BC Ferries is buying four new ships from China with loans from the Canada Infrastructure Bank.DARRYL DYCK/The Canadian Press
The federal government’s Canada Infrastructure Bank provided $1-billion in financing for BC Ferries’ plan to buy four new ships from a Chinese state-owned shipyard, a fact that Transport Minister Chrystia Freeland did not mention last week when she sharply criticized the purchase.
Ms. Freeland sent a strongly worded letter last week to B.C. Transportation Minister Mike Farnworth expressing her “great consternation and disappointment” with the planned purchase.
The letter referenced a previous $75-million loan by the CIB for four other ferries and Ottawa’s annual grant for ferry operations, but did not mention that the bank is also providing $1-billion in low-interest loans for the specific purchase she was criticizing.
The letter also called on Mr. Farnworth to “verify and confirm with utmost certainty that no federal funding will be diverted to support the acquisition of these new ferries.”
In a statement to The Globe and Mail, CIB spokesperson Hillary Marshall confirmed the bank’s financing for the project but said the CIB is not involved in BC Ferries’ decisions related to awarding contracts.
The bank is planning to formally announce its involvement Thursday.
Transport Minister Chrystia Freeland answers questions in the House of Commons on June 12. Ms. Freeland made no mention of CIB's $1-billion in financing to BC Ferries in her letter to B.C. Transportation Minister Mike Farnworth last week.Sean Kilpatrick/The Canadian Press
Relying on a Chinese shipyard at a time when Canadian political leaders are vowing to boost support for Canadian manufacturers has generated considerable controversy since the contract was first announced by BC Ferries on June 10.
Ms. Freeland’s letter says: “China has imposed unjustified tariffs on Canada, including 100-per-cent tariffs on canola oil, meal, and pea imports.”
She later added: “There have also been ongoing concerns regarding threats to security, including cybersecurity, from China.”
Mr. Farnworth distanced the B.C. government from the decision within hours of the announcement, saying he was worried about procuring ships from any country that is actively harming the Canadian economy with tariffs.
He also said BC Ferries, which provides passenger and vehicle ferry services for provincial coast and island communities, is an independent company that makes its own operational decisions.
B.C. Premier David Eby said earlier this month that he was “not happy” with the plan and that ferries should be “built here at home in Canada.”
BC Ferries says state-owned Chinese builder clear choice for new vessels despite trade war
The province changed BC Ferries’ governance in 2003 from a Crown corporation to a private company that receives public funding.
A BC Ferries management document dated June 12 indicates the project received significant support from the CIB.
The document states that on March 28, BC Ferries entered into an agreement with the CIB to provide $1-billion in loans at a rate of 1.8 per cent a year, which is below market rates. The document says the difference between that rate and fair market value will be classified as government funding for the project.
While the corporate document, titled “Management’s Discussion & Analysis of Financial Condition and Financial Performance” is posted online, the $1-billion in CIB financing has not yet been formally announced by the bank or BC Ferries.
In response to a request for comment from The Globe, the CIB provided an advance copy of a news release that will announce the funding.
It says the loan of up to $1-billion will be allocated as two tranches, with up to $690-million for the new vessels and up to $310-million toward electrification infrastructure.
“The CIB’s partnership with BC Ferries further helps to improve one of the world’s largest ferry networks,” said CIB CEO Ehren Cory in a statement in the news release. “In addition to their environmental benefits, the new larger vessels will have the capacity to transport more people and vehicles on some of its marquee routes, extending the network’s capacity.”
The news release does not mention the plan to purchase the vessels from China.
In a news release, CIB CEO Ehren Cory said the bank's partnership with BC Ferries will help to modernize one of the world’s largest ferry networks.Tijana Martin/The Globe and Mail
Ms. Freeland’s office declined to comment on her letter to the province or the CIB funding for the ferries purchase, referring questions to the office of Gregor Robertson, the Minister of Housing, Infrastructure and Communities and a former mayor of Vancouver.
Mr. Robertson is a first-term MP who was named to cabinet on May 13.
The CIB is an arm’s-length Crown corporation that reports to Parliament through the Infrastructure Minister.
Renée LeBlanc Proctor, a spokesperson for Mr. Robertson, said in an e-mail to The Globe on Wednesday that the procurement decision of BC Ferries “is extremely disappointing” and that more should be done to buy and build domestically and from Canadian allies.
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“While our government had no influence or participation in this procurement decision, we will still emphasize once again the importance of supporting domestic industry,” she said. “Minister Robertson has asked for a briefing from the Canada Infrastructure Bank’s CEO on the kind of considerations this decision raises.”
BC Ferries president and CEO Nicolas Jimenez said in an e-mailed statement to The Globe on Wednesday that the organization is facing serious financial pressures.
“Strategic financing tools like the CIB loan allow us to invest in new, reliable vessels while easing pressure on future fare increases,” he said.
Kalen Lumgair, a spokesperson for Mr. Farnworth, said the provincial Transportation Minister and Ms. Freeland have spoken by phone and they discussed how to expand capacity so that future ships can be built in Canada.
Ms. Lumgair also repeated that the B.C. government has no role in the arrangement between the CIB and BC Ferries.
The CIB was created in 2017 as a Crown corporation with a $35-billion budget and a mandate to help spur investment in Canadian infrastructure projects.
One of the ways the bank supports projects is by providing low-interest loans, such as the one it is providing to BC Ferries.
The Liberal government under prime minister Justin Trudeau created the bank after it was recommended by an advisory council on economic growth. The panel included Michael Sabia, who at the time was president and chief executive officer of the Caisse de dépôt et placement du Québec, the province’s pension fund.
After the infrastructure bank faced criticism in its early days for a slow start, the federal government briefly appointed Mr. Sabia to lead the bank.
Prime Minister Mark Carney recently named Mr. Sabia as Clerk of the Privy Council, where he will be expected to help implement the Liberal government’s focus on quickly supporting large new infrastructure projects.
The bank’s pace of activity has picked up considerably in recent years. Earlier this month, it announced its 100th investment, which will support the construction of a new wind farm in Quebec’s Gaspésie-Îles-de-la Madeleine region.
The Liberal Party platform included pledges to direct the CIB to prioritize investments in agriculture, fisheries, agrifood and the food supply chain. It also said that a re-elected Liberal government would expand the kinds of projects the CIB can support to be more in line with First Nation, Inuit and Métis priorities and would explore options for an Indigenous Infrastructure Bank.
Those pledges have not yet been formalized as federal-government policy since Mr. Carney’s Liberals won a minority government in late April.