Inter Pipeline Announces Corporate Restructuring and Distribution Increase

Inter Pipeline Announces Corporate Restructuring and Distribution Increase 
CALGARY, ALBERTA -- (Marketwired) -- 06/03/13 -- Inter Pipeline Fund
("Inter Pipeline") (TSX:IPL.UN) announced today that it has completed
several internal transactions related to the restructuring of its
current limited partnership structure to position the business for a
planned conversion to a corporate form. Inter Pipeline has indirectly
purchased Pipeline Management Inc, its General Partner, for initial
consideration valued at $170 million, plus adjustments, and a future
second instalment valued at $170 million which is partly contingent
on the outcome of certain organic growth projects currently under
development. These transactions (the "Internalization Transactions")
have been designed to eliminate all future management, acquisition,
divestiture and incentive fees payable to an external manager. 
In conjunction with the Internalization Transactions, Inter Pipeline
has announced a distribution increase of $0.03 per unit on an
annualized basis. Unitholders of record as of June 21, 2013 will be
eligible for Inter Pipeline's new, higher level of cash distributions
with initial payment on or about July 15, 2013. This increase will
result in annual distribution payments of $1.14 per unit. 
David Fesyk, President and Chief Executive Officer, commented, "The
transactions announced today represent a positive step forward for
our business. They are part of a broader plan to convert to a
corporation and capture related benefits, including broader access to
capital markets and certain changes to current corporate governance
practices. The purchase of Inter Pipeline's General Partner has been
structured on terms that help ensure immediate and long-term
accretion to cash flow, as is evidenced by the board's decision to
increase cash distributions payable to unitholders." 

Background    Inter Pipeline is structured as a publicly-traded limited     
              partnership. The business is managed by its General Partner   
              which is paid certain fees based on operating cash flow       
              results, acquisition and divestiture activity and incentive   
              fees. The Internalization Transactions have been designed to  
              eliminate all fees payable to an external manager. In 2012,   
              the General Partner was paid combined fees of $18.4 million.  
              Incentive fees are based on a sliding scale that increasingly 
              rewards the General Partner for cash distributions paid above 
              certain thresholds. For example, the General Partner is       
              entitled to 15% of incremental distributions above $1.01 per  
              unit, 25% of incremental distributions above $1.10 per unit   
              and 35% of incremental distributions above $1.19 per unit.    
              In making its decision to complete the Internalization        
              Transactions, the board carefully considered Inter Pipeline's 
              organic growth projects under development, the probability of 
              future distribution increases and the magnitude of incentive  
              fees that would become payable to the General Partner. Based  
              on Inter Pipeline's anticipated growth profile, base          
              management and incentive fees payable to the General Partner  
              could reasonably be expected to exceed $50 million annually   
              within the next 5 years.                                      
Strong        Inter Pipeline is currently advancing over $2.7 billion in    
 Organic      large-scale organic development projects within its oil sands 
 Growth       transportation business segment. These projects involve major 
 Profile      capacity expansions and facility enhancements on both the Cold
              Lake and Polaris pipeline systems, all of which have been     
              publicly announced and commercially secured.                  
