Cannabis producer Tilray doubles revenue but deepens losses in 2018

Biggest marijuana ETF on TSX adds 9 new cannabis companies, including Tilray

Nanaimo, B.C.-based cannabis firm Tilray more than doubled its revenue in 2018 as pot became legal in Canada, but had a net loss of $67.7 million as it expanded rapidly.

Tilray, which listed last year, said it sold 6,478 kilograms of cannabis in the year at an average selling price of $8.59 Cdn per gram.

Its revenue for the year was $56.4 million Cdn, a 110 per cent increase. Revenue continued increasing in the fourth quarter to $20.9 million, three times its revenue in the comparable period in 2017.

Net loss for the quarter was $0.33 per share compared to $0.04 per share for the previous year. The loss was double what analysts had expected and a disappointment to the market.

Tilray noted the significant revenue growth for extract products compared to dried flower, where extracts represented 49 per cent of the sales mix in 2018 compared to 20 per cent in 2017.

The company raised $153 million in its IPO last year and has been plowing that into a rapid expansion.

Tilray acquired Manitoba Harvest, a hemp and natural foods producer in Winnipeg, Natura Naturals Holdings Inc., a licensed cannabis cultivation facility in Leamington, Ont., and Alef Biotechnology SpA, a licensed cannabis company in Chile. It also invested $7.5 million in Quebec-based cannabis producer ROSE Lifescience Inc.

Tilray has been cleared to import cannabis into the U.S. for medical purposes and its purchase of Alef allows it to import, produce and distribute Tilray branded medical cannabis throughout Latin America.

It also announced an alliance with Sandoz, part of Novartis Division, to supply medical cannabis products to patients around the world.

Its research partnerships include one into the effects of cannabis on cognitive function with Lambert Initiative for Cannabinoid Therapeutics at the University of Sydney.

It is working with AB InBev to develop non-alcohol THC and CBD beverages and with Authentic Brands Group to market consumer cannabis in the U.S. and Canada.

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WestJet suspends 2019 financial forecast after Boeing groundings

WestJet suspends 2019 financial forecast after Boeing groundings

WestJet Airlines is suspending its 2019 financial guidance following the grounding of its 13 Boeing 737 Max 8 aircraft by regulators in Canada and the United States due to safety concerns.

The Calgary-based airline says its financial outlook provided as late as a month ago are being put on hold except for earnings per share, return on invested capital and cumulative free cash flow between 2020 and 2022 until more information is known.

The move follows a similar decision last week by Air Canada, which operates 24 of the narrowbody aircraft.

WestJet says it grounded all Max aircraft within 55 minutes of Transport Canada’s order last Wednesday, with only three planes outside of Canada. The action was taken after aviation authorities across the globe grounded the aircraft in the wake of the Ethiopian Airlines crash March 10 that killed 157 aboard the plane, including 18 Canadians.

The airline says through its contingency plan it expects to preserve about 86 per cent of passengers bookings on Max flights and find alternative planes for about 75 per cent of Max flights.

Walter Spracklin of RBC Capital Markets described the challenge as a temporary issue for both airlines.

“Overall, we see the impact as limited and short-term,” he wrote in a research note.

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Oil prices, TSX rise after OPEC extends production cuts to June

Oil prices, TSX rise after OPEC extends production cuts to June

Oil prices and the TSX moved higher Monday after OPEC scrapped its planned meeting in April and said it will decide whether to extend output cuts in June.

The 1.2 million barrels per day cut made by the oil cartel in December has helped to dampen oversupply and U.S. sanctions against Venezuela and Iran will have an additional impact over the coming months. OPEC said it would slightly deepen the cuts in coming months.

West Texas Intermediate, the benchmark North American contract, was up 45 cents at midday to $58.95 US a barrel, while Brent, the European contract, had soared to $67.45. Western Canada Select, the Canadian contract, stood at $49.30 US, reflecting the strength it has demonstrated since Alberta curtailed output.

The TSX continued the climb it has maintained since the beginning of the year, up 41 points to 16,181. It was mainly buoyed by energy stocks.

