Pembina
Pipeline Corporation



MANAGEMENT'S RESPONSIBILITY



The Consolidated Financial Statements of Pembina
Pipeline Corporation (the "Company") 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 maintains a system of internal controls
designed to provide reasonable assurance that assets are safeguarded and that accounting systems provide timely, accurate and reliable
financial information.



The Board of Directors of the Company (the
"Board") is responsible for ensuring management fulfils its responsibilities for financial reporting and internal control.
The Board is assisted in exercising its responsibilities through the Audit Committee, which consists of four non-management directors.
The Audit Committee meets periodically with management and the 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
the Company's financial statements in accordance with Canadian generally accepted auditing standards and their report follows.
The independent auditors have full and unrestricted access to the Audit Committee to discuss their audit and their related findings.









|                             |                                                  
|---------------------------- | -------------------------------------------------
|Robert B. Michaleski         | Peter D. Robertson                               
|Chief Executive Officer      | Vice President, Finance & Chief Financial Officer
|Pembina Pipeline Corporation | Pembina Pipeline Corporation                     
|                             |                                                  
|March 1, 2013                |                                                  



50









Pembina
Pipeline Corporation



INDEPENDENT AUDITORS'
REPORT



To the Shareholders of Pembina
Pipeline Corporation



We have audited the accompanying consolidated
financial statements of Pembina Pipeline Corporation, which comprise the consolidated statement of financial position as at December
31, 2012 and December 31, 2011, the consolidated statements of comprehensive income, changes in equity and cash flows for the years
then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.



Management's Responsibility for the Consolidated
Financial Statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.



Auditors' Responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.



An audit involves performing procedures to
obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion, the consolidated financial
statements present fairly, in all material respects, the consolidated financial position of Pembina Pipeline Corporation as at
December 31, 2012 and December 31, 2011, and its consolidated financial performance and its consolidated cash flows for the years
then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.



/s/ KPMG LLP

Calgary, Alberta



March 1, 2013



51









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENT OF FINANCIAL POSITION



|As at December
                                               31 ($
                                                                                                                                               thousands) |  | Note |  | 2012 |            |   | 2011 | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ---- | ---------- | - | ---- | 
|Assets                                                                                                                                                                                                                        |  |      |  |      |            |   |      | 
|Current assets                                                                                                                                                                                                                |  |      |  |      |            |   |      | 
|Cash and cash equivalents                                                                                                                                                                                                     |  |      |  |      | 27,336     |   |      | 
|Trade receivables and other                                                                                                                                                                                                   |  | 6    |  |      | 331,692    |   |      | 
|Derivative financial instruments                                                                                                                                                                                              |  | 27   |  |      | 7,528      |   |      | 
|Inventory                                                                                                                                                                                                                     |  |      |  |      | 108,096    |   |      | 
|                                                                                                                                                                                                                              |  |      |  |      | 474,652    |   |      | 
|Non-current assets                                                                                                                                                                                                            |  |      |  |      |            |   |      | 
|Property, plant and equipment                                                                                                                                                                                                 |  | 7    |  |      | 5,014,542  |   |      | 
|Intangible assets and goodwill                                                                                                                                                                                                |  | 8    |  |      | 2,622,677  |   |      | 
|Investments in equity accounted investees                                                                                                                                                                                     |  | 9    |  |      | 161,205    |   |      | 
|Derivative financial instruments                                                                                                                                                                                              |  | 27   |  |      | 343        |   |      | 
|Other receivables                                                                                                                                                                                                             |  | 6    |  |      | 3,080      |   |      | 
|                                                                                                                                                                                                                              |  |      |  |      | 7,801,847  |   |      | 
|Total Assets                                                                                                                                                                                                                  |  |      |  |      | 8,276,499  |   |      | 
|Liabilities and Shareholders' Equity                                                                                                                                                                                          |  |      |  |      |            |   |      | 
|Current liabilities                                                                                                                                                                                                           |  |      |  |      |            |   |      | 
|Bank indebtedness                                                                                                                                                                                                             |  |      |  |      |            |   |      | 
|Trade payables and accrued liabilities                                                                                                                                                                                        |  | 11   |  |      | 344,740    |   |      | 
|Dividends payable                                                                                                                                                                                                             |  |      |  |      | 39,586     |   |      | 
|Loans and borrowings                                                                                                                                                                                                          |  | 12   |  |      | 11,652     |   |      | 
|Derivative financial instruments                                                                                                                                                                                              |  | 27   |  |      | 15,932     |   |      | 
|                                                                                                                                                                                                                              |  |      |  |      | 411,910    |   |      | 
|Non-current liabilities                                                                                                                                                                                                       |  |      |  |      |            |   |      | 
|Loans and borrowings                                                                                                                                                                                                          |  | 12   |  |      | 1,932,774  |   |      | 
|Convertible debentures                                                                                                                                                                                                        |  | 13   |  |      | 609,968    |   |      | 
|Derivative financial instruments                                                                                                                                                                                              |  | 27   |  |      | 51,759     |   |      | 
|Employee benefits                                                                                                                                                                                                             |  | 25   |  |      | 28,623     |   |      | 
|Share-based payments                                                                                                                                                                                                          |  |      |  |      | 17,239     |   |      | 
|Deferred revenue                                                                                                                                                                                                              |  |      |  |      | 3,099      |   |      | 
|Provisions                                                                                                                                                                                                                    |  | 14   |  |      | 361,206    |   |      | 
|Deferred tax liabilities                                                                                                                                                                                                      |  | 10   |  |      | 584,489    |   |      | 
|                                                                                                                                                                                                                              |  |      |  |      | 3,589,157  |   |      | 
|Total Liabilities                                                                                                                                                                                                             |  |      |  |      | 4,001,067  |   |      | 
|Shareholders' Equity                                                                                                                                                                                                          |  |      |  |      |            |   |      | 
|Equity attributable to shareholders of the Company:                                                                                                                                                                           |  |      |  |      |            |   |      | 
|Share capital                                                                                                                                                                                                                 |  | 15   |  |      | 5,324,058  |   |      | 
|Deficit                                                                                                                                                                                                                       |  |      |  |      | (1,027,678 | ) |      | 
|Accumulated other comprehensive income                                                                                                                                                                                        |  |      |  |      | (26,123    | ) |      | 
|                                                                                                                                                                                                                              |  |      |  |      | 4,270,257  |   |      | 
|Non-controlling interest                                                                                                                                                                                                      |  |      |  |      | 5,175      |   |      | 
|Total Equity                                                                                                                                                                                                                  |  |      |  |      | 4,275,432  |   |      | 
|Total Liabilities and Shareholders' Equity                                                                                                                                                                                    |  |      |  |      | 8,276,499  |   |      | 



See accompanying notes to the consolidated
financial statements



52









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



|Year Ended December
                                               31 ($
                                                                                                                                                   thousands,
                                                                                                                                                   except
                                                                                                                                                   per
                                                                                                                                                   share
                                                                                                                                                   amounts) |  | Note |  | 2012 |           |   | 2011 | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ---- | --------- | - | ---- | 
|Revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | 16   |  |      | 3,427,402 |   |      | 
|Cost of sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 17   |  |      | 2,920,208 |   |      | 
|Gain on commodity-related derivative financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 27   |  |      | 31,529    |   |      | 
|Gross profit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |      |  |      | 538,723   |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|General and administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 18   |  |      | 97,488    |   |      | 
|Acquisition-related and other expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |      |  |      | 24,748    |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      | 122,236   |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|Results from operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |      |  |      | 416,487   |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|Finance income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |      |  |      | (6,611    | ) |      | 
|Finance costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |  |      | 121,751   |   |      | 
|Net finance costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 21   |  |      | 115,140   |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|Earnings before income tax and equity accounted investees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |      |  |      | 301,347   |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|Share of loss (profit) of investments in equity accounted
    investees, net of tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |      |  |      | 1,056     |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|Income tax expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 10   |  |      | 75,339    |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|Earnings for the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |      |  |      | 224,952   |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      |           |   |      | 
|Other comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |      |  |      |           |   |      | 
|Defined benefit plan actuarial losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |      |  |      | (14,568   | ) |      | 
|Income tax benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 10   |  |      | 3,641     |   |      | 
|Other comprehensive loss for the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | 25   |  |      | (10,927   | ) |      | 
|Total comprehensive income for the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |      |  |      | 214,025   |   |      | 
|Earnings attributable to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |      |  |      |           |   |      | 
|Shareholders of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |      |  |      | 224,844   |   |      | 
|Non-controlling interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |      |  |      | 108       |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      | 224,952   |   |      | 
|Total comprehensive income attributable
    to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |      |  |      |           |   |      | 
|Shareholders of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |      |  |      | 213,917   |   |      | 
|Non-controlling interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |      |  |      | 108       |   |      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |      |  |      | 214,025   |   |      | 
|Earnings per share attributable to shareholders of the Company:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |      |  |      |           |   |      | 
|Basic
    and diluted earnings per share(dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 23   |  |      | 0.87      |   |      | 



See accompanying notes to the consolidated
financial statements



53









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



|                                                        |  |      |    |  | Attributable
    to Shareholders of the Company |  |           |         |  |  |                                            |  
|------------------------------------------------------- |  | ---- | -- |  | ----------------------------------------------- |  | --------- | ------- |  |  | ------------------------------------------ | -
|($ thousands)                                           |  | Note |    |  | Share
    Capital                               |  |           | Deficit |  |  | Accumulated
    Other Comprehensive Income |  
|December 31, 2010                                       |  |      |    |  |                                                 |  | 1,794,536 |         |  |  | (739,351                                   | )
|Total
    comprehensive income for period               |  |      |    |  |                                                 |  |           |         |  |  |                                            |  
|Earnings                                                |  |      |    |  |                                                 |  |           |         |  |  | 165,666                                    |  
|Other comprehensive income                              |  |      |    |  |                                                 |  |           |         |  |  |                                            |  
|Defined
    benefit plan actuarial losses, net of tax   |  |      | 25 |  |                                                 |  |           |         |  |  |                                            |  
|Total
    comprehensive income for the year             |  |      |    |  |                                                 |  |           |         |  |  | 165,666                                    |  
|Transactions
    with shareholders of the Company       |  |      |    |  |                                                 |  |           |         |  |  |                                            |  
|Share-based
    payment transactions                    |  |      | 15 |  |                                                 |  | 16,978    |         |  |  |                                            |  
|Debenture
    conversions and other                     |  |      | 15 |  |                                                 |  | 220       |         |  |  |                                            |  
|Dividends
    declared                                  |  |      | 15 |  |                                                 |  |           |         |  |  | (261,236                                   | )
|Total
    transactions with shareholders of the Company |  |      |    |  |                                                 |  | 17,198    |         |  |  | (261,236                                   | )
|December 31, 2011                                       |  |      |    |  |                                                 |  | 1,811,734 |         |  |  | (834,921                                   | )
|                                                        |  |      |    |  |                                                 |  |           |         |  |  |                                            |  
|Total
    comprehensive income for period               |  |      |    |  |                                                 |  |           |         |  |  |                                            |  
|Earnings                                                |  |      |    |  |                                                 |  |           |         |  |  | 224,844                                    |  
|Other comprehensive income                              |  |      |    |  |                                                 |  |           |         |  |  |                                            |  
|Defined
    benefit plan actuarial losses, net of tax   |  |      | 25 |  |                                                 |  |           |         |  |  |                                            |  
|Total
    comprehensive income (loss) for the year      |  |      |    |  |                                                 |  |           |         |  |  | 224,844                                    |  
|Transactions
    with shareholders of the Company       |  |      |    |  |                                                 |  |           |         |  |  |                                            |  
|Share-based payment transactions                        |  |      | 15 |  |                                                 |  | 9,221     |         |  |  |                                            |  
|Debenture
    conversions and other                     |  |      | 15 |  |                                                 |  | 432       |         |  |  |                                            |  
|Dividends
    declared                                  |  |      | 15 |  |                                                 |  |           |         |  |  | (417,601                                   | )
|Common
    shares issued on acquisition                 |  |      | 5  |  |                                                 |  | 3,283,976 |         |  |  |                                            |  
|Dividend
    reinvestment plan                          |  |      | 15 |  |                                                 |  | 218,695   |         |  |  |                                            |  
|Total
    transactions with shareholders of the Company |  |      |    |  |                                                 |  | 3,512,324 |         |  |  | (417,601                                   | )
|Non-controlling
    interest assumed on acquisition     |  |      | 5  |  |                                                 |  |           |         |  |  |                                            |  
|December 31, 2012                                       |  |      |    |  |                                                 |  | 5,324,058 |         |  |  | (1,027,678                                 | )



See accompanying notes to the consolidated
financial statements



54









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENTS OF CASH FLOWS



|Year Ended December 31 ($ thousands)                                                |  | Note |  | 2012 |          |   | 2011 | 
|----------------------------------------------------------------------------------- |  | ---- |  | ---- | -------- | - | ---- | 
|Cash provided by (used in):                                                         |  |      |  |      |          |   |      | 
|Operating activities:                                                               |  |      |  |      |          |   |      | 
|Earnings for the year                                                               |  |      |  |      | 224,952  |   |      | 
|Adjustments for:                                                                    |  |      |  |      |          |   |      | 
|Depreciation and amortization                                                       |  | 19   |  |      | 179,386  |   |      | 
|Unrealized gain on commodity-related derivative financial
    instruments           |  |      |  |      | (36,100  | ) |      | 
|Net finance costs                                                                   |  | 21   |  |      | 115,140  |   |      | 
|Share of loss (profit) of investments in equity accounted
    investees, net of tax |  |      |  |      | 1,056    |   |      | 
|Deferred income tax expense                                                         |  | 10   |  |      | 75,802   |   |      | 
|Share-based payments expense                                                        |  | 26   |  |      | 17,028   |   |      | 
|Employee future benefits expense                                                    |  | 25   |  |      | 7,225    |   |      | 
|Other                                                                               |  |      |  |      | 1,006    |   |      | 
|Changes in non-cash working capital                                                 |  | 24   |  |      | (109,881 | ) |      | 
|Payments from equity accounted investees                                            |  | 9    |  |      | 17,428   |   |      | 
|Decommissioning liability expenditures                                              |  | 14   |  |      | (4,944   | ) |      | 
|Employer future benefit contributions                                               |  | 25   |  |      | (10,000  | ) |      | 
|Net interest paid                                                                   |  |      |  |      | (118,291 | ) |      | 
|Cash flow from operating activities                                                 |  |      |  |      | 359,807  |   |      | 
|Financing activities:                                                               |  |      |  |      |          |   |      | 
|Bank borrowings                                                                     |  |      |  |      | 6,861    |   |      | 
|Repayment of loans and borrowings                                                   |  |      |  |      | (61,332  | ) |      | 
|Issuance of debt                                                                    |  |      |  |      | 450,000  |   |      | 
|Financing fees                                                                      |  |      |  |      | (7,343   | ) |      | 
|Exercise of stock options                                                           |  |      |  |      | 7,295    |   |      | 
|Dividends paid (net of shares issued under
    the Dividend Reinvestment Plan)      |  | 15   |  |      | (181,148 | ) |      | 
|Cash flow from financing activities                                                 |  |      |  |      | 214,333  |   |      | 
|Investing activities:                                                               |  |      |  |      |          |   |      | 
|Net capital expenditures                                                            |  |      |  |      | (546,820 | ) |      | 
|Contributions to equity accounted investees                                         |  |      |  |      | (8,182   | ) |      | 
|Cash acquired on acquisition                                                        |  |      |  |      | 8,874    |   |      | 
|Cash flow used in investing activities                                              |  |      |  |      | (546,128 | ) |      | 
|Change in cash                                                                      |  |      |  |      | 28,012   |   |      | 
|Cash (bank indebtedness), beginning of year                                         |  |      |  |      | (676     | ) |      | 
|Cash and cash equivalents (bank indebtedness),
    end of year                      |  |      |  |      | 27,336   |   |      | 



See accompanying notes to the consolidated
financial statements



55









Pembina
Pipeline Corporation





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





|    |                                                     | Page
|--- | --------------------------------------------------- | ----
|    |                                                     |     
|1.  | Reporting entity                                    | 57  
|2.  | Basis of preparation                                | 57  
|3.  | Significant accounting policies                     | 59  
|4.  | Determination of fair values                        | 72  
|5.  | Acquisition                                         | 73  
|6.  | Trade and other receivables                         | 74  
|7.  | Property, plant and equipment                       | 75  
|8.  | Intangible assets and goodwill                      | 76  
|9.  | Investments in equity accounted investees           | 77  
|10. | Income taxes                                        | 78  
|11. | Trade payables and accrued liabilities              | 79  
|12. | Loans and borrowings                                | 80  
|13. | Convertible debentures                              | 81  
|14. | Provisions                                          | 82  
|15. | Share capital                                       | 82  
|16. | Revenues                                            | 83  
|17. | Cost of sales                                       | 83  
|18. | General and administrative expense                  | 84  
|19. | Depreciation and amortization                       | 84  
|20. | Personnel expenses                                  | 84  
|21. | Net finance costs                                   | 84  
|22. | Operating segments                                  | 84  
|23. | Earnings per share                                  | 86  
|24. | Changes in non-cash working capital                 | 87  
|25. | Employee benefits                                   | 87  
|26. | Share-based payments                                | 90  
|27. | Financial instruments and financial risk management | 93  
|28. | Operating leases                                    | 99  
|29. | Capital management                                  | 99  
|30. | Group entities                                      | 100 
|31. | Related parties                                     | 100 



56









Pembina
Pipeline Corporation



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



1.	REPORTING ENTITY



Pembina Pipeline Corporation ("Pembina" or the "Company")
is an energy transportation and service provider domiciled in Canada. The consolidated financial statements ("Financial Statements")
include the accounts of the Company, its subsidiary companies, partnerships and any interests in associates and jointly controlled
entities as at and for the year ended December 31, 2012. These Financial Statements present fairly the financial position, financial
performance and cash flows of the Company.