              As new construction projects are completed over the next 5    
              years, they are expected to generate over $335 million in     
              incremental annual long-term EBITDA. For perspective, Inter   
              Pipeline generated total EBITDA of $573 million in 2012. The  
              oil sands expansion projects under active development will    
              significantly increase cash available for distribution,       
              resulting in expected annual accretion of approximately $0.41 
              per unit.                                                     
Payment       Under the Internalization Transaction agreements, Inter       
 Structure    Pipeline has indirectly purchased all outstanding shares of   
              Pipeline Assets Corp. ("PAC"), the owner of Inter Pipeline's  
              General Partner, Pipeline Management Inc. ("PMI"). The initial
              consideration is valued at $170 million, plus adjustments of  
              approximately $8.6 million to reflect the market value of the 
              279,469 Class B limited partnership units held by the General 
              Partner, fees earned by PMI prior to closing and working      
              capital adjustments.                                          
              A second instalment valued at $170 million will be made once  
              Inter Pipeline becomes entitled to receive revenue from both  
              the FCCL Foster Creek and FCCL Christina Lake expansion       
              projects which are currently under construction. These large  
              scale expansion projects involve the integration of           
              transportation services on the Cold Lake and Polaris pipeline 
              systems at an estimated capital cost $2.35 billion. New       
              diluent delivery services to the Foster Creek and Christina   
              Lake projects are expected to be operational in mid 2014 and  
              new bitumen blend facilities in support of the Foster Creek   
              project are expected to be in service in early 2015. The FCCL 
              Partnership is a business venture between Cenovus Energy and  
              In the event that the Foster Creek and Christina Lake projects
              are not both generating revenue by January 1, 2017, the value 
              of the second instalment will be reduced to $70 million.      
              PAC's shareholders have agreed to accept all consideration in 
              the form of preferred shares rather than cash. These shares,  
              issued by a new corporation established for the purpose of the
              Internalization Transactions, will carry a value that         
              parallels the market price of Inter Pipeline's Class A limited
              partnership units. It is anticipated that the preferred shares
              issued in relation to the initial payment will be exchanged   
              for common shares of Inter Pipeline's successor upon          
              unitholder approval of a corporate conversion later in 2013.  
              Similarly, it is anticipated that the preferred shares issued 
              in relation to the second instalment will ultimately be       
              converted into common shares of Inter Pipeline's corporate    
              successor upon the earlier of revenue commencement from the   
              two identified oil sands expansion projects or January 1,     
              Furthermore, PAC shareholders are prevented from selling any  
              of their equity holdings related to the initial payment within
              6 months of exchange into common shares of Inter Pipeline's   
              corporate successor.                                          
Accretion and The elimination of external management fees in exchange for   
 Fairness     the negotiated payment structure results in an immediately    
 Opinion      accretive transaction. Splitting the internalization purchase 
              price into two instalment payments, the latter tied to the    
              revenue commencement dates of certain projects under          
              construction, will help ensure long-term accretion. Inter     
              Pipeline expects the Internalization Transactions to generate 
              annual long-term accretion of $0.06 per unit relative to cash 
              available for distribution. Inter Pipeline's board decision to
              increase distributions by $0.03 per unit is fully supported by
              the stand-alone economics of the Internalization Transactions.
              A Special Committee of the PMI board, chaired by Inter        
              Pipeline's lead independent director and comprised solely of  
              independent directors, reviewed and negotiated the transaction
              on behalf of Inter Pipeline. The Special Committee determined 
              that the internalization payment is reasonable in lieu of the 
              future fees that will no longer be payable to an external     
              manager under the existing limited partnership agreement.     
              TD Securities Inc., as financial advisor to the Special       
              Committee, delivered an opinion which confirmed that the      
              consideration paid to acquire the General Partner is fair to  
              Inter Pipeline's unitholders from a financial point of view.  
              CIBC World Markets acted as financial advisor to PAC.         
Improved      The Internalization Transactions have been designed to allow  
 Corporate    Inter Pipeline to move forward with a more transparent and    
 Governance   investor-friendly form of corporate governance. Effective     
              immediately, the composition of the PMI board has changed     
              through the elimination of two board seats formerly held by   
              non-independent directors. The board is now comprised of the  
              five independent directors, Messrs. Shaw, Brown, Keinick,     
              Robertson, and Sangster, as well as Mr. Fesyk, Inter          
              Pipeline's President and Chief Executive Officer, and Mr.     
              Driscoll, PMI's Chairman. In addition, Inter Pipeline intends 
              to appoint a new independent chairman of the board upon the   
              retirement of John F. Driscoll expected by year-end 2013.     
              No immediate changes to Inter Pipeline's management team are  
              contemplated as a result of the Internalization Transactions. 