Energy stocks also rose in the U.S., but the Dow was down 37 points to 25,858 after Boeing continued its fall and tech stocks slipped.

U.S. investors are hoping their central bank gives some guidance over its rate hike plans later this week.

The outlook for oil is complicated by fears of a global slowdown, precipitated by the trade war between the U.S. and China.

President Donald Trump has been critical of the Organization of Petroleum Exporting Countries, claiming it is forcing oil prices too high.

But Saudi Arabia’s energy minister Khalid al-Falih said the market was looking oversupplied until the end of the year. He suggested the Saudis might be willing to extend the cuts in production another six months after a meeting in June. However, he said April would be too early for any decision on output policy.

While OPEC is holding to its production cutbacks, the U.S. is increasing its shale production and exporting more oil.

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Lyft plans to sell 30 million shares and raise $2 billion in IPO within weeks

Lyft plans to sell 30 million shares and raise $2 billion in IPO within weeks

Lyft officially kicked off the road show for its initial public offering, putting 30 million shares up for sale Monday with an anticipated price of between $62 and $68 US per share.

That would raise more than $2 billion for the San Francisco ride-hailing company, which could be valued between $20 billion and $25 billion US eventually.

Lyft and Uber have raced to be first with an IPO, and Lyft’s rival is expected to offer shares in the coming weeks.

Lyft released financial details about the company for the first time this month, reporting $2.2 billion US in revenue last year, more than double its $1.1 billion in revenue in 2017, but also $911 million in losses. Lyft has lost nearly $3 billion since 2012, but has brought in more than $5 billion in venture capital.

The company’s executives warned that the company could struggle to turn a profit, despite a rapidly growing market share.

The company’s share of the U.S. ride-hailing market was 39 per cent in December 2018, up from 22 per cent in December 2016, according to its filing. The $2.2 billion in revenue for 2018 was about double what it brought in the previous year.

Bookings rising dramatically

Bookings, which represent Lyft’s fares after subtracting taxes, tolls and tips, have been rising dramatically — a trend that the company intends to highlight to potential investors. Lyft’s bookings surpassed $8 billion last year, 76 per cent more than in 2017 and more than four times the number from 2016.

Lyft’s recent market-share gains came as Uber was dogged by reports that drivers accosted passengers and that the company tolerated rampant sexual harassment internally. Those problems ultimately led its co-founder Travis Kalanick to resign. Uber has been working to repair its image under CEO Dara Khosrowshahi.

Lyft said it would offer 30,700,000 shares of its common stock to the public and give underwriters the option to buy up to 4,615,500 more shares.

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There’s nothing funny about the economic effects of Brexit: Don Pittis

There's nothing funny about the economic effects of Brexit: Don Pittis

If Brexit is the equivalent of a 10-tonne weight falling on the British economy, why are so many British people laughing?

Despite enormous optimism by the Leave campaign that everything will be wonderful after departing the European Union, every independent indicator and economic study shows the long and painful process of trying to get there has been really bad.

In what seems like a humorously over-the-top comparison, one of latest studies I spotted relates the long and wearing Brexit process to the ultimate financial bogeyman of the last century.

“The clearest historical parallel that led to such an extended period of uncertainty is the Great Depression, which started with the stock market crash of 1929 and generated continued uncertainty until 1932,” said the authors, a group of credible international economists funded by British research money, writing in the Harvard Business Review.

The article, Brexit Is Already Affecting UK Business — Here’s How, says that not only did the unexpected vote to leave shock the economy, long-term uncertainty as to what’s next has meant less investment and reduced employment.  

Of course the contrast between horrible reality and the over-the-top optimism of the initial campaign has been one of the tropes for British satire, that, as with the Trump presidency in the U.S., has been a growth industry.
In one skit an all-white English family sits around an imagined post-Brexit kitchen table happily discussing how things have improved since the U.K. has left the EU. The promised boost in health-care spending has cured the disabled father. The country grows rich on fish.

Brexit campaigner and member of the European Parliament Nigel Farage made lots of bright promises about the future from more heath spending to fewer immigrants. (Vincent Kessler/Reuters)

Reading a paper whose front page headline screams Free Puppies For Everyone, the daughter celebrates the many available jobs now that the foreigners are gone. The cupboard is full of British food, and in the new paradise, the family is allowed to have “bendy” bananas because European restrictions have been lifted.

