Transport Committee on May 1st, 2012

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Is Magna building natural gas engines?

[David Pascoe]

Magna today does natural gas, but only at prototype level, such as natural gas fuel tanks. We've done a natural gas vehicle. We can do the integration. We can do the valving and plumbing and so on. So we know how to get involved with it. We believe it's a big part of the future, so we want to participate.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Natural gas is something that Magna will be doing, natural gas vehicles?

[David Pascoe]

Yes, we want to participate.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

The Decoma is your engine?

[David Pascoe]

Decoma does trim. We have a power train group that does power train. We have Magna Steyr. Most of our development activity was done at Magna Steyr.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay. On to the city of Calgary. When does your pilot project come into place?

[Russell Davies]

We expect to take delivery of our first CNG vehicles at the tail end of this year.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

How long will that last?

[Russell Davies]

Probably 18 months. We want to run it through two winters to make sure we address our cold weather concerns.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

You've anticipated for a larger purchase of, I think, 200 vehicles. Is it 200 or 400?

[Russell Davies]

Our original study was on 200, but we are building a facility that can cope with 400.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay, so 400, and you expect to pay out in six years, 10 years max. Correct?

[Russell Davies]

That's our estimate right now, yes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

That seems like an exceptionally good payout. The question I have is, why would you need any additional help to achieve that?

[Russell Davies]

It's the initial capital cost upfront. You need to be able to build the fuelling infrastructure.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

That said, businesses make investments upfront all the time and they often expect payouts that take much longer. They make enormous capital investments upfront. Presumably a very well-financed and large organization like Calgary Transit, backed by a city and ultimately a creature of the Province of Alberta, one of the wealthiest jurisdictions in the country, would have access to the capital to make that kind of investment, if it made business sense.

[Russell Davies]

We are looking at a P3 model for the facility, as I mentioned, which is the biggest part of the infrastructure. In terms of other advanced funding available from the city, I guess we have to fit within the budget of the rest of the city demands.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I guess what I'm saying is that there should be no incremental demand from the city. In fact, you should be going to the city and saying you have good news that you're going to be costing less. Presumably, if your plan pays for itself in six or ten years and then thereafter presents an annual cost savings, there should be no need for any additional money. Capital can be funded by debt, which is what businesses do every day.

The reason I'm asking these questions is that we've been burned as governments—all three levels. Whenever there is an exciting new fuel source that comes along, we're approached by organizations that say they have an amazing idea. It's a great business opportunity and no one will invest their own money in it, so they need other people's money.

We have wind power in Ontario, which has driven power prices through the ceiling—they've gone up again today, killing jobs in the manufacturing sector. We have other fuel sources that were promised for automobiles, which are now proving uneconomical despite massive front-end subsidies from taxpayers.

If these are good investments, why don't they pay for themselves, capital cost included?

[Russell Davies]

I can't speak for the detail of the city debt, but if we were to procure 400 buses—for argument's sake—even if they weren't CNG, that's still a commitment of around about $160 million. It's not that the city isn't putting money into the investment that's needed. It's just that there is an additional amount needed for the CNG premium that, for the moment, is difficult to find on top of our existing budgets.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Is there not a way you can shift some of the operating savings into your present day capital budget in order to finance it on a cost-neutral basis?

[Russell Davies]

I think essentially that was one of the recommendations I was making in terms of saying maybe we can get something along the lines of an interest-free loan that ends up getting paid back out of our operating budget. That's kind of the model that we're....

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

The Government of Canada has offered some financing through the economic action plan. I'm not sure exactly how that carries forward, but for capital costs, again, the problem with interest-free loans and government-issued loans is that they are ultimately subsidies. The cost of money is real, and the opportunity costs—we have to borrow it. We have a federal deficit, so we'd have to pay for that money.

Again, if this is a good business decision, it should pay for itself, right? It shouldn't need a subsidy.

[Russell Davies]

That seems to be easier to say than to achieve sometimes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I realize; that's my problem. We keep seeing these ideas. We're told they're such great business concepts, and then they all lose money—other people's money.

We're trying to look for ways here that transportation innovation can fund itself because it is meritorious enough to do so. How do you respond to that?