IPPLF - Pembina Pipeline: Inter Pipeline Sends Debt Soaring And Cash Flow Won't Fully Catch Up

• Pembina Pipeline is intending to acquire Inter Pipeline in a friendly all-equity transaction.
• This will initially boost their operating cash flow by approximately 30% and possibly as much as slightly over 50% in the medium-term once their HPC project comes online in 2023.
• Whilst this is positive, on the other hand, it will also see their net debt instantly soar by slightly over 60% and thus this acquisition will push their leverage higher.
• Thankfully, they currently have a healthy financial position that can shoulder higher leverage but this still increases the risks, especially since a significant portion of the value is riding upon the HPC project.
• I believe that downgrading my rating to neutral from bullish is now appropriate following these higher acquisition-related risks.

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