/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
Trading Symbol: FCE.UN
CALGARY, Oct. 18 /CNW/ - Fort Chicago Energy Partners L.P. ("Fort Chicago") announced today that upon its conversion to a corporation effective January 1, 2011, as discussed further in this news release, the new corporation will be named Veresen Inc. The name Veresen Inc. was inspired by the Latin phrase, vis vires, which means "with power, force, strength", together with the word "energy".
Mr. Stephen H. White, President and Chief Executive Officer of Fort Chicago, commented: "Our goal was to develop a new and distinctive name that is reflective of qualities that are meaningful to us and that will be readily identifiable by all of our stakeholders. We believe that Veresen Inc. fully achieves all of those goals."
Fort Chicago also announced that it has entered into an arrangement agreement (the "Arrangement Agreement") with Fort Chicago Energy Management Ltd. (the "General Partner"), the general partner of Fort Chicago, and Veresen Inc., a wholly-owned subsidiary of Fort Chicago, relating to a proposed arrangement (the "Arrangement") under Section 193 of the Business Corporations Act (Alberta) involving Fort Chicago, the General Partner, Veresen Inc. and the holders (the "Unitholders") of Class A limited partnership units of Fort Chicago (the "Class A Units"). The Arrangement will result in the conversion of Fort Chicago from a limited partnership to a taxable Canadian corporation, namely, Veresen Inc. The Arrangement is expected to become effective on January 1, 2011 (the "Effective Date"). Fort Chicago intends to seek approval of the Arrangement and other matters from Unitholders at a special meeting of Unitholders scheduled for November 23, 2010 (the "Meeting").
Rationale and Anticipated Benefits of the Arrangement
The board of directors of the General Partner (the "Board of Directors") believes that the proposed Arrangement will enable Fort Chicago to pursue its current strategic plan and strategy of efficient capital management for the benefit of Unitholders. Given the changes to Canadian federal income tax legislation relating to publicly traded specified investment flow-through trusts and partnerships ("SIFTs") which will be effective January 1, 2011 for Fort Chicago, resulting in the diminished value of a publicly traded limited partnership structure at that time, the Board of Directors believes that the best opportunity for creating value is to move to a corporate structure effective on January 1, 2011, allowing Fort Chicago to continue to benefit from its current limited partnership structure for the maximum time permitted, and thereafter continue as a dividend paying public corporation.
In addition, the Board of Directors believes that the Arrangement provides a number of compelling and strategic benefits including, among other things, the expectation that the Arrangement would:
- remove Fort Chicago from any uncertainty that exists today in the
publicly traded income trust and partnership marketplace;
- remove the restrictions on non-resident ownership applicable to
"Canadian partnerships" (as defined in the Income Tax Act (Canada)
(the "Tax Act")), which may provide Veresen Inc. greater access to
capital and improved liquidity;
- permit Veresen Inc.'s financial and operational performance to be
more easily valued relative to its corporate peers;
- position Veresen Inc. to invest in and structure attractive
opportunities for growth and expansion;
- provide for the payment of dividends to shareholders of Veresen Inc.
with a view to sustainability while at the same time delivering
strong returns through capital appreciation; and
- be accomplished, from a Canadian federal income tax perspective, on a
tax-deferred rollover basis for Unitholders.
Recommendation of the Board of Directors
The Board of Directors, based upon its own investigations and on the advice of independent legal counsel and tax advisors, has unanimously determined that the Arrangement is in the best interests of Fort Chicago and the Unitholders. The Board of Directors unanimously recommends that Unitholders vote in favor of the Arrangement.
Details of the Arrangement
Pursuant to the Arrangement, Unitholders will receive one common share of Veresen Inc. (each, a "Common Share") in exchange for each Class A Unit held as of the Effective Date. Upon completion of the Arrangement, Unitholders will own all of the issued and outstanding Common Shares and Veresen Inc. will own all of the issued and outstanding Class A Units and carry on the businesses presently carried on by Fort Chicago. The board of directors and management of Veresen Inc. will be comprised of the current members of the board of directors and management of the General Partner. The Arrangement will not result in any benefits for, or change of control, termination or other payments being made to, any officers, directors or employees of Fort Chicago or any of its subsidiaries or of the General Partner.
