Evidence of meeting #137 for Industry, Science and Technology in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was telesat.
A recording is available from Parliament.
Liberal
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Thank you, Mr. Chair.
Thank you to the officials.
My Liberal colleagues seem to be confused about what the ownership of a company is, so I'm going to ask you a couple of questions.
First, 36% of Telesat is owned by MHR Fund Management, a New York-based investment fund. Is that right? They're voting shares.
Acting Deputy Minister, Department of Industry
I believe that to be correct. Yes.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Okay.
New York-based Gamco Asset Management and Gabelli Funds, also in New York, combined own 21%. Is that correct? It's from the SEC filings.
Acting Deputy Minister, Department of Industry
As I was about to note, I do think their ownership structure would be public. If you have those in front of you, I will—
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
They are public. Those are voting shares.
Philosophy Capital Management of California owns 4.9%—again, that's according to SEC filings—so a total of 63% of Telesat is owned by American shareholders. This is just to educate my Liberal colleagues, who seem to think it's somehow owned by Canadians. It's owned by Americans.
I will go on to ask you some questions, if I could, about the $2.1-billion loan structure. The minister wasn't answering my question about the interest relief. This $2.1-billion loan has interest relief in the first five years. They don't have to pay the interest. I estimate that right now it's somewhere between 9% to 10%, based on 4.75% interest on top of the overnight repo rate. That's about $225 million to $230 million of interest over each of those individual years of interest relief. That's $1 billion of interest relief.
What goods in kind are you getting for that interest relief?
Acting Deputy Minister, Department of Industry
I have maybe a few points on that. Again, as I've mentioned, I'm happy to provide greater detail on the Telesat deal itself and to have that provided to the committee.
Telesat is a Canadian-headquartered company, with the bulk of its jobs within Canada. The supply chain on this is also—
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
I wasn't asking about that. Perhaps you could stick to the question on the loan portion and the goods in kind.
Acting Deputy Minister, Department of Industry
Sure.
In terms of the structure of that deal, it was intended that there would be an initial portion during the deployment period where there would be no repayment, followed by a 4.75%—
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Right, but what are the goods in kind? I've read it. I know what it is. I've outlined it for everyone who's watching.
What are the goods in kind? How are you evaluating that those goods in kind are worth $225 million a year?
Acting Deputy Minister, Department of Industry
I'm happy to come back with some of the details.
I don't know if Benoit is able to add anything.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Can you come back to the committee with those details and table them, please, along with any analysis you've done on the goods in kind?
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
The second part of the loan is a unique feature called “sculpted amortization”.
For those who don't know what sculpted amortization is, the loan payments are matched to the cash flow of the company. That means if the company's cash flow is declining, the payments are declining.
Do you know what? The company's cash flow is declining. It has been declining for five years. It's down to less than $100 million of free cash flow a year. How are you going to get that $2 billion back, plus interest, when it's attached to a declining payment, on declining cash flow, with a company with declining revenue?
Conservative
Acting Deputy Minister, Department of Industry
Obviously, in coming to negotiating and in coming to the deal that was struck, as you've mentioned, there was analysis done around their potential market share, their potential sales and their potential for the repayment. The loan was structured to strike an appropriate balance of risk and reward for the government.
It is our assessment and our analysis—
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Right, but they have no satellites up. They've only just contracted. They contracted once before in 2021 for a company called TAS to put up satellites for this. It never happened. Now they're going to contract again for it.
You're betting that once those 198 satellites are up, they'll start to magically have revenue, which has been declining. It's going to take years to put those satellites up. I think it's going to take longer. I don't think you're going to get this money back.
I don't believe you've gotten the money back on the $1.4 billion that was loaned to them in 2021. Have you?
Acting Deputy Minister, Department of Industry
As I said, the current loan supersedes the 2021 loan. Our assessment in—
Acting Deputy Minister, Department of Industry
Our assessment, and we've had independent assessments done as well, is that we believe the loan is appropriately structured for the risk being undertaken. We believe there's a high likelihood of full repayment.
Liberal
Liberal
Chandra Arya Liberal Nepean, ON
Thank you, Mr. Chair.
I'll go back to the question on foreign ownership. The question raised on foreign ownership is a genuine concern.
I'll just go back to the steel and aluminum sector, which I referenced in the first part of my questioning. For the steel and aluminum industries, we have the natural resources, we have the technology and we have the talent. However, all the companies in these two sectors are foreign-owned. There has been no growth, zero growth, in steel installed capacity during the last 20 years. The number of employees in these sectors is going down.
However, when it comes to protection—