Quite wonderfully the skit, which to all appearances says only good things about Britain’s Brexit future, has been attacked from both sides of the debate. Humourless Remainers criticize it as insensitive while humourless Leavers complain it trivializes important issues.

The tradition of humour that viciously attacks Britain’s greatest institutions from the Royal Family to the BBC is one of the things that, despite glaring inequality and miserable weather, gives the country a feeling of careening freedom so obviously different from Putin’s Russia or Xi’s China.

Humour is subversive. It is also a coping mechanism when it feels like you may have lost control and may be in for something unpleasant.

Monty Python Parliament

Some of the country’s biggest butts of British humour are the politicians and the political system that even a serious political journalist in the Financial Times compared last week to a giant Monty Python skit.

A dip into one of BBC Radio’s jolly game shows such as The News Quiz will usually offer equal-opportunity ridicule of  British politicians on a Brexit theme.

The Scots News Quiz comedian-contestant Susan Calman, who claimed to have voted Leave (to much laughter), pointed out one clear industrial winner.

Pro-Brexit protest signs exhibit the outrage of the political devotee. (Henry Nicholls/Reuters)

“I think Brexit has been very positive for the metaphor industry,” quipped Calman, pointing out that a comment by Prime Minister Theresa May about scraping mould off old jam in her fridge was being used by the Washington Post as a metaphor for the entire Brexit process.

“It’s a scandal there aren’t more funny Brexit-supporting comedians to come on this show,” responded another contestant.

But an online sample of pro-Brexit comedians reveal that like many strong political devotees, they take things pretty seriously. Jokes about terrorists and Muslims seem especially humourless after last week’s killings in New Zealand.

Brexit comedy for export

When it comes to the comedy industry, not only has Brexit created domestic humour, but it has become an export commodity.

Last week a segment from Full Frontal with Samantha Bee, called A Brief History of Brexit for Americans presented by British-raised American comedian Amy Hoggart, was making the rounds.

Hoggart’s funny video, which, like the Financial Times article mentioned above employed the Monty Python stomping foot, was more than just a joke. By satirizing the politicians, their confusion and their quest for more power at any cost, Hoggart told a complex political tale in a palatable form.

Take a British history lesson:

With a signature introductory “No, no, no, let me speak,” impressionist comedian Jon Culshaw from the radio show Dead Ringers plays the role of United Kingdom Independence Party chief Nigel Farage, complaining about Tory government mismanagement of Brexit.

“You took something that was good and pure where a plucky band of idealists defeated the political elite with nothing but hope in their hearts and oodles of cash from a few shadowy billionaires,” says the faux Farage, making light of an accusation reported in serious news elsewhere that the campaign was partially funded by cash from Russians bent on making Britain not a strong economy for the people but a tax oasis.

Anti-Brexit protest signs employ classic British humour. (Henry Nicholls/Reuters)

In a news story it is hard to declare so directly that the poor and stupid have been manipulated by the nefarious rich, but that is another comedy trope. 

As one Twitter joke went, the solution to the whole problem is merely to end Brexit quietly, tell each other Britain has crashed out of the EU and hand out passport covers that require people to stand in longer lines at customs and immigration.

That would make people feel as if they were outside the European Union with the bonus of their economy not collapsing.

But to about half of British people who remain honestly convinced that the country will be better off outside the EU, that just isn’t funny.

Follow Don on Twitter @don_pittis

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Like the label? You’ll probably like the wine, says UBC researcher

Like the label? You'll probably like the wine, says UBC researcher

New research suggests that the branding and design on a wine label can affect how people taste what’s in the bottle.

Darcen Esau, a master’s candidate in Community, Culture and Global Studies at the University of British Columbia’s Okanagan campus, researched the phenomenon for his master’s thesis, which he’s scheduled to defend next Friday. 

Esau, 34, says the idea for his thesis came to him based on his own experience as a wine consumer. Like many people, he says, he often decides which wine to buy once he’s in the store. 

