Enhanced Investments - Financial Portal

Published: 2020-02-27

Financial Statements & Notes

MANAGEMENT'S REPORT
The audited consolidated financial statements of Pembina Pipeline Corporation (the "Company" or "Pembina") are the responsibility of Pembina's management. The financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, using management's best estimates and judgments, where appropriate.
Management is responsible for the reliability and integrity of the financial statements, the notes to the financial statements and other financial information contained in this report. In the preparation of these financial statements, estimates are sometimes necessary because a precise determination of certain assets and liabilities is dependent on future events. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying financial statements.
Management's Assessment of Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a - 15(e) and 15d - 15(e) under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act") and National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings ("NI 52-109").
Management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), has conducted an evaluation of Pembina's internal control over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on management's assessment as at December 31, 2019, the CEO and CFO have concluded that Pembina's internal control over financial reporting is effective.
In accordance with the provisions of NI 52-109 and consistent with U.S. Securities and Exchange Commission (the "SEC") guidance, the scope of the evaluation did not include internal controls over financial reporting of Kinder Morgan Canada Limited or controls associated with the U.S. portion of the Cochin Pipeline system, both of which Pembina acquired on December 16, 2019 (collectively the "Kinder Acquisition") and were excluded from management's evaluation of the effectiveness of Pembina’s internal control over financial reporting as at December 31, 2019 due to the proximity of the Kinder Acquisition to year-end. Further details related to the Kinder Acquisition are disclosed in Note 6 to Pembina's consolidated financial statements for the year ended December 31, 2019. The assets and revenue acquired in the Kinder Acquisition represented approximately 16 percent and nil percent, respectively, of Pembina's total assets and revenue as at December 31, 2019.
Due to its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of Pembina's financial statements would be prevented or detected. Further, the evaluation of the effectiveness of internal control over financial reporting was made as at a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate.
The Board of Directors of Pembina (the "Board") is responsible for ensuring management fulfills its responsibilities for financial reporting and internal control. The Board is assisted in exercising its responsibilities through the Audit Committee, which consists of five non-management directors. The Audit Committee meets periodically with management and the internal and external auditors to satisfy itself that management's responsibilities are properly discharged, to review the financial statements and to recommend approval of the financial statements to the Board.
KPMG LLP, the independent auditors, have audited Pembina's consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2019 in accordance with the standards of the Public Company Accounting Oversight Board (United States). The independent auditors have full and unrestricted access to the Audit Committee to discuss their audit and their related findings.
59	Pembina Pipeline Corporation 2019 Annual Report

	Changes in Internal Control over Financial Reporting
	Pembina's internal controls over financial reporting commencing December 16, 2019 include the systems, processes and controls associated with the Kinder Acquisition, as well as additional controls designed to result in complete and accurate consolidation of the financial information relating to the Kinder Acquisition. Other than the Kinder Acquisition, there has been no change in Pembina's internal control over financial reporting that occurred during the year ended December 31, 2019 that has materially affected, or are reasonably likely to materially affect, Pembina's internal control over financial reporting.
	"M. H. Dilger"	"J. Scott Burrows"
	M. H. Dilger	J. Scott Burrows
	President and Chief Executive Officer	Senior Vice President and Chief Financial Officer
	February 27, 2020
Pembina Pipeline Corporation 2019 Annual Report 60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Pembina Pipeline Corporation Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Pembina Pipeline Corporation and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of earnings and comprehensive income, changes in equity, and cash flows for each of the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2020 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of goodwill impairment
As discussed in Notes 4 and 9 to the consolidated financial statements, the Company performs goodwill impairment testing on an annual basis. The recoverable amount was determined using a fair value less costs of disposal approach which is based on a discounted cash flow model. For the purpose of the impairment test, goodwill has been allocated to the Company's operating segments which represents the lowest level within the Company at which the goodwill is monitored for management purposes. The goodwill balance as of December 31, 2019 was $4,684 million.
61	Pembina Pipeline Corporation 2019 Annual Report

	We identified the assessment of goodwill impairment as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the significant revenue assumptions such as contract renewal volumes and rates, projected commodity pricing ("forecasted cash flow assumptions") and discount rates used in the discounted cash flow model. Minor changes to those assumptions significantly impacted the Company's assessment of the recoverable amount of the operating segments.
	The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company's estimate of the recoverable amount of the operating segments, including controls related to forecasted cash flow assumptions and the discount rate used in the determination of the recoverable amount. We evaluated the Company's projected commodity pricing assumptions by comparing to publicly available forward price curves. We compared the Company's historical forecasted results, including contract renewal volumes and rates, to actual results to assess the Company's ability to accurately forecast. In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in:
	• Evaluating the discount rates used in the valuation for each operating segment by comparing them against publicly
	available market data for comparable entities; and
	• Developing an estimate of the recoverable amount of the operating segments by performing a sensitivity analysis over the
	estimate of the Company's forecasted cash flows and the discount rate, and compared the results of our estimate of fair value to the Company's estimate.
	Evaluation of the fair value measurement of the customer relationships intangible assets acquired in the Kinder Acquisition
	As discussed in Note 6 to the consolidated financial statements, on December 16, 2019, the Company acquired all the issued and outstanding shares of Kinder Morgan Canada Limited by way of a plan of arrangement and the U.S. portion of the Cochin Pipeline system (collectively, the "Kinder Acquisition") for total consideration of $4,255 million. The acquisition date fair value for the customer relationships intangible assets recognized was $1,254 million.
	We identified the evaluation of the fair value measurement of the customer relationships intangible assets acquired as a critical audit matter. There was a high degree of subjectivity in evaluating the Company's assumptions over forecasted revenue growth rates, contract renewal rates, and the discount rates. There was limited observable market information and the calculated fair value of such assets was sensitive to possible changes to these assumptions.
	The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company's estimate of acquisition date fair values, including controls related to assumptions over forecasted revenue growth rates, contract renewal rates and the discount rates. We evaluated the Company's forecasted revenue growth rates from existing customers by comparing to the acquired assets' historical actual results, as well as by comparing contractual revenue details to signed contracts to assess the accuracy of the Company's forecast. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
	• Evaluating the contract renewal assumptions used by the Company as an input in the fair value of the intangible assets by
	examining existing contract terms and assessing future contract renewal expectations based on industry knowledge and experience from comparable market transactions;
	• Evaluating the methodologies used by the Company to determine discount rates used in addition to comparing the
	discount rates to publicly available market data for comparable entities; and
	• Assessing the methodologies used by the Company to determine the fair value of the customer relationships intangible
	assets and testing the accuracy of calculations of fair value.
Pembina Pipeline Corporation 2019 Annual Report 62

Assessment of impairment of the Ruby investment
As discussed in Note 10 to the consolidated financial statements, the Company recognized an impairment charge on its convertible preferred share interest in Ruby of $300 million. At December 31, 2019, the Company's investment in Ruby, subsequent to the impairment charge, accounted for $1,273 million of the carrying value of its total equity investments of $5,954 million. The carrying amounts of the Company's non-financial assets, other than: inventory, assets arising from employee benefits and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. The recoverable amount of the Ruby investment was determined to be $1,273 million using a value in use approach by discounting expected cash flows resulting from the Company's convertible preferred share interest.
We identified the assessment of impairment of the Ruby investment as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the Company's assumptions used to determine the recoverable amount, including future contracts, renewals, volumes, future financing within the investment, ability to utilize tax deductions ("forecasted cash flow assumptions"), and the discount rate. These assumptions were challenging to test as minor changes to those assumptions had a significant effect on the Company's assessment of the recoverable amount of the investment in Ruby.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company's estimate of recoverable amount, including controls related to forecasted cash flow assumptions and the discount rate used in the determination of the recoverable amount. We evaluated the Company's expected future contracts, renewals and volumes by comparing them to historical contracted volumes adjusted for market projections. We compared the Company's historical cash flow forecasts to actual results to assess the Company's ability to accurately forecast. We developed an estimate of the recoverable amount of the Ruby investment using the estimate of the forecasted cash flows and the discount rate evaluated by our valuation professional, and compared the results of our estimate of value in use to the Company's estimate. We involved a tax professional with specialized skills and knowledge who assisted in evaluating the projection of the utilization of available tax deductions. In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in:
• Evaluating the future financing alternatives against comparable market financing transactions for similar entities; and
• Evaluating the discount rate used in the valuation by comparing it against publicly available market data for comparable
investments.
Chartered Professional Accountants
We have served as the Company's auditor since 1997.Calgary, Canada
February 27, 2020
63	Pembina Pipeline Corporation 2019 Annual Report

	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
	To the Shareholders and Board of Directors of Pembina Pipeline Corporation
	Opinion on Internal Control Over Financial Reporting
	We have audited Pembina Pipeline Corporation’s (and subsidiaries') (the "Company") internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
	We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2019 and 2018, the related consolidated statements of earnings and comprehensive income, changes in equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements), and our report dated February 27, 2020 expressed an unqualified opinion on those consolidated financial statements.
	The Company acquired Kinder Morgan Canada Limited and the U.S. portion of the Cochin Pipeline system (collectively, the "Kinder Acquisition"), on December 16, 2019, and management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2019, Kinder Acquisition's internal control over financial reporting associated with approximately 16 percent of total assets and nil percent of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of the Kinder Acquisition.
	Basis for Opinion
	The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting included in Management's Discussion and Analysis. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
	We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Pembina Pipeline Corporation 2019 Annual Report 64

Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Chartered Professional AccountantsCalgary, Canada
February 27, 2020
65	Pembina Pipeline Corporation 2019 Annual Report

	CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
	As at December 31($ millions)
		2019	2018(1)
	Assets
	Current assets
	Cash and cash equivalents	129	157
	Trade receivables and other (Note 7)	692	604
	Inventory	126	198
	Derivative financial instruments (Note 24)	40	54
		987	1,013
	Non-current assets
	Property, plant and equipment (Note 8)	18,775	14,730
	Investments in equity accounted investees (Note 10)	5,954	6,368
	Intangible assets and goodwill (Note 9)	6,429	4,409
	Right-of-use assets (Note 13)	822	—
	Advances to related parties and other assets (Note 27)	186	144
		32,166	25,651
	Total assets	33,153	26,664
	Liabilities and equity
	Current liabilities
	Trade payables and other (Note 12)	1,013	803
	Loans and borrowings (Note 14)	74	480
	Dividends payable	110	97
	Lease liabilities	112	—
	Contract liabilities (Note 18)	39	37
	Taxes payable	103	67
	Derivative financial instruments (Note 24)	6	6
		1,457	1,490
	Non-current liabilities
	Loans and borrowings (Note 14)	10,078	7,057
	Lease liabilities	707	—
	Decommissioning provision (Note 15)	864	569
	Contract liabilities (Note 18)	192	131
	Deferred tax liabilities (Note 11)	2,906	2,774
	Other liabilities	179	239
		14,926	10,770
	Total liabilities	16,383	12,260
	Equity
	Attributable to shareholders	16,710	14,344
	Attributable to non-controlling interest	60	60
	Total equity	16,770	14,404
	Total liabilities and equity	33,153	26,664
	(1)			Pembina has applied IFRS 16 Leases at January 1, 2019 using the modified retrospective approach and has not restated comparative information. See Note 3.
	See accompanying notes to the consolidated financial statements
	Approved on behalf of the Board of Directors:
	"Gordon J. Kerr"				"Randall J. Findlay"
	Gordon J. Kerr				Randall J. Findlay
	Director				Director
Pembina Pipeline Corporation 2019 Annual Report 66

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
For the years ended December 31($ millions, except per share amounts)
	2019	2018(1)
Revenue (Note 18)	7,230	7,351
Cost of sales	5,187	5,457
Gain on commodity-related derivative financial instruments	(20)	(22)
Share of profit from equity accounted investees (Note 10)	370	411
Gross profit	2,433	2,327
General and administrative	296	279
Other expense	15	27
Impairment of investment in equity accounted investees (Note 10)	300	—
Results from operating activities	1,822	2,021
Net finance costs (Note 19)	294	279
Earnings before income tax	1,528	1,742
Current tax expense (Note 11)	210	70
Deferred tax (recovery) expense (Note 11)	(174)	394
Income tax expense	36	464
Earnings attributable to shareholders	1,492	1,278
Other comprehensive (loss) income
Exchange (loss) gain on translation of foreign operations	(213)	330
Remeasurements of defined benefit liability, net of tax (Note 22)	(6)	(6)
Total comprehensive income attributable to shareholders	1,273	1,602
Earnings attributable to common shareholders, net of preferred share dividends (Note 21)	1,361	1,157
Earnings per common share – basic (dollars) (Note 21)	2.66	2.28
Earnings per common share – diluted (dollars) (Note 21)	2.65	2.28
Weighted average number of common shares (millions)
Basic (Note 21)	512	505
Diluted (Note 21)	514	509
(1)			Pembina has applied IFRS 16 Leases at January 1, 2019 using the modified retrospective approach and has not restated comparative information. See Note 3.
See accompanying notes to the consolidated financial statements
67	Pembina Pipeline Corporation 2019 Annual Report

	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
		Attributable to Shareholders of the Company
					Accumulated
			Common	Preferred		Other	Non-
		Share		Share	Comprehensive			Controlling	Total
	($ millions)		Capital	Capital	Deficit				(Loss) Income		Total	Interest		Equity
	December 31, 2018(1)	13,662		2,423	(2,058)					317	14,344	60		14,404
	Impact of change in accounting policy (Note 3)	—	—										22	—	22	—	22
	Opening Value January 1, 2019	13,662		2,423	(2,036)					317	14,366	60		14,426
	Total comprehensive income
	Earnings	—	—	1,492					—	1,492	—		1,492
	Other comprehensive income
	Exchange loss on translation of foreign
	operations	—	—										—	(213)	(213)		(213)
	Remeasurements of defined benefit liability,
	net of tax (Note 22)	—	—	—					(6)	(6)	—		(6)
	Total comprehensive income	—	—	1,492					(219)	1,273	—		1,273
	Transactions with shareholders of the Company
	Common shares issued, net of issue costs
	(Note 16)	1,710	—										—	—	1,710	—	1,710
	Preferred shares issued, net of issue costs
	(Note 16)	—		533						—	—	533	—		533
	Share-based payment transactions (Note 16)	167	—										—	—	167	—	167
	Dividends declared – common (Note 16)	—	—	(1,213)					—	(1,213)	—		(1,213)
	Dividends declared – preferred (Note 16)	—	—	(126)					—	(126)	—		(126)
	Total transactions with shareholders of the
	Company	1,877		533	(1,339)					—	1,071	—		1,071
	December 31, 2019	15,539		2,956	(1,883)					98	16,710	60		16,770
	December 31, 2017		13,447	2,424	(2,083)					(7)	13,781	60		13,841
	Total comprehensive income
	Earnings	—	—	1,278					—	1,278	—		1,278
	Other comprehensive income
	Exchange gain on translation of foreign
	operations	—	—										—	330	330	—	330
	Remeasurements of defined benefit liability,
	net of tax (Note 22)	—	—	—					(6)	(6)	—		(6)
	Total comprehensive income	—	—	1,278					324	1,602	—		1,602
	Transactions with shareholders of the Company
	Preferred shares issue costs (Note 16)	—	(1)										—	—	(1)	—	(1)
	Debenture conversions (Note 16)	140	—										—	—	140	—	140
	Share-based payment transactions (Note 16)	75	—										—	—	75	—	75
	Dividends declared – common (Note 16)	—	—	(1,131)					—	(1,131)	—		(1,131)
	Dividends declared – preferred (Note 16)	—	—	(122)					—	(122)	—		(122)
	Total transactions with shareholders of the
	Company	215	(1)	(1,253)					—	(1,039)	—		(1,039)
	December 31, 2018	13,662		2,423	(2,058)					317	14,344	60		14,404
	(1)										Pembina has applied IFRS 16 Leases at January 1, 2019 using the modified retrospective approach and has not restated comparative information. See Note 3.
	See accompanying notes to the consolidated financial statements
Pembina Pipeline Corporation 2019 Annual Report 68

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31($ millions)
	2019	2018(1)
Cash provided by (used in)Operating activitiesEarnings
	1,492	1,278
Adjustments for:
Share of profit from equity accounted investees (Note 10)	(370)	(411)
Distributions from equity accounted investees (Note 10)	575	622
Depreciation and amortization (Note 8 & 9)	511	417
Impairment of investment in equity accounted investees (Note 10)	300	—
Unrealized loss (gain) on commodity-related derivative financial instruments	13	(73)
Net finance costs (Note 19)	294	279
Net interest paid (Note 19)	(269)	(259)
Income tax expense (Note 11)	36	464
Taxes paid	(141)	(26)
Share-based compensation expense (Note 23)	66	63
Share-based compensation payment	(50)	(32)
Loss on asset disposal	(1)	19
Net change in contract liabilities	(30)	11
Other—	(13)
Change in non-cash operating working capital	106	(83)
Cash flow from operating activities	2,532	2,256
Financing activities
Bank borrowings and issuance of debt	2,153	1,366
Repayment of loans and borrowings	(1,866)	(1,998)
Repayment of lease liability	(68)	—
Issuance of medium term notes (Note 14)	2,318	700
Issue costs and financing fees	(14)	(8)
Exercise of stock options	151	61
Dividends paid	(1,323)	(1,247)
Cash flow provided by (used in) financing activities	1,351	(1,126)
Investing activities
Capital expenditures	(1,645)	(1,226)
Contributions to equity accounted investees (Note 10)	(206)	(58)
Acquisitions (Note 6)	(2,009)	—
Interest paid during construction (Note 19)	(42)	(35)
Recovery of assets or proceeds from sale	7	5
Advances to related parties	(63)	(84)
Changes in non-cash investing working capital and other	48	87
Cash flow used in investing activities	(3,910)	(1,311)
Change in cash and cash equivalents	(27)	(181)
Effect of movement in exchange rates on cash held	(1)	17
Cash and cash equivalents, beginning of period	157	321
Cash and cash equivalents, end of period	129	157
(1)			Pembina has applied IFRS 16 Leases at January 1, 2019 using the modified retrospective approach and has not restated comparative information. See Note 3.
See accompanying notes to the consolidated financial statements
69	Pembina Pipeline Corporation 2019 Annual Report

	NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
	1. REPORTING ENTITY
	Pembina Pipeline Corporation ("Pembina" or the "Company") is a Calgary-based, leading transportation and midstream service provider serving North America's energy industry. The consolidated financial statements include the accounts of Pembina, its subsidiary companies, partnerships and any investments in associates and joint arrangements as at and for the year ended December 31, 2019.
	Pembina owns an integrated system of pipelines that transport various hydrocarbon liquids and natural gas products produced primarily in western Canada. Pembina also owns gas gathering and processing facilities and an oil and natural gas liquids infrastructure, storage and logistics business; is growing an export terminals business; and is currently constructing a petrochemical facility to convert propane into polypropylene. Pembina's integrated assets and commercial operations along the majority of the hydrocarbon value chain allow it to offer a full spectrum of midstream and marketing services to the energy sector.
	2. BASIS OF PREPARATION
	a. Basis of Measurement and Statement of Compliance
	The consolidated financial statements have been prepared on a historical cost basis with some exceptions, as detailed in the accounting policies set out below in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). Except for the changes described in Note 3, these accounting policies have been applied consistently for all periods presented in these consolidated financial statements.
	Certain insignificant comparative amounts have been reclassified to conform to the presentation adopted in the current year.
	These consolidated financial statements were authorized for issue by Pembina's Board of Directors on February 27, 2020.
	b. Functional and Presentation Currency
	The consolidated financial statements are presented in Canadian dollars. All financial information presented in Canadian dollars has been disclosed in millions, except where noted. The assets and liabilities of subsidiaries, and investments in equity accounted investees, whose functional currencies are other than Canadian dollars are translated into Canadian dollars at the foreign exchange rate at the balance sheet date, while revenues and expenses of such subsidiaries are translated using average monthly foreign exchange rates, which approximate the foreign exchange rates on the dates of the transactions. Foreign exchange differences arising on translation of subsidiaries and investments in equity accounted investees with a functional currency other than the Canadian dollar are included in other comprehensive income.
	c. Use of Estimates and Judgments
	The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that are based on the facts and circumstances and estimates at the date of the consolidated financial statements and affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
	Judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Pembina Pipeline Corporation 2019 Annual Report 70

The following judgment and estimation uncertainties are those management considers material to the consolidated financial statements:
Judgments
(i) Business Combinations
Business combinations are accounted for using the acquisition method of accounting. The determination of fair value often requires management to make judgments about future possible events. The assumptions with respect to lease identification, classification and measurement, the fair value of property plant and equipment, intangible assets, decommissioning provisions and contract liabilities acquired, as well as the determination of deferred taxes, generally require the most judgment.
(ii) Depreciation and Amortization
Depreciation and amortization of property, plant and equipment and intangible assets are based on management's judgment of the most appropriate method to reflect the pattern of an asset's future economic benefit expected to be consumed by Pembina. Among other factors, these judgments are based on industry standards and historical experience.
(iii) Impairment
Assessment of impairment of non-financial assets is based on management’s judgment of whether or not there are sufficient internal or external factors that would indicate that an asset, investment, or cash generating unit ("CGU") is impaired. The determination of a CGU is based on management's judgment and is an assessment of the smallest group of assets that generate cash inflows independently of other assets. In addition, management applies judgment to assign goodwill acquired as part of a business combination to the CGU or group of CGUs that is expected to benefit from the synergies of the business combination for purposes of impairment testing. When an impairment test is performed, the carrying value of a CGU or group of CGUs is compared to its recoverable amount, defined as the greater of fair value less costs to sell and value in use. As such, the asset composition of a CGU or group of CGUs directly impacts both the carrying value and recoverability of the assets included therein.
(iv) Assessment of Joint Control Over Joint Arrangements
The determination of joint control requires judgment about the influence Pembina has over the financial and operating decisions of an arrangement and the extent of the benefits it obtains based on the facts and circumstances of the arrangement during the reporting period. Joint control exists when decisions about the relevant activities require the unanimous consent of the parties that control the arrangement collectively. Ownership percentage alone may not be a determinant of joint control.
(v) Pattern of Revenue Recognition
The pattern of revenue recognition is impacted by management's judgments as to the nature of Pembina's performance obligations, the amount of consideration allocated to performance obligations that are not sold on a stand-alone basis, the valuation of material rights and the timing of when those performance obligations have been satisfied.
(vi) Leases
Management applies judgment to determine whether a contract is, or contains, a lease from both a lessee and lessor perspective. This assessment is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. Key judgments include whether a contract identifies an asset (or portion of an asset), whether the lessee obtains substantially all the economic benefits of the asset over the contract term and whether the lessee has the right to direct the asset's use. Judgment is also applied in determining the rate used to discount the lease payments.
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	Estimates
	(i) Business Combinations
	Estimates of future cash flows, forecast prices, interest rates, discount rates, cost, market values and useful lives are made in determining the fair value of assets acquired and liabilities assumed. Changes in any of the assumptions or estimates used in determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets, liabilities, intangible assets, goodwill and deferred taxes in the purchase price equation. Future earnings can be affected as a result of changes in future depreciation and amortization, asset or goodwill impairment.
	(ii) Provisions and Contingencies
	Management uses judgment in determining the likelihood of realization of contingent assets and liabilities to determine the outcome of contingencies. Provisions recognized are based on management's best estimate of the timing, scope and amount of expected future cash outflows to settle the obligation.
	Based on the long-term nature of the decommissioning provision, the most significant uncertainties in estimating the provision are the determination of whether a present obligation exists, the discount and inflation rates used, the costs that will be incurred and the timing of when these costs will occur.
	(iii) Deferred Taxes
	The calculation of the deferred tax asset or liability is based on assumptions about the timing of many taxable events and the enacted or substantively enacted rates anticipated to be applicable to income in the years in which temporary differences are expected to be realized or reversed.
	(iv) Depreciation and Amortization
	Estimated useful lives of property, plant and equipment and intangible assets are based on management's assumptions and estimates of the physical useful lives of the assets, the economic lives, which may be associated with the reserve lives and commodity type of the production area, in addition to the estimated residual value.
	(v) Impairment of Non-Financial Assets
	In determining the recoverable amount of a CGU, a group of CGUs or an individual asset, management uses its best estimates of future cash flows, and assesses discount rates to reflect management’s best estimate of a rate that reflects a current market assessment of the time value of money and the specific risks associated with the underlying assets and cash flows.
	(vi) Impairment of Financial Assets
	The measurement of financial assets carried at amortized cost includes management’s estimates regarding the expected credit losses that will be realized on these financial assets.
	(vii) Revenue from Contracts with Customers
	In estimating the contract value, management makes assessments as to whether variable consideration is constrained or not reasonably estimable, such that an amount or portion of an amount cannot be included in the estimate of the contract value. Management's estimates of the likelihood of a customer’s ability to use outstanding make-up rights may impact the timing of revenue recognition. In addition, in determining the amount of consideration to be allocated to performance obligations that are not sold on a stand-alone basis, management estimates the stand-alone selling price of each performance obligation under the contract, taking into consideration the location and volume of goods or services being provided, the market environment, and customer specific considerations.
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(viii) Fair Value of Financial Instruments
For Level 2 valued financial instruments, management makes assumptions and estimates value based on observable inputs such as quoted forward prices, time value and volatility factors. For Level 3 valued financial instruments, management uses estimates of financial forecasts, expected cash flows and risk adjusted discount rates to measure fair value.
(ix) Employee Benefit Obligations
An actuarial valuation is prepared to measure Pembina's net employee benefit obligations using management’s best estimates with respect to longevity, discount and inflation rates, compensation increases, market returns on plan assets, retirement and termination rates.
(x) Leases
In measuring its lease liabilities, management makes assessments of the stand-alone selling prices of each lease and non-lease component for the purposes of allocating consideration to each component. Management applies its best estimate with respect to the likelihood of renewal, extension and termination option exercise in determining the lease term.
3. CHANGES IN ACCOUNTING POLICIES
Except for the changes described below, accounting policies as disclosed in Note 4 of the Consolidated Financial Statements have been applied to all periods consistently.
IFRS 16 Leases ("IFRS 16")
Pembina adopted IFRS 16 effective January 1, 2019. IFRS 16 introduced a new lease definition that increases the focus on control of the underlying asset. In addition, IFRS 16 introduced a single, on balance sheet accounting model for lessees that has resulted in Pembina recording right-of-use assets representing its right to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting has remained unchanged, except for changes in the classification of subleases.
IFRS 16 has been applied using the modified retrospective approach, under which the cumulative effect of initial application was recognized in equity at January 1, 2019 as further disclosed below. Accordingly, the comparative financial information has not been restated and continues to be reported under International Accounting Standard ("IAS") 17 Leases and International Financial Reporting Interpretations Committee Interpretation 4 Determining whether an arrangement contains a lease ("IFRIC 4"). The details of Pembina's accounting policies under IAS 17 and IFRIC 4, for the comparative period, are disclosed separately below.
On transition to IFRS 16, Pembina elected to apply the practical expedient to grandfather the assessment of whether a contract entered into before the date of initial application was, or contained, a lease under IFRIC 4, rather than reassess based on the new definition of a lease under IFRS 16. Contracts previously identified as leases were recognized and measured in accordance with IFRS 16.
a. Accounting Policies Applicable from January 1, 2019
The details of significant accounting policies under IFRS 16 and the nature of the changes to previous accounting policies under IAS 17 are outlined below.
i. Leases
For all contracts entered into or amended on or after January 1, 2019, Pembina applies the definition of a lease under IFRS 16 to determine if a contract is, or contains, a lease. A specific asset is the subject of a lease if the contract conveys the right to control the use of that identified asset for a period of time in exchange for consideration. This determination is made at inception of a contract, and is reassessed when the terms and conditions of the contract are amended.
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	At inception or on reassessment of a contract that contains a lease component, Pembina allocates contract consideration to the lease and non-lease components on the basis of their relative stand-alone prices. The consideration allocated to the lease components is recognized in accordance with the policies for lessee and lessor leases, as described below. The consideration allocated to non-lease components is recognized in accordance with its nature.
	ii. Lessee
	Leased assets are recognized as right-of-use assets, with corresponding lease liabilities recognized on the statement of financial position at the lease commencement date. Right-of-use assets include terminals, rail, buildings, storage tanks and land and other assets.
	Right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset and restore the site of an underlying asset to the condition required by the terms of the lease, less any lease incentives received. Right-of-use assets recognized as a result of business combination are initially measured in the same manner, plus an adjustment to reflect favourable or unfavourable lease terms compared to market terms. Right-of-use assets are subsequently measured at cost less any accumulated depreciation and accumulated impairment losses, adjusted for remeasurements of the lease liability. The right-of-use asset is depreciated over the lesser of the asset’s useful life and the lease term on a straight-line basis.
	The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease if readily determinable, or at a rate Pembina would be required to pay to borrow over a similar term, with a similar security to obtain an asset of a similar value to the right-of-use asset. Lease payments in an optional renewal period are included in the lease liability if Pembina is reasonably certain to exercise such option. The lease liability is subsequently increased by interest expense on the lease liability and decreased by lease payments made. Interest expense is recorded in earnings at an amount that represents a constant periodic rate of interest on the remaining balance of the lease liability.
	The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimated guaranteed residual value to be paid, or a change in the assessment of whether a purchase option, extension option or termination option is reasonably certain to be exercised. A corresponding adjustment is made to the right of use asset when a liability is remeasured, or the adjustment is recorded in earnings if the right of use asset has been reduced to zero.
	Pembina has elected to apply the recognition exemptions for short-term and low value leases. Pembina recognizes lease payments associated with these leases as an expense on a straight-line basis over the lease term.
	iii. Lessor
	Lessor leases are classified as either operating leases or finance leases according to the substance of the contract. Leases transferring substantially all of the risks incidental to asset ownership are classified as finance leases, while all other leases are classified as operating leases. Subleases are classified as either operating or finance leases in reference to the right-of-use asset arising from the head lease. Under IAS 17, Pembina also classified lessor subleases as operating or finance leases based on an overall assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset, considering certain indicators such as whether the lease was for the major part of the economic life of the asset.
	Assets under finance lease are recognized in finance lease receivables at the value of the net investment in the lease. The net investment in the lease is measured at the net present value of the future amounts receivable, discounted using the interest rate implicit in the lease. Finance income is recognized over the lease term in a pattern reflecting a consistent rate of return on the finance lease receivable.
	Lease payments from operating leases are recognized as income on either a straight-line basis or a systematic basis representative of the pattern in which benefit from the use of the underlying asset is received.
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b. Accounting Policies Applicable Prior to January 1, 2019
The details of significant accounting policies under IAS 17 and IFRIC 4, under which comparative balances continue to be reported, are outlined below.
At inception of an arrangement, Pembina determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to a lessee the right to control the use of the underlying asset.
At inception or upon reassessment of the arrangement, Pembina separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values.
Leases which Pembina assumes substantially all the risks and rewards of ownership are classified as finance leases. The leased asset is initially recognized at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Other leases are operating leases and are not recognized in Pembina's consolidated statement of financial position.
Payments made under lessee operating leases are recognized in earnings on a straight-line basis over the term of the lease. Lease incentives received are deferred and recognized over the term of the lease.
Payments received under lessor operating leases are recognized in earnings in accordance with the benefit received by the customer.
c. Transition
i. Lessee
At transition, lease liabilities for contracts previously identified as operating leases under IAS 17 were measured at the present value of the remaining lease payments, discounted at Pembina's incremental borrowing rate as at January 1, 2019. For all leases, right-of-use assets were measured at an amount equal to the lease liability.
Pembina applied the following practical expedients on transition:
• Pembina applied a single discount rate to a portfolio of leases with similar characteristics rather than multiple discount
rates to match the term of each lease;
• Pembina has relied on onerous lease contract assessments previously performed under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets as an alternative to an impairment review on right-of-use assets, resulting in an adjustment of the right-of-use asset balance by the amount of the onerous lease contract provision outstanding immediately before the date of initial application; and
• Pembina elected not to recognize right-of-use assets and corresponding lease liabilities for leases with terms of less than
12 months remaining.
There has been no change to the accounting for contracts previously identified as finance leases under IAS 17. The carrying amount of the right-of-use asset and lease liability on transition were determined to be equal to the carrying amount of the lease asset and lease liability under IAS 17.
ii. Lessor
Sub-lease contracts previously classified as operating leases are recognized as finance leases under IFRS 16.
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	d. Financial Statement Impacts
	On transition to IFRS 16, Pembina recognized significant right-of-use assets and lease liabilities related to rail, buildings and land. Further disclosures related to leases are provided in Note 13 to the Consolidated Financial Statements.
	i. Consolidated Statement of Financial Position
	The impacts of adoption of IFRS 16 as at January 1, 2019 are as follows:
		As at December			Opening Value
			31, 2018	Adjustments	January 1, 2019	($ millions)AssetsCurrent assetsTrade receivables and other(1)
			604		1	605
	Non-current assetsProperty, plant and equipment(2)
			14,730				(18)	14,712
	Right-of-use assets(3)							—	427	427
	Advances to related parties and other assets(1)(4)		144				33	177
	Liabilities and EquityCurrent liabilitiesTrade payables and other(4)
			870		(7)	863
	Loans and borrowings(5)		480		(8)	472
	Lease liabilities							—	64	64
	Non-current liabilitiesLoans and borrowings(5)
			7,057				(11)	7,046
	Lease liabilities							—	416	416
	Deferred tax liabilities		2,774		8	2,782
	Other liabilities(4)		239				(41)	198
	EquityAttributable to shareholders
			14,344				22	14,366
	(1)	Includes lessor finance lease receivables.
	(2)	Finance lease assets previously recorded in property, plant and equipment were reclassified to right-of-use assets.
	(3)	Right-of-use assets are recorded at a value equal to the associated lease liability of $480 million, less $33 million for sublease arrangements, less onerous lease liability
	balance at December 31, 2018 of $20 million.
	(4)	Operating lease payments were previously recognized on a straight-line basis, with the difference between cash payments and expense (income) recorded to a deferred lease
	asset or deferred lease liability. These deferrals were derecognized on adoption of IFRS 16. In addition, $20 million of onerous lease liabilities were offset against right-of-use
	assets.
	(5)	Finance leases previously recorded in loans and borrowings were reclassified to lease liabilities.
	ii. Reconciliation of Lease Liability
	($ millions)Lease commitments, disclosed at December 31, 2018
						796
	Leases not yet commenced					(33)
	Non-lease components					(217)
	Renewal options reasonably certain to be exercised					53
	Total undiscounted lease payments					599
	Discounting impact(1)					(119)
	Lease liabilities recognized as at January 1, 2019					480
	(1)	Pembina discounted lease payments using the incremental credit-risk adjusted borrowing rate applicable to the contract. The weighted-average rate applied on transition for
	all lease liabilities was 4.01 percent.
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4. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies as set out below have been applied consistently to all periods presented in these consolidated financial statements.
a. Basis of Consolidation
i) Business Combinations
Pembina measures goodwill as the fair value of the consideration transferred including the recognized amount of any non-controlling interest in the acquiree, less the fair value of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in earnings.
Pembina elects on a transaction-by-transaction basis whether to measure non-controlling interest at its fair value, or at its proportionate share of the recognized amount of the identifiable net assets, at the acquisition date.
Non-controlling interests represent equity interests in subsidiaries owned by outside parties. The share of net assets of subsidiaries attributable to non-controlling interests is presented as a separate component of equity. Their share of net income and other comprehensive income is also recognized in this separate component of equity. Changes in Pembina's ownership interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in earnings.
Transaction costs, other than those associated with the issue of debt or equity securities, that Pembina incurs in connection with a business combination are expensed as incurred.
ii) Subsidiaries
Subsidiaries are entities, including unincorporated entities such as partnerships, controlled by Pembina. The financial results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are aligned with the policies adopted by Pembina.
iii) Joint Arrangements
Joint arrangements represent activities where Pembina has joint control established by a contractual agreement. Joint control requires unanimous consent for the relevant financial and operational decisions. A joint arrangement is either a joint operation, whereby the parties have rights to the assets and obligations for the liabilities, or a joint venture, whereby the parties have rights to the net assets.
For a joint operation, the consolidated financial statements include Pembina's proportionate share of the assets, liabilities, revenues, expenses and cash flows of the arrangement with items of a similar nature on a line-by-line basis, from the date that joint control commences until the date that joint control ceases.
Joint ventures are accounted for using the equity method of accounting and are initially recognized at cost, or fair value if acquired as part of a business combination. Joint ventures are adjusted thereafter for the post-acquisition change in the Company's share of the equity accounted investment's net assets. Pembina's consolidated financial statements include its share of the equity accounted investment's profit or loss and other comprehensive income, or income equal to preferred distributions for certain preferred share interests in equity accounted investees, until the date that joint control ceases. When Pembina's share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that Pembina has an obligation or has made payments on behalf of the investee. Distributions from investments in equity accounted investees are recognized when received.
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	Acquisition of an incremental ownership in a joint arrangement where Pembina maintains joint control is recorded at cost or fair value if acquired as part of a business combination. Where Pembina has a partial disposal, including a deemed disposal, of a joint arrangement and maintains joint control, the resulting gains or losses are recorded in earnings at the time of disposal.
	iv) Transactions Eliminated on Consolidation
	Balances and transactions, and any revenue and expenses arising from intersegment transactions, are eliminated in preparing the consolidated financial statements. Gains arising from transactions with investments in equity accounted investees are eliminated against the investment to the extent of Pembina's interest in the investee. Losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
	v) Foreign Currency
	Transactions in foreign currencies are translated to Pembina's functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to Pembina's functional currency at the exchange rate at that date, with exchange differences recognized in earnings.
	Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
	Gains and losses arising from translation of foreign subsidiaries or investments in equity accounted investees with a functional currency other than Pembina's Canadian dollar reporting currency are reflected in other comprehensive income. Asset and liability accounts are translated at the period-end exchange rates while revenues, expenses, gains and losses are translated at the exchange rates in effect at the time of the transaction.
	b. Cash and Cash Equivalents
	Cash and cash equivalents comprise cash balances, call deposits and short-term investments with original maturities of ninety days or less, and are used by Pembina in the management of its short-term commitments.
	c. Inventories
	Inventories are measured at the lower of cost and net realizable value and consist primarily of crude oil, NGL and spare parts. The cost of inventories is determined using the weighted average costing method and includes direct purchase costs and when applicable, costs of production, extraction, fractionation, and transportation. Net realizable value is the estimated selling price in the ordinary course of business less the estimated selling costs. All changes in the value of inventories are reflected in earnings.
	d. Financial Instruments
	Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, Pembina has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
	i) Non-Derivative Financial Assets
	Pembina initially recognizes loans, receivables, advances to related parties and deposits on the date that they are originated. All other financial assets are recognized on the trade date at which Pembina becomes a party to the contractual provisions of the instrument.
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Pembina derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by Pembina is recognized as a separate asset or liability. On derecognition, the difference between the carrying amount of the financial asset and the consideration received is recognized in earnings.
Pembina classifies non-derivative financial assets into the following categories:
Financial Assets at Amortized Cost
A financial asset is classified in this category if the asset is held within a business model whose objective is to collect contractual cash flows on specified dates that are solely payments of principal and interest. At initial recognition, financial assets at amortized cost are recognized at fair value plus directly attributable transaction costs. Subsequent to initial recognition, these financial assets are recorded at amortized cost using the effective interest method less any impairment loss allowances.
Financial Assets at Fair Value Through Other Comprehensive Income
A financial asset is classified in this category if the asset is held within a business model whose objective is met by both collecting contractual cash flows and selling financial assets. Pembina did not have any financial assets classified as fair value through other comprehensive income during the years covered in these financial statements.
Financial Assets at Fair Value Through Earnings
A financial asset is classified in this category if it is not classified as a financial asset at amortized cost or a financial asset at fair value through other comprehensive income, or it is an equity instrument designated as such on initial recognition. At initial recognition, and subsequently, these financial assets are recognized at fair value.
ii) Non-Derivative Financial Liabilities
Pembina initially recognizes financial liabilities on the trade date at which Pembina becomes a party to the contractual provisions of the instrument.
Non-derivative financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
Pembina derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. On derecognition, the difference between the carrying value of the liability and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in earnings.
Pembina records a modification or exchange of an existing liability as a derecognition of the financial liability if the terms are substantially different, resulting in a difference of more than 10 percent when comparing the present value of the remaining cash flows of the existing liability to the present value of the discounted cash flows under the new terms using the original effective interest rate.
If a modification to an existing liability causes a revision to the estimated payments of the liability but is not treated as a derecognition, Pembina adjusts the gross carrying amount of the liability to the present value of the estimated contractual cash flows using the instrument’s original effective interest rate, with the difference recorded in earnings.
Pembina's non-derivative financial liabilities are comprised of the following: bank overdrafts, trade payables and accrued liabilities, taxes payable, dividends payable, loans and borrowings including finance lease obligations and other liabilities.
Bank overdrafts that are repayable on demand and form an integral part of Pembina's cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statements of cash flows.
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	iii) Common Share Capital
	Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects.
	iv) Preferred Share Capital
	Preferred shares are classified as equity because they bear discretionary dividends and do not contain any obligations to deliver cash or other financial assets. Discretionary dividends are recognized as equity distributions on approval by Pembina's Board of Directors. Incremental costs directly attributable to the issue of preferred shares are recognized as a deduction from equity, net of any tax effects.
	v) Derivative Financial Instruments
	Pembina holds derivative financial instruments to manage its interest rate, commodity, power costs and foreign exchange risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative meet the definition of a derivative, and the combined instrument is not measured at fair value through earnings. Derivatives are recognized initially at fair value with attributable transaction costs recognized in earnings as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes in non-commodity-related derivatives are recognized immediately in earnings as part of net finance costs and changes in commodity-related derivatives are recognized immediately in earnings.
	e. Property, Plant and Equipment
	i) Recognition and Measurement
	Items of property, plant and equipment are measured initially at cost, unless they are acquired as part of a business combination in which case they are initially measured at fair value. Thereafter, property, plant and equipment are recorded net of accumulated depreciation and accumulated impairment losses.
	Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, estimated decommissioning provisions and borrowing costs on qualifying assets.
	Cost may also include any gain or loss realized on foreign currency transactions directly attributable to the purchase or construction of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
	When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate components of property, plant and equipment.
	The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognized in earnings.
	ii) Subsequent Costs
	The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to Pembina, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized and recorded as depreciation expense. The cost of maintenance and repair expenses of the property, plant and equipment are recognized in earnings as incurred.
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iii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of the asset, that component is depreciated separately. Land and linefill are not depreciated.
Depreciation is recognized in earnings over an asset's useful life on a straight line or declining balance basis, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. An asset's useful life is determined as the lower of its physical life and economic life. Depreciation commences once an asset is available for use.
Depreciation methods, useful lives and residual values are reviewed annually and adjusted if appropriate.
f. Intangible Assets
i) Goodwill
Goodwill that arises upon acquisitions is included in intangible assets and goodwill. See Note 4(a)(i) for the policy on measurement of goodwill at initial recognition.
Subsequent Measurement
Goodwill is measured at cost less accumulated impairment losses.
In respect of investments in equity accounted investees, goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is allocated to the investment and not to any asset, including goodwill, that forms the carrying amount of the investment in equity accounted investee.
ii) Other Intangible Assets
Other intangible assets acquired individually by Pembina are initially recognized and measured at cost, unless they are acquired as part of a business combination in which case they are initially measured at fair value. Thereafter, intangible assets with finite useful lives are recorded net of accumulated amortization and accumulated impairment losses.
iii) Subsequent Expenditures
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in earnings as incurred.
iv) Amortization
Amortization is based on the cost of an asset less its residual value.
Amortization is recognized in earnings over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.
Amortization methods, useful lives and residual values are reviewed annually and adjusted if appropriate.
g. Leases
Accounting policies related to leases are disclosed in Note 3 Changes in Accounting Policies.
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	h. Impairment
	i) Non-Derivative Financial Assets
	Impairment of financial assets carried at amortized cost is assessed using the lifetime expected credit loss of the financial asset at initial recognition and throughout the life of the financial asset, except where credit risk has not increased significantly since initial recognition, in which case impairment is assessed at the 12 month expected credit loss of the financial asset at the reporting date.
	In determining the impairment loss allowance for trade receivables, Pembina uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
	Impairment losses are recognized in earnings and reflected as a reduction in the related financial asset.
	ii) Non-Financial Assets
	The carrying amounts of Pembina's non-financial assets, other than: inventory, assets arising from employee benefits and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.
	For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated annually in connection with the annual goodwill impairment test. An impairment loss is recognized if the carrying amount of an asset or its related CGU exceeds its estimated recoverable amount.
	The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing the recoverable amount, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset, CGU or group of CGUs. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into CGUs, the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets. CGUs may incorporate integrated assets from multiple operating segments. For the purpose of goodwill impairment testing, CGUs are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal purposes. Goodwill acquired in a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
	Pembina's corporate assets do not generate separate cash inflows and are utilized by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset has been allocated.
	Impairment losses are recognized in earnings. Impairment losses recognized in respect of a CGU (group of CGUs) are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
	An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Pembina Pipeline Corporation 2019 Annual Report 82

