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Concerns grow that Alberta’s Sovereignty Act will drive investment from province when it’s needed most

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On the 15th floor of a downtown Calgary office tower on Wednesday, a new clean-tech fund was launched with an aim of decarbonizing the energy sector. But much of the talk at the event was about the Alberta government’s controversial Sovereignty Act, which was introduced in the provincial legislature less than 24 hours earlier.

Some organizers couldn’t help but shake their heads at the timing.

The irony was evident in having an announcement promoting collaboration between industry and government, while so much attention in the province is on the combative new policy.

That’s why concerns in the business community are growing over the new piece of legislation and how it could scare people and companies away from locating or investing in Alberta at a time when the oilpatch is finally back on its feet after several years in a downturn and as the province tries to keep its economy growing amid a possible recession.

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There is no shred of evidence that the act will lead to economic growth, said Calgary Chamber of Commerce president Deborah Yedlin, who describes the confrontational nature of the policy as “troubling.”

“This comes at a time when we are dealing with high inflation, supply chain challenges and a labour shortage. We’re trying to get people to come to Alberta so that we can address that talent shortage. This is not going to set the table for people to look at Alberta as a place to invest or necessarily to come and find economic opportunities,” she said on Wednesday.

“We see this as potentially introducing a very significant element of risk and uncertainty for businesses in Alberta.”

Controversial sovereignty bill introduced in Alberta

Alberta’s premier followed through on her leadership campaign promise and introduced the controversial Alberta Sovereignty to a United Canada bill in an attempt to reject federal laws. Plus, Rosemary Barton weighs in on the risks the federal government runs by trying to avoid the issue.

Collaboration is key

On Wednesday, Avatar Innovations kicked off a new $3 million fund to provide cash for startups pursuing energy transition technologies. The firm works with a range of companies from traditional oil and gas producers and pipeline companies to technology firms.

Avatar is also expanding into the United States to increase its network. The more people and companies who become involved, the more opportunities and funding become available to scale-up new technologies.

“Conversations that are about anything other than how we advance investment and technology and collaboration in this province is going to hinder those efforts,” said CEO Kevin Krausert.

Kevin Krausert, the CEO of Avatar Innovations, says collaboration among industry and government is important to grow the clean tech industry. (Nick Brizuela/Radio-Canada)

Investors won’t be attracted to Alberta unless it is a safe and sound jurisdiction that is governed by the rule of law, said Krausert, who spent most of his career in the oil and gas drilling industry.

Meanwhile, there are concerns that Alberta Premier Danielle Smith’s Sovereignty Act could put up walls around Alberta and target certain federal policies.

“I hope we never have to use this bill,” Smith told reporters on Tuesday. “I hope that we’ve sent a message to Ottawa that we will vigorously defend our constitutional areas of jurisdiction and they should just butt out.”

For decades, Alberta politicians of all stripes have routinely criticized the federal government. Call it a political pastime. But, make no mistake, choosing not to enforce federal rules is a much more aggressive type of opposition to Ottawa.

Internal opposition

Smith became premier after winning the leadership of the United Conservative Party in October. During that leadership campaign, no policy was discussed more than the Sovereignty Act.

Then-Premier Jason Kenney called the proposal “risky, dangerous, half-baked” and said it “would do devastating damage to jobs, the economy and the prospect of pipelines.”

Sonya Savage, who was energy minister at the time, said the legislation could be as harmful to Alberta’s future as Prime Minister Justin Trudeau’s policies have been to the province’s past, while also noting that international investors concerned about their Alberta assets had been asking her about the Sovereignty Act.

Sonya Savage has criticized the Sovereignty Act in recent months, but said Wednesday that her concerns were addressed as the legislation has been developed. (Kyle Bakx/CBC)

Savage remains in Smith’s cabinet, now as environment minister. On Wednesday, she said her original concerns have been addressed as the legislation has been developed.

The average oil and gas company may not be concerned about the Sovereignty Act since it won’t have any immediate impact on the day-to-day activity in the sector, especially considering how profits remain robust and commodity prices are elevated, too.

But there are worries about the legislation’s short and long term impacts.

The largest oilpatch lobby group appeared apprehensive about supporting the legislation.

“We are concerned about any government policy that has the potential to create uncertainty for investors,” said Lisa Baiton, CEO of the Canadian Association of Petroleum Producers, in an emailed statement.

“It is important for governments at all levels to work together with the industry in order to attract investment back into Canada.”

The oilpatch wants billions of dollars to build dozens of carbon capture and storage projects in Alberta. (Kyle Bakx/CBC)

Lobbying Ottawa for cash

The Sovereignty Act comes at a time when many companies in the oilpatch are looking for investment to decarbonize the sector and fuel the growth of new industries like hydrogen and carbon capture and sequestration.