“With so many options available, why do some labels appeal to some people but not others? And then taking it a step further, does that label actually impact the wine drinking experience?” he said. 

UBC masters student Darcen Esau conducting field research in Tuscany, Italy, for his thesis. Esau says wine drinkers are more likely to enjoy a bottle they have picked that has a label they identify with. (Darcen Esau)

According to Esau’s research, the answer to that question is a resounding yes. 

People are more likely to enjoy a wine if the branding and design on the bottle matches their personal identity, Esau says. 

Wine label designer Emily Pedriks agrees.

“More and more, the visuals have become very important to how people select wine,” Pedriks said. “Loving a label can sway somebody into also believing that the liquid inside is exactly what they were looking for.”

Taste test

To test his hypothesis, Esau used online surveys to divide a wine label’s brand image into four categories: personality, design type, narrative and conveyance of luxury.

Esau then used online research again to measure how much people anticipated they would enjoy the wine based on the label design. If people found the design relatable, they thought the wine would taste better — despite not knowing anything about traditional markers like region, vintage, year and variety.

Finally, Esau conducted two in-person tests. The first, called a triangle test, had people taste three glasses of wine, two of which were the same. Esau says most people couldn’t tell the difference based on taste alone.

Esau’s research showed that most people couldn’t differentiate between different types of wine. (Isla Binnie/Reuters)

For the second in-person test, Esau had people taste wines with two different labels. One had a more contemporary design with a parrot, the other a more traditional design often noted on old-world wines from places like France and Italy. 

“Regardless of what wine was in the glass, if somebody identified with the label they thought the wine tasted better,” he said. 

“People want to be able to relate to the labels so that it can represent who they are and the image they want to convey.”

No silver bullet for buyers

As for which type of label did better, Esau said it was about a 50/50 split between the two. There doesn’t appear to be a silver bullet for a design that appeals to more people, he said. 

“Everybody is kind of shaped by their own experiences,” he said. “There’s a label that will appeal to me that won’t necessarily appeal to somebody else.”

Each person can experience a wine differently based on their personal experiences, Esau says. (Peter Forest/Getty Images for Starz)

He notes that a label’s appeal, and thus the perception of how it tastes, has more to do with branding than if it appears expensive or not.

“Even if you think a label is more luxurious or higher quality, if you don’t personally identify with it you still won’t think the wine tastes good,” he said.

Saturated market

That’s advice wine label designer Pedriks, who is creative lead at marketing firm Brandever, often gives her winery clients who would rather stick with a more classic design. 

“People are quite precious about their wines, I think, and they always kind of want to see themselves as that very stoic, conservative label,” she said.

“But I think more often than not they find that going with something a little more fun or a little more playful actually resonates better with consumers.”

The wine market is saturated with thousands of products, Pedriks said, and it pays for wines to stand out — especially because the average wine consumer isn’t that knowledgeable about the products. 

Emily Pedricks, creative lead at Brandever, says more adventurous wine labels like this one can stand out in a saturated market. (Brandever)

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Superstore, Shoppers Drug Mart customers say they were forced to use self-checkout

Superstore, Shoppers Drug Mart customers say they were forced to use self-checkout

Marvin Kaye said he was taken aback when, last weekend, he was told he’d have to use self-checkout at a Shoppers Drug Mart in Ajax, Ont.

“Everybody is being funnelled, herded through this self-checkout.”

After protesting, Kaye said he was told he could go to a cashier — if he paid cash. He had none, so that option was out.

“I find it distasteful that I can’t even get that basic level of customer service,” said Kaye, who grudgingly used the self-checkout machine to pay for his purchase. 

“If I wasn’t with my daughter, I might have just dropped my stuff on the floor and walked out.”

Many large retailers are adding self-checkout machines to stores, claiming they’re offering more choice. But several Shoppers Drug Mart and Real Canadian Superstore customers complained to CBC News that they were recently given only one choice: self-checkout.

Each Shoppers Drug Mart customer relayed the same experience: because they were paying with debit or credit, they were ordered to use the self-checkout machine — which accepts cards but not cash.

