Evidence of meeting #5 for Transport, Infrastructure and Communities in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was ferries.
A video is available from Parliament.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
Thank you, Mr. Chair.
Mr. Jimenez, thank you for joining us today.
The media reported that no Canadian company bid on the contract to build the required ferries. You said so yourself.
Do you know why no company in the country submitted a bid?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
The best answer we have for that is simply that the yards that initially expressed an interest ultimately determined they weren't able to participate because of commitments they have to the national shipbuilding strategy. The yards are at full capacity currently. We didn't have the luxury of waiting for those yards—for their order books to become open and available—because the ships, essentially, need to be replaced now. We would have had to wait up to a decade to consider evaluating those yards.
Again, they didn't bid. They are filled up with national shipbuilding commitments, so we went with what we had.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
I believe that you talked about inviting Canadian companies to bid on the shipbuilding contract. Which Quebec companies were approached?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
Yes, I can confirm that one of the shipyards in Quebec—Davie—expressed an initial interest in participating but, again, ultimately declined to participate in the procurement.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
I'm not an expert on how this works. In general, how do you advertise an open process that asks for bids? Since not everyone necessarily knows that you have vessels to build, do you contact the companies yourself? I'm asking because Ocean Group in Quebec could build these types of vessels. Was this group also contacted?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
I can say to the member that, essentially, in the course of a procurement, we have a number of phases. One of the phases is soliciting expressions of interest. We do that globally. We encourage yards all over the world to express their interest and whether they'd like to be active and engaged in the procurement. We then go through a qualifying process wherein we set out minimum conditions. It's at that point that we move into the actual formal receipt of bids.
In the context of engaging yards, I would say we engaged them not just here in Canada but also around the world.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
That doesn't quite answer my question, but never mind. Perhaps you don't have the answer. I'll move on to another question.
Given your recent experience…it seems that no local company was able to bid on your project. I personally contacted some companies that told me that they were very busy with federal contracts. Others also told me that there was a competitiveness issue. Prices in China can't compare with prices in other parts of the world. Moreover, China monopolizes a significant part of the global shipbuilding market. It accounts for around 65% of the market share. Given China's prices, obviously no one can compete with it. This causes issues.
Does it concern you that a foreign power—not a direct ally of Canada—is cornering most of the world's shipbuilding market?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
There's a lot of strength inside the Canadian shipbuilding market. As I was saying earlier in my comments, we do more than $100 million a year of work with yards in British Columbia, specifically, to maintain, repair and upgrade our vessels, so I think there is strength.
What's also true, again, is that those yards are being fully committed to federal contracts. They don't have scale in the same way to be able to commit to that program and do other work that comes through. One of the challenges we see is that not a lot of ships outside of navy and coast guard vessels are being built in Canada. In fact, I don't think there has been a ship over 3,000 gross tonnes built in the last 10 years in Canada.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
You said earlier that, when it looked like a Chinese supplier would be chosen, you contacted people in the federal government for advice on national security, for example. Since the Canada Infrastructure Bank was acting as lender in this case, I imagine that you also informed the bank at some point in the process.
Did the Canada Infrastructure Bank offer you the loan before the Chinese supplier was chosen, or after? When the bank was told that the Chinese state‑owned company had been chosen to build the vessels, did the bank ask you any questions or did it find this perfectly normal and natural?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
Throughout the process of working with the bank on the loan and certainly towards the latter part of our procurement it was clear that we were looking at a short list that involved Chinese shipyards. I would say that the bank was aware, not necessarily of the yard itself, but certainly of where the ultimate decision would lie as we got closer to the decision point.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Jimenez.
Next, we'll go to Mr. Albas.
Mr. Albas, the floor is yours. You have five minutes, sir.
Conservative
Dan Albas Conservative Okanagan Lake West—South Kelowna, BC
Thank you, Mr. Chair.
Thank you, Mr. Jimenez.
On July 7 Minister Robertson was on CKNW, on Jas Johal's show, where he said that the bank had no idea that these ships that they were going to finance were going to be made in China. However, Richard Zussman reported on Global News that BC Ferries had said that they had known the whole time.
Who's correct here?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
Again, I would go back to comments I literally just made, which is to say that we had conversations with the CIB in the development of this loan.
Conservative
Dan Albas Conservative Okanagan Lake West—South Kelowna, BC
Were they aware that it was to buy ships in China? Yes or no, please.
President and Chief Executive Officer, British Columbia Ferry Services Inc.
It was in the March time frame that we advised the bank that the short list, because that's only when it was known, was going to be focused entirely on shipyards in China.
Conservative
Dan Albas Conservative Okanagan Lake West—South Kelowna, BC
Okay, so they were aware. Thank you very much, sir.
Second, I've had a former trade commissioner contact me. I've had a CEO who's had extensive marine experience, and you would know his name. The first thing they said to me was, Mr. Albas, why did BC Ferries go to the CIB, when China subsidizes its steel and also subsidizes its shipbuilding? Why not go to an export development agency and get them to front the money? Why should it be the taxpayer? Why is it not the Chinese taxpayer?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
I would go back again to comments I made earlier. The relationship we have with the CIB actually predates this particular program. They are participating on another program that is currently in flight to build a smaller class of vessel, providing significant value to us. It's not just the ships. In this program—
Conservative
Dan Albas Conservative Okanagan Lake West—South Kelowna, BC
Is it because you had a pre-existing relationship? Did you reach out to any credit development agencies, sir?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
I can talk about the relationship we have with the CIB and the value that that loan brings, not just to our business, but certainly to our customers. It's a game-changing—
Conservative
Dan Albas Conservative Okanagan Lake West—South Kelowna, BC
Did you, sir, seek out other forms of funding besides the CIB?
It's a yes or no question.
President and Chief Executive Officer, British Columbia Ferry Services Inc.
We were in a relationship with the CIB.
Conservative
Dan Albas Conservative Okanagan Lake West—South Kelowna, BC
Okay. I'm taking that as a yes and moving on, because clearly you don't want to talk about that.
I've heard you reference that you want to leave the geopolitics to politicians, largely.
The question I ask is about supply chains. How do we know in five years that China is going to be a reliable partner and we're not going to see tariffs put on like they have put on many Canadian goods? How do you know that they're going to be friendly enough that you're not going to see a huge escalation in the cost of parts?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
The contracts that we have provide explicit guarantees in terms of pricing and other elements of risk, so that we are protected through the life of the program.
Conservative
Dan Albas Conservative Okanagan Lake West—South Kelowna, BC
A state-owned enterprise could listen to the BC Ferries contract or its masters at the PRC.
What if China were to invade Taiwan, and Canada were to oppose that, joining with our allies against it, while these ships are being made? It's not just the ships. It also has $1 billion of taxpayers' money. Have you thought any of this through?
President and Chief Executive Officer, British Columbia Ferry Services Inc.
I am going to correct the member, because the money is a loan to BC Ferries, and it's a loan that BC Ferries will pay back with interest to the CIB. The relationship we have with the yard is structured under a contract that gives us significant guarantees throughout the life of the program. We feel very confident that it addresses all the risks—