Planemaker Bombardier said yesterday it signed a long-expected deal with Quebec for the Canadian province to invest $1bn in its CSeries aircraft programme, which has struggled with years of delays and cost overruns.
The agreement leaves the Montreal-based manufacturer free to focus on talks with Canada’s federal government over possible investment, a deal which is proving much harder to pull off.
Quebec and Bombardier want the federal government to match the province’s $1bn investment in the narrowbody jet programme.
But negotiations have dragged on, with sources close to the talks saying Justin Trudeau’s Liberal government wants changes to the plane-and-train-maker’s dual class share structure.
Quebec Transport Minister Jacques Daoust said the deal contains a clause that would allow the province to match the terms of any future investment from the federal government.
“I have the option to ask for the same terms,” Daoust said in an interview, adding that he still believed a deal with the federal government was possible despite the protracted talks.
Quebec Premier Philippe Couillard said earlier this month the terms of the federal and Quebec deals would need to be complementary, but not necessarily the same.
Should federal investment not materialise, Daoust said the province would not rule out a foreign investor in the CSeries.
But he said Quebec would retain veto rights while conditions already negotiated by the province, like keeping Bombardier’s head office in Quebec, would have to be respected.
Bombardier said it would transfer the assets, liabilities and obligations of the programme to a newly created limited partnership, in which the company will hold a 50.5% equity stake and Quebec the rest.
The investment will be made in two instalments of $500mn, the first on June 30 and the second Sept.
1, Bombardier said.
“We understand that the deal structure is legal from a WTO (World Trade Organisation) perspective,” analysts at BMO Capital Markets wrote in a note.
Brazil and Canada have locked horns repeatedly at the WTO over the past two decades over the issue of government support for Embraer and Bombardier, the world’s biggest commercial planemakers after Boeing Co and Airbus Group.
Bombardier shares were up about 1.5% at C$1.98 in afternoon trading.
The company also said yesterday that it had won a contract, in partnership with Australian firm Downer EDI, to supply and maintain 10 commuter trains in Perth, Australia.
Its share of the contract is worth $46mn.
Bombardier said it will maintain operational control of the CSeries and consolidate its financial results.
The limited partnership’s board will consist of five directors, three proposed by Bombardier and two by Quebec.