“They’re forcing me to use it and I don’t think that’s fair,” said Linda Chaikowski, who was directed to self-checkout last week at a Shoppers in Winnipeg.

“I use a cane to walk with. To use this machine, I have to put my cane down, I have to find a place to put my purse, I have to pack the stuff. It’s just too much.”

Some Shoppers Drug Mart customers say they were forced to use self-checkout if they were paying with debit or credit. (CBC)

Nancy McCurdy said she was also forced to use the machines this week at a Shoppers in London, Ont.

“I hate these new blasted self-checkouts, because they talk to you and I can’t figure out what they’re saying,” said McCurdy, who is hard of hearing. 

Marvin Kaye, the Shoppers customer in Ajax, Ont., suspects the retailer is pushing self-checkout as a way to save on labour costs — a saving he suggests should be passed on to customers.

“If I’m going to go through, pay me for the 10 minutes that I have to stand there and figure out which button to push.”

Customers should have choice, Loblaw says

Loblaw Co., which owns Real Canadian Superstore and Shoppers Drug Mart, said it expects stores to always give customers the option of checking out with a cashier.

“We’ve now heard from a few customers that some [Shoppers] stores are encouraging those using credit or debit to use self-checkout,” said spokesperson Catherine Thomas in an email.

“It is not our intention that customers feel they do not have a choice, and we have reminded all stores of this expectation.”

Loblaw said there should always be a cash lane open for Superstore customers. (CBC)

Customers have also complained they were not offered a cashier option at grocer, Superstore. 

Kerri-Lynn Parker said that around 10 p.m. last Sunday, there were no cashiers open at her Superstore in Edmonton, so she was told to use a machine.

“[An employee] said, ‘We will help you.’ And I said, ‘Nope,’ and I dropped my basket and I walked out,” said Parker.

“The more people accept it, the more it’s going to happen. It’s a slippery slope.”

Jared Gossen of Grande Prarie, Alta., was unhappy to discover no cashiers open at his local Superstore. (Zoe Todd/CBC)

Jared Gossen said he also discovered no cashiers on staff early Friday morning, both this week and last, at the Superstore in Grande Prairie, Alta. On both occasions, Gossen had a cartful of food for a weekly breakfast program he runs at the St. Lawrence Centre drop-in shelter.

He said he got help scanning his items at self-checkout, but was upset to learn from an employee that the store would have no cashiers from 7 to 9 a.m. every day.

“So, virtually now, I work for Loblaws for free,” said Gossen.

“It’s this disturbing trend of large corporations passing on labour to their customers.”

Loblaw said there should always be a cash lane open for Superstore customers.

“We are sorry to hear about these stories and have reached out to stores to clarify our expectations,” said spokesperson Catherine Thomas.

“As a customer-centric company, our goal is to make shopping more convenient, not to mandate how customers check out their purchases.”

‘It’s probably a little trial balloon’

Shoppers and Superstore aren’t the first stores to face accusations of mandatory self-checkout. In November, CBC News interviewed two Walmart customers who complained that no cashier lanes were open at their local store during certain hours.

Walmart Canada said its goal is to have a cashier available at all times.

Toronto retail consultant Bruce Winder said retailers often experiment with different ways to cut costs. But he believes mandatory self-checkout is one experiment that won’t stick because, while some people love using the machines, other customers detest them.

“It’s probably a little trial balloon to see if they can get away with it,” says Winder, co-founder of the Retail Advisors Network. “But I’m certain that customers will revolt, and they’ll have to reverse it.”

Walmart Canada said its goal is to have a cashier available at all times for those who don’t want to use the self-checkout. (CBC)

The two Walmart customers said their store now appears to have backtracked on not providing cashiers at certain hours.

And Linda Chaikowski, the Shoppers customer in Winnipeg, has reported that during her most recent visit this week to the same store, she was allowed to pay at the cashier using her debit card.

“I’m glad they’re changing it and realizing that there’s an issue,” she said.

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Bridge: A Canadian school trying to smash the tech sector’s glass ceiling

Bridge: A Canadian school trying to smash the tech sector's glass ceiling

After graduating with a masters degree in chemical engineering from the University of Quebec in Chicoutimi, Meltem Kilic decided to pursue a different career path — in software development.

