B.C. Ferries receives $1B federal bank loan for Chinese-made ships

B.C. Ferries has secured a $1 billion loan by a federal Crown corporation to help obtain four Chinese-made ships, a purchase that federal Transport Minister Chrystia Freeland recently said should not involve federal funds.

Freeland expressed dismay about the selection of China Merchants Industry Weihai Shipyards in a June 16 letter to B.C. Transportation Minister Mike Farnworth, and asked the province to confirm "with utmost certainty that no federal funding will be diverted to support the acquisition" of new ferries from the Chinese state-owned shipyard.

On Thursday the Canada Infrastructure Bank confirmed the loan and said the province's new electric ferries "wouldn't likely be purchased" without the financing.

B.C. Premier David Eby said B.C. Ferries went through a five-year procurement process and the vessels were "desperately needed."

"Anyone who sat on the tarmac waiting for a ferry because the propeller fell off knows that we need to replace these boats and that the need is urgent," Eby said

"We have goals around building Canada's economy, absolutely, and part of it means ferries to act for business to access markets, and people are able to get to where they need to get."

B.C. Ferries CEO Nicolas Jimenez said in an interview with The Canadian Press that he "was surprised and disappointed" by Freeland's letter, and would "have expected more engagement and dialogue" from Ottawa.

"You know we haven't built a ship, a large ship, in this province for 30 years. So there's a lot that has to happen for the domestic capacity to be there," Jimenez told CBC's On the Island on Thursday.

"You've got to meet the world where it is, not where you want it to be in this very moment."

Loan will also support electrification infrastructure

Jeff Groot, executive director of communications for B.C. Ferries, said the company signed the loan with the bank before it was finalized that the Chinese shipyard would win the contract, and before Freeland's letter to Farnworth.

The bank said the low-cost loan consists of up to $690 million to buy the vessels and up to $310 million for electrification infrastructure.

Groot said "commercial realities" for both B.C. Ferries and the shipyard prevent him from talking about the full size of the agreement, but added that the loan will cover a "substantial" part of the deal. 

"It is, in our view, a game-changing financial arrangement that has allowed us to make this significant investment in fleet renewal," he said. 

B.C. Ferries said the vessel portion of the bank's loan will represent a maximum of 42.5 per cent of the total purchase price. That would suggest that if the maximum $690 million is spent on the new ferries, their minimum cost would be about $1.6 billion.

But Groot said that was "not representative" of the cost, and there was "flexibility to repurpose" unspent amounts on the vessel side of the loan to cover infrastructure costs.

$650 million in savings on interest

Jiminez also said it was not possible to "reverse engineer" the cost of the ships from the loan amounts, and the loan is a "deal maker" for B.C. Ferries and its customers.

"If we fully exercise the loan, we'd be saving about $650 million in interest charges we would otherwise have to pay if we got these loans at market rates,"Jimenez said Thursday.

Eby said the loan brings up the issue of fairness around federal support.

He says East Coast ferries get "$300 of federal support for every $1" B.C. Ferries receives per user.

The Canada Infrastructure Bank is accountable to Parliament through the federal Minister of Housing, Infrastructure and Communities, former Vancouver mayor Gregor Robertson. 

Mohammad Hussain, a spokesperson for Robertson's office, said Robertson has asked for a briefing from the bank's CEO "on the kind of considerations this decision raises." 

Hussain called B.C. Ferries' procurement decision "extremely disappointing."

He said the bank supports key infrastructure projects needed in communities.

"While our government had no influence or participation in this procurement decision, we will still emphasize once again the importance of supporting domestic industry," he said. 

B.C. Conservative Harman Bhangu, transportation critic for his party, said in a statement that Freeland needs to "immediately" reconsider the terms of the loan to protect Canadian jobs, businesses and security interests.