Maple Leaf Memo
Parliament to Return…in October
As widely anticipated by politics watchers north of the border, Prime Minister Stephen Harper last week extended Canada’s parliamentary vacation by a month, proroguing the current session.
Parliament was due to reconvene Sept. 17, but Prime Minister Stephen Harper last week called a new session to begin Oct. 16 with a throne speech, an act that will trigger a vote of confidence in Harper’s minority government. A vote on a throne speech is, by definition, a confidence vote.
The session will begin with a speech repackaging “Canada’s New Government” (as it’s touted in Conservative communiqués). If opposition parties reject his agenda, the government will fall and elections will follow. The House of Commons will vote on the speech within six working days.
Recent polls show the Conservatives, basically even with the Liberals, are in no position to win a majority in a fall election. But the Liberals and the Bloc Quebecois could insist on removing Canadian troops from Afghanistan in February 2009; the New Democratic Party advocates an immediate withdrawal.
Any indication in the throne speech that Harper wants to extend the Afghan mission would almost certainly lead to a vote of no confidence. Harper seems to be gambling that the other parties don’t want a new election any more than he does.
The Conservatives currently have 125 of 308 seats. The Bloc Quebecois (48 seats), the Liberals (97 seats) and the New Democratic Party (29 seats) would all have to vote against the speech to force an election.
Bloc Quebecois Leader Gilles Duceppe has said his caucus would vote against a throne speech if the government failed to make a clear statement in the speech that Canadian troops would be withdrawn from Afghanistan by February 2009.
Liberal Leader Stephane Dion wants to hear the throne speech before declaring his party’s intention, but did say in a press release that Harper should “announce, without equivocation, that Canada will notify its allies in NATO that it is putting an end to the combat mission in Kandahar Afghanistan, in February 2009.” Dion also wants Harper to “commit to reintroducing Bill C-30, which is the best tool Canadians have to effectively protect the environment and fight the effects of climate change, in the new session.”
New Democratic Party (NDP) Leader Jack Layton has offered no specifics, but said in August that it would be a waste of time if Harper’s government were to start a fresh session of Parliament with a speech from the throne. Last week, he said Harper was preventing Members of Parliament (MPs) from doing their job.
Harper has said he would seek a parliamentary consensus on a new role for Canadian forces in Afghanistan beyond February 2009.
Among the pending legislation that will die, the most politically charged is Bill C-30, the climate change law, from which the Conservatives had been backing away ever since a parliamentary committee tried in the spring to give it more teeth by including tougher regulations for industry. Private members’ bills survive prorogation, meaning Bill C-288–the bill introduced by Liberal MP Pablo Rodriguez requiring the government to incorporate the Kyoto Protocol–is still on the books.
Trust Revival?
The Liberal Party can’t hang its electoral hat on revising the tax on trusts.
Opinion polls suggest the income trust decision hasn’t had much impact on public support for the Tories, but Dion seems to be using the issue to broaden the party platform and position the Grits as the more responsible stewards of Canada’s economy.
In meetings last week with energy patch executives and tax experts, Dion, Liberal Finance Critic John McCallum and Opposition House Leader Ralph Goodale suggested they’d end the moratorium on the creation of new trusts, if only for a limited number of sectors–including oil and gas.
The Liberals are considering banning certain sectors from forming trusts, such as federally regulated industries, including banks, telephone companies, railways and airlines.
They’re also considering an alternative: Allowing broad use of the trust structure by all sectors, but with restrictions to prevent initiatives solely designed to dodge taxes.
The Liberals have already promised to replace the 31.5 percent tax on distributions with a 10 percent levy refundable for domestic investors but not foreigners.
McCallum likened energy trusts to real estate investment trusts, which are largely exempt from the trust tax ratified with the 2007 Canadian federal budget in June.
John Dielwart, chief executive officer of ARC Energy Trust, told the Toronto Globe and Mail, “It’s not the government’s job to pick winners and losers, that’s for the capital markets to decide. If the wrong businesses are in the sector, then the marketplace will resolve that.”
