IN THE NEWS ~ Ottawa approves foreign takeover bids

Jason Fekete, Postmedia News; With Files From Gordon Hamilton And Jonathan Fowlie, Vancouver Sun, And Mike De Souza And Jordan Press, Postmedia News



- Canada is open for business and foreign investment - but is not for sale - the Harper government declared Friday in approving two major foreign takeovers of Canadian natural resource companies, including one deal with major implications for British Columbia.

The approved deals are CNOOC's $15.1-billion takeover of Calgary-based petroleum producer Nexen and the $6-billion takeover bid by Malaysian national energy company Pet-ronas for Calgary-based natural gas producer Progress Energy Resources.

The approval of the Petro-nas deal improves the economics around the company's proposed $9-billion liquefied natural gas project at Prince Rupert, Progress Energy president Michael Culbert told The Vancouver Sun Friday.

The new Canadian company emerging from the takeover is to be called Progress Energy Canada, he said.

B.C.'s Minister of Energy, Mines and Natural Gas Rich Coleman celebrated the decision Friday, saying it will bring a boost to the Prince Rupert LNG project.

"I think this is a real sea change for British Columbia. I'm very pleased with the decision the federal government made," Coleman said in an interview.

"I think the Prime Minister made absolutely the right decision," he said.

"We're a four million population and we need partnerships when we're into something this large for the future of our province," he said.

B.C. New Democratic Party energy critic John Horgan agreed Friday the deal was good for B.C., but with a note of caution.

"Because the (Petronas) deal has been approved by the federal government, and that they are preparing to put together a deal in Prince Rupert, is obviously something that we want to see come to fruition, but it comes with lots of complications ...," he said. "They (the B.C. Liberal government) are so locked into pretending that jobs are the most important thing to British Columbians when it's really about training and what are the greenhouse gas implications going to be as we start piling up these projects," he added.

Culbert would not comment on particulars of the deal between Ottawa and Petro-nas, but he noted that Petro-nas had offered to list the new company on the Toronto stock exchange.

"There was an indication by the chief executive officer of Petronas that a potential listing in Canada could occur down the road," he said.

Progress Energy has built a solid position in British Columbia's Montney shale gas basin in the Fort Nelson region, where it holds almost 300,000 hectares of drilling rights.

"With access to all of Progress's resources in the Mont-ney in British Columbia, the LNG project can ultimately be increased in size by some 60 per cent," Culbert said. "The transaction is approved so we are very pleased with that."

He described the Petronas-Progress deal as positive for Western Canada and particularly British Columbia.

"Obviously scope and scale of these agreements is very important to be competitive.

"We are looking at the infusion of incremental capital to a company that has a lot of opportunity in front of it."

In announcing its approval of the China National Offshore Oil Corporation-Nexen transaction, the Conservative government introduced a series of grittier rules for acquisitions of Canadian companies by state-owned enterprises.

The government signalled it welcomes foreign investment, but state-owned enterprises must answer to a different set of rules and that Canada's natural resources - especially the lucrative oilsands - won't be raided by so-called SOEs that may have interests beyond commercial objectives.

The government said it does not want to see Canadian industries - including those in the oilsands and other sectors - transformed from operating on a commercial basis to under the control of a foreign state.

"When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments," Prime Minister Stephen Harper said Friday.

"Canadians generally, and investors specifically, should understand that these decisions are not the beginning of a trend, but rather the end of a trend," he added.

Moreover, the federal industry minister will now closely examine SOE transactions on three key fronts:

. the degree of control or influence a state-owned enterprise would likely exert on the Canadian business being acquired;

. the degree of control or influence an SOE would likely exert on the industry in which the Canadian company operates; and

. the extent to which a foreign state is likely to exercise control or influence over the SOE acquiring the Canadian business.

The federal government is also introducing new measures that will allow the industry minister to extend the timelines for national security reviews, while keeping the net benefit threshold for SOE investments at $330 million in asset value.

The current review criteria for foreign investments by private companies will remain in place, as will plans to increase the review threshold to $1 billion over the next four years.

"Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead," Harper said.

The decision to approve the two takeover bids - especially CNOOC's acquisition of Nexen - will undoubtedly be controversial, including inside the Conservative government.

At least a couple of cabinet ministers, as well as a number of other Tories in the wider caucus, were believed to have opposed the acquisition, the largest foreign takeover by a Chinese firm. Some Conservative MPs are worried about letting Chinese state-owned companies acquire such a large stake in Canada's resource sector.

Opposition parties had mixed reactions to the decision and new set of investment rules.

NDP natural resources critic Peter Julian described it as a "badly botched file," saying it is sad the decision doesn't appear to protect Canadian interests or provide clarity on foreign investment rules.

"The reality is what this government is trying to do is sugar-coat a decision that I think many Canadians will find very bitter to swallow," said Julian, during a conference call with reporters.

He also criticized the government for not staging public consultations on the decision.

The federal Liberals said Friday's announcement is problematic because the Conservatives gave few details of the Nexen takeover, including whether Canada will be able to have increased access to Chinese markets and companies.

There doesn't need to be 100 per cent reciprocity, but Canada should receive some level of give from the Chinese, said Liberal MP John McCallum.

"I think there should be a number of conditions (on CNOOC) and we don't know what the government has agreed on," McCallum said.

The Liberals are also concerned the new rules focusing on the oilsands could almost block other state-owned firms from investing in Canada, when they have the capital Canada needs.

Nexen shareholders voted overwhelmingly in September to approve the takeover, along with its 61 per cent premium on the price of the company's shares.

The Conservative government initially blocked the $6-billion Petronas takeover of Progress because the acquisition didn't meet the "net benefit" test under the Investment Canada Act, although Petronas tweaked its proposal to get Friday's federal approval.

Opposition parties and some political observers argued that allowing Chinese state-owned companies like CNOOC to acquire a major Canadian energy company - and a valuable stake in the oilsands - would set a dangerous precedent and open the floodgates to more foreign investment that could "nationalize" Canada's natural resources. ILLUS: / Nexen's two shale gas rigs work in the Horn River Basin at Dilly Creek, B.C. The Harper government approved CNOOC's $15.1-billion takeover of the Calgary-based petroleum producer Friday.; / A Nexen environment engineer holds up a beaker containing a water sample extracted from a pond near its gas plant in Calgary.

Latest posts

Share this page

Are you ready to take action?

Attend an Event
Constituent Resources

Sign up for updates