Pembina owns or has interests in pipelines that transport conventional crude oil and natural gas liquids
("NGL"), oil sands and heavy oil pipelines, gas gathering and processing facilities, and an NGL infrastructure and logistics
business. Facilities are located in Canada and in the U.S. Pembina also offers midstream services that span across its operations.



2.	BASIS OF PREPARATION



| | a. | Statement of compliance
| | -- | -----------------------



The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").



The Financial Statements were authorized for issue by the Board
of Directors on March 1, 2013.



| | b. | Basis of measurement
| | -- | --------------------



The Financial Statements have been prepared on the historical
cost basis except for the following material items in the statement of financial position:



| | · | derivative financial instruments are measured at estimated fair value;
and
| | - | --------------------------------------------------------------------------



| | · | liabilities for cash-settled share-based payment arrangements are measured
at estimated fair value.
| | - | ---------------------------------------------------------------------------------------------------



| | c. | Functional and presentation currency
| | -- | ------------------------------------



The Financial Statements are presented in Canadian dollars, which
is the Company's functional currency. All financial information presented in Canadian dollars has been disclosed in thousands except
where noted.



| | d. | Use of estimates and judgments
| | -- | ------------------------------



The preparation of the Financial Statements in conformity with
IFRS requires management to make judgments, estimates and assumptions that are based on the circumstances and estimates at the
date of the 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.



The following judgment and estimation uncertainties are those
management considers material to the Company's financial statements:



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Pembina
Pipeline Corporation



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 determining the fair value of property, plant and equipment and intangible assets acquired generally
require the most judgment.



| | (ii) | Componentization
| | ---- | ----------------



The componentization of the Company's assets are based on management's
judgment of what components constitute a significant cost in relation to the total cost of an asset and whether these components
have similar or dissimilar patterns of consumption and useful lives for purposes of calculating depreciation and amortization.



| | (iii) | 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 the Company. Among other factors, these judgments are based on industry standards and
historical experience.



Estimates



| | (i) | Inventory
| | --- | ---------



Due to the inherent limitations in metering and the physical
properties of storage caverns and pipelines, the determination of precise volumes of NGL held in inventory at such locations is
subject to estimation. Actual inventories of NGL within storage caverns can only be determined by draining of the caverns.



| | (ii) | Financial derivative instruments
| | ---- | --------------------------------



The Company's financial derivative instruments are recognized
on the statement of financial position at fair value based on management's estimate of commodity prices, share price and associated
volatility, foreign exchange rates, interest rates and the amounts that would have been received or paid to settle these instruments
prior to maturity given future market prices and other relevant factors.



| | (iii) | Business Combinations
| | ----- | ---------------------



Estimates of future cash flows, forecast prices, interest rates
and discount rates are made in determining the fair value of assets acquired and liabilities assumed for allocation of the purchase
price. 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 and goodwill in the purchase price analysis. Future net earnings
can be affected as a result of changes in future depreciation and amortization, asset or goodwill impairment.



| | (iv) | Defined benefit obligations
| | ---- | ---------------------------



The calculation of the defined benefit obligation is sensitive
to many estimates, but most significantly of which include the discount rate and long-term rate of return on assets applied.



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Pipeline Corporation



| | (v) | Provisions and contingencies
| | --- | ----------------------------



Provisions recognized are based on management's judgment about
assessing contingent liabilities and timing, scope and amount of liabilities. Management uses judgment in determining the likelihood
of realization of contingent assets and liabilities to determine the outcome of contingencies.



Based on the long-term nature of the decommissioning provision,
the biggest uncertainties in estimating the provision are the discount rates used, the costs that will be incurred and the timing
of when these costs will occur. In addition, in determining the provision it is assumed that the Company will utilize technology
and materials that are currently available.



| | (vi) | Share-based payments
| | ---- | --------------------



Compensation costs pursuant to the share-based compensation plans
are subject to estimated fair values, forfeiture rates and the future attainment of performance criteria.



| | (vii) | 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 rated anticipated to apply to income
in the years in which temporary differences are expected to be realized or reversed.



| | (viii) | Depreciation and amortization
| | ------ | -----------------------------



Estimated useful lives of property, plant and equipment is based
on management's assumptions and estimates of the physical useful lives of the assets, the economic life, which may be associated
with the reserve life and commodity type of the production area, in addition to the estimated residual value.



3.	SIGNIFICANT ACCOUNTING POLICIES



The accounting policies are set out below have been applied consistently
to all periods presented in these Financial Statements.



| | a. | Basis of consolidation
| | -- | ----------------------



| | i) | Business combinations
| | -- | ---------------------



The Company measures goodwill as the fair value of
the consideration transferred including the recognized amount of any non-controlling interest in the acquiree, less the net recognized
amount (generally 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 profit or loss.



The Company 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 the Company'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 profit or loss.



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Pipeline Corporation



Transaction costs, other than those associated with
the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.



| | ii) | Subsidiaries
| | --- | ------------



Subsidiaries are entities controlled by the Company.
The financial statements of subsidiaries are included in the 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 the Company.



| | iii) | Investments in associates and jointly controlled entities (equity accounted investees)
| | ---- | --------------------------------------------------------------------------------------



Associates are those entities in which the Company
has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is
presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. Joint ventures are those
entities over whose activities the Company has joint control, established by contractual agreement and requiring unanimous consent
for strategic financial and operating decisions.



The Financial Statements include the Company's share
of the profit or loss and other comprehensive income, after adjustments to align the accounting policies with those of the Company,
from the date that significant influence or joint control commences until the date that significant influence or joint control
ceases. The Company's investments in its associates and joint ventures are accounted for using the equity method and are recognized
initially at cost, including transaction costs.



When the Company'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 the Company has an obligation or has made payments
on behalf of the investee.



| | iv) | Jointly controlled operations
| | --- | -----------------------------



A jointly controlled operation is a joint venture
carried on by each venture using its own assets in pursuit of the joint operations. The Financial Statements include the assets
that the Company controls and the liabilities that it incurs in the course of pursuing the joint operation, and the expenses that
the Company incurs and its share of the income that it earns from the joint operation.



| | v) | Transactions eliminated on consolidation
| | -- | ----------------------------------------



Intra-group balances and transactions, and any unrealized
revenue and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent
of the Company's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the
extent that there is no evidence of impairment.



| | vi) | Foreign currency
| | --- | ----------------



Transactions in foreign currencies are translated
to the Company's functional currency, Canadian dollars, at exchange rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the reporting date are retranslated to the Company's functional currency at the
exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the
functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized
cost in foreign currency translated at the exchange rate at the end of the reporting period.



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Pembina
Pipeline Corporation



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.



Foreign currency differences arising on retranslation
are recognized in profit or loss.



| | b. | Inventories
| | -- | -----------



Inventories are measured at the lower of cost and net realizable
value and consist primarily of crude oil and NGL. 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 costs, and
transportation costs. 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 the inventories are reflected in inventories and cost of sales.



| | c. | Financial instruments
| | -- | ---------------------



Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only when, the Company 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
| | -- | -------------------------------



The Company initially recognizes loans and receivables
and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through
profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of
the instrument.



The Company 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 the Company is recognized as a separate asset or liability.



The Company classifies non-derivative financial assets
into the following categories:



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 that are subject to an insignificant risk
of changes in their fair value, and are used by the Company in the management of its short-term commitments.



Trade and other receivables



Trade and other receivables are financial assets with
fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus
any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized
cost using the effective interest method less any impairment losses.



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Pembina
Pipeline Corporation





| | ii) | Non-derivative financial liabilities
| | --- | ------------------------------------



The Company initially recognizes debt securities issued
and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated
at fair value through profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual
provisions of the instrument.



The Company derecognizes a financial liability when
its contractual obligations are discharged, cancelled or expire.



The Company's non-derivative financial liabilities
are comprised of the following: bank indebtedness, trade payables and accrued liabilities, dividends payable, loans and borrowings
including finance lease obligations and the liability component of convertible debentures.



Such 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.



Bank overdrafts that are repayable on demand and form
an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.



| | iii) | Share capital
| | ---- | -------------



Common shares



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) | Compound financial instruments
| | --- | ------------------------------



The Company's convertible debentures are compound
financial instruments consisting of a financial liability and an embedded conversion feature. In accordance with IAS 39, the embedded
derivatives are required to be separated from the host contracts and accounted for as stand-alone instruments.



Debentures containing a cash conversion option allow
Pembina to pay cash to the converting holder of the debentures, at the option of the Company. As such, the conversion feature is
presented as a financial derivative liability within long-term derivative financial instruments. Debentures without a cash conversion
option are settled in shares on conversion, and therefore the conversion feature is presented within equity, in accordance with
its contractual substance.



On initial recognition and at each reporting date,
the embedded conversion feature is measured using a method whereby the fair value is measured using an option pricing model. Subsequent
to initial recognition, any unrealized gains or losses arising from fair value changes are recognized through profit or loss in
the statement of comprehensive income at each reporting date. If the conversion feature is included in equity, it is not remeasured
subsequent to initial recognition. On initial recognition, the debt component, net of issue costs, is recorded as a financial liability
and accounted for at amortized cost. Subsequent to initial recognition, the debt component is accreted to the face value of the
debentures using the effective interest rate method. Upon conversion, the corresponding portions of the debt and equity are removed
from those captions and transferred to share capital.



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Pembina
Pipeline Corporation





| | v) | Derivative financial instruments
| | -- | --------------------------------



The Company holds derivative financial instruments
to manage its interest rate, commodity, power costs and foreign exchange risk exposures as well as cash conversion features on
convertible debentures and a redemption liability. 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 profit or loss. Derivatives are recognized initially
at fair value with attributable transaction costs recognized in profit or loss as incurred. Subsequent to initial recognition,
derivatives are measured at fair value and changes in non-commodity-related derivatives are recognized immediately in profit or
loss in net finance costs and changes in commodity-related derivatives are recognized immediately in profit or loss in operating
activities.



| | d. | Property, plant and equipment
| | -- | -----------------------------



| | i) | Recognition and measurement
| | -- | ---------------------------



Items of property, plant and equipment are measured
at cost less 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 also may 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 are recognized within other expense (income) in profit or loss.



| | 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 the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized.
The cost of maintenance and repair expenses of the property, plant and equipment are recognized in profit or loss as incurred.



| | iii) | Depreciation
| | ---- | ------------



Depreciation is based on the cost of an asset less
its residual value. Significant components of individual assets, other than land, are assessed and if a component has a useful
life that is different from the remainder of the asset, that component is depreciated separately.



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Pembina
Pipeline Corporation



Depreciation is recognized in profit or loss 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. Pipeline assets and facilities are generally depreciated using the straight line method over 3
to 75 years (an average of 47 years) or declining balance method at rates ranging from 3 percent to 37 percent per annum (an average
rate of 15 percent per annum). Facilities and equipment are depreciated using straight line method over 3 to 75 years (at an average
rate of 35 years) or declining balance method at rates ranging from 3 to 37 percent (at an average rate of 12 percent per annum).
Other assets are depreciated using the straight line method over 2 to 45 years (an average of 17 years) or declining balance method
at rates ranging from 3 percent to 37 percent (at an average rate of 2 percent per annum). These rates are established to depreciate
remaining net book value over the economic lives or contractual duration of the related assets.



Leased assets are depreciated over the shorter of
the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the
lease term.



Depreciation methods, useful lives and residual values
are reviewed annually and adjusted if appropriate.



| | e. | Intangible assets
| | -- | -----------------



| | i) | Goodwill
| | -- | --------



Goodwill that arises upon acquisitions is included
in intangible assets. See note 3(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 equity accounted investees, the carrying
amount of 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 equity accounted investee.



| | ii) | Other intangible assets
| | --- | -----------------------



Other intangible assets acquired individually by the
Company and have finite useful lives are recognized and measured at cost less accumulated amortization and accumulated impairment
losses.



| | iii) | Subsequent expenditures
| | ---- | -----------------------



Subsequent expenditures are capitalized only when
it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized
in profit or loss as incurred.



| | iv) | Amortization
| | --- | ------------



Amortization is based on the cost of an asset less
its residual value.



Amortization is recognized in profit or loss on a
straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available
for use. The estimated useful lives of other intangible assets with finite useful lives range from 3 to 25 years (at an average
of 17 years).



Amortization methods, useful lives and residual values
are reviewed annually and adjusted if appropriate.



| | f. | Leased assets
| | -- | -------------



Leases which the Company 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.



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Pembina
Pipeline Corporation



Other leases are operating leases and are not recognized in the
Company's statement of financial position.



| | g. | Lease payments
| | -- | --------------



Payments made under operating leases are recognized in profit
or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the
total lease expense, over the term of the lease.



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. Contingent lease payments
are accounted for by revising the minimum lease payments over the remaining life.



| | i) | Determining whether an arrangement contains a lease
| | -- | ---------------------------------------------------



At inception of an arrangement, the Company 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,
the Company 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. If the Company concludes for a finance lease that it is impracticable to separate
the payments reliably, an asset and liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently,
the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Company's incremental
borrowing rate.



| | h. | Impairment
| | -- | ----------



| | i) | Non-derivative financial assets
| | -- | -------------------------------



A financial asset not carried at fair value through
profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial
asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset, and that a loss event had a negative effect on the estimated future cash flows of that asset and the
impact can be estimated reliably.



Objective evidence that financial assets are impaired
can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not
consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers
or issuers in the Company, economic conditions that correlate with defaults or the disappearance of an active market for a security
or a significant or prolonged decline in the fair value below cost.



Trade and other receivables ("Receivables")



The Company considers evidence of impairment for Receivables
at both a specific asset and collective level. All individually significant Receivables are assessed for specific impairment. All
individually significant Receivables found not to be specifically impaired are then collectively assessed for any impairment that
has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment
by grouping together Receivables with similar risk characteristics.



