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Quebec’s new McInnis Cement project a gamble for taxpayers

It was 20 years in the making, but it took Laurent Beaudoin's insistence and a big financial push from the Quebec government to make a $1-billion investment in a Gaspésie cement plant come true.

There is no overstating how big the McInnis Cement project is – and what it means for the region. Unemployment stands at 16.4 per cent, and good jobs are so rare many young people are forced to move south.

Opening up a limestone quarry, building a cement plant and a deep-sea terminal will create close to 1,500 direct jobs when the construction work starts this spring in Port-Daniel–Gascons, a village of less than 2,500 people. This is when Pauline Marois is expected to call a general election in the hopes of winning a majority.

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While the Quebec Premier balked at the suggestion she is already on the campaign trail, she did mention that voters in the traditionally liberal riding had made the right choice in voting for the Parti Québécois last time around. "This [investment] is the result of your choice," she said with a broad smile.

The McInnis Cement project bears great similarities with the defunct Gaspésia project. Gaspésia might not ring a bell in the rest of Canada, but in Quebec, it was the industrial equivalent of the Olympic Stadium – a monumental fiasco.

Both were huge industrial undertakings that required massive public funding. Both were unveiled by PQ governments seeking to get re-elected – Bernard Landry was Premier at the time. So Quebec taxpayers can wonder if history will repeat itself with the $250-million loan and the $100-million Investissement Québec stake, which comes on top of the $100-million the Caisse de dépôt et placement du Québec invested in the project.

Fortunately, things are different. While Ottawa and Quebec tried in 2003 to reopen a closed newspaper plant that employed 500 workers in Chandler, no private sector partner put in any money in the $465-million project with the exception of the labour-sponsored venture fund Fonds de solidarité FTQ. (Tembec invested $35-million, but by doing so, it erased a $35-million debt to the Quebec government.) The construction site was mismanaged and rife with union infighting, so when cost overruns forced Gaspésia into bankruptcy protection in 2004, both governments lost the $148-million they had already spent.

This project, on the other hand, is backed by Quebec Inc. pillars. National Bank of Canada leads the syndicate that is lending $275-million to McInnis Cement, a company controlled by the Bombardier-Beaudoin family holding, Beaudier, and by the Caisse, its partner. And those private investors did their homework when Laurent Beaudoin attempted to revive the old project spotted by his son-in-law Louis Laporte.

Mr. Beaudoin once ran a company that made cement panels in Bromont, but that he admits he knew nothing about the cement industry when he looked into the project. His family hired up to 70 experts and spent $75-million studying the industry. Beaudier is investing $150-million in the project, which makes it the family's biggest investment outside of Bombardier and BRP.

"I would rather invest in something concrete than in the stock market," says the 75 year-old entrepreneur.

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Both the Caisse and the National Bank conducted their own research. They found that the plant, with an initial cement capacity of 2.2 million tonnes per year, could ship its production to the eastern coast of the United States, where construction is finally picking up after it cratered during the Great Recession. Most cement plants in the region are old, and using the latest technologies will allow McInnis Cement to be competitively priced. "We haven't built a cement plant in close to 50 years, and it is a great project," said Louis Vachon, president of the National Bank.

The Quebec cement industry doesn't quite see it that way. It has lobbied the government to stop it from funding a new competitor. They believe there is still overcapacity in the North-East, and they argue McInnis Cement will not only export but dump its products in Quebec.

In a letter to Ms. Marois, Bob Cartmel, CEO of Lafarge Canada (East), said this competition might force them to make layoffs at their cement plant in Saint-Constant, which employs 105 workers. "We are very disappointed with the government. This creates an uneven playing field," said Lafarge spokesperson Regan Watts.

Of course, it is not very surprising that an industry with high barriers to entry would lament the arrival of an agile newcomer. But Lafarge and the like have a point, in as much as the Quebec government now has a vested interest in McInnis Cement's future with its 24 per cent stake.

Ms. Marois defended her government's investment. The $250-million loan was consented at a commercial rate – 3 per cent higher that the National Bank rate. But then, it is that Quebec loan that convinced the National Bank to come on board as senior lender, Mr. Beaudoin recounted. If McInnis Cement fails, the bankers get repaid first, and Quebec gets whatever is left.

Then there are the perks like the 10-year tax-break on investments over $200-million or the cheaper electricity McInnis Cement could apply for because of the 200 jobs created on a permanent basis, once the plant is running.

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"We are taking a big risk," Mr. Beaudoin said. No one understands that any better than the Quebec taxpayers.

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About the Author
Chief Quebec correspondent

Sophie Cousineau is The Globe and Mail’s chief Quebec correspondent. She has been working as a journalist for more than 20 years, and was La Presse’s business columnist prior to joining the Globe in 2012. Ms. Cousineau earned a master’s degree in journalism from the University of Illinois and a bachelor’s degree in economics and political science from McGill University. More


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