Alberta Investment Management Corporation looks after oil patch assets
In a deal with Precision Drilling that some business rivals and free enterprise purists derided as unfair help, Alberta Investment Management Corp. made its fifth foray into the oil and gas industry as custodian of the provincial government’s petroleum-based wealth
In return for up to 19 per cent ownership, the Crown corporation put $280 million into Canada’s biggest rig contractor.
No comparable accusations of playing favorites followed AIMCo’s barely noticed inaugural investment move after its creation two years ago with a mandate to make the most of more than $70 billion in provincial assets. In its first deal, the government money manager participated in a $3.5-billion transaction that converted CCS Energy Services, operator of a 3,000-employee oilfield waste disposal network, into a private firm from a publicly traded income trust.
Details of the CCS commitment, such as how much public money went into the firm and the resulting government ownership share, have yet to be disclosed. AIMCo and a British Columbia counterpart were among seven financial organizations in on the Calgary deal. Alberta’s auditor-general has power to examine the wealth management agency’s books but has yet to make a first performance report.
Not all of AIMCo’s oil and gas investment has flowed to Calgary. The portfolio includes a confidential interest in KMC Mining Corp., a private Edmonton family firm with thousands of employees in bitumen mining north of Fort McMurray.
Two pipeline networks also figure in AIMCo’s oil and gas holdings: Texas-based Kinder Morgan Inc., owner of numerous operations in Canada and the United States, and Compañía Logística de Hidrocarburos S.A. or CLH, which is the main refined petroleum product transportation and storage firm in Spain. As in the Canadian cases, details of the international interests have yet to be disclosed.
Precision will use AIMCo’s money to replace a $296-million “bridge” loan used for its winter takeover of Houston-based Grey Wolf Drilling that was unsecured and charged interest of 17 per cent. The rate on the new debt paper will drop to 10 per cent. Overall, Precision expects to shave $70 million a year off its total debt servicing costs as a result of the AIMCo transaction. The firm is scrambling to economize. Precision posted a 46 per cent drop in earnings for first-quarter 2009 and reported paring down staff and operations to brace for a prolonged drilling slump across the U.S. and Canada.
AIMCo is far from relying only on oil. A growing investment portfolio ranges from international pharmaceutical firm AxCan Pharma to RTL Westcan, the largest transportation and construction contractor in the Northwest Territories. Utilities are a big part of the package, including British water systems and the principal power and gas service in Washington state.
Alberta’s sovereign wealth fund is also heavily committed to real estate. A long list of ownership and loan assets of varying sizes ranges from Telus Plaza in Edmonton to the mammoth Richmond Adelaide Centre in Toronto. AIMCo interests in Calgary’s deflating real estate boom include Eighth Avenue Place, a 49-storey office tower under construction downtown with no announced tenants, and the 1,100-acre StoneGate Landing suburban industrial, office and retail complex.
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