“Male colleagues of mine, developers, they’ve actually been so much in contact with technology since they were really young,” Kilic said. “That wasn’t the case for me.”

Although she now works as a software developer at Toronto-based software maker, the 28-year-old said advancing her career in the sector came with some doubts due to her late start.

Meltem Kilic, a graduate of Bridge, says she definitely sees less women in leadership roles and those who are new to the technology industry need more gender-diverse role models to look up to. (Submitted by Meltem Kilic)

That was compounded by the lack of gender diversity in leadership roles in her chosen field.

“When I look at the industry and community I see definitely less women in leadership roles,” Kilic said.

New people in the tech industry need more gender-diverse role models to look up to, she says, so the lack of them makes climbing the career ladder even harder than it would otherwise be.

After going to a coding bootcamp, Kilic decided to join Bridge School, a not-for-profit organization based in Toronto that offers free programs in advanced software development and product design to marginalized groups.

She is among 92 graduates from the school since it was founded in 2016.

“We started Bridge largely in response to a problem that is in the tech industry but in many male dominated industries,” said Emily Porta, executive director at Bridge School. “An issue where there is nowhere near enough women, agender and non-binary professionals working.”

Porta began Bridge as a passion project while also working at, which is one of the school’s lead sponsors, along with the Royal Bank of Canada. Bridge operates its business through funding from sponsors and donations. 

She said the organization is for those who are already in the technology industry, but don’t know what their next career step might be. The programs are meant to help professionals advance their careers in technology.

Emily Porta, the executive director of Bridge, says the Bridge team wanted to remove the economic barriers that many students in the technology industry face by offering the school’s programs for free. (Melissa Bennardo/CBC News)

Porta said the number one challenge the tech industry faces are people saying no to excellent talent, because they have preconceived gender-based biases that they may not even be aware of.

“You walk into a room and immediately you’re just labelled as a junior developer or junior in your career no matter how much experience you have,” said Purvi Kanal, the organization’s director of software development.

Removing economic barriers

Kanal said it’s common for marginalized groups to have to work exceptionally harder to get into the sector by paying for supplementary education like bootcamps that teach you skills to start a career in development and design.

Kanal said these bootcamps aren’t very cheap and they can cost about $10,000, which is why she wanted to ease that burden a little for people who already face an uphill struggle.

Economic disadvantage is just another way to marginalize  people.– Emily Porta , executive director of  Bridge School

“We really wanted to take those people who are willing to work so hard and give them those extra skills that they would need to stay in the industry and hopefully, eventually become leaders,” Kanal said.

There is a moral imperative to offer these programs for free, according to Porta.

“Economic disadvantage is just another way to marginalize people,” Porta said. “Coming from a low economic background myself … we didn’t want to put that barrier in front of our students.”

Tech’s diversity problem

Almost 80 per cent of companies globally haven’t fully prioritized putting more women in leadership roles, according to a recent study from the IBM Institute for Business Value

The study surveyed 2,300 executives and professionals — an equal amount of men and women — across 10 industries worldwide including the technology industry.

The study showed that only 18 per cent of the companies surveyed had women in top leadership positions.

Paul Papas, the global leader for IBM digital strategy & iX, said what gets in the way of a company having better gender diversity and representation in the workplace is the lack of urgency in making this a priority.

Papas said striving for gender equality in the workplace is not only the right thing to do, but there are real benefits to having more diverse representation at the top.

Only 12 per cent of the firms surveyed made advancing women in leadership roles a business priority. “They outperformed along key metrics of revenue growth, profitability and innovation,” Papas said.

He added that those people already in leadership roles should be fostering a culture of inclusion. According to the study, most of those leaders are men. 

No easy fix

Porta said this problem in the technology industry is not easy to fix, and companies need to be dedicated in order for change to happen.

“I think most companies and the people who run most companies don’t prioritize it anywhere near highly enough,” Porta said. “I don’t know why they don’t just look at the numbers and make some changes.”

