Veresen Announces US$1.425 Billion Acquisition of 50% Interest in the Ruby Pipeline and Acquisition Financing

CALGARY, ALBERTA--(Marketwired - Sept. 22, 2014) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Veresen Inc. ("Veresen") (TSX:VSN) is pleased to announce that it has entered into an agreement with Global Infrastructure Partners ("GIP") to acquire GIP's 50% convertible preferred interest (the "Preferred Interest") in the Ruby pipeline system ("Ruby") for US$1.425 billion. The acquisition will be made through a wholly-owned subsidiary of Veresen.

Ruby is a newly-built, large-scale natural gas transmission system delivering U.S. Rockies natural gas production to markets in the western United States. The 680-mile, 42-inch pipeline has a current capacity of approximately 1.5 billion cubic feet per day (bcf/d), with expansion potential to 2.0 bcf/d through the addition of compression. Ruby originates at the Opal hub in Wyoming and extends to the Malin hub in Oregon. The Malin hub is the main interconnect to the proposed Pacific Connector Gas Pipeline (50% owned by Veresen), which would supply Veresen's proposed Jordan Cove LNG terminal.

El Paso Pipeline Partners, an affiliate of Kinder Morgan Inc. ("Kinder Morgan"), holds the remaining 50% ownership interest in Ruby through a common equity interest (the "Common Interest"). Kinder Morgan, North America's largest natural gas pipeline operator, will continue to operate Ruby on a day‐to‐day basis.

"This is a rare opportunity to acquire a large interest in a core U.S. pipeline asset. Ruby is an ideal fit for Veresen because it offers immediate long-term contracted cash flows with downside protection through the preferred interest structure, and provides significant future added upside related to our Jordan Cove LNG project," commented Don Althoff, President and CEO of Veresen. "This transaction is consistent with Veresen's growth strategy, where we are focused on leveraging our existing footprint, adding assets with further growth potential, and providing natural gas connectivity from competitive supply regions to high-value markets."

Mr. Althoff added, "Concurrent with this transaction, we are pleased to announce that we have entered into an $800 million bought deal subscription receipt financing which, together with our access to sources of credit as a result of our strong balance sheet, will successfully fund this acquisition."

This transaction is expected to close in the fourth quarter of 2014 and is subject to customary closing conditions and the receipt of approval by the Committee on Foreign Investment in the United States.

Highlights of Strategic Acquisition

Key investment highlights of the Ruby acquisition are as follows:

Long-term Contracted Asset Supporting Stable Cash Flow

• High quality, long-term ship‐or‐pay contracts for approximately 1.1 bcf/d, representing 71% of total current capacity, provide stable base cash flows.
• Strong mix of investment grade shippers.
• Weighted average remaining contract term of approximately nine years.
• Enhances Veresen's portfolio of contracted pipeline assets providing diversification into a high value market in the U.S.

Strong and Growing Financial Performance and Impact

• Veresen will receive US$91 million of preferred distributions annually based on the Preferred Interest structure (as described below).
• Immediately accretive to distributable cash per share.
• Limited maintenance capital and a low cost structure enhance free cash flow.
• Significant future cash flow growth potential upon conversion to common equity following additional contracting and/or de-leveraging.
• Estimated after-tax return on equity in the low teens based on current toll structure and expected volumes.

Synergistic to Veresen's Jordan Cove LNG Project

• Ruby provides direct access to the U.S. West Coast through the proposed Pacific Connector Gas Pipeline which would supply the proposed Jordan Cove LNG terminal.
• Provides significant future upside associated with Jordan Cove LNG.

Attractive Convertible Preferred Structure

• Preferred Interest structure provides strong downside protection while preserving upside.
• Preferred distributions are payable prior to any distributions on the Common Interest, with any unpaid preferred distribution compounding at an annual return until paid.
• Contractual debt amortization will substantially de-lever Ruby over the initial shipper contract term while Veresen earns its preferred distribution.
• 50/50 joint control governance provides alignment of interests with experienced operating partner.
• Preferred Interest can convert to a 50% common equity interest in Ruby at Veresen's option, providing the opportunity to participate in cash flow growth.
• Contracting of an incremental approximately 250 million cubic feet per day of long-term firm capacity at rates generally consistent with current contracts activates an automatic conversion of the Preferred Interest to common equity.

Significant Opportunity for Additional Long-term Contracting and Expansion

• Opportunity to participate in significant potential cash flow growth from contracting the remaining 29% of capacity.
• Average capacity of approximately 1.5 bcf/d is expandable to 2 bcf/d through the addition of compression.
• Attractive market dynamics in higher growth areas including California, Oregon, Washington, and northern Nevada.
• Ruby provides western U.S. natural gas consumers with critical supply diversity.
• Shifting market dynamics, including the potential development of U.S. West Coast LNG, support Ruby's continued and growing long‐term utilization.