Goodwill that forms part of the carrying amount of an investment in an equity accounted investee is not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment is tested for impairment as a single asset when there is objective evidence that the equity accounted investee may be impaired, unless the equity accounted investee does not generate cash flows that are largely independent of those from other assets of the entity in which case it is combined in a CGU with the related assets.
i. Employee Benefits
i) Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in earnings in the periods during which services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.
ii) Defined Benefit Pension Plans
A defined benefit pension plan is a post-employment benefit plan other than a defined contribution plan. Pembina's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, discounted to determine its present value, less the fair value of any plan assets. The discount rate used to determine the present value is established by referencing market yields on high-quality corporate bonds on the measurement date with cash flows that match the timing and amount of expected benefits.
The calculation is performed, at a minimum, every three years by a qualified actuary using the actuarial cost method. When the calculation results in a benefit to Pembina, the recognized asset is limited to the present value of economic benefits available in the form of future expenses payable from the plan, any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in Pembina. An economic benefit is available to Pembina if it is realizable during the life of the plan or on settlement of the plan liabilities.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in earnings immediately.
Pembina recognizes all actuarial gains and losses arising from defined benefit plans in other comprehensive income and expenses related to defined benefit plans in earnings.
Pembina recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains or losses and past service cost that had not previously been recognized.
iii) Short-Term Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognized for the amount expected to be paid if Pembina has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
83	Pembina Pipeline Corporation 2019 Annual Report

	iv) Share-Based Payment Transactions
	For equity settled share-based payment plans, the fair value of the share-based payment at grant date is recognized as an expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service conditions at the vesting date.
	For cash settled share-based payment plans, the fair value of the amount payable to employees is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as an expense in earnings.
	j. Provisions
	A provision is recognized if, as a result of a past event, Pembina has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions are remeasured at each reporting date based on the best estimate of the settlement amount. The unwinding of the discount rate is recognized as accretion in finance costs.
	i) Decommissioning Provision
	Pembina's activities give rise to certain dismantling, decommissioning, environmental reclamation and remediation obligations at the end of an asset's economic life. A provision is made for the estimated cost of site restoration and capitalized in the relevant asset category.
	Decommissioning obligations are measured at the present value, based on a risk-free rate, of management's best estimate of what is reasonably expected to be incurred to settle the obligation at the end of an asset's economic life. Subsequent to the initial measurement, the obligation is adjusted at the end of each period to reflect the passage of time, changes in the risk-free rate and changes in the estimated future cash flows underlying the obligation. The increase in the provision due to the passage of time is recognized as accretion in finance costs whereas increases or decreases due to changes in the estimated future cash flows or risk-free rate are added to or deducted from the cost of the related asset.
	Decommissioning obligations assumed in a business combination are initially recorded at fair value and remeasured using a risk-free rate subsequent to acquisition. This remeasurement is added to or deducted from the cost of the related asset.
	k. Revenue
	i) Take-or-Pay
	Pembina provides transportation, gas processing, fractionation, terminalling, and storage services under take-or-pay contracts. In a take-or-pay contract, Pembina is entitled to a minimum fee for the firm service promised to a customer over the contract period, regardless of actual volumes transported, processed, terminalled, or stored. This minimum fee can be represented as a set fee for an annual minimum volume, or an annual minimum revenue requirement. In addition, these contracts may include variable consideration for operating costs that are flow through to the customer.
Pembina Pipeline Corporation 2019 Annual Report 84

Pembina satisfies its performance obligations and recognizes revenue for services under take-or-pay commitments when volumes are transported, processed, terminalled, or stored. Make-up rights may arise when a customer does not fulfill their minimum volume commitment in a certain period, but is allowed to use the delivery of future volumes to meet this commitment. These make-up rights are subject to expiry and have varying conditions associated with them. When contract terms allow a customer to exercise their make-up rights using firm volume commitments, revenue is not recognized until these make-up rights are used, expire, or management determines that it is remote that they will be utilized. If Pembina bills a customer for unused service in an earlier period and the customer utilizes available make-up rights, Pembina records a refund liability for the amount to be returned to the customer through an annual adjustment process. For contracts where no make-up rights exist, revenue is recognized to take-or-pay levels once Pembina has an enforceable right to payment for the take-or-pay volumes. Make-up rights generally expire within a contract year, and the majority of the related contract years follow the calendar year.
When customers are transporting, processing, terminalling, or storing volumes below their take-or-pay commitments early in a contract year, and the customer has the right to exercise make up rights against future firm volume commitments, there will be a change to the timing of revenue recognition. Where Pembina has a right to invoice to take-or-pay levels throughout the contract year, revenue is deferred and a contract liability is recorded for the volumes invoiced that were not utilized by the customer. Once the customer has used its make-up rights or it is determined to be remote that a customer will use them, the previously deferred revenue is recognized. In these instances, there will be a deferral of revenue in early quarters of the year, with subsequent recognition occurring in later quarters although there is no impact on cash flows.
For certain arrangements where the customer does not have make-up rights, where the make-up rights have been determined to be insignificant, and for cost of service agreements, revenue is recognized using the practical expedient to recognize revenue in an amount equal to Pembina's right to invoice. For these arrangements, the consideration Pembina is entitled to invoice in each period is representative of the value provided to the customer.
When up-front payments or non-cash consideration is received in exchange for future services to be performed, revenue is deferred as a contract liability and recognized over the period the performance obligation is expected to be satisfied. Non-cash consideration is measured at the fair value of the non-cash consideration received.
ii) Fee-for-Service
Fee-for-service revenue includes firm contracted revenue that is not subject to take-or-pay commitments and interruptible revenue. Pembina satisfies its performance obligations for transportation, gas processing, fractionation, terminalling, and storage as volumes of product are transported, processed, or stored. Revenue is based on a contracted fee and consideration is variable with respect to volumes. Payment is due in the month following Pembina's provision of service.
iii) Product Sales
Pembina satisfies its performance obligation on product sales at the time legal title to the product is transferred to the customer. Certain commodity buy/sell arrangements where control of the product has not transferred to Pembina are recognized on a net basis in revenue.
For product sales, revenue is recognized using the practical expedient to recognize revenue in an amount equal to Pembina's right to invoice as the consideration Pembina is entitled to invoice in each period is representative of the value provided to the customer.
85	Pembina Pipeline Corporation 2019 Annual Report

