Risk-freeinterestrate(basedongovernmentbonds)(percent) 0.5 1.6
DisclosureofLong-TermShareUnitAwardIncentivePlan
Thelong-termshareunitawardincentiveplanswerevaluedusingthevolumeweightedaveragepricefor20daysending
December31,2020of$32.53(2019:$47.52).Actualpaymentmaydifferfromamountvaluedbasedonmarketpriceand
companyperformance.
EmployeeExpenses
FortheyearsendedDecember31
($millions) 2020 2019
Shareoptionplan,equitysettled 17 16
Long-termshareunitawardincentiveplan 11 50
Share-basedcompensationexpense 28 66
Totalcarryingamountofliabilitiesforcashsettledarrangements 60 95
Totalintrinsicvalueofliabilityforvestedbenefits 39 57
26.ACCUMULATEDOTHERCOMPREHENSIVEINCOME
($millions)
CurrencyTranslation
Reserve
CashFlowHedge
Reserve
PensionandotherPost-RetirementBenefitPlan
Adjustments(2) Total
BalanceatDecember31,2018 347 — (30) 317
Othercomprehensivelossbeforehedgingactivities (213) — (6) (219)
BalanceatDecember31,2019 134 — (36) 98
Othercomprehensivelossbeforehedgingactivities (117) — (10) (127)
Othercomprehensivegainresultingfromhedgingactivities(1) 32 — — 32
Taximpact (1) — — (1)
BalanceatDecember31,2020 48 — (46) 2(1) AmountsrelatetohedgesoftheCompany'snetinvestmentinforeignoperations(reportedinCurrencyTranslationReserve)andinterestratederivativesdesignatedascash
flowhedges(reportedinCashFlowHedgeReserve)(Note27).(2) PensionandotherPost-RetirementBenefitPlanAdjustmentswillnotbereclassifiedintoearnings.
124PembinaPipelineCorporationAnnualReport2020
27.FINANCIALINSTRUMENTS&RISKMANAGEMENT
RiskManagementOverview
Pembinahasexposuretocounterpartycreditrisk,liquidityriskandmarketrisk.Pembinarecognizesthateffective
managementoftheserisksisacriticalsuccessfactorinmanagingorganizationandshareholdervalue.
Riskmanagementstrategies,policiesandlimitsensurerisksandexposuresarealignedtoPembina'sbusinessstrategyandrisk
tolerance.Pembina'sBoardofDirectorsisresponsibleforprovidingriskmanagementoversightatPembinaandoverseeshow
managementmonitorscompliancewithPembina'sriskmanagementpoliciesandproceduresandreviewstheadequacyof
thisriskframeworkinrelationtotherisksfacedbyPembina.InternalauditpersonnelassisttheBoardofDirectorsinits
oversightrolebymonitoringandevaluatingtheeffectivenessoftheorganization'sriskmanagementsystem.
CounterpartyCreditRisk
CounterpartycreditriskrepresentsthefinanciallossPembinamayexperienceifacounterpartytoafinancialinstrumentor
commercialagreementfailedtomeetitscontractualobligationstoPembinainaccordancewiththetermsandconditionsof
thefinancialinstrumentsoragreementswithPembina.CounterpartycreditriskarisesprimarilyfromPembina'scashandcash
equivalents,tradeandotherreceivables,advancestorelatedpartiesandfromcounterpartiestoitsderivativefinancial
instruments.ThecarryingamountofPembina'scashandcashequivalents,tradeandotherreceivables,advancestorelated
parties,derivativefinancialinstrumentsandcertainfinancialguaranteesrepresentsthemaximumcounterpartycredit
exposure,withouttakingintoaccountsecurityheld.
Pembinamanagescounterpartycreditriskthroughestablishedcreditmanagementtechniques,includingconducting
comprehensivefinancialandotherassessmentsforallnewcounterpartiesandregularreviewsofexistingcounterpartiesto
establishandmonitoracounterparty'screditworthiness,settingexposurelimits,monitoringexposuresagainsttheselimits,
enteringintomasternettingarrangementsandobtainingfinancialassuranceswherewarranted.Pembinautilizesvarious
sourcesoffinancial,creditandbusinessinformationinassessingthecreditworthinessofacounterpartyincludingexternal
creditratings,whereavailable,andinothercases,detailedfinancialstatementanalysisinordertogenerateaninternalcredit
ratingbasedonquantitativeandqualitativefactors.TheestablishmentofcounterpartyexposurelimitsisgovernedbyaBoard
ofDirectorsdesignatedcounterpartyexposurelimitmatrixwhichrepresentsthemaximumdollaramountsofcounterparty
exposurebydebtratingthatcanbeapprovedforacounterparty.Pembinacontinuestocloselymonitorandreassessthe
creditworthinessofitscounterparties,whichhasresultedinPembinareducingormitigatingitsexposuretocertain
counterpartieswhereitwasdeemedwarrantedandpermittedundercontractualterms.
