CWB’s multimillion-dollar building and buying spree on its path to early privatization continues with the proposed purchase of Prairie West Terminal and its four elevators for $43.13 million.
And it’s not done yet.
“Our aim is to ultimately have a proper network of port and country facilities and this is a very important stepping stone for us in building that total network,” CWB president CEO Ian White said in an interview April 17.
White said the company is planning more announcements in the months ahead. “We have announced over the last month or so quite a bit of stuff. It’s probably a good position for us to take a bit of a breather, but we’re certainly working on other things and we will continue to march ahead.”
CWB is the federal government-owned grain company created in late 2011 by legislation that ended the old Canadian Wheat Board’s single desk effective Aug. 1, 2014.
Earlier this month, CWB announced it’s building a new high-throughput elevator in Colonsay, Sask. In March, it announced construction had already begun on its new elevator near Bloom west of Portage la Prairie.
CWB is financing its investment in bricks and mortar with retained earnings and commercial loans, White said. “There’s no government financial support for the CWB strategy in this regard,” he said.
However, the investments are raising eyebrows amongst competing private grain companies. One official said CWB may have commercial loans, but should it default, the federal government would be on the hook.
Many farm groups have argued money from the old wheat board’s contingency fund is farmers and shouldn’t be used to bankroll a private CWB.
But White maintains since the money didn’t come from pool accounts, it belonged to the wheat board and now CWB. Legislation requires CWB to present the agriculture minister with a privatization plan by 2016 and implement it no later than the following year.
“We expect our privatization to happen sooner than that,” White said. “We are expecting to be able to get a plan to government this year and then the process will take place after that.”
- More from the Manitoba Co-operator: CWB bidding for full ownership of Prairie West Terminal
White has said CWB wants farmers to participate in CWB, but because so much additional capital is needed, CWB will almost certainly be a shareholder company rather than a co-operative.
Last September, CWB announced farmers will get $5 of equity in CWB for every tonne sold to it.
The privatized CWB will continue to offer pools, if farmers want them, White said. PWT shareholders, most of whom are farmers, must approve CWB’s purchase of Prairie West Terminal for $2,109.23 per share. Prairie West Terminal’s board of directors is recommending shareholders accept the buyout.
White hopes the deal will be completed by sometime in June. The largest of the Prairie West Terminal’s (PWT) is a 47,000-tonne elevator at Plenty, Sask. The company also has a 7,000-tonne wooden elevator at Plenty, Sask.
In addition PWT has a 12,500-tonne elevator at Kindersley, Sask., and 5,000- and 6,000-tonne wooden and steel elevators at Dosland and Luseland, Sask., respectively, putting total storage at 77,000 tonnes.
CWB’s new builds at Colonsay and Bloom with 42,000 and 35,900 tonnes of storage will bring CWB’s country storage to almost 153,000 tonnes.
CWB has handling agreements with most elevator companies in Western Canada. CWB has had trouble moving grain this crop year, but only because of poor rail service, White said.
“We’re now seeing rail movement has improved very substantially and I expect you will see a lot more movement of CWB grain as things start to free up here,” he said.
While there is surplus export capacity through the Great lakes-St. Lawrence Seaway, more is needed at the West Coast, White said.
“It’s certainly part of our overall plan to have capacity, in some fashion, at the West Coast,” he said. “We do have capacity now through agreements with companies and we just hope we will be able to eventually have the capacity that’s necessary for the size of company we’re going to become.”
There is still room to build new terminals in the Vancouver area, White said.
“There’s room in the Burrard Inlet in the current harbour and there’s also room on the Fraser River,” White said. But he noted dredging is necessary.
“I would say the Fraser River in the future — some years down the track — will be a very important grain link for us.
“There’s much more opportunity for (new capacity) at the West Coast than people think.”
Meanwhile, the former wheat board’s decision in 2010 to build two new lake ships for $65 million, which CWB will now own, is looking better all the time. At the time board chair Allen Oberg said there was a strong business case for it. But board opponents, including the federal government criticized it.
“It was a good move at the time and it will probably prove to be a very good move in the future,” White said, who was president and CEO of the wheat board when the purchase was made.
The ships, which are behind schedule, will likely be delivered near the end of this shipping season and be in full operation next year, White said.
Algoma Central Marine will operate CWB’s lakers along with its own fleet.