In a short amount of time, both Porta and Kanal said they’ve seen graduates go on to advance their careers.

“Slowly we can see some progress there as well where we’ve seen a few of our graduates take on advance leadership roles in development and become team leads,” Kanal said.

Graduates like Kilic are still giving back to the place that helped kick-start their careers. She is now a mentor at Bridge, and she hopes she can share her story with other women beginning their careers in the tech sector.

I know a lot of women are in my situation where somehow in their careers they thought about tech, but they felt that they weren’t really caught up for that,” Kilic said.

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LNG Canada could approve expansion before natural gas export facility is complete

LNG Canada could approve expansion before natural gas export facility is complete

One of the most expensive energy projects in Canada could soon get larger.

Construction ramped up this month on LNG Canada’s massive natural gas export facility in northern B.C., but the consortium is now talking about possible expansion.

LNG Canada is a consortium of companies led by Shell Canada and includes Petronas, PetroChina, KOGAS and Mitsubishi Corporation. The project includes a pipeline across B.C., a port and terminal that liquifies the gas so it can be transported on tankers. The potential price tag of the entire project has been estimated to be upwards of $40 billion.

Chief executive Andy Calitz spoke confidently of how it’s likely just a matter of time before the ownership group commits to an expansion of the Kitimat site. A decision on making the investment could happen before the initial five-year construction project is finished.

A 34,000-tonne heavy lift vessel carrying barges for LNG Canada is completing pre-construction work in Kitimat harbour, to prepare the existing port for larger vessels once the new $40-billion natural gas export facility is constructed. (Youtube/LNG Canada)

“The five joint venturers now have probably two main considerations in their head as to when they go ahead with [the final investment decision] on the expansion trains,” said Calitz, referring to the system of compressors that turn the natural gas into a liquid. “The first one is, what is the market doing? What is the market doing globally in terms of Korea, Japan and China, South Asia and India?”

The other consideration is whether construction of the initial facility and pipeline are on schedule and on budget. 

Positive for beleaguered sector

The pipeline, which had faced a blockade from a group of Indigenous hereditary chiefs, is being built by a subsidiary of TransCanada. Calitz said construction is underway on the pipeline in the area where the blockade occurred.

Calitz said he has no doubts the pipeline and export facility will be completed. 

“Right now, the focus of the team is to make sure that we give them that confidence [to move ahead],” said Calitz, commenting on efforts to keep the construction on schedule.

LNG Canada is a joint venture of Shell, Petronas, PetroChina, KOGAS and Mitsubishi Corporation. (Submitted by LNG Canada)

Any talk of an expansion is positive for the beleaguered natural gas sector. It has suffered from poor commodity prices for much of the last decade. The additional spending by LNG Canada would also be noteworthy, considering the decline of investment in Western Canada’s energy sector since the oil price crash in 2014.

“I’m surprised they’re talking about [the expansion], but I’m not surprised that they see the potential for it,” said Kevin Birn, an analyst with IHS Markit.

‘They win in terms of scale’

Birn pointed to the growing demand in Asia, the plethora of natural gas in Western Canada, and the relatively close geography of Canada and Asia as reasons the project likely makes financial sense.

“They win in terms of scale,” he said about the possible expansion. “And you have that resource potential that is so large there. It’s not a question about whether they can supply that expansion.”

The joint venture partners will look at construction progress of the initial facility and pipeline. 1:02

Calitz didn’t want to speculate about the cost of the expansion. But he said there would be many cost savings compared to the initial facility, including the fact there would be no need to repeat the costly expense of site preparation.

“The joint venturers see a very competitive export project for the second phase,” said Calitz, who made the remarks to journalists in Houston at CERAWeek, an annual global energy forum.

Outstanding dispute over import tariffs

One outstanding issue for LNG Canada is the continued dispute over import tariffs for fabricated industrial steel within the Chinese modules used for the project.

LNG Canada has argued it cannot afford to wait years to see whether Canadian manufacturers can construct the large LNG modules it needs. However, industry stakeholders such as the Canadian Institute of Steel Construction want Ottawa to maintain the border duties.