Financialassurancesfromcounterpartiesmayincludeguarantees,lettersofcreditandcash.AtDecember31,2020lettersof
credittotaling$130million(December31,2019:$90million)wereheldprimarilyinrespectofcustomertradereceivables.
PembinatypicallyhascollecteditstradereceivablesinfullandatDecember31,2020,94percentwerecurrent(2019:95
percent).Managementdefinescurrentasoutstandingaccountsreceivableunder30dayspastdue.Pembinahasagenerallien
andacontinuingandfirstprioritysecurityinterestin,andasecuredchargeon,allofashipper'spetroleumproductsinits
custody.
AtDecember31,theagingofpastduetradeandotherreceivableswasasfollows:
($millions) 2020 2019
31-60dayspastdue 3 1
Greaterthan61dayspastdue 8 7
11 8
PembinaPipelineCorporationAnnualReport2020125
Pembinausesalossallowancematrixtomeasurelifetimeexpectedcreditlossesatinitialrecognitionandthroughoutthelife
ofthereceivable.ThelossallowancematrixisdeterminedbasedonPembina'shistoricaldefaultratesovertheexpectedlife
oftradereceivables,adjustedforforward-lookingestimates.Managementbelievestheunimpairedamountsthatarepastdue
bygreaterthan30daysarefullycollectiblebasedonhistoricaldefaultratesofcustomersandmanagement'sassessmentof
counterpartycreditriskthroughestablishedcreditmanagementtechniquesasdiscussedabove.
Expectedcreditlossesonleasereceivablesaredeterminedusingaprobability-weightedestimateofcreditlosses,measured
asthepresentvalueofallexpectedcashshortfalls,discountedattheinterestratesimplicitintheleases,usingreasonableand
supportableinformationaboutpastevents,currentconditionsandforecastsoffutureeconomicconditions.Pembina
considerstheriskofdefaultrelatingtoleasereceivableslowbasedonPembina'sassessmentofindividualcounterpartycredit
riskthroughestablishedcreditmanagementtechniquesasdiscussedabove.
AdvancestorelatedpartiesatDecember31,2020areheldatamortizedcostandconsistoffundsadvancedbyPembinatoa
jointlycontrolledentity.Expectedcreditlossesaremeasuredusingaprobability-weightedestimateofcreditlosses,measured
asthepresentvalueofallexpectedcashshortfalls,discountedattheeffectiveinterestrateofthefinancialasset,using
reasonableandsupportableinformationaboutpastevents,currentconditionsandforecastsoffutureeconomicconditions.
AsaresultoftheassessmentleadingtotheimpairmentofPembina'spreferredinterestinRuby,Pembinafurtherimpairedits
remainingrelatedpartyadvanceof$139milliontoRuby.SeeNote13foradditionaldetails.
Pembinamonitorsandmanagesitsconcentrationofcounterpartycreditriskonanongoingbasis.Pembinabelievesthese
measuresminimizeitscounterpartycreditriskbutthereisnocertaintythattheywillprotectitagainstallmateriallosses.As
partofitsongoingoperations,Pembinamustbalanceitsmarketandcounterpartycreditriskswhenmakingbusiness
decisions.
LiquidityRisk
LiquidityriskistheriskPembinawillnotbeabletomeetitsfinancialobligationsastheycomedue.Thefollowingarethe
contractualmaturitiesoffinancialliabilities,includingestimatedinterestpayments.
OutstandingBalancesDuebyPeriod
December31,2020CarryingAmount
ExpectedCashFlows
LessThan1Year 1-3Years 3-5Years
MoreThan5Years($millions)
Tradepayablesandaccruedliabilities 780 780 780 — — —
Loansandborrowings 10,876 16,275 1,058 2,262 2,708 10,247
Dividendspayable 115 115 115 — — —
Derivativefinancialliabilities 69 69 69 — — —
Leaseliabilities 774 1,064 131 217 174 542
Pembinamanagesitsliquidityriskbyforecastingcashflowsovera12monthrollingtimeperiodtoidentifyfinancing
requirements.Thesefinancingrequirementsarethenaddressedthroughacombinationofcreditfacilitiesandthroughaccess
tocapitalmarkets,ifrequired.
