Takeover stand raises questions
Could affect investments in oilsands
As Premier Alison Redford said she wants clarity from the Harper-government on its approval of two major foreign takeovers, observers question the cost Ottawa’s new guidelines on such deals will have by potentially ruling out a set of “deep-pocketed” investors from Alberta’s oilsands.
Ottawa approved Friday the $15.1-billion takeover bid of Calgary-based Nexen Inc. by China’s CNOOC and Malaysia-owned Petronas’s $6-billion bid for Progress Energy Resources.
Redford told reporters in Calgary on Saturday the province is pleased with Ottawa’s decision on the takeovers of the two Calgary-based companies because the foreign investment is needed “to grow the oilsands.”
“It’s a tremendous success story for us,” she said. “It’s certainly important for what we think future economic growth looks like in Alberta.”
Alberta had asked the federal government to impose conditions on the Nexen takeover, including guarantees that half the corporation’s management and board will remain Canadian.
Redford said she talked briefly with the federal minister of industry, Christian Paradis, Friday about the deal, and specifically on the issue of corporate governance.
“We think that’s important and we certainly have always had confidence that the corporate partners would want to keep those commitments, so we’re really looking forward to this,” she said.
In announcing its approval of the bids Friday, the federal Conservative government also revealed a series of stricter rules for the acquisition of Canadian companies by stateowned enterprises.
Foreign government-owned companies may continue to have joint ventures or minority stakes, but Prime Minister Stephen Harper said future takeovers by foreign stateowned enterprises would only be approved under “exceptional circumstances.”
The move likely helps calm some of the anxiety over Chinese ownership in the Canadian oilpatch, said Gordon Houlden, director of the China Institute at the University of Alberta.
The institute conducted a survey this summer that found the majority of Albertans believed the province should promote energy exports to China, while opposing Chinese investment in Alberta in the form of full ownership.
“From that perspective, it should be the new regulations should be politically popular. That is, one could say the government is listening to the populace, whether in Alberta or nationally,” Houlden said.
But the state-owned enterprises now singled out for special attention from foreign investment not only have enormous asset pools, they are also “patient investors,” Houlden said.
“They’re companies that are not known for being particularly nimble, but are prepared to take the long term view to invest for decades,” he said.
“One set of deep-pocketed investors is now more or less ruled out. That may slow things a bit in terms of finding the assets we need to develop.”
The Redford-government has been courting, in particular, investment from Asia.
The province’s reaction to the guidelines has so far been “pretty muted,” considering the new rules may slow oilsands growth, added Houlden.
“It’ll be interesting to see what the Alberta reaction will be as the crown jewels of the Alberta economy are affected by a federal decision.”
Alberta’s International and Intergovernmental Affairs Minister, Cal Dallas, told the Herald Friday the province plans to ask Ottawa for more information about the “exceptional circumstances” under which foreign state-owned enterprises will be approved. Dallas said the province, as owner of the resource, believes it has a “significant stake in these decisions.”
Mount Royal University political analyst David Taras said the Harper-government’s decision is part of a “larger geopolitical game” that sends a message to the United States: “There’s another big customer out there.”
The CNOOC Nexen bid and Petronas’ Progress Energy bid will shake up the composition of Alberta’s energy sector, and Ottawa took its time considering the changes, Taras noted.
“(Harper) took a long time getting here. This is a shift in policy. The pressures were enormous and he tried to thread the needle,” said Taras.
“Just watching Harper on this is very, very interesting. They’ve gone from anything goes, to drawing a line in the sand.