39540
34943
S&P/TSX
15838.63
-25.54
-0.16%
S&P-CDNX
843.92
+0.60
+0.07%
S&P-500
2351.16
+3.94
+0.17%
NASDAQ
5838.58
+23.68
+0.41%
Dow
20624.05
+4.28
+0.02%
Dollar
0.7629
-0.0001
-0.01%
Oil
53.69
+0.33
+0.62%
Gold
1237.20
-2.80
-0.23%
Silver
18.04
-0.03
-0.19%


Big banks ease up on energy

Credit has started to flow more freely to Canada's battered oil and gas sector, though some executives say lenders are favouring larger and more financially secure producers.

Many Canadian energy companies had their credit lines cut in recent years as crude prices crashed, with benchmark West Texas Intermediate oil prices hitting a 12-year low of US$26.05 per barrel last February.

Oil prices have doubled since then as OPEC producers scale back output.

"The bank lending industry is a little more comfortable with some stability in oil prices, and that gives them the courage to lend a little more," said John Rooney, chief executive of Calgary-based Northern Blizzard Resources (TSX:NBZ), a mid-sized heavy oil company that had its borrowing base cut twice by lenders last year.

"There is a stratification, in that the banks appear to be pretty comfortable with mid-market and up but are still being pretty tight with smaller companies."

Improved credit availability partly explains why only $220 million has been placed from a $750-million Export Development Canada fund set aside in February 2017 to back small- and medium-sized energy companies hit by low oil prices, according to Mark Senn, Western Canada vice-president for the government-owned credit agency.

"There's been a lot less blood than I anticipated," he said.

Senn said he had expected to place about $300 million in loans in the first year. The Crown corporation's loans are often used to supplement or replace credit lines from private banks. He now expects EDC will place another $100 million by this fall if current price and market conditions persist.

Canadian oilfield activity is rising this year but the industry is still "a long way away from healthy," said Bruce Edgelow, vice-president of strategic initiatives with ATB Financial, a lender owned by the Alberta government with heavy exposure to energy companies.

"It looks like there are some green shoots, some of the traditional lenders are coming back into the space," he said. "But it's been spotty."

Canadian banks were burned by the unexpected oil price plunge, which started in 2014 as Saudi Arabia sought to protect market share and discourage higher-cost rivals.

Barclays Capital calculated that over the five quarters ended on Oct. 31, 2016, Canada's Big Six banks — CIBC, Royal Bank, Scotiabank, TD Bank, BMO and National Bank — took $1.3 billion in energy industry loan loss provisions.

Barclays banking analyst John Aiken noted the banks did most of their oil and gas industry loan loss writedowns in the first half of 2016 and provisions for losses have since tailed off.

"It's not surprising that the traditional banks are definitely more open to lending," Aiken said.

"Part of it is the recovery in WTI. But we've had very significant resiliency in terms of the energy companies operating in Canada."

Both debt and equity financing options are much more available to the Canadian energy sector now than a year ago, said Victor Vallance, senior vice-president of energy, global corporates, for credit rating agency DBRS.

"Most companies can live now in a US$50 to $60 oil world," he said. "They're not growing but they can survive, they can manage."





Drive-through pot shop

The western Colorado town of Parachute is getting a drive-through marijuana shop, believed to be the first in the state.

The Parachute Board of Trustees approved a business license for Tumbleweed Express last week, the Glenwood Springs Post Independent reported Saturday.

"As far as I can tell, we are not aware of this business model ever coming up before," said Robert Goulding, spokesman for the state Marijuana Enforcement Division.

The business is expected to open in March in a former car wash.

Tumbleweed Express also had to get approval from the Marijuana Enforcement Division, which said the store cannot allow anyone younger than 21 on the premises, even in the back seat of a car.

The business must also have security and surveillance, and marijuana may not be visible from outside the dispensary.

The car wash building will allow the goods to be screened from outside view.

"We think the drive-through is a very creative and innovative idea," Parachute Town Manager Stuart McArthur said.

Marijuana accounted for nearly 30 per cent of the community's 2016 sales tax revenue of just over $1 million, McArthur said. "The really good news is that other businesses are benefiting from it," he said.

Travellers stopping to buy marijuana in Parachute are more likely to stop at restaurants and other shops, he said, helping an economy that was hit hard by a downturn in natural gas production.

Parachute Mayor Roy McClung said the town's economy would have been in serious trouble without legalized recreational marijuana.

Statewide, marijuana sales brought in close to $200 million in taxes and fees last year, the Colorado Department of Revenue said.



