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PMO writing foreign takeover rules: Sources

Tags: CNOOC, Nexen
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A long time Bay Street executive is the likely author of the federal government's new guidelines on investments in Canada by state-owned enterprises.

Sources with detailed knowledge of the resource sector and the inner workings of the federal government---and in one case, one of the current takeover files---say the Prime Minister's chief of staff Nigel Wright, previously at private equity firm Onex, is penning the SOE guidelines.

The new framework is being written as Ottawa mulls over two transactions in the energy sector involving Asian state-owned companies---CNOOC's $15.1-billion bid for Nexen and Petronas' $5.5-billion bid for Progress Energy Resources.

If Wright is indeed the author of the guidelines, it means they have been crafted inside the Prime Minister's Office rather than at Industry Canada which technically is in charge of the files.

When contacted, spokespersons for both the Prime Minister's Office and Industry Canada would not comment.

Sources stressed that while the SOE guidelines are important and will deal with issues such as governance and transparency, the tough negotiations occurring right now are over the so-called "undertakings"---what the acquiring firms will promise to deliver if the deals are approved.

The undertakings are said to be quite specific and one source suggested that CNOOC may be required to divest of Nexen's seven percent stake in Syncrude because another Chinese state-owned company, Sinopec, owns nine percent of the joint venture which includes Suncor, Imperial Oil, Canadian Oil Sands, Murphy Oil and Mocal Energy.

Another source suggested the government may be looking at capping SOE investment in oil sands assets at 20 percent, the foreign investment limit on Canadian banks.

The current deadline for the CNOOC-Nexen transaction is December 10, while the "outside date" for the Petronas-Progress transaction is December 30.

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