Showdown Between Pension Fund and Petro-Canada Looms

Correspondent Derek Armstrong

With Petro-Canada unable to provide shareholders a return in the last few years, despite the big oil market, Ontario’s giant Teacher’s pension fund is mobilizing to become a major investor in the company. The Ontario Pension Plan will almost certainly build momentum towards a restructuring plan, which may not be a bad thing considering Petro-Canada’s lack of performance. Petro-Canada is billions in cost over-runs on its environmentally contentious oil sands project, although it’s balance sheet is solid.

While the giant pension plan may file in the next month filing will likely happen in the next two weeks, a takeover is impossible under Canadian federal law, which prohibits any group from owning more than 20 percent voting shares.

This would not necessarily prevent the Pension from a proxy battle, assuming the support of other major investors, in a move designed to replace the board of directors.

The aggressive move follows on long-term lack of shareholder performance, seen as unacceptable given the performance of the industry in general. Petro-Canada’s shares lost over three percent in the last five years. Major shareholders complain that capital-intensive projects have resulted in poor results.
The showdown came from the investor end after the board of directors ignored suggestions to divest some costly projects.