2014 Guidance

Given the anticipated fourth quarter closing of the Ruby acquisition, Veresen's guidance for 2014 remains unchanged from guidance issued on August 6, 2014, with distributable cash to be in the range of $1.02 to $1.20 per common share, and a midpoint of $1.11 per common share. Further details regarding Veresen's 2014 guidance can be found at www.vereseninc.com.

Acquisition Financing

Funding for the Ruby acquisition is expected to be provided from a combination of equity and debt, specifically: (i) the proceeds from an approximate $800 million equity offering pursuant to which subscription receipts will be issued; (ii) $750 million from new credit facilities; and (iii) the balance from Veresen's existing revolving credit facility. Veresen intends to refinance the acquisition-related borrowings over the course of the next 12 months through various capital market instruments, as well as with ongoing proceeds received from equity issued in connection with Veresen's Premium Dividend™ and Dividend Reinvestment Plan (the "Plan").

Subscription Receipt Offering

Veresen has agreed to sell, on a bought deal basis, an aggregate of 48,800,000 subscription receipts at a price of $16.40 per subscription receipt for gross proceeds of approximately $800 million. The subscription receipts will be offered through a syndicate of underwriters led by Scotiabank as bookrunner, and co-led by CIBC World Markets Inc. and TD Securities Inc., under Veresen's short form base shelf prospectus dated September 20, 2013, and a prospectus supplement to such short form base shelf prospectus to be filed on or before September 24, 2014. Veresen has also granted the underwriters an option to purchase up to an additional 7,320,000 subscription receipts at a price of $16.40 per subscription receipt to cover over-allotments, if any, which option is exercisable in whole or part for a period of 30 days following the closing of the offering. If the Ruby acquisition closes prior to the exercise of the over-allotment option, the over-allotment option will be exercisable in respect of an equivalent number of common shares. If the over-allotment option is exercised in full, the total gross proceeds from the offering and the exercise of the over-allotment option will be approximately $920 million. The additional gross proceeds received pursuant to the exercise of the over-allotment option will be used to reduce Veresen's anticipated draw under its credit facilities to fund the Ruby acquisition.

Each subscription receipt will entitle the holder thereof to receive, concurrent with closing of the Ruby acquisition and upon satisfaction of certain escrow release conditions, one common share of Veresen plus an amount equal to the dividends Veresen declares on the common shares, if any, for record dates which occur during the period from the closing date of the offering to the date immediately preceding the date that common shares are issued on the exchange of the subscription receipts, net of any applicable withholding taxes.

The proceeds from the sale of the subscription receipts will be held by an escrow agent pending, among other things, receipt of all regulatory and government approvals required to finalize the Ruby acquisition and fulfillment or waiver of all other outstanding conditions precedent to closing the acquisition. In the event the Ruby acquisition does not close prior to 5:00 pm ET on January 30, 2015, or if the agreement with respect to the Ruby acquisition is terminated prior to such time, the holders of the subscription receipts will be entitled to receive an amount equal to the full subscription price thereof plus their pro rata share of the interest earned on such amount, net of any applicable withholdings taxes.

The offering is expected to close on or about October 1, 2014, subject to customary closing conditions and the receipt of all necessary regulatory approvals.

New Credit Facilities

In connection with the Ruby acquisition, Veresen has obtained an underwritten commitment from The Bank of Nova Scotia to provide new credit facilities in an aggregate amount of $1.5 billion which will rank equally with Veresen's senior unsecured obligations and will be subject to mandatory reductions from the net proceeds of certain debt and equity issuances and asset dispositions. A portion of the commitment under the new credit facilities will be cancelled upon deposit of the proceeds from the subscription receipt offering into escrow. Subject to the satisfaction of certain conditions precedent customary for a financing of this type, funds will be available by way of a single draw on the closing of the acquisition. The new credit facilities will contain terms that are customary for bank credit facilities of this nature.

Premium Dividend™ and Dividend Reinvestment Plan

Eligible shareholders will be permitted to continue to participate in the dividend reinvestment component of the Plan, which entitles such shareholders to reinvest their dividends in common shares issued from treasury and to have such common shares credited to their account. Commencing with the cash dividend payable to shareholders of record on October 31, 2014, Veresen intends to permit eligible shareholders to participate in the Premium Dividend™ component of the Plan which will entitle such shareholders to reinvest their dividends in common shares issued from treasury and to have such common shares exchanged for a premium cash payment equal to 102% of the cash dividend that such shareholders would otherwise be entitled to receive on the applicable dividend payment date.

Registered shareholders of Veresen who have not previously enrolled in the Plan and who wish to enroll in the Plan with respect to the cash dividend payable to shareholders of record on October 31, 2014 and future cash dividends declared by Veresen, must deliver to Computershare Trust Company of Canada, as Plan Agent, a completed enrollment form which is available at www.computershare.com/investorcentrecanada, at or before 5:00 pm (ET) on October 24, 2014. A copy of the enrollment form may also be obtained by calling Computershare Trust Company of Canada at 1-800-564-6253, or from Veresen's website at www.vereseninc.com.

