New Trend Sees Major Alberta Utilities Investing Outside of Province
Companies leaving Alberta is not news. Last month, Devon, with roots in Alberta dating back to 1998 and with 400 employees at its Calgary office, decided to move forward in selling off their assets and plan to leave Canada by the end of 2019.
Over the last couple of years, we have seen announcements by Shell, Statoil, Koch, Marathon, and many others who have been strangled by problems in Alberta.
In January of this year AltaGas, which was founded in 1994 and headquartered in Calgary, completed its sale of various Canadian business units, successfully monetizing $3.8 billion in assets so that they can now focus on the U.S. utilities business. In particular, the purchase of Washington Gas and Hampshire Gas holdings of WGL.
There is also a worrisome trend in Alberta’s regulated utility market. Is our government watching what is happening?
Did you know that many of our major government regulated utilities are moving investments and/or jobs out of the province? ENMAX is the latest with an announcement to purchase the Bangor-based utility provider in Maine. Why?
Gianna Manes, President and CEO of ENMAX said in a statement that the purchase will allow for targeted growth, but added it would not be a job creator for Calgary. With this said, why are we risking taxpayer dollars on this international venture when there are so many other important problems in the city to resolve? Prior to spending a couple billion dollars in the U.S. and adding to our debt, we need to keep the snapshot of poverty in Calgary top of mind.
Possibly, other world markets are more stable, have lower labour rates, attractive tax incentives, or offer a more attractive return on dollars invested when compared to doing business in Alberta. Possibly the regulated utilities have maxed out the profit potential here in Alberta and it is easier and more economically prudent to expand elsewhere rather than focusing on investing in productivity improvements here at home and lowering prices for local consumers.
The trend is real. There is a problem that needs addressing.
Did you know?
· EPCOR was one of the first municipal utilities to aggressively expand out of the country when they purchased a water utility service in Arizona and New Mexico. Additionally, in 2018 they moved into Ontario’s electricity market.
· ATCO sold off their Information Technology (ATCO I-Tek) business to Wipro in India and signed a 10-year outsourcing contract worth over $1 Billion (technology, customer care and billing service jobs lost). Then, ATCO diversified with investments in generation in Mexico and other investments in Chile and Uruguay.
· Direct Energy, owned by Centrica in the UK, and who is the provider of natural gas under government regulated rate (RRO) to customers in Alberta, sold off their Alberta gas holdings for over $722 million to a joint-venture which included two Hong Kong-based companies, MIE Holdings Corp. and Can-China Global Resource Fund. Additionally, Direct Energy shipped customer care jobs to Guatemala through a business deal with HCL, also from India.
· ENMAX recently laid-off workers again and previously outsourced technology jobs to the Tata Group from India. But this is just the beginning.
As the trend continues, this week’s announcement by ENMAX will see almost $2 Billion move out of Alberta. This could be a wise investment, but the timing is wrong.
A Look at the Numbers
ENMAX will pay $1.29 Billion for the acquisition of Emera Maine and assume roughly $500 million in debt.
But wait. ENMAX only made $5 million net earnings last year. So, who is financing this expansion program? Is it being guaranteed by the city of Calgary? If the city has this much surplus money to spend, why not invest our municipal tax dollars in our own city?
On Total Revenue of $2.378 Billion, ENMAX’s net earnings for the year ending December 31, 2018 were $5.1 million. Compared with a net loss of $30.3 million the prior year on revenue of $1,970.6 Billion. Long-term debt increased to $1,686 Billion from $1,581 billion in 2017.
The Alberta market has been tough. Looking back five years, in 2013 ENMAX’s balance sheet reported Comprehensive Income of $365.8 million. On this years Consolidated Statement, the Comprehensive Income is now running at a Loss of $11.3 million.
Can the taxpayers of Calgary really afford to add another $2 Billion to the debt?
ENMAX, wholly owned by the City of Calgary, pays a dividend to The City each year. Dividends paid to The City were reduced to $40 million in 2018 and that number has been declining over the last few years from typical historical levels of $60 million.
Rather than buying a utility in Maine – how about increasing the dividends paid to the city? Or reducing our homeowner and business tax? Or trying to fill up the 30% vacant office space downtown? Surely there are local economic initiatives The City can sponsor to help new businesses open up in Calgary.
Is this the right time for the city of Calgary to be investing in United States?
Hopefully those consumers who are buying off of the regulated utilities will see the real value in supporting local and independent companies that are continuing to invest in Alberta.
How may billions of dollars have slipped through the cracks and have moved out of the province by ENMAX, EPCOR, Direct Energy, and ATCO?
Who is going to fix the problems in Alberta’s utility industry?