YOU GONNA PAY ALBERTA TAXPAYERS BACK

TC Energy could divest Keystone oil pipeline, analysts say

Geoffrey Morgan and Robert Tuttle, Bloomberg News

TC Energy Corp. could sell billions of dollars of assets to help fund projects in Mexico and Western Canada and may even seek the divestiture of its Keystone oil pipeline to the Gulf Coast, according to analysts.

The Canadian company may look to monetize its liquids pipelines as well as smaller gas pipelines with targeted proceeds of as much as $4 billion (US$2.9 billion), RBC Capital Markets analyst Robert Kwan said in a note Monday, citing a recent meeting with TC’s Chief Financial Officer Joel Hunter.

Separately, Tudor Pickering & Co. analysts said they see the possibility of the company shoring up its balance sheet with asset sales. A sale of the liquids pipeline would be an “ESG-accretive divestiture” and “the major prize in right-sizing the balance sheet,” analyst Matthew Taylor said in a note Tuesday, upgrading his rating on the stock to buy from hold. 

TC Energy declined to comment, saying in an email that it doesn’t comment on rumors or speculation.

The company has faced challenges in recent years including the cancellation of its expansion of the Keystone XL pipeline after U.S. President Joe Biden pulled a key permit for the project on his first day in office. The company has also experienced a 70 per cent cost overrun in the Coastal GasLink pipeline, which is being built to supply LNG Canada, a massive natural gas export project in British Columbia. TC’s stock price fell to a 19-month low in Toronto earlier this month.

The company is primarily focused on natural gas pipelines and power generation. It built the first phase of the 600,000-barrel-a-day Keystone pipeline system more than a decade ago. In recent years, concern about greenhouse gas emissions has prompted some investors to shun oil-sands assets.

TC Energy invests in renewable natural gas project at Jack Daniel distillery

The Canadian Press

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TC Energy Corp. says it will invest $29.3 million in a renewable natural gas production facility that will use a byproduct from the Jack Daniel Distillery in Lynchburg, Tenn.

TC Energy says once the facility owned by Lynchburg Renewable Fuels LLC is operational in 2024 it will break down the byproduct from the distilling process to generate methane gases recovered as biogas.

A biogas upgrade plant will remove contaminants to produce pipeline-quality renewable natural gas that will be connected to a local natural gas utility.

Liquid fertilizer will also be produced in the process.

The project is being developed by 3 Rivers Energy Partners LLC, which is an owner in Lynchburg Renewable Fuels.

TC Energy and 3 Rivers Energy Partners have also committed to jointly develop future renewable natural gas projects.

VERTICALLY INTEGRATED STATE

CIBC names former finance minister Morneau to board  

Kevin Orland, Bloomberg News   

Bill Morneau, Canada's minister of finance, speaks during a news conference in Ottawa, Ontario, Canada, on Friday, March 13, 2020. The Bank of Canada cut interest rates by half a percentage point in an emergency move to buffer the nation's economy from the double hit from the coronavirus and tanking oil prices. , Bloomberg

Canadian Imperial Bank of Commerce named former Finance Minister Bill Morneau to its board, adding one of Prime Minister Justin Trudeau’s most influential lieutenants from his first years in office. 

Morneau served as Trudeau’s finance chief after the Liberal Party swept to power in 2015. He resigned in 2020 amid a public rift with the prime minister over the government’s decision-making on COVID-19 programs. Before joining the government, Morneau led Morneau Shepell, a human resource and pension-services provider that was later renamed LifeWorks.

“Bill Morneau is an accomplished leader with extensive government, public policy and business experience along with strong international expertise,” CIBC Chair Kate Stevenson said in a statement Tuesday. Morneau joins the board on Nov. 1, the Toronto-based bank said.

Another former finance minister, John Manley, was on CIBC’s board for 16 years before retiring last year. 

After leaving office, Morneau entered the race to become secretary-general of the Organization for Economic Cooperation and Development but withdrew in January 2021, citing a lack of support. 

SORRY YOU SOLD THE WHEAT BOARD, YET

• This year's harvest under possible threat of Canada's supply chain shortcomings

Caitlin Yardley, The Canadian Press

This year's important harvest has farmers hopeful it will make up for last year's poor crop yield, yet supply chain stalls could put a further wrench in agriculture profits.

