Final Evaluation of the Structured Financing Facility — Final Report
1.0 Introduction (continued)
1.2 Description of the Structured Financing Facility
The Structured Financing Facility (SFF) was first announced in June 2001 and was a key component of the overall policy framework for the Shipbuilding and Industrial Marine sector. This policy focused on taking advantage of market opportunities, promoting investments to complement Canadian competencies in marine industries in areas of market opportunity, and assisting innovation in key technologies.9 The SFF was a response to requests from industry to modify tax regulations to permit the use of specific tax provisions in situations where Canadian vessels are sold to leasing companies rather than operators. By providing financial assistance to Canadian and foreign buyers and lessees through the SFF, it was anticipated that demand would be stimulated for new-builds, conversions, refits and modifications in existing Canadian shipyards. This, in turn, would help address some of the competitive gaps between Canadian and foreign shipyards.10
The initial budget for the SFF in 2001 was $150 million over a five-year period, with $5 million reserved for operating costs. In January 2003, the SFF budget was reduced by $20 million in 2003–2004 and $24 million in 2004–2005 as part of the government-wide resource reallocation exercise. Budget reductions for the SFF continued over time. As a result, the budget stood at $68 million as of March 31, 2007 when the SFF budget commitment terminated.11
In June 2007, Industry Canada (IC) received $45 million in contribution funding and $5 million in operating funds for a renewed Structured Financing Facility Program. This funding was approved until March 2011.12
Three of the roughly thirty Canadian shipyards (large to medium size) have benefited from the SFF under the renewed terms and conditions.13 As shown in Exhibit 1.6, two of the shipyards are in British Columbia and one is in Prince Edward Island.
|Source: SFF program files|
|2007–2010||Deas Pacific Marine||BC||$1,012,092|
|Irving — East Isle||PEI||$12,110,400|
1.2.1 Objectives and Activities
Whereas the original SFF program was intended to stimulate economic activity in the Canadian shipbuilding and industrial marine industry, the renewed SFF is intended to maintain shipbuilding capacity in Canada until there is sufficient government procurement to provide the activity base to make the industry self-sustaining.14
Under the program, a non-repayable contribution is provided to lending and leasing institutions to buy down the interest rate of the loan or lease that is used to acquire a new or converted vessel built in Canada.15 The federal contribution can be up to 15 percent of the purchase price paid to the Canadian shipyard for the construction or modification of an eligible vessel or offshore marine structure.
Eligible projects include the purchase, conversion, refurbishment or modification in a Canadian shipyard of a vessel that is solely intended for use in a commercial operation, service or venture. The shipyard must be in Canada on a water way accessible to ocean-going traffic. The purchase price must be at least $5 million.top of page
1.2.2 Planned and Actual SFF Expenditures
The total program budget was $50 million over four years (2007–2008 to 2010–2011), of which $5 million was intended for operating and maintenance and $45 million for grants and contributions. The renewed program went through a startup phase the first year, during which operating and maintenance expenditures were not budgeted, although projects began to be approved. Exhibit 1.7 provides planned and actual expenditures for the program.
Expenditures between 2008 and 2010 were lower than expected. In this period, there was a downturn in the global economy while the Canadian dollar was relatively high. This reduction in demand in Canada was consistent with world-wide shipbuilding activity. The OECD reported that, globally, new orders fell from 22.2 million Compensated Gross Tons (cgt) in the third quarter of 2007 to 12.3 million cgt in the third quarter of 2008, and to just over 1 million cgt in the last quarter of 2008 and first quarter of 2009. This represents a decrease of approximately 90% from the peak level.16
|Source: SFF Program Files|
1.2.3 Expected Outcomes and Logic Model
The SFF Program logic model, developed as part of the RMAF/RBAF (2007), is as follows.
The SFF logic model illustrates the expected impact of the program by linking program activities to outputs, and outputs to outcomes. The key program activities (market the program; assess and process applications and provide assistance to applicants; and establish policies and procedures, monitor, measure and report on results) are expected to lead to the outputs described in the model. These in turn are expected to lead the following outcomes:
- Shipbuilders are aware of the program and inform potential owners
- Ship owners acquire/modify vessels or offshore marine structures in Canadian shipyards where, without the SFF, they may not otherwise have done so
- Maintenance of shipbuilding capacity to meet government procurement needs
- Creation of demand for new-builds, conversions, refits and modifications in Canadian shipyards.
- Ongoing demand for new-builds, conversions, refits and modifications in Canadian shipyards
- Maintenance or increase in number of direct and indirect shipyard jobs
- Maintenance or development in skill level of shipyard workers
- Development of innovation, adoption of new technology and improvement of productivity in Canadian shipyards.
- Competitive conditions in Canadian shipyards to cost-effectively meet federal government procurement needs.
9 Integrated Results-based Management and Accountability Framework (RMAF) and Risk-Based Audit Framework (RBAF) for the Structured Financing Facility (SFF) Program, 2007, p. 1. Return to reference 9
10 Ibid. Return to reference 10
11 Final Evaluation of the Structured Financing Facility Program, Final Report, Feb. 8, 2008. Raymond Chabot Grant Thornton Consulting Inc., p. 4. Return to reference 11
13 SFF Program Database. Return to reference 13
14 Integrated Results-based Management and Accountability Framework (RMAF) and Risk Based Audit Framework (RBAF) for the Structured Financing Facility (SFF) Program, 2007, p. 3. Return to reference 14
17 Total planned expenditures exceed the $50M provided for the program for a number of reasons, namely reprofiling of funds, transfers to/from a reserve, and reallocation within the department. Total actual expenditures reflect spending under previous and current terms and conditions. Return to reference 17
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