Former McInnis Cement CEO Christian Gagnon posed with a cement plant under construction in August, 2015.Jacques Gratton/The Globe and Mail
With the dismissal of the chief executive of McInnis Cement, investors led by Bombardier Inc.'s founding family are hoping to get the $1.1-billion cement project in Quebec's Gaspé peninsula back on track amid massive cost overruns.
But finding a CEO replacement may not be easy. And with just months to go before a planned operational startup in November, workers will be scrambling to finish construction on Canada's first new cement production plant in decades at a time when an independent firm monitoring the project has already flagged safety on the site as a concern.
There has been a continuous effort to maintain and improve the health, safety and environmental management culture on-site, "which is positive," according to a confidential March progress report by consultancy Hatch Ltd. for National Bank of Canada, the project's main lender with a $360-million commitment. Still, with 10 first-aid interventions, seven medical treatments and three temporary work assignments on-site in March, the second-highest reported to date, increased caution is paramount, Hatch said.
"The high level of activities required to complete the construction of the Port-Daniel cement plant will create significant risks," Hatch said. "Safety management practices will have to be adjusted to tackle weekend and multishift work, as well as the increased safety risks due to a high density of workers."
McInnis Cement's project in the village of Port-Daniel-Gascons, Que., is an effort to produce up to 2.5 million tonnes a year of cement, the dry powder used to make concrete for construction, using the most state-of-the-art technology available. Made using limestone mined at the site, the cement would be shipped by sea to international markets.
Privately held McInnis announced earlier this week that Christian Gagnon, who was headhunted to lead McInnis, was no longer with the company and that it had begun an international search for a replacement. It named a new three-person executive committee to take over management of the business until a new CEO is found.
One key person on the executive committee is Ronald Bougie, a seasoned industrial development expert who recently oversaw the construction of Stornoway Diamond Corp.'s mine in Quebec's remote Otish Mountains. That endeavour was completed on time and under budget, and Stornoway began processing ore last month. Mr. Bougie will provide progress reports directly to McInnis Cement's board of directors.
The leadership changes come after The Globe and Mail in June revealed that the Bombardier-Beaudoin family and its private and public partners in the project were confronting cost overruns in the range of $400-million to $450-million. Caisse de dépôt et placement du Québec, a key investor, cited several factors for the blown budget, including a squeezed construction timeline that led to more employee overtime. The pension fund and other investors are now negotiating further funding for the project and the conditions attached.
The Caisse has said the profit potential for the venture is even stronger than it was when construction started, helped by strong demand for cement in the United States and a weaker loonie. But it is clearly flexing its muscle as a shareholder, and sources say its reassessment of the situation and demands for greater accountability resulted not only in Mr. Gagnon's exit but in the naming of management adviser Marc Baillargeon, a Caisse representative, to the executive committee.
Political pressure also may have played a role in Mr. Gagnon's departure.
In the wake of the financial revelations, Quebec Economy Minister Dominique Anglade told Radio-Canada that McInnis needed to "review its management" and that Quebec would not commit any more money to the venture. Privately, certain members of Premier Philippe Couillard's cabinet were said to be rattled by news of the cost overruns because the government has championed the project – even exempting it from new provincial environmental assessment hearings.
Quebec has pledged a $100-million equity investment in the project and offered a $250-million loan on commercial terms. According to documents tabled in the National Assembly in the spring, Investissement Québec, the government's investment arm, has already taken provisions for losses totalling $116-million on the loan. The provisions, which may or may not translate into realized losses over the loan's 10-year term, were required under accounting rules and reflect the high risk involved in the project.
Maryse Tremblay, a spokeswoman for McInnis Cement, said the project remains on schedule despite the leadership upheaval. She said it's imperative that the company have cement ready to sell by the spring of 2017, when orders are typically placed for the summer construction season.
McInnis's cement project is the largest industrial project active in Quebec, with some 400 workers labouring at the Port-Daniel construction site during weekdays this past March, according to the Hatch report. That number has since swelled to more than 600 and will increase further in the weeks ahead, Ms. Tremblay said. She noted that there has been no lost-time accident on-site for 550 days.
"Our investors and board firmly believe in this project and they want it to be completed," Ms. Tremblay said. "They've taken actions towards that end. What we announced this week is a first step and other steps will follow."
Nicolas Van Praet