LNG Canada has launched a judicial review of the import tariffs. The partner companies decided to go ahead with the project despite the outstanding issue and the potential costs associated with it. 

When asked if the dispute with Canada Border Services Agency has been resolved, Calitz took a long pause before answering, “Not fully.”

From 2 trains to 4

LNG facilities are comprised of a system of compressors known as trains. The LNG Canada facility under construction will have two trains, and Calitz said the expansion would be for an additional two trains.

LNG Canada already has all the environmental permits for four trains, in addition to an export licence to operate all four trains for the next 40 years.

 “So, many things [are] very positively in place,” he said.

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TD bank predicts loonie may fall to 71 cents US as Canadian dollar’s outlook shifts ‘considerably’

TD bank predicts loonie may fall to 71 cents US as Canadian dollar's outlook shifts 'considerably'

A strong start to the year for the Canadian dollar — rising 3.5 per cent against the greenback in the first two months after a nearly eight per cent drop in value last year — had many wondering if this was the year the loonie would stage a comeback.

But, since the start of March, the Canadian dollar has fallen 1.3 per cent against the U.S. dollar as prospects for the Canadian economy have also dimmed.

Gross domestic product (GDP) contracted 0.1 per cent in January, following a deeper than anticipated slowdown that in the second half of last year.

Strategists at TD Securities say the Canadian economy has a “real problem on its hands,” which will lead to broad weakness for the currency going forward.

They predict the loonie will spend much of this year in range where it will cost between $1.35 and $1.40 Canadian to buy one U.S. dollar. Put another way, that means it could dip as low as 71 cents US against the greenback. That’s a more than five per cent decline from its current 75-cent level. 

“Prospects for Canadian dollar have shifted considerably to the downside over the medium-term. This comes in the wake of a poor fourth quarter GDP report, and the Bank of Canada returning to the drawing board on what it got wrong,” said Mazen Issa, senior foreign exchange strategist at TD securities, in a note on Friday. 

“To put it bluntly, the Canadian dollar has established itself uniquely as a “problem child” in the G10. The positives are hard to find.”

Issa thinks the Bank of Canada is now at the end of its tightening cycle after five interest rate hikes since mid-2017. If the central bank does move on rates this year, Issa says it will more likely be a cut.

“This dynamic should keep U.S. dollar – Canadian dollar [cross] elevated via the interest rate differential channel — especially given our view that the Fed has one last hike to deliver,” Issa said, suggesting another rate hike from the U.S. Federal Reserve would further strengthen the U.S. dollar.

The probability of an interest rate hike from the Bank of Canada is at zero per cent for the next six months at least, according to trading in investments known as overnight index swaps. 

“As much as the Canadian dollar is a price taker to global factors, the Bank [of Canada] can no longer ignore the fact that final domestic demand has now contracted two quarters in a row (with the fourth quarter registering a paltry -1.5 per cent),” Issa said.

“The last time this happened was in 2015. Then, the economy registered a technical recession and the bank provided “insurance cuts” due to the collapse in oil prices.”

Oil and the loonie

But so far this year, the benchmark price of U.S. oil — West Texas Intermediate (WTI) —has jumped almost 29 per cent on the back of production cuts from the Organization of the Petroleum Exporting Countries (OPEC), and Canadian energy producers.

However, Stephen Brown, senior Canada economist at Capital Economics, predicts another drop in oil prices, and slow wage growth are reasons why the loonie will decline to 72 cents US this year.

“We do not expect the rebound in oil prices to be sustained. Due to a combination of weak global demand and a likely pick-up in production in the U.S., we see WTI falling back to $45 US later this year,” Brown said.

“Although Alberta’s production cuts have proved effective at boosting Canadian oil prices relative to U.S. benchmarks, transporting oil by rail is not financially viable at the current low discounts.”

Meanwhile, Bipan Rai, head of North American foreign exchange strategy at CIBC Capital Markets, is also betting on the Canadian dollar to fall further, even though he expects the currency’s correlation to oil prices to wane. 

“As we’ve stated many times in the past, the Canadian dollar – crude oil correlation is hardly stable,” Rai said in a note. “We expect the relationship to weaken in the near-term.”

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