126PembinaPipelineCorporationAnnualReport2020
MarketRisk
Pembina'sresultsaresubjecttomovementsincommodityprices,foreignexchangeandinterestrates.AformalRisk
ManagementProgramincludingpoliciesandprocedureshasbeendesignedtomitigatetheserisks.
a. CommodityPriceRisk
CertainofthetransportationcontractsortollingarrangementswithrespecttoPembina'spipelineassetsdonotincludetake-
or-paycommitmentsfromcrudeoilandgasproducersand,asaresult,Pembinaisexposedtothroughputriskwithrespectto
thoseassets.AdecreaseinvolumestransportedcandirectlyandadverselyaffectPembina’srevenuesandearnings.The
demandfor,andutilizationof,Pembina'spipelineassetsmaybeimpactedbyfactorssuchaschangingmarketfundamentals,
capacitybottlenecks,operationalincidents,regulatoryrestrictions,systemmaintenance,weatherandincreasedcompetition.
Marketfundamentals,suchascommoditypricesandpricedifferentials,naturalgasandgasolineconsumption,alternative
energysourcesandglobalsupplydisruptionsoutsideofPembina'scontrolcanimpactboththesupplyofanddemandforthe
commoditiestransportedonPembina'spipelines.
Pembina'sMarketingbusinessincludesactivitiesrelatedtoproductstorage,terminalling,andhubservices.Theseactivities
exposePembinatocertainrisksrelatingtofluctuationsincommoditypricesand,asaresult,Pembinamayexperience
volatilityinrevenueandimpairmentsrelatedtothebookvalueofstoredproductwithrespecttotheseactivities.Primarily,
Pembinaentersintocontractstopurchaseandsellcrudeoil,condensate,NGLandnaturalgasatfloatingmarketprices;asa
result,thepricesofproductsthataremarketedbyPembinaaresubjecttovolatilityasaresultoffactorssuchasseasonal
demandchanges,extremeweatherconditions,marketinventorylevels,generaleconomicconditions,changesincrudeoil
marketsandotherfactors.Pembinamanagesitsriskexposurebybalancingpurchasesandsalestosecurelessvolatile
margins.NotwithstandingPembina'smanagementofpriceandqualityrisk,marketingmarginsforcommoditiescanvaryand
havevariedsignificantlyfromperiodtoperiodinthepast.Thisvariabilitycouldhaveanadverseeffectontheresultsof
Pembina'sMarketingbusinessanditsoverallresultsofoperations.Toassistinreducingthisinherentvariabilityinits
Marketingbusiness,Pembinahasinvested,andwillcontinuetoinvest,inassetsthathaveafee-basedrevenuecomponent.
PembinaisalsoexposedtopotentialpricedeclinesanddecreasingfracspreadsbetweenthetimePembinapurchasesNGL
feedstockandsellsNGLproducts.FracspreadisthedifferencebetweenthesalepricesofNGLproductsandthecostofNGL
sourcedfromnaturalgasandacquiredatpricesrelatedtonaturalgasprices.Fracspreadscanchangesignificantlyfrom
periodtoperioddependingontherelationshipbetweenNGLandnaturalgasprices(the"fracspreadratio"),absolute
commoditypricesandchangesintheCanadiantoU.S.dollarexchangerate.Inadditiontothefracspreadratiochanges,there
isalsoadifferentialbetweenNGLproductpricesandcrudeoilpriceswhichcanchangemarginsrealizedformidstream
products.Theamountofprofitorlossmadeontheextractionportionofthebusinesswillgenerallyincreaseordecreasewith
fracspreads.ThisexposurecouldresultinvariabilityofcashflowgeneratedbytheMarketingbusiness,whichcouldaffect
PembinaandthecashdividendsthatPembinaisabletodistribute.
Pembinautilizesfinancialderivativeinstrumentsaspartofitsoverallriskmanagementstrategytoassistinmanagingthe
exposuretocommodityprice,interestrate,costofpowerandforeignexchangerisk.Asanexampleofcommodityprice
mitigation,Pembinaactivelyfixesaportionofitsexposuretofractionationmarginsthroughtheuseofderivativefinancial
instruments.Additionally,Pembina'sMarketingbusinessisalsoexposedtovariabilityinquality,timeandlocation
differentialsforvariousproducts,andfinancialinstrumentsmaybeusedtooffsetPembina'sexposurestothesedifferentials.
