Junior company Gen III Oil investing $90 million to rebuild idle oil refinery in Alberta

CALGARY – A little-known, TSX-Venture listed company plans to tear down a refinery that has sat idle for 17 years and rebuild it as a re-refinery, making it the first used oil refinery in Alberta.

Gen III Oil Corp. announced Wednesday that it had inked a 20-year lease with Calgary-based Parkland Fuel Corp. for land in Bowden, Alta. where Parkland owns an inactive oil refinery along the highway between Calgary and Edmonton.

The company plans to begin construction on its 2,800-barrels-per-day re-refinery this summer and commission the facility in the first quarter of 2019 – making it the first re-refinery on the Prairies and just the third in Canada after a facility in North Vancouver and another in Kitchener, Ont.

“We’re taking a waste product, what is chemical garbage, we’re taking that and re-refining it, cleaning it up,” Gen III president and CEO Greg Clarkes said, adding that used oil can be recycled six times. “What would otherwise go down the drain can be used again and again,” he said.

Gen III – whose market capitalization is just $43 million – says the project would cost $90 million, employ 445 people during construction and 25 people once the project is up and running.

Gen III also announced this week it had wrapped up a front-end engineering study with Stantec Inc., bringing it closer to construction. It’s now seeking bids from engineering, procurement and construction firms for the project.

The company believes being connected to the rail-loading facility and oil storage tanks that already exists at the Parkland facility in Bowden would shave off $35 million in costs to improve its economic viability.

Clarkes said Gen III is in conversations with major banks in the U.S. and Canada for some of the financing it needs, and the company also expects to raise money through equity issuances. Gen III was down 8.5 per cent by close on Wednesday.

He said he doesn’t expect financing will be a major issue for Gen III in part as the company also has a signed off-take agreement with a subsidiary of Parkland for 100 per cent of the re-refinery’s lubricants production for five years.

Parkland spokesperson Annie Cuerrier said the company will be working with Gen III to get all the permits to begin the project. “This is an attractive project for Parkland and the community of Bowden,” she said.

The Gen III project would be just the second refinery project in Alberta in the last 30 years. The other new refinery in Alberta is the exponentially more expensive $9.7-billion, 50,000-bpd Sturgeon refinery near Edmonton, which is expected to reach full capacity this summer.

“There’s a need for a plant on the Prairies,” Rockmount Financial Corp. president and CEO Russell Kalmacoff said. His Calgary-based firm had until recently been researching a re-refinery of its own.

Kalmacoff said there is currently 100 million litres of waste oil being produced in Alberta every year, and another 20 million litres produced in Saskatchewan that are currently shipped to the facilities in B.C. and Ontario. “The proximity will given them an advantage [over those facilities],” he said.

Financial Post

gmorgan@nationalpost.com

RBC raises prime lending rate to 3.45% in wake of Bank of Canada hike

TORONTO —The Royal Bank of Canada is raising its prime lending rate by a quarter of a percentage point in the wake of the Bank of Canada’s decision to raise its key interest rate target.

The increase raises RBC’s rate to 3.45 per cent, effective Thursday.

Changes in the prime rate affect variable-rate mortgages, lines of credit and other lending linked to the benchmark rate.

The Bank of Canada raised its target for the overnight rate to 1.25 per cent on Wednesday following a string of strong economic data.

Last week, RBC raised its five-year, fixed-rate mortgage rates, and was followed by the rest of Canada’s big banks.

 

 

Loblaws Accused Of Using Barbados Bank Subsidiary For Tax Avoidance

A Loblaws store is seen Monday, March 9, 2015 in Montreal.

TORONTO — Loblaw Companies Ltd. and the Canada Revenue Agency faced off in a Toronto court today, the latest in an ongoing battle involving allegations that the grocery giant’s Barbadian banking subsidiary was misused for tax avoidance.

The case involving Barbados-based Glenhuron Bank Ltd. was the focus of the Tax Court of Canada hearing, which was largely procedural, ahead of a trial due to start on April 23.