	l. Finance Income and Finance Costs
	Finance income comprises interest income on funds deposited and invested, finance lease receivables, gains on non-commodity-related derivatives measured at fair value through earnings and foreign exchange gains. Interest income is recognized as it accrues in earnings, using the effective interest rate method.
	Finance costs comprise interest expense on loans and borrowings and lease liabilities, accretion on provisions, losses on disposal of available for sale financial assets, losses on non-commodity-related derivatives, impairment losses recognized on financial assets (other than trade and other receivables) and foreign exchange losses.
	Borrowing costs that are not directly attributable to the acquisition or construction of a qualifying asset are recognized in earnings using the effective interest rate method.
	m. Income Tax
	Income tax expense comprises current and deferred tax. Current and deferred taxes are recognized in earnings except to the extent that they relate to a business combination, or items are recognized directly in equity or in other comprehensive income.
	Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
	Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
	• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination
	and that affects neither accounting nor taxable earnings;
	• temporary differences relating to investments in subsidiaries and joint arrangements to the extent that it is probable that
	they will not reverse in the foreseeable future; and
	• taxable temporary differences arising on the initial recognition of goodwill.
	The measurement of deferred tax reflects the tax consequences that would follow the manner in which Pembina expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
	Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
	Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
	A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
	In determining the amount of current and deferred tax, Pembina takes into account income tax exposures and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes Pembina to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact tax expense in the period that such a determination is made.
Pembina Pipeline Corporation 2019 Annual Report 86

n. Earnings Per Common Share
Pembina presents basic and diluted earnings per common share ("EPS") data for its common shares. Basic EPS is calculated by dividing the earnings attributable to common shareholders of Pembina by the weighted average number of common shares outstanding during the period. To calculate earnings attributable to common shareholders, earnings are adjusted for accumulated preferred dividends. Diluted EPS is determined by adjusting the earnings attributable to common shareholders and the weighted average number of common shares outstanding, for the effects of all potentially dilutive common shares, which comprise share options granted to employees. Only outstanding share options that will have a dilutive effect are included in fully diluted calculations.
The dilutive effect of share options is determined whereby outstanding share options at the end of the period are assumed to have been converted at the beginning of the period or at the time issued if issued during the year. Amounts charged to earnings relating to the outstanding share options are added back to earnings for the diluted calculations. The shares issued upon conversion are included in the denominator of per share basic calculations for the date of issue.
o. Segment Reporting
An operating segment is a component of Pembina that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company's other components. All operating segments' operating results are reviewed regularly by Pembina's Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO") and other Senior Vice Presidents ("SVPs") to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the CEO, CFO and other SVPs include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
p. New Standards and Interpretations Not Yet Adopted
A number of new standards are effective for annual periods beginning after January 1, 2020 and earlier application is permitted; however, Pembina has not early adopted the new or amended standards in preparing Pembina's consolidated financial statements.
The following amended standards and interpretations are not expected to have a significant impact on Pembina's consolidated financial statements, on adoption January 1, 2020.
• Amendments to References to Conceptual Framework in IFRS Standards.
• Definition of a Business (Amendments to IFRS 3).
• Definition of Material (Amendments to IAS 1 and IAS 8).
5. DETERMINATION OF FAIR VALUES
A number of Pembina's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
i) Property, Plant and Equipment
The fair value of property, plant and equipment recognized as a result of a business combination or transferred from a customer is based on market values when available, income approach and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.
87	Pembina Pipeline Corporation 2019 Annual Report

	ii) Intangible Assets
	The fair value of intangible assets acquired in a business combination is determined by an active market value or using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.
	The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.
	iii) Derivatives
	Fair value of derivatives are estimated by reference to independent monthly forward prices, interest rate yield curves, and currency rates at the reporting dates.
	Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the company, entity and counterparty when appropriate.
	iv) Non-Derivative Financial Assets and Liabilities
	The fair value of non-derivative financial assets and liabilities is determined on initial recognition, on a recurring basis, or for disclosure purposes. Fair values of financial assets at amortized cost are calculated based on the present value of estimated future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Fair values of financial assets held at fair value are calculated using a probability-weighted income approach based on current market expectations for future cash flows. For other financial liabilities where market rates are not readily available, a risk adjusted market rate is used which incorporates the nature of the instrument as well as the risk associated with the underlying cash payments.
	v) Decommissioning Provision
	The fair value of decommissioning obligations assumed as part of a business combination are measured as the present value of management's best estimate of what is reasonably expected to be incurred to settle the obligation at the end of an asset's economic life. The obligation is discounted using a risk adjusted rate corresponding to the underlying assets to which the obligation relates.
	vi) Share-Based Compensation Transactions
	The fair value of employee share options is measured using the Black-Scholes formula on grant date. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, expected forfeitures and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
	The fair value of the long-term share unit award incentive plan and associated distribution units are measured based on the volume-weighted average price for 20 days ending at the reporting date of Pembina's shares.
Pembina Pipeline Corporation 2019 Annual Report 88

6. ACQUISITION
On December 16, 2019, Pembina acquired all the issued and outstanding shares of Kinder Morgan Canada Limited ("Kinder Morgan Canada") by way of a plan of arrangement and the U.S. portion of the Cochin Pipeline system (collectively the "Kinder Acquisition") for total consideration of $4.3 billion comprised of $2.0 billion in cash and $2.3 billion of share consideration including, 35.7 million common shares of Pembina at $47.87 per share, 12 million series 23 preferred shares at $24.43 per share and 10 million series 25 preferred shares at $24.33 per share. The common shares were valued using Pembina's market price on the Toronto Stock Exchange immediately prior to the acquisition closing on December 16, 2019 and the preferred shares were valued using Kinder Morgan Canada's equivalent preferred share value on the same date. In accordance with the plan of arrangement, Kinder Morgan Canada was amalgamated with Pembina and the outstanding Kinder Morgan Canada preferred shares were exchanged for Pembina preferred shares with the same terms and conditions. Kinder Morgan Canada owns a significant crude oil storage and terminalling business located in the core of the Edmonton area crude oil complex, the Canadian portion of the Cochin Pipeline system and a 125-acre bulk marine terminal facility in the Port of Vancouver, Canada. Following the acquisition Pembina owns the entire Cochin Pipeline, which is a cross-border pipeline system that connects Pembina's Channahon, Bakken and Edmonton area assets and is connected to markets in Mont Belvieu, Conway and Edmonton.
The acquisition was accounted for as a business combination using the acquisition method where the acquired tangible and intangible assets and assumed liabilities were recorded at their estimated fair values at the date of acquisition, with the exception of right-of-use assets, deferred tax liabilities, and lease liabilities, which are measured in accordance with Pembina's accounting policies.
The purchase price equation, subject to finalization, is based on assessed fair values and is as follows:
($ millions)	December 16, 2019
Purchase Price ConsiderationCommon shares
		1,710
Cash (net of cash acquired)		2,009
Preferred shares		536
		4,255
Current assets		68
Property, plant and equipment		2,660
Intangible assets		1,254
Right-of-use assets		348
Goodwill		809
Other assets		9
Current liabilities		(124)
Deferred tax liabilities		(281)
Decommissioning provision		(74)
Lease liability		(348)
Other liabilities		(66)
		4,255
Pembina engaged an independent valuator to assist with determining the fair value of certain tangible and intangible assets within the purchase price equation. Tangible assets of $2.7 billion were valued primarily using a cost approach. Intangible assets of $1.3 billion are entirely attributable to the acquisition date fair value of customer relationships, which was determined using a discounted cash flow model based on significant assumptions including forecasted revenue growth rates, contract renewal rates, and the discount rate.
The primary drivers that generated goodwill were synergies and business opportunities from the integration of Pembina and Kinder Morgan Canada. A portion of goodwill in the amount of $180 million is expected to be deductible from taxable income
89	Pembina Pipeline Corporation 2019 Annual Report

	for tax purposes. Pembina recognized $12 million in acquisition-related expenses in 2019. All acquisition-related expenses were expensed as incurred and included in other expenses in the Consolidated Statement of Earnings and Comprehensive Income.
	Revenue generated by the acquisition for the period from the acquisition date of December 16, 2019 to December 31, 2019 was $27 million. Net earnings for the same period were $11 million. If the acquisition had occurred on January 1, 2019, management estimates that consolidated revenue would have increased an additional $579 million and consolidated net earnings for the year would have increased an additional $65 million. In determining these amounts, management assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on January 1, 2019.
	Given the acquisition closed on December 16, 2019, the purchase price allocation is not final as Pembina is continuing to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes arising on their recognition, including: identification and classification of leases, contingencies, decommissioning provisions and other potential provisions.
	7. TRADE RECEIVABLES AND OTHER
	As at December 31($ millions)
		2019	2018
	Trade receivables from customers	575	501
	Other receivables	92	88
	Prepayments	25	16
	Impairment loss allowance	—	(1)
	Total trade receivables and other	692	604
Pembina Pipeline Corporation 2019 Annual Report 90

8. PROPERTY, PLANT AND EQUIPMENT
			Facilities	Cavern
	Land and		and	Storage and	Assets Under
($ millions)	Land Rights	Pipelines	Equipment	Other	Construction	Total
CostBalance at December 31, 2017
	329	6,650	6,715	1,223			659	15,576
Additions and transfers								12	531						469	231	291	1,534
Change in decommissioning provision—		(10)	5	19			—	14
Disposals and other								(1)		(7)	(30)	5		(11)	(44)
Balance at December 31, 2018	340	7,164	7,159	1,478			939	17,080
Reclassification on adoption of IFRS 16 (Note 3)								—		—	—	(44)		—	(44)
Additions and transfers								32	215						691	203	534	1,675
Acquisition (Note 6)								86	1,434						798	314	28	2,660
Change in decommissioning provision—		10	143	5			—	158
Foreign exchange adjustments								(2)		(17)	(4)	—		(11)	(34)
Disposals and other—		(3)	(31)	(12)			3	(43)
Balance at December 31, 2019	456	8,803	8,756	1,944			1,493	21,452
DepreciationBalance at December 31, 2017
								9	1,096						721	204	—	2,030
Depreciation								3	142						164	55	—	364
Disposals and other—		(17)	(18)	(9)			—	(44)
Balance at December 31, 2018								12	1,221						867	250	—	2,350
Reclassification on adoption of IFRS 16 (Note 3)								—		—	—	(26)		—	(26)
Depreciation								4	155						174	59	—	392
Disposals and other—		(13)	(26)	—			—	(39)
Balance at December 31, 2019								16	1,363	1,015	283		—	2,677
Carrying amountsBalance at December 31, 2018
	328	5,943	6,292	1,228			939	14,730
Balance at December 31, 2019	440	7,440	7,741	1,661			1,493	18,775
Property, Plant and Equipment Under Construction
Costs of assets under construction at December 31, 2019 totaled $1.5 billion (2018: $939 million) including capitalized borrowing costs.
For the year ended December 31, 2019, included in additions and transfers are capitalized borrowing costs related to the construction of new pipelines or facilities amounting to $42 million (2018: $35 million), with capitalization rates ranging from 3.91 percent to 4.05 percent (2018: 3.86 percent to 4.01 percent).
Depreciation
Pipeline assets are depreciated using the straight line method over three to 75 years with the majority of assets depreciated over 40 years. Facilities and equipment are depreciated using the straight line method over three to 75 years with the majority of assets depreciated over 40 years. Cavern storage and other assets are depreciated using the straight line method over three to 40 years with the majority of assets depreciated over 40 years. These rates are established to depreciate remaining net book value over the shorter of their useful lives or economic lives.
91	Pembina Pipeline Corporation 2019 Annual Report

	9. INTANGIBLE ASSETS AND GOODWILL
		Intangible Assets
				Purchase			Total
				and Sale			Goodwill
				Contracts	Customer					Purchase			& Intangible
	($ millions)		Goodwill	and Other	Relationships					Option	Total	Assets
	CostBalance at December 31, 2017
			3,871	216		638							277	1,131	5,002
	Additions and other									7	11							1	—	12	19
	Transfers									—	—							—	(277)	(277)	(277)
	Balance at December 31, 2018		3,878	227		639							—	866	4,744
	Additions and other									—	13							—	—	13	13
	Acquisition (Note 6)		809	—		1,254							—	1,254	2,063
	Foreign exchange adjustments									(3)	—		(12)			—	(12)	(15)
	Balance at December 31, 2019		4,684	240		1,881							—	2,121	6,805
	AmortizationBalance at December 31, 2017
										—	145		143			—	288	288
	Amortization									—	19		28			—	47	47
	Balance at December 31, 2018									—	164		171			—	335	335
	Amortization									—	10		31			—	41	41
	Balance at December 31, 2019									—	174		202			—	376	376
	Carrying amountsBalance at December 31, 2018
			3,878	63		468							—	531	4,409
	Balance at December 31, 2019		4,684	66		1,679							—	1,745	6,429
	Intangible assets with a finite useful life are amortized using the straight line method over 7 to 40 years.
	The purchase option attributable to Facilities of $277 million to assume an additional interest in the Younger Facilities was reclassified to property, plant and equipment on exercise of the option effective April 1, 2018.The aggregate carrying amount of intangible assets and goodwill allocated to each operating segment is as follows:
				2019		2018
	As at December 31 ($ millions)			Intangible								Intangible
			Goodwill	Assets	Total			Goodwill	Assets	Total
	Pipelines		2,703	1,505	4,208			1,897	278	2,175
	Facilities		541	97	638			541	102	643
	Marketing & New Ventures		1,440	112	1,552			1,440	131	1,571
	Corporate		—	31	31			—	20	20
			4,684	1,745	6,429			3,878	531	4,409
	Goodwill Impairment Testing
	For the purpose of impairment testing, goodwill is allocated to Pembina’s operating segments which represent the lowest level within Pembina at which goodwill is monitored for management purposes. Consistent with prior year, impairment testing for goodwill was performed as at September 30, 2019 other than goodwill acquired in the Acquisition (Note 6) on December 16, 2019 which was supported by the acquisition valuation.
Pembina Pipeline Corporation 2019 Annual Report 92

The recoverable amount was determined using the fair value less costs of disposal approach by discounting each operating segment’s expected future cash flows. The key assumptions that influence the calculation of the recoverable amounts include:
• Cash flows for the first five years are projected based on past experience, actual operating results and the business plan
approved by management. Cash flows for Pipelines and Facilities incorporate assumptions regarding contract renewal volumes and rates, which are based on market expectations. In addition, revenue and cost of product projections for Marketing & New Ventures incorporate assumptions regarding volumes and commodity pricing, which are sensitive to changes in the commodity price environment.
• Cash flows for the remaining years of the useful lives of the assets within each operating segment are extrapolated for
periods up to 75 years (2018: 75 years) using a constant medium-term inflation rate, except where contracted, long-term cash flows indicate that no inflation should be applied or a specific reduction in cash flows was more appropriate.
• Pre-tax discount rates were applied in determining the recoverable amount of operating segments. Discount rates were
estimated based on past experience, the risk free rate and average cost of debt, targeted debt to equity ratio, in addition to estimates of the specific operating segment's equity risk premium, size premium, projection risk and betas.
For each operating segment, key assumptions and discount rate sensitivity are presented below:
	Operating Segments
2019
				Marketing & New
		Pipelines	Facilities		Ventures	(Percent)Pre-tax discount rate
		6.80	6.48		10.57
Adjusted inflation rate		1.16	1.62		1.80
Incremental increase in discount rate that would result in carrying value equal to recoverable amountIncrease in pre-tax discount rate
		4.14	4.85		7.65
The level of the fair value hierarchy within which the fair value measurement is categorized in accordance with IFRS 13 Fair Value Measurement is Level 3 with inputs which are unobservable inputs for the associated assets within each operating segment.
10. INVESTMENTS IN EQUITY ACCOUNTED INVESTEES
							Share of Profit (Loss) from
							Equity Investments
						Ownership Interest	Investment in Equity Accounted
						at December 31	Investees at December 31				12 Months Ended December 31
($ millions)						2019		2018	2019	2018		2019		2018
Alliance						50%		50%	149	160		2,620		2,799
Aux Sable						42.7% - 50%				42.7% - 50%	51	102								426	480
Ruby(1)												-	-	120	118	1,273	1,648
Veresen Midstream						45%		45.3%	48	26		1,348		1,324
CKPC						50%		50%	(1)	—								171		—
Other						50% - 75%		50% - 75%	3	5								116	117
									370	411		5,954		6,368
(1)	Pembina owns a 50 percent convertible preferred interest in Ruby.
Investments in equity accounted investees include the unamortized excess of the purchase price over the underlying net book value of the investee's assets and liabilities at the purchase date, which is comprised of $98 million (2018: $98 million) Goodwill, $2.9 billion (2018: $3.0 billion) in property, plant and equipment and intangibles and $42 million in long-term debt (2018: $52 million).
Pembina has US$2.3 billion in Investments in Equity Accounted Investees that is held by entities whose functional currency is the US dollar. The resulting foreign exchange loss for the year ended December 31, 2019 of $169 million (2018: $295 million gain) has been included in Other Comprehensive Income.
93	Pembina Pipeline Corporation 2019 Annual Report

