Enbridge-Spectra deal part of a bigger North American trend, says analyst
Bill Harris says current regulatory and economic conditions in Canada driving companies south of the border
More Canadian energy companies are likely to follow in the footsteps of Enbridge by buying up major American energy assets, predicts one business analyst.
Bill Harris with Avenue Investment Management said the announcement by Calgary-based Enbridge to purchase Houston-based Spectra Energy Corporation came as no surprise, and is actually part of a bigger North American trend.
He said more and more Canadian companies are being driven to the U.S. because of poor rates of return in Canada and the increasing difficulty of getting new projects approved.
"As everybody is aware, it's very difficult to build pipelines in Canada right now," Harris said.
Yet from an economic standpoint, this "extraordinary trend" runs counter to conventional wisdom.
"When the Canadian dollar fell dramatically, what you're supposed to do is take your foreign investments, come back to Canada, and look for great Canadian businesses," he explained.
"What we kept finding, over and over again, is over the last couple of years our great Canadian businesses have consistently gone to the U.S."
Harris said companies such as Fortis, Emera, Interfor and TransCanada have already begun acquiring assets in the U.S.
'Real genius,' says econ prof
Michal Moore, economics professor at the University of Calgary agreed that it was a smart strategic move on Enbridge's part, given the current political climate in Canada.
For example, mounting public opposition to projects like Northern Gateway, and the prevailing uncertainty surrounding the NEB approval and hearing process have greatly slowed energy development progress, he said.
"When they're cash-rich and they've got a position that they can take looking to the future, then the real genius is to strike now and perfect a deal where you gather together more resources ... so that you're ready when the market turns around," he told CBC Calgary News at 6.
Moore said this move indicates that Enbridge is "probably pretty bullish" with respect to their market outlook.
"Frankly, they should be," he added.
"There will be a need for hydrocarbons worldwide, especially in the U.S."
With files from CBC Calgary News at 6