An information circular of Fort Chicago with respect to the Arrangement and other matters to be considered at the Meeting is expected to be mailed on or about October 27, 2010 to Unitholders of record at the close of business on October 4, 2010. A copy of the information circular will also be available on Fort Chicago's website at www.fortchicago.com and on SEDAR at www.sedar.com.
The Arrangement must be approved by a majority of not less than 66?% of the votes cast by Unitholders, other than Fort Chicago, the General Partner or any of their respective affiliates, voting in person or by proxy at the Meeting. Completion of the Arrangement is also subject to the satisfaction or waiver of certain conditions set out in the Arrangement Agreement including, among other things, the approval of the Court of Queen's Bench of Alberta and receipt of all requisite regulatory approvals and material third party consents and approvals.
The Toronto Stock Exchange (the "TSX") has conditionally approved, among other things, the listing of (i) the Common Shares issuable pursuant to the Arrangement in substitution for the issued and outstanding Class A Units, (ii) the Series C Debentures to be assumed by Veresen Inc. in substitution for the Series C Debentures of Fort Chicago following the completion of the Arrangement, and (iii) the Common Shares issuable upon the conversion, redemption or maturity of the Series C Debentures to be assumed by Veresen Inc. in substitution for the Class A Units issuable upon the conversion, redemption or maturity of the Series C Debentures of Fort Chicago. The listing of the Common Shares and the Series C Debentures on the TSX is subject to Veresen Inc. fulfilling all of the listing requirements of the TSX.
Effect of the Arrangement on Distributions
The monthly distribution payable on January 21, 2011 to holders of Class A Units of record on December 31, 2010 will not be affected by the Arrangement and will be paid in the usual manner.
Fort Chicago currently anticipates that there will be no change in its distribution policy following the completion of the Arrangement and that Veresen Inc. will declare cash dividends on a monthly basis in the amount of $0.0833 per Common Share (representing an annual dividend of $1.00 per Common Share), the first of which will be paid on February 23, 2011 to shareholders of record on January 31, 2011. Veresen Inc. expects to designate any dividends paid as eligible dividends for Canadian income tax purposes, which are anticipated to qualify for the enhanced federal dividend tax credit in Canada.
Pursuant to the Arrangement, it is proposed that Fort Chicago's Premium Distribution(TM) and Distribution Reinvestment Plan (the "DRIP") be amended and restated so that, among other things, shareholders of Veresen Inc. may participate in the amended and restated DRIP with respect to cash dividends declared and paid by Veresen Inc. on the Common Shares and all existing participants in the DRIP will be deemed to be participants in the amended and restated DRIP without any further action on their part.
With respect to the distribution payable on January 21, 2011, Fort Chicago's obligation to issue Class A Units under the DRIP in respect of such distribution will be satisfied instead by the issuance of Common Shares by Veresen Inc. reserved and authorized for issuance under the amended and restated DRIP.
Effect of the Arrangement on Outstanding Debt
Fort Chicago's $300 million unsecured committed revolving credit facility (the "2004 Revolving Credit Facility") expires on April 1, 2011. Fort Chicago is currently negotiating the terms of a new revolving credit facility which will either amend or replace the 2004 Revolving Credit Facility (the "New Revolving Credit Facility"). Fort Chicago expects that any indebtedness outstanding under the 2004 Revolving Credit Facility or the New Revolving Credit Facility will be assumed by Veresen Inc. subject to satisfaction of customary conditions. Fort Chicago expects to finalize the New Revolving Credit Facility no later than January 1, 2011.