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Pembina
Pipeline Corporation



In assessing collective impairment, the Company 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.



An impairment loss in respect of a financial asset
measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future
cash flows discounted at the asset's original effective interest rate. Losses are recognized in profit or loss and reflected in
an allowance account against Receivables. Interest on the impaired asset continues to be recognized through the unwinding of the
discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed
through profit or loss.



| | ii) | Non-financial assets
| | --- | --------------------



The carrying amounts of the Company's non-financial
assets, other than line fill and 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, then 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 each year at the same time. An impairment
loss is recognized if the carrying amount of an asset or its related Cash Generating Unit ("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 value in use, 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 or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, for the purpose of goodwill impairment testing,
CGUs to which goodwill has been allocated 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.



The Company'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 belongs.



Impairment losses are recognized in profit or loss.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment
losses recognized in respect 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.



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Pipeline Corporation



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.



Goodwill that forms part of the carrying amount of
an investment in an associate is not recognized separately, and therefore is not tested for impairment separately. Instead, the
entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that
the investment in an associate may be impaired.



| | 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 profit or loss 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 that are 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. The Company's net obligation in respect of Defined Benefit Pension Plans ("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. Unrecognized past service costs and the fair
value of any plan assets are deducted. The discount rate used to determine the present value is comprised of the following: estimated
returns for each major asset class consistent with market conditions on the valuation date and the target asset mix specified in
the Plans investment policy, additional net returns assumed to be achievable due to active equity management, implicit provision
for expenses determined as the average rate of investment and administrative expenses paid by the Plans over the last five years,
and a margin for adverse deviations, based on the proportion of the Plans' assets invested in equities in excess of the return
expected on equities, over government bond yields.



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 the Company, the
recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available
in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present
value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An
economic benefit is available to the Company 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 profit or loss on a straight-line basis over the
average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately
in profit or loss.



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Pipeline Corporation



The Company recognizes all actuarial gains and losses
arising from defined benefit plans in other comprehensive income and expenses related to defined benefit plans in personnel expenses
in profit or loss.



The Company 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) | Other long-term employee benefits
| | ---- | ---------------------------------



The Company's net obligation in respect of long-term
employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service
in the current and prior periods is discounted to determine its present value, and the fair value of any related assets is deducted.
The discount rate is comprised of the following: estimated returns for each major asset class consistent with market conditions
on the valuation date and the target asset mix specified in the Plans investment policy, additional net returns assumed to be achievable
due to active equity management, implicit provision for expenses determined as the average rate of investment and administrative
expenses paid from the Plans over the last five years, and a margin for adverse deviations, based on the proportion of the Plans
assets invested in equities in excess return expected on equities, over government yield bonds.



The calculation is performed using an actuary.



| | iv) | 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 under short-term cash bonus if the Company 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.



| | v) | 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 profit or loss.



| | j. | Provisions
| | -- | ----------



A provision is recognized if, as a result of a past event, the
Company 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 (accretion)
is recognized as a finance cost.



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Pembina
Pipeline Corporation





Decommissioning obligation



The Company's activities give rise to dismantling, decommissioning
and site disturbance remediation activities. 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 expenditure required to settle the obligation at the balance sheet
date. 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 finance costs whereas increases/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.



| | k. | Revenue
| | -- | -------



Revenue in the course of ordinary activities is measured at the
fair value of the consideration received or receivable. Revenue is recognized when persuasive evidence exists that the significant
risks and rewards of ownership have been transferred to the customer or the service has been provided, recovery of the consideration
is probable, the associated costs can be estimated reliably, there is no continuing management involvement with the goods, and
the amount of revenue can be measured reliably.



The timing of the transfer of significant risks and rewards varies
depending on the individual terms of the sales or service agreement. For product sales, usually transfer of significant risks and
rewards occurs when the product is delivered to a customer. For pipeline transportation revenues and storage revenue, transfer
of significant risks and rewards usually occurs when the service is provided as per the contract with the customer. For rate or
contractually regulated pipeline operations, revenue is recognized in a manner that is consistent with the underlying rate design
as mandated by agreement or regulatory authority.



Certain commodity buy/sell arrangements where the risks and rewards
of ownership have not transferred are recognized on a net basis in profit or loss.



| | l. | Finance income and finance costs
| | -- | --------------------------------



Finance income comprises interest income on funds deposited and
invested, gains on non-commodity-related derivatives measured at fair value through profit or loss and foreign exchange gains.
Interest income is recognized as it accrues in profit or loss, using the effective interest method.



Finance costs comprise interest expense on loans and borrowings,
unwinding of discount rate 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 profit or loss using the effective interest method.



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Pembina
Pipeline Corporation



| | m. | Income tax
| | -- | ----------



Income tax expense comprises current and deferred tax. Current
and deferred tax are recognized in profit or loss except to the extent that it relates 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 profit or loss;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | temporary differences relating to investments in subsidiaries and jointly
controlled entities 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 the Company 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 current tax liabilities and assets, 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, the Company
takes into account the impact of uncertain tax positions 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 the Company 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.



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Pembina
Pipeline Corporation





| | n. | Earnings per share
| | -- | ------------------



The Company presents basic and diluted earnings per share ("EPS")
data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company
by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit
or loss attributable to common shareholders and the weighted average number of common shares outstanding, for the effects of all
potentially dilutive common shares, which comprise convertible debentures and share options granted to employees ("Convertible
Instruments"). Only outstanding and Convertible Instruments that will have a dilutive effect are included in fully diluted
calculations.



The dilutive effect of Convertible Instruments is determined
whereby outstanding Convertible Instruments 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 income or loss relating to the outstanding Convertible
Instruments are added back to net income 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 the Company 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 the Company's Chief
Executive Officer ("CEO"), Chief Financial Officer ("CFO") and Chief Operating Officer ("COO") 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 COO include
items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise
mainly corporate assets, head office expenses, finance income and costs and income tax assets and liabilities.



Segment capital expenditure is the total cost incurred during
the period to acquire property, plant and equipment, and intangible assets other than goodwill.



| | p. | Cash flow statements
| | -- | --------------------



The cash flow statement is prepared using the indirect method.
Changes in balance sheet items that have not resulted in cash flows such as share-based payment expense, unrealized gains and losses,
depreciation and amortization, employee future benefit expenses, deferred income tax expense, share of profit from equity accounted
investees, among others, have been eliminated for the purpose of preparing this statement. Dividends paid to ordinary shareholders,
among other expenditures, are included in financing activities. Interest paid is included in operating activities.



| | q. | New standards and interpretations not yet adopted
| | -- | -------------------------------------------------



Certain new standards, interpretations, amendments and improvements
to existing standards were issued by the IASB or International Financial Reporting Interpretations Committee ("IFRIC")
for accounting periods beginning after January 1, 2013. The Company has reviewed these and determined the following:



Amendments to IFRS 7 Financial Instruments: Disclosures
are effective for annual periods beginning on or after January 1, 2013. The adoption of these amendments is not expected to have
a material impact on the Company’s Financial Statements.



IFRS 9 (2010) Financial Instruments is effective for annual
periods beginning on or after January 1, 2015, with early adoption permitted. The Company intends to adopt IFRS 9 (2010) in its
financial statements for the annual period beginning January 1, 2015. The extent of the impact of adoption of IFRS 9 (2010) has
not yet been determined.



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Pembina
Pipeline Corporation



IFRS 10 Consolidated Financial Statements, IFRS 11 Joint
Arrangements, IFRS 12 Disclosure of Interest in Other Entities and IFRS 13 Fair Value Measurement are effective
for annual periods beginning on or after January 1, 2013. The adoption of these standards is not expected to have a material impact
on the Company’s financial statements.



Amendments to IAS 19 Employee Future Benefits are effective for
annual periods beginning on or after January 1, 2013. The adoption of these amendments is not expected to have a material impact
on the Company’s Financial Statements.



IAS 32 Financial Instruments: Presentation is effective
for annual periods beginning on or after January 1, 2014. The Company is currently evaluating the impact that the standard will
have on its results of operations and financial position.



4.	DETERMINATION OF FAIR VALUES



A number of the Company'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 is based on market values when available and depreciated replacement cost when appropriate.
Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.



| | ii) | Intangible assets
| | --- | -----------------



The fair value of intangible assets acquired in a business combination
is determined 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, with the exception of the redemption
liability which is related to the acquisition of the Company's subsidiary, are estimated by reference to independent monthly forward
settlement prices, interest rate yield curves, currency rates, quoted market prices per share and volatility rates at the period
ends.



The redemption liability related to one of the Company's subsidiaries
represents a put option, held by the non-controlling interest, to sell the remaining one-third of the business to the Company after
the third anniversary of the acquisition date (October 3, 2014). The put price to be paid by the Company for the residual interest
upon exercise is based on a multiple of the subsidiary's earnings during the three year period prior to exercise, adjusted for
associated capital expenditures and debt based on management estimates (see Note 27 "Financial Instruments and Financial Risk
Management").



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.



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Pembina
Pipeline Corporation





| | iv) | Non-derivative financial assets and liabilities
| | --- | -----------------------------------------------



Fair value, which is determined for disclosure purposes, is calculated
based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting
date. In respect of the convertible debentures, the fair value is determined by the market price of the convertible debenture on
the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.



| | v) | Share-based payment transactions
| | -- | --------------------------------



The fair value of the employee share options is measured using
the Black-Scholes formula. 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 reporting date market price of the Company's shares. Expected dividends
are not taken into account in determining fair value as they are issued as additional distribution share units.



| | vi) | Inventories
| | --- | -----------



The net realizable value of inventories is determined based on
the estimated selling price in the ordinary course of business less estimated cost to sell.



5.	ACQUISITION



On April 2, 2012, Pembina acquired all of the outstanding Provident
Energy Ltd. ("Provident") common shares (the "Provident Shares") in exchange for Pembina common shares valued
at approximately $3.3 billion (the "Acquisition"). Provident shareholders received 0.425 of a Pembina common share for
each Provident Share held for a total of 116,535,750 Pembina common shares. On closing, Pembina assumed all of the rights and obligations
of Provident relating to the 5.75 percent convertible unsecured subordinated debentures of Provident maturing December 31, 2017,
and the 5.75 percent convertible unsecured subordinated debentures of Provident maturing December 31, 2018 (collectively, the "Provident
Debentures"). The face value of the outstanding Provident Debentures at April 2, 2012 was $345 million. The debentures remain
outstanding and continue with terms and maturity as originally set out in their respective indentures. Pursuant to the Acquisition,
Provident amalgamated with a wholly-owned subsidiary of Pembina and has continued under the name "Pembina NGL Corporation".
The results of the acquired business are included as part of the Midstream business.



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Pembina
Pipeline Corporation



The purchase price equation, subject to finalization of deferred
tax liabilities, is based on assessed fair values and is estimated as follows:



|($ millions)                                               |  |  |      
|---------------------------------------------------------- |  |  | -----
|Cash                                                       |  |  | 9    
|Trade receivables and other                                |  |  | 195  
|Inventory                                                  |  |  | 87   
|Property, plant and equipment                              |  |  | 1,988
|Intangible assets and goodwill (including $1,753 goodwill) |  |  | 2,414
|Trade payables and accrued liabilities                     |  |  | (249 
|Derivative financial instruments – current                 |  |  | (53  
|Derivative financial instruments – non-current             |  |  | (36  
|Loans and borrowings                                       |  |  | (215 
|Convertible debentures                                     |  |  | (317 
|Provisions and other                                       |  |  | (128 
|Deferred tax liabilities                                   |  |  | (406 
|Non-controlling interest                                   |  |  | (5   
|                                                           |  |  | 3,284



The determination of fair values and the purchase price equation
are based upon an independent valuation. The primary drivers that generate goodwill are synergies and business opportunities from
the integration of Pembina and Provident and the acquisition of a talented workforce. The recognized goodwill is generally not
expected to be deductible for tax purposes.



Upon closing of the Acquisition, Pembina repaid Provident's revolving
term credit facility of $205 million.



The Company has recognized $24.1 million in acquisition-related
expenses. These expenses are included in acquisition-related and other expenses in the Financial Statements.



The Pembina Shares were listed and began trading on the NYSE
under the symbol "PBA" on April 2, 2012.



Revenue generated by the Provident business for the period from
the Acquisition date of April 2, 2012 to December 31, 2012, before intersegment eliminations, was $1,151.4 million. Net earnings,
before intersegment eliminations, for the same period were $54.2 million.



Unaudited proforma consolidated revenue (prepared as if the Provident
Acquisition had occurred on January 1, 2012) for the year ended December 31, 2012 are $3,967.5 million and net earnings for the
same period are $277 million.



6.	TRADE AND OTHER RECEIVABLES



|December 31 ($ thousands)                                            |  | 2012 |         |  | 2011 | 
|-------------------------------------------------------------------- |  | ---- | ------- |  | ---- | 
|Trade accounts receivable from customers                             |  |      | 310,364 |  |      | 
|Trade accounts receivable and other receivables from related parties |  |      | 10,814  |  |      | 
|Prepayments                                                          |  |      | 10,514  |  |      | 
|Total current trade and other receivables                            |  |      | 331,692 |  |      | 
|Non-current holdbacks receivable                                     |  |      | 3,080   |  |      | 
|Receivable due from related parties                                  |  |      |         |  |      | 
|                                                                     |  |      | 334,772 |  |      | 



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Pembina
Pipeline Corporation



On March 29, 2012 the Musreau Deep Cut experienced a gear box
failure, resulting in an interruption to business until Pembina brought the Deep Cut compressor back into service on September
2, 2012. Business interruption and capital insurance claims are currently being pursued. Pembina has recognized a receivable based
on information on the claim status as of the reporting date.



