Friday, May 29, 2009

Mr Veniez against the world...

While the forces gather to try and block his plans of privatization, Dan Veniez, Chairman of Ridley Terminals continues on with his letter writing campaign, eager to share his vision with anyone within the range of a news stand or a computer terminal.

As we highlighted on our blog last week, the always media savvy Veniez had taken his corporate concerns over perceived government interference on the privatization issue to the national media, offering up a number of rapid response pieces for a variety of newspapers.

This weeks installment of the Chronicles of Dan, find the Chairman outlining his thoughts on why he thinks having the Port of Prince Rupert take over Ridley Terminals would be a bad idea.

Writing a piece for the National Post, posted to their website on Thursday evening, Mr. Veniez, with the zeal of an evangalist, outlines what he believes are the flaws in the argument that the future of Ridley Terminals would best be served under the umbrella of Don Krusel and the Port of Prince Rupert.
Suggesting that the taxpayers of Canada may not appreciate the Port having to borrow more money to fulfill such an ambition.

While he goes about trying to gain momentum for his plans the private sector alternative, other community leaders are taking a more cautious approach. As the Northern View outlined on their website early Thursday afternoon.

In a story posted to their website, the Northern View reviews the thoughts of Prince Rupert mayor Jack Mussallem and the concerns of Port Edward council, as both bodies of municipal government feel that without further details, the prospect of a privatized Ridley would not bode well for the Northwest and leaves far too much at the whim of market forces.

As Mr. Veniez continues to send his opinions near and far, we can no doubt expect that more voices will be heard from those that are concerned about his plans and his push to privatize the assets at Ridley Terminals.

So far, Mr. Veniez has been but the sole public voice for the privatization option, while the opposition to the plan seems to be multiplying by the day. He may soon need to bring some fellow travellers to his side of the debate if he hopes to develop a sense of momentum for his ambitious plans.

The Ridley Terminals debate: Privatization still the best option
Posted: May 28, 2009, 8:40 PM

Handing Ridley to the Prince Rupert Port Authority would be a mistake
By Daniel D. Veniez

Mr. Pierre Gratton, president and CEO of the Mining Association of British Columbia, the association representing coal producers, praised efforts that made Ridley Terminals viable. But if he agrees that being viable is good thing, and it wasn’t viable before, how does giving it to the Prince Rupert Port Authority (PRPA) keep it viable?

The truth is that it doesn’t.

There are only three choices for this business. The first is continued government ownership. Cash injections would be required to fund operating losses, pension liabilities, capital maintenance and modernization programs, and of course, subsidizing users because they refuse to pay market rates. The second is amalgamation into the Prince Rupert Port Authority (PRPA).In October, 2006, Don Krusel, CEO of the PRPA said before the House Finance Committee:

“The PRPA can only raise $22-million. What we would ask for is support for the amalgamation of federal assets in Prince Rupert, in the same way as it’s happening here in Vancouver, where the three port authorities look to be amalgamated. There is a Crown corporation in Prince Rupert called Ridley Terminals. We would like to see that amalgamated with the operations of the PRPA. It would provide us with funds that could be directed to this Pacific Gateway strategy initiative. It would also provide the Port of Prince Rupert with the leverage to borrow even more money in the public sector so we can fulfill this initiative.”

Is the fact that the PRPA needs to increase its borrowing authority sufficient justification for this swallowing up of RTI? We’re not so sure the taxpayer would agree with that.

The Vancouver “precedent” cited by Mr. Krusel is not a precedent at all. The consolidation of three separate port authorities operating adjacent to each other is different than the concept of putting the port authorities into operating businesses (with the result that a quasi-governmental authority would become a competitor to other commercial operators seeking to develop or operate a business).

The third alternative is a private-sector solution.

RTI is a public trust belonging to all Canadians. And Canadians deserve answers to the assertions made by Mr. Gratton. He should explain where, precisely, are the synergies to flow from an amalgamation between RTI and the PRPA? Or how he defines a “competitive” rate? So, if a rate is “competitive,” doesn’t that by definition mean that it is comparable or slightly better than other terminal operators in Canada and elsewhere? And if that’s the case, why does he think a private sector solution is such a bad idea?

Coal producers in B.C. have at least five choices available to them because there are many alternative terminals to RTI on the Pacific Coast. That being the case, what then is Mr. Gratton’s definition of a “monopoly,” as he describes us? And why would a private-sector participant impose “monopoly” rates?

Is Mr. Gratton proposing that the taxpayer fund the $50-million in maintenance and upgrade capital RTI needs in the near term to properly service its customers? On top of that, should the taxpayer subsidize coal producers through the PRPA or by funding RTI? In today’s poor global market, coal producers generate $110 per tonne in revenues. Will the mines that Mr. Gratton represents go out of business because RTI charges what its “competitors” charge?

The “competitive” rates referenced by Mr. Gratton were established at a time that coal prices for export hovered around $80 per metric ton. Metallurgical coal export prices over the past year have ranged from $330-$140 per metric ton. RTI has suggested rate increases ranging from 1% to 2% of current export pricing for coal. Those increases reflect the “cost” of the activity inclusive of the capital required to renew the resource. Is that, by any reasonable measure, “monopolistic” behaviour?

If Mr. Gratton believes that RTI’s public policy purpose is to develop coal mines in B.C., and therefore subsidize them, does he also believe that RTI must offer the same economic advantage to pellet producers, petroleum coke producers, potash producers and sulphur producers? And if RTI, a federal Crown corporation, subsidizes them through deeply discounted rates, shouldn’t other commodity producers that ship elsewhere in B.C. and Canada get equal treatment from the taxpayer?

It is up to the federal cabinet to decide RTI’s future. Our promise and duty to them is to protect RTI, its people, the customers that will need our services for many years to come and Canada’s taxpayer.Financial PostDaniel D. Veniez is chairman, Ridley Terminals Inc.

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