Fort Chicago's 5.60% senior unsecured notes due June 28, 2014 (the "Senior Notes") will become notes of Veresen Inc. having substantially the same terms as the Senior Notes without the consent of any holders of the Senior Notes and Veresen Inc. will assume all of the rights, covenants, obligations and liabilities of Fort Chicago under the Senior Notes
Fort Chicago's 5.75% convertible unsecured subordinated debentures, Series C due July 31, 2017 (the "Series C Debentures") will become debentures of Veresen Inc. having substantially the same terms as the Series C Debentures without the consent of any holders of the Series C Debentures and Veresen Inc. will assume all of the rights, covenants, obligations and liabilities of Fort Chicago under the Series C Debentures. In addition, holders of Series C debentures will be entitled to receive Common Shares, rather than Class A Units, on the basis of one Common Share in lieu of each Class A Unit which they were previously entitled to receive, on conversion, redemption or maturity.
Since Fort Chicago's 6.75% convertible unsecured subordinated debentures, Series B ("Series B Debentures") of Fort Chicago mature on December 31, 2010, no Series B Debentures will remain outstanding as at the Effective Date.
As previously announced, Fort Chicago's indirect wholly-owned subsidiary, Fort Chicago Power Ltd., has given notice to holders of its 6.25% exchangeable unsecured subordinated debentures due October 31, 2012 (the "Exchangeable Debentures") of the exercise of its right to redeem all of the Exchangeable Debentures which remain outstanding on October 31, 2010. As a result, no Exchangeable Debentures will remain outstanding as at the Effective Date.
Fort Chicago is a publicly traded limited partnership based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America. Its Class A Units are listed on the TSX under the symbol FCE.UN and the Series B Debentures and the Series C Debentures are listed on the TSX under the symbols FCE.DB.B and FCE.DB.C, respectively. Fort Chicago is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; an NGL extraction business which includes an interest in a world-class extraction facility near Chicago; and a power business with power facilities in Ontario, New York, Colorado and California, district energy systems in Ontario and Prince Edward Island, waste heat power facilities along the Alliance Pipeline in Saskatchewan and renewable power projects in British Columbia. Fort Chicago and each of its pipeline, NGL extraction and power businesses are also actively developing a number of greenfield investment opportunities that will be a key source of future growth. In the normal course of its business, Fort Chicago and each of its businesses regularly evaluate and pursue acquisition and development opportunities.
Class A Unit Ownership Restrictions
Fort Chicago is organized in accordance with the terms and conditions of a limited partnership agreement which provides that no Class A Units may be held by or transferred to, among others, a person who is a "non-resident" of Canada, a person in which an interest would be a "tax shelter investment" or a partnership which is not a "Canadian partnership", each for purposes of the Tax Act. This restriction will not apply to the securities of Veresen Inc. following the Arrangement.
Certain information contained herein relating to, but not limited to, Fort Chicago and its businesses and the anticipated completion of the Arrangement constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Fort Chicago expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to the Arrangement including, but not limited to, the timing and completion of the Arrangement, the anticipated benefits of the Arrangement, the receipt of the necessary consents and approvals for the Arrangement to proceed, and the anticipated Canadian federal tax treatment of dividends declared and paid on the Common Shares of Veresen Inc.. The risks and uncertainties that may affect the forward-looking statements in this news release include, but are not limited to, the following factors: Fort Chicago's ability to successfully obtain the regulatory, stock exchange, court and any other third party approvals necessary to complete the Arrangement; the failure to complete the Arrangement and the resulting continued application of the SIFT legislation to Fort Chicago subsequent to January 1, 2011; the failure to realize the anticipated benefits of the Arrangement; and changes in Canadian federal tax laws. Additional information on risks, uncertainties and factors that could affect Fort Chicago's operations or financial results is included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time Many of the risks described in such filings will also be applicable to Veresen Inc. following completion of the Arrangement. Readers are also cautioned that such additional information is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time.
Although Fort Chicago believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual results achieved will vary from the information provided herein and the variations may be material. Fort Chicago makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Fort Chicago does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.
(TM) denotes trademark of Canaccord Genuity Corp.
SOURCE Veresen Inc.
For further information: For further information: Stephen H. White, President and C.E.O.; Richard Weech, Vice President, Finance and C.F.O., Fort Chicago Energy Partners L.P., Livingston Place, Suite 440, 222 - 3rd Avenue S.W., Calgary, AB, T2P 0B4, Phone: (403) 296-0140, Fax: (403) 213-3648, www.fortchicago.com