Inter Pipeline Fund has entered into a binding agreement with NOVA Chemicals Corporation involving the long term sale of ethane production from its Cochrane extraction plant. Under the new agreement, NOVA will purchase the majority of ethane volumes produced from Inter Pipeline's extraction facilities at Cochrane, Alberta. The contract extends to the end of 2024 and will significantly increase cash flow within Inter Pipeline's ethane extraction business unit. In 2012, Inter Pipeline's Cochrane extraction plant produced approximately 52,000 bpd, making it the largest ethane production facility in Canada. NOVA currently purchases a significant portion of ethane production from the Cochrane facility under an agreement due to expire at the end of 2014.
"Inter Pipeline is pleased to announce a long term agreement with one of Canada's leading petrochemical producers," commented David Fesyk, President and CEO. "The new contract includes improved pricing and commercial terms when compared to historical ethane contracts in Alberta. This reflects continued strong market demand for ethane in the Province, particularly from large, stable sources of long term supply." The term of the new ethane sales agreement begins on January 1, 2015 and extends for a 10 year period. Inter Pipeline and NOVA have also agreed to amend certain terms of the existing ethane contract at Cochrane for the interim period through December 31, 2014. Under the terms of the new agreement, Inter Pipeline will receive a combination of fixed and variable revenue payments which include the recovery of operating costs. Inter Pipeline expects that over 50% of cash flow under the new contract will be derived from fixed payments which are not dependent on natural gas throughput levels at the Cochrane plant. This will result in more stable and predictable cash flow. Under the current agreement, Inter Pipeline's cash flow is dependent on variable ethane production levels at the Cochrane plant. Structuring the new contract with a significantly higher fixed payment component also creates a stronger alignment of incentives for both parties to maximize natural gas flow rates through the Cochrane plant.