Veresen Announces Closing of Veresen Midstream Transaction

CALGARY, ALBERTA--(Marketwired - April 1, 2015) - Veresen Inc. (VSN.TO) ("Veresen" or the "Company") is pleased to announce that Veresen Midstream Limited Partnership ("Veresen Midstream") has closed the acquisition of certain natural gas gathering and compression assets supporting Montney development in the Dawson area of northeastern British Columbia from Encana Corporation ("Encana") and the Cutbank Ridge Partnership ("CRP"). As part of this transaction, Veresen Midstream has agreed to undertake up to $5 billion of new midstream expansion for Encana and CRP in the Montney region. Veresen Midstream is a newly created entity, owned equally by Veresen and affiliates of Kohlberg Kravis Roberts & Co. L.P. ("KKR").

The aggregate purchase price of the acquisition was approximately $760 million which is based on a reimbursement of Encana's and CRP's actual costs to date associated with the acquired infrastructure. The purchase price is comprised of approximately $435 million for operating compression facilities and pipelines, $155 million for work in progress associated with the Saturn compressor station, and $170 million for other work in progress, including the Sunrise and Tower gas plants and additional gas gathering pipelines. All infrastructure acquired and to be developed associated with this transaction is supported by 30-year fee-for-service arrangements with Encana and CRP.

Construction of the 200 million cubic feet per day ("MMcf/d") Saturn compression station is nearly complete, with the facility expected to be operational in mid-2015. The 400 MMcf/d Sunrise gas plant and the 200 MMcf/d Tower gas plant are currently in advanced development, with construction expected to begin in the second half of 2015 and in-service dates anticipated in the second half of 2017.

"The completion of this transaction represents a significant milestone in our history and transforms our midstream business," said Don Althoff, President and Chief Executive Officer. "Through this transaction, Veresen Midstream becomes a leading independent natural gas gathering and processing business in the heart of the Montney."

Mr. Althoff added, "The Montney play is one of the lowest cost gas supply regions in North America which is demonstrated by the significant level of current and planned producer activity despite today's commodity price environment. We look forward to working with Encana and CRP, and other producers in the area to unlock the value of this world class resource play by providing flexible and innovative midstream solutions."

"We are pleased to have achieved this important milestone in our partnership with Veresen," said Brandon Freiman, KKR's Head of Canadian Energy & Infrastructure. "We are looking forward to working with Veresen in the coming years to build a leading Canadian midstream business."

Concurrent with this acquisition, Veresen contributed its Hythe/Steeprock gathering and processing assets to Veresen Midstream in exchange for a 50% equity position valued at $500 million and $420 million in cash, and KKR contributed $500 million in cash to Veresen Midstream in exchange for a 50% equity position. Veresen used its $420 million in cash proceeds to repay the majority of its bridge loan drawn in connection with its acquisition of a 50% convertible preferred interest in the Ruby Pipeline in November 2014.

Veresen Midstream also closed a US$575 million drawn Term Loan B and $1,350 million of largely undrawn syndicated credit facilities. Proceeds from these facilities, which are non-recourse to Veresen, will be used to fund the acquisition from Encana and CRP and ongoing infrastructure development.

With the start-up of the Saturn compressor station in mid-2015, Veresen Midstream's annual run-rate EBITDA is expected to be between $145 million and $155 million. Cash distributions to Veresen are expected to be approximately $45 million over the remainder of 2015 which, combined with reduced interest expense from the repayment of $420 million of debt, is expected to result in a neutral overall impact to Veresen's 2015 distributable cash flow guidance. Veresen Midstream's credit facilities allow quarterly cash distributions that escalate annually over the initial construction period.

As part of the closing requirements, Veresen Midstream obtained Investment Canada Act approval and received a "no-action letter" from the Competition Bureau.

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 the Alliance Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System; a midstream business which includes a partnership interest in Veresen Midstream Limited Partnership which owns midstream assets in western Canada and an ownership interest in Aux Sable, a world-class natural gas liquids (NGL) extraction facility near Chicago and other natural gas and NGL processing energy infrastructure; and a power business comprised of a portfolio of assets in Canada. Veresen is also developing Jordan Cove LNG, a six million tonne per annum natural gas liquefaction facility proposed to be constructed in Coos Bay, Oregon, and the Pacific Connector Gas Pipeline. In the normal course of business, Veresen regularly evaluates and pursues acquisition and development opportunities.

Veresen's common shares, Series A preferred shares, Series C preferred shares and Series E preferred shares are listed on the Toronto Stock Exchange under the symbols "VSN", "VSN.PR.A","VSN.PR.C" and "VSN.PR.E" respectively. For further information, please visit www.vereseninc.com.

About KKR

KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR's investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (KKR), please visit KKR's website at www.kkr.com.

Forward-Looking Information

Certain information contained herein relating to, but not limited to, Veresen and its businesses 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 "may", "estimate", "anticipate", "believe", "expect", "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: the in-service date for the Saturn compressor station, the timing of construction and in-service date of the Sunrise and Tower gas processing facilities, returns provided by the Dawson MSA, and the impact of the transaction on Veresen's distributable cash and EBITDA. The risks and uncertainties that may affect the operations, performance, development and results of Veresen's businesses include, but are not limited to, the following factors: the ability of Veresen to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Veresen's ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, midstream and power industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America.
Additional information on these and other risks, uncertainties and factors that could affect Veresen's operations or financial results are 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. Readers are also cautioned that the foregoing list of factors and risks 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 result 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. Any forward-looking information contained herein is expressly qualified by this cautionary statement.

Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in the United States and may not be comparable to similar measures presented by other entities. These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in the United States. For further information on non-GAAP financial measures used by Veresen see Management's Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Veresen with Canadian securities regulators.