Minister clarifies Marystown Shipyard deal and releases all divestiture documents

Beaton Tulk, Minister of Industry, Trade and Rural Development, today clarified some aspects of the sale of Marystown Shipyard to Friede Goldman that have been the subject of recent media reports. Minister Tulk also released the full text of the province's two agreements with Friede Goldman to help ensure complete public understanding of commitments made by both parties when the facility was sold in 1998.

Minister Tulk noted that while the main text of the agreements was previously released to and carried by some media, more recent news reports are giving an inaccurate account of commitments made under the agreements.

The assets of Marystown Shipyard Limited were transferred to Friede Goldman on January 1, 1998 for a nominal fee of $1. Friede Goldman committed to maintain certain work levels at the facility over three years or pay a penalty for non-performance. Friede Goldman also committed to a certain level of capital improvements at the facility.

For its part, government committed to provide Friede Goldman Newfoundland with EDGE status and to assume all liabilities associated with the facility up to the time of transfer to Friede Goldman. These liabilities related to ongoing work at the yard while the divestiture was being concluded, environmental liabilities, and various arrangements with the workers at the facility.

"Contrary to some recent media reports, government did not give Friede Goldman $2.5 million of taxpayers money for working capital to help the company take over the operation," said Minister Tulk. "Reports indicating that the deal with Friede Goldman included a bank account worth $2.5 million are absolutely false and misleading."

When government owned the facility, the day to day working capital needs of the company were being provided by a bank and were guaranteed by government, as was the normal practice with all government-owned enterprises. Friede Goldman agreed to assume full financial responsibility for the ongoing working capital needs of the facility upon conclusion of the sale, without a government guarantee.

When government entered into negotiations with Friede Goldman, the working capital available to the facility was $2.5 million. Friede Goldman was given a commitment by government that this level of working capital would be maintained by government and would be available to Friede Goldman at the time of actual turnover of the operation, but without a government guarantee, so that the facility could continue to operate and complete various contracts without interruption.

Between the time negotiations commenced with Friede Goldman in September of 1997 and the conclusion of the sale in January 1998, the financial performance on several contracts in progress at the facility deteriorated by an amount ultimately determined to be $1.86 million, not unlike what had occurred historically at the facility during its more than 30 years of operation. This deterioration was confirmed by two independent audits. Government temporarily covered this deterioration by drawing down on the $2.5 million available in working capital, recognizing that it would have to pay out the $1.86 million once the facility was sold and upon the completion of an independent audit. This arrangement was previously disclosed by government and was reported by The Telegram on April 13, 1999. 

"It is important to note that the deterioration in the shipyard's working position occurred while under government ownership and operation," Minister Tulk said. "If government had retained ownership of Marystown Shipyard, it would have had to deal with the deterioration of its financial position either by a direct injection of cash into the Crown corporation or through an increase in the government guaranteed line of credit for the corporation. As part of the sale, government simply paid off this liability." 

"To ensure there is no further misunderstanding on the divestiture, I am today releasing full and complete copies of government's agreements with Friede Goldman. The main text of these agreements has been released in the past to a number of interested stakeholders including the media. I trust that the release of the documents will help reassure the public that government has been open on the arrangements with Friede Goldman," Minister Tulk said. "Our interest, focus and priority at this time is to work with Friede Goldman and all other players at the facility and in the community to attract more work to the facility and thereby improve the overall economic and employment circumstances on the Burin Peninsula." 

NOTE TO EDITORS: Copies of the two documents are being delivered today to news media in the St. John's area. Media outside that area can arrange to get copies by calling (709) 729-4570.

Media contact: Josephine Cheeseman, Communications (709) 729-4570.

2001 04 16                                               3:00 p.m.