CBC NEWS - Newfoundland
Gray Aqua files for bankruptcy protection
Government to wait 30 days to see how $3.8-million equity stake will shake out
By Jamie Baker, CBC News
Aug. 28, 2013
Fisheries and Aquaculture Minister Derrick Dalley says it's not clear at this point what will happen to Newfoundland and Labrador's $3.8 million equity share in the Gray Aqua Group given that the company has now filed for bankruptcy protection.
The company was recently hard hit by a series of infectious salmon anemia cases, resulting in millions of dollars worth of fish having to be destroyed.
At the same time, Gray's has been ordered by the courts to repay Corey Nutrition just under $650,000 that it owes for fish feed supplied to its farms in Newfoundland.
Dalley says the company will go through a standard 30-day restructuring process, after which it will be more clear what will happen with the company — and the province's equity investment.
"We do have a $5-million equity share with this company which we announced some time ago — only $3.8 million of that has been used at this time," Dalley told The Fisheries Broadcast.
"As they go through the next 30 days and look at restructuring, we'll see how the details shake out."
Dalley said he met with the company on Aug. 13, to discuss the company and the situation it found itself in following the ISA setbacks.
He said there was no indication at that time what their immediate plan was.
"We had a good discussion, recognizing they have run through a very difficult period," he said.
In the case of ISA, when any fish are ordered destroyed by the federal authorities, companies are generally compensated for their direct fish stock losses.
Costs 'on the front end'
However, Dalley said it's important to remember that the costs associated with growing the fish and the expected profits that would have been realized by selling them once they reached full maturity are not covered.
"A lot of the expense of growing the fish is on the front end, and you don't get covered on the front end unless fish are able to grow to full maturity," Dalley said.
"In this case they weren't at full maturity in part of the depopulation, so as a result of that it ended up being a loss in the compensation."
While the province is concerned about what might happen with its equity stake in the Gray Aqua Group, Dalley says that one investment doesn't cast a pall over the support the province has given the aquaculture industry in recent years.
He says the Gray situation is a small snapshot in a much bigger picture.
"Not only have we seen tremendous economic gains and growth in the region, our $24 million in equity investments to date in the industry has resulted in some $400 million return on investment," Dalley said.
"The idea of the equity share, the idea of the investments has certainly spurred a lot of economic growth, but it's unfortunate that Gray's find themselves in this particular situation."
Dalley said the situation won't make the province gun-shy about future investment in aquaculture operations.
"The equity share we had with this company and other companies was about supporting economic development and entrepreneurship in a rural area of the province," he said.
"At this point we have to wait for the 30-day restructuring … but as well, we certainly see it as a tremendous win when you put in a $24-million equity investment and get a $400-million return — but perhaps more importantly, in particular in the south coast region of the province, some 1,000 people are working now. It's tremendous when you see people working 52 weeks of the year in the fishery."