Pembinadoesnotusefinancialinstrumentsforspeculativepurposes.Commoditypricefluctuationsandvolatilitycanalso
impactproduceractivityandthroughputinPembina’sinfrastructure.
PembinaPipelineCorporationAnnualReport2020127
Thefollowingtableshowstheimpactonearnings(1)iftheunderlyingcommoditypriceriskofthederivativefinancial
instruments(increased)ordecreasedby15percent,withothervariablesheldconstant.
AsatDecember31,2020 15Percent 15Percent
($millions) PriceIncrease PriceDecrease
Crudeoil (30) 28
Naturalgas 9 (9)
NGL(2) (32) 32(1) Basedonaveragemarketprices.(2) Includespropane,butaneandcondensate.
b. ForeignExchangeRisk
CertainofPembina'scashflows,namelyaportionofitscommodity-relatedcashflows,certaincashflowsfromU.S.-based
infrastructureassetsanddistributionsfromU.S.-basedinvestmentsinequityaccountedinvestees,aresubjecttocurrency
risk,arisingfromthedenominationofspecificcashflowsinU.S.dollars.Additionally,aportionofPembina'scapital
expendituresandcontributionsorloanstoPembina'sU.S.-basedinvestmentsinequityaccountedinvestees,maybe
denominatedinU.S.dollars.Furthermore,thevalueoftheinvestmentinU.S.dollardenominatedsubsidiarieswillfluctuate
withchangesinexchangerateswhentranslatedintoPembina'sfunctionalcurrency.
Pembinamonitors,assessesandrespondstotheseforeigncurrencyrisksusinganactiveriskmanagementprogram,which
mayincludetheissuanceofU.S.dollardebt,andexchangeofforeigncurrencyfordomesticcurrencyatafixedrate.
Thefollowingtableshowstheimpactonearnings(1)iftheunderlyingforeignexchangeriskrateofthederivativefinancial
instruments(increased)ordecreasedby$0.10,withothervariablesheldconstant.
AsatDecember31,2020 $0.10 $0.10
($millions) RateIncrease RateDecrease
U.S.toCanadiandollars (26) 26(1) BasedontheU.S.toCanadiandollarexchangerate.
c. InterestRateRisk
InterestbearingfinancialliabilitiesincludePembina'sdebtandleaseliabilities.Pembinahasafloatinginterestratedebtinthe
formofitscreditfacilitiesandcertainlong-termdebt,whichsubjectsPembinatointerestraterisk.Pembinamonitorsand
assessesvariableinterestrateriskandrespondstothisriskbyissuinglong-termdebtwithfixedinterestratesorbyentering
intointerestrateswaps.
Pembina'sU.S.drawingsonitscreditfacilities,certainU.S.debt,andPembina'sinterestrateswapshavevariablerate
componentsthatreferencetheLondonInterbankOfferedRate("LIBOR").Thisrateisexpectedtobephasedoutfollowing
2021andwilllikelybereplacedbyasecuredovernightfinancingrate.LIBORwillceasetobepublishedattheendof2023.
Pembinawillcontinuetomonitordevelopmentsandthepotentialimpactonthebusiness.
Atthereportingdate,theinterestrateprofileofPembina'sinterest-bearingfinancialinstrumentswas:
AsatDecember31
($millions) 2020 2019
Carryingamountsoffinancialliability
Fixedrateinstruments(1) 10,120 8,874
Variablerateinstruments(2) 1,530 2,097
11,650 10,971(1) Includesleaseliabilities.(2) AtDecember31,2020,Pembinaheldpositionsinfinancialderivativecontractsdesignatedascashflowhedginginstruments,fixingtheinterestratesonU.S.$250millionof
variableratedebt(December31,2019:nil).
128PembinaPipelineCorporationAnnualReport2020
CashFlowSensitivityAnalysisforVariableRateInstruments
Thefollowingtableshowstheimpactonearningsifinterestratesatthereportingdatewouldhave(increased)decreased
earningsby100basispoints,withothervariablesheldconstant.
AsatDecember31,2020 100BasisPoint 100BasisPoint
($millions) Increase DecreaseVariablerateinstruments (13) 13
FairValues
Thefairvaluesoffinancialassetsandliabilities,togetherwiththecarryingamountsshownintheconsolidatedstatementsof
financialposition,areshowninthetablebelow.Certainnon-derivativefinancialinstrumentsmeasuredatamortizedcost
includingcashandcashequivalents,tradereceivablesandother,financeleasereceivables,advancestorelatedpartiesand
tradepayablesandotherhavebeenexcludedbecausetheyhavecarryingamountsthatapproximatetheirfairvaluedueto
thenatureoftheitemortheshorttimetomaturity.TheseinstrumentswouldbeclassifiedinLevel2ofthefairvalue
hierarchy.
