What’s the real story at G3 Canada?

To be a little mouse in the corner listening to boardroom conversations at G3 Canada would no doubt be very interesting.

G3 has unflinchingly advanced nothing but positive news on all its country terminal and port terminal projects. Of course, its crown jewel is the big export terminal with loop tracks under construction in Vancouver. That project is reported to be well ahead of schedule with an opening slated for the fall of 2019.

However, within a couple weeks of chief executive officer Karl Gerrand announcing new primary elevator builds for Wetaskiwin, Alta., and Maidstone, Sask., he is no longer with the company.

No formal news release was issued and as of April 9 nothing was posted about the change on the G3 website. Gerrand is no longer listed on the site and the new CEO, Don Chapman, has not been added.

As you may remember, G3 has the former assets of the Canadian Wheat Board, including a hopper car fleet and lake vessel. In a deal that has never been satisfactorily explained, G3 bought a majority share in the CWB but never paid the money to government or farmers. Instead, the value remained with the new company.

As well, the majority owners are the multinational firm Bunge and the state-owned Saudi Agricultural Livestock Investment Co., known as Salic.

Producers delivering grain to G3 supposedly build up equity in the company, but it might be best to not count on getting rich from this. Getting anything at all would surprise many.

News outlets reported in January and February that ADM was in discussions to buy Bunge. Squeezed margins in the grain handling business were cited as one of the reasons for the potential deal.

When there’s an unanswered question, it’s usually best to follow the money. It seems likely that Gerrand’s unceremonious departure had something to do with financial performance.

Salic must have deep pockets, but maybe Saudi patience is running out. And maybe Bunge is wondering about the long timelines for when G3 can potentially earn money rather than just spend it.

G3 does have older facilities in the country and at eastern export locations that were bought from other operators. However, most of its network is new, and the export terminal at Vancouver has a huge price tag.

Even if it builds many more country terminals, G3 won’t source enough grain to service its Vancouver terminal. Instead, it will have to hope other exporters are short of capacity.

Liken the G3 model to a farm where you buy almost all new equipment and grain storage to farm 40,000 acres, but you only have 5,000 acres and the hope for more rented land in future years.

For farmers, whether you deal with G3 or not, more competition for grain and more logistical capacity are positive, but you have to wonder how long G3 will sink money into assets where the payback will be long term at best.

For Salic, even if the end game is about food security with large stockpiles of grain around the world, that would not seem to be a concern in the near term.

With grand business ventures, it’s sometimes not the original owner that makes money — it’s the second or third owner buying distressed assets for a fraction of the original cost.

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