	Ruby Impairment
	In December 2019, Pembina recognized an impairment charge of $300 million ($220 million net of tax) on its convertible preferred interest in Ruby. The impairment charge was the result of an assessment triggered by upcoming contract expirations in a business environment in the Rockies Basin that remains challenged. The recoverable amount of Ruby was was estimated to be $1.3 billion, calculated using a value in use approach by discounting expected cash flows resulting from Pembina's convertible preferred share interest. Key assumptions that influenced the calculation of the recoverable amount include incremental future contracts (including volumes associated with the Jordan Cove LNG Project being approved and placed in to service), renewals and volumes, future financing within the investment, Pembina's ability to utilize available tax deductions, and the discount rate. Pembina applied a discount rate of 8 percent in calculating the recoverable amount, which was determined using comparable preferred share yields adjusted for the specific risk profile of the investment. If the discount rate used to calculate the impairment was higher by 50 basis points, it would have resulted in an increase to the impairment charge of $80 million ($60 million net of tax). If the discount rate used to calculate the impairment was lower by 50 basis points, it would have resulted in a decrease to the impairment charge of $90 million ($65 million net of tax).
	Distributions
	Distributions received from equity investments for the year ended December 31, 2019 were $575 million (2018: $622 million) and are included in Operating Activities in the Consolidated Statement of Cash Flows. Distributions from Alliance and Veresen Midstream are subject to satisfying certain financing conditions including a minimum debt service coverage ratio requirement.
	Contributions
	Contributions made to investments in equity accounted investees for the year ended December 31, 2019 were $206 million (2018: $58 million) and are included in investing activities in the Consolidated Statement of Cash Flows. Contributions were largely related to funding CKPC and expansions at Veresen Midstream.
	Summarized Financial Information
	Summarized combined financial information of equity accounted investees (presented at 100 percent) is as follows:
	For the years ended December 31($ millions)
		2019	2018
	Net Income and Comprehensive IncomeRevenue
		3,114	3,605
	Cost of sales	(1,178)	(1,566)
	General and administrative expense	(204)	(171)
	Depreciation and amortization	(486)	(511)
	Finance costs and other	(286)	(308)
	Net Income and Comprehensive Income	960	1,049
	Net income and Comprehensive Income attributable to Pembina	370	411
	As at December 31($ millions)
		2019	2018
	Balance SheetCurrent assets
		797	838
	Non-current assets	11,379	11,667
	Current liabilities	802	908
	Non-current liabilities	4,985	5,262
Pembina Pipeline Corporation 2019 Annual Report 94

Financing Activities
On March 28, 2019, Ruby Pipeline, L.L.C., in which Pembina owns a 50 percent preferred interest, amended the maturity date of its 364-day term loan to March 26, 2020. The term loan will continue to amortize at US$16 million per quarter (US$8 million per quarter net to Pembina), beginning March 2019, until a final bullet payment of US$78 million (US$39 million net to Pembina) is payable March 26, 2020, unless otherwise extended.
On September 26, 2019, Veresen Midstream, successfully amended and extended its senior secured credit facilities, which were originally scheduled to mature on April 20, 2022, to April 20, 2024. Under the terms of the amendment and extension reached with a syndicate of lenders, Veresen Midstream increased its borrowing capacity to $225 million under the revolving credit facility and to $2.6 billion of availability under the term facility. Amortization payments of the term facility are deferred twenty-four months, recommencing again on September 30, 2021.
On December 10, 2019, Alliance Pipeline Limited Partnership amended and extended its revolving credit facility. The maturity date was extended to December 12, 2022, and the supplemental commitments provision was exercised, increasing total borrowing capacity by $100 million to $300 million.
Subsequent to year-end, on February 27, 2020, Canada Kuwait Petrochemical Limited Partnership closed a syndicated senior secured credit agreement consisting of a US$1.7 billion amortizing term facility, and a US$150 million revolving facility, which have been guaranteed equally by the owners through the completion of construction on a several basis. The final maturity date of the term facility and revolving facility is February 27, 2027.
95	Pembina Pipeline Corporation 2019 Annual Report

	11. INCOME TAXESThe movements of the components of the deferred tax assets and deferred tax liabilities are as follows:
				Recognized in
		Balance at	Other					Balance at
		December 31,	Recognized in	Comprehensive	December 31,
	($ millions)	2018	Earnings	Income		Acquisition	Equity	Other	2019
	Deferred income tax assetsDerivative financial instruments
						(18)	5	—		—	—	—		(13)
	Employee benefits		9				(1)	1		—	—	—		9
	Share-based payments					26	(2)	—		—	—	—		24
	Provisions					156	29	—		20	—	—		205
	Benefit of loss carryforwards					153	256	—		13	—	(22)		400
	Other deductible temporary
	differences					68	(39)	—		2	(3)	—		28
	Deferred income tax liabilitiesProperty, plant and equipment
		1,660					301	—		136	—	8	2,105
	Intangible assets					118	(14)	—		180	—	—		284
	Investments in equity accounted
	investees	1,262					(155)	—		—	—	—	1,107
	Taxable limited partnership
	income deferral					122	(46)	—		—	—	—		76
	Other taxable temporary
	differences		6				(12)	—		—	—	(7)		(13)
	Total deferred tax liabilities	2,774					(174)	(1)		281	3	23	2,906
				Recognized in
		Balance at	Other					Balance at
		December 31,	Recognized in	Comprehensive	December 31,
	($ millions)	2017	Earnings	Income		Acquisition	Equity	Other	2018
	Deferred income tax assetsDerivative financial instruments
						11	(29)	—		—	—	—		(18)
	Employee benefits		7				—	2		—	—	—		9
	Share-based payments					21	5	—		—	—	—		26
	Provisions					153	3	—		—	—	—		156
	Benefit of loss carryforwards					180	(33)	—		(7)	—	13		153
	Other deductible temporary
	differences					56	16	—		—	(4)	—		68
	Deferred income tax liabilitiesProperty, plant and equipment
		1,361					299	—		—	—	—	1,660
	Intangible assets					198	(80)	—		—	—	—		118
	Investments in equity accounted
	investees	1,173					89	—		—	—	—	1,262
	Taxable limited partnership
	income deferral					56	66	—		—	—	—		122
	Other taxable temporary
	differences					16	(18)	—		—	—	8		6
	Total deferred tax liabilities	2,376					394	(2)		7	4	(5)	2,774
	Pembina's consolidated statutory tax rate for the year ended December 31, 2019 was 26.7 percent (2018: 27.0 percent).
Pembina Pipeline Corporation 2019 Annual Report 96

Reconciliation of Effective Tax Rate
For the years ended December 31($ millions, except as noted)
	2019	2018
Earnings before income tax	1,528	1,742
Statutory tax rate	26.7%	27.0%
Income tax at statutory rate	408	470
Tax rate changes and foreign rate differential	(359)	(16)
Changes in estimate and other	(16)	9
Permanent items	3	1
Income tax expense	36	464
In the second quarter of 2019, the enactment of Bill 3 Job Creation Tax Cut Act ("Alberta Corporate Tax Amendment") reduced the corporate income tax rate from 12 percent to eight percent over a four-year period which resulted in a deferred income tax recovery of $305 million.
Income Tax Expense
For the years ended December 31 ($ millions)
	2019	2018
Current tax expense	210	70
Deferred tax expenseOrigination and reversal of temporary differences
	393	368
Tax rate changes on deferred tax balances	(345)	(1)
(Increase) decrease in tax loss carry forward	(222)	27
Total deferred tax (recovery) expense	(174)	394
Total income tax expense	36	464
Deferred Tax Items Recovered Directly in Equity
For the years ended December 31($ millions)
	2019	2018
Share issue costs	(3)	(4)
Other comprehensive income (loss)	1	2
Deferred tax items recovered directly in equity	(2)	(2)
Pembina has temporary differences associated with its investments in subsidiaries. At December 31, 2019, Pembina has not recorded a deferred tax asset or liability for these temporary differences (2018: nil) as Pembina controls the timing of the reversal and it is not probable that the temporary differences will reverse in the foreseeable future.
At December 31, 2019, Pembina had US$1.1 billion (2018: US$221 million) of U.S. tax losses that will expire after 2030 and $67 million (2018: $349 million) of Canadian tax losses that will expire after 2037. Pembina has determined that it is probable that future taxable profits will be sufficient to utilize these losses.12. TRADE PAYABLES AND OTHER
As at December 31($ millions)
	2019	2018
Trade payables	717	519
Other payables & accrued liabilities	296	284
Total trade payables and other	1,013	803
97	Pembina Pipeline Corporation 2019 Annual Report

	13. LEASES
	Lessee Leases
	Pembina enters into arrangements to secure access to assets necessary for operating the business. Leased (right-of-use) assets include terminals, rail, buildings, land and other assets. Total cash outflows related to leases were $83 million for the 12 months ended December 31, 2019.
	Right-of-Use Assets
	($ millions)	Terminals	Rail	Buildings Land & Other	Total
	Balance at January 1, 2019 (Note 3)	—			221		127	79	427
	Additions	—			54		1	58	113
	Acquisition (Note 6)	317			—		7	24	348
	Amortization	—			(37)		(17)	(12)	(66)
	Balance at December 31, 2019	317			238		118	149	822
	Included in additions is $45 million related to the remeasurement of the decommissioning provision for the restoration of leased land assets to the condition required by the terms of the underlying lease subsequent to the Kinder Acquisition.
	Lessor Leases
	Pembina has entered into contracts for the use of its assets that have resulted in lease treatment for accounting purposes. Assets under operating leases include pipelines, terminals and storage caverns. The carrying value of property, plant and equipment under operating leases at December 31, 2019 is $664 million (2018: $679 million). Assets under finance leases include office sub-leases.
	Pembina is continuing to obtain and verify information required to determine the identification and classification of lessor leases acquired on December 16, 2019 as part of the Kinder Acquisition. Lessor lease identification could materially impact the classification of acquired assets in the final purchase price allocation, the classification and carrying value of acquired assets at the reporting date, and the following disclosures. Based on information available at the reporting date, Pembina estimates the total undiscounted lessor operating lease payments related to assets acquired as part of the Kinder Acquisition to be approximately $175 million and the carrying value of property, plant and equipment under operating leases at December 31, 2019 to be $58 million.
	Maturity of Lease Receivables
	As at December 31, 2019
				Operating Leases (1)		Finance Leases	($ millions)Less than one year
							90	6
	One to two years						89	7
	Two to three years						89	6
	Three to four years						89	4
	Four to five years						89	4
	More than five years						910	12
	Total undiscounted lease payments						1,356	39
	Unearned finance income				(4)
	Finance lease receivable				35
	(1)	Excludes the total undiscounted lessor operating lease payments of $175 million related to assets acquired as part of the Kinder Acquisition as noted above.
	Finance lease receivables are included in advances to related parties and other assets on the Consolidated Statement of Financial Position.
Pembina Pipeline Corporation 2019 Annual Report 98

14. LOANS AND BORROWINGS
This note provides information about the contractual terms of Pembina's interest-bearing loans and borrowings, which are measured at amortized cost. Carrying Value, Terms and Conditions, and Debt Maturity Schedule
	Carrying Value
		Authorized at	Nominal	Year of
($ millions)		December 31, 2019	interest Rate	Maturity December 31, 2019	December 31, 2018
Senior unsecured credit facilities(1)(4)						3,020	3.25(2)	Various(1)	2,097		1,305
Senior unsecured notes – series A						73	5.57	2020	74		76
Senior unsecured notes – series C						200	5.58	2021	199		199
Senior unsecured notes – series D						—	5.91	2019	—		267
Senior unsecured medium-term notes series 1						250	4.89	2021	250		250
Senior unsecured medium-term notes series 2						450	3.77	2022	449		449
Senior unsecured medium-term notes series 3						450	4.75	2043	446		446
Senior unsecured medium-term notes series 4						600	4.81	2044	596		596
Senior unsecured medium-term notes series 5						450	3.54	2025	449		448
Senior unsecured medium-term notes series 6						500	4.24	2027	498		498
Senior unsecured medium-term notes series 7						500	3.71	2026	498		498
Senior unsecured medium-term notes series 8						650	2.99	2024	646		646
Senior unsecured medium-term notes series 9						550	4.74	2047	542		541
Senior unsecured medium-term notes series 10						400	4.02	2028	398		398
Senior unsecured medium-term notes series 11						300	4.75	2048	298		298
Senior unsecured medium-term notes series 12						400	3.62	2029	398		—
Senior unsecured medium-term notes series 13						700	4.54	2049	714		—
Senior unsecured medium-term notes series 14						600	2.56	2023	598		—
Senior unsecured medium-term notes series 15						600	3.31	2030	597		—
Senior unsecured medium-term notes 3A						50	5.05	2022	52		50
Senior unsecured medium-term notes 4A						—	3.06	2019	—		205
Senior unsecured medium-term notes 5A						350	3.43	2021	353		353
Finance lease liabilities and other(3)						—	—			14
Total interest bearing liabilities	10,152						7,537
Less current portion	(74)						(480)
Total non-current	10,078						7,057
(1)	Pembina's unsecured credit facilities include a $2.5 billion revolving facility that matures May 2024, a $500 million non-revolving term loan that matures August 2022 and a
$20 million operating facility that matures May 2020, which is typically renewed on an annual basis.
(2)	The nominal interest rate is the weighted average of all drawn credit facilities based on Pembina's credit rating at December 31, 2019. Borrowings under the credit facilities
bear interest at prime, Bankers' Acceptance, or LIBOR rates, plus applicable margins.
(3)	On adoption of IFRS 16 on January 1, 2019, finance leases previously reported in loans and borrowings were reclassified to lease liabilities. See Note 3.
(4)	At December 31, 2019, US$454 million was drawn on the $2.5 billion revolving credit facility (2018: $nil).
On April 3, 2019, Pembina closed an offering of $800 million of senior unsecured medium-term notes. The offering was conducted in two tranches, consisting of $400 million in senior unsecured medium-term notes, series 12, having a fixed coupon of 3.62 percent per annum, paid semi-annually, and maturing on April 3, 2029 and $400 million in senior unsecured medium-term notes, series 13, having a fixed coupon of 4.54 percent per annum, paid semi-annually, and maturing on April 3, 2049.
On May 31, 2019, Pembina completed an extension on its unsecured $2.5 billion revolving credit facility, which now matures on May 31, 2024.
On June 13, 2019, Pembina's $200 million senior unsecured medium term note 4A matured and was fully repaid.
99	Pembina Pipeline Corporation 2019 Annual Report

	On September 12, 2019, Pembina closed an offering of $1.5 billion of senior unsecured medium-term notes. The offering was conducted in three tranches, consisting of $600 million in senior unsecured medium-term notes, series 14, having a fixed coupon of 2.56 percent per annum, paid semi-annually, and maturing on June 1, 2023; $600 million in senior unsecured medium-term notes, series 15, having a fixed coupon of 3.31 percent per annum, paid semi-annually, and maturing on February 1, 2030; and $300 million issued through a re-opening of Pembina's senior unsecured medium-term notes, series 13, having a fixed coupon of 4.54 percent per annum, paid semi-annually, and maturing on April 3, 2049.
	On September 19, 2019, Pembina fully-repaid its unsecured $1.0 billion non-revolving term loan.
	On November 18, 2019, Pembina's $267 million senior unsecured note, series D, matured and was fully repaid.
	On December 16, 2019, Pembina closed a $500 non-revolving term loan with certain existing lenders. The term loan has an initial term of three years and is pre-payable at Pembina's option. The other terms and conditions of the term loan, including financial covenants, are substantially similar to Pembina's $2.5 billion revolving credit facility.
	Subsequent to year-end, on January 10, 2020, Pembina closed an offering of $1.0 billion of senior unsecured medium-term notes. The offering was conducted in three tranches, consisting of $250 million issued through a re-opening of Pembina's senior unsecured medium-term notes, series 10, having a fixed coupon of 4.02 percent per annum, paid semi-annually and maturing on March 27, 2028; $500 million issued through a re-opening of Pembina's senior unsecured medium-term notes, series 11, having a fixed coupon of 4.75 percent per annum, paid semi-annually and maturing on March 26, 2048; and $250 million issued through a re-opening of Pembina's senior unsecured medium-term notes, series 12, having a fixed coupon of 3.62 percent per annum, paid semi-annually and maturing on April 3, 2029.
	All facilities are governed by specific debt covenants which Pembina was in compliance with at December 31, 2019 (2018: in compliance).
	For more information about Pembina's exposure to interest rate, foreign currency and liquidity risk, see Note 24 Financial Instruments.15. DECOMMISSIONING PROVISION
	($ millions)	2019	2018
	Balance at January 1	573	551
	Unwinding of discount rate	14	12
	Change in rates	191	—
	Acquisition (Note 6)	74	—
	Additions	28	18
	Change in cost estimates and other	(13)	(8)
	Total	867	573
	Less current portion (included in accrued liabilities)	(3)	(4)
	Balance at December 31	864	569
	The decommissioning provision reflects the discounted cash flows expected to be incurred to decommission Pembina's pipeline systems, gas processing and fractionation plants, storage and terminalling hubs, including estimated environmental reclamation and remediation costs.
	Changes in the measurement of the decommissioning provision are added to, or deducted from, the cost of the related property, plant and equipment or right of use asset. When a re-measurement of the decommissioning provision relates to a retired asset, the amount is recorded in earnings.
	The undiscounted cash flows at the time of decommissioning are calculated using an estimated timing of economic outflows ranging from one to 83 years, with the majority estimated at 50 years. The estimated economic lives of the underlying assets form the basis for determining the timing of economic outflows.
Pembina Pipeline Corporation 2019 Annual Report 100

