The SGF: Four years of investment and job creation
$7.5 billion invested in four years, 43,000 jobs created
Montréal, May 22, 2002 - The Annual Report of the Société générale de financement du Québec was tabled today before the Quebec National Assembly by Premier Bernard Landry. “In 2001, we invested $579 million in capital, which led to an investment of $3.1 billion in partnership with the private sector, corresponding to 41 new development projects,” stated Claude Blanchet, the president of SGF. This is a 25% increase over 2000. In terms of employment, those projects led to the creation of 5,800 jobs in the operational phase and 8,300 full‑time equivalent jobs in the construction and implementation phases.
Heading Towards the Conclusion of the Five‑Year Development Plan
Mr. Blanchet explained that “between 1998 and 2001 the Société carried out in partnership 178 projects for a total value of $7.5 billion, equivalent to 30% of the Quebec manufacturing industry’s capital expenditures. Fifty‑seven international partners from four continents operate companies located in Quebec and targeting mostly the U.S. market.”
As a result, more than 43,000 direct, indirect and construction jobs were created, contributing significantly to the development of the Quebec economy. The impact of those new projects on the workforce has also been significant, particularly in terms of the quality of the jobs created, 94% of them being in medium –or high‑tech industries. These achievements clearly and unmistakably confirm the pertinence and effectiveness of the present five‑year plan.
“In 2001, the SGF’s annual rate of return in terms of the carrying value of investments was –.1%. However, in terms of the fair market value of SGF participation in public corporations, the figure rises to 4.1% for that year,” continued the president of the Société.
Within the framework of its five‑year plan, the SGF is to maintain a rate of return higher than its borrowing costs over five years as part of its commitment to the Société’s shareholder, in this case the Government of Quebec. At the end of these five years, the rate of return calculated based on the carrying value is 5.4% and 6.3% at the fair market value, while the cost to the shareholder was 4.9%. The Société reiterates the same commitment for the future so that its results have no negative impact on the Government of Quebec’s bottom line.
In order to carry out its ambitious development plan of investing $10 billion in the Quebec economy over five years, the SGF has had to commit substantial amounts, which will only produce a return a few years from now. Large projects such as Interquisa Canada, Circuit Foil America or Magnola, required investment of $698 million, or 30% of the SGF’s own capital. In the construction phase, those projects do not generate any profit because they are not in the production phase yet. It is even expected that they will produce losses, with some exceptions, during the first years of operation. These new businesses will therefore only begin to be profitable once they reach their cruising speed. Therefore, if we include 2001 projects such as Gaspésia or Kruger Wayagamack, we can clearly see the strong impact on the short-term profitability of the SGF.
“In order to correctly evaluate the impact of our involvement,” added Mr. Blanchet, “we must examine it over a longer period of time, which is quite comparable to the normal performance evolution in the private sector.”
Impact on the Quebec Economy
“The very mission of the SGF,” reminded Mr. Blanchet, “requires that its investments have a positive impact on increasing the Quebec GDP. I am particularly satisfied with the results we can report in this respect.”
As a matter of fact, the 43,000 direct and indirect jobs created through SGF investments and its private sector partners represent 15% of the jobs created on average in Quebec during the same period of time. This contribution is equivalent to adding 0.3% to the average annual employment growth rate, which was at 2.1% and would have been at 1.8% without SGF’s contribution.
The Société can also be satisfied with the impact of its investments on the value of the Quebec GDP. They added $4.8 billion to the Quebec GDP over the last four years. This represents the equivalent of an average annual increase of 0.6% of the GDP during that period.
Regional Economical Development
“The presence of SGF investments in various regions of Quebec has clearly increased over the last four years, as 118 of 173 of our investments (68%) were made outside Montreal,” the president of the Société noted. Twelve multi-regional investments representing $1.3 billion generated economic benefits for the whole Quebec territory (Domtar, Saputo, etc.).
Of the 43,000 jobs created in four years, 23,700 are located in the regions, while in terms of invested capital, out of $7.5 billion approximately $4 billion were invested in the regions of Quebec.
A New Development Plan
“By the end of 2002,” noted Mr. Blanchet, “we will have reached the objectives established when the five‑year plan was submitted to the government. We have just tabled a new five‑year plan to the Premier and the government is studying it. We expect a response by autumn 2002.”
The SGF is committed to an accelerated process of regional development in association with the ministère des Régions, private entrepreneurs and economic development organizations. “Together with area stakeholders, we intend to build a productive regional system that is competitive on North‑American and world markets.
The SGF’s mission is to implement economic development projects in cooperation with various partners and under normal profitability conditions. As of December 31, 2001, SGF’s consolidated assets exceeded $3 billion. The SGF has 57 international partners operating companies in Quebec. (sgfqc.com)
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