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

Quebec Premier Pauline Marois chats with Laurent Beaudoin, Chairman of Beaudier Inc., prior to a news conference in Port-Daniel-Gascons, Que., Friday, January 31, 2014 where they announced the go ahead of McInnis Cement's Port-Daniel-Gascons cement plant project where work is set to begin this coming spring. THE CANADIAN PRESS/Graham Hughes

GASPE, Que. -- Bombardier's founding family is partnering with the Quebec government and two provincial agencies to invest $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 about 2,300 jobs during a two-year construction phase set to start in the spring. It will support about 400 jobs when in operation, about 200 of them direct jobs.

The project 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 management system will invest an additional $100 million.

The Beaudier Group, the investment arm of the Beaudoin family, will contribute $150 million, while the rest will come from private investors and debt via the National Bank of Canada.

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 part 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 it was the interest from Laurent Beaudoin that created conditions that helped the project gain traction.

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."

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 other jobs in the province, with the Canadian Cement Association 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.

"The government's financial participation in the project jeopardizes jobs and existing plants," he said before the announcement was made.

Marois rejected claims that the project would threaten the jobs of others.

"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 said 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 targetting 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.

French-based Lafarge, which is partially owned by Montreal-based Power Corp. (TSX:POW), has said it would be forced to cut some of the 150 jobs at its cement plant in St-Constant, Que., if it can't maintain production in the face of the added capacity.

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 output after the Beaudoin family's investment arm, which also partially owns Ski-Doo maker BRP (TSX:DOO).

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

"Ultimately, the production of the project's cement plant will replace that of older plants," said a November report by engineering firm Genivar, now WSP.

That puts it in direct conflict with Quebec's Desmarais family, whose Power Corp. owns a 21 per cent stake in Lafarge.

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

But Power spokesman denies any friction. 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 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."