A. If our EOI is accepted and we are asked to submit a Comprehensive Business Proposal (CBP), we will:
- Seek additional input from First Nations and other stakeholders and with that input we will complete the CBP
- Seek to conclude conditional partnership-like arrangements with First Nations
- Seek matching grants from government and other sources to match the NTCF grant
- Seek to conclude conditional letters of understanding with potential stakeholders including potential tenants at Jervis Ports
- Conclude conditional terms with government departments regarding land acquisition, permitting and additional requirements
- Draft Terms of Reference and Requests for Proposals for Class D engineering studies, environmental impact assessments
These matters, including the submission of the CBP should be completed by the end of 2020
B. If our CBP is accepted and we are awarded the NTCF grant and matching grants we will:
- Issue RFPs to select firms, review proposals and conclude contracts with successful firms.
- Continue to promote the Jervis Ports with potential stakeholders
- Conclude partnership-like arrangements with First Nations, subject only to proceeding to Class C studies
- Convert conditional letters of understanding with potential stakeholders including potential tenants at Jervis Ports to firm agreement, subject only to the completion of the building of the port
- Anticipate receiving the findings of the Class D reports by the end of 2021 or at the latest the early spring of 2022 and be prepared to make a decision to proceed with Class C studies
C. Deciding to proceed to Class C studies is a huge decision. This mean s that once we have appointed the professionals to conduct the Class D engineering and environmental studies, we will have only about a year to advance several senior managerial initiatives. Receiving the results of the Class D studies will give us our first professional evaluation of feasibility, expected cost and environmental issues. It will be time to move to the Class C studies or to end the project.
Moving to the Class C studies is a $300 million financial decision to be made by the private sector. That amount of funding will not likely be forthcoming without recognition that it will require being followed by an additional $400 million for Class B studies and then $200 million for Class A studies and $9 billion for construction. Most of this money will have to be equity funding from the private sector. It may be possible to acquire about $5 billion of debt funding for the actual construction. It is important to remember that these are tentative estimates that could change depending on the outcome of the D, C, B and A studies.
Here is a summary:
|C studies||$300 million|
|B studies||400 million|
|A studies||200 million|
|- Equity||4,000 million|
|Total equity financing required||4,900 million|
|- Debt||5,000 million|
|D studies||100 million|
|Total per original estimates||10,000 million|
Several observations are in order:
- The federal government grant and the matching grants are a relatively modest portion of the costs of the total project
- The financing from the private sector is huge. Not withstanding that that investment is made in stages, participants will not undertake the next stage (Class C studies) unless they expect to continue to construction.
- There will have to be high levels of certainty that cash flow expectations will be adequate to service the debt.
Sourcing the above equity of 4,900 million may be a challenge. Some possibilities could be:
|First Nations (collectively)||possibly 25%||$1,225 million|
|Private placements with stakeholders||possibly 50%||2,450 million|
|IPO||possibly 25%||1,225 million|
Any shortfall could be covered by temporary government investment in shares that could later be sold on the market
It is reasonable to assume that an IPO could be quite successful because of the large numbers of grain producers, other stakeholders and general interest.
In any case, several other conditions need to be put in place for the foregoing to happen:
- A management transition must occur. Industry leaders who command the respect of all stakeholders must be put in place. This could be a challenge depending on competitive and other factors that we are not aware of. We need to identify and recruit an appropriate committee of industry insiders.
- Interim management must be put in place. This subject is receiving the attention of the current Board. Consultation will be taking place with industry leaders