Wholesale trade rises 0.7%

Canadian wholesale trade grew 0.7 per cent to $57.3 billion in December, registering its third consecutive monthly gain.

Statistics Canada says sales in categories such as machinery, equipment and supplies, as well as building material and supplies were the biggest contributors to the increase.

In 2016, wholesale trade was up 3.1 per cent compared with 2015, marking a seventh straight annual increase.

The report says wholesale sales in December rose in six provinces — Quebec, Alberta, Saskatchewan, British Columbia, Nova Scotia and Prince Edward Island.

Sales edged down 0.2 per cent in Ontario.

The agency also says wholesale inventories rose by 1.1 per cent in December for a fifth consecutive monthly increase.





Similar pension challenges

China sees Canada as a valuable source of expertise as both countries grapple with the needs of an aging population that's increasingly retired, according to the head of the Canada Pension Plan Investment Board.

"China faces very similar demographic issues and pension challenges that Canada has faced and continues to face. When you put the demographics side-by-side, there are some striking similarities," Mark Machin said in a phone interview Monday from Beijing.

He said the most important similarity is that each country will have only about 2-1/2 working-age people per retired person by 2046.

"That's the crux of the challenge for pension systems."

As recently as September, the Chief Actuary of Canada's latest three-year projection said the Canada Pension Plan will remain sustainable at current contribution rates if the CPP Fund managed by Machin's organization can produce inflation-adjusted rates of return averaging 3.9 per cent over 75 years.

As of Dec. 31, the CPP Funds inflation-adjusted rate of return over the past 10 years was 4.8 per cent and about $300 billion of assets around the world — with more than half in North America.

While CPP Investment Board has had an office in Hong Kong that looks for suitable deals in China and the surrounding region, Machin said that its new collaboration with Chinese officials has a more general purpose.

"I think part of this is making sure that, when we're investing in markets, we're not just looking for things that we can get but offering a little bit back — offering a little bit of advice and insights."

Machin was in China's capital for the launch of a Chinese translation of "Fixing the Future," a book tracing the political and financial hurdles that were overcome when the Canada Pension Plan Investment Board was created in the 1990s.

He anticipates the book — written by a former Globe and Mail reporter under a commission from CPPIB — will be used as a textbook in China to help teach about pension reform.

Machin says the translation of the 380-page book was a Chinese initiative that complements a previously announced "pooling of resources" planned by the CPP Investment Board and China's National Development and Reform Commission under a memorandum of understanding signed in September.

The memorandum was one of the agreements signed in Ottawa during an official visit by China's Premier Li Keqiang.

While the CPP Investment Board is designed to be politically independent from all levels of government, Machin said there's a common interest with the Canadian federal government's efforts to build economic and trade ties with China.

"Those two things are definitely aligned. I wouldn't say they're co-ordinated, but they're aligned."



Atlantic premiers talk trade

Atlantic Canada's premiers are meeting today in Newfoundland to discuss the Atlantic Growth Strategy and trade.

Newfoundland and Labrador Premier Dwight Ball is hosting the two-day gathering in Steady Brook, just outside Corner Brook.

New Brunswick Premier Brian Gallant and P.E.I. Premier Wade MacLauchlan are at the meeting, but Nova Scotia's Stephen McNeil decided to remain in Halifax as his government deals with legislation aimed at ending a contract impasse with the province's 9,300 teachers.

Gallant says they will look at how to strengthen trade relations between Atlantic Canada, the U.S. and the European Union.

He says they will also talk about ways to improve the regional economy by co-ordinating training opportunities, harmonizing regulations and getting more women in the workforce.

In a statement, he says the premiers are expected to discuss regulatory alignment, infrastructure development, clean growth and innovation in health care.



Driverless car test sites

Self-driving vehicles could begin tooling down a bustling Atlanta street full of cars, buses, bicyclists and college students, as the city vies with other communities nationwide to test the emerging technology.

Atlanta would become one of the largest urban areas for testing self-driving vehicles if plans come together for a demonstration as early as September.

Nationwide, 10 sites were designated last month as "proving grounds" for automated vehicles by the U.S. Department of Transportation.

Backers of driverless cars say they could be part of a broader effort to rebuild the nation's infrastructure, something President Donald Trump has pledged to do. As roads and highways are rebuilt, "we think it would be very, very wise to build modern infrastructure with 21st-century capability in mind," said Paul Brubaker, president and CEO of the Washington, D.C.-based Alliance for Transportation Innovation.

Self-driving vehicles, he said, "should be a national priority."

