HALIFAX — The Nova Scotia government is sinking $60 million into a joint venture to produce wind turbine components in a move critics say exposes a province with a long history of failed business subsidies to another risk.
NDP Premier Darrell Dexter announced the revitalization of the TrentonWorks plant Friday, saying the partnership with manufacturing heavyweight Daewoo Shipbuilding and Marine Engineering Ltd. will create hundreds of jobs in the “green economy.”
Part of the $90-million deal gives the government a 49 per cent equity stake in the venture, which will produce turbine towers and blades in an area hit hard by the closure of the former railcar plant three years ago. The province is spending $19.6 million to get its share of the company, while Daewoo gets 51 per cent for $20.4 million.
But one critic said the scheme could open up the province to steep costs and small dividends if the venture doesn’t turn a profit and collapses like many have in the past.
“My summary reaction to this is: If at first you don’t succeed, subsidize and subsidize again,” said Charles Cirtwill of the Atlantic Institute for Market Studies.
“Maybe this one will work out, but the odds are strongly against them.”
Cirtwill said he fears the ambitious project will share the same fate as the Sydney Steel Corp., a heavily subsidized operation in Cape Breton that folded in 2001 after the province tried for years to sell it.
The province in 2002 also had to sell off its interests in Nova Scotia Resources Ltd., a Crown corporation that partnered with a British company that hoped to profit from the offshore only to find the field off the coast underperformed.
The federal government is chipping in $10 million in the Daewoo deal through the Atlantic Canada Opportunities Agency.
Dexter said the project should create 120 jobs in the first year and up to 500 within the next three years after the plant is up and running by September.
“Trenton has waited three years to hear good news about this facility,” Dexter said Friday in the old finishing section of the plant.
“Not only does this create clean and green jobs for Nova Scotia — it will bring this plant back to life.”
In addition to the $19.6 million for the equity stake, the province is also providing a $30 million loan for new equipment, up to $6 million for working capital, and a $4 million forgivable loan to acquire land and buildings through the Industrial Expansion Fund.
The Opposition questioned why the government was putting so much into the deal and only getting a 49 per cent stake in it, while a global manufacturing company with multibillion-dollar profits was investing a fraction of the total.
Liberal Leader Stephen McNeil said the announcement left him with many questions about whether Nova Scotia taxpayers would be on the hook if the business fails and when or if the loan would be repaid.
“Why are they (Daewoo) coming to the table with $20 million for 51 per cent of the company? There’s an inequity here all right,” he said.
“There are so many unanswered questions around this deal. What happens if the company loses money? Do Nova Scotia taxpayers have to put in more money?”
One analyst put the concerns aside, saying the arrangement is similar to so many other provincial-private partnerships that have lured businesses to the province and created jobs.
Armand Pinard, an economics professor at Saint Mary’s University in Halifax, said investing in the wind sector could prove to be profitable as more jurisdictions seek renewable energy sources in a bid to meet environmental targets.
“These products are products in high demand and probably will continue being in high demand for some time to come,” he said.
“That’s the significant difference there.”
Still, Cirtwill said the arrangement came down to cynical politics and poor business planning.
“They’re buying jobs in Trenton with money from the rest of Nova Scotia,” he said. “Is that an appropriate use of taxpayers money? Do we really have the money to be giving to multibillion-dollar profitable corporations? I don’t think so.”