The Western Grain Elevator Association said that capacity remains stable but not comfortable, as grain elevator levels reach 85 per cent, leading to fears of grain delivery delays.

Western Canada's grain harvest is an estimated 75 million tonnes this year, said Wade Sobkowich, executive director for the Western Grain Elevator Association, as drought, floods and wildfires contributed to a below average harvest of 49 billion tonnes the year prior.

Sobkowich said 85 per cent is an acceptable fulfilment level. When the rate drops below that, railcar delays impact the entire supply chain, leading to a buildup at the grain elevators and slow down farmer deliveries.

"Farmer's don't get paid until they deliver," he said.

Last year, one in nine people were employed by the agriculture sector, contributing $135 billion to Canada's gross domestic product, according to Agriculture and Agri-Food Canada.

Currently, farmers are ordering around 10,000 to 11,000 railcars per week, said Sobkowich.

The AG Transport Coalition's most recent grain report from September, said that Canadian National Railway fulfilled 88 per cent of hopper cars and Canadian Pacific Railway fulfilled 77 per cent, at an increase of 73 per cent the week prior.

CP spokeswoman Salem Woodrow, said in a statement that the company is prepared to meet the transportation needs of grain customers this crop year.

She said CP ramped up hopper car delivery at the start of the crop year, matching record order fulfilment and port unload levels over September.

Sobkowich said the discrepancy in the numbers between CP and CN is due to the recording methods of CP as the railway company calculates the demand they accept rather than legitimate demand.

"Probably, in CP's view they are performing better than what our numbers show," said Sobkowich.

CN also said it has made record grain movements, as 2.62 million tonnes of grain move from Western Canada in September, said CN spokesman Jonathan Abecassis.

Although, Abecassis said CN did have a slow start to the season, as the harvest was slow to get underway and grain supplies were tight given the impact of last year’s drought.

"Unfortunately, getting trains moving again is a progressive process, it doesn’t all just happen at once,” said Abecassis in a statement.

Sobkowich said CN seems to be holding at an acceptable level, "although of course we would like to see them get closer to 100 per cent."

He said the WGEA will continue to watch fulfilment levels closely but has some concerns about how delivery stalls could persist into the fall.

Transport Minister Omar Alghabra announced an $8 million investment in new grain terminal equipment in the Port of Montréal earlier this month to improve the quality of the grain-cleaning service, optimize traffic flow in the yard, and increase capacity for loading and handling containers.

“Thanks to these funds, grain exports here at the Port of Montréal will be able to move more than double,” said Alghabra at a news conference.

In a phone interview, Alghabra said a new rail regulation will come into force, that requires rail companies to provide more information about operations and performance. However, no exact timeline on when the regulation will come into effect has been announced.

The Minister's announcements come after the National Supply Chain Task Force said in a final report that urgent action from both government and industry is needed to keep goods flowing in Canada.

FORMER FEDERAL LIBERAL MINISTER

Hall Findlay, Suncor Energy's first 'chief climate officer,' to retire from role

Amanda Stephenson, The Canadian Press

Suncor Energy Inc.'s first-ever chief climate officer is departing her role at the end of November, but Martha Hall Findlay says she feels "far more optimistic" than she once did that Canada's oil and gas sector can be part of the climate change solution.

Hall Findlay joined Suncor in 2020 as chief sustainability officer, and was named the company's chief climate officer — the first appointment of its kind by a Canadian energy company — in February of this year.

While at the company, Hall Findlay played a key role in the development of the Pathways Alliance, a consortium of major oilsands companies that have together pledged to reach net-zero carbon emissions from production by 2050.

Her tenure also coincided with a rocky period for the Calgary-based energy giant, one that saw the company targeted by U.S.-based activist investor Elliott Investment Management for a string of recent operational difficulties and workplace safety incidents. Suncor's former chief executive Mark Little resigned in July. 

But while Hall Findlay acknowledged it has been an "interesting" time to be part of the Suncor executive team, she said she is retiring because of a string of personal challenges over the past two years — challenges that have included a breast cancer diagnosis, a double mastectomy, and the death of her sister.