2020 2019AsatDecember31 Carrying
Value
FairValue(1) CarryingValue
FairValue(1)
($millions) Level1 Level2 Level3 Level1 Level2 Level3
Financialassetscarriedatfairvalue
Derivativefinancialinstruments(3) 53 — 53 — 48 — 48 —
Financialliabilitiescarriedatfairvalue
Derivativefinancialinstruments(3) 69 — 69 — 9 — 9 —
Financialliabilitiescarriedatamortizedcost
Loansandborrowings(2) 10,876 — 11,902 — 10,152 — 10,729 —(1) ThebasisfordeterminingfairvalueisdisclosedinNote6.(2) Carryingvalueofcurrentandnon-currentbalances.(3) AtDecember31,2020allderivativefinancialinstrumentsarecarriedatfairvaluethroughearnings.
Pembina'sfinancialinstrumentscarriedatfairvaluearevaluedusingLevel2inputsthatincludequotedforwardpricesfor
commodities,timevalueandvolatilityfactors,whichcanbesubstantiallyobservedorcorroboratedinthemarketplace.
Instrumentsinthiscategoryincludenon-exchangetradedderivativessuchasover-the-counterphysicalforwardsandoptions,
includingthosethathavepricessimilartoquotedmarketprices.Pembinaobtainsquotedmarketpricesforitsinputsfrom
informationsourcesincludingbanks,BloombergTerminalsandNaturalGasExchange.
InterestRatesUsedforDeterminingFairValue
Theinterestratesusedtodiscountestimatedcashflows,whenapplicable,arebasedonthegovernmentyieldcurveatthe
reportingdateplusanadequatecreditspread,andwereasfollows:
AsatDecember31
(percent) 2020 2019
Derivatives 0.5-0.7 2.0-2.5
Loansandborrowings 0.5-3.9 2.3-4.0
Fairvalueofpowerderivativesarebasedonmarketratesreflectingforwardcurves.
PembinaPipelineCorporationAnnualReport2020129
Non-DerivativeInstrumentsDesignatedasNetInvestmentHedges
PembinahasdesignatedcertainU.S.dollardenominateddebtasahedgeoftheCompany'snetinvestmentinU.S.dollar
denominatedsubsidiariesandinvestmentsinequityaccountedinvestees.Thedesignateddebthasbeenassessedashaving
noineffectivenessastheU.S.dollardebthasanequalandoppositeexposuretoU.S.dollarfluctuations.Asaresult,allforeign
exchangegainsorlossesonthedebtarereporteddirectlyinothercomprehensive(loss)income.
ThefollowingbalancesofU.S.dollardebthadbeendesignatedashedges:
FortheYearsendedDecember31
($millions) 2020 2019
NotionalamountofU.S.debtdesignated(inU.S.dollars) 250 —
CarryingvalueofU.S.debtdesignated 317 —
Maturitydate 2025 NA
Derivativeinstruments
Pembinaentersintoderivativeinstrumentstohedgefuturecashflowsassociatedwithinterestrate,commodity,andforeign
exchangeexposures.Derivativesareconsideredeffectivehedgestotheextentthattheyoffsetthechangesvalueofthe
hedgeditemortransactionresultingfromaspecifiedriskfactor.Insomecases,eventhoughthederivativesareconsideredto
beeffectiveeconomichedges,theydonotmeetthespecificcriteriaforhedgeaccountingtreatmentandareclassifiedasheld
atfairvaluethroughprofitorloss("FVTPL").
Thefollowingtableisasummaryofthenetderivativefinancialinstruments,whichisconsistentwiththegrossbalances:
2020 2019
AsatDecember31($millions)
CurrentAsset
Non-CurrentAsset
CurrentLiability Total
CurrentAsset
Non-CurrentAsset
CurrentLiability
Non-CurrentLiability Total
Commodity,power,storageandrailfinancialinstruments 11 27 (68) (30) 34 5 (6) (3) 30
Interestrate — 1 (1) — — — — — —
Foreignexchange 14 — — 14 6 3 — — 9
Netderivativefinancialinstruments 25 28 (69) (16) 40 8 (6) (3) 39
NotionalandMaturitySummary
ThematurityandnotionalamountorquantityoutstandingrelatedPembina'sderivativeinstrumentsisasfollows:
($millions)Liquids(bpd)
NaturalGas(GJ/d)
Power(MWh)
ForeignExchange
InterestRate
AsatDecember31,2020
Purchases(1) 1,756 73,557 6 — —
Sales(1) 25,284 — — — —
MillionsofU.S.dollars — — — 260 250
Maturitydates 2021 2021 2021 2021 2025
AsatDecember31,2019
Purchases(1) 409 94,727 — — —
Sales(1) 24,839 — — — —
MillionsofU.S.dollars — — — 470 —
Maturitydates 2020-2021 2020-2021 NA 2020-2021 NA(1) Barrelsperday("bpd"),gigajoulesperday("GJ/d")andmegawatthours("MWh").