At December 31, 2018, Pembina used a 1.8 percent inflation rate per annum and a risk-free nominal rate of 2.3 percent to calculate the present value of the decommissioning provision.
In the third quarter of 2019, due to forces influencing global capital markets, long-term risk free nominal rates in Canada declined below target inflation rates, implying a negative real rate of return. Pembina determined that applying these rates to current cost estimates would not provide an accurate measurement of the decommissioning liability as observable stand-alone risk free real rates of return continue to be positive. To provide a more accurate measurement of the liability, Pembina applied a risk-free real return rate of 0.3 percent to estimate the present value of the decommissioning provision at September 30, 2019, resulting in a change in estimate. The risk-free real return rate represents an observable, market based risk-free rate of return after adjusting for inflation.
In the fourth quarter of 2019, Pembina continued to apply a risk free real return rate of 0.3 percent to estimate the present value of the decommissioning provision at December 31, 2019. The change in rates of $191 million includes $135 million resulting from the recalculation of the Kinder Acquisition decommissioning provision using the real risk free rate of 0.3 percent compared to the risk adjusted rate at the acquisition date in the purchase price equation.
16. SHARE CAPITAL
Pembina is authorized to issue an unlimited number of common shares, without par value, 254,850,850 Class A preferred shares, issuable in series and an unlimited number of Class B preferred shares. The holders of the common shares are entitled to receive notice of, attend and vote at any meeting of the shareholders of Pembina, receive dividends declared and share in the remaining property of Pembina upon distribution of the assets of Pembina among its shareholders for the purpose of winding-up its affairs.Common Share Capital
	Number of
	Common Shares	Common
($ millions, except as noted)	(millions)	Share Capital
Balance at December 31, 2017			503	13,447
Debenture conversions			3	140
Share-based payment transactions			2	75
Balance at December 31, 2018			508	13,662
Issued on Acquisition, net of issue costs (Note 6)			36	1,710
Share-based payment transactions			4	167
Balance at December 31, 2019			548	15,539
Preferred Share Capital
					Number of Preferred
	Shares	Preferred
($ millions, except as noted)	(millions)	Share Capital
Balance at December 31, 2017			100	2,424
Part VI.1 tax			—	(1)
Balance at December 31, 2018			100	2,423
Class A, Series 23 Preferred shares issued on Acquisition, net of issue costs (Note 6)			12	293
Class A, Series 25 Preferred shares issued on Acquisition, net of issue costs (Note 6)			10	243
Part VI.1 tax			—	(3)
Balance at December 31, 2019			122	2,956
On December 1, 2018, none of the 10 million Cumulative Redeemable Rate Reset Class A Preferred Series 1 shares outstanding were converted into Cumulative Redeemable Floating Rate Class A Preferred Series 2 shares.
On March 1, 2019, none of the six million Cumulative Redeemable Rate Reset Class A Preferred Series 3 shares outstanding were converted into Cumulative Redeemable Floating Rate Class A Preferred Series 4 shares.
101	Pembina Pipeline Corporation 2019 Annual Report

	On March 31, 2019, none of the six million Cumulative Redeemable Rate Reset Class A Preferred Series 17 shares outstanding were converted into Cumulative Redeemable Floating Rate Class A Preferred Series 18 shares.
	On June 3, 2019, none of the 10 million Cumulative Redeemable Rate Reset Class A Preferred Series 5 shares outstanding were converted into Cumulative Redeemable Floating Rate Class A Preferred Series 6 shares.
	On December 2, 2019, none of the 10 million Cumulative Redeemable Rate Reset Class A Preferred Series 7 shares outstanding were converted into Cumulative Redeemable Floating Rate Class A Preferred Series 8 shares.
	On December 16, 2019, in connection with the Kinder Acquisition, the outstanding preferred shares of Kinder Morgan Canada were exchanged for Series 23 and 25 Class A preferred shares with similar terms and conditions as the shares previously issued by Kinder Morgan Canada. Dividends on the Series 23 and 25 Class A preferred shares will continue to be paid on the 15th February, May, August and November in each year, if, as and when declared by the Board of Directors.
	Dividends
	The following dividends were declared by Pembina:
	For the years ended December 31($ millions)
		2019	2018
	Common shares
	Common shares $2.36 per qualifying share (2018: $2.24)	1,213	1,131
	Preferred shares
	$1.23 per Series 1 preferred share (2018: $1.06)	12	11
	$1.13 per Series 3 preferred share (2018: $1.18)	7	7
	$1.19 per Series 5 preferred share (2018: $1.25)	12	12
	$1.12 per Series 7 preferred share (2018: $1.13)	11	11
	$1.19 per Series 9 preferred share (2018: $1.19)	11	11
	$1.44 per Series 11 preferred share (2018: $1.44)	10	10
	$1.44 per Series 13 preferred share (2018: $1.44)	14	14
	$1.12 per Series 15 preferred share (2018: $1.12)	9	9
	$1.22 per Series 17 preferred share (2018: $1.25)	7	8
	$1.25 per Series 19 preferred share (2018: $1.25)	10	10
	$1.23 per Series 21 preferred share (2018: $1.20)	20	19
	$0.16 per Series 23 preferred share (2018: nil)	2	—
	$0.16 per Series 25 preferred share (2018: nil)	1	—
		126	122
	On May 2, 2019, Pembina's Board of Directors approved a five percent increase to its monthly common share dividend rate (from $0.19 per common share to $0.20 per common share), commencing with the dividend paid on June 14, 2019.
	On December 16, 2019, upon closing of the Kinder Acquisition, Pembina's Board of Directors approved a $0.01 per common share increase to its monthly common share dividend rate (from $0.20 per common share to $0.21 per common share), commencing with the dividend paid on February 14, 2020.
Pembina Pipeline Corporation 2019 Annual Report 102

On January 9, 2020, Pembina announced that its Board of Directors had declared a dividend of $0.21 per qualifying common share ($2.52 annually) in the total amount of $115 million, payable on February 14, 2020 to shareholders of record on January 24, 2019. Pembina's Board of Directors also declared quarterly dividends for Pembina's preferred shares as outlined in the following table:
			Dividend Amount
SeriesRecord DatePayable DatePer Share Amount		($ millions)
Series 1	February 3, 2020	March 2, 2020		$0.306625	3
Series 3	February 3, 2020	March 2, 2020		$0.279875	2
Series 5	February 3, 2020	March 2, 2020		$0.285813	3
Series 7	February 3, 2020	March 2, 2020		$0.273750	3
Series 9	February 3, 2020	March 2, 2020		$0.296875	3
Series 11	February 3, 2020	March 2, 2020		$0.359375	2
Series 13	February 3, 2020	March 2, 2020		$0.359375	4
Series 15	March 16, 2020	March 31, 2020		$0.279000	2
Series 17	March 16, 2020	March 31, 2020		$0.301313	2
Series 19	March 16, 2020	March 31, 2020		$0.312500	3
Series 21	February 3, 2020	March 2, 2020		$0.306250	5
Series 23	January 31, 2020	February 18, 2020		$0.328125	4
Series 25	January 31, 2020	February 18, 2020		$0.325000	3
On February 5, 2020, Pembina announced that its Board of Directors had declared a dividend of $0.21 per common share ($2.52 annually) in the total amount of $115 million, payable on March 13, 2020 to shareholders of record on February 25, 2020. 17. PERSONNEL EXPENSES
For the years ended December 31($ millions)
						2019	2018
Salaries and wages						304	254
Share-based compensation expense (Note 23)						66	63
Short-term incentive plan						64	59
Pension plan expense						25	23
Health, savings plan and other benefits						30	21
						489	420
18. REVENUE
Revenue has been disaggregated into categories to reflect how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.
a. Revenue Disaggregation
		2019				2018
For the years ended December 31		Marketing	Marketing
		& New	& New
	Pipelines						Facilities	Ventures				Total	Pipelines						Facilities	Ventures			Total	($ millions)Take-or-pay(1)
									1,200	625						—	1,825	979		582	—	1,561
Fee-for-service(1)									387	117						—	504			424		103	—		527
Product sales(2)(3)									—	5	4,804			4,809	—		10	5,175	5,185
Revenue from contracts with customers									1,587	747	4,804			7,138	1,403					695	5,175	7,273
Lease and other revenue(4)									63	29						—	92			61		17	—		78
Total external revenue									1,650	776	4,804			7,230	1,464					712	5,175	7,351
(1)	Revenue recognized over time.
(2)	Revenue recognized at a point in time.
(3)	Revenue reported for 2018 periods have been recast to reflect updated presentation for 2019, where product sales are reported in Marketing & New Ventures.
(4)	Includes fixed operating lease income of $92 million (2018: $78) for the 12 months ended December 31, 2019.
103	Pembina Pipeline Corporation 2019 Annual Report

	b. Contract BalancesSignificant changes in the contract liabilities balances during the period are as follows:
		2019	2018
OtherTotalOther
	For the years ended December 31	Contract			Contract	Contract			Total Contract
	($ millions)			Take-or-Pay	Liabilities		Liabilities	Take-or-Pay	Liabilities	Liabilities
	Opening balance						9	159		168	8	149	157
	Additions (net in the period)						4	35		39	5	33	38
	Acquisition (Note 6)						—	77		77	—	—	—
	Revenue recognized from contract liabilities(1)						(5)	(48)		(53)	(4)	(23)	(27)
	Closing balance						8	223		231	9	159	168
	Less current portion(2)						(8)	(31)		(39)	(9)	(28)	(37)
	Ending balance						—	192		192	—	131	131
	(1)	Recognition of revenue related to performance obligations satisfied in the current period that were included in the opening balance of contract liabilities.
	(2)	As at December 31, 2019, the balance includes $8 million of cash collected under take-or-pay contracts which will be recognized within one year as the customer chooses to
	ship, process, or otherwise forego the associated service.
	Contract liabilities depict Pembina's obligation to perform services in the future for which payment has been received from customers. Contract liabilities include up-front payments or non-cash consideration received from customers for future transportation, processing and storage services. Contract liabilities also include consideration received from customers for take-or-pay commitments where the customer has a make-up right to ship or process future volumes under a firm contract. These amounts are non-refundable should the customer not use its make-up rights.
	Pembina does not have any contract assets. In all instances where goods or services have been transferred to a customer in advance of the receipt of customer consideration, Pembina's right to consideration is unconditional and has therefore been presented as a receivable.
	c. Revenue Allocated to Remaining Performance Obligations
	Pembina expects to recognize revenue in future periods that includes current unsatisfied remaining performance obligations totaling $9.3 billion (2018: $10.3 billion). Over the next five years, this remaining performance obligation will be recognized annually ranging from $1.1 billion (2018: $1.1 billion) declining to $983 million (2018: $964 million). Subsequently, up to 2039 (2018: 2039), Pembina will recognize from $977 million (2018: $1.0 billion) to $13 million (2018: $8 million) per year.
	In preparing the above figures, Pembina has taken the practical expedient to exclude contracts that are being accounted for using the practical expedient to recognize revenue in an amount equal to Pembina's right to invoice, as well as the practical expedient to exclude contracts that have original expected durations of one year or less.
	Variable consideration relating to flow through costs are not included in the amounts presented. These flow through costs do not impact net income or cash flow, and due to the long-term nature of the contracts there is significant uncertainty in estimating these amounts. In addition, Pembina excludes contracted revenue amounts for assets not yet in-service unless both board of directors approval and regulatory approval for the asset has been obtained.
Pembina Pipeline Corporation 2019 Annual Report 104

19. NET FINANCE COSTS
For the years ended December 31($ millions)
	2019	2018
Interest expense on financial liabilities measured at amortized cost:
Loans and borrowings	291	268
Convertible debentures—	6
Leases	17	—
Unwinding of discount rate	13	12
Finance lease income	(1)	—
Loss in fair value of non-commodity-related derivative financial instruments	(4)	(4)
Foreign exchange gains and other	(22)	(3)
Net finance costs	294	279
Net interest paid of $311 million (2018: $294 million) includes interest paid during construction and capitalized of $42 million (2018: $35 million).
20. OPERATING SEGMENTS
Pembina determines its reportable segments based on the nature of operations and includes three operating segments: Pipelines, Facilities and Marketing & New Ventures.
The Pipelines segment includes conventional, oil sands and transmission pipeline systems, crude oil storage and terminalling business and related infrastructure serving various markets and basins across North America.
The Facilities segment includes processing and fractionation facilities and related infrastructure that provide Pembina's customers with natural gas and NGL services that are highly integrated with Pembina's other businesses and a bulk marine terminal in the Port of Vancouver, Canada.
The Marketing & New Ventures segment undertakes value-added commodity marketing activities including buying and selling products and optimizing storage opportunities, by contracting capacity on Pembina's and various third-party pipelines and utilizing Pembina's rail fleet and rail logistics capabilities. Marketing activities also include identifying commercial opportunities to further develop other Pembina assets. Pembina's Marketing business also includes results from Aux Sable's NGL extraction facility near Chicago, Illinois and other natural gas and NGL processing facilities, logistics and distribution assets in the United States and Canada.
The financial results of the operating segments are included below. Performance is measured based on results from operating activities, net of depreciation and amortization, as included in the internal management reports that are reviewed by Pembina's Chief Executive Officer, Chief Financial Officer and other Senior Vice Presidents. These results are used to measure performance as management believes that such information is the most relevant in evaluating results of certain segments relative to other entities that operate within these industries. Intersegment transactions are recorded at market value and eliminated under corporate and intersegment eliminations.
105	Pembina Pipeline Corporation 2019 Annual Report

	For the year ended December 31, 2019				Corporate &
			Marketing & New		Inter-Division
		Pipelines	Facilities			Ventures	Eliminations	Total	($ millions)
	Revenue from external customers	1,650	776			4,804			—	7,230
	Inter-division revenue	137	345							—	(482)	—
	Total revenue(1)(2)	1,787	1,121			4,804			(482)	7,230
	Operating expenses	436	344							—	(178)	602
	Cost of goods sold, including product purchases							—	4	4,417			(311)	4,110
	Realized gain on commodity-related derivative
	financial instruments							—	—					(33)	—	(33)
	Share of profit from equity accounted investees	270	50				50	—	370
	Depreciation and amortization included in operations	245	168							51	11	475
	Unrealized loss on commodity-related derivative
	financial instruments							—	—					13	—	13
	Gross profit	1,376	655			406			(4)	2,433
	Depreciation included in general and administrative							—	—					—	36	36
	Other general and administrative							30	14					35	181	260
	Other expense							3	—					3	9	15
	Impairment of investment in equity accounted
	investees	300	—				—	—	300
	Reportable segment results from operating activities	1,043	641			368			(230)	1,822
	Net finance costs (income)							9	23					(8)	270	294
	Reportable segment earnings (loss) before tax	1,034	618			376			(500)	1,528
	Capital expenditures	892	569			157			27	1,645
	Contributions to equity accounted investees							13	73	177			—	263
	For the year ended December 31, 2018				Corporate &
			Marketing & New		Inter-Division
		Pipelines	Facilities(3)			Ventures(3)	Eliminations	Total	($ millions)
	Revenue from external customers	1,464	712			5,175			—	7,351
	Inter-division revenue	124	302							—	(426)	—
	Total revenue(1)(2)	1,588	1,014			5,175			(426)	7,351
	Operating expenses	396	313							—	(158)	551
	Cost of goods sold, including product purchases							—	8	4,789			(282)	4,515
	Realized loss on commodity-related derivative
	financial instruments							—	—					51	—	51
	Share of profit from equity accounted investees	279	30	102		—	411
	Depreciation and amortization included in operations	216	149							26	—	391
	Unrealized gain on commodity-related derivative
	financial instruments							—	—					(73)	—	(73)
	Gross profit	1,255	574			484			14	2,327
	Depreciation included in general and administrative							—	—					—	26	26
	Other general and administrative							26	17					41	169	253
	Other expense							—	5					12	10	27
	Reportable segment results from operating activities	1,229	552			431			(191)	2,021
	Net finance costs							9	6					16	248	279
	Reportable segment earnings (loss) before tax	1,220	546			415			(439)	1,742
	Capital expenditures	711	348			134			33	1,226
	Contributions to equity accounted investees							—	56					2	—	58
	(1) Total revenue includes $215 million (2018: $265 million) associated with U.S. revenues.
	(2)	During both periods, one customer accounted for 10 percent or more of total revenues, with $718 million (2018: $792 million) reported throughout all segments.
	(3)	Revenue and cost of goods sold reported for all 2018 periods have been recast to reflect updated presentation for 2019, where the majority of cost of goods sold and
	corresponding revenues are reported in Marketing & New Ventures.
Pembina Pipeline Corporation 2019 Annual Report 106

Geographical Information
Non-Current Assets
For the years ended December 31($ millions)
	2019	2018
Canada	26,596	20,936
United States	5,569	4,715
Total non-current assets(1)	32,165	25,651
(1)	Excludes deferred income tax assets.
21. EARNINGS PER COMMON SHARE
Basic Earnings Per Common Share
The calculation of basic earnings per common share at December 31, 2019 was based on the earnings attributable to common shareholders of $1.4 billion (2018: $1.2 billion) and a weighted average number of common shares outstanding of 512 million (2018: 505 million).
Diluted Earnings Per common Share
The calculation of diluted earnings per common share at December 31, 2019 was based on earnings attributable to common shareholders of $1.4 billion (2018: $1.2 billion), and weighted average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares of 514 million (2018: 509 million).
Earnings Attributable to Common Shareholders
For the years ended December 31($ millions)
	2019	2018
Earnings	1,492	1,278
Dividends on preferred shares	(123)	(122)
Cumulative dividends on preferred shares, not yet declared	(8)	(3)
Basic earnings attributable to common shareholders	1,361	1,153
Effect of after-tax interest on debentures to earnings—	4
Diluted earnings attributable to common shareholders	1,361	1,157
Weighted Average Number of Common Shares
(In millions of shares, except as noted)	2019	2018
Issued common shares at January 1	508	503
Effect of shares issued on Acquisition	1	—
Effect of shares issued on exercise of options	3	1
Effect of conversion of convertible debentures—	1
Basic weighted average number of common shares at December 31	512	505
Dilutive effect of debentures converted—	2
Dilutive effect of share options on issue	2	2
Diluted weighted average number of common shares at December 31	514	509
Basic earnings per common share (dollars)	2.66	2.28
Diluted earnings per common share (dollars)	2.65	2.28
The average market value of Pembina's shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding.
107	Pembina Pipeline Corporation 2019 Annual Report