The dispute, which began in 2015 after Loblaw Financial Holdings filed an appeal, could cost the grocery giant as much as $404 million including interest and penalties, according to its latest quarterly report.

Earlier on HuffPost Canada:

The CRA alleges in court filings that Loblaw Financial Holdings took steps to have Glenhuron appear to be a foreign bank in Barbados in order to circumvent the rules.

The federal government reassessed Loblaw’s subsidiary for several taxation years as far back as 2001, and concluded that it should pay taxes on $473 million of Glenhuron’s income, filings show.

A Loblaw spokesman says it has paid its taxes appropriately, and Glenhuron’s income earned outside of Canada should not be taxable under federal policy and law.

Also on HuffPost:

Women-In-Business Group Created By Trudeau, Ivanka Trump Shares 1st Report

Prime Minister Justin Trudeau converses with Ivanka Trump during the Fortune Most Powerful Women Summit and Gala in Washington, D.C., on Oct. 10, 2017.

WASHINGTON — A Canada-U.S. women-in-business group created by Prime Minister Justin Trudeau and Ivanka Trump released its first set of recommendations Wednesday, proposing more affordable child care and a new binational procurement initiative.

It’s the first of four anticipated reports from the Canada-U.S. Council for Advancement of Women Entrepreneurs and Business Leaders, created during Trudeau’s first meeting with President Donald Trump last February.

It is delivering its findings to the two leaders. This first report is on supporting women-owned businesses, and subsequent ones due through July will look at science education, attracting entrepreneurs, and improving access to capital.

Earlier:

This first report makes four recommendations: Affordable child care, getting startup-funding groups to measure and encourage women’s access to investment, diversity programs in private-sector supply chains and a new public-sector procurement initiative.

The procurement idea calls on Canada to create a program like one in the U.S. where five per cent of public contracts are set aside for women-owned businesses, in sectors where women are under-represented.

It says the countries’ programs should be linked, with women able to qualify for the contracts in either country.

The report notes the differences between existing child-care policies in Canada and the U.S.: Canada has a national system allowing paid parental leave, unlike the U.S. But the report says access to day care remains a challenge in both countries.

Prime Minister Justin Trudeau, his wife Sophie and Senior White House Advisor Ivanka Trump sit together at the 2017 Fortune magazine's "Most Powerful Women" summit in Washington on Oct. 10, 2017.

”We recognize that Canada and the United States have taken different approaches to family policy and unpaid care work and do not suggest there is a ‘one-size-fits-all’ solution,” said the report.

”In the United States, we heard women say that the high cost of childcare or in-home support prevented them from scaling their companies to their full potential. In Canada, we heard the need for more affordable quality child care programs… (Solutions) could include things such as maternity leave policies and tax incentives. It could also include measures to level the playing field between caregivers — for example, paternity leave policies.”

The 20-page report lays out numerous gender disparities in the business world.

It points to the minuscule percentage of major companies owned by women. The percentage is even smaller in Canada than the U.S. Citing federal data from both countries, it notes that a mere 14 per cent of companies in the U.S. with 100-500 employees are female-owned, and just seven per cent in Canada. The numbers for smaller businesses are only slightly higher.

There’s a similar disparity in startup funding: 19 per cent of startups that get seed funding have a female founder, according to figures it cites from CrunchBase. The ratio drops for companies getting subsequent funding — for later-stage funding, 13 per cent or less of it goes to companies with a female founder.

‘You cannot improve what you don’t measure’

The paper urges funding groups to keep these statistics, and track them, quoting one CEO: ”You cannot improve what you don’t measure.” It also encourages companies to establish more networking opportunities.

The challenge of networking is laid out in another part of the paper that cites survey stats showing there’s no clear consensus among men and women when asked whether it’s appropriate to have dinner, have lunch, drive in a car, or have a drink with a women who’s not their spouse.

”It is worth noting that business relations between men and women are receiving greater scrutiny in the wake of recent sexual harassment scandals,” says the paper.

