Groupe Ocan given generous concessions under previous PC government

A Quebec shipbuilding company received generous concessions approved by the PC government of David Alward in return for setting up shop at a shipyard in Bas-Caraquet, according to a signed 2014 agreement obtained by CBC News.

The original memorandum of understanding lists previously unrevealed terms for Quebec-based Groupe Ocan's use of the New Brunswick Naval Centre.

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The nine-page agreement, obtained through the Right to Information and Protection of Privacy Act, includes several appendices, among them a two-page list of tools and equipment the shipyard had to buy for Groupe Ocan.

The more we find out about the deal, the more the deal stinks.- Kevin Lacey, Canadian Taxpayers Federation

It says the Quebec company, through its subsidiary Ocan NB, could rent the yard for only five dollars per square foot, while the centre agreed to cover expenses.

The centre was also required to build offices for Ocan, ensure that workers were properly trained, and give Ocan the first option to buy the shipyard once the taxpayer-subsidized upgrades were finished.

"The more we find out about the deal, the more the deal stinks," says Kevin Lacey of the Canadian Taxpayers Federation, a frequent critic of public subsidies to businesses. He called it "a better deal than the government let on at the time."

Agreement signed before election campaign

The agreement was signed by the PCs on July 31, 2014, less than a month before the start of the provincial election campaign that the PCs lost. The new Liberal government approved the funding and is now bailing out the centre.

Interim PC leader Bruce Fitch defended the terms of the deal, saying the centre "needed a substantial amount of investment. It needed work."

The PCs say they planned on the centre attracting private investors to inject enough money into the facility to cover its costs, and it would have been viable if the Liberals had followed through on that.

Instead, the Liberal government is itself buying the facility in the wake of its financing falling apart last year. The bailout will keep the yard open and ensure suppliers, including Ocan, are paid.

Groupe Ocan halted work last December on the drydock it was building at the site, laying off 28 workers. The company said at the time it was among several suppliers who hadn't been paid. That forced the province to agree to take over the centre.

The New Brunswick Naval Centrewas incorporated as a private, non-profit company by the town of Caraquet and the village of Bas-Caraquet to revive the defunct shipyard.

While the PCs signed the 2014 agreement, the Gallant Liberals approved and announced funding in May 2015, including $4 million in infrastructure money from the Regional Development Corporation and $3.8 million in payroll rebates.

Last fall the shipyard's shaky financing became public when several suppliers filed liens because they hadn't been paid.

The Liberals saidthey realized onlyat that point that the 2014 agreement was flawed because it required the naval centre to come up with an additional $13 million to finance construction of a drydock that Groupe Ocan would build then lease.

The 2014 agreement doesn't say explicitly that the centre would raise the money, though it identifies the centre as the landlord and Groupe Ocan as the tenant who would make lease payments on the drydock.

The centre was restricted in what it could borrow because it was backed by two municipalities, and wasn't able to find a bank willing to lend the money.

'Set up to fail'

Earlier this year, Victor Boudreau, then minister for the regional development corporation, said the 2014 agreement wasn't part of the briefing material prepared for the Liberal cabinet when it approved the funding.

He said the Liberals believed Groupe Ocan had to find the $13 million, and they hadn't been told otherwise by civil servants. They approved the infrastructure and payroll money without realizing the centre was "set up to fail," he said.

But Lacey says the Liberals should have insisted on seeing the 2014 agreement when they approved funding. "It raises real questions about whether the government was on the ball," he said.

Philippe Fillion, a spokesperson for Ocan, said earlier this year "the principal fact" that the Naval Centre had to raise the $13 million was in the agreement.

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

The province is now negotiating with Groupe Ocan and the Naval Centre board to take over the facility.

Lacey said any new agreement should ensure Ocan pays "fair market value" for what it gets from the Naval Centre. "There should be no more special deals with regards to the shipyard," he said.

Donald Arseneault, who took over as minister for the Regional Development Corporation inlast week's cabinet shuffle, wasn't made available Monday to comment on the document.