7.	PROPERTY, PLANT AND EQUIPMENT



|($ thousands)                       |  | Land and Land Rights |        |   | Pipelines |  |           | Facilities and Equipment |  |  | Linefill and Other |   |  | Assets Under Construction |         |     | Total | 
|----------------------------------- |  | -------------------- | ------ | - | --------- |  | --------- | ------------------------ |  |  | ------------------ | - |  | ------------------------- | ------- | --- | ----- | 
|Cost                                |  |                      |        |   |           |  |           |                          |  |  |                    |   |  |                           |         |     |       | 
|Balance at December 31, 2010        |  |                      | 57,248 |   |           |  | 1,997,267 |                          |  |  | 483,765            |   |  |                           | 149,117 |     |       | 
|Additions                           |  |                      | 10,006 |   |           |  | 216,293   |                          |  |  | 30,208             |   |  |                           | 48,891  |     |       | 
|Change in decommissioning provision |  |                      |        |   |           |  | 117,491   |                          |  |  |                    |   |  |                           |         |     |       | 
|Capitalized interest                |  |                      |        |   |           |  | 207       |                          |  |  |                    |   |  |                           |         |     |       | 
|Transfers                           |  |                      | 104    |   |           |  | 169,354   |                          |  |  | 15,075             |   |  |                           | 1,139   |     |       | 
|Disposals and other                 |  |                      | (139   | ) |           |  | (585      | )                        |  |  | (428               | ) |  |                           | 1,579   |     |       | 
|Balance at December 31, 2011        |  |                      | 67,219 |   |           |  | 2,500,027 |                          |  |  | 528,620            |   |  |                           | 200,726 | (1) |       | 
|Acquisition (Note 5)                |  |                      | 18,093 |   |           |  | 276,225   |                          |  |  | 1,319,286          |   |  |                           | 287,319 |     |       | 
|Additions                           |  |                      | 5,900  |   |           |  | 20,315    |                          |  |  | 38,533             |   |  |                           | 31,021  |     |       | 
|Change in decommissioning provision |  |                      |        |   |           |  | (139,468  | )                        |  |  | (31,441            | ) |  |                           |         |     |       | 
|Capitalized interest                |  |                      |        |   |           |  | 570       |                          |  |  | 98                 |   |  |                           |         |     |       | 
|Transfers                           |  |                      | 1,793  |   |           |  | (61,401   | )                        |  |  | 217,928            |   |  |                           | (13,149 | )   |       | 
|Disposals and other                 |  |                      | (5,001 | ) |           |  | (2,534    | )                        |  |  | (828               | ) |  |                           | 626     |     |       | 
|Balance at December 31, 2012        |  |                      | 88,004 |   |           |  | 2,593,734 |                          |  |  | 2,072,196          |   |  |                           | 506,543 |     |       | 
|                                    |  |                      |        |   |           |  |           |                          |  |  |                    |   |  |                           |         |     |       | 
|Depreciation                        |  |                      |        |   |           |  |           |                          |  |  |                    |   |  |                           |         |     |       | 
|Balance at December 31, 2010        |  |                      | 4,043  |   |           |  | 659,277   |                          |  |  | 76,498             |   |  |                           | 49,301  |     |       | 
|Depreciation                        |  |                      | 45     |   |           |  | 48,334    |                          |  |  | 16,768             |   |  |                           | 4,374   |     |       | 
|Disposals                           |  |                      |        |   |           |  | (516      | )                        |  |  | (268               | ) |  |                           | (1,436  | )   |       | 
|Balance at December 31, 2011        |  |                      | 4,088  |   |           |  | 707,095   |                          |  |  | 92,998             |   |  |                           | 52,239  |     |       | 
|Depreciation                        |  |                      | 279    |   |           |  | 70,795    |                          |  |  | 54,476             |   |  |                           | 19,629  |     |       | 
|Transfers                           |  |                      |        |   |           |  | 917       |                          |  |  | 24,628             |   |  |                           | (25,545 | )   |       | 
|Disposals and other                 |  |                      |        |   |           |  | (2,099    | )                        |  |  | (225               | ) |  |                           | (1,514  | )   |       | 
|Balance at December 31, 2012        |  |                      | 4,367  |   |           |  | 776,708   |                          |  |  | 171,877            |   |  |                           | 44,809  |     |       | 
|                                    |  |                      |        |   |           |  |           |                          |  |  |                    |   |  |                           |         |     |       | 
|Carrying amounts                    |  |                      |        |   |           |  |           |                          |  |  |                    |   |  |                           |         |     |       | 
|December 31, 2011                   |  |                      | 63,131 |   |           |  | 1,792,932 |                          |  |  | 435,622            |   |  |                           | 148,487 |     |       | 
|December 31, 2012                   |  |                      | 83,637 |   |           |  | 1,817,026 |                          |  |  | 1,900,319          |   |  |                           | 461,734 |     |       | 



| | (1) | $1.5 million was reclassified from inventory to Linefill and Other at December 31, 2011.
| | --- | ----------------------------------------------------------------------------------------



Property, plant and equipment under construction



Costs of assets under construction at December 31, 2012 totalled
$751.8 million ($2011: $307.4 million). Such amounts include capitalized borrowing costs.



For the year ended December 31, 2012, capitalized borrowing costs
related to the construction of the new pipelines or facilities amounted to $14.5 million (2011: $10.2 million), with capitalization
rates ranging from 4.29 percent to 4.77 percent (2011: 4.91 percent to 5.36 percent).



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Pembina
Pipeline Corporation



Commitments



At December 31, 2012, the Company has contractual commitments
for the acquisition and or construction of property, plant and equipment of $362.8 million (December 31, 2011: $364.3 million).



8.	INTANGIBLE ASSETS AND GOODWILL



|                                              |  |          |           |  | Other Intangible Assets     |  |         |                        |  |  |                  | 
|--------------------------------------------- |  | -------- | --------- |  | --------------------------- |  | ------- | ---------------------- |  |  | ---------------- | 
|                                              |  | Goodwill |           |  | Purchase and Sale Contracts |  |         | Customer Relationships |  |  | Purchase Options | 
|Cost                                          |  |          |           |  |                             |  |         |                        |  |  |                  | 
|Balance at December 31, 2010 and 2011         |  |          | 222,670   |  |                             |  | 23,038  |                        |  |  |                  | 
|Acquisition (Note 5)                          |  |          | 1,752,942 |  |                             |  | 157,051 |                        |  |  | 226,497          | 
|Additions and other                           |  |          |           |  |                             |  | 5,000   |                        |  |  |                  | 
|Balance at December 31, 2012                  |  |          | 1,975,612 |  |                             |  | 185,089 |                        |  |  | 226,497          | 
|                                              |  |          |           |  |                             |  |         |                        |  |  |                  | 
|Amortization                                  |  |          |           |  |                             |  |         |                        |  |  |                  | 
|Accumulated amortization at December 31, 2010 |  |          |           |  |                             |  | 1,106   |                        |  |  |                  | 
|Amortization                                  |  |          |           |  |                             |  | 698     |                        |  |  |                  | 
|Accumulated amortization at December 31, 2011 |  |          |           |  |                             |  | 1,804   |                        |  |  |                  | 
|Amortization                                  |  |          |           |  |                             |  | 24,778  |                        |  |  | 15,289           | 
|Accumulated amortization at December 31, 2012 |  |          |           |  |                             |  | 26,582  |                        |  |  | 15,289           | 
|                                              |  |          |           |  |                             |  |         |                        |  |  |                  | 
|Carrying amounts                              |  |          |           |  |                             |  |         |                        |  |  |                  | 
|December 31, 2011                             |  |          | 222,670   |  |                             |  | 21,234  |                        |  |  |                  | 
|December 31, 2012                             |  |          | 1,975,612 |  |                             |  | 158,507 |                        |  |  | 211,208          | 



Other intangible assets consist of customer purchase and sale
contracts with several producers acquired through business combinations. In addition, Pembina has a purchase option of $277.3 million
to acquire property, plant and equipment. The purchase option is not being amortized because it is not exercisable until 2018.



The aggregate carrying amount of intangible assets and goodwill
allocated to each operating segment is as follows:



|($ thousands)           |  | 2012 |           |  | 2011 | 
|----------------------- |  | ---- | --------- |  | ---- | 
|Conventional Pipelines  |  |      | 315,470   |  |      | 
|Oil Sands and Heavy Oil |  |      | 33,300    |  |      | 
|Gas Services            |  |      | 196,136   |  |      | 
|Midstream               |  |      | 2,077,771 |  |      | 
|                        |  |      | 2,622,677 |  |      | 



Impairment testing



For the purpose of impairment testing, goodwill is allocated
to the Company's operating divisions which represent the lowest level within the Company at which the goodwill is monitored for
internal management purposes, which is not higher than the Company's operating segments. Impairment testing for goodwill was performed
on December 31, 2012. The recoverable amounts were based on their value in use and were determined to be higher than their carrying
amounts.



Value in use was determined by discounting the future cash flows
generated from the continuing use of each cash generating unit. The calculation of the value in use was based on the following
key assumptions:



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Pembina
Pipeline Corporation



Cash flows were projected based on past experience, actual operating
results and the first 5 years of the business plan approved by management. Cash flows for periods up to 68 years (2011: 75 years)
were extrapolated using a constant growth rate of 2 percent (2011: 1.9 percent), which does not exceed the long-term average growth
rate for the industry. Pre-tax discount rates between 7.49 percent and 8.63 percent (2011: 7.51 percent and 8.84 percent) were
applied in determining the recoverable amount of the cash generating units. The discount rates were estimated based on past experience,
the Company's risk free rate and average cost of debt in addition to estimates of the specific cash generating unit's equity risk
premium, size premium, small capitalization premium, projection risk, betas, tax rate and industry targeted debt to equity ratios.



9.	INVESTMENTS IN EQUITY ACCOUNTED INVESTEES



The Company has a 50 percent interest in two jointly controlled,
equity accounted investees that are reported using the equity method of accounting. The carrying value of the investment at December
31, 2012 is $161.2 million (2011: $161 million).



|                                                                    |  | Pembina's Proportionate Share of
    Balance As At |       |  | Pembina's Proportionate Share of
    Transaction Value For The Year Ended |  |        | Payments from
    Equity Accounted Investees | 
|------------------------------------------------------------------- |  | -------------------------------------------------- | ----- |  | ------------------------------------------------------------------------- |  | ------ | -------------------------------------------- | 
|                                                                    |  | Current
    Assets                                 |       |  | Non-Current
    Assets                                                    |  |        | Current
    Liabilities                      | 
|($ thousands)                                                       |  |                                                    |       |  |                                                                           |  |        |                                              | 
|Fort Saskatchewan Ethylene Storage Corporation
    (FSESC)          |  |                                                    | 316   |  |                                                                           |  | 11     |                                              | 
|Fort Saskatchewan
    Ethylene Storage Limited Partnership (FSESLP) |  |                                                    | 3,271 |  |                                                                           |  | 26,216 |                                              | 
|December 31, 2011                                                   |  |                                                    | 3,587 |  |                                                                           |  | 26,227 |                                              | 
|FSESC                                                               |  |                                                    | 331   |  |                                                                           |  | 4      |                                              | 
|FSESLP                                                              |  |                                                    | 2,917 |  |                                                                           |  | 41,343 |                                              | 
|December 31, 2012                                                   |  |                                                    | 3,248 |  |                                                                           |  | 41,347 |                                              | 



On acquisition, Pembina recognized a fair value adjustment which
is amortized over the useful life of the assets. Pembina's share of profit of investments in equity accounted investees includes
amortization of the fair value adjustment of $7.7 million (2011: $5.2 million), derecognition of fair value adjustment of $nil
(2011: $25.2 million), income tax benefit (expense) of $0.5 million (2011: $(1.9) million) and other $0.3 million (2011: $(0.7)
million) In 2012, Pembina made contributions for the construction of caverns of $8.2 million (2011: $nil).



Commitments



At December 31, 2012, the Company's share of investment in equity
accounted investees contractual commitments for the construction of property, plant and equipment is $31.6million (December 31, 2011: $42.7 million).



77







Pembina Pipeline Corporation



| | 10. | INCOME TAXES
| | --- | ------------



The components of the deferred assets and deferred tax liabilities
are as follows:



|($ thousands)                               |  | 2012 |         |  | 2011 | 
|------------------------------------------- |  | ---- | ------- |  | ---- | 
|Asset:                                      |  |      |         |  |      | 
|Intangible assets                           |  |      |         |  |      | 
|Derivative financial instruments            |  |      | 22,787  |  |      | 
|Employee benefits                           |  |      | 7,156   |  |      | 
|Share-based payments                        |  |      | 7,971   |  |      | 
|Provisions                                  |  |      | 114,617 |  |      | 
|Benefit of loss carryforwards               |  |      | 76,702  |  |      | 
|Other deductible temporary differences      |  |      | 2,783   |  |      | 
|Total deferred tax asset                    |  |      | 232,016 |  |      | 
|                                            |  |      |         |  |      | 
|Liability:                                  |  |      |         |  |      | 
|Property, plant and equipment               |  |      | 589,909 |  |      | 
|Intangible assets                           |  |      | 127,467 |  |      | 
|Investments in equity accounted investees   |  |      | 21,841  |  |      | 
|Taxable limited partnership income deferral |  |      | 75,295  |  |      | 
|Other taxable temporary differences         |  |      | 1,993   |  |      | 
|Total deferred tax liability                |  |      | 816,505 |  |      | 
|                                            |  |      |         |  |      | 
|Total deferred tax liability                |  |      | 584,489 |  |      | 



The Company's consolidated effective tax rate for the year ended
December 31, 2012 was 25 percent (2011: 19.6 percent).



Reconciliation of effective tax rate



|Year Ended December 31 ($
    thousands)         |  | 2012 |         |   | 2011 | 
|------------------------------------------------ |  | ---- | ------- | - | ---- | 
|Earnings before income tax                       |  |      | 301,347 |   |      | 
|                                                 |  |      |         |   |      | 
|Statutory tax rate                               |  |      | 25.0    | % |      | 
|                                                 |  |      |         |   |      | 
|Income tax at statutory rate                     |  |      | 75,337  |   |      | 
|                                                 |  |      |         |   |      | 
|Tax rate changes on deferred income tax balances |  |      | 1,948   |   |      | 
|Changes in estimate from prior year              |  |      | (2,160  | ) |      | 
|Other                                            |  |      | 214     |   |      | 
|Income tax expense                               |  |      | 75,339  |   |      | 



In 2007, the Canadian federal government enacted a change in
the federal income tax rate from 16.5 percent in 2011 to 15 percent in 2012.



78







Pembina Pipeline Corporation





Income tax expense



|Year Ended December 31($ thousands)               |  | 2012 |        |   | 2011 | 
|------------------------------------------------- |  | ---- | ------ | - | ---- | 
|Current tax benefit                               |  |      |        |   |      | 
|Adjustment for prior period                       |  |      | (463   | ) |      | 
|Total current tax benefit                         |  |      | (463   | ) |      | 
|Deferred tax expense                              |  |      |        |   |      | 
|Origination and reversal of temporary differences |  |      | 58,005 |   |      | 
|Tax rate changes on deferred tax balances         |  |      | 1,948  |   |      | 
|Decrease in tax loss carry forward                |  |      | 15,849 |   |      | 
|Total deferred tax expense                        |  |      | 75,802 |   |      | 
|Total income tax expense                          |  |      | 75,339 |   |      | 



The movement of the deferred tax liability is as follows:



|($ thousands)                                                       |  | 2012 |         |   | 2011 | 
|------------------------------------------------------------------- |  | ---- | ------- | - | ---- | 
|Opening balance, January 1                                          |  |      | 106,915 |   |      | 
|Deferred income tax expense                                         |  |      | 75,802  |   |      | 
|Tax benefit on share of (loss) profit of equity accounted investees |  |      | (458    | ) |      | 
|Income tax benefit in other comprehensive income                    |  |      | (3,641  | ) |      | 
|Acquisition (Note 5)                                                |  |      | 405,847 |   |      | 
|Other                                                               |  |      | 24      |   |      | 
|Deferred income taxes, December 31                                  |  |      | 584,489 |   |      | 



| | 11. | TRADE PAYABLES AND ACCRUED LIABILITIES
| | --- | --------------------------------------



|December 31 ($ thousands)                       |  | 2012 |         |  | 2011 | 
|----------------------------------------------- |  | ---- | ------- |  | ---- | 
|Trade payables                                  |  |      | 301,936 |  |      | 
|Non-trade
    payables & accrued liabilities(1) |  |      | 42,804  |  |      | 
|                                                |  |      | 344,740 |  |      | 



| | (1) | Includes current portion of decommissioning provision of $532 (2011 - $10,720).
| | --- | -------------------------------------------------------------------------------



U.S. dollar trade payables at December 31, 2012 are $0.3 million
(December 31, 2011: Nil).



79







Pembina Pipeline Corporation



| | 12. | LOANS AND BORROWINGS
| | --- | --------------------



This note provides information about the contractual terms of
the Company's interest-bearing loans and borrowings, which are measured at amortized cost.



