Evidence of meeting #86 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was reits.
A recording is available from Parliament.
Conservative
The Chair Conservative Brian Pallister
Where is the income trust investment index now, where it was October 30?
President, Canadian Association of Income Funds
I don't know about the indexes, but I do know in terms of market capital we're down somewhere between $17 billion and $22 billion to October 31, so the losses are still there, in terms of capital loss.
Conservative
The Chair Conservative Brian Pallister
You alluded earlier to takeovers, and so on. Some of the takeovers I've read about were at premium prices, not at fire-sale prices. I'm wondering if you'd like to clarify a little bit on that.
President, Canadian Association of Income Funds
When you calculate that premium, it's important to note whether that premium is to the current market price or to the pre-October 31 price. I think in many cases you will find that, yes, there's a significant premium to the current market price because these trusts have been devalued by what took place on October 31.
If you go back, though, and you look at the pricing relative to the pre-October 31 pricing, you will find very small premiums.
Liberal
Conservative
The Chair Conservative Brian Pallister
No. We'll go to Mr. Plamondon now.
Mr. Plamondon, you have three minutes.
Conservative
The Chair Conservative Brian Pallister
You may be able to get in later in the order, Mr. McKay, if you speak to your colleague Mr. Thibault.
Mr. Plamondon.
Bloc
Louis Plamondon Bloc Bas-Richelieu—Nicolet—Bécancour, QC
Ms. Lysack, earlier we discussed the child care system in Quebec, which is working very well. This is what we call the $7-child care system. People all over Canada said that they wanted to implement this model, with a few changes in some cases. The federal government and the provinces seemed to want this.
How do you explain the fact that the implementation was not as quick in the other provinces as it was in Quebec?
Executive Director, Child Care Advocacy Association of Canada
Well, I certainly believe that Canada could learn much from Quebec and the way that Quebec implemented their system. It's hard to understand why other provincial governments would not move as quickly on this when we saw the effect in Quebec—a 40% economic return in the first year because of increased taxes, because women, who have tended to be under-employed, had the opportunity to go to work and know that they had good, reliable, high-quality child care arrangements for their children.
Conservative
The Chair Conservative Brian Pallister
Thank you very much, sir.
We'll continue now with Mr. Dykstra.
Conservative
Rick Dykstra Conservative St. Catharines, ON
Thank you, Mr. Chair.
I find it interesting that my good friend and colleague Mr. McKay indicated that we legislated this through a press release. I'd argue it's probably a little better than legislating it through an e-mail, but I guess we'll leave it to others to work on.
Mr. Michaleski, I've listened to and heard the presentations of many of your colleagues, including Mr. Kesteven, who's obviously been here before. I certainly respect why you're here and the points you want to make.
I have financial report after financial report telling me it's not as bad as you say it is. Why are they all wrong and you're right?
President and Chief Executive Officer, Pembina Pipeline Income Fund, Canadian Energy Infrastructure Group
I'm not sure what financial reports you're referring to, sir.
Conservative
Rick Dykstra Conservative St. Catharines, ON
I'm referring to comments that were made today in the National Post by Mr. Ben Cheng, who said, “The knee-jerk reaction to the coming income trust meltdown in 2011 is overdone”.
I'm referring to the sale of the Vancouver-based Gateway Casinos Income Fund, which yesterday or a couple of days ago had an agreement that would see the gaming company sold to New World Gaming of Australia for $1.3 billion. The unit price of $25.26 looks anything but cheap, being 25% to 26% above the latest market value.
I could go on. These stories are ones I'm sure you've read. You guys continue to come here, and you come back to one theme or one comment.
At the very beginning of your presentation, you said it's our job to represent our constituents.
President and Chief Executive Officer, Pembina Pipeline Income Fund, Canadian Energy Infrastructure Group
That's correct.
Conservative
Rick Dykstra Conservative St. Catharines, ON
It's your job to represent your constituents, who are your investors.
President and Chief Executive Officer, Pembina Pipeline Income Fund, Canadian Energy Infrastructure Group
Yes, absolutely.
Conservative
Rick Dykstra Conservative St. Catharines, ON
A decision's been made, rightly or wrongly, in your opinion, but a decision's been made. It would seem to me that your job, as you stated very clearly to me and to this committee, is to make sure you do the best you possibly can for your clients.
President and Chief Executive Officer, Pembina Pipeline Income Fund, Canadian Energy Infrastructure Group
Yes, and it's why I'm here. It's why I'm here seeking an exemption with respect to dealing with infrastructure.
I don't think we're different from our competitors south of the border, the U.S. MLP market. I think it's a vibrant market, and we compete with that market. It's why I'm here. We need to be able to operate in a situation where we can compete with the people south of the border and with the tax exemptions, because I think it's what we'll need to do.
With respect to people saying it's not a bad deal, I'll echo Mr. Kesteven's point. We're trading at a discount to today's market value. If you went back to October 31, you'd see the premium is not going to be there.
On the other part of that question, sir, the entities that are acquiring Gateway Casinos and others are U.S. or foreign private equities. They're not going to pay any taxes here in Canada. I think it's a shame.
Conservative
Rick Dykstra Conservative St. Catharines, ON
The other point I'd like to make is this, and I'm sorry for being direct with you on this. When Mr. Del Mastro asked you specifically about the environmental impacts, you made the point that whether it's Liberal legislation in terms of wanting to stay on with Kyoto or whether it's the approach we've taken, you don't really know much about the environment and you're not prepared to comment on it.
It would seem to me, based on your earlier comment about making sure that looking out for your constituents would be a priority, it's obvious that whichever party forms the government, there's going to be an impact on the environment. We happen to be the party that's forming the government now, and we're obviously going forward on a plan.
Conservative
The Chair Conservative Brian Pallister
Thank you, Mr. Dykstra.
We'll now conclude with Monsieur Thibault.
Liberal
Robert Thibault Liberal West Nova, NS
I have one question, but I want to make a couple of points of clarification first.
One is that a decision hasn't been made. An intention's been announced in a bill, it's now being considered by Parliament, and it's at committee for that reason.
Second, if we look at a deal like the casino deal, we can say it's a premium on the latest market value. But what would those market values have been if nothing had changed and the income trust had continued to evolve as it did? Surely, yes, you can say the index has come up a little in the last months. But if you do that proportionate to the TSE general index on stocks and bonds, it doesn't compare.
As far as Governor Dodge, yes, he said there were problems with the income trust sector. But he also said it was an excellent vehicle for certain sectors and it needed some repairs--not a nuclear bomb, but surgical improvements.
The question I have for Mr. Kesteven is this. Do you know of individuals who would have increased their exposure in the income trust sector because of the promise by the Prime Minister and the Minister of Finance, and were therefore burned more?
President, Canadian Association of Income Funds
Yes, tragically, I do.
In my day job as an investor relations manager with PrimeWest Energy I've known a number of people who bought additional units in PrimeWest in October, previous to the announcement, specifically based on the fact that--and I quote--“the Conservative government is now in place and they've promised to leave the income trusts alone”.
So clearly, there are individuals...and some of them have lost substantial amounts of money based on what occurred.