There is a need to attract significant funding not only from private investors, but from the federal government as well.

In other words, the oilpatch wants a helping hand from Ottawa at the same time that the Alberta government is picking a fight.

The largest oilpatch companies want tens of billions of federal dollars to design and construct large-scale facilities to capture harmful greenhouse gases and inject them underground. Ottawa has already announced funding for carbon capture projects, but the oilpatch wants more.

Even smaller companies are looking for federal cash. Just last week, a group of oil and gas drillers asked the federal government to create a new tax credit aimed at helping the industry decarbonize.

 

Trudeau says he’s ‘not looking for a fight’ with Alberta over Sovereignty Act

 

Prime Minister Justin Trudeau plans to follow developments on contentious bill but says his government will focus on ‘delivering for Albertans.’

Ottawa is also the largest government funder of a massive new hydrogen production facility that is breaking ground in Edmonton, among other projects big and small.

The Sovereignty Act could hurt the clean energy sector, which is already struggling to attract investment, especially from venture capitalists.

Many of the players are small- and medium-sized firms trying to research, develop and commercialize their technology. Without adequate funding, it’s difficult to overcome those challenges and eventually scale up production.

Krausert, with Avatar Innovations, described the federal government as providing a tremendous amount of funding for clean technology startups and companies that are the envy of the world.

“I would be very nervous about putting any of those at risk,” he said.

Krausert believes the way to build Alberta’s future is to play well with others.

“Let’s just hope this is political theatre for the day.”

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Zacks Investment Ideas feature highlights: Alphabet, Tesla, Shopify, Amazon and Palo Alto

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For Immediate Release

Chicago, IL – February 2, 2023 – Today, Zacks Investment Ideas feature highlights Alphabet GOOGL, Tesla TSLA, Shopify SHOP, Amazon AMZN and Palo Alto Networks PANW.

Which of These Stocks Has Been the Best Buy, Post-Split?

Stock splits have been a regular occurrence in the market over the last several years, with many companies aiming to boost liquidity within shares and knock down barriers for potential investors.

Of course, it’s important to remember that a split doesn’t directly impact a company’s financial standing or performance.

In 2022, several companies performed splits, including Alphabet, Tesla, Shopify, Amazon and Palo Alto Networks. Below is a chart illustrating the performance of all five stocks over the last year, with the S&P 500 blended in as a benchmark.

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As we can see, PANW shares have been the best performers over the last year, the only to outperform the general market.

However, which has turned in a better performance post-split? Let’s take a closer look.

Tesla

We’re all familiar with Tesla, which has revolutionized the EV (electric vehicle) industry. It’s been one of the best-performing stocks over the last decade, quickly becoming a favorite among investors.

Earlier in June of 2022, the mega-popular EV manufacturer announced that its board approved a three-for-one stock split; shares began trading on a split-adjusted basis on August 25th, 2022.

Since the split, Tesla shares have lost roughly 40% in value, widely underperforming relative to the S&P 500.

Palo Alto Networks

Palo Alto Networks offers network security solutions to enterprises, service providers, and government entities worldwide.

PANW’s three-for-one stock split in mid-September seemingly flew under the radar. The company’s shares started trading on a split-adjusted basis on September 14th, 2022.

Following the split, PANW shares have struggled to gain traction, down roughly 15% compared to the S&P 500’s 3.3% gain.

Shopify

Shopify provides a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses.

SHOP shares started trading on a split-adjusted basis on June 29th, 2022; the company performed a 10-for-1 split.

Impressively, Shopify shares have soared for a 50% gain since the split, crushing the general market’s performance.

Alphabet

Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.

Last February, the tech titan announced a 20-for-1 split, and investors cheered on the news – GOOGL shares climbed 7% the day following the announcement. Shares started trading on a split-adjusted basis on July 18th, 2022.

Alphabet shares have sailed through challenging waters since the split, down 10% and lagging behind the S&P 500.

Amazon

Amazon has evolved into an e-commerce giant with global operations. The company also enjoys a dominant position within the cloud computing space with its Amazon Web Services (AWS) operations.

AMZN’s 20-for-1 split was a bit of a surprise, as it was the company’s first split since 1999. Shares started trading on a split-adjusted basis on June 6th, 2022.

Following the split, Amazon shares have lost roughly 18% in value, well off the general market’s performance.

Bottom Line

Stock splits are typically exciting announcements that investors can receive, with companies aiming to boost liquidity within shares.

Interestingly enough, only Shopify shares reside in the green post-split of the five listed.