Carrying value terms and debt repayment schedule



Terms and conditions of outstanding loans were as follows:



|($ thousands)                        |  |                                           |           |  |                       |  |                              |                  |  |  | Carrying amount(3) | 
|------------------------------------ |  | ----------------------------------------- | --------- |  | --------------------- |  | ---------------------------- | ---------------- |  |  | ------------------ | 
|                                     |  | Available facilities at December 31, 2012 |           |  | Nominal interest rate |  |                              | Year of maturity |  |  | December 31, 2012  | 
|Operating facility(1)                |  |                                           | 30,000    |  |                       |  | prime + 0.50 or BA(2)+ 1.50  |                  |  |  | 2013               | 
|Revolving unsecured credit facility  |  |                                           | 1,500,000 |  |                       |  | prime + 0.50 or BA(2) + 1.50 |                  |  |  | 2017               | 
|Senior secured notes                 |  |                                           |           |  |                       |  | 7.38                         |                  |  |  |                    | 
|Senior unsecured notes – Series A    |  |                                           | 175,000   |  |                       |  | 5.99                         |                  |  |  | 2014               | 
|Senior unsecured notes – Series C    |  |                                           | 200,000   |  |                       |  | 5.58                         |                  |  |  | 2021               | 
|Senior unsecured notes – Series D    |  |                                           | 267,000   |  |                       |  | 5.91                         |                  |  |  | 2019               | 
|Senior unsecured term facility       |  |                                           | 75,000    |  |                       |  | 6.16                         |                  |  |  | 2014               | 
|Senior unsecured medium-term notes 1 |  |                                           | 250,000   |  |                       |  | 4.89                         |                  |  |  | 2021               | 
|Senior unsecured medium-term notes 2 |  |                                           | 450,000   |  |                       |  | 3.77                         |                  |  |  | 2022               | 
|Subsidiary debt                      |  |                                           | 9,347     |  |                       |  | 5.04                         |                  |  |  | 2014               | 
|Finance lease liabilities            |  |                                           |           |  |                       |  |                              |                  |  |  |                    | 
|Total interest bearing liabilities   |  |                                           | 2,956,347 |  |                       |  |                              |                  |  |  |                    | 
|Less current portion                 |  |                                           |           |  |                       |  |                              |                  |  |  |                    | 
|Total non-current                    |  |                                           |           |  |                       |  |                              |                  |  |  |                    | 



| | (1) | Operating facility expected to be renewed on an annual basis.
| | --- | -------------------------------------------------------------

| | (2) | Bankers' Acceptance.
| | --- | --------------------

| | (3) | Deferred financing fees are all classified as non-current. Non-current carrying amount of facilities are net of deferred financing
fees.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



All facilities are governed by specific debt covenants which
Pembina has been in compliance with during the years ended December 31, 2012 and 2011.



For more information about the Company's exposure to interest
rate, foreign currency and liquidity risk, see financial instruments and financial risk management Note 27.



80







Pembina Pipeline Corporation



13.   CONVERTIBLE DEBENTURES



|($ thousands, except as noted)                |  | Series C – 5.75%        |         |   | Series E – 5.75%        |  |         | Series F – 5.75%        |  |  | Total   |  
|--------------------------------------------- |  | ----------------------- | ------- | - | ----------------------- |  | ------- | ----------------------- |  |  | ------- | -
|Conversion price (dollars)                    |  | $28.55                  |         |   | $24.94                  |  |         | $29.53                  |  |  |         |  
|Interest payable semi-annually in arrears on: |  | May 31 and
 November 30 |         |   | June 30 and December 31 |  |         | June 30 and December 31 |  |  |         |  
|Maturity date                                 |  | November 30,
2020       |         |   | December 31,
2017       |  |         | December 31,
2018       |  |  |         |  
|Balance December 31, 2010                     |  |                         | 288,635 |   |                         |  |         |                         |  |  |         |  
|Conversions                                   |  |                         | (220    | ) |                         |  |         |                         |  |  |         |  
|Deferred financing fees (net of amortization) |  |                         | 950     |   |                         |  |         |                         |  |  |         |  
|Balance, December 31, 2011                    |  |                         | 289,365 |   |                         |  |         |                         |  |  |         |  
|Assumed on acquisition(1) (Note
    5)        |  |                         |         |   |                         |  | 158,471 |                         |  |  | 158,343 |  
|Conversions and redemptions                   |  |                         | (54     | ) |                         |  | (351    | )                       |  |  | (55     | )
|Accretion of liability                        |  |                         |         |   |                         |  | 841     |                         |  |  | 688     |  
|Deferred financing fee (net amortization)     |  |                         | 1,168   |   |                         |  | 826     |                         |  |  | 726     |  
|Balance, December 31, 2012                    |  |                         | 290,479 |   |                         |  | 159,787 |                         |  |  | 159,702 |  



| | (1) | Excludes conversion feature of convertible debentures.
| | --- | ------------------------------------------------------



The Series C debentures may be converted at the option of the
holder at a conversion price of $28.55 per share at any time prior to maturity and may be redeemed by the Company. The Company
may, at its option after November 30, 2016, (or after November 30, 2014, provided that the volume weighted average trading price
of the common shares on the TSX during the 20 consecutive trading days ending on the fifth trading day preceding the date on when
the notice of redemption is given is not less than 125 percent of the conversion price of the debentures) elect to redeem the debentures
by issuing shares. The Company may also elect to pay interest on the debentures by issuing shares.



The Series E debentures may be converted at the option of the
holder at a conversion price of $24.94 per share at any time prior to maturity and may be redeemed by the Company. The Company
may, at its option on or after December 31, 2013 and prior to December 31, 2015, elect to redeem the Series E debentures in whole
or in part, provided that the volume weighted average trading price of the common price of the shares on the TSX during the 20
consecutive trading days ending on the fifth trading day preceding the date on which the notice of redemption is given is not less
than 125 percent of the conversion price of the Series E debentures. On or after December 31, 2015, the Series E debentures may
be redeemed in whole or in part at the option of the Company at a price equal to their principal amount plus accrued and unpaid
interest. Any accrued unpaid interest will be paid in cash.



The Series F debentures may be converted at the option of the
holder at a conversion price of $29.53 per share at any time prior to maturity and may be redeemed by the Company. The Company
may, at its option on or after December 31, 2014 and prior to December 31, 2016, elect to redeem the Series F debentures in whole
or in part, provided that the volume weighted average trading price of the common price of the shares on the TSX during the 20
consecutive trading days ending on the fifth trading day preceding the date on which the notice of redemption is given is not less
than 125 percent of the conversion price of the Series F debentures. On or after December 31, 2016, the Series F debentures may
be redeemed in whole or in part at the option of the Company at a price equal to their principal amount plus accrued and unpaid
interest. Any accrued unpaid interest will be paid in cash.



The Company retains a cash conversion option on the Series E
and F convertible debentures, allowing the Company to pay cash to the converting holder of the debentures, at the option of the
Company. For convertible debentures with a cash conversion option, the conversion feature is recognized as an embedded derivative
and accounted for as a derivative financial instrument, measured at fair value using an option pricing model.



81







Pembina Pipeline Corporation



| | 14. | PROVISIONS
| | --- | ----------



The Company has estimated the net present value of its total
decommissioning obligations based on a total future liability of $361.7 million (2011: $416.2 million). The estimate has applied
a medium-term inflation rate and current discount rate and includes a revision in the decommissioning assumptions and associated
costs and timing of payments. The obligations are expected to be paid over the next 75 years with majority being paid between 30
and 40 years. The Company applied a 2 percent inflation rate per annum (2011: 2.4 percent) and a risk free rate of 2.36 percent
(2011: 2.49 percent) to calculate the present value of the decommissioning provision. During the year ended December 31, 2012,
the Company estimated a decrease of $54.5 million (2011: increase of $134.5 million) in the total decommissioning obligation, including
an increase of $124.6 million assumed on the Acquisition, offset by a $144.8 million decrease due to revised assumptions which
the Company believes are more in line with industry, a $46.7 million decrease (2011: increase of $106.8 million) based on a change
in the discount and inflation rates used to remeasure the obligation and $7 million (2011: $7.1 million) for unwinding of the discount
rate, net of any settlements and a $5.4 million increase (2011: $20.6 million increase) representing the present value of additional
obligations. The remeasured decommissioning provision decreased property, plant and equipment and decommissioning provision liability.
$5.9 million of the re-measurement reduction in the decommissioning provision was in excess of the carrying amount of the related
asset and is recognized as a credit to depreciation expense (2011: nil).



The property, plant and equipment of the Company consist primarily
of underground pipelines, above ground equipment facilities and storage assets. No amount has been recorded relating to the removal
of the underground pipelines or the storage assets as the potential obligations relating to these assets cannot be reasonably estimated
due to the indeterminate timing or scope of the asset retirement. As the timing and scope of retirement become determinable for
these assets, the fair value of the liability and the cost of retirement will be recorded.



|($ thousands)                                          |  | 2012 |          |   | 2011 | 
|------------------------------------------------------ |  | ---- | -------- | - | ---- | 
|Balance at January 1                                   |  |      | 416,153  |   |      | 
|Unwinding of discount rate                             |  |      | 11,956   |   |      | 
|Assumed on acquisition (Note 5)                        |  |      | 124,579  |   |      | 
|Decommissioning liabilities settled during the period  |  |      | (4,944   | ) |      | 
|Change in rates                                        |  |      | (46,654  | ) |      | 
|Change in estimates and other                          |  |      | (139,352 | ) |      | 
|Total                                                  |  |      | 361,738  |   |      | 
|Less current portion (included in accrued liabilities) |  |      | 532      |   |      | 
|Balance at December 31                                 |  |      | 361,206  |   |      | 



| | 15. | SHARE CAPITAL
| | --- | -------------



Share capital



Pembina is authorized to issue an unlimited number of common
shares and an unlimited number of a class of preferred shares designated as Preferred Shares, Series A. The holders of the common
shares are entitled to receive notice of, attend at and vote at any meeting of the shareholders of the Company, receive dividends
declared and share in the remaining property of the Company upon distribution of the assets of the Company among its shareholders
for the purpose of winding-up its affairs.



82







Pembina Pipeline Corporation



Pembina has adopted a shareholder rights plan ("Plan")
as a mechanism designed to assist the board in ensuring the fair and equal treatment of all shareholders in the face of an actual
or contemplated unsolicited bid to take control of the company.  Take-over bids may be structured in such a way as to be coercive
or discriminatory in effect, or may be initiated at a time when it will be difficult for the board to prepare an adequate response.
Such offers may result in shareholders receiving unequal or unfair treatment, or not realizing the full or maximum value of their
investment in Pembina. The Plan discourages the making of any such offers by creating the potential of significant dilution to
any offeror who does so.



|($ thousands, except share amounts) |  | Number of Common Shares |             |  | Share Capital | 
|----------------------------------- |  | ----------------------- | ----------- |  | ------------- | 
|Balance December 31, 2010           |  |                         | 166,876,651 |  |               | 
|Share-based payment transactions    |  |                         | 1,023,916   |  |               | 
|Debenture conversions and other     |  |                         | 7,704       |  |               | 
|Balance December 31, 2011           |  |                         | 167,908,271 |  |               | 
|Issued on acquisition (Note 5)      |  |                         | 116,535,750 |  |               | 
|Share-based payment transactions    |  |                         | 427,934     |  |               | 
|Dividend reinvestment plan          |  |                         | 8,338,254   |  |               | 
|Debenture conversions and other     |  |                         | 16,264      |  |               | 
|Balance December 31, 2012           |  |                         | 293,226,473 |  |               | 



Dividends



The following dividends were
declared by the Company:



|Year Ended December 31 ($
    thousands)         |  | 2012 |         |  | 2011 | 
|------------------------------------------------ |  | ---- | ------- |  | ---- | 
|$1.61 per qualifying common share (2011: $1.56 ) |  |      | 417,601 |  |      | 



On January 8, 2013 and February 12, 2013, Pembina announced
that the Board of Directors declared a dividend for each of January and February of $0.135 per qualifying common share ($1.62
annualized) in the total amount of $79.5 million.



| | 16. | REVENUES
| | --- | --------



|Year Ended December 31 ($
    thousands)                             |  | 2012 |           |   | 2011 | 
|-------------------------------------------------------------------- |  | ---- | --------- | - | ---- | 
|Rendering of Services:                                               |  |      |           |   |      | 
|Conventional pipeline transportation                                 |  |      | 338,772   |   |      | 
|Oil Sands and Heavy Oil pipeline transportation                      |  |      | 172,429   |   |      | 
|Midstream and marketing terminalling, storage and hub services (net) |  |      | 2,847,403 |   |      | 
|Gas services gathering and processing services                       |  |      | 88,285    |   |      | 
|Intersegment eliminations                                            |  |      | (19,487   | ) |      | 
|                                                                     |  |      | 3,427,402 |   |      | 



| | 17. | COST OF SALES
| | --- | -------------



|Year
    Ended December 31 ($ thousands)        |  | 2012 |           |  | 2011 | 
|----------------------------------------------- |  | ---- | --------- |  | ---- | 
|Operating expense                               |  |      | 271,566   |  |      | 
|Cost of goods sold, including product purchases |  |      | 2,475,038 |  |      | 
|Depreciation and amortization – operating       |  |      | 173,604   |  |      | 
|                                                |  |      | 2,920,208 |  |      | 



83







Pembina Pipeline Corporation



| | 18. | GENERAL AND ADMINISTRATIVE EXPENSE
| | --- | ----------------------------------



|Year
    Ended December 31 ($ thousands)                   |  | 2012 |        |  | 2011 | 
|---------------------------------------------------------- |  | ---- | ------ |  | ---- | 
|Other general & administrative expense                     |  |      | 91,706 |  |      | 
|Depreciation and amortization – general and administrative |  |      | 5,782  |  |      | 
|                                                           |  |      | 97,488 |  |      | 



| | 19. | DEPRECIATION AND AMORTIZATION
| | --- | -----------------------------



|Year Ended December 31 ($
    thousands) |  | 2012 |         |  | 2011 | 
|---------------------------------------- |  | ---- | ------- |  | ---- | 
|Cost of sales                            |  |      | 173,604 |  |      | 
|General and administrative               |  |      | 5,782   |  |      | 
|                                         |  |      | 179,386 |  |      | 



| | 20. | PERSONNEL EXPENSES
| | --- | ------------------



|Year
    Ended December 31 ($ thousands) |  | 2012 |         |  | 2011 | 
|---------------------------------------- |  | ---- | ------- |  | ---- | 
|Salaries and wages                       |  |      | 82,350  |  |      | 
|Canada Pension Plan and EI remittances   |  |      | 2,436   |  |      | 
|Share-based payment transactions         |  |      | 17,028  |  |      | 
|Short-term incentive plan (bonus)        |  |      | 11,430  |  |      | 
|Defined contribution plan expense        |  |      | 1,685   |  |      | 
|Defined benefit pension plan expense     |  |      | 7,225   |  |      | 
|Health and dental benefit expense        |  |      | 3,459   |  |      | 
|Employee Savings plan expense            |  |      | 3,946   |  |      | 
|Other benefits                           |  |      | 1,573   |  |      | 
|                                         |  |      | 131,132 |  |      | 



| | 21. | NET FINANCE COSTS
| | --- | -----------------



|Year
    Ended December 31 ($ thousands)                                            |  | 2012 |         |   | 2011 | 
|----------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | 
|Interest income from:                                                               |  |      |         |   |      | 
|Related parties                                                                     |  |      | (262    | ) |      | 
|Bank deposits                                                                       |  |      | (1,200  | ) |      | 
|Interest expense on financial liabilities measured at amortized cost:               |  |      |         |   |      | 
|Loans and borrowings                                                                |  |      | 72,956  |   |      | 
|Convertible debentures                                                              |  |      | 36,348  |   |      | 
|Finance leases                                                                      |  |      | 426     |   |      | 
|Unwinding of discount                                                               |  |      | 12,021  |   |      | 
|(Gain) loss in fair value of non-commodity-related derivative financial instruments |  |      | (4,087  | ) |      | 
|Foreign exchange gains                                                              |  |      | (1,062  | ) |      | 
|Net finance costs                                                                   |  |      | 115,140 |   |      | 



| | 22. | OPERATING SEGMENTS
| | --- | ------------------



The Company determines its reportable segments based on the nature
of operations and includes four operating segments: Conventional Pipelines, Oil Sands & Heavy Oil, Gas Services and Midstream.



Conventional Pipelines consists of the tariff based operations
of pipelines and related facilities to deliver crude oil, condensate and NGL in Alberta and B.C.



