BNP - Letter to Shareholders - August 2017 The purpose of this monthly letter is to bring BNP shareholders up to date, on issues and news, since the last letter.
- The following is a summary of activities over the past month:
- Met with our executive in charge of upstream (oil and gas) and our power generation partner, this past week. Our core focus is on the raising of funding, prior to the end of Q4. The funding is now proposed to consist of a small equity placement, followed by unsecured debt. We will now be working towards $30 million in debt, followed by a larger equity placement, once shares begin trading again. This is a smaller dollar value than our previous $160 million plan, but is still positive for shareholders.
- Business development activities:
McDonalds Restaurants update – Max Pasley passed away this spring at the age of 96. Max was an early invester in the McDonalds concept, through Ray Kroc, and held the McDonalds franchises for Alberta from the 1960’s through 1976, when he sold off the Northern Alberta territory to McDonalds Canada. He held the Red Deer territory, south to the border, with a focus on the larger cities such as Red Deer, Calgary, Medicine Hat and Lethbridge. He sold 48 restaurants back to McDonalds Canada about 5 years ago and held his remaining 7 restaurants, which will soon be sold back to the company. I was advised that when McDonalds Canada decides to sell these company owned stores (soon to be 55 restaurants) to franchisees, they prefer to deal with individual owner / operators. Costs to become a franchisee, of one of the higher grossing restaurants is about $3.5 million, which provides a gross profit of about $800,000 annually. This allows a restaurant investment to pay out in approximately 5 years. McDonalds Canada generally selects single owner / operators as franchisees, not corporate investors such as BNP. It turns out, that this is not a suitable investment for BNP as a corporation. Any BNP shareholders interested in such an opportunity must apply with McDonalds Restaurants in Burnaby. A total investment of $5 million is required, which will provide $1.5 million for working capital, as all expenses must be paid cash on delivery (COD).
Wendy’s recently sold off all of their corporately owned restaurants in Canada, to a single corporate investor. This investor already owned 80 Wendy’s Restaurants in the USA.
Oil prices are holding steady in the $47.35 US for WTI crude. Gasoline prices are also rising due to refinery outages in Texas. Kinder Morgan is planning to proceed with the oil pipeline expansion to BC, which will create employment in Alberta and BC.