”It is critical that women be encouraged and supported as they come forward about these instances. At the same time, some men have described heightened caution when interacting with women, especially in professional settings. A big takeaway is the need to challenge harmful social attitudes and biases, but also to be mindful of overcompensating behaviours that can further isolate women in business.”

The paper released Wednesday was part of the project led by GE Canada President Elyse Allan, and NRStor Inc. CEO Annette Verschuren.

Don’t look for ‘fast and furious’ rate hikes from here, economists say

The Bank of Canada surprised almost no one when it hiked its key interest rate 25 basis points to 1.25 per cent Wednesday.

The central bank’s tone, however, was more dovish than many economists were expecting.

So where do rates go from here? Canada’s top economists weigh in:

Avery Shenfeld, CIBC chief economist

• One further hike this year, early in Q3, and a further 50 bps in 2019

“Today’s rate hike was a rear-view mirror move, but the Bank of Canada hints that the view out the front window isn’t quite as sunny. Canada did so well in 2017 that it left little slack in labour markets or capacity in its wake, easily justifying a quarter-point hike today. The output gap is now slightly positive, so quarterly growth rates from here have to average below 2 per cent (the Bank has 1.8 per cent for the average of the next four quarters) to avoid an inflationary overheating.
We share the Bank of Canada’s view that higher rates will be needed over time to stay on that path, but they won’t come quite as fast and furious as the market was starting to think. For one, the Bank’s statement put NAFTA uncertainties right up front, and has started to build in a drag on investment and exports into its forecast.
While the Bank isn’t ready to assume that NAFTA will be completely cancelled, doubts on that front can impact business sentiment, and they’ve included a 0.5% hit to the level of GDP through the next two years to account for that effect.
… Overall, this was a dovish statement relative to the minimum degree of optimism needed to justify a rate hike today, and could put some downward pressure on 2-year yields and the value of the C$. We’re looking for one further hike this year, likely early in Q3, and a further 50 bps in 2019. Yes, we’re facing higher rates, but not SO fast given other risks to growth ahead.

Mark Chandler, RBC Dominion Securities, head of Canadian rates strategy

• Three more hikes to leave the overnight target at 2% by the end of 2018

Overall, the “cautious” catchword from the BoC remains in place even with today’s hike and this may be how additional moves later this year pan out (we expect three more to leave the overnight target at 2.00% by the end of 2018). We concur with the Bank’s assessment that “some accommodation will likely be needed to keep the economy operating close to potential and inflation on target” and we believe that the Bank will need to slow the pace of rate hikes in 2019 (we currently have the overnight rate holding at 2.25%, below the 3.00% mid-point of the Bank’s estimated neutral rate range, largely reflecting the impact of higher rates on high household debt).

Douglas Porter, BMO chief economist

• Sticking with prior call of two more hikes in 2018, ending the year at 1.75 per cent, but next hike not until July

While the move was no big surprise (markets had assumed a greater-than-80% chance of a rate hike), the initial read on the commentary leaned a tad dovish, with the Bank re-stating that they would be “cautious” in future rate moves, putting the NAFTA risk front and centre, and suggesting that “some continued monetary policy accommodation will likely be needed”. Having said that, the dovish remarks did not run the table, as they nudged up their growth forecasts for the next two years, and actually sounded a bit positive on non-auto exports …
By making NAFTA risks so prominent in this Statement, rate hike odds will now ebb and flow with the negotiations, even moreso than earlier. One new possibility is that the talks could be put on ice for a spell until after the mid-year Mexican election; if that’s how it indeed plays out, then the Bank could get on with its business sooner.
Bottom Line: Combined with lingering uncertainties around NAFTA and the housing market, we suspect the Bank will take a bit more time before hiking again. Barring another run of roaring data, we look for the Bank to hold off until possibly July before hiking again (depending, of course, on the fate of the NAFTA talks). But, big picture view, we remain entirely comfortable with our prior call that the Bank will hike two more times in 2018, ending the year at 1.75%.

