By TOM PETERS
The government of Nova Scotia has made a huge financial commitment to Irving Shipbuilding offering up $304 million in loans from the Nova Scotia Jobs Fund to support Irving’s $25 billion federal combat vessel shipbuilding program. Irving was selected last October as the yard to build the vessels under the National Shipbuilding Procurement Strategy (NSPS).
The province’s assistance package includes a $260 million, 29-year forgivable capital loan that is secured and interest-bearing, and a secured and interest-bearing repayable marine industry loan of $44 million for human resource development, technology and industrial development. The province also committed to loan guarantees, if needed, as the contracts are finalized.
The money also provides access to working capital, to help modernize the yard and ensures that beyond the cost of the ships, there will be no additional cost to the federal government.
Provincial spokesman Toby Koffman, said in an email: “Irving Shipbuilding has the opportunity to earn these incentives based on investment in capital costs and employment targets for itself and its direct suppliers. The $44 million marine industry loan was specified under the NSPS because an opportunity of this size has the potential to benefit the entire marine sector. This can only enhance Nova Scotia’s position as a centre of excellence in these innovative fields and the province is doing everything possible to maximize these benefits for Nova Scotians.”
The employment target for this investment is an average of 4,000 jobs for the majority of the 30 years of these contracts. For confidentiality reasons the province does not disclose information on interest rates.
Irving spokeswoman Mary Keith said governments assisting industry is nothing new in Canada. “Strategic investments have been made in the offshore, technology, auto and aerospace industries in order to spur growth and prosperity for the benefit of the province, region and country as a whole,” she said. “Irving Shipbuilding has invested more than $100 million in infrastructure and facilities’ modernization in the last five years alone. The company expects to invest another $5 million to $10 million per year over the lifetime of the contract for ongoing infrastructure maintenance and upgrading – a total of $150 to $300 million,” she added.
As part of the agreement, Irving will contribute $250,000 per year, over the next 30 years to support the Irving Shipbuilding Centre of Excellence at the Nova Scotia Community College. The centre will provide opportunities for Nova Scotians to learn about career options in the shipbuilding industry and about the training involved.
“Irving recognizes it will need a skilled and adaptable workforce to deliver these contracts. It will need to have well-trained young people looking to build a life in Nova Scotia. Additional opportunities will be identified in the near future,” Koffman said.
The province said it will work with Irving to develop an early apprenticeship program and a 10-year workforce plan to ensure Nova Scotians are aware of future opportunities and to ensure that the province’s education and training institutions can plan for, and deliver relevant training. Irving will continue to work with the province’s Ships Start Here partnership to participate in supply chain development as work continues on a strategy to help companies develop skills and certifications to become a supplier or subcontractor.
Koffman noted that if the province had not stepped up with its assistance package, “Irving would not have won the bid. NSPS was a competitive process and Irving approached the province last spring to ask for support to strengthen its bid. The company explained how the scoring worked and stressed that its bid had to include no costs to Canada or it would be a strike against them.”
Koffman said if Irving had invested its own money “it would have driven up costs, which in turn would have had a negative impact on the bid.”
Keith said that in preparing the bid “the company did an in-depth assessment of the bid evaluation structure and how we felt our competitors would rank within that structure.” She said it was “imperative” Irving’s bid would result in “zero cost to Canada”. The province’s financial commitment allowed us to submit a bid that had zero cost to Canada.”
She said that, “In total, the project is estimated to generate $2.8 billion in tax revenue during the next 19 years. The maximum forgivable amount of the loan is estimated to be between 6 per cent and 9 per cent of the projected $2.8 billion increase in provincial tax revenue (Conference Board of Canada study). We expect the capital loan to be drawn down in phase one of the construction period over the next three to four years and phase two which will be complete within the next 10 years.”