The 10 "proving grounds" are:

  • City of Pittsburgh and the Thomas D. Larson Pennsylvania Transportation Institute
  • Texas AV Proving Grounds Partnership
  • U.S. Army Aberdeen Test Center
  • American Center for Mobility (ACM) at Willow Run, Michigan
  • Contra Costa Transportation Authority (CCTA) & GoMentum Station
  • San Diego Association of Governments
  • Iowa City Area Development Group
  • University of Wisconsin-Madison
  • Central Florida Automated Vehicle Partners
  • North Carolina Turnpike Authority


Unilever shares slide

Shares in Unilever, the owner of brands like Hellman's, Lipton, and Knorr, are down sharply after rival Kraft Heinz withdrew a $143 billion takeover offer.

The companies said Sunday in a joint press release that Kraft Heinz has "amicably" abandoned the offer.

Shares in Unilever slumped 6.5 per cent on Monday to 41.91 euros in Amsterdam, one of the places they're listed. They'd jumped 14 per cent on Friday.

The deal would have combined Kraft Heinz products such as Oscar Mayer, Jell-O and Velveeta with Unilever's stable of brands, which include food as well as other consumer goods like Dove soap and Vaseline. The merged company would have rivaled Nestle as the world's biggest packaged food maker by sales.

Analysts say Kraft Heinz, co-headquartered in Chicago and Pittsburgh, is still in the market for acquisitions. The fact that it bid for all of Unilever and not just its food business indicates that Kraft Heinz is potentially open to acquiring other packaged consumer goods, one analyst said.

Unilever, which has a head office in London and multiple stock listings, rejected the offer on Friday, but despite that, Kraft Heinz said at the time that it was still interested in the deal.



Quebec turns up syrup taps

Quebec, the world's largest producer of maple syrup, is ramping up output as it fends off rising competition from the U.S. and neighbouring provinces as well as a farmer rebellion from within.

The province is adding five million taps over the next two years to its existing 43 million spigots. Simon Trepanier, executive director of the Quebec Maple Syrup Federation, says that is intended to satisfy a growing appetite for the natural sugar, which is increasingly being used as an ingredient in food and drinks.

"We allowed those new taps to fulfil the demand and make sure that Quebec is still producing and being part of the expansion of the market right now," Trepanier says.

More than 90 per cent of the record 73 million kilograms of maple syrup made in Canada last year was tapped in Quebec, according to Statistics Canada. Yet the province's near-monopoly over the maple syrup market is loosening.

Despite a 30 per cent increase in production over the last decade, Quebec's share of global output has fallen from a high of about 82 per cent in 2003 to nearly 71 per cent last year, according to data from Statistics Canada and the U.S. Department of Agriculture.

The problem, some say, lies with the tight grip that the Quebec Maple Syrup Federation has over the province's maple syrup producers. The group sets quotas and prices that Quebec sugar shacks have to abide by, requires they sell to authorized buyers and pay an administrative fee on their output.

Faced with no such restrictions, Quebec's competitors have been tapping trees at a rapid pace.

Tony VanGlad, president of the New York State Maple Producers Association, says production in the state has grown five to 10 per cent annually over the last few years.

Angele Grenier, a maple syrup producer in Sainte-Clotilde-de-Beauce, has spent $150,000 in legal fees to fight $400,000 in fines for bypassing the federation to sell her syrup to a buyer in New Brunswick. The Supreme Court of Canada has to decide whether to hear an appeal in her case.

A lot is riding on the court's decision in Grenier's case, says Nicole Varin, a farmer facing about $500,000 in fines for selling maple butter, candy and other products outside the purview of the federation to sugar shacks and small fruit stands.

There is plenty of money at stake. Last year's record maple syrup harvest in Canada yielded nearly $487 million.

The price of syrup runs at about $2.88 per pound, according to the Quebec Maple Syrup Federation, making it 10 times more valuable than crude oil.



$Billion offer withdrawn

Kraft Heinz has decided to withdraw its $143 billion offer to buy mayonnaise, tea and seasonings maker Unilever.

The companies announced the decision Sunday in a joint press release.

Unilever, which has a head office in London, earlier had spurned the offer, saying the price was too low.

Despite rejection, ketchup, cheese and lunch meat maker Kraft Heinz said last week it was still interested in the deal.

Analysts say Kraft Heinz, co-headquartered in Chicago and Pittsburgh, is still in the market for acquisitions.

The deal would have brought together Kraft Heinz brands such as Oscar Mayer, Jell-O and Velveeta and Unilever's Hellman's, Lipton and Knorr. The combined company would have rivaled Nestle as the world's biggest packaged food maker by sales.