	22. PENSION PLAN
	As at December 31($ millions)
		2019	2018
	Registered defined benefit net obligation	19	19
	Supplemental defined benefit net obligation	16	12
	Net employee benefit obligations	35	31
	Pembina maintains defined contribution plans and non-contributory defined benefit pension plans covering its employees. On April 1, 2018, Pembina exercised its option to assume an additional interest in the Younger extraction and fractionation facilities ("Younger Facilities"). Accordingly, Pembina also assumed the Bargaining Unit Pension Plan for Employees at the Younger Plant ("Younger Plan") with the net obligation of $6 million. Pembina contributes five to 10 percent of an employee's earnings to the defined contribution plan until the employee's age plus years of service equals 50, at which time they become eligible for the defined benefit plans. Pembina recognized $11 million in expense for the defined contribution plan during the year (2018: $8 million). The defined benefit plans include a funded registered plan for all eligible employees and an unfunded supplemental retirement plan for those employees affected by the Canada Revenue Agency maximum pension limits. The defined benefit plans are administered by separate pension funds that are legally separated from Pembina. Benefits under the plans are based on the length of service and the annual average best three years of earnings during the last 10 years of service of the employee. Benefits paid out of the plans are not indexed. Pembina measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year. The most recent actuarial valuation was at December 31, 2018. The defined benefit plans expose Pembina to actuarial risks such as longevity risk, interest rate risk, and market (investment) risk.
	Defined Benefit Obligations
2019		2018
	As at December 31			Registered	Supplemental	Registered				Supplemental
	($ millions)	Plans					Plan	Plan	Plan
	Present value of unfunded obligations	—					16	—	12
	Present value of funded obligations	250					—	212	—
	Total present value of obligations	250					16	212	12
	Fair value of plan assets	231					—	193	—
	Recognized liability for defined benefit obligations	(19)					(16)	(19)	(12)
	Pembina funds the defined benefit obligation plans in accordance with government regulations by contributing to trust funds administered by an independent trustee. The funds are invested primarily in equities and bonds. Defined benefit plan contributions totalled $20 million for the year ended December 31, 2019 (2018: $19 million).
	Pembina has determined that, in accordance with the terms and conditions of the defined benefit plans, and in accordance with statutory requirements of the plans, the present value of refunds or reductions in future contributions is not lower than the balance of the total fair value of the plan assets less the total present value of obligations. As such, no decrease in the defined benefit asset is necessary at December 31, 2019 (2018: nil).
	Registered Defined Benefit Pension Plan Assets Comprise
	As at December 31(Percent)
		2019	2018
	Equity securities	62	61
	Debt	38	39
		100	100
Pembina Pipeline Corporation 2019 Annual Report 108

Movement in the Present Value of the Defined Benefit Pension Obligation
	2019	2018
			Registered	Supplemental		Registered	Supplemental
($ millions)	Plans				Plan	Plan			Plan
Defined benefits obligations at January 1	212				12	192			11
Benefits paid by the plan	(12)				—	(12)			—
Current service costs	15				1	14			1
Interest expense	8				—	7			—
Transfer from Younger——	16						—
Actuarial losses (gains) in other comprehensive income	27				3	(5)			—
Defined benefit obligations at December 31	250				16	212			12
Movement in the Present Value of Registered Defined Benefit Pension Plan Assets
($ millions)		2019						2018
Fair value of plan assets at January 1		193						182
Contributions paid into the plan		20						19
Benefits paid by the plan		(12)						(12)
Return on plan assets		22						(13)
Transfer from Younger—						10
Interest income		8						7
Fair value of registered plan assets at December 31		231						193
Expense Recognition in Earnings
For the years ended December 31 ($ millions)
		2019						2018
Registered PlanCurrent service costs
		15						14
Interest on obligation		8						8
Expected return on plan assets		(8)						(7)
		15						15
The expense is recognized in the following line items in the consolidated statement of comprehensive income:
For the years ended December 31 ($ millions)
		2019						2018
Registered PlanOperating expenses
		7						8
General and administrative expense		8						7
		15						15
Expense recognized for the Supplemental Plan was less than $2 million for each of the years ended December 31, 2019 and 2018.
109	Pembina Pipeline Corporation 2019 Annual Report

	Actuarial Gains and Losses Recognized in Other Comprehensive Income
		2019	2018
				Registered	Supplemental	Registered	Supplemental
	($ millions)			Plans	Plan		Total		Plan	Plan	Total
	Balance at January 1						(28)	(1)				(29)	(22)	(1)	(23)
	Remeasurements:				—
	Financial assumptions						(21)	(1)				(22)	3	—	3
	Experience adjustments						—	—				—	—	—	—
	Return on plan assets excluding interest income						16	—				16	(9)	—	(9)
	Recognized loss during the period after tax						(5)	(1)				(6)	(6)	—	(6)
	Balance at December 31						(33)	(2)				(35)	(28)	(1)	(29)
	Principal actuarial assumptions used:
	As at December 31(weighted average percent)
			2019			2018
	Discount rate		3.1%			3.8%
	Future pension earning increases		4.0%			4.0%
	Assumptions regarding future mortality are based on published statistics and mortality tables. The current longevities underlying the values of the liabilities in the defined plans are as follows:
	As at December 31(years)
			2019			2018
	Longevity at age 65 for current pensionersMales
			21.8			21.7
	Females		24.2			24.1
	Longevity at age 65 for current member aged 45Males
			22.8			22.8
	Females		25.1			25.1
	The calculation of the defined benefit obligation is sensitive to the discount rate, compensation increases, retirements and termination rates as set out above. An increase or decrease of the estimated discount rate of 3.1 percent by 100 basis points at December 31, 2019 is considered reasonably possible in the next financial year but would not have a material impact on the obligation.
	Pembina expects to contribute $21 million to the defined benefit plans in 2020.
	23. SHARE-BASED PAYMENTS
	At December 31, 2019, Pembina has the following share-based payment arrangements:
	Share Option Plan (Equity Settled)
	Pembina has a share option plan under which employees are eligible to receive options to purchase shares in Pembina.
	Long-Term Share Unit Award Incentive Plan (Cash-Settled)
	In 2005, Pembina established a long-term share unit award incentive plan. Under the share-based compensation plan, awards of restricted ("RSU") and performance ("PSU") share units are made to officers, non-officers and directors. The plan results in participants receiving cash compensation based on the value of the underlying notional shares granted under the plan. Payments are based on a trading value of Pembina's common shares plus notional dividends and performance of Pembina.
Pembina Pipeline Corporation 2019 Annual Report 110

In 2015, Pembina also established a deferred share units ("DSU") plan. Under the DSU plan, directors are required to take at least 50 percent of total director compensation as DSUs. A DSU is a notional share that has the same value as one Pembina common share. Its value changes with Pembina's share price. DSUs do not have voting rights but they accrue dividends as additional DSUs, at the same rate as dividends paid on Pembina's common shares. DSUs are paid out when a director retires from the board and are redeemed for cash using the weighted average of trading price of common shares on the Toronto Stock Exchange ("TSX") for the last five trading days before the redemption date, multiplied by the number of DSUs the director holds. As of January 1, 2018 directors no longer receive meeting fees, but their base retainer and committee retainer has been increased.
Terms and Conditions of Share Option Plan and Share Unit Award Incentive Plan
The terms and conditions relating to the grants of the share option program and the long-term share unit award incentive plans are listed in the tables below:
Grant Date Share Options Granted to EmployeesContractual Life of
(thousands of options, except as noted)Number of OptionsOptions
March 6, 2018			1,993	7
May 14, 2018			310	7
July 10, 2018			424	7
August 15, 2018			961	7
October 10, 2018		94		7
November 13, 2018			939	7
December 31, 2018		34		7
March 5, 2019			2,409	7
April 8, 2019			367	7
July 9, 2019			249	7
August 14, 2019			1,162	7
October 8, 2019		97		7
November 12, 2019			1,145	7
One-third vest on the first anniversary of the grant date, one-third vest on the second anniversary of the grant date and one-third vest on the third anniversary of the grant date.Long-Term Share Unit Award Incentive Plan(1)
Grant date RSUs, PSUs and DSUs to Officers, Non-Officers(2) and Directors
(thousands of units, except as noted)					PSUs (3)	RSUs (3)	DSUs	Total
January 1, 2018					404	395	44	843
January 1, 2019					475	460	36	971
(1)	Distribution Units are granted in addition to RSU and PSU grants based on notional accrued dividends from RSU and PSU granted but not paid.
(2)	Non-Officers defined as senior selected positions within Pembina.
(3)	Contractual life of 3 years.
PSUs vest on the third anniversary of the grant date. RSUs vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and one-third on the third anniversary of the grant date. Actual units awarded are based on the trading value of the shares and performance of Pembina.
111	Pembina Pipeline Corporation 2019 Annual Report

	Disclosure of Share Option Plan
	The number and weighted average exercise prices of share options as follows:
			Weighted Average
			Exercise Price
	(thousands of options, except as noted)	Number of Options		(dollars)
	Outstanding at December 31, 2017				15,677	$40.94
	Granted				4,755	$43.86
	Exercised				(1,729)	$35.34
	Forfeited				(523)	$41.56
	Expired				(252)	$49.20
	Outstanding at December 31, 2018				17,928	$42.12
	Granted				5,470	$48.27
	Exercised				(3,979)	$37.95
	Forfeited				(655)	$45.29
	Expired				(180)	$48.98
	Outstanding at December 31, 2019				18,584	$44.65
	As of December 31, 2019, the following options are outstanding:
	(thousands of options, except as noted)					Number Outstanding	Weighted Average
	Exercise Price (dollars)					at December 31, 2019	Options Exercisable	Remaining Life
	$29.60 – $41.38	3,466		3,426		3.1
	$41.39 – $43.21	3,524		1,618		4.7
	$43.22 – $46.00	3,491		2,170		4.2
	$46.01 – $48.59	4,350					279	6.2
	$48.60 – $52.01	3,753		2,057		3.9
	Total	18,584		9,550		4.5
	Options are exercised regularly throughout the year. Therefore, the weighted average share price during the year of $48.87 (2018: $44.97) is representative of the weighted average share price at the date of exercise.
	Expected volatility is estimated by considering historic average share price volatility. The weighted average inputs used in the measurement of the fair values at grant date of share options are the following:
	Share Options Granted
	For the years ended December 31 (dollars, except as noted)
					2019	2018
	Weighted average
	Fair value at grant date				4.12	3.86
	Expected volatility (percent)				18.7	20.3
	Expected option life (years)				3.67	3.67
	Expected annual dividends per option				2.36	2.24
	Expected forfeitures (percent)				6.6	6.7
	Risk-free interest rate (based on government bonds)(percent)				1.6	2.1
	Disclosure of Long-Term Share Unit Award Incentive Plan
	The long-term share unit award incentive plans was valued using the volume weighted average price for 20 days ending December 31, 2019 of $47.52 (2018: $42.89). Actual payment may differ from amount valued based on market price and company performance.
Pembina Pipeline Corporation 2019 Annual Report 112

Employee Expenses
For the years ended December 31($ millions)
	2019	2018
Share option plan, equity settled	16	14
Long-term share unit award incentive plan	50	49
Share-based compensation expense	66	63
Total carrying amount of liabilities for cash settled arrangements	95	96
Total intrinsic value of liability for vested benefits	57	57
24. FINANCIAL INSTRUMENTS
Financial Risk Management
Pembina has exposure to counterparty credit risk, liquidity risk and market risk. Pembina recognizes that effective management of these risks is a critical success factor in managing organization and shareholder value.
Risk management strategies, policies and limits ensure risks and exposures are aligned to Pembina's business strategy and risk tolerance. Pembina's Board of Directors is responsible for providing risk management oversight at Pembina and oversees how management monitors compliance with Pembina's risk management policies and procedures and reviews the adequacy of this risk framework in relation to the risks faced by Pembina. Internal audit personnel assist the Board of Directors in its oversight role by monitoring and evaluating the effectiveness of the organization's risk management system.
Counterparty Credit Risk
Counterparty credit risk represents the financial loss Pembina may experience if a counterparty to a financial instrument or commercial agreement failed to meet its contractual obligations to Pembina in accordance with the terms and conditions of the financial instruments or agreements with Pembina. Counterparty credit risk arises primarily from Pembina's cash and cash equivalents, trade and other receivables, advances to related parties and from counterparties to its derivative financial instruments. The carrying amount of Pembina's cash and cash equivalents, trade and other receivables, advances to related parties and derivative financial instruments represents the maximum counterparty credit exposure, without taking into account security held.
Pembina manages counterparty credit risk through established credit management techniques, including conducting comprehensive financial and other assessments for all new counterparties and regular reviews of existing counterparties to establish and monitor a counterparty's creditworthiness, setting exposure limits, monitoring exposures against these limits and obtaining financial assurances where warranted. Pembina utilizes various sources of financial, credit and business information in assessing the creditworthiness of a counterparty including external credit ratings, where available, and in other cases, detailed financial statement analysis in order to generate an internal credit rating based on quantitative and qualitative factors. The establishment of counterparty exposure limits is governed by a Board of Directors designated counterparty exposure limit matrix which represents the maximum dollar amounts of counterparty exposure by debt rating that can be approved for a counterparty. Pembina continues to closely monitor and reassess the creditworthiness of its counterparties, which has resulted in Pembina reducing or mitigating its exposure to certain counterparties where it was deemed warranted and permitted under contractual terms.
Financial assurances from counterparties may include guarantees, letters of credit and cash. At December 31, 2019 letters of credit totaling $90 million (2018: $122 million) were held primarily in respect of customer trade receivables.
Pembina typically has collected its trade receivables in full and at December 31, 2019, 95 percent were current (2018: 99 percent). Management defines current as outstanding accounts receivable under 30 days past due. Pembina has a general lien and a continuing and first priority security interest in, and a secured charge on, all of a shipper's petroleum products in its custody.
113	Pembina Pipeline Corporation 2019 Annual Report

	At December 31, the aging of trade and other receivables was as follows:
	Past Due	2019	2018
	31-60 days past due	1	2
	Greater than 61 days	7	—
		8	2
	Pembina uses a loss allowance matrix to measure lifetime expected credit losses at initial recognition and throughout the life of the receivable. The loss allowance matrix is determined based on Pembina’s historical default rates over the expected life of trade receivables, adjusted for forward-looking estimates. Management believes the unimpaired amounts that are past due by greater than 30 days are fully collectible based on historical default rates of customers and management’s assessment of counterparty credit risk through established credit management techniques as discussed above.
	Advances to related parties held at amortized cost consists of funds advanced by Pembina to a jointly controlled entity. Expected credit losses are measured using a probability-weighted estimate of credit losses, measured as the present value of all expected cash shortfalls, discounted at the effective interest rate of the financial asset, using reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. Management considers the risk of default relating to the advances to be low due to their priority ranking against other interests.
	For 2019, Pembina recognized no impairment loss allowance (2018: $1 million). Pembina recognized less than $1 million in impairment losses on financial assets during 2019 (2018: $1 million).
	Pembina monitors and manages its concentration of counterparty credit risk on an ongoing basis. Pembina believes these measures minimize its counterparty credit risk but there is no certainty that they will protect it against all material losses. As part of its ongoing operations, Pembina must balance its market and counterparty credit risks when making business decisions.
	Liquidity Risk
	Liquidity risk is the risk Pembina will not be able to meet its financial obligations as they come due. The following are the contractual maturities of financial liabilities, including estimated interest payments.
				Outstanding Balances Due by Period
	December 31, 2019
					Carrying	Expected			Less Than 1		More Than
					Amount	Cash Flows	Year			1 - 3 Years	3 - 5 Years	5 Years	($ millions)Trade payables and accrued liabilities
					1,013	1,013	1,013	—						—	—
	Loans and borrowings				10,152	14,565	477	2,379							3,337	8,372
	Dividends payable				110	110	110	—						—	—
	Derivative financial liabilities						9	9	9	—						—	—
	Lease liabilities				819	1,152	130	237							179	606
	Pembina manages its liquidity risk by forecasting cash flows over a 12 month rolling time period to identify financing requirements. These financing requirements are then addressed through a combination of credit facilities and through access to capital markets, if required.
Pembina Pipeline Corporation 2019 Annual Report 114