David Madani, senior Canadian economist, Capital Economics

• Hike in spring, probably April, followed by a rate cut before year-end

The Bank of Canada’s … more upbeat economic outlook suggests that it will hike rates again later this year, probably in April. In contrast to the consensus, we wouldn’t bet too heavily on further rates hikes beyond the spring, however. The economy is still heavily dependent on housing and debt which, we still firmly believe, will eventually upend the economy and prompt a reversal in monetary policy before year-end.

Brian DePratto, TD Economics senior economist

• Gradual pace of tightening is most likely, with the next hike penciled in for July

Emergency level rates may not be needed, but that doesn’t mean that the Bank is in a rush to continue hiking. NAFTA uncertainty hangs over the outlook, with the Bank explicitly downgrading the outlook for business investment and trade to account for the impact of negotiations. What’s more, despite the positive run of labour market data, wage growth remains weaker than the Bank had expected. Most explicit was the statement that while the outlook will likely “warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed”.
As such, it remains our base-case view that a gradual pace of tightening is most likely, with the next hike penciled in for July. Data dependency of course means that this is not a lock. Developments in Poloz’s list of areas to watch, including interest rate sensitivity, labour market developments, and inflation dynamics could easily bring the next hike forward, or push it back.

Odds of Bank of Canada rate hike close to 90% on decision day

OTTAWA — All eyes will be on the Bank of Canada this morning as it makes its latest scheduled interest-rate announcement.

Economists widely believe that based on the economic environment, it’s likely that governor Stephen Poloz will raise the central bank’s benchmark interest rate today for a third time since last summer.

Market odds of a rate  hike are now close to 90 per cent.

Many note that Poloz has indicated that interest rate decisions will be data dependent.

In addition to a stronger-than-expected jobs report released earlier this month, the central bank’s Business Outlook Survey revealed that sentiment remained positive during the final quarter of 2017.

But many economists say a rate hike today doesn’t mean the Bank of Canada is poised to start a rapid tightening cycle.

Given high household debt levels, the unknown impact of tighter stress tests for uninsured mortgages that came into effect this year and uncertainty surrounding NAFTA renegotiations, the bank must be cautious about how quickly it raises rates in order to avoid derailing the economy.

Scotiabank Economics is forecasting 75 basis points of gradual tightening this year spread out throughout 2018, while TD Economics expects a gradual pace of tightening over the next two years of about 25 basis points every six months.

RBC Economics Research says it expects the Bank of Canada to raise the overnight rate by 25 basis points to 1.25 per cent today.

Shareholder votes on CanniMed merger could decide fate of hostile bid by Aurora

The fate of the first major hostile takeover attempt in Canada’s burgeoning cannabis sector could be decided over the next week when shareholders at a pair of companies vote on a merger of their own.

On Wednesday, Ontario’s Newstrike Resources Ltd., the recreational cannabis company backed by the Tragically Hip, will vote on whether to merge with Saskatchewan’s medical marijuana-focused CanniMed Ltd. Shareholders of CanniMed will vote on the same deal the following Tuesday.

CanniMed has been locked in an increasingly fractious battle with larger rival Aurora Cannabis Inc., which is trying to take over CanniMed in a deal that is contingent on the Newstrike merger being rejected.

Both Newstrike CEO Jay Wilgar and CanniMed CEO Brent Zettl are urging shareholder support for the merger plan, which they say has been in the works since October.

The main stumbling block, however, in Wednesday’s vote could be Newstrike’s share price, which shot up from $0.64 on Jan. 2 to $2.95 on Jan. 9, before dropping back down to $1.34 by Tuesday.

“With the way the multiples work, Newstrike is now worth more than CanniMed,” said Jason Zandberg, an analyst with PI Financial Corp. “I believe it’s a 65, 35 merger, so (Newstrike shares) would be worth almost half in that transaction.”

Wilgar is hoping that his company’s shareholders look past the short-term moves in the market, which have made Newstrike investors richer but the merger with CanniMed less attractive.

“Certainly there’s been some short-term fluctuations in our share price, but we don’t make long-term strategic decisions based on a few days of trading,” said Wilgar, who added that CanniMed’s share price has been “somewhat artificially constrained” by the Aurora bid.