Beneficial shareholders of Veresen who have not previously enrolled in the Plan and who wish to participate in the Plan with respect to the cash dividend payable to shareholders of record on October 31, 2014 and future cash dividends declared by Veresen, should contact their broker, investment dealer, financial institution or other nominee to provide appropriate enrollment instructions and to ensure any deadlines or other requirements that such nominee may impose or be subject to are met.

Conference Call Advisory

Veresen will host a conference call and webcast to discuss the Ruby acquisition today at 2:30 pm MT (4:30 pm ET). A presentation will be available prior to the conference call at www.vereseninc.com or at www.sedar.com.

Dial-in: 1 (888) 231-8191 or 1 (647) 427-7450 conference ID 8918150

Webcast: A live webcast of the call can be accessed on Veresen's website at www.vereseninc.com or http://event.on24.com/r.htm?e=855012&s=1&k=8B528026E0EA72D0AE77687E591C947C.

A replay of the call will be available from 4:30 pm MT (6:30 pm ET) on September 22, 2014 by dialing 1-855-859-2056 and 1-416-849-0833. The passcode is 8918150, followed by the pound sign. The replay will expire at Midnight ET on September 29, 2014. The webcast will be archived for one year.

Advisors

CIBC World Markets Inc. and Scotiabank acted as financial advisors to Veresen with respect to this transaction.

This news release does not constitute an offer to sell or the solicitation of an offer to buy subscription receipts or common shares issuable upon the exchange of subscription receipts in the United States, in any province or territory of Canada or in any other jurisdiction. The subscription receipts to be offered and the common shares issuable upon the exchange of subscription receipts have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any U.S. state securities laws and may not be offered or sold in the United States absent registration or absent an applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. There shall be no sale of the subscription receipts in any jurisdiction in which an offer to sell, a solicitation of an offer to buy or a sale would be unlawful.

About Veresen Inc.

Veresen is a publicly-traded dividend paying corporation based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America. Veresen is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; a midstream business which includes ownership interests in a world-class natural gas liquids extraction facility near Chicago, the Hythe/Steeprock complex, and other natural gas and natural gas liquids processing energy infrastructure; and a power business with a portfolio of assets in Canada and the United States. Veresen is also actively developing a number of greenfield projects, including the Jordan Cove LNG terminal, a six million tonne per annum natural gas liquefaction facility proposed to be constructed in Coos Bay, Oregon, and the Pacific Connector Gas Pipeline, a 234-mile natural gas transmission system proposed to originate in Malin, Oregon and terminate at the Jordan Cove LNG terminal. In the normal course of its business, Veresen regularly evaluates and pursues acquisition and development opportunities.

Veresen's common shares, Series A Preferred Shares, Series C Preferred Shares, and 5.75% convertible unsecured subordinated debentures, Series C due July 31, 2017 are listed on the Toronto Stock Exchange under the symbols "VSN", "VSN.PR.A", "VSN.PR.C" and VSN.DB.C", respectively. For further information, please visit www.vereseninc.com.

Forward-Looking Information

Certain information contained herein relating to, but not limited to, Veresen and its businesses, the Ruby acquisition, the offering of the subscription receipts and the entering into of the new credit facilities, constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Veresen expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "will", "may", "estimate", "anticipate", "believe", "expect", "potential", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to annual distributions in respect of the Preferred Interest, expected returns and contributions to cash flow from the Ruby acquisition, future markets from the Ruby pipeline, future growth prospects of Ruby, and the ability of Veresen to recognize synergies between Ruby and the Jordan Cove LNG project, the timing of closing of the Ruby acquisition, the sources of financing of the Ruby acquisition, the timing of completion of the subscription receipt offering and new credit facilities, the use of the proceeds of the subscription receipt offering, Veresen's plan to provide for the premium cash payment under the Plan and Veresen's forecast of 2014 distributable cash, annual dividend payment and dividend payout ratio. The forward-looking information included herein involves significant risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to, risks relating to closing of the Ruby acquisition, the potential for undisclosed liabilities associated with the Ruby acquisition, realizing the expected benefits from the Ruby acquisition, increased indebtedness as a result of completing the Ruby acquisition and the availability of the new senior credit facilities. Additional information on risks, uncertainties and factors that could affect the foregoing forward-looking information and/or Veresen's operations or financial results is included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time and will be included in the prospectus supplement relating to the offering of subscription receipts. Readers are also cautioned that such additional information is not exhaustive.
The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time. Although Veresen believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual results achieved will vary from the information provided herein and the variations may be material. Veresen makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Veresen does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable laws. Any forward-looking information contained herein is expressly qualified by this cautionary statement.

All dollar amounts contained in this news release are in Canadian dollars unless otherwise specified.

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