Market Risk
Pembina's results are subject to movements in commodity prices, foreign exchange and interest rates. A formal Risk Management Program including policies and procedures has been designed to mitigate these risks.
a. Commodity Price Risk
Certain of the transportation contracts or tolling arrangements with respect to Pembina's pipeline assets do not include take-or-pay commitments from crude oil and gas producers and, as a result, Pembina is exposed to throughput risk with respect to those assets. A decrease in volumes transported can directly and adversely affect Pembina’s revenues and earnings. The demand for, and utilization of, Pembina's pipeline assets may be impacted by factors such as changing market fundamentals, capacity bottlenecks, operational incidents, regulatory restrictions, system maintenance, weather and increased competition. Market fundamentals, such as commodity prices and price differentials, natural gas and gasoline consumption, alternative energy sources and global supply disruptions outside of Pembina’s control can impact both the supply of and demand for the commodities transported on Pembina’s pipelines.
Pembina's Marketing business includes activities related to product storage, terminalling, and hub services. These activities expose Pembina to certain risks relating to fluctuations in commodity prices and, as a result, Pembina may experience volatility in revenue and impairments related to the book value of stored product with respect to these activities. Primarily, Pembina enters into contracts to purchase and sell crude oil, condensate, NGL and natural gas at floating market prices; as a result, the prices of products that are marketed by Pembina are subject to volatility as a result of factors such as seasonal demand changes, extreme weather conditions, market inventory levels, general economic conditions, changes in crude oil markets and other factors. Pembina manages its risk exposure by balancing purchases and sales to secure less volatile margins. Notwithstanding Pembina's management of price and quality risk, marketing margins for commodities can vary and have varied significantly from period to period in the past. This variability could have an adverse effect on the results of Pembina's Marketing business and its overall results of operations. To assist in reducing this inherent variability in its Marketing business, Pembina has invested, and will continue to invest, in assets that have a fee-based revenue component.
Pembina is also exposed to potential price declines and decreasing frac spreads between the time Pembina purchases NGL feedstock and sells NGL products. Frac spread is the difference between the sale prices of NGL products and the cost of NGL sourced from natural gas and acquired at prices related to natural gas prices. Frac spreads can change significantly from period to period depending on the relationship between NGL and natural gas prices (the "frac spread ratio"), absolute commodity prices and changes in the Canadian to U.S. dollar exchange rate. In addition to the frac spread ratio changes, there is also a differential between NGL product prices and crude oil prices which can change margins realized for midstream products. The amount of profit or loss made on the extraction portion of the business will generally increase or decrease with frac spreads. This exposure could result in variability of cash flow generated by the Marketing business, which could affect Pembina and the cash dividends that Pembina is able to distribute.
Pembina utilizes financial derivative instruments as part of its overall risk management strategy to assist in managing the exposure to commodity price, interest rate, cost of power and foreign exchange risk. As an example of commodity price mitigation, Pembina actively fixes a portion of its exposure to fractionation margins through the use of derivative financial instruments. Additionally, Pembina's Marketing business is also exposed to variability in quality, time and location differentials for various products, and financial instruments may be used to offset Pembina's exposures to these differentials. Pembina does not trade financial instruments for speculative purposes.
115	Pembina Pipeline Corporation 2019 Annual Report

	b. Foreign Exchange Risk
	Certain of Pembina's cash flows, namely a portion of its commodity-related cash flows, certain cash flows from U.S.-based infrastructure assets and distributions from U.S.-based investments in equity accounted investees, are subject to currency risk, arising from the denomination of specific cash flows in U.S. dollars. Additionally, a portion of Pembina's capital expenditures and contributions or loans to Pembina’s U.S.-based investments in equity accounted investees, may be denominated in U.S. dollars. Pembina monitors, assesses and responds to these foreign currency risks using an active risk management program, which may include the exchange of foreign currency for domestic currency at a fixed rate.
	c. Interest Rate Risk
	Interest bearing financial liabilities include Pembina's debt and lease liabilities. Pembina has a floating interest rate debt which subjects Pembina to interest rate risk.
	At the reporting date, the interest rate profile of Pembina's interest-bearing financial instruments was:
	As at December 31($ millions)
		2019	2018
	Carrying amounts of financial liabilityFixed rate instruments (1)
		8,874	6,232
	Variable rate instruments(2)	2,097	1,305
		10,971	7,537
	(1)	Includes lease liabilities following the adoption of IFRS 16, see "Changes in Accounting Policies"
	(2)	At December 31, 2019, Pembina held no positions in financial derivative contracts to fix interest rates (December 31, 2018: nil).
	Cash Flow Sensitivity Analysis for Variable Rate Instruments
	A change of 100 basis points in interest rates at the reporting date would have (increased) decreased earnings by the amounts shown below. This analysis assumes that all other variables remain constant.
	As at December 31($ millions)
		2019	2018
		± 100 bp	± 100 bp
	Earnings sensitivity (net)	±9	±13
	Fair ValuesThe fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statements of
	financial position, are shown in the table below. Certain non-derivative financial instruments measured at amortized cost
	including cash and cash equivalents, trade receivables and other, finance lease receivables, advances to related parties and
	trade payables and other have been excluded because they have carrying amounts that approximate their fair value due to the
	nature of the item or the short time to maturity. These instruments would be classified in Level 2 of the fair value hierarchy.
2019				2018
	As at December 31	Fair Value(1)				Fair Value(1)
					Carrying	Carrying
					Value	Value	($ millions)				Level 1	Level 2							Level 3	Level 1	Level 2	Level 3
	Financial assets carried at fair valueDerivative financial instruments
									48	—							48	—				54	—			54	—
	Advances to related parties(2)								—	—							—	—				58	—			—	58
									48	—							48	—	112	—				54	58
	Financial liabilities carried at fair valueDerivative financial instruments
							9	—						9	—				6	—				6	—
	Financial liabilities carried at amortized costLoans and borrowings(3)
					10,152	—	10,729				—	7,537	—		7,588	—
	(1)	The basis for determining fair value is disclosed in note 5.
	(2)	Advances to related parties carried at fair value consisted of funds advanced by Pembina to a jointly controlled entity with an equity conversion option that was exercised
	during the first quarter of 2019. US$43 million of advances were converted to shares during the first quarter of 2019 and are included in the Investments in Equity Accounted
	Investees balance in the condensed consolidated interim statements of financial position at December 31, 2019.
	(3)	Carrying value of current and non-current balances.
Pembina Pipeline Corporation 2019 Annual Report 116

Interest Rates Used for Determining Fair Value
The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at the reporting date plus an adequate credit spread, and were as follows:
As at December 31(percent)
	2019	2018
Derivatives	2.0 - 2.5	2.2 - 2.3
Loans and borrowings	2.3 - 4.0	2.6 - 5.6
Fair value of power derivatives are based on market rates reflecting forward curves.
Fair Value Hierarchy
The fair value of financial instruments carried at fair value is classified according to the following hierarchy based on the amount of observable inputs used to value the instruments.
Level 1: Unadjusted quoted prices are available in active markets for identical assets or liabilities as the reporting date. Pembina does not use Level 1 inputs for any of its fair value measurements.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Instruments in this category include non-exchange traded derivatives such as over-the-counter physical forwards and options, including those that have prices similar to quoted market prices. Pembina obtains quoted market prices for its inputs from information sources including banks, Bloomberg Terminals and Natural Gas Exchange. The majority of Pembina's significant financial instruments carried at fair value are valued using Level 2 inputs.
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Level 3 valuations use unobservable inputs, such as a financial forecast developed using the entity’s own data for expected cash flows and risk adjusted discount rates, to measure fair value to the extent that relevant observable inputs are not available. The unobservable inputs reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. In developing unobservable inputs, the entity’s own data is used and adjusted for reasonably available information that would be used by other market participants.
Advances to related parties carried at fair value consist of funds advances by Pembina to a jointly controlled entity with an equity conversion option. Fair value is measured on a recurring basis using a valuation model that considers the present value of management's best estimate of future cash flows expected to result from the asset under development in the jointly controlled entity, discounted using a risk-adjusted discount rate.
The following table is a summary of the net derivative financial instruments, which is consistent with the gross balances:
			2019	2018
					Non-	Non-	Non-	Non-
As at December 31 ($ millions)				Current	Current	Current	Current		Current	Current	Current						Current
				Asset	Asset	Liability	Liability	Total	Asset	Asset	Liability						Liability	Total
Commodity, power, storage
and rail financial
instruments				34	5	(6)	(3)	30	44	—	(2)						—	42
Foreign exchange									6	3	—	—	9	10	—	(4)			—	6
Net derivative financial
instruments				40	8	(6)	(3)	39	54	—	(6)						—	48
117	Pembina Pipeline Corporation 2019 Annual Report

	Sensitivity Analysis
	The following table shows the impact on earnings if the underlying risk variables of the derivative financial instruments changed by a specified amount, with other variables held constant.
	As at December 31, 2019($ millions)(1)
		+ Change	- Change
	Frac spread related
	Natural gas			(AECO +/- $0.25 per GJ)	9	(9)
	NGL (includes propane, butane and condensate)			(Belvieu/Conway +/- U.S. $0.10 per gal)	(43)	43
	Foreign exchange (US$ vs. C$)			(FX rate +/- $0.10)	(46)	46
	Product margin
	Crude oil			(WTI +/- $2.50 per bbl)	(2)	2
	NGL (includes propane, butane and condensate)			(Belvieu/Conway +/- U.S. $0.10 per gal)	N/A	N/A
	(1)	As at December 31, 2019, there were no outstanding financial derivative contracts related to power and interest rates.
	25. CAPITAL MANAGEMENT
	Pembina's objective when managing capital is to ensure a stable stream of dividends to shareholders that is sustainable over the long-term. Pembina manages its capital structure based on requirements arising from significant capital development activities, the risk characteristics of its underlying asset base and changes in economic conditions. Pembina manages its capital structure and short-term financing requirements using non-GAAP measures, including the ratios of debt to adjusted EBITDA, debt to total enterprise value, adjusted cash flow to debt and debt to equity. The metrics are used to measure Pembina's financial leverage and measure the strength of Pembina's balance sheet. Pembina remains satisfied that the leverage currently employed in its capital structure is sufficient and appropriate given the characteristics and operations of the underlying asset base. Pembina, upon approval from its Board of Directors, will balance its overall capital structure through new equity or debt issuances, as required.
	Pembina maintains a conservative capital structure that allows it to finance its day-to-day cash requirements through its operations, without requiring external sources of capital. Pembina funds its operating commitments, short-term capital spending as well as its dividends to shareholders through this cash flow, while new borrowing and equity issuances are primarily reserved for the support of specific significant development activities. The capital structure of Pembina consists of shareholder's equity, comprised of common and preferred equity, plus long-term debt. Long-term debt is comprised of bank credit facilities, unsecured notes and finance lease obligations.
	Pembina is subject to certain financial covenants in its credit facility agreements and is in compliance with all financial covenants as of December 31, 2019.
	Note 16 of these financial statements shows the change in share capital for the year ended December 31, 2019.
	26. GROUP ENTITIES
	Significant Subsidiaries
	As at December 31	Ownership Interest
	(percentages)	2019	2018
	Pembina Gas Services Limited Partnership				100	100
	Pembina Holding Canada L.P.				100	100
	Pembina Infrastructure and Logistics L.P.				100	100
	Pembina Midstream Limited Partnership				100	100
	Pembina Oil Sands Pipeline L.P.				100	100
	Pembina Pipeline				100	100
	Pembina Empress NGL Partnership				100	100
	Ruby Blocker LLC				100	100
	Pembina Cochin LLC				100	—
Pembina Pipeline Corporation 2019 Annual Report 118

27. RELATED PARTIES
Pembina enters into transactions with related parties in the normal course of business and on terms equivalent to those that prevail in arm's length transactions, unless otherwise noted. Pembina contracts capacity from its equity accounted investee Alliance, advances funds to support operations and provides services, on a cost recovery basis, to investments in equity accounted investees. A summary of the significant related party transactions are as follows: Equity Accounted Investees
($ millions)	2019	2018
For the years ended December 31:
Services provided	82	42
Services received	2	—
Interest income	10	6
As at December 31:
Advances to related parties(1)	131	135
Trade receivables and other	17	12
(1)	During the year ended December 31, 2019, Pembina converted $58 million in advances to Canada Kuwait Petrochemical Corporation into equity contributions, and advanced
US$31 million (2018: US$31 million) to Ruby Pipeline, L.L.C. and $17 million (2018: nil), net of repayments, to Fort Saskatchewan Ethylene Storage Limited Partnership.
Key Management Personnel and Director Compensation
Key management consists of Pembina's directors and certain key officers.
Compensation
In addition to short-term employee benefits, including salaries, director fees and short-term incentives, Pembina also provides key management personnel with share-based compensation, contributes to post employment pension plans and provides car allowances, parking and business club memberships.
Key management personnel compensation comprised:
For the years ended December 31($ millions)
	2019	2018
Short-term employee benefits	10	10
Share-based compensation and other	13	13
Total compensation of key management	23	23
Transactions
Key management personnel and directors of Pembina control less than one percent of the voting common shares of Pembina (consistent with the prior year). Certain directors and key management personnel also hold Pembina preferred shares. Dividend payments received for the common and preferred shares held are commensurate with other non-related holders of those instruments.
Certain officers are subject to employment agreements in the event of termination without just cause or change of control.
Post-Employment Benefit Plans
Pembina has significant influence over the pension plans for the benefit of their respective employees. No balance payable is outstanding at December 31, 2019 (December 31, 2018: nil).
	Transaction Value Year
($ millions)	Ended December 31
Post-employment benefit planTransaction	2019	2018
Defined benefit planFunding	20	19
119	Pembina Pipeline Corporation 2019 Annual Report

	28. COMMITMENTS AND CONTINGENCIES
	Commitments
	Pembina had the following contractual obligations outstanding at December 31, 2019:
	Contractual Obligations	Payments Due by Period
	($ millions)	Total	Less than 1 Year	1 – 3 Years	3 – 5 Years	After 5 Years
	Leases(1)	1,152	130						237	179	606
	Loans and borrowings(2)	14,565	477				2,379	3,337			8,372
	Construction commitments(3)	1,766	1,128						123	33	482
	Other(4)	659	109						158	93	299
	Total contractual obligations	18,142	1,844				2,897	3,642			9,759
	(1)	Includes terminals, rail, office space, land and vehicle leases.
	(2)	Excluding deferred financing costs. Including interest payments on senior unsecured notes.
	(3)	Excluding significant projects that are awaiting regulatory approval at December 31, 2019, projects which Pembina is not committed to construct, and projects that are
	executed by equity accounted investees.
	(4)	Includes $65 million in commitments related to leases that have not yet commenced.
	Pembina enters into product purchase agreements and power purchase agreements to secure supply for future operations. Purchase prices of both NGL and power are dependent on current market prices. Volumes and prices for NGL and power contracts cannot be reasonably determined and therefore an amount has not been included in the contractual obligations schedule. Product purchase agreements range from one to 10 years and involve the purchase of NGL products from producers. Assuming product is available, Pembina has secured between 20 and 175 mbpd each year up to and including 2028. Power purchase agreements range from one to 25 years and involve the purchase of power from electrical service providers. Pembina has secured up to 67 megawatts per day each year up to and including 2043.
	Commitments to Equity Accounted Investees
	Pembina is contractually committed to provide CKPC with funding to construct assets that will form part of CKPC's PDH/PP Facility, subject to certain conditions being met.
	Pembina has a contractual commitment to advance US$39 million to Ruby by March 26, 2020.
	Pembina has commitments to provide contributions to certain equity accounted investees based on annual budgets approved by the joint venture partners.
	Contingencies
	Pembina, its subsidiaries and its investments in equity accounted investees are subject to various legal and regulatory proceedings and actions arising in the normal course of business. We represent our interests vigorously in all proceedings in which we are involved. Legal and administrative proceedings involving possible losses are inherently complex, and we apply significant judgment in estimating probable outcomes. While the outcome of such actions and proceedings cannot be predicted with certainty, management believes that the resolutions of such actions and proceedings will not have a material impact on Pembina's financial position or results of operations.
	Letters of Credit
	Pembina has provided guarantees to various third parties in the normal course of conducting business. The guarantees include financial guarantees to counterparties for product purchases and sales, transportation services, utilities, engineering and construction services. The guarantees have not had and are not expected to have a material impact on Pembina's financial position, earnings, liquidity or capital resources.
	Pembina has $103 million (2018: $69 million) in letters of credit issued to facilitate commercial transactions with third parties and to support regulatory requirements.
Pembina Pipeline Corporation 2019 Annual Report 120

29. SUBSEQUENT EVENTS
On January 7, 2020, Pembina and Petrochemical Industries Company K.S.C. of Kuwait, announced their equally-owned joint venture entity, Canada Kuwait Petrochemical Limited Partnership ("CKPC"), executed a lump sum engineering, procurement and construction ("EPC") contract related to the construction of the propane dehydrogenation ("PDH") facility within its integrated PDH and polypropylene ("PP") upgrading facility ("PDH/PP Facility"). Pembina’s proportionate share of the capital cost of the PDH/PP Facility, including the 100 percent directly-owned supporting facilities, is estimated at $2.7 billion and going into commercial service in the second half of 2023.
121	Pembina Pipeline Corporation 2019 Annual Report

HEAD OFFICEPembina Pipeline CorporationSuite 4000, 585 – 8th Avenue SWCalgary, Alberta T2P 1G1

AUDITORSKPMG LLPChartered AccountantsCalgary, Alberta

TRUSTEE, REGISTRAR & TRANSFER AGENTComputershare Trust Company of CanadaSuite 600, 530 – 8th Avenue SWCalgary, Alberta T2P 3S81.800.564.6253

STOCK EXCHANGEPembina Pipeline Corporation

Toronto Stock Exchange listing symbols for:COMMON SHARES PPLPREFERRED SHARES PPL.PR.A, PPL.PR.C, PPL.PR.E, PPL.PR.G, PPL.PR.I, PPL.PR.K, PPL.PR.M, PPL.PR.O, PPL.PR.Q, PPL.PR.S, PPL.PF.A, PPL.PF.C and PPL.PF.E

New York Stock Exchange listing symbol for:Common shares PBA

INVESTOR INQUIRIESPhone 403.231.3156Fax 403.237.0254Toll Free 1.855.880.7404Email investor-relations@pembina.comWebsite www.pembina.com