Morningstar DBRS Assigns Provisional Credit Rating of (P) BBB (low) to Pembina Pipeline Corporation's Subordinated Notes Series 2; Existing Subordinated Notes Under Review With Developing Implications

DBRS Limited (Morningstar DBRS) assigned a provisional credit rating of (P) BBB (low) with a Stable trend to Pembina Pipeline Corporation's (Pembina or the Company) proposed $200 million Fixed-to-Fixed Rate Subordinated Notes issuance, due June 2055 (the New Hybrid Notes). Morningstar DBRS also expects to assign an equity weight of 50% to the New Hybrid Notes based on the "Morningstar DBRS Global Corporate Criteria" released on February 3, 2025. Concurrently, Morningstar DBRS placed Pembina's existing Fixed-to-Fixed Rate Subordinated Notes due January 25, 2081 (the Existing Hybrid Notes) Under Review with Developing Implications.

Morningstar DBRS notes that the New Hybrid Notes are direct unsecured subordinated obligations of Pembina and subordinated in right of payment to the prior payment in full of all present and future senior indebtedness. The New Hybrid Notes will be effectively subordinated to all indebtedness and obligations of the Company's subsidiaries. Pembina proposes to use the net proceeds from the sale of the New Hybrid Notes to fund the redemption of its outstanding Series 19 Class A Preferred Shares and for general corporate purposes.

The New Hybrid Notes and the Existing Hybrid Notes rank equally in right of payment until the occurrence of certain bankruptcy and related events, at which time the Existing Hybrid Notes would automatically convert into preferred shares and rank below the New Hybrid Notes. However, Pembina has indicated that it intends to launch a solicitation process to amend the terms so the Existing Hybrid Notes rank pari passu in the event of insolvency with the New Hybrid Notes. Consequently, Morningstar DBRS has placed the Existing Hybrid Notes Under Review with Developing Implications. If the solicitation process is successfully completed, Morningstar DBRS will resolve the Under Review with Developing Implications status on the Existing Hybrid Notes and confirm the Existing Hybrid Notes at BBB (low) with a Stable trend. Conversely, a lack of progress in making the notes pari passu could result in Morningstar DBRS downgrading the Existing Hybrid Notes to BB (high). Morningstar DBRS aims to resolve the Under Review with Developing Implications status within 90 days.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in Canadian dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in the Oil & Gas, Oilfield Services, and Pipeline and Midstream Energy Industries (May 6, 2025), https://dbrs.morningstar.com/research/453396

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodology has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

A provisional credit rating is not a final credit rating with respect to the above-mentioned security and may change or be different than the final credit rating assigned or may be discontinued. The assignment of a final credit rating on the above-mentioned security is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit rating.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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