"Pathways has been my heart and soul for the last two years. I never took time off," Hall Findlay said in an interview Wednesday. "It's been awesome, but I'm not going to lie — I'm exhausted."

Before joining Suncor, Hall Findlay served as the Liberal Member of Parliament for the Toronto riding of Willowdale, Ont from 2008 to 2011. She then moved to Calgary to become president and chief executive of the Canada West Foundation, a Calgary-based think tank. 

Hall Findlay said at the time, she was deeply concerned about the federal government's negative rhetoric with respect to the oilsands industry, and believed it posed a threat to national unity. 

On Wednesday, she said she believes significant progress has been made since then. Oilsands companies have a plan to get to net-zero, and have said they will spend $16.5 billion before 2030 on the first stage of a massive proposed carbon capture and storage facility near Cold Lake, Alta.

The federal government has also made its own commitment to industry in the form of an investor tax credit for carbon capture and storage projects.

A final investment decision for the Pathways carbon capture project — which would capture CO2 emissions from more than 20 oilsands facilities in northern Alberta and store them safely underground, delivering an estimated 10 million tonnes of emissions reductions per year — has not yet been made. Hall Findlay said industry still needs more government support — both from a financial and regulatory perspective.

"Part of the discussion we’re trying to have is how we can get these big projects up and running as soon as possible, because that’s important for the federal government too," she said.

"But I'm confident we can do it. I think it’s absolutely critical not just for Alberta, not just for the industry – I think it’s critical for the country.”

In an emailed statement Wednesday, Pathways Alliance president Kendall Dilling said Hall Findlay has been an "integral and outstanding contributor" to the organization's efforts to work collaboratively with governments and help Canada meet its climate commitments.

“While Pathways Alliance will miss Martha’s straightforward approach to communicating about the need for the oilsands industry to take a leadership role in reducing emissions, the momentum she and other company leaders have helped build will continue as we pursue our goals," Dilling said.

CANADA'S ON LINE CREDIT UNION

Vancity to offer carbon footprint tracker for its Visa credit cards

The Canadian Press

Vancity says it is launching a program that will allow its Visa credit card holders to track the estimated carbon emissions of their purchases. 

The Vancouver-based credit union says all Vancity Visa credit card holders will be offered the data, which will also include how their spending-linked emissions compare nationally and which purchases have the highest environmental cost.

Vancity says it is partnering with climate-focused German fintech ecolytiq to offer the carbon calculator.

The credit union says it will be the first to offer a Visa-based carbon footprint calculator in Canada when the program becomes available in the new year.

Mastercard last year announced a carbon calculator tool that banks could roll out to customers, but did not immediately respond to clarify whether any Canadian banks currently offer its calculator tool.

The Mastercard option was rolled out in collaboration with Doconomy, a Swedish fintech company that in 2019 launched a credit card with a carbon footprint limit.

Rent remains cheaper than monthly mortgage payments in most Canadian cities: Zoocasa

Hilary Punchard, BNN Bloomberg

The cost to rent an apartment is still cheaper than an average mortgage payment in most Canadian cities, according to a brokerage Zoocasa.

In a post published by the brokerage on Monday, it states average monthly rent is still less expensive than monthly mortgage payments for a condo in 11-out-of-15 major Canadian cities.

For example, the average price of a condo in Toronto is $769,058, with an average monthly mortgage payment of $3,335. That’s still 44.81 per cent more expensive than the average monthly rent for a one-bedroom apartment in Toronto ($2,303), Zoocasa states.

“The rise in demand for rentals is reflected in the housing market; in September of last year when interest rates were low, there were 9,046 sales across the GTA,” Daniel Crook, author at Zoocasa, said in the post.

“This September, we were down to 5,038, a decline of 44 per cent. With that higher cost of borrowing, some are considering rentals as a more financially sound option.”

The only major cities where monthly mortgage payments are actually cheaper than rent are in Western Canada. The average monthly mortgage payment in Edmonton is $954, which is 19.22 per cent less than the average rent of $1,181.

Calgary’s average mortgage payment is $1,205, which is 18.58 per cent less than the average rent of $1,480. In Winnipeg, the average mortgage is $1,152, which is 12.33 per cent less than an average rent of $1,314. Saskatoon’s average mortgage is $949, which is 11.39 per cent less than the average rent of $1,071.

 

HOME SALES SLOW

On Wednesday, Statistics Canada reported the price of other owned accommodation expenses, which includes the commissions on the sale of real estate, rose at a slower pace in September (5.8 per cent), than in August (7.4 per cent).

The organization also found that the homeowners’ replacement cost index, which looks at the price of new homes, increased slightly in September (7.7 per cent), which was lower than the 8.4 per cent rise in August.

“These movements reflect a general cooling of the housing market,” the report said.

Methodology for Zoocasa

“Rental prices. Average rental price for one bedroom units courtesy of Zumper.com, TorontoRentals.com and Rentals.ca. The average price of condo apartments is sourced by TREEB, the CREA MLS Home Price Index, and local real estate board data.

Mortgage payments. The average monthly montage payments were calculated using RateHub.ca’s Mortgage Payment Calculator, assuming a 20 per cent down payment, 30-year amortization, and a 5-year fixed interest rate of 5.14 per cent.”

Path to lower inflation can be achieved without 'crushing' economy: Poloz

Ian Vandaelle, BNN Bloomberg TODAY

Former Bank of Canada governor Stephen Poloz believes there’s a path for the central bank to tamp down sky-high inflation without crushing economic growth, so long as Tiff Macklem and company operate with a deft touch.

In an interview Thursday, Poloz – now a special advisor at law firm Osler – said that while there will be some painful side-effects to the inflation fight, a combination of prudent policy and consideration of the transitory inflationary effects of the war in Ukraine, could lead to a scenario where price pressures continue to abate without sending the domestic economy into a deep funk.

“It would be nonsense to crush inflation down to two per cent immediately since some of it is going to go away by itself, obviously it would be nonsense to just ignore it and hope for the best,” he said. “So somewhere in the middle is that sort of stagflationary some-of-this, some-of-that path, and there’s no painless way to get there because what has happened in Ukraine.”

Inflation has moderated from its June high of 8.1 per cent year-over-year; it did run at a 6.9 per cent pace in September – more than three times the Bank of Canada’s two per cent target.

That decline has largely been due to moderating gasoline prices, with the average of the three core measures – which strip out volatile items like gas and groceries – holding steady at 5.3 per cent in the month.

Digging deeper, grocery prices rose 11.4 per cent in September, the fastest pace since 1981.

While Canadians have been adjusting their spending habits – the Bank of Canada’s latest survey of consumer expectations showed more than 80 per cent of Canadians are taking actions to cope with higher inflation – Poloz said there are other factors at play when it comes to businesses adjusting their behaviour in ways that should prove disinflationary.

“There are some mechanisms affecting inflation that people aren’t really talking about, like how much less disposable income people have. Walmart results – they had a lot less stuff in the basket,” he said.

“What’s Walmart’s response? They’re going to slash prices: that’s what disinflation looks like, it’s not about crushing the economy. So I think we have a lot of those preconditions there that are helping.”

The prospect of more outsized rate hikes has led to a growing chorus of calls that Canada will enter a recession next year. Earlier this week, Scotiabank said it expects a technical recession – two consecutive quarters of negative economic growth – in 2023, and that the Bank of Canada will ultimately have to raise rates by another full percentage point by year’s end.

While Poloz did admit a recession of some type is the most likely outcome for the domestic economy, he said that underlying strength in the labour market should soften the blow and make such a drop in economic activity feel like more of an adjustment to more normalized conditions.

“It does look [like a recession] from where we’re sitting, but it’s not necessarily the case: I’ve got to admit there’s a grey zone there. I think of it more as an altitude adjustment: the plane got up to 40,000 feet by mistake, we really were supposed to be at 35,000 feet – too much turbulence up here,” he said.

“So let’s get it levelled off at a sustainable altitude of 35,000 feet. Do we have to go down to 30 for a while to get back to 35? Possibly, but it’s not going to feel like much of a recession if that’s what happens: the labour market is super strong, the economy is strong.”

Though central banks around the world are walking something of a tightrope as the pandemic recedes, Poloz said from his vantage point, policymakers are largely doing a good job.

"They’re on the right path, they’re doing the right thing, or course they are. We just don’t know – nobody, including them – when we’ll actually get there. It will be real-time discovery.”