Loan guarantee withdrawn | In 2011, Ottawa also withdrew a $10 million loan to Keystone Processors
It happened without fanfare, but Manitoba’s government has withdrawn financial support for a controversial beef slaughter plant in Winnipeg.
In its 2012 annual report, published on its website this spring, the Manitoba Cattle Enhancement Council noted the “provincial government recently indicated that it will not provide a loan guarantee and has asked MCEC to replace that financing arrangement with new private investment.”
The MCEC board, which was appointed by the province, ex-plained in the annual report that the “proposed loan guarantee is for… approximately $9 million…. This change of direction means that MCEC began meeting with potential investors and adjusting our financing proposal to fit an entirely private model.”
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The government formed MCEC in 2006, giving it a mandate to increase beef slaughter capacity in Manitoba.
The council’s investment pool was funded by a $2 levy on cattle sold in Manitoba, combined with federal and provincial money and private investment.
The plan was to construct a 250 to 500 head per day slaughter plant in Winnipeg for an estimated $30 to $40 million.
With financing fully in place in the fall of 2009, the plant, known as Keystone Processors, was expected to open in a couple of years.
The project publicly unravelled in the summer of 2011 when the federal government pulled a $10 million loan. Federal officials said the enterprise lacked a viable business plan.
Since then, MCEC board members and staff have repeatedly said construction would begin shortly, when private investors inject the necessary capital into the proposed slaughter plant.
The project, renamed ProNatur last year, is supposed to produce beef for the halal and kosher markets.
In its 2012 report the MCEC board said the financial plan for the $40 million project includes “equity investment from MCEC, bank financing, private investment from an industry group and a MASC (Manitoba Agricultural Services Corporation) loan.”
Adam Dooley, communications manager for MCEC and ProNatur, said the provincial loan guarantee was for bank financing.
Since learning the government would not guarantee the loan, MCEC leaders have actively searched for private equity to re-place that portion of the financial arrangement.
“MCEC has been working towards that and that’s been occupying a lot of their time over the last few weeks and months,” Dooley said.
Manitoba Beef Producers president Trevor Atchison said almost no one in the province’s cattle industry knows the names of the investors or potential investors in the plant.
“We hear about these private investors that are coming forward or are part of it, but I’ve never seen a list,” said Atchison, who farms near Pipestone, Man.
With the federal and provincial governments no longer supporting the slaughter plant and private investors remaining in the shadows, Manitoba cattle producers, via the $2 checkoff, are the only group publicly financing the project.
However, their support isn’t enthusiastic.
MBP members have passed resolutions at their last two annual meetings asking the federal government to terminate the checkoff because many farmers doubt the plant will ever be constructed.
“This year there was pretty decisive vote counts at our AGM (against the checkoff),” Atchison said.
“More guys are wondering, ‘why am I leaving (check-off) money in if nobody else is supporting this (plant).’ ”
Besides rejection of the loan guarantee, there is additional evidence the province is backing away from the proposed slaughter plant.
The government had been matching the $2 producer checkoff and directing the money to MCEC, but the council said in its 2012 annual report that the province stopped matching the levy in April 2011.
As a result, MCEC’s cash flows dropped dramatically last year. It received $1.06 million from producer levies and returned $333,000 to farmers who requested a check-off refund, resulting in total revenue of $733,000.
In 2010, the council received $1.32 million in check-off revenue and returned $415,000 to producers. The province matched the net revenues of $904,000, leading to 2010 revenues of $1.808 million.
Atchison said it’s not surprising that cattle producers have a few questions, considering they have contributed more than $6 million to MCEC and the site of the proposed plant in Winnipeg is nothing but tumbleweeds in a vacant lot.
“The accountability of where that money has gone and what it’s going to be used for and where (the money) they have collected so far has gone to: those are all questions that producers are asking.”
The Manitoba government didn’t respond to an interview request before deadline.
