BUSINESS

Alberta ventures beyond oil

GILLIAN STEWARD August 8 1983
BUSINESS

Alberta ventures beyond oil

GILLIAN STEWARD August 8 1983

Alberta ventures beyond oil

BUSINESS

Alberta has had little need for intense economic concern for more than 30 years. The undisputed fountainhead of the province’s financial good fortune in the past decade has been the oil and gas industry. Revenues from that sector swelled the Alberta Heritage Savings Trust Fund to $13 billion last year. But since early 1982 the energy boom has dramatically collapsed. Now, many office towers and houses are vacant and the once robust inflow of immigrants seeking a share of the wealth has been reversed. Ever since the pitfalls of overdependence on the sector became painfully clear, government planners have been converting to a new, if belated, goal: increasing Alberta’s industrial diversification.

The clearest evidence of the strategy lies in the government’s creation of Vencap Equities Alberta Ltd., a fledgling investment company with headquarters in Edmonton. First promised in Premier Peter Lougheed’s 1982 election campaign, Vencap will have $200 million from the Heritage Fund to invest in the coming months. That money, in addition to another $44 million that the company hopes to raise in a share offering expected in the fall, would make the fund one of the few in the world with both government and business backing as well as the largest single pool of venture capital in the country. And that prospect is sending ripples of excitement through the province’s business community. Although Vencap is still in the midst of hiring

new employees and settling into its new offices, President Derek Mather, 50, says that he already has more than 90 requests for funds on his desk.

The provincial government will provide the primary financing for Vencap, but Mather stresses that it will not be a Crown corporation. “The government is more like a banker to us,” he said, “a banker that wants its loan repaid.” Indeed, Mather and his management team will not see any money from the province until Vencap raises at least $25 million from its stock offering. What is more,

Vencap’s board is noticeably free of politicians and civil servants.

Banks and real estate developers, as well as oil and gas companies, will not have access to Vencap’s funds. As its name suggests, Vencap is particularly interested in high technology, especially the sort that relates to computers and the growing field of biotechnology. As well, the fund will entertain proposals from manufacturers of resource extraction and processing machinery. But recently organized firms are excluded. Says Mather: “We want to work with companies that already have a track record and the po-

tential to become major players.” As a result, one of the areas in which Vencap will concentrate its initial efforts is medium-sized firms that it believes have the capacity to increase their sales to the $50-million to $100-million range.

Beyond that the criteria are fairly loose. Applicants do not have to be Canadian-owned and, if they are already based within the province, they may seek funds to expand outside its borders. As Mather, who has 20 years experience in the venture capital business, put it, “The main criterion is that the expansion broadens the province’s industrial base and will be in the longterm interest of Albertans.”

For the past five years Mather has commuted between Montreal and Calgary in an effort to restore the fortunes of Calgary-based Westmills Carpets Ltd. He had been appointed president of the ailing firm by the Canadian Enterprise Development Corp., a venture capital firm. Mather had planned to return east when Westmills’ financial health improved but he changed his plans when offered the Vencap job. Last week he bought a house in Edmonton and he now plans to move his family west as soon as possible.

No one, including Mather, expects Vencap’s program to wean Alberta single-handedly from its overreliance on the energy sector. But few experts dispute the need for further diversification. More than half the provincial economy still depends on oil and gas activity. And as a report last week by the independent Canadian Petroleum Monitoring Agency showed, even conservatively run Canadian-controlled oil companies that avoided the postNational Energy Program takeover fever are suffering. Their profits dropped by 14 per cent in 1982 over 1981. And the slump has taken a heavy toll in the province for the past two years. Calg gary’s unemployment 8 rate has soared to 11 5 per cent from four per I cent. Developers have delayed implementing plans for new office towers, and many executives who were transferred from Eastern Canada to the province are returning home. Lougheed has always stressed that the Heritage Fund should be preserved until the province’s oil and gas wealth could no longer be counted on. The creation of Vencap signals that the day has arrived.

GILLIAN STEWARD in Calgary.