As an equity partner in the idle DSME factory in Trenton, the province appears stuck in a conflict of interest.
Government holds a 49-per-cent stake in DSME Trenton Ltd., a small part of the South Korean shipbuilding empire owned by Daewoo Shipbuilding & Marine Engineering Co., Ltd.
The province has given and loaned the business $56.3 million since mid-2010 when the deal was closed to launch a new enterprise at the former TrentonWorks site, where railcars used to be built. DSME Trenton’s plan was to build turbine towers and make blades for windmills.
But the market was soft and despite promises to build a workforce of 500, employment peaked at 220.
This week, 31 employees at the plant were building nothing.
Project manager Scott Covey said Friday: “There has not been any recent hiring, but if an order is secured we will be hiring once again.”
The last products to come out of the factory in October were components for tidal power. Covey said DSME Trenton was “working towards” supplying high-pressure units for the tank trailers, among other possibilities.
This public-private equity partnership has yielded very little gain for the public’s investment. The business itself seems to be a building with very little purpose.
But the sour deal for taxpayers is made worse by a shroud of government secrecy.
These were the basic terms of the 2010 deal. DSME would contribute $20.4 million to the Trenton business and would hold 51 per cent of the common shares. The province would invest $19.6 million to hold the remaining shares, earning it a seat on the board.
Through the Industrial Expansion Fund, which later became the Jobs Fund and was widely derided as a “slush fund,” the province also offered a financial package to kick-start manufacturing. This included a $30 million loan for new equipment, a loan of up to $6 million for working capital, and a forgivable loan of $4 million to buy land and buildings.
When asked this week how much of the unforgivable loans had been repaid, a department of business spokeswoman gave this answer by email: “That level of financial information is not available as it could violate existing agreements with the company or harm the competitiveness of the business. Government will provide as much information as possible while maintaining compliance with privacy laws and inherited agreements.”
Almost word-for-word, Covey provided the same answer to the same question.
When pressed to explain why government could not disclose such basic information, the premier’s press secretary, Laurel Munroe, wrote: “We can’t comment until we understand our obligations as laid out in agreements, such as the Shareholders Agreement.” Munroe also repeated the stock phrase: “These are agreements our government inherited.”
That’s bunk. The Liberal government “inherited” those documents when it took office in October 2013 and has had plenty of time to ask its lawyers to read them.
But that’s a quibble compared with the deeper problem created when government became a partner in this private enterprise. When the Liberals won the election, they swore to do away with cabinet-led, self-interested, and secret deals with the companies that receive public money.
To back this up, the new government passed the Accountability in Economic Development Assistance Act, which binds the minister in charge to make private sector deals more transparent.
That act only applies to agreements made on or after Oct. 22, 2013. But non-disclosure to the public seems to be contrary to the spirit of this law. Government should be obliged to share such basic information with the public, who are the true shareholders.
Rachel Brighton, an independent journalist and former magazine publisher, writes on industry, agri-business, economics and rural issues.