              Bill van Yzerloo, Inter Pipeline's Chief Financial Officer,   
              has advised Inter Pipeline of his intention to retire in the  
              first quarter of 2014, following the release of Inter         
              Pipeline's 2013 financial results.                            
              Upon unitholder approval of a conversion to a corporate form, 
              Inter Pipeline will begin holding Annual General Meetings     
              during which directors will be elected by shareholders.       
Planned       Inter Pipeline intends to seek unitholder approval for its    
 Corporate    planned conversion to a corporation within the next 4 months. 
 Conversion   In addition to unitholder approval, the conversion will be    
              subject to receipt of all required regulatory, stock exchange 
              and Court of Queen's Bench of Alberta approvals.              
              Upon conversion, Inter Pipeline will have access to a much    
              larger investor base. As a limited partnership, all of Inter  
              Pipeline's equity investors must currently be Canadian        
              residents for income tax purposes. This restriction limits    
              Inter Pipeline's access to foreign sources of capital.        
              Converting to a Canadian corporation will help support Inter  
              Pipeline's growth plans by gaining access to a larger and more
              competitively priced pool of capital.                         
              Pursuant to the conversion, unitholders will exchange their   
              limited partnership units, on a one-for-one basis, for common 
              shares of Inter Pipeline's successor corporation. The exchange
              is expected to occur on a tax-deferred basis for Canadian     
              income tax purposes.                                          
Special       William Robertson, PMI's lead independent director and Chair  
 Committee    of the Special Committee, commented, "Inter Pipeline's        
 Perspectives independent directors felt strongly that this was the right   
              window to eliminate the external management contract. The     
              consideration being paid is fair and it represents a highly   
              accretive transaction. It also allows us to move toward a more
              conventional governance model while broadening our investor   
              base in support of Inter Pipeline's aggressive growth plans." 
              "The Special Committee is very pleased that PAC shareholders  
              have accepted a form of equity rather than cash as            
              consideration. This shows strong endorsement of the business  
              going forward. We are also pleased with the structuring of    
              payments which will help ensure the immediate and long-term   
              accretion of this transaction."                               
Supplemental  Additional information related to the Internalization         
 Website      Transactions is available on Inter Pipeline's website at      
 Information under the icon titled       
              "General Partner Internalization". Supplemental materials     
              include background information on the General Partner,        
              historical and projected management fees, transaction         
              benefits, preferred share characteristics and accounting      
Material      Under securities law, Inter Pipeline is required to file a    
 Change       Material Change Report with respect to the Internalization    
 Report       Transactions. Because the Internalization Transactions were   
              not subject to any unitholder, regulatory or third party      
              consent or approval requirements, there was no commercial     
              reason not to complete the Internalization Transactions as    
              soon as the agreements giving effect to the transaction were  
              completed, approved and executed. Accordingly, the Material   
              Change Report will be filed less than 21 days from the time of
              closing of the Internalization Transactions. Inter Pipeline   
              considers this to be reasonable and necessary in the present  
Inter         Inter Pipeline is a major petroleum transportation, natural   
 Pipeline     gas liquids extraction, and bulk liquid storage business based
 Fund         in Calgary, Alberta, Canada. Structured as a publicly traded  
              limited partnership, Inter Pipeline owns and operates energy  
              infrastructure assets in western Canada, the United Kingdom,  
              Denmark, Germany and Ireland. Additional information about    
              Inter Pipeline can be found at                                
              Inter Pipeline is a member of the S&P/TSX Composite Index.    
              Class A Units trade on the Toronto Stock Exchange under the   
              symbol IPL.UN.                                                
Eligible      Pursuant to Inter Pipeline's limited partnership agreement    
 Investors    dated October 9, 1997, as amended, all unitholders are        
              required to be residents of Canada. A copy of the limited     
              partnership agreement can be found at                         
     by selecting "Corporate     
              Governance". If a unitholder is a non-resident of Canada      
              ("Non-Eligible Unitholder"), he will not be considered to be a
              member of the partnership effective the date the Class A Units
              were acquired. Inter Pipeline requires all Non-Eligible       
              Unitholders to dispose of their Class A Units in accordance   
              with the limited partnership agreement.                       
