Manitoba cattle producers need the facts about the recent re-allocation of federal funds under the federal Slaughter Improvement Program. They have a right to know what was done and said and draw their own conclusions.
The Manitoba Cattle Enhancement Council (MCEC) was pleased when the federal government joined the chorus of support for the proposed Canadian Food Inspection Agency-inspected slaughter facility with a promise of $10 million in 2009.
Early in 2010, MCEC determined new management was needed to move the project forward. Experience and connections were needed for a niche concept favoured by MCEC and the management team had run successful operations in North and South America.
Read Also
Research looks to control flea beetles with RNAi
A Vancouver agri-tech company wants to give canola growers another weapon in the never-ending battle against flea beetles.
They had just come to the end of a three year non-compete covenant on the successful plant they had sold in Uruguay. The team knows how to operate a mid-sized plant profitably in this competitive industry.
They reviewed the business plan and addressed the remaining conditions including demonstrating how niche markets, such as kosher beef, can deliver higher margins on smaller volumes.
The project also secured financing and enthusiastic support from a major bank for up to $18.2 million. The bank’s term sheet stipulated that the loan would be executed as soon as the government did the same. We garnered local and international interest, improving this project at every turn.
The federal government provided three written reasons on July 13, 2011 for withdrawing its funding.
First, they stated the business plan was not viable. We strongly disagree with that assessment because the plan is based on broad real-world experience proven by this management team. The plan also attracted support from many industry observers.
The federal government provided no numbers or detailed rationale for their conclusion.
Second, they said the bank’s terms weren’t definitive enough because the term sheet remained subject to change and final documentation. One of those final documents was the federal loan itself.
So far, the bank remains committed for up to $18.2 million alongside MCEC’s $7.5 million equity commitment.
Third, they declared that the business plan didn’t call for the plant to repay the money within 10 years. The first plan from the new management team projected full debt repayment in just five years, which the consultants hired by the government rejected as “too optimistic.” It was stretched to 10 years at their request.
Financial scenarios were drawn up to show how the plant could achieve it and where the numbers would fall apart. They then used one of the worst case scenarios (projected at their request) to say the money would not be repaid.
The federal government is saying that the civil servants at the Slaughter Improvement Program reviewed the business plan 10 times.
There was a lot of data and as we kept moving ahead, there were updates — all of which strengthened the plan. We certainly didn’t send them 10 different plans and we have no sense of why 10 reviews would be needed. The bank put its commitment on paper after one review.
In the final analysis, it would seem they were looking for something different…. They were not clear during the process, in our view, and the re-allocation of the funds was shocking.
We were disappointed that the government and its consultants simply wouldn’t accept the niche business model, which we believe stands the best chance for success.
They acknowledged a difference of opinion between their ‘expert’ consultants and our management team but repeatedly refused to meet with management to clarify these essential matters….
It is the beef producers that the federal government has let down here. They are still trapped and remain vulnerable to any trade disruption in live shipping without access to a federally inspected beef plant for Manitoba. We can’t let up now.