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Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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$13 million investment in Campbellford Memorial Hospital

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The Campbellford Memorial Hospital will be receiving a $13 million investment from the Ontario Government to address infrastructure concerns.

The announcement was made at the hospital by Northumberland—Peterborough South MPP David Piccini.

The $13 million is broken down as follows:

  • $9,639,900 will be going to CMH as one-time capital funding to address the HVAC and generator
  • $1,874,929 for reimbursement of CMH’s COVID-19-related capital expenses
  • $771,797 in COVID-19 incremental operating funding
  • up to $600,000 in one-time funding to support the hospital’s in-year financial and operating pressures
  • $163,600 in pandemic prevention and containment funding
  • $81,132 through the Health Infrastructure Renewal Fund
  • $46,884 in health human resources funding.

Interim President and CEO Eric Hanna welcomed the news, saying much needs to be done about the HVAC and generator.

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At the announcement, Hanna spoke of the issues with the generator.

“I’ve got the wee little generator up at the lake and then I’m thinking well, everything should be going well at the hospital,” Hanna told the audience in attendance.

“You get a call from the person in charge who says, ‘Guess what Eric? Generator didn’t start. Oh, so what does that mean? There’s no power in the hospital.’  That’s happened a couple of times in the past year and the generator is over 30 years old.”

Hanna says the solution was not as easy as replacing the generator.

“You can go buy the generator and that may be about a million dollars. But then when we found out afterwards, we came to hook up the new generator to the electrical distribution system and said it won’t work with that because your electrical distribution system is 1956. You can’t plug this generator into that. So now we’re putting close to $5 million into a whole electrical distribution system so the generator will work. It’s part of that ongoing thing and that’s why these costs continue to go up.”

The HVAC system was also something addressed by Hanna.

“It’s a contract close to $7 million to replace that. This wing, for example. There’s no fresh air in this wing. It hasn’t worked in here for 15 years. So now this is administrative areas and the concern was that in some of the patient carriers, it wasn’t working either.  So – having those discussions with David (Piccini) and saying what we have to do to correct this.”

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Chile’s Enap Set to Slash Debt Burden That Weighed on Investment

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(Bloomberg) — Enap, Chile’s state oil and gas company, plans to use near-record earnings to slash its debt burden, while increasing investment in its refineries and in exploration and production.

The company aims to reduce its debt load to about $3 billion “medium term” from the current $4.3 billion, Chief Executive Officer Julio Friedmann said in an interview. Plans include a bond sale in the first half of this year to refinance some securities.

The improved financial position — with 2022 profit surging to $575 million — comes after Enap’s oil and gas operations in Egypt, Ecuador and Argentina got a boost from high crude prices, while healthy international refining margins benefited plants in Chile. Those trends are expected to extend into this year and next, enabling the company to pre-pay some short-term obligations. About half of the current debt burden matures in the next three years.

“We are going to issue bonds,” the MIT-trained executive said Wednesday from the Aconcagua refinery in central Chile. “We are closely evaluating the local and international markets.”

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At the same time, Friedmann, who took the reins at Enap in November, plans to increase capital expenditure to about $700 million this year from $550 million last year.

The increase comes after underinvestment in the past few years because of Covid restrictions and the heavy debt load. Spending will focus on making treatment processes cleaner and upgrading infrastructure, as well as a more aggressive approach to increasing gas reserves in the far south of the country, he said.

Gas Markets

Enap plans to expand in both liquefied petroleum gas and natural gas markets in Chile, focusing on the wholesale business and eventually selling directly to large-scale consumers such as mines. Organizational changes to enable the expansion will be announced soon. There are no plans to enter the final distribution business, Friedmann said. The company wants to supply more gas to southern cities as a way of replacing dirtier fuels such as wood and diesel.

Enap and its partners are also preparing pipelines and a refinery near Concepcion to start receiving crude from Argentina’s Neuquen basin sometime this year in an arrangement that could supply as much as 30% of its needs.

While there’s plenty of potential do collaborate more with energy-rich Argentina, particularly in the Magallanes area, that would require greater long-term visibility on supplies from the neighboring country, Friedmann said.

He sees a role for Enap in the development of green hydrogen in Chile. It’s in talks with three companies to enable its facilities in Magallanes to be used to receive all the wind turbines, electrolyzers and other equipment that will be needed to make the clean fuel. Enap is also evaluating its own small pilot plants and will consider whether to take up options to enter other green hydrogen projects as an equity partner.

While the company will maintain its focus on meeting rising demand for traditional fuels, it anticipates new regulation that will require lower emissions. It’s also looking closely at clean-fuel options for aviation, Friedmann said.

(Adds clean fuel plans in last paragraph. I previous version corrected spelling of CEO’s surname.)

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