84







Pembina Pipeline Corporation



Oil Sands & Heavy Oil consists of the Syncrude, Horizon,
Nipisi and Mitsue Pipelines, and the Cheecham Lateral. These pipelines and related facilities deliver synthetic crude oil produced
from oil sands under long-term cost-of-service arrangements.



Gas Services consists of natural gas gathering and processing
facilities, including three gas plants, twelve compressor stations and over 300 kilometres of gathering systems.



Midstream consists of the Company's interests in extraction and
fractionation facilities, terminalling and storage hub services under a mixture of short, medium and long-term contractual arrangements.



The financial results of the business segments is 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 the Company's CEO, CFO and COO. The segments results from operating activities, before
depreciation and amortization, is 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.



|Year Ended December 31, 2012 ($ thousands)                                                   |  | ConventionalPipelines(1) |         |   | Oil Sands &
    Heavy Oil |  |         | Gas
    Services |  |  | Midstream(2) |  |  | Corporate &
    Intersegment Eliminations |           |   | Total | 
|-------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ------------------------- |  | ------- | ---------------- |  |  | ------------ |  |  | ----------------------------------------- | --------- | - | ----- | 
|Revenue:                                                                                     |  |                          |         |   |                           |  |         |                  |  |  |              |  |  |                                           |           |   |       | 
|Pipeline transportation                                                                      |  |                          | 338,772 |   |                           |  | 172,429 |                  |  |  |              |  |  |                                           |           |   |       | 
|NGL product and services,
    terminalling, storage and hub services                         |  |                          |         |   |                           |  |         |                  |  |  |              |  |  |                                           | 2,847,403 |   |       | 
|Gas Services                                                                                 |  |                          |         |   |                           |  |         |                  |  |  | 88,285       |  |  |                                           |           |   |       | 
|Total revenue                                                                                |  |                          | 338,772 |   |                           |  | 172,429 |                  |  |  | 88,285       |  |  |                                           | 2,847,403 |   |       | 
|Operations                                                                                   |  |                          | 129,555 |   |                           |  | 55,629  |                  |  |  | 29,260       |  |  |                                           | 59,685    |   |       | 
|Cost of goods sold, including
    product purchases                                          |  |                          |         |   |                           |  |         |                  |  |  |              |  |  |                                           | 2,494,525 |   |       | 
|Realized
    gain (loss) on commodity-related derivative financial instruments               |  |                          | 111     |   |                           |  |         |                  |  |  |              |  |  |                                           | (4,682    | ) |       | 
|Operating margin                                                                             |  |                          | 209,328 |   |                           |  | 116,800 |                  |  |  | 59,025       |  |  |                                           | 288,511   |   |       | 
|Depreciation and amortization
    (operational)                                              |  |                          | 43,959  |   |                           |  | 19,800  |                  |  |  | 14,546       |  |  |                                           | 95,299    |   |       | 
|Unrealized
    gain (loss) on commodity-related derivative financial instruments             |  |                          | (9,043  | ) |                           |  |         |                  |  |  |              |  |  |                                           | 45,143    |   |       | 
|Gross profit                                                                                 |  |                          | 156,326 |   |                           |  | 97,000  |                  |  |  | 44,479       |  |  |                                           | 238,355   |   |       | 
|Depreciation included
    in general and administrative                                      |  |                          |         |   |                           |  |         |                  |  |  |              |  |  |                                           |           |   |       | 
|Other general and administrative                                                             |  |                          | 6,692   |   |                           |  | 3,771   |                  |  |  | 4,130        |  |  |                                           | 15,478    |   |       | 
|Acquisition-related
    and other expenses (income)                                          |  |                          | 957     |   |                           |  | 297     |                  |  |  | 11           |  |  |                                           | 434       |   |       | 
|Reportable
    segment results from operating activities                                     |  |                          | 148,677 |   |                           |  | 92,932  |                  |  |  | 40,338       |  |  |                                           | 222,443   |   |       | 
|Net finance costs (income)                                                                   |  |                          | 6,192   |   |                           |  | 1,889   |                  |  |  | 800          |  |  |                                           | 3,205     |   |       | 
|Reportable
    segment earnings (loss) before tax and income from equity accounted investees |  |                          | 142,485 |   |                           |  | 91,043  |                  |  |  | 39,538       |  |  |                                           | 219,238   |   |       | 
|Share
    of loss of investments in equity accounted investees, net of tax                   |  |                          |         |   |                           |  |         |                  |  |  |              |  |  |                                           | 1,056     |   |       | 
|Capital
    expenditures                                                                     |  |                          | 187,264 |   |                           |  | 30,432  |                  |  |  | 162,838      |  |  |                                           | 203,969   |   |       | 



| | (1) | 5.1 percent of Conventional Pipelines revenue is under regulated tolling arrangements.
| | --- | --------------------------------------------------------------------------------------

| | (2) | NGL product and services, terminalling, storage and hub services revenue includes $97.1 million associated with U.S. midstream
sales.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------

85







Pembina Pipeline Corporation



|Year Ended December 31, 2011($ thousands)                                                    |  | ConventionalPipelines(1) |         |  | Oil Sands &
    Heavy Oil |  |         | Gas
    Services |  |  | Midstream |  |  | Corporate &
    Intersegment
    Eliminations |           |   | Total | 
|-------------------------------------------------------------------------------------------- |  | ------------------------ | ------- |  | ------------------------- |  | ------- | ---------------- |  |  | --------- |  |  | --------------------------------------------- | --------- | - | ----- | 
|Revenue:                                                                                     |  |                          |         |  |                           |  |         |                  |  |  |           |  |  |                                               |           |   |       | 
|Pipeline transportation                                                                      |  |                          | 296,190 |  |                           |  | 134,874 |                  |  |  |           |  |  |                                               |           |   |       | 
|Terminalling, storage and
    hub services                                                   |  |                          |         |  |                           |  |         |                  |  |  |           |  |  |                                               | 1,173,480 |   |       | 
|Gas Services                                                                                 |  |                          |         |  |                           |  |         |                  |  |  | 71,506    |  |  |                                               |           |   |       | 
|Total revenue                                                                                |  |                          | 296,190 |  |                           |  | 134,874 |                  |  |  | 71,506    |  |  |                                               | 1,173,480 |   |       | 
|Operations                                                                                   |  |                          | 119,093 |  |                           |  | 43,986  |                  |  |  | 22,407    |  |  |                                               | 8,833     |   |       | 
|Cost of goods sold, including
    product purchases                                          |  |                          |         |  |                           |  |         |                  |  |  |           |  |  |                                               | 1,072,270 |   |       | 
|Realized
    gain (loss) on commodity-related derivative financial instruments               |  |                          | 4,413   |  |                           |  |         |                  |  |  |           |  |  |                                               | 882       |   |       | 
|Operating margin                                                                             |  |                          | 181,510 |  |                           |  | 90,888  |                  |  |  | 49,099    |  |  |                                               | 93,259    |   |       | 
|Depreciation and amortization
    (operational)                                              |  |                          | 41,595  |  |                           |  | 12,786  |                  |  |  | 9,921     |  |  |                                               | 3,710     |   |       | 
|Unrealized
    gain (loss) on commodity-related derivative financial instruments             |  |                          | 3,743   |  |                           |  |         |                  |  |  |           |  |  |                                               | 1,433     |   |       | 
|Gross profit                                                                                 |  |                          | 143,658 |  |                           |  | 78,102  |                  |  |  | 39,178    |  |  |                                               | 90,982    |   |       | 
|Depreciation included
    in general and administrative                                      |  |                          |         |  |                           |  |         |                  |  |  |           |  |  |                                               |           |   |       | 
|Other general and administrative                                                             |  |                          | 6,421   |  |                           |  | 2,898   |                  |  |  | 4,117     |  |  |                                               | 5,234     |   |       | 
|Acquisition-related
    and other expenses (income)                                          |  |                          | 1,018   |  |                           |  | (127    | )                |  |  | 6         |  |  |                                               | 2         |   |       | 
|Reportable
    segment results from operating activities                                     |  |                          | 136,219 |  |                           |  | 75,331  |                  |  |  | 35,055    |  |  |                                               | 85,746    |   |       | 
|Net finance costs                                                                            |  |                          | 7,110   |  |                           |  | 1,729   |                  |  |  | 999       |  |  |                                               | 109       |   |       | 
|Reportable
    segment earnings (loss) before tax and income from equity accounted investees |  |                          | 129,109 |  |                           |  | 73,602  |                  |  |  | 34,056    |  |  |                                               | 85,637    |   |       | 
|Share
    of loss (profit) of investments in equity accounted investees, net of tax          |  |                          |         |  |                           |  |         |                  |  |  |           |  |  |                                               | (5,766    | ) |       | 
|Capital
    expenditures                                                                     |  |                          | 72,034  |  |                           |  | 191,723 |                  |  |  | 136,505   |  |  |                                               | 111,480   |   |       | 



| | (1) | 4.8 percent of Conventional Pipelines revenue is under regulated tolling arrangements.
| | --- | --------------------------------------------------------------------------------------



| | 23. | EARNINGS PER SHARE
| | --- | ------------------



Basic earnings per share



The calculation of basic earnings per share at December 31, 2012
was based on the earnings attributable to common shareholders of $224.8 million (2011: $165.7 million) and a weighted average number
of common shares outstanding of 258.9 million (2011: 167.4 million).



Diluted earnings per share



The calculation of diluted earnings per share at December 31,
2012 was based on earnings attributable to common shareholders of $224.8 million (December 31, 2011: $165.7 million), and weighted
average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares of 259.5 million
(2011: 168.2 million), calculated as follows:



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Pembina Pipeline Corporation



Weighted average number of common shares



|(In thousands of shares)                                          |  | 2012 |         |  | 2011 | 
|----------------------------------------------------------------- |  | ---- | ------- |  | ---- | 
|Issued common shares at January 1                                 |  |      | 167,908 |  |      | 
|Effect of shares issued on acquisition                            |  |      | 87,243  |  |      | 
|Effect of share options exercised                                 |  |      | 185     |  |      | 
|Effect of conversion of convertible debentures                    |  |      | 9       |  |      | 
|Effect of shares issued under dividend reinvestment plan          |  |      | 3,524   |  |      | 
|Weighted average number of common shares at December 31 (basic)   |  |      | 258,869 |  |      | 
|                                                                  |  |      |         |  |      | 
|Dilutive effect of conversion of convertible debentures           |  |      |         |  |      | 
|Dilutive effect of share options on issue                         |  |      | 614     |  |      | 
|Weighted average number of common shares at December 31 (diluted) |  |      | 259,483 |  |      | 
|                                                                  |  |      |         |  |      | 
|Basic earnings per share ($)                                      |  |      | 0.87    |  |      | 
|Diluted earnings per share ($)                                    |  |      | 0.87    |  |      | 



At December 31, 2012, the effect of the conversion of the convertible
debentures was excluded from the diluted earnings per share calculation as the impact was anti-dilutive. If the convertible debentures
were included, an additional 23.3 million (2011: 10.5 million) common shares would be added to the weighted average number of common
shares and $27.3 million (2011: $13.8 million) would be added to earnings, representing after tax interest expense of the convertible
debentures.



The average market value of the Company'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.



| | 24. | CHANGES IN NON-CASH WORKING CAPITAL
| | --- | -----------------------------------



|Year Ended December 31 ($
    thousands)     |  | 2012 |          |   | 2011 | 
|-------------------------------------------- |  | ---- | -------- | - | ---- | 
|Accounts receivable, inventory and other     |  |      | 6,043    |   |      | 
|Accounts payable and accrued liabilities     |  |      | (115,924 | ) |      | 
|Change in non-cash operating working capital |  |      | (109,881 | ) |      | 



| | 25. | EMPLOYEE BENEFITS
| | --- | -----------------



|December 31 ($ thousands)               |  | 2012 |        |  | 2011 | 
|--------------------------------------- |  | ---- | ------ |  | ---- | 
|Registered defined benefit obligation   |  |      | 21,394 |  |      | 
|Supplemental defined benefit obligation |  |      | 6,180  |  |      | 
|Other accrued benefit obligations       |  |      | 1,049  |  |      | 
|Employee benefit obligations            |  |      | 28,623 |  |      | 



The Company maintains a defined contribution plan and non-contributory
defined pension plans covering its employees. The defined benefit plans include a funded registered plan for all employees and
an unfunded supplemental retirement plan for those employees affected by the Canada Revenue Agency maximum pension limits. The
Company also has other accrued benefit obligations which include a non-contribution unfunded post employment extended health and
dental plan provided to a few remaining retired employees. Benefits under the plans are based on the length of service and the
annual average best three years of earnings during last ten years of service of the employee. Benefits paid out of the plans are
not indexed. The Company 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, 2009.



87







Pembina Pipeline Corporation



Defined benefit obligations



|December 31                                          |  | 2012            |         |   | 2011              | 
|---------------------------------------------------- |  | --------------- | ------- | - | ----------------- | 
|($ thousands)                                        |  | Registered Plan |         |   | Supplemental Plan | 
|Present value of unfunded obligations                |  |                 |         |   |                   | 
|Present value of funded obligations                  |  |                 | 121,783 |   |                   | 
|Total present value of obligations                   |  |                 | 121,783 |   |                   | 
|Fair value of plan assets                            |  |                 | 100,389 |   |                   | 
|Recognized liability for defined benefit obligations |  |                 | (21,394 | ) |                   | 



The Company 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 $10 million for the year ended December 31, 2012 (2011: $8 million).



The Company 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 decreases in the defined benefit asset is necessary at December 31, 2012 and December 31, 2011.