George Kesteven, president of the Canadian Association of Income Funds, said, “They’re probably looking at the same demographics we have…an aging population looking for an income stream, looking for an investment vehicle.”
The Roundup
Oil & Gas
Crescent Point Energy Trust (CPG.UN, CPGCF) is buying Innova Exploration (TSX: IXL) for CD360.1 million (USD342 million) to improve its position in southeastern Saskatchewan. The deal is for CD7.55 per share, a 22 percent premium over Innova’s Sept. 4 closing price. Including net debt of about CD39.9 million, the deal has a total transaction value of about CD400 million. Crescent Point will acquire about 4,300 barrels of oil equivalent per day (boe/d) of light oil and natural gas production, 65 percent of which is in the Viewfield Bakken resource play.
The acquisition increases the Crescent Point’s current Bakken production to more than 8,000 boe/d. In February, the trust bought Mission Oil & Gas, which gave it a bigger presence in southeastern Saskatchewan. Crescent Point has also entered into a bought deal agreement to offer 8.9 million trust units at CD18.55 each to raise CD165 million. Buy Crescent Point Energy Trust up to USD20.
Enterra Energy Trust (ENT.UN, NYSE: ENT) announced Sept. 7 that Victor Roskey, senior vice president and Chief Financial Officer of Enterra Energy Corp, the administrator of the trust, has provided notice that he intends to leave Enterra. His departure is expected to be no later than Sept. 30, 2007. Enterra Energy Trust is a sell.
Freehold Royalty Trust (FRU.UN, FRHLF) has acquired a royalty interest in an Alberta oil property for CD32.7 million. The deal, with an unnamed private oil and gas company, involves a long-life property in northwest Alberta. The royalty encompasses 7,330 gross acres of land and is expected to add about 225 boe/d to Freehold’s production. The trust also said it had closed the previously announced acquisition of royalty interests in Alberta and Saskatchewan for CD57.3 million. Those two properties are expected to add 550 boe/d. Freehold Royalty Trust is a sell.
Gas/Propane
CCS Income Trust’s (CCR.UN, CCRUF) unitholders have approved a CD3.5 billion, CD46-per-unit plan to go private. The deal was approved at a special meeting in Calgary. The going-private transaction was approved with 92.8 percent of the votes cast by unitholders. The transaction is expected to close in the fourth quarter. CCS Income Trust is a hold.
Keyera Facilities Income Fund (KEY.UN, KEYUF) has concluded its previously announced private placement of long-term senior unsecured notes in the principal amount of CD120 million to a group of institutional investors in Canada and the US. The notes were issued in two tranches: CD60 million due in 2017 bearing interest at 5.89 percent and CD60 million due in 2022 bearing interest at 6.14 percent.
The net proceeds from the sale of the notes will be used to repay borrowings under Keyera’s short-term bank credit facilities and will be a source of long term funding for Keyera’s ongoing growth capital program, working capital requirements and general corporate purposes. Keyera has received CD80 million of the proceeds from the offering, with receipt of the remaining CD40 million scheduled for December 2007. Keyera Facilities Income Fund is a buy up to USD19.
Business Trusts
Cinram International Income Fund (CRW.UN, CRWFF) has expanded its North American distribution deal with cell phone maker Motorola (NYSE: MOT) to Europe. Cinram will provide picking, packing, programming, packaging and reverse logistics for Motorola’s products in Europe beginning in the third quarter of 2008. Financial terms of the deal weren’t disclosed. Hold Cinram International Income Fund.
Real Estate Trusts
Lanesborough REIT (LRT.UN, LRTEF) has signed an agreement to purchase a 160-suite apartment property being built in the Timberlea area of Fort McMurray, Alberta, for CD60.73 million. Lanesborough will finance the transaction with a new first mortgage loan in the estimated amount of CD45 million and the balance in cash. Lanesborough REIT is a hold.
