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ENMAX Corporation
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filer granted exemption from the prospectus requirement in connection with trades of commercial paper/short term debt instruments that do not meet the rating threshold condition requirement of the short-term debt exemption in section 2.35 of National Instrument 45-106 Prospectus and Registration Exemptions -- Relief granted subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.A., 2000, c. S-4, s. 144.
Citation: Re ENMAX Corporation, 2021 ABASC 12
February 2, 2021
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF ENMAX CORPORATION (the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation), in respect of certain negotiable promissory notes or commercial paper maturing not more than one year from the date of issue (Notes), that distributions of Notes issued by the Filer and offered for sale in Canada are exempt from the prospectus requirement under the Legislation (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in respect of the Exemption Sought in each of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation governed by the Business Corporations Act (Alberta) with its head and registered office located in Calgary, Alberta.
2. The Filer is not a reporting issuer in any jurisdiction, and is not in default of any requirement of the securities legislation in any jurisdiction.
3. All of the shares of the Filer are owned by the City of Calgary.
4. The Filer has implemented a commercial paper program that involves the sale, from time to time, of Notes issued by the Filer to purchasers located in Canada.
5. The offering and sale of Notes issued by the Filer are subject to the prospectus requirement under the Legislation.
6. Sections 2.35(1)(b) and (c) of National Instrument 45-106 Prospectus Exemptions (NI 45-106) provides that an exemption from the prospectus requirement of the Legislation for short-term debt (the CP Exemption) is only available where such short-term debt: (a) "has a credit rating from a designated rating organization ... that is at or above" certain prescribed short-term ratings, and (b) "has no credit rating from a designated rating organization ... that is below" certain prescribed short-term ratings.
7. Prior to March 25, 2020 the Notes had a designated rating of "R-1 (low)" from DBRS Limited (DBRS), which satisfied the rating categories prescribed in the CP Exemption under sections 2.35(1)(b) and (c) of NI 45-106.
8. Accordingly, prior to March 25, 2020, the Notes were offered and sold in Canada pursuant to, and in accordance with, the CP Exemption.
9. On March 25, 2020, DBRS issued a news release indicating, among other things, that it had downgraded the Notes by one ratings notch to "R-2 (high)" (the Downgrade) with a stable trend, which is a lower rating than that required by the CP Exemption. The Downgrade was in response to the Filer's increased debt from the Filer borrowing to finance its acquisition of Versant Power (formerly Emera Maine), a regulated electricity transmission and distribution company, in March 2020.
10. As a result of the Downgrade, the Filer is no longer able to rely on the CP Exemption for the distribution of Notes, and the Filer ceased distributions of Notes following the Downgrade.
11. All Notes will have a maturity not exceeding 365 days from the date of issuance, and will be sold in denominations of not less than $250,000.
12. The Notes will be offered and sold in Canada only:
(a) through investment dealers registered, or exempt from the requirement to register, under applicable securities legislation in Canada (Canadian Dealers); and
(b) to persons or companies (Canadian Qualified Purchasers) that are "accredited investors" as defined in NI 45-106, other than those that are any of the following:
(i) an individual referred to in any of paragraphs (j), (j.1), (k) and (l) of that definition;
(ii) a person or company referred to in paragraph (t) of that definition in respect of which any owner of an interest, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, is an individual referred to in any of paragraphs (j), (j.1), (k) and (l); and
(iii) a trust referred to in paragraph (w) of that definition.
13. The Filer will require each Canadian Dealer to apply procedures to ensure that sales of Notes by such Canadian Dealer, as well as any subsequent resales of previously issued Notes by such Canadian Dealer, are made only to Canadian Qualified Purchasers in accordance with paragraph 12 of this decision.
Decision
Each of the Decision Makers is satisfied that the decision concerning the Exemption Sought meets the test set out in the Legislation to make the decision.
1. The decision of the Decision Makers is that the Exemption Sought is granted in respect of the distribution of Notes, provided that:
(a) each Note:
(i) is not convertible or exchangeable into, or accompanied by a right to purchase, another security other than a Note;
(ii) is not a "securitized product", as defined in NI 45-106;
(iii) is of a class of Notes that has a rating issued by a "designated rating organization" or a "DRO affiliate", both as defined in NI 45-106, at or above one of the following rating categories:
Designated Rating Organization
Rating
DBRS Limited
R-2 (high)
Fitch Ratings, Inc.
F1
Moody's Canada Inc.
P-1
S&P Global Ratings Canada
A-1 (Low) (Canada national scale)
and has no rating below:
Designated Rating Organization
Rating
DBRS Limited
R-2 (high)
Fitch Ratings, Inc.
F1
Moody's Canada Inc.
P-1
S&P Global Ratings Canada
A-1 (Low) (Canada national scale) or A-2 (global scale)
(b) each distribution of Notes is made:
(i) to a purchaser that is purchasing as a principal and is a Canadian Qualified Purchaser; and
(ii) through a Canadian Dealer;
(c) each Canadian Dealer has agreed to apply the procedures referred to in paragraph 13 of this decision; and
(d) for each jurisdiction of Canada, the Exemption Sought will terminate on December 31, 2025.
For the Commission:
"Tom Cotter"
Vice-Chair
"Kari Horn"
Vice-Chair