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Tim Irons, a quality control technician at Trican, checks the state of fluid that will be pumped into the ground during the hydraulic fracturing process at an operation near Bowden, Alta., Tuesday, Feb. 14, 2012.

Jeff McIntosh/The Globe and Mail

Orange Capital LLC, the activist investor that successfully pushed for change at InnVest REIT, is looking to go two-for-two on successful Canadian campaigns in just a few months.

Newalta Corp. last week said that it was nominating two new directors after consulting with "certain major investors, including New York-based Orange Capital LLC, and respected their views" on board renewal.

Orange, run by portfolio manager Daniel Lewis, was behind the short proxy fight at InnVest, which eventually gave in to his demands to rework the board and how the company is managed. The two new directors proposed for Newalta include one that Orange had put forward for the InnVest board.

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At Newalta, Orange is seeking a sale of the company's industrial waste services decision, and a focus on its business helping energy companies deal with waste from activities such as drilling. Newalta has hired Royal Bank of Canada to look at options that might include a sale or an initial public offering. Mr. Lewis said he wants to ensure that the company follows through with a split.

"I give them a lot of credit for constructively engaging," Mr. Lewis said in an interview. "That said, we will continue to monitor the situation and will urge the company to execute a swift separation or sale of the industrial division."

The bet is that without the slower-growth industrial division, Newalta shares will garner a higher multiple. The risk is that a lack of diversification will hurt Newalta if drilling activity slows, reducing demand for its services. However, if one believes in the long term secular trend that drilling activity in North America is going to keep growing, and will involve more fracking fluid that will need to be cleaned up, then that might be a risk worth taking.

According to Newalta's disclosure, the industrial division has been the slowest-growing of its divisions. It also has skinnier margins.

Industrial posted a compound annual growth rate of 4 per cent from 2010 to 2013.

The oilfield division grew 9 per cent a year. The new markets division, which is focused on new energy opportunities in Canada and the U.S., posted a 32 per cent growth rate.

The company says in its annual report that the oilfield and new markets divisions "currently offer the best combination of high returns, low risk, and stable cash flows.

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