130PembinaPipelineCorporationAnnualReport2020
GainsandLossesonDerivativeInstruments
Realizedandunrealizedgains(losses)onderivativeinstrumentsareasfollows:
FortheyearsendedDecember31
($millions) 2020 2019
DerivativeinstrumentsheldatFVTPL(1)
Realized(gain)loss
Commodity-related (54) (33)
Foreignexchange 2 3
Unrealizedloss(gain)
Commodity-related 84 13
Foreignexchange 5 4(1) Realizedandunrealized(gains)lossesoncommodityderivativeinstrumentsheldatFVTPLareincludedin(gain)lossoncommodity-relatedderivativefinancialinstrumentsin
theconsolidatedstatementsof(loss)earningsandcomprehensive(loss)income.Realizedandunrealized(gains)lossesonforeignexchangederivativeinstrumentsheldatFVTPLareincludedinnetfinancecostsintheconsolidatedstatementsof(loss)earningsandcomprehensive(loss)income.
28.CAPITALMANAGEMENT
Pembina'sobjectivewhenmanagingcapitalistoensureastablestreamofdividendstoshareholdersthatissustainableover
thelong-term.Pembinamanagesitscapitalstructurebasedonrequirementsarisingfromsignificantcapitaldevelopment
activities,theriskcharacteristicsofitsunderlyingassetbaseandchangesineconomicconditions.Pembinamanagesitscapital
structureandshort-termfinancingrequirementsusingnon-GAAPmeasures,includingtheratiosofdebttoadjustedEBITDA,
debttototalenterprisevalue,adjustedcashflowtodebtanddebttoequity.ThemetricsareusedtomeasurePembina's
financialleverageandmeasurethestrengthofPembina'sbalancesheet.Pembinaremainssatisfiedthattheleverage
currentlyemployedinitscapitalstructureissufficientandappropriategiventhecharacteristicsandoperationsofthe
underlyingassetbase.Pembina,uponapprovalfromitsBoardofDirectors,willbalanceitsoverallcapitalstructurethrough
newequityordebtissuances,asrequired.
Pembinamaintainsaconservativecapitalstructurethatallowsittofinanceitsday-to-daycashrequirementsthroughits
operations,withoutrequiringexternalsourcesofcapital.Pembinafundsitsoperatingcommitments,short-termcapital
spendingaswellasitsdividendstoshareholdersthroughthiscashflow,whilenewborrowingandequityissuancesare
primarilyreservedforthesupportofspecificsignificantdevelopmentactivities.ThecapitalstructureofPembinaconsistsof
shareholder'sequity,comprisedofcommonandpreferredequity,pluslong-termdebt.Long-termdebtiscomprisedofbank
creditfacilitiesandunsecurednotes.
Pembinaissubjecttocertainfinancialcovenantsunderitsnoteindenturesandcreditagreementsandisincompliancewith
allfinancialcovenantsasofDecember31,2020.
Note19ofthesefinancialstatementsshowsthechangeinsharecapitalfortheyearendedDecember31,2020.
