Tignish Co-op plans to sell home-heating division

Tignish Co-op is getting out of the residential heating oil business after delivering fuel to homes in western P.E.I. for more than 54 years.

The community-owned co-operative sent letters to members earlier in December saying it planned to sell off its home heating oil business. The co-op is in final talks with a potential buyer, but the deal has not been finalized.

CBC News has learned that potential buyer is Parkland Fuel Corp., based in Calgary, which also owns Island Petroleum.

The change over is expected to happen Jan. 17, according to a letter sent to Tignish Co-op members. CBC obtained a copy of the letter from one of the 500 members.

Darren MacKinnon, general manager of Tignish Co-op, says the changes should be seamless for home heating oil customers. 

"I think it's important to know that these decisions sometimes aren't easy," MacKinnon said from his office at the Tignish Co-op store.

"Our board has worked very hard over the last little while ensuring our co-op is well-positioned financially and that we are making good decisions that are in the best interests of the long-term validity of our co-op."

'Not interested in investing'

The co-op and its fuel distributor, Parkland Fuel, were going to have to make major capital investments if they wanted to stay in the highly-competitive home heating oil delivery business, said MacKinnon.

The co-op was going to have to replace its fleet of aging vehicles at a cost of nearly $400,000, and the distributor would have to replace its fuel depot just outside Tignish, at a cost of more than $900,000, he said.

In the letter to members, Ruby Arsenault, president of the board of directors of the Tignish Co-operative Association, wrote, "Our fuel distributor has informed us based on our volume and industry trends, that they are not interested in investing in this equipment."

MacKinnon said with a combined capital investment of $1.3 million for both new vehicles and an overhaul of the tank farm, the co-op and its fuel distributor would need six times the business it currently has to remain competitive. 

"It doesn't make business sense for us to continue on with an investment like that given the trends that are showing in our market," said MacKinnon.

Seamless transition expected 

Those trends include more people switching to heat pumps to heat their homes and an increasingly competitive market, where the co-op is going up against giants in the industry like Irving Oil.

Customers receiving furnace oil or diesel products should not see any interruption in service, said MacKinnon.

Once the sale is finalized, the new fuel distributor plans to notify customers of the changes, he said.

I haven't had anybody that's really discouraged or negative about the change.— Darren MacKinnon, Tignish Co-op

CBC News left several messages for both Parkland Fuel and Island Petroleum. In an emailed statement, Leroy McKinnon, senior specialist corporate communications with Parkland Fuels, said, "We have not announced any transactions on Prince Edward Island and as company policy we do not comment on speculation."

Tignish Co-op continues to operate the retail store, gas bar and Home Hardware franchises in Tignish, Alberton and O'Leary.

The 4,250 member co-op employs 110 people and has an annual payroll of more than $2.5 million.

MacKinnon said he believes the sale of the home heating oil division is in the best interest of the co-op. It will release the purchase price for the home heating oil division during its annual meeting in April.

"Once the situation is explained thoroughly to our membership, I haven't had anybody that's really discouraged or negative about the change."

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