Inter Pipeline Fund
TSX : IPL.UN

Inter Pipeline Fund

December 06, 2007 11:35 ET

Inter Pipeline Fund Announces Record 2008 Capital Expenditure Program and December 2007 Cash Distribution

CALGARY, ALBERTA--(Marketwire - Dec. 6, 2007) - Inter Pipeline Fund (Inter Pipeline) (TSX:IPL.UN) announced today the largest capital expenditure program in its 10-year history. In 2008, Inter Pipeline plans to invest approximately $964 million in organic growth projects and roughly $13 million in sustaining capital projects. The majority of growth capital will be directed toward Inter Pipeline's oil sands transportation business segment, which includes the newly acquired Corridor pipeline system and related capacity expansion project.

Inter Pipeline also announced today the declaration of a cash distribution of $0.07 per unit for December 2007. This distribution will be paid on or about January 15, 2008 to unitholders of record on December 31, 2007. Inter Pipeline expects to maintain its current level of cash distributions through 2010 and beyond, despite becoming taxable in 2011. This positive outlook is underpinned by attractive business fundamentals within each of Inter Pipeline's four business segments and a large inventory of future capital investment opportunities, including the completion of the $1.8 billion Corridor expansion project.

Inter Pipeline confirms that cash flow from the Corridor pipeline system will not be impacted by the November 19th fire at Shell Canada Energy's Scotford upgrader. Cash flow from the Corridor system is supported by a 25-year cost of service contract that includes provisions for the recovery of all operating costs, depreciation, taxes and interest as well as a structured return on equity. As a result, Corridor's cash flow is not dependant on throughput volumes or impacted by commodity prices.



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Capital Expenditure Summary

CAD $million 2008 2007
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Growth Capital(i)
Oil Sands Transportation $904 $402
Bulk Liquid Storage 38 30
NGL Extraction 14 18
Conventional Oil Pipelines 8 6
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Total Growth Capital 964 456
Sustaining Capital 13 13
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Total Capital $977 $469
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(i)Represents Inter Pipeline's ownership interest in each business segment.


Oil Sands Transportation

In 2008, Inter Pipeline expects to spend approximately $904 million of growth capital within its oil sands transportation business segment. Approximately, $844 million will be directed toward the expansion of the Corridor pipeline system and $60 million on the Cold Lake pipeline system.

The total cost of the Corridor expansion project is estimated at $1.8 billion. Upon completion, bitumen blend capacity on the Corridor system is expected to increase from 300,000 barrels per day (b/d) to 465,000 b/d. In 2008, approximately $445 million of capital will be allocated toward pipeline construction costs and the remaining $397 million will be used for facility related costs and financing charges.

The Corridor expansion project remains on budget and on schedule, with approximately 52% of line pipe already installed. In late October, remote monitoring and control of the Corridor pipeline system was successfully transferred to Inter Pipeline's control centre in Sherwood Park, Alberta. This activity substantially completes the transition of Corridor pipeline operations to Inter Pipeline from Kinder Morgan Canada Inc., the former owner of Corridor.

The Corridor expansion project is expected to be complete in 2010, at which time Corridor's existing 12-inch diluent line will become available for alternative service. Inter Pipeline has recently commenced an "open-season" process to solicit non-binding proposals from potential future shippers on that 12-inch pipeline, and will invest approximately $2 million in 2008 on preliminary engineering studies. With the appropriate facility modifications, the 12-inch pipeline has potential to transport multiple commodity types and can be configured to flow either north or south.

A number of capacity expansion projects are scheduled for the Cold Lake pipeline system in 2008 to accommodate increased oil sands production from Imperial Oil, EnCana, Canadian Natural Resources and Shell Canada. Approximately $45 million of growth capital is directed toward the installation of quarter-point pump stations on the south mainline from the Cold Lake region to Hardisty, Alberta. With the addition of the new pump stations, bitumen blend capacity on the Cold Lake pipeline system is expected to increase from 435,000 b/d today to over 560,000 b/d by the end of 2008. Inter Pipeline also expects to invest roughly $15 million on additional facility expansions.

Bulk Liquid Storage

Inter Pipeline's bulk liquid storage business is expected to spend $38 million on organic growth projects in 2008. In response to an escalating demand for biofuel storage facilities in the European Union, Inter Pipeline plans to invest approximately $23 million to construct an additional 318,000 barrels of tankage at the Immingham West terminal located on the eastern coast of the United Kingdom. The remainder of capital will be used for the construction of additional bulk liquid storage tanks and for selected tank modification projects.

NGL Extraction

Organic growth capital projects within Inter Pipeline's natural gas liquids extraction business will total approximately $14 million during 2008. The largest project, accounting for roughly $10 million, relates to the previously announced Empress V deep cut initiative. The facility enhancements at Empress V are anticipated to increase ethane production by approximately 7,000 b/d by the end of 2008. The remaining capital will be directed toward improving operational efficiencies and enhancing liquids recovery at the Cochrane and Empress II facilities.

Conventional Oil Pipelines

In 2008 Inter Pipeline plans to invest approximately $8 million towards organic growth initiatives in its conventional oil pipelines business. Capital initiatives include new third party connections and expansion of existing tanks and related facilities.

Inter Pipeline Fund

Inter Pipeline is a major petroleum transportation, bulk liquid storage and natural gas liquids extraction business based 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, Germany and Ireland. Additional information about Inter Pipeline can be found at www.interpipelinefund.com

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 Investors

Only persons who are residents of Canada, or if partnerships, are Canadian partnerships, in each case for purposes of the Income Tax Act (Canada) are entitled to purchase and own Class A Units and debentures of Inter Pipeline.

Disclaimer

Certain information contained herein may constitute forward-looking statements that involve risks and uncertainties. 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 and the ability to access sufficient capital from internal and external sources. You can find a discussion of those risks and uncertainties in Inter Pipeline's securities filings at www.sedar.com. 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.

All dollar values are expressed in Canadian dollars unless otherwise noted.

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