As widely anticipated by politics watchers north of the border, Prime Minister Stephen Harper last week extended Canada’s parliamentary vacation by a month, proroguing the current session.
Parliament was due to reconvene Sept. 17, but Prime Minister Stephen Harper last week called a new session to begin Oct. 16 with a throne speech, an act that will trigger a vote of confidence in Harper’s minority government. A vote on a throne speech is, by definition, a confidence vote.
The session will begin with a speech repackaging “Canada’s New Government” (as it’s touted in Conservative communiqués). If opposition parties reject his agenda, the government will fall and elections will follow. The House of Commons will vote on the speech within six working days.
Recent polls show the Conservatives, basically even with the Liberals, are in no position to win a majority in a fall election. But the Liberals and the Bloc Quebecois could insist on removing Canadian troops from Afghanistan in February 2009; the New Democratic Party advocates an immediate withdrawal.
Any indication in the throne speech that Harper wants to extend the Afghan mission would almost certainly lead to a vote of no confidence. Harper seems to be gambling that the other parties don’t want a new election any more than he does.
The Conservatives currently have 125 of 308 seats. The Bloc Quebecois (48 seats), the Liberals (97 seats) and the New Democratic Party (29 seats) would all have to vote against the speech to force an election.
Bloc Quebecois Leader Gilles Duceppe has said his caucus would vote against a throne speech if the government failed to make a clear statement in the speech that Canadian troops would be withdrawn from Afghanistan by February 2009.
Liberal Leader Stephane Dion wants to hear the throne speech before declaring his party’s intention, but did say in a press release that Harper should “announce, without equivocation, that Canada will notify its allies in NATO that it is putting an end to the combat mission in Kandahar Afghanistan, in February 2009.” Dion also wants Harper to “commit to reintroducing Bill C-30, which is the best tool Canadians have to effectively protect the environment and fight the effects of climate change, in the new session.”
New Democratic Party (NDP) Leader Jack Layton has offered no specifics, but said in August that it would be a waste of time if Harper’s government were to start a fresh session of Parliament with a speech from the throne. Last week, he said Harper was preventing Members of Parliament (MPs) from doing their job.
Harper has said he would seek a parliamentary consensus on a new role for Canadian forces in Afghanistan beyond February 2009.
Among the pending legislation that will die, the most politically charged is Bill C-30, the climate change law, from which the Conservatives had been backing away ever since a parliamentary committee tried in the spring to give it more teeth by including tougher regulations for industry. Private members’ bills survive prorogation, meaning Bill C-288–the bill introduced by Liberal MP Pablo Rodriguez requiring the government to incorporate the Kyoto Protocol–is still on the books.
Trust Revival?
The Liberal Party can’t hang its electoral hat on revising the tax on trusts.
Opinion polls suggest the income trust decision hasn’t had much impact on public support for the Tories, but Dion seems to be using the issue to broaden the party platform and position the Grits as the more responsible stewards of Canada’s economy.
In meetings last week with energy patch executives and tax experts, Dion, Liberal Finance Critic John McCallum and Opposition House Leader Ralph Goodale suggested they’d end the moratorium on the creation of new trusts, if only for a limited number of sectors–including oil and gas.
The Liberals are considering banning certain sectors from forming trusts, such as federally regulated industries, including banks, telephone companies, railways and airlines.
They’re also considering an alternative: Allowing broad use of the trust structure by all sectors, but with restrictions to prevent initiatives solely designed to dodge taxes.
The Liberals have already promised to replace the 31.5 percent tax on distributions with a 10 percent levy refundable for domestic investors but not foreigners.
McCallum likened energy trusts to real estate investment trusts, which are largely exempt from the trust tax ratified with the 2007 Canadian federal budget in June.
John Dielwart, chief executive officer of ARC Energy Trust, told the Toronto Globe and Mail, “It’s not the government’s job to pick winners and losers, that’s for the capital markets to decide. If the wrong businesses are in the sector, then the marketplace will resolve that.”