PembinaPipelineCorporationAnnualReport2020131
29.GROUPENTITIES
SignificantSubsidiaries
AsatDecember31
(percentages) Jurisdiction OwnershipInterest
PembinaCochinLLC DelawareU.S. 100
PembinaEmpressNGLPartnership Alberta 100
PembinaGasServicesLimitedPartnership Alberta 100
PembinaHoldingCanadaL.P. Alberta 100
PembinaInfrastructureandLogisticsL.P. Alberta 100
PembinaMidstreamLimitedPartnership Alberta 100
PembinaOilSandsPipelineL.P. Alberta 100
PembinaPipeline Alberta 100
PKMCanadaNorth40LimitedPartnership Manitoba 100
30.RELATEDPARTIES
Pembinaentersintotransactionswithrelatedpartiesinthenormalcourseofbusinessandontermsequivalenttothosethat
prevailinarm'slengthtransactions,unlessotherwisenoted.Pembinacontractscapacityfromitsequityaccountedinvestee
Alliance,advancesfundstosupportoperationsandprovidesservices,onacostrecoverybasis,toinvestmentsinequity
accountedinvestees.Asummaryofthesignificantrelatedpartytransactionsareasfollows:
EquityAccountedInvestees
($millions) 2020 2019
FortheyearsendedDecember31:
Servicesprovided 136 82
Servicesreceived 14 2
Interestincome 14 10
AsatDecember31:
Advancestorelatedparties(1) 13 131
Tradereceivablesandother 19 17
Tradepayablesandaccruedliabilities 2 —(1) DuringtheyearendedDecember31,2020,PembinaadvancedU.S.$24million(2019:U.S.$31million)toRubyand$5million(2019:$17million),netofrepayments,toFort
Corp.InDecember31,2020,PembinarecognizedanimpairmentofU.S.$110milliononitsadvancestoRuby(Note13).DuringtheyearendedDecember31,2019,Pembinaconverted$57millioninadvancestoCKPCintoequitycontributions.
KeyManagementPersonnelandDirectorCompensation
KeymanagementconsistsofPembina'sdirectorsandcertainkeyofficers.
Compensation
Inadditiontoshort-termemployeebenefits,includingsalaries,directorfeesandshort-termincentives,Pembinaalsoprovides
keymanagementpersonnelwithshare-basedcompensation,contributestopostemploymentpensionplansandprovidescar
allowances,parkingandbusinessclubmemberships.
Keymanagementpersonnelcompensationcomprised:
FortheyearsendedDecember31
($millions) 2020 2019
Short-termemployeebenefits 10 10
Share-basedcompensationandother 10 13
Totalcompensationofkeymanagement 20 23
132PembinaPipelineCorporationAnnualReport2020
Transactions
KeymanagementpersonnelanddirectorsofPembinacontrollessthanonepercentofthevotingcommonsharesofPembina
(consistentwiththeprioryear).CertaindirectorsandkeymanagementpersonnelalsoholdPembinapreferredshares.
Dividendpaymentsreceivedforthecommonandpreferredsharesheldarecommensuratewithothernon-relatedholdersof
thoseinstruments.
Certainofficersaresubjecttoemploymentagreementsintheeventofterminationwithoutjustcauseorchangeofcontrol.
Post-EmploymentBenefitPlans
Pembinahassignificantinfluenceoverthepensionplansforthebenefitoftheirrespectiveemployees.Nobalancepayableis
outstandingatDecember31,2020(December31,2019:nil).
($millions)TransactionValue
YearsEndedDecember31
Post-employmentbenefitplan Transaction 2020 2019
Definedbenefitplan Funding 23 20
31.COMMITMENTSANDCONTINGENCIES
Commitments
PembinahadthefollowingcontractualobligationsoutstandingatDecember31,2020:
ContractualObligations(1) PaymentsDuebyPeriod
($millions) Total Lessthan1Year 1–3Years 3–5Years After5Years
Leases(2) 1,064 131 217 174 542
Loansandborrowings(3) 16,275 1,058 2,262 2,708 10,247
Constructioncommitments(4) 1,208 523 149 43 493
Other 569 112 145 75 237
Totalcontractualobligations 19,116 1,824 2,773 3,000 11,519(1) Pembinaentersintoproductpurchaseagreementsandpowerpurchaseagreementstosecuresupplyforfutureoperations.PurchasepricesofbothNGLandpowerare
dependentoncurrentmarketprices.VolumesandpricesforNGLandpowercontractscannotbereasonablydetermined,andtherefore,anamounthasnotbeenincludedinthecontractualobligationsschedule.Productpurchaseagreementsrangefromoneto9yearsandinvolvethepurchaseofNGLproductsfromproducers.Assumingproductisavailable,Pembinahassecuredbetween35and175mbpdofNGLeachyearuptoandincluding2029.Powerpurchaseagreementsrangefromoneto24yearsandinvolvethepurchaseofpowerfromelectricalserviceproviders.Pembinahassecuredupto80megawattsperdayeachyearuptoandincluding2044.
(2) Includesterminals,rail,officespace,landandvehicleleases.(3) Excludingdeferredfinancingcosts.IncludinginterestpaymentsonPembina'sseniorunsecurednotes.(4) Excludingsignificantprojectsthatareawaitingregulatoryapproval,projectswhichPembinaisnotcommittedtoconstruct,andprojectsthatareexecutedbyequity
accountedinvestees.
