Canadian construction giant Aecon Group has withdrawn from a consortium that is bidding to build and operate the Gordie Howe International bridge connecting Windsor and Detroit as it awaits Ottawa’s verdict on whether it will be allowed to be acquired by a giant Chinese state-owned enterprise.
The Globe and Mail reported last month that the federal government had decided for security reasons that Toronto-based Aecon would be prevented from working on the $4.8-billion Gordie Howe bridge if it is taken over by China Communications Construction Company (CCCC), which is 63-per-cent owned by Beijing.
Senior federal sources told The Globe that the Trudeau government made the decision that it would be unacceptable for any U.S. administration – but particularly one led by President Donald Trump, who regards China as a security and trade threat – to have one of the most important infrastructure projects connecting both countries to be built and run by a Chinese government-backed firm.
Former CSIS official urges Ottawa to reject China firm’s Aecon takeover
The winning bidder in the competition to construct the Gordie Howe crossing would not only build the bridge, but manage it for the next 30 years as part of a design-build-operate contract.
Aecon President and CEO John Beck, who has launched a public relations campaign to win federal approval for the $1.5-billion Chinese buyout, said in a statement Saturday that his company was pulling out of the bridge construction bid, a project that amounts to a top federal infrastructure priority as Canada seeks to broaden its most vital trade conduit.
However, Mr. Beck maintained that the decision to withdraw was unrelated to national security concerns arising from the proposed takeover by CCCC.
“This was a commercial decision based on the company’s growing backlog of projects and its ability to meet its resource commitments for any project in which it participates,” he said. “The decision was made independently of the company’s proposed transaction with CCCC International Holding Ltd (CCCI) and not at the request of any government, government agency or authority.”
Although a full-scale national security review of the acquisition is ongoing, federal sources say Ottawa could never allow a Chinese-owned Aecon to get access to key data on the flow of goods and people across the soon-to-be constructed Gordie Howe bridge. One official described the data as a treasure trove of information that would be available to a hostile state.
Last week, former CSIS director Ward Elcock said the federal cabinet should reject the Aecon takeover because the company is heavily involved in critical Canadian infrastructure.
“It seems to me very difficult for the government to approve the Aecon acquisition without incurring significant risks to national security going forward,” he said in a speech to the Macdonald-Laurier Institute. “It would certainly not be my recommendation to allow it to proceed.”
Aecon was put up for sale last August and was sold to CCCC for $1.5-billion in October, pending federal approval. The Fortune 500 giant is one of the world’s largest engineering and construction firms.
Cabinet ordered a full national security review of the Aecon takeover in February under section 23.5 of the Investment Canada Act, invoking a section of law used when it believes an investment “could be injurious to national security.” This review was extended for another 45 days.
Mr. Beck would not comment on when he expected a decision from the government on whether to allow or reject the controversial takeover.
“The company is not commenting on any specific aspect of the approval process and, as previously disclosed, expects the deal to close before the end of the second quarter,” he said.
One senior official has told The Globe and Mail it’s possible Ottawa might order Aecon to divest itself of other critical infrastructure work in the energy sector, such as the $2.75-billion contract to refurnish the Darlington Nuclear Generating Station in Clarington, Ont. Aecon is also working on the massive Site C hydroelectric dam project in British Columbia.
Mr. Beck has played down security concerns that have been raised about its involvement in critical infrastructure projects, such as nuclear facilities – contracts that would pass on to CCCC if the transaction is approved by Ottawa.
The Canadian CEO and Lu Jianzhong, president of the Chinese construction conglomerate’s international holding company, wrote an op-ed in The Globe and Mail on Friday saying Aecon does not own any intellectual property related to nuclear energy “and the Candu reactors on which it works are already widely used in China.”
The two executives dismissed concerns raised by Mr. Ward and Richard Fadden, another former CSIS director, that a China-owned Aecon would act as an arm of the one-party state. Many state-owned enterprises are adding Communist Party units to their companies on the orders of Chinese President Xi Jinping as he seeks to increase the party’s influence in these government firms.
“Perhaps the wildest assumptions of all is that Aecon’s employees would be complicit agents of a foreign government, which is a deep insult to the thousands of Canadian men and women who work on Aecon constructions sites across Canada and the unions that represent them,” Mr. Beck and Mr. Lu wrote in their recent column.
The Chinese construction company was banned from bidding on projects for the World Bank for eight years – ending in 2017 – after one of its two founding companies was found to have engaged in bid-rigging and collusion.
In all these incidents, CCCC or its subsidiaries have denied the allegations.
Robert Fife
Steven Chase