              In most cases, a unitholder with an address outside of Canada 
              will be a Non-Eligible Unitholder.                            
Disclaimer    Certain information contained herein may constitute forward-  
              looking statements that involve risks and uncertainties.      
              Forward-looking statements in this news release include, but  
              are not limited to, anticipated benefits derived from the     
              Internalization Transactions, timing for proposed corporate   
              conversion and anticipated benefits derived therefrom, timing 
              and cost schedules of expansion capital projects, and forward 
              EBITDA, accretion and cash available for distribution         
              estimates. Readers are cautioned not to place undue reliance  
              on forward-looking statements. Such information, although     
              considered reasonable by the General Partner of Inter Pipeline
              at the time of preparation, may later prove to be incorrect   
              and actual results may differ materially from those           
              anticipated in the statements made. For this purpose, any     
              statements that are not statements of historical fact may be  
              deemed to be forward-looking statements. Forward-looking      
              statements often contain terms such as "may", "will",         
              "should", "anticipate", "expects" and similar expressions.    
              Such risks and uncertainties include, but are not limited to, 
              risks associated with operations, such as loss of markets,    
              regulatory matters, environmental risks, industry competition,
              potential delays and cost overruns of construction projects,  
              the ability to access sufficient capital from internal and    
              external sources and the ability to complete the conversion to
              a corporation in the manner and timeframe expected. You can   
              find a discussion of those risks and uncertainties in Inter   
              Pipeline's securities filings at The   
              forward-looking statements contained in this news release are 
              made as of the date of this document, and, except to the      
              extent required by applicable securities laws and regulations,
              Inter Pipeline assumes no obligation to update or revise      
              forward-looking statements made herein or otherwise, whether  
              as a result of new information, future events, or otherwise.  
              The forward-looking statements contained in this document are 
              expressly qualified by this cautionary note. This news        
              release, in particular the information in respect of          
              anticipated incremental EBITDA and accretion in cash available
              for distribution, may contain Future Oriented Financial       
              Information ("FOFI") within the meaning of applicable         
              securities laws. The FOFI has been prepared by management to  
              provide an outlook of Inter Pipeline's activities and results 
              and may not be appropriate for other purposes. The FOFI has   
              been prepared based on a number of assumptions including the  
              assumptions contained herein. The actual results of operations
              of Inter Pipeline and the resulting financial results may vary
              from the amounts set forth herein, and such variation may be  
              material. Inter Pipeline and its management believes that the 
              FOFI has been prepared on a reasonable basis, reflecting      
              management's best estimates and judgments.                    
              All dollar values are expressed in Canadian dollars unless    
              otherwise noted.                                              
Non-GAAP      Certain financial measures referred to in this news release,  
 Financial    namely, "EBITDA", "cash flow" and "cash available for         
 Measures     distribution" are not measures recognized by Canadian         
              generally accepted accounting principles ("GAAP"). These non- 
              GAAP financial measures do not have standardized meanings     
              prescribed by GAAP and therefore may not be comparable to     
              similar measures presented by other entities. Investors are   
              cautioned that these non-GAAP financial measures should not be
              construed as alternatives to other measures of financial      
              performance calculated in accordance with GAAP. The non-GAAP  
              financial measures are provided to assist investors with their
              evaluation of Inter Pipeline, including their assessment of   
              its ability to generate cash and fund monthly distributions.  
              Management considers these non-GAAP financial measures to be  
              important indicators in assessing its performance.            

Inter Pipeline Fund - Investor Relations:
Jeremy Roberge
Vice President, Capital Markets
403-290-6015 or 1-866-716-7473 
Inter Pipeline Fund - Media Relations:
Tony Mate
Director, Corporate and Investor Communications
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