Business: 5 things to watch

Five things to watch this week in Canadian business:

Closed for holidays: Stock markets in Toronto and New York will be closed Monday, The United States will be marking Presidents Day while many Canadians will be off for various provincial holidays, including Family Day in Ontario.

Economic data: After a relatively sleepy week, Canadian economic data begins flowing again. Statistics Canada will release the latest wholesale trade figures on Monday, retail trade figures on Wednesday and the consumer price index on Friday.

B.C. budget: What goodies await British Columbians when the provincial government delivers its budget come Tuesday? Premier Christy Clark is on record saying it's time for the province give back to taxpayers. The fiscal plan comes three months before she seeks re-election in May.

The bottom line: It's another heavy earnings week. Some of the heavyweights include Loblaw, CIBC and Royal Bank.

Rail and drug talk: Two Canadian corporate titans are giving talks in the U.S. on Thursday. Keith Creel, CEO of Canadian Pacific Railway, speaks at the Barclays Industrial Select Conference in Miami Beach. In New York, Valeant Pharmaceuticals CEO Joseph Papa will give a speech at the 2017 RBC Capital Markets' Healthcare Conference.



'Get real' PM tells elite

Prime Minister Justin Trudeau used one of Germany's most prestigious black-tie galas to tell business leaders to "get real" about the addressing the anxieties of their workers in an uncertain world.

Trudeau delivered the no-holds-barred message to an audience of 400 politicians, business leaders and other notables at the annual St. Matthew's Banquet in the opulent Hamburg city hall.

The St. Matthew's Banquet is a 700-year-old event in which the elders of the city-states invited foreign guests to celebrate their friendship. It has heard from kings, presidents, mayors and others in what is now Germany's second-largest city.

Last year, former British prime minister David Cameron addressed the gathering and laid out his plan for battling his country's Brexit forces. Cameron failed and Britons voted to leave the European Union, part of a global wave of disruption that culminated with Donald Trump's surprise victory in the November presidential election.

Officials say Trudeau was mindful of the whirlwind global changes that have taken place since, especially in Europe — rising anti-trade resentment and a backlash against immigration — when he accepted the invitation to address the banquet.

Trudeau has spoken repeatedly in Europe this week about the need for politicians to address the "anxieties" of working people, who are fearful of the pace of change, and of being left behind in the globalized world.

And he has spoken of the need for politicians to do a better job explaining the tangible benefits of agreements such as Canada's free trade deal with the European Union — a pact the European Parliament ratified earlier in the week over the objections of a vocal civil society movement.

But the prime minister ramped up the message on Friday night in Hamburg, all but telling the corporate elite seated before him to shape up, and stop profiting at the expense of their employees.

"No more brushing aside the concerns of our workers and our citizens," the prime minister said in prepared remarks. "We have to address the root cause of their worries, and get real about how the changing economy is impacting peoples' lives."



$1.7B wind farm investment

Energy giant Enbridge Inc. is making big inroads into renewables even as changes in government policies are paving the way for the rapid expansion of its traditional oil and gas pipeline business.

The company said Friday it was investing $1.7 billion for 50 per cent of the Hohe See wind energy project off the coast of Germany, which follows last year's $282-million buy of a 50 per cent stake in a group of French offshore wind projects.

"It's clear that we're going to need all sources of supply to meet growing global energy demand, and that includes renewable supplies," said Enbridge CEO Al Monaco in an earnings conference call.

A day earlier, the Federal Trade Commission approved Enbridge's (TSX:ENB) proposed $37-billion takeover of Spectra Energy Corp., which will greatly expand the Calgary-based company's footprint in the United States just as the new administration there brings in more oil-and-gas-friendly policies.

"The political landscape in North America has shifted to, let's call it a more balanced tone for energy and infrastructure and development," said Monaco.

"We've seen strong conviction from the federal and provincial governments in Canada to advance infrastructure, and we see that happening as well in the United States on economic growth and a positive stance on energy."

For the company's new German wind project, it expects to spend $600 million this year and invest the remaining $1.1 billion through 2019, when the project is expected to be in service.

Power generated by the 497-megawatt wind farm will be sold at fixed prices over a 20-year period under a German government incentive program, with the option to expand a further 112 megawatts of capacity.

The company has yet to give the final go-ahead on the 1,428 megawatts of potential French offshore projects, while the 400-megawatt offshore Rampion project in the United Kingdom, which it owns a 25 per cent stake, should come online in 2018.



More Business News

38655
Recent Trending
38715
Castanet Proud Member of RTNDA Canada
Press Room