Difference between revisions of "Invested Equity"

Latest revision as of 05:57, 5 March 2012

This article may be obsolete or of historical interest only, as it refers to the now-terminated role of the DCBC and the Concession Agreement.

The Invested Equity was the amount of equity capital (or equivalent) provided by the DCBC for the Bridge project. The Concession Agreement limited this to a maximum of $5 million, and provided for a guaranteed annual return of 4.5% annual, as well as the potential for a 15% return given sufficient revenues in a year (as well as half of any remaining amounts).

Original equity

It was originally reported that the two original partners in the DCBC (the Fort Providence Dene and Metis groups) would provide 60% ($3 million) of the maximum equity. As there had been an announcement in April 2004 of a $3 million federal INAC grant to the DCBC, the logical assumption was that this was the source of the equity. However, according to the Department of Transportation timeline and subsequent communication from them to me, it appears that the INAC contribution was conditional on unknown criteria being met by the DCBC, and only $1.8 million was eventually obtained. See the INAC grant article for details.

Atcon equity

The remaining $2 million was originally intended to be provided by an unnamed Alberta company. However, during the final modifications to the Concession Agreement in January 2008 they apparently required conditions unacceptable to the project partners. Atcon Construction, the general contractor for the project, stepped in with an offer to fill the equity hole. Although this was nominally $2 million, reports indicate that this was not completely funded at the time Atcon left the project. Presumably any Atcon equity will be part of