MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, JANUARY 15, 1998 (7)
PIPELINES
Pipeline May Force Refinery Closure
A mid-sized gas retailer may be forced to close its $41-million refinery in central Alberta due to a provincial regulatory decision.
Jack Donald, president of Parkland Industries Ltd., said yesterday the Bowden, Alta., refinery could close because a decision by Alberta's energy regulators will lead to contamination of its feedstock of sweet condensate.
The firm uses the hydrocarbon liquid to produce about 3,500 barrels a day of gasoline, providing about half the supply sold through its 350 retail outlets across Western Canada.
Alberta's Energy Utilities Board recently approved Husky Oil Ltd.'s plan to built a pipeline to connect sour oil wells near Calgary into a provincial pool that feeds the refinery.
Sour crude from Husky's wells may force Parkland to spend millions of dollars to install and operate sulphur removal equipment, Donald said.
Further jeopardizing the refinery's future is the price of condensate. Its value has risen above oil because the surge in heavy crude developments in Alberta is putting a squeeze on supplies. Condensate is used to dilute heavy oil and make it flow easier through pipelines.
The higher price adds 2 1/2› a litre in costs, Donald said.
The company has not yet made a final decision.
Discoveries from drilling could increase the supply of condensate, or the price of feedstock may decline.
Parkland shares (PKI/TSE) closed yesterday at $7.20, up 5›.
MISC.
JCPs Thriving After Shaky Start
Jeff Adams, Calgary Herald
In the 11 years since the first one began, Junior Capital Pools have been the Alberta Stock Exchange's biggest embarrassment -- and its strongest engine of growth.
Some of the pools were nothing more than excuses for promoters to launch shell companies and quickly blow investors' cash. But hundreds of others served to pull together the seed capital for what have become impressive job creating corporations -- including Jordan Petroleum, Maxx Petroleum and Liquidation World.
"There have been problems," says ASE president Tom Cumming. "But in total, the junior capital pool program has been a huge success."
JCPs were immediately nick-named "blind pools" after their 1986 startup because of the lax disclosure rules governing them. A company launching itself on the ASE as a junior capital pool could be incredibly vague about how it planned to spend investors' money.
Many did little more than refer to an industry or sector.
This led quickly to abuse -- and the demise of one of the first brokerage firms to jump on the JCP bandwagon, Edmonton-based First Commonwealth Securities.
The province eventually responded with tougher rules to boost capital requirements and force directors of newly launched JCP firms to hold their shares in escrow for three years, rather than cashing in and walking at the earliest signs of trouble.
Under the initial rules, directors put up as little as $50,000 and promised after raising funds from outsiders to conduct a "major transaction" worth $150,000 or more. The transaction was supposed to be the acquisition of some type of money making asset or venture other than real estate. But with only $200,000 normally at their disposal, many JCP companies never had enough cash to acquire anything viable.
The money they raised was "just enough to get them in trouble," Cumming says.
These misguided companies often blew a big chunk of their seed capital on shopping expeditions.
Then they became shells -- awaiting someone with the resources to revive them or, failing that, to be delisted.
Although there were dozens of shells on the exchange in the late 1980s, most ultimately attracted people to pump in more money, execute a major transaction and become full-fledged companies on the Alberta exchange.
Cumming reports that of the 858 junior capital pools launched on the ASE since 1986, 660 have completed their major transaction and another 160 are still within the 18-month time frame before they must do so or face delisting. Only 38 -- or 4.4 per cent of the entire 858 -- have been delisted.
More than 70 JCPs have gone on to become listed on the much larger Toronto Stock Exchange -- a fact Cumming says makes him "immensely proud."
He said most of the roughly 120 junior capital pools launched so far this year are led by directors with very clear plans for their major transactions. Some are executing the transactions on the same day their shares are listed.
While some securities regulators outside Alberta have ridiculed the JCP program as a relic from the province's out-of-control cowboy past, others envy the economic growth the pools have spawned.
Cumming said officials from both Saskatchewan and Nova Scotia have expressed interest in establishing similar programs.
He told them it's crucial to have an "indigenous industry" such as oil and gas that can provide the basis for many JCPs' formation.
He also urged them to impose tough rules at the start, rather than waiting until there are embarrassing reasons to do so.
US SANCTIONS
Fears Grow Over U.S. Sanctions
Stalemate may hurt bid for global investment deal
Canadian business is increasingly worried a stalemate between the U.S. and the European Union over Cuba may hurt an international investment deal being negotiated.
"It would be unfortunate if that issue scuttled the agreement," said David Hecnar, head of the Canadian Chamber of Commerce's international division.
Hecnar said from Paris yesterday that so far, the U.S. has been unwilling to make any concessions on its use of sanctions to punish countries it is unhappy with. Often those sanctions can extend to foreign companies operating in the offending countries.
"The U.S. has made it clear it is not willing to budge on this issue," he said.
Hecnar was part of an international business advisory group meeting in Paris with negotiators trying to hammer together a multilateral agreement on investment (MAI) by April 27.
The broader agreement among countries in the Organization for Economic Co-operation and Development would protect the investment of companies operating in foreign countries.
Proposed new rules would allow companies to repatriate profits and capital and prevent governments from unilaterally expropriating their investments.
But last year, the U.S. and the EU agreed to head off a confrontation over the U.S. sanctions laws, especially those aimed at Cuba, by trying to include new rules on extra-territorial laws in the MAI.
The EU, Canada and other major countries have objected to U.S. sanctions laws that attempt to punish non-U.S. companies operating in countries like Cuba, Libya and Iran.
Most business groups, including some in the U.S., want the U.S. administration to stop using these far-reaching sanctions, something the administration and Congress are unwilling to do.
The business groups are also worried that OECD negotiators may cave in to demands by environmental groups that environment and labor standards be included in the final agreement.
"We object to these groups hijacking the talks," said Milos Barutcisiki, an international trade lawyer working for the Canadian Chamber of Commerce. "This is not the place for those."
Barutcisiki also said the business group meeting with OECD negotiators wants to narrow as much as possible the "carve-outs" that are being demanded by several countries, including Canada.
Ottawa wants a very broad exemption for its cultural industries, while the U.S. said it needs to park its sanctions laws under a broader exemption of national security reason.
"It's too early to say whether they've agreed in principle to that approach," he said.
Most countries also want sweeping exemptions for taxation, something Barutcisiki said could "weaken the agreement entirely."
Some governments may use large withholding taxes to force companies to leave their profits in their country, he said.
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