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The Canadian Press - ONLINE EDITION

Quebec, Bombardier founding family announce $1-billion cement project in Gaspe

GASPE, Que. - Bombardier's founding family is tapping into public funds by partnering with the Quebec government and two provincial agencies to invest more than $1 billion in a new cement plant in the Gaspe region aimed at increasing exports to the U.S. market.

The project is expected to support nearly 1,500 direct jobs during a two-year construction phase set to start in the spring. The plant will employ 200 workers once it opens in 2016.

It is being led by McInnis Cement, a company formed by members of the family that founded Bombardier Inc. (TSX:BBD.B) and its spinoff, BRP Inc. (TSX:DOO).

The Quebec government will provide a guaranteed loan worth about $250 million. The province's investment arm will invest $100 million and the Caisse de depot pension fund manager will also invest $100 million. It will be an equity partner in the Beaudier Group, the investment arm of the Beaudoin family, like it was with BRP.

Beaudier will contribute $150 million, while the rest will come from private investors and debt via the National Bank of Canada. McInnis will have access to 10 years of tax breaks and low electricity prices.

The location in the community of Port-Daniel-Gascons, with a population of 2,600, was selected because of its rich limestone formations and proximity to maritime shipping that will carry 95 per cent of annual production.

Premier Pauline Marois said the investment will help the province to increase exports and denied it was designed to curry voter favour ahead of the next election, which could be called this spring.

She said the project was presented to her many years ago when she was finance minister, but gained traction with the involvement of Laurent Beaudoin, Bombardier's chairman.

Caisse CEO Michael Sabia said the project is a sound investment" for the pension fund manager because of the plant's export focus that is a driving force for Quebec's economy.

"With its production targeting the U.S. market, the McInnis Cement project is fully aligned with this approach," he said, noting trillions of dollars in market potential.

The plant is welcome news for an area of Quebec that suffers from an unemployment rate exceeding 16 per cent.

But rivals in the cement industry say government funding will threaten jobs elsewhere in the province, with the Cement Association of Canada criticizing the government for supporting a project that will add unneeded supply.

Association president Michael McSweeney said the new plant would compete directly with Quebec producers at a time when 60 per cent of their capacity sits idle.

Lafarge Canada, which operates a cement plant near Montreal that employs more than 100 workers, said it threatens jobs there and at other plants across the province.

Spokesman Regan Watts said the government funding would "create an unlevel playing field among cement producers by giving McInnis an unfair financial advantage."

Marois rejected those claims, noting that some U.S. producers may not be able to continue operating under stricter environmental regulations.

"If, as premier, I took a decision saying it's not bad that 500 jobs will disappear here and gain 500 there, I don't think I would responsible for making that decision," she told a news conference.

Beaudoin added that the market in the east coast of the U.S. isn't oversupplied, saying it's growing at about eight per cent and has more potential as the economy and construction continues to recover. The plant is also targeting to replace 300,000 tonnes a year that is imported into the province.

He wouldn't say if the project would have proceeded without the government's financial assistance.

"It could but it would have been more difficult because the junior debt they put in helped us get the senior debt," he said in an interview.

The idea of a cement plant in the region dates back more than 20 years. Planning for the project began in 1998 but was postponed for a few years due to the lack of financial support.

It got back on track with a more than doubling of planned output with the involvement of the Beaudoin family's investment arm, which also partially owns Ski-Doo maker BRP.

The cement plant promises to be among the North American industry's most fuel-efficient and lowest emitters of greenhouse gases. It will initially burn petroleum coke, a refinery product and may add biomass from logging and sawmills.

The Beaudoin family's new adventure puts it in competition with Quebec's Desmarais family, whose Power Corp. (TSX:POW) owns a 21 per cent stake in French-based Lafarge.

Quebec media have labelled the competition a battle between two of Quebec's wealthiest families.

But Power's spokesman denies any friction, noting that Bombardier CEO Pierre Beaudoin sits on Power's board of directors.

"There is no disagreement between the Desmarais and the Beaudoin families. They are, in fact, very good friends," Stephane Lemay said in an email.

Laurent Beaudoin also called such claims a "joke."

"Lafarge in Quebec does not represent one per cent of the total Lafarge volume in the world, which is nothing. It's a joke. It has nothing to do with our relationship with the Desmarais."

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