In May 2014, the Minister of Industry issued a net benefit approval for PTTEP’s acquisition of control of the Thornbury, Hangingstone and South Leismer oil sands projects from Statoil Canada. PTTEP is a Thai state-owned enterprise for purposes of the Investment Canada Act.
By way of background, in December 2012 the Prime Minister and the Minister of Industry issued new and revised guidance in relation to State-Owned Enterprises. In relation to the oil sands, the relevant policy provides that acquisitions of oil sands businesses by SOEs will only be approved in exceptional circumstances. The PTTEP acquisition is significant because it represents the first test of this policy.
As we previously discussed, the revised SOE guidance was issued the day the Government approved CNOOC’s $19 billion acquisition of Nexen, the largest state-owned takeover in Canadian history. Since that day, there has been extensive debate in media, policy, business and legal circles in relation to the future of state-owned investment in Canada. Meanwhile, in June 2013, the Investment Canada Act itself was amended to include expansive provisions aimed at giving the government greater discretion in relation to reviewing investments by SOEs.
Several commentators have pointed to an apparent decline in state-owned investment in Canada in 2013/2014, and have queried whether the government’s new policies are responsible for the decline. Others have noted that it is very difficult to attribute the decline to any particular policy because the timing of the revised guidance coincided with a more general slowdown in M&A activity in the oil patch.
Approvals for SOEs
Despite the concerns for the government’s guidance, it is important to note that several state-owned acquisitions of control have been approved since the CNOOC / Nexen approval was issued. As counsel for CNOOC in 2012, CQ Energy Canada Partnership in 2013 and PTTEP this year, we at Stikeman Elliott have witnessed first-hand the fact that obtaining approvals for state-owned enterprises under the Investment Canada Act will continue to be achievable in cases where transactions are structured appropriately and with regard to the government’s policies. To that end, clear-sighted, strategic guidance from experienced counsel is required to mitigate regulatory risk and manage the approval process.