Registered defined benefit pension plan assets comprise



|December 31 (percentages) |  | 2012 |       |  | 2011 | 
|------------------------- |  | ---- | ----- |  | ---- | 
|Equity securities         |  |      | 65.1  |  |      | 
|Debt                      |  |      | 30.1  |  |      | 
|Other                     |  |      | 4.8   |  |      | 
|                          |  |      | 100.0 |  |      | 



Movement in the present value of the pension obligation



|Year Ended December 31                         |  | 2012            |         |   | 2011              | 
|---------------------------------------------- |  | --------------- | ------- | - | ----------------- | 
|($ thousands)                                  |  | Registered Plan |         |   | Supplemental Plan | 
|Defined benefits obligations at January 1      |  |                 | 100,138 |   |                   | 
|Benefits paid by the plan                      |  |                 | (5,896  | ) |                   | 
|Current service costs and interest             |  |                 | 12,009  |   |                   | 
|Actuarial losses in other comprehensive income |  |                 | 15,532  |   |                   | 
|Defined benefit obligations at December 31     |  |                 | 121,783 |   |                   | 



Movement in the present value of registered defined benefit
pension plan assets



|Year Ended December 31 ($
    thousands)               |  | 2012 |         |   | 2011 | 
|------------------------------------------------------ |  | ---- | ------- | - | ---- | 
|Fair value of plan assets at January 1                 |  |      | 89,383  |   |      | 
|Contributions paid into the plan                       |  |      | 10,000  |   |      | 
|Benefits paid by the plan                              |  |      | (5,896  | ) |      | 
|Expected return on plan assets                         |  |      | 5,288   |   |      | 
|Actuarial (losses) gains in other comprehensive income |  |      | 1,614   |   |      | 
|Fair value of registered plan assets at December 31    |  |      | 100,389 |   |      | 



88







Pembina Pipeline Corporation



Expense recognition in profit or loss



|Year Ended December 31         |  | 2012            |        |   | 2011              | 
|------------------------------ |  | --------------- | ------ | - | ----------------- | 
|($ thousands)                  |  | Registered Plan |        |   | Supplemental Plan | 
|Current service costs          |  |                 | 6,655  |   |                   | 
|Interest on obligation         |  |                 | 5,354  |   |                   | 
|Expected return on plan assets |  |                 | (5,288 | ) |                   | 
|                               |  |                 | 6,721  |   |                   | 



The expense is recognized in the following line items in the
statement of comprehensive income:



|Year Ended December 31             |  | 2012            |       |  | 2011              | 
|---------------------------------- |  | --------------- | ----- |  | ----------------- | 
|($ thousands)                      |  | Registered Plan |       |  | Supplemental Plan | 
|Operating expenses                 |  |                 | 3,734 |  |                   | 
|General and administrative expense |  |                 | 2,987 |  |                   | 
|                                   |  |                 | 6,721 |  |                   | 
|                                   |  |                 |       |  |                   | 
|Actual return on plan assets       |  |                 | 6,902 |  |                   | 



Actuarial gains and losses recognized in other comprehensive
income



|                                       |  | 2012            |        |  | 2011              | 
|-------------------------------------- |  | --------------- | ------ |  | ----------------- | 
|($ thousands)                          |  | Registered Plan |        |  | Supplemental Plan | 
|Cumulative amount at January 1         |  |                 | 15,050 |  |                   | 
|Recognized during the period after tax |  |                 | 10,439 |  |                   | 
|Cumulative amount at December 31       |  |                 | 25,489 |  |                   | 



Principal actuarial assumptions used as at December 31 (expressed
as weighted averages):



|                                                 |  | 2012 |     |   | 2011 | 
|------------------------------------------------ |  | ---- | --- | - | ---- | 
|Discount rate                                    |  |      | 4.4 | % |      | 
|Expected long-term rate of return on plan assets |  |      | 5.8 | % |      | 
|Future pension earning increases                 |  |      | 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:



|December 31 (years)                            |  | 2012 |      |  | 2011 | 
|---------------------------------------------- |  | ---- | ---- |  | ---- | 
|Longevity at age 65 for current pensioners     |  |      |      |  |      | 
|Males                                          |  |      | 19.8 |  |      | 
|Females                                        |  |      | 22.1 |  |      | 
|                                               |  |      |      |  |      | 
|Longevity at age 65 for current member aged 45 |  |      |      |  |      | 
|Males                                          |  |      | 21.3 |  |      | 
|Females                                        |  |      | 22.9 |  |      | 



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 4.4 percent by 100 basis points at December 31, 2012 is considered reasonably possible in the next financial
year. A discount rate of 5.4 percent would decrease the obligation by $18.2 million. A discount rate of 3.4 percent would increase
the obligation by $23.2 million.



89







Pembina Pipeline Corporation



The overall expected long-term rate of return on assets is 5.8
percent. The expected long-term rate of return is based on the portfolio as a whole and not the sum of the returns on individual
asset categories. The return is based exclusively on historical returns, without adjustments.



Historical information



|December 31                                        |  | 2011            |         |   | 2010              | 
|-------------------------------------------------- |  | --------------- | ------- | - | ----------------- | 
|($ thousands)                                      |  | Registered Plan |         |   | Supplemental Plan | 
|Present value of the defined benefit obligation    |  |                 | 100,138 |   |                   | 
|Fair value of plan assets                          |  |                 | 89,383  |   |                   | 
|(Deficit) in the plan                              |  |                 | (10,755 | ) |                   | 
|Experience adjustments arising on plan liabilities |  |                 |         |   |                   | 
|Experience adjustments arising on plan assets      |  |                 | 7,639   |   |                   | 



|December 31                                        |  | 2009            |        |   | 2008              | 
|-------------------------------------------------- |  | --------------- | ------ | - | ----------------- | 
|($ thousands)                                      |  | Registered Plan |        |   | Supplemental Plan | 
|Present value of the defined benefit obligation    |  |                 | 76,873 |   |                   | 
|Fair value of plan assets                          |  |                 | 78,852 |   |                   | 
|(Deficit)/surplus in the plan                      |  |                 | 1,979  |   |                   | 
|Experience adjustments arising on plan liabilities |  |                 | 1,402  |   |                   | 
|Experience adjustments arising on plan assets      |  |                 | (7,417 | ) |                   | 



The Company expects $12.6 million in contributions to be paid
to its defined benefit plans in 2013.



| | 26. | SHARE-BASED PAYMENTS
| | --- | --------------------



At December 31, 2012, the Company has the following share-based
payment arrangements:



Share option plan (equity settled)



The Company has a share option plan under which employees are
eligible to receive options to purchase shares in the Company.



Long-term share unit award incentive (cash-settled) plan



In 2005, the Company 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 the Company's common shares plus notional
dividends and performance of the Company.



90







Pembina Pipeline Corporation



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 employees(Number of units in thousands) |  | Number of Options in thousands |       |  | Contractual life of options
|--------------------------------------------------------------------------- |  | ------------------------------ | ----- |  | ---------------------------
|August 3, 2011                                                              |  |                                | 1,052 |  |                            
|October 1, 2011                                                             |  |                                | 48    |  |                            
|January 3, 2012                                                             |  |                                | 55    |  |                            
|April 2, 2012                                                               |  |                                | 19    |  |                            
|August 9, 2012                                                              |  |                                | 1,372 |  |                            
|October 1, 2012                                                             |  |                                | 49    |  |                            



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 PSUs to Officers, Non-Officers(2) and Directors(Number of units in thousands) |  | Units |     |  | Contractual life of PSU
|---------------------------------------------------------------------------------------- |  | ----- | --- |  | -----------------------
|January 1, 2011                                                                          |  |       | 284 |  |                        
|January 1, 2012                                                                          |  |       | 188 |  |                        
|April 2, 2012 (on acquisition)                                                           |  |       | 201 |  |                        



Vest on the third anniversary of the grant date. Actual PSUs
awarded is based on the trading value of the shares and performance of the Company.



|Grant date RSUs to Officers, Non-Officers(2) and Directors(Number of units in thousands) |  | Units |     |  | Contractual life of RSU
|---------------------------------------------------------------------------------------- |  | ----- | --- |  | -----------------------
|January 1, 2011                                                                          |  |       | 185 |  |                        
|January 1, 2012                                                                          |  |       | 186 |  |                        
|April 2, 2012 (on acquisition)                                                           |  |       | 177 |  |                        



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.



| | (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 the Company.
| | --- | ---------------------------------------------------------------------



91







Pembina Pipeline Corporation



Disclosure of share option
plan



The number and weighted average
exercise prices of share options as follows:



|                                    |  | Number of Options |            |   | Weighted Average Exercise Price | 
|----------------------------------- |  | ----------------- | ---------- | - | ------------------------------- | 
|Outstanding at December 31, 2010    |  |                   | 2,759,259  |   |                                 | 
|Granted                             |  |                   | 1,100,800  |   |                                 | 
|Exercised                           |  |                   | (1,023,916 | ) |                                 | 
|Forfeited                           |  |                   | (161,763   | ) |                                 | 
|Outstanding at December 31, 2011    |  |                   | 2,674,380  |   |                                 | 
|Granted                             |  |                   | 1,495,050  |   |                                 | 
|Exercised                           |  |                   | (427,934   | ) |                                 | 
|Forfeited or expired                |  |                   | (209,858   | ) |                                 | 
|Outstanding as at December 31, 2012 |  |                   | 3,531,638  |   |                                 | 



As of December 31, 2012, the
following options are outstanding:



|Exercise Price (dollars) |  | Number outstanding at December 31, 2012 |           |  | Options Exercisable |  |         | Weighted averageremaining life (years) | 
|------------------------ |  | --------------------------------------- | --------- |  | ------------------- |  | ------- | -------------------------------------- | 
|$14.18 – $17.99          |  |                                         | 589,433   |  |                     |  | 589,433 |                                        | 
|$18.00 – 20.99           |  |                                         | 593,380   |  |                     |  | 369,124 |                                        | 
|$21.00 – $30.06          |  |                                         | 2,348,825 |  |                     |  | 288,723 |                                        | 



The weighted average share price at the date of exercise for
share options exercised in the year ended December 31, 2012 was $28.28 (December 31, 2011: $24.64).



Expected volatility 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



|Year
    ended December 31 (dollars)                |  | 2012 |       |   | 2011 |  
|--------------------------------------------------- |  | ---- | ----- | - | ---- | -
|                                                    |  |      |       |   |      |  
|Weighted average                                    |  |      |       |   |      |  
|Fair value at grant date                            |  | $    | 2.10  |   |      | $
|Share price at grant date                           |  | $    | 26.68 |   |      | $
|Exercise price                                      |  | $    | 26.70 |   |      | $
|Expected volatility                                 |  |      | 21.4  | % |      |  
|Expected option life (years)                        |  |      | 3.67  |   |      |  
|Expected annual dividends per option                |  | $    | 1.61  |   |      | $
|Expected forfeitures                                |  |      | 7.9   | % |      |  
|Risk-free interest rate (based on government bonds) |  |      | 1.3   | % |      |  



Disclosure of long-term share unit award incentive plan



The long-term share unit award incentive plan was valued using
the reporting date market price of the Company's shares of $28.46 (December 31, 2011: $29.66). Actual payment may differ from amount
valued based on market price and company performance.



Long-term share unit award incentive units granted



|Year ended December 31        |  | 2012 |         |  | 2011 | 
|----------------------------- |  | ---- | ------- |  | ---- | 
|Number of share units granted |  |      | 752,187 |  |      | 



92







Pembina Pipeline Corporation



Employee expenses



|($ thousands)                                                      |  | 2012 |        |  | 2011 | 
|------------------------------------------------------------------ |  | ---- | ------ |  | ---- | 
|Share option plan, equity settled                                  |  |      | 1,828  |  |      | 
|Long-term share unit award incentive plan                          |  |      | 15,200 |  |      | 
|Total expense recognized as employee costs                         |  |      | 17,028 |  |      | 
|                                                                   |  |      |        |  |      | 
|Total carrying amount of liabilities for cash settled arrangements |  |      | 33,506 |  |      | 
|Total intrinsic value of liability for vested benefits             |  |      | 16,267 |  |      | 



| | 27. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
| | --- | ---------------------------------------------------



Economic hedges



The Company has entered into derivative financial instruments
to limit the exposures to changes in commodity prices, interest rates, cost of power and foreign currency exchange rates. Hedge
accounting has not been applied, however the Company still considers that there is an economic hedge which limits the exposure
to fluctuations in revenue and expenses.



Financial risk



The Company has exposure to credit risk, liquidity risk and market
risk. The Company's Board of Directors has the overall responsibility for the oversight of these risks and reviews the Company's
policies on an ongoing basis to ensure that these risks are appropriately managed. The Company's Audit Committee oversees how management
monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of this risk framework
in relation to the risks faced by the Company. The Company's Risk Management function assists in managing these risks. The Company's
primary risk management objective is to protect capital resources, earnings and cash flow.



Counterparty credit risk



Counterparty credit risk is the risk of financial loss to the
Company if a customer, partner or counterparty to a financial instrument failed to meet its contractual obligations in accordance
with the terms and conditions of the financial instruments with the Company and which arise primarily from the Company's cash and
cash equivalents, trade and other receivables, and from counterparties to its derivative financial instruments. The carrying amount
of the financial assets represents the maximum credit exposure to the Company. The maximum counterparty credit exposure to counterparty
credit risk at the reporting date was:



|                                                                                                                                                                  |  | Carrying Amount |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------
|December 31 ($
                                                                                                                                        thousands) |  | 2012            |        
|Cash and cash equivalents                                                                                                                                         |  |                 | 27,336 
|Trade and other receivables                                                                                                                                       |  |                 | 334,772
|Derivative financial instruments                                                                                                                                  |  |                 | 7,871  
|                                                                                                                                                                  |  |                 | 369,979



93







Pembina Pipeline Corporation



The Company manages counterparty credit risk for its cash and
cash equivalents by maintaining bank accounts with Schedule 1 banks. The Company has minimal counterparty credit risk related to
its receivables as a majority of these amounts are with large established counterparties in the oil and gas industry and are subject
to the terms of the Company's shipping rules and regulations or pursuant to contracts. The rules and regulations permit the Company
to receive and hold financial assurances against a counterparty to cover current and aged receivables when warranted. Balances
are generally payable the 25th day of the following month. This date coincides with the date on which oil and gas companies receive
payment from industry partners and counterparties. Typically, the Company has collected its receivables in full and at December
31, 2012, approximately 93 percent were current. The Company also maintains lien rights on the oil and NGL that are in its custody
during the transportation of such products on the pipeline as well as the right to offset for single shipper operations. Therefore,
the risk of non-collection is considered to be low and no impairment of receivables has been made.



Additionally, counterparty credit risk is mitigated 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, using contract netting arrangements and obtaining financial assurances when warranted.
In general, financial assurances include guarantees, letters of credit and cash. The Company monitors and manages its concentration
of counterparty credit risk on an ongoing basis. The Company believes these measures minimize its counterparty credit risk but
there is no certainty that they will protect it against all material losses. Letters of credit mitigate the counterparty credit
risk on $44.6 million (December 31, 2011: $7.8 million) of the receivables balance. The Company's assessment of a counterparty’s
creditworthiness includes external credit ratings, where available, and in other cases, detailed financial and other assessments
which generate an internal credit rating based on financial ratios. Counterparty exposure limits are established for each counterparty
representing the maximum unsecured dollar amount in conjunction with an associated counterparty exposure limit approval authority
matrix which has been approved by the Risk Management Committee. The Company continues to closely monitor and reassess its counterparty
exposure limits on an ongoing basis.



Liquidity risk



Liquidity risk is the risk the Company 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 and excluding the impact of netting agreements.



|                                                                                                                                                                                                                             |  | Outstanding balances due by period |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ---------
|December 31,
                                               2012 ($
                                                                                                                                              thousands) |  | Carrying Amount                    |          
|Trade payables and accrued liabilities                                                                                                                                                                                       |  |                                    | 344,208  
|Loans and borrowings                                                                                                                                                                                                         |  |                                    | 1,938,626
|Finance lease liabilities                                                                                                                                                                                                    |  |                                    | 5,800    
|Convertible debentures                                                                                                                                                                                                       |  |                                    | 609,968  
|Dividends payable                                                                                                                                                                                                            |  |                                    | 39,586   
|Derivative financial
    liabilities                                                                                                                                                                                         |  |                                    | 67,691   



|                                       |  | Outstanding balances due by period |          
|-------------------------------------- |  | ---------------------------------- | ---------
|December 31, 2011($ thousands)         |  | Carrying Amount                    |          
|Bank overdraft                         |  |                                    | 676      
|Trade payables and accrued liabilities |  |                                    | 155,926  
|Unsecured notes and credit facilities  |  |                                    | 1,272,838
|Senior secured notes                   |  |                                    | 57,499   
|Finance lease liabilities              |  |                                    | 5,650    
|Convertible debentures                 |  |                                    | 289,365  
|Dividends payable                      |  |                                    | 21,828   
|Derivative financial
    liabilities   |  |                                    | 17,539   



94







Pembina Pipeline Corporation



The Company's approach to managing liquidity risk is to ensure
funds and credit facilities are available to meet its short-term obligations. Management monitors daily cash positions and performs
cash forecasts weekly to determine cash requirements. On a monthly basis, Management typically forecasts cash flows for a period
of 12 months to identify financing requirements. These financing requirements are then addressed through a combination of credit
facilities and through access to capital markets if required.



Market risk



Market risk is the risk that the fair value of a financial instrument
will fluctuate because of changes in market prices. Market risk is generally comprised of price risk, currency risk and interest
rate risk.



| | a. | Price risk
| | -- | ----------



Commodity price volatility and market location
differentials affect the Midstream business. In addition, Midstream is exposed to possible price declines between the time
Pembina purchases NGL feedstock and sells NGL products, and to narrowing frac spreads. Frac spreads are the difference
between the selling prices for propane-plus and the input cost of the natural gas required to produce the respective NGL
products.