George Kesteven, president of the Canadian Association of Income Funds, said, “They’re probably looking at the same demographics we have…an aging population looking for an income stream, looking for an investment vehicle.”
The Roundup
Oil & Gas
Crescent Point Energy Trust (CPG.UN, CPGCF) is buying Innova Exploration (TSX: IXL) for CD360.1 million (USD342 million) to improve its position in southeastern Saskatchewan. The deal is for CD7.55 per share, a 22 percent premium over Innova’s Sept. 4 closing price. Including net debt of about CD39.9 million, the deal has a total transaction value of about CD400 million. Crescent Point will acquire about 4,300 barrels of oil equivalent per day (boe/d) of light oil and natural gas production, 65 percent of which is in the Viewfield Bakken resource play.
The acquisition increases the Crescent Point’s current Bakken production to more than 8,000 boe/d. In February, the trust bought Mission Oil & Gas, which gave it a bigger presence in southeastern Saskatchewan. Crescent Point has also entered into a bought deal agreement to offer 8.9 million trust units at CD18.55 each to raise CD165 million. Buy Crescent Point Energy Trust up to USD20.
Enterra Energy Trust (ENT.UN, NYSE: ENT) announced Sept. 7 that Victor Roskey, senior vice president and Chief Financial Officer of Enterra Energy Corp, the administrator of the trust, has provided notice that he intends to leave Enterra. His departure is expected to be no later than Sept. 30, 2007. Enterra Energy Trust is a sell.
Freehold Royalty Trust (FRU.UN, FRHLF) has acquired a royalty interest in an Alberta oil property for CD32.7 million. The deal, with an unnamed private oil and gas company, involves a long-life property in northwest Alberta. The royalty encompasses 7,330 gross acres of land and is expected to add about 225 boe/d to Freehold’s production. The trust also said it had closed the previously announced acquisition of royalty interests in Alberta and Saskatchewan for CD57.3 million. Those two properties are expected to add 550 boe/d. Freehold Royalty Trust is a sell.
Gas/Propane
CCS Income Trust’s (CCR.UN, CCRUF) unitholders have approved a CD3.5 billion, CD46-per-unit plan to go private. The deal was approved at a special meeting in Calgary. The going-private transaction was approved with 92.8 percent of the votes cast by unitholders. The transaction is expected to close in the fourth quarter. CCS Income Trust is a hold.
Keyera Facilities Income Fund (KEY.UN, KEYUF) has concluded its previously announced private placement of long-term senior unsecured notes in the principal amount of CD120 million to a group of institutional investors in Canada and the US. The notes were issued in two tranches: CD60 million due in 2017 bearing interest at 5.89 percent and CD60 million due in 2022 bearing interest at 6.14 percent.
The net proceeds from the sale of the notes will be used to repay borrowings under Keyera’s short-term bank credit facilities and will be a source of long term funding for Keyera’s ongoing growth capital program, working capital requirements and general corporate purposes. Keyera has received CD80 million of the proceeds from the offering, with receipt of the remaining CD40 million scheduled for December 2007. Keyera Facilities Income Fund is a buy up to USD19.
Business Trusts
Cinram International Income Fund (CRW.UN, CRWFF) has expanded its North American distribution deal with cell phone maker Motorola (NYSE: MOT) to Europe. Cinram will provide picking, packing, programming, packaging and reverse logistics for Motorola’s products in Europe beginning in the third quarter of 2008. Financial terms of the deal weren’t disclosed. Hold Cinram International Income Fund.
Real Estate Trusts
Lanesborough REIT (LRT.UN, LRTEF) has signed an agreement to purchase a 160-suite apartment property being built in the Timberlea area of Fort McMurray, Alberta, for CD60.73 million. Lanesborough will finance the transaction with a new first mortgage loan in the estimated amount of CD45 million and the balance in cash. Lanesborough REIT is a hold.