BC Ferries CEO, two MPs to testify in federal review of $1B loan for Chinese-built vessels

The House of Commons transport committee agreed yesterday to launch a review of the $1B loan from the Canada Infrastructure Bank (CIB) to fund BC Ferries’ new Chinese-built vessels.

The review will determine why BC Ferries chose to outsource to a Chinese company, as well as CIB’s decision to loan the money for the project. The transport committee will hear testimonies on the purchase in the next 30 days. The motion states that recommendations must be voted on within an hour of the review’s conclusion.

Of the $1B loan, $690M will go toward four new hybrid vessels—built by Chinese state-owned shipyard CMI Weihai—and up to $310M will go toward electrification infrastructure at major ports (including Victoria and Vancouver).

BC Ferries’ CEO Nicolas Jimenez will testify in Ottawa, along with the CEO of CIB, Federal Transportation Minister Chrystia Freeland, and Housing and Infrastructure Minister Gregor Robertson.

The motion was submitted by Conservative MP Dan Albas, who criticized CIB for approving the loan.

CIB said in a June 26 release that without its financing, “the new ferries wouldn’t likely be purchased, and every year of delayed purchase risks more service disruptions, reduced travel options, and employment gains.”

CIB estimates that repairs and refits over the lifespan of the four vessels alone will eventually lead to $1B+ generated for the province’s maritime sector by BC Ferries.

Jimenez said in the same release that the investment from CIB prevents fare hikes and will help the company “save $650M in debt interest charges.”

No bids from Canadian shipyards: lack of government funding blamed

The criticism surrounding the decision to hire CMI Weihai centres on the fact that no Canadian maritime workers are set to be involved in the construction of the ships.

In a June 20 letter from Freeland to BC Transportation Minister Mike Farnworth, the federal minister expressed her "great consternation and disappointment" that a company affiliated with China—a country she says has put "unjustified tariffs" on Canadian goods—would be awarded the contract. She says BC Ferries should have been mandated to include some level of Canadian involvement in the project.

However, when BC Ferries announced that prequalified shipyards could bid for the contract last fall, Seaspan—BC’s largest shipbuilding company— said the project required a budget that was too low for most Canadian shipyards.

“Canadian shipyards and their supply chains cannot compete with low-wage countries that have lower employment standards, lower environmental standards, and lower safety standards than Canada and BC,” Seaspan said in a release, arguing the province isn’t prioritizing the local maritime industry.

The BC Ferries and Marine Workers Union (BCFMW) recently called on the federal government to fund the province’s ferry industry with amounts equal to VIA Rail and Marine Atlantic in Eastern Canada. BCFMW says the feds’ yearly grant of $38M is too low, arguing that “BC’s ferry system isn’t being treated like the vital national infrastructure it is.”

BC Premier David Eby echoed this, saying yesterday that part of the review should focus on how ferry companies in BC are funded compared to their eastern counterparts.

Ritinder Matthews, BC Ferries’ director of media relations, told Capital Daily in June that “without greater investment by all levels of government,” building in BC would mean “passing on higher costs to customers” through fare hikes.

“Both organizations [Seaspan and BCFMW] highlight that Canada’s shipbuilding industry operates in a very competitive international environment,” Matthews said in an email. She said Transport Canada would be involved every step of the way.

Not the only ferry company to outsource to China

Jeff Groot, BC Ferries communication director, told CBC that Canadian companies have acquired around 100 vessels built at Chinese shipyards over the last decade.

"Globally, only a few shipyards have the capacity to deliver complex passenger ferries on the timelines and budgets required."

Groot said the ferry company has been working with Transport Canada since before the contract was signed and with Public Safety Canada on safety and security issues. He also says that “sensitive systems,” such as IT networks, will be procured within Canada.