Pembina responds to these risks using a market risk management
program to protect margins on a portion of its natural gas based supply sales contracts, and to manage physical contract exposure
while retaining some ability to participate in a widening margin environment. The Company uses derivative financial instruments
to manage exposure to commodity prices and power costs. The Company does not trade financial instruments for speculative purposes.
The derivative instruments include participating swaps and fixed price swap contracts that settle against indexed reference pricing.
Participating swaps are contracts that provide a floor and ceiling for a certain percentage of the volume of a contract. A swap
contract is an agreement where a floating price is exchanged for a fixed price over a specified period.



| | b. | Currency risk
| | -- | -------------



Pembina's commodity sales are exposed to both positive and negative
effects of fluctuations in the Canadian/U.S. exchange rate. Pembina manages this exposure by matching a significant portion of
the cash costs that it expects with revenues in the same currency. In addition, Pembina uses derivative instruments to manage the
U.S. cash requirements of its business.



Pembina regularly sells or purchases a portion of expected U.S.
cashflows. Pembina's also manages the exposure it has to fluctuations in the U.S./Canadian dollar exchange rate when the underlying
commodity price is based upon a U.S. index price. Pembina may also use derivative products that provide for protection against
a stronger Canadian dollar, while allowing it to participate if the currency weakens relative to the U.S. dollar.



| | c. | Interest rate risk
| | -- | ------------------



At the reporting date, the interest rate profile of the Company's
interest-bearing financial instruments was:



|($ thousands)             |  | Carrying Amounts of Financial Liability |           
|------------------------- |  | --------------------------------------- | ----------
|December 31               |  | 2012                                    |           
|Fixed rate instruments    |  |                                         | (1,417,950
|Variable rate instruments |  |                                         | (520,675  



The Company uses swap contracts to manage exposure to variable
interest rates.

95







Pembina Pipeline Corporation



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 profit or loss by the amounts shown below. This analysis assumes that all other variables
remain constant.



|December 31($ thousands)         |  | 2012     |          |   | 2011     | 
|-------------------------------- |  | -------- | -------- | - | -------- | 
|                                 |  | ± 100 bp |          |   | ± 100 bp | 
|Variable rate instruments        |  |          | ± 5,250  |   |          | 
|Interest rate swap               |  |          | ± (3,800 | ) |          | 
|Profit or loss sensitivity (net) |  |          | ± 1,450  |   |          | 



Fair values



The fair values of financial assets and liabilities, together
with the carrying amounts shown in the statement of financial position, are as follows:



|December 31                                     |  | 2012            |           |     | 2011       | 
|----------------------------------------------- |  | --------------- | --------- | --- | ---------- | 
|($ thousands)                                   |  | Carrying Amount |           |     | Fair Value | 
|Financial assets carried at fair value          |  |                 |           |     |            | 
|Derivative financial instruments                |  |                 | 7,871     |     |            | 
|                                                |  |                 |           |     |            | 
|Financial assets carried at amortized cost      |  |                 |           |     |            | 
|Cash and cash equivalents                       |  |                 | 27,336    |     |            | 
|Trade and other receivables                     |  |                 | 334,772   |     |            | 
|                                                |  |                 | 362,108   |     |            | 
|                                                |  |                 |           |     |            | 
|Financial liabilities carried at fair value     |  |                 |           |     |            | 
|Derivative financial instruments                |  |                 | 67,691    |     |            | 
|                                                |  |                 |           |     |            | 
|Financial liabilities carried at amortized cost |  |                 |           |     |            | 
|Bank overdraft                                  |  |                 |           |     |            | 
|Trade payables and accrued liabilities          |  |                 | 344,208   |     |            | 
|Finance lease liabilities                       |  |                 | 5,800     |     |            | 
|Dividends payable                               |  |                 | 39,586    |     |            | 
|Loans and borrowings                            |  |                 | 1,938,626 |     |            | 
|Senior secured notes                            |  |                 |           |     |            | 
|Convertible debentures                          |  |                 | 609,968   | (1) |            | 
|                                                |  |                 | 2,938,188 |     |            | 



| | (1) | Carrying amount excludes conversion feature of convertible
debentures.
| | --- | ----------------------------------------------------------------------



The basis for determining fair values is disclosed in Note 4.



96







Pembina Pipeline Corporation



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 and adequate credit spread, and were as follows:



|December 31          |  | 2012 |            |   | 2011 | 
|-------------------- |  | ---- | ---------- | - | ---- | 
|Derivatives          |  |      | 1.2% - 2.5 | % |      | 
|Loans and borrowings |  |      | 2.0% - 3.7 | % |      | 
|Leases               |  |      | 4.4        | % |      | 



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 commodities, future power contracts, interest rates and foreign exchange rates from information
sources including banks, Bloomberg Terminals and Natural Gas Exchange (NGX). With the exception of one item described under Level
3, all of Pembina's financial instruments carried at fair value are valued using Level 2 inputs.



Level 3: Valuations in this level require the most significant
judgments and consist primarily of unobservable or non-market based inputs. Level 3 inputs include longer-term transactions, transactions
in less active markets or transactions at locations for which pricing information is not available. In these instances, internally
developed methodologies are used to determine fair value. The redemption liability related to Three Star is classified as a Level
3 instrument, as the fair value is determined by using inputs that are not based on observable market data. The liability represents
a put option, held by the non-controlling interest of Three Star, to sell the remaining one-third of the business to Pembina after
the third anniversary of the original acquisition date (October 3, 2014). The put price to be paid by the Company for the residual
interest upon exercise is based on a multiple of Three Star's earnings during the three year period prior to exercise, adjusted
for associated capital expenditures and debt based on management estimates. These estimates are subject to measurement uncertainty
and the effect on the financial statements of future periods could be material.



Financial instruments classified as Level 3



|($ thousands)                           |  | 2012 |       |   | 2011 | 
|--------------------------------------- |  | ---- | ----- | - | ---- | 
|Redemption liability, beginning of year |  |      |       |   |      | 
|Assumed on acquisition                  |  |      | 6,183 |   |      | 
|Accretion of liability                  |  |      | 65    |   |      | 
|Gain on revaluation                     |  |      | (962  | ) |      | 
|Redemption liability, end of year       |  |      | 5,286 |   |      | 





97







Pembina Pipeline Corporation





The following table is a summary
of the net derivative financial instrument liability:





|As at December 31 ($ thousands)                               |  | 2012 |         |   | 2011 | 
|------------------------------------------------------------- |  | ---- | ------- | - | ---- | 
|Frac spread related                                           |  |      | (3,068  | ) |      | 
|Product margin                                                |  |      | (1,088  | ) |      | 
|Corporate                                                     |  |      |         |   |      | 
|Power                                                         |  |      | (7,100  | ) |      | 
|Interest rate                                                 |  |      | (14,302 | ) |      | 
|Foreign exchange                                              |  |      | 653     |   |      | 
|Other derivative financial instruments                        |  |      |         |   |      | 
|Conversion feature of convertible debentures (Note 13)        |  |      | (29,629 | ) |      | 
|Redemption liability related to acquisition
    of subsidiary |  |      | (5,286  | ) |      | 
|Net derivative financial instruments liability                |  |      | (59,820 | ) |      | 





In conjunction with the Acquisition, the Company assumed all
of the rights and obligations of Provident relating to the Provident Debentures which included a $29.7 million liability for the
conversion feature of the Provident Debentures. These convertible debentures contain a cash conversion option which is measured
at fair value through profit and loss at each reporting date, with any unrealized gains or losses arising from fair value changes
reported in the consolidated statement of comprehensive income. This resulted in the Company recording a gain of $0.1 million on
the revaluation on the conversion feature of convertible debentures in profit and loss in net finance costs for the year ended
December 31, 2012.



|Commodity-Related Derivative Financial Instruments                         |  | Year Ended December 31 |       
|-------------------------------------------------------------------------- |  | ---------------------- | ------
|($ thousands)                                                              |  | 2012                   |       
|Realized (loss) gain on commodity-related derivative financial instruments |  |                        |       
|Frac spread related                                                        |  |                        | (4,497
|Product margin                                                             |  |                        | (141  
|Power                                                                      |  |                        | 67    
|Realized (loss) gain on commodity-related derivative financial instruments |  |                        | (4,571
|Unrealized gain on commodity-related derivative
    financial instruments  |  |                        | 36,100
|Gain on commodity-related derivative financial
    instruments             |  |                        | 31,529



For non-commodity-related derivative
financial instruments see Note 21, Net Finance Costs.



98







Pembina Pipeline Corporation



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, 2012 ($ thousands)     |  |                                           |  | + Change |        |   | - Change | 
|--------------------------------------------- |  | ----------------------------------------- |  | -------- | ------ | - | -------- | 
|Frac spread related                           |  |                                           |  |          |        |   |          | 
|Natural gas                                   |  | (AECO +/- $1.00 per GJ)                   |  |          | 6,724  |   |          | 
|NGL (includes propane, butane)                |  | (Belvieu +/- U.S. $0.10 per gal)          |  |          | (3,991 | ) |          | 
|Foreign exchange (U.S.$ vs. Cdn$)             |  | (FX rate +/- $0.05)                       |  |          | (3,637 | ) |          | 
|Product margin                                |  |                                           |  |          |        |   |          | 
|Crude oil                                     |  | (WTI +/- $5.00 per bbl)                   |  |          | (6,387 | ) |          | 
|NGL (includes propane, butane and condensate) |  | (Belvieu +/- U.S. $0.10 per gal)          |  |          | 6,112  |   |          | 
|Corporate                                     |  |                                           |  |          |        |   |          | 
|Interest rate                                 |  | (Rate +/- 50 basis points)                |  |          | 3,857  |   |          | 
|Power                                         |  | (AESO +/- $5.00 per MW/h)                 |  |          | 3,631  |   |          | 
|Conversion feature of convertible debentures  |  | (Pembina share price +/- $0.50 per share) |  |          | (2,761 | ) |          | 



| | 28. | OPERATING LEASES
| | --- | ----------------



Leases as lessee



Operating lease rentals are payable as follows:



|December 31 ($ thousands) |  | 2012 |         |  | 2011 | 
|------------------------- |  | ---- | ------- |  | ---- | 
|Less than 1 year          |  |      | 22,754  |  |      | 
|Between 1 and 5 years     |  |      | 109,542 |  |      | 
|More than 5 years         |  |      | 153,574 |  |      | 
|                          |  |      | 285,870 |  |      | 



The Company leases a number of offices, warehouses, vehicles
and rail cars under operating leases. The leases run for a period of one to fifteen years, with an option to renew the lease after
that date. The Company has sublet office space up to 2022 and has contracted sub-lease payments of $51.4 million over the term.



During the year ended December 31, 2012, an amount of $7.1 million
was recognized as an expense in profit or loss in respect of operating leases (December 31, 2011: $3.8 million).



| | 29. | CAPITAL MANAGEMENT
| | --- | ------------------



The Company's objective when managing capital is to safeguard
the Company's ability to provide a stable stream of dividends to shareholders that is sustainable over the long-term. The Company
manages its capital structure and makes adjustments to it in light of changes in economic conditions and risk characteristics of
its underlying asset base and based on requirements arising from significant capital development activities. Pembina manages and
monitors its capital structure and short-term financing requirements using Non-GAAP measures; the ratios of debt to EBITDA, debt
to Enterprise Value (market value of common shares and convertible debentures), adjusted cash flow to debt and debt to equity.
The metrics are used to measure the Company's overall debt position and measure the strength of the Company's balance sheet. The
Company remains satisfied that the leverage currently employed in the Company's capital structure is sufficient and appropriate
given the characteristics and operations of the underlying asset base. The Company, upon approval from its Board of Directors,
will balance its overall capital structure through new equity or debt issuances as required.



99







Pembina Pipeline Corporation



The Company 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. The Company
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 reserved for the support of specific significant development activities. The capital structure
of the Company consists of shareholder's equity plus long-term liabilities. Long-term debt is comprised of bank credit facilities,
unsecured notes, finance lease obligations and convertible debentures.



Pembina is subject to certain financial covenants in its credit
facility agreements and is in compliance with all financial covenants as of December 31, 2012.



Note 15 of these financial statements demonstrates the change
in Share Capital for the year ended December 31, 2012.



| | 30. | GROUP ENTITIES
| | --- | --------------



Significant subsidiaries



|                                         |  | Ownership Interest |    
|---------------------------------------- |  | ------------------ | ---
|December 31 (percentages)                |  | 2012               |    
|Pembina Pipeline                         |  |                    | 100
|Pembina Gas Services Limited Partnership |  |                    | 100
|Pembina Oil Sands Pipeline LP            |  |                    | 100
|Pembina Midstream Limited Partnership    |  |                    | 100
|Pembina North Limited Partnership        |  |                    | 100
|Pembina West Limited Partnership         |  |                    | 100
|Pembina NGL Corporation                  |  |                    | 100
|Pembina Facilities NGL LP                |  |                    | 100
|Pembina Infrastructure and Logistics LP  |  |                    | 100
|Pembina Empress NGL Partnership          |  |                    | 100
|Pembina Resource Services Canada         |  |                    | 100
|Pembina Resource Services (U.S.A.)       |  |                    | 100
|Three Star Trucking Ltd.                 |  |                    | 67 



| | 31. | RELATED PARTIES
| | --- | ---------------



All transactions with related parties were made on terms equivalent
to those that prevail in arm's length transactions.



Investments in equity accounted investees



Officers of Pembina Pipeline Corporation, the ultimate controlling
party, are Directors of Fort Saskatchewan Ethylene Storage Corporation ("FSESC"), the parent of Fort Saskatchewan Ethylene
Storage Limited Partnership ("FSESLP"). FSESLP and FSESC are both recognized as investments in joint ventures under the
equity method on Pembina's financial statements. Results from operating activities are recorded as Share of Profit from Equity
Accounted Investees on Pembina's Statement of Comprehensive Income, representing a 50 percent interest in the joint ventures.



100







Pembina Pipeline Corporation



|($ thousands) |  |                  |  |      |  |  | Transaction Value Year Ended December 31 |  |     | Balance Outstanding As At December 31 | 
|------------- |  | ---------------- |  | ---- |  |  | ---------------------------------------- |  | --- | ------------------------------------- | 
|              |  |                  |  |      |  |  | 2012                                     |  |     | 2011                                  | 
|Related Party |  | Transaction      |  | Note |  |  |                                          |  |     |                                       | 
|FSESLP        |  | Interest revenue |  |      |  |  |                                          |  | 262 |                                       | 
|              |  | Loan receivable  |  |      |  |  |                                          |  |     |                                       | 



Key management personnel and director compensation



Key management consists of the Company's directors and certain
key officers.



Compensation



In addition to short-term employee benefits –
including salaries, director fees and bonuses – the Company 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:



|Year Ended December
    31 ($ thousands) |  | 2012 |       |  | 2011 | 
|---------------------------------------- |  | ---- | ----- |  | ---- | 
|Short-term employee benefits             |  |      | 2,743 |  |      | 
|Post-employment benefits                 |  |      | 231   |  |      | 
|Share-based compensation                 |  |      | 5,806 |  |      | 
|Other compensation                       |  |      | 121   |  |      | 
|Total compensation of key management     |  |      | 8,901 |  |      | 



Transactions



Key management personnel and directors of the Company control
0.5 percent (2011: 0.8 percent) of the voting common shares of the Company. Certain directors and key management personnel also
hold Pembina convertible debentures. Dividend and interest payments received for the common shares and debentures 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.



101







Pembina Pipeline Corporation



Transactions



|($ thousands)                |  |             |  | Transaction Value Year Ended December 31 |        |  | Balance Outstanding As At December 31 | 
|---------------------------- |  | ----------- |  | ---------------------------------------- | ------ |  | ------------------------------------- | 
|Post-employment benefit plan |  | Transaction |  | 2012                                     |        |  | 2011                                  | 
|Defined benefit plan         |  | Funding     |  |                                          | 10,000 |  |                                       | 



102