CommitmentstoEquityAccountedInvestees
Pembinahascommitmentstoprovidecontributionstocertainequityaccountedinvesteesbasedonannualbudgetsapproved
bythejointventurepartners.
Contingencies
Pembina,includingitssubsidiariesanditsinvestmentsinequityaccountedinvestees,aresubjecttovariouslegaland
regulatoryandtaxproceedings,actionsandauditsarisinginthenormalcourseofbusiness.Werepresentourinterests
vigorouslyinallproceedingsinwhichweareinvolved.Legalandadministrativeproceedingsinvolvingpossiblelossesare
inherentlycomplex,andweapplysignificantjudgmentinestimatingprobableoutcomes.Ofmostsignificanceisaclaimfiled
againstAuxSablebyacounterpartytoanNGLsupplyagreement.AuxSablehasfiledStatementsofDefenserespondingto
theclaim.Whilethefinaloutcomeofsuchactionsandproceedingscannotbepredictedwithcertainty,atthistime
managementbelievesthattheresolutionsofsuchactionsandproceedingswillnothaveamaterialimpactonPembina's
financialpositionorresultsofoperations.
PembinaPipelineCorporationAnnualReport2020133
LettersofCredit
Pembinahasprovidedlettersofcredittovariousthirdpartiesinthenormalcourseofconductingbusiness.Thelettersof
creditincludefinancialguaranteestocounterpartiesforproductpurchasesandsales,transportationservices,utilities,
engineeringandconstructionservices.Thelettersofcredithavenothadandarenotexpectedtohaveamaterialimpacton
Pembina'sfinancialposition,earnings,liquidityorcapitalresources.
AtDecember31,2020,Pembinahad$91million(December31,2019:$103million)inlettersofcreditissuedtofacilitate
commercialtransactionswiththirdpartiesandtosupportregulatoryrequirements.
32.SUBSEQUENTEVENTS
OnJune1,2021,PembinaannouncedthatithadenteredintoanarrangementagreementwithInterPipelineLtd.("Inter
Pipeline"),pursuanttowhichPembinaproposedtoacquirealloftheissuedandoutstandingcommonsharesofInterPipeline
bywayofaplanofarrangementundertheBusinessCorporationsAct(Alberta)(the"InterPipelineArrangement").Pursuant
totheInterPipelineArrangement,holdersofInterPipelinecommonshares(otherthandissentingholdersofInterPipeline
commonshares)wouldhavereceived0.5ofacommonshareofPembinaforeachcommonshareofInterPipelinethatthey
owned.OnJuly25,2021,thearrangementagreementwasterminatedandPembinareceivedtheterminationfeeof
$350million.
OnJune4,2021,Pembinaacquireda49.9percentinterestinajointventurewiththeHaislaNationtodeveloptheCedarLNG
Project,aLNGfacilitylocatedonthecoastofBritishColumbiawithintheDouglasChannelonHaisla-ownedland.Pembina's
initialinvestmentof$129millionincluded$76millionofaccruedcontingentconsiderationpayableonachievementofcertain
conditions.Underthetermsoftheagreement,Pembinahascommitmentstomakeadditionalpaymentsonapositivefinal
investmentdecisionaswellascontributionstofunddevelopmentcostsandannualoperatingbudgets.
134PembinaPipelineCorporationAnnualReport2020
www.pembina.com
HEAD OFFICEPembina Pipeline Corporation
Suite 4000, 585 – 8th Avenue SW
Calgary, Alberta T2P 1G1
AUDITORSKPMG LLP
Chartered Accountants
Calgary, Alberta
TRUSTEE, REGISTRAR & TRANSFER AGENTComputershare Trust Company of Canada
Suite 600, 530 – 8th Avenue SW
Calgary, Alberta T2P 3S8
1.800.564.6253
STOCK EXCHANGEPembina Pipeline Corporation
Toronto Stock Exchange listing symbols for:COMMON SHARES PPL
PREFERRED SHARES PPL.PR.A, PPL.PR.C, PPL.PR.E, PPL.PR.G, PPL.PR.I, PPL.PR.K,
PPL.PR.M, PPL.PR.O, PPL.PR.Q, PPL.PR.S, PPL.PF.A, PPL.PF.C and PPL.PF.E
New York Stock Exchange listing symbol for:Common shares PBA
INVESTOR INQUIRIESPhone 403.231.3156
Fax 403.237.0254
Toll Free 1.855.880.7404
Email investor-relations@pembina.com
Website www.pembina.com
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