The idea that CanniMed shares are trading below where they should be was echoed by Zettl, who claims his company’s shares would be trading at between $45 and $75 if they weren’t “anchored by Aurora’s bid.”

It’s a claim that was put forward in an aggressive advertising campaign which included full page ads in national newspapers, including the National Post, and said CanniMed shares could be worth $49 if the Newstrike merger goes through.

Zandberg, however, questioned CanniMed’s optimistic valuations.

“(CanniMed) haven’t performed as well as Aurora has, but they hadn’t performed as well as Aurora had before the bid happened,” he said.

Even if Newstrike shareholders do vote in favour of the merger, the deal faces another hurdle next Tuesday, when CanniMed shareholders vote on the deal — a vote that’s happening against the backdrop of Aurora’s bid for CanniMed.

Aurora has been trying to acquire the company since November, when it began communicating with a major CanniMed shareholder. In mid November, Aurora made its bid known to CanniMed, having entered lock-up agreements worth around 38 per cent of the company at $24 a share.

The ensuing two months have been anything but friendly, with CanniMed trying, unsuccessfully, to prevent Aurora from buying more shares on the open market and launching a $725 million lawsuit against Aurora and a number of CanniMed’s own investors alleging conspiracy. Still, Aurora persisted, and is urging CanniMed shareholders to reject the Newstrike deal on Tuesday.

“Our offer to make CanniMed part of Aurora is contingent on the Newstrike deal being voted down,” said Aurora’s chief corporate officer Cam Battley, who said he is confident that CanniMed shareholders will vote against the Newstrike deal and eventually support the Aurora offer, which expires March 9.

A no vote from CanniMed shareholders would end Zettl and Wilgar’s hopes for the Newstrike deal.

But that wouldn’t necessarily mean that the Aurora takeover will succeed, according to Zandberg. Again, the issue is the surge in cannabis share prices over the past month, which has brought CanniMed’s share price above the $24 that was offered by Aurora.

“We’re losing faith that (the CanniMed and Aurora) transaction is going to go through,” Zandberg said. “It really has nothing to do with the fact that this isn’t the right thing for CanniMed shareholders. But because we’ve had this rally, and prices have moved up… Aurora would have to remove their (offer price) cap.”

Battely wouldn’t say whether Aurora was considering increasing the price on offer. But he did acknowledge the potential problem caused by surging prices. “The sector does have occasional pull-backs, it has seen a certain degree of volatility, so we will be monitoring the market conditions in the coming weeks,” he said.

Short seller sues Home Capital and three former executives for $4 million in damages

TORONTO — A short seller is suing Home Capital Group (TSX:HCG) and three former executives for $4 million, alleging the alternative mortgage lender’s false representations scandal cost him millions when he closed his position early.

Marc Cohodes filed a statement of claim Monday with the Ontario Superior Court of Justice saying he took a substantial short position in Home Capital’s shares in 2014 after determining the company was overvalued.

Between March and June 2015, the claim says based on positive information provided in Home Capital’s financial reporting, Cohodes repurchased 91,800 of those shares at more than $40 each, resulting in a purchase cost of more than $3.6 million.

Cohodes alleges Home Capital, former CEO Gerald Soloway and former CFOs Robert Blowes and Robert Morton knowingly misled investors in the company’s annual and quarterly results by misrepresenting risk management controls.

Home Capital did not immediately return a request for comment. None of the allegations have been proven in court.

In 2017, the lender was accused by regulators of misleading investors, which caused depositors to swiftly withdraw their money and leaving the company in crisis mode.

Home Capital eventually agreed to pay $29.5 million to settle with the Ontario Securities Commission and class-action lawsuit matters related to the allegations.

Soloway and Morton faced $1 million and $500,000 penalties respectively. Soloway was barred from acting as director or officer of a public company for four years, while Morton faces a two-year ban.

Blowes is the only executive named in the suit who remains on the company’s board of directors.