Investment bankers along Bay Street struggling with a lack of deals must be salivating over the upcoming PrairieSky offering--Encana will spin off an energy trust that will be biggest IPO the street has seen since shares in Sun Life were sold in 2000.
PrairieSky Royalty Ltd is already attracting interest among investors for the company’s unique business offering. The royaltry trust will hold what is known as “mineral fee title land,” a vast 5.2 million acres of Alberta soil that was part of an 1880s-era deal between Ottawa and the Canadian Pacific Railway. The company received the land, and the minerals rights, and so pays no government royalties when resources are extracted from the land. Encana ended up with the land when PanCanadian Energy, formerly the oil-subsidiary of CP, merged into Encana.
“There is absolutely no fee paid to the crown because they own the resource,” a Calgary lawyer explained to the National Post.
This is a unique legal structure that will see PrairieSky collect royalties and fees from energy companies operating on the land, while paying out money royalty-free to shareholders. No wonder the deal is attracting interest from investors.
Encana has already upped the price of shares to between $26.50 and $28 apiece. The share float has also been expanded since the deal was announced. The total value of the issue could the largest Canadian IPO since Sun Life Financial Inc.'s $1.8-billion float in 2000 according to Bloomberg. Encana shares are up 30 per cent on the year.