Bas-Caraquet shipyard financing details clear from start, Groupe Océan says

The Quebec company that's part of the troubled shipyard deal in northeast New Brunswick is backing up a key part of the Liberal government's version of events.

But Groupe Océan is also contradicting another one of cabinet minister Victor Boudreau's assertions: that the Liberals were kept in the dark about a flaw in the financing plan.

It's the latest development in a controversy that has seen the Gallant government try to blame the previous Progressive Conservative government for the fiasco.

The province announced last weekend it would buy the New Brunswick Naval Centre, pay off its debts, and complete upgrades at the facility that could cost up to $38 million.

• Bas-Caraquet shipyard deal sees PCs, Liberals blaming each other
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• Liberals were given inaccurate picture of shipyard deal, Boudreau says

Boudreau says the facility was "set up to fail" because of flaws in a deal approved by the previous Progressive Conservative government in July 2014.

That memorandum of understanding said the centre, incorporated by the Town of Caraquet and the Village of Bas-Caraquet, would have to borrow $17 million, something the two small municipalities were never able to do, Boudreau said.

Philippe Filion, a spokesperson for Groupe Océan, told CBC News on Thursday that everyone involved in the July 2014 memorandum of understanding — the company, the naval centre, and PC government officials — knew that was part of the deal.

"In the agreement of 2014, the principal fact was there, and the Centre Naval assured us they could find the financing for the floating dry dock," Filion said.

"That is the commitment the Centre Naval made … We signed all these documents with the Centre Naval, so for us, it was solid and it was real."

Filion said Quebec management consultant Michel Beaudry, then the CEO of the naval centre, "told everybody he would be able to find the financing. Michel had letters and commitments from different banking institutions."

PCs announced MOU, Liberals, funding

Then-premier David Alward was in Caraquet to announce the MOU in August 2014, just before the provincial election campaign began. In May 2015, Premier Brian Gallant announced the provincial funding.

The centre was to borrow $4 million from lenders to match the province's grant for initial infrastructure work. Ottawa contributed $2 million.

Not mentioned by the Liberals in their May 2015 announcement was that the naval centre would have to borrow another $13 million to finance the dry dock, which Groupe Océan would build and then lease.

But the centre wasn't able to borrow the money, and starting last August, it was not able to pay many of its suppliers. Eventually Groupe Océan stopped work at the site, throwing 28 people out of work.

That in turn forced the province to step in to buy the centre and assume its debts and future costs.

Boudreau has repeatedly said the Liberals' hands were tied by the MOU signed by the PCs when they were in office.

I think [the Liberals] knew. It's just they thought, like we did, that the Centre Naval would be able to find the financing. We all trusted the Centre Naval's commitment.- Philippe Filion, Groupe Océan 

"We're fixing a situation that the former government put these two municipalities in," he said on Wednesday during a legislative committee session.

Provincial law prevents municipalities from borrowing the amount set out in the MOU and from spending money on job incentives, Boudreau said.

The PCs now say their agreement was intended to let private-sector players invest in the centre, though they haven't said what companies they had in mind.

While Filion is backing up Boudreau's version of events on the July 2014 agreement, he is contradicting another key part of the minister's explanation.

Boudreau said earlier this week the Liberals went ahead with the funding last May because they didn't know it was up to the naval centre to borrow the $17 million. The cabinet briefing was "inaccurate," leaving out that information, he said.

Filion said that's not what he remembers. "I think they knew from the start," he said. "I think they knew. It's just they thought, like we did, that the Centre Naval would be able to find the financing. We all trusted the Centre Naval's commitment."

Briefing materials didn't include MOU

Boudreau insisted again Thursday that the the Liberal cabinet was kept in the dark when Regional Development Corporation officials presented them with briefing materials.

In fact, he said, those materials didn't even include the July 2014 deal signed by the PCs.

"The MOU was not part of the [memorandum] that came to cabinet," he said. Looking back, he said, it probably should have been.

RDC's deputy minister at the time the Liberal cabinet was presented with the deal, Denis Caron, has refused to comment on the briefing materials.

Boudreau says he'd like to release the 2014 MOU, but Groupe Océan won't permit it. Filion says the document contains financial information its competitors could use.

Caraquet Mayor Kevin Haché said this week the naval centre believed its lease with Groupe Océan would be enough of a guarantee for the banks to lend it the $13 million, but it wasn't.

He said the banks felt the centre didn't have enough assets to put up as collateral.

Filion said the $13 million the province will now spend on the dry dock won't be lost to taxpayers, because once it's finished, Groupe Océan will lease it back for 20 years, reimbursing the entire cost.

"At the end, it's zero cost, no cost for the shipyard," he said.

The dry dock will be used by Groupe Océan at its other facilities in Quebec, but the company has plans to service other boats from its fleet in Bas-Caraquet.

The dry dock was never destined to stay in Bas-Caraquet, but was intended to kick-start the shipyard and allow workers there to get training for later projects.