Berkshire Hathaway Inc. has backed out of financing a major gas project in the Canadian province of Quebec, prompting worries that international investors are increasingly shunning the country after protests over another energy project.
Warren Buffett’s conglomerate pulled out of providing roughly 4 billion Canadian dollars ($2.99 billion) in equity financing for the Énergie Saguenay Project, a proposed Canadian natural gas export facility to be built 130 miles north of Quebec City, according to three people familiar with the matter.
Berkshire’s move was spurred by a series of rail blockades set up to oppose construction of a natural-gas pipeline in British Columbia, said a person with knowledge of the decision.
Canada has been roiled by activists and indigenous groups who have obstructed the country’s rail network and its supply chain since early February to protest the pipeline. Such strident opposition to big energy projects has worried investors that the investment climate in Canada is too risky for large deals.
Berkshire’s decision to scrap the deal, first reported on Thursday by the Montreal-based newspaper La Presse, comes despite the conglomerate’s earlier willingness to invest in Canadian energy. The company’s energy arm owns AltaLink Transmission, the largest regulated energy transmission company in the province of Alberta. Berkshire also owns a large stake in Suncor Energy Inc., Canada’s largest crude-oil producer.
Énergie Saguenay confirmed in a blog post on its website that a “potential private investor” had decided at the last moment to step away, though it declined to name the firm.
“This decision was taken because of the political context that has prevailed for a month now in Canada,” said the post, which was written in French.
The energy project, jointly owned by California-based investors James Illich and James Breyer through their investment companies Freestone International and Breyer Capital, said the project is still on track. It is seeking other potential investors ahead of a final decision to proceed in 2021.
According to one person familiar with Berkshire’s decision, the company had initially agreed to invest a few hundred million dollars in the project, ramping up to C$4 billion in stages. But during the second week of the rail blockades, the company signaled it was concerned by the uncertainty caused by the disruption and was losing interest in the investment. Berkshire walked away a week later, this person said.
Canadian police dismantled the most disruptive blockade, which had choked off east-to-west freight rail traffic, late last month. The last remaining major blockade, in the Montreal area, was taken down on Thursday.
The Énergie Saguenay Project is just one of several Canadian projects that hit hurdles recently, creating doubts about Canada as a place to invest. Prime Minister Justin Trudeau’s Liberal government failed to get approved energy projects completed, such as the expansion of the Trans Mountain energy pipeline. The pipeline has been mired in court cases for years.
Houston-based Kinder Morgan Inc. became so frustrated with opposition to the Trans Mountain expansion that it sold the pipeline to the Canadian government in 2018, and sold its Canadian assets to Pembina Pipeline Corp. a year later.
“There’s a question vis-à-vis domestic and international investors if Canada is open for business,” said Pat Fiore, president of GNL Quebec, the company that runs the Énergie Saguenay project. “Can we get these large projects across the line?”
The concern isn’t limited to international investors.
Last month, Canadian mining company Teck Resources Ltd. announced it was shelving a proposed C$20 billion energy project in the Canadian oil sands, home to the world’s third-largest oil reserves. Teck Chief Executive Don Lindsay said the company was withdrawing from the project because of the widening schism in the country between resources development and environmental policy.
Mr. Trudeau on Thursday noted that foreign investment in Canada rose more than 18% last year, but acknowledged the country needs to send a unified message to investors, emphasizing environmental policy.
“We need to do more to show that the jobs we’re creating and the investments we are making and attracting will allow us to succeed in a world where climate change is hitting us harder and harder,” he said. “That is why we need to have a united message across this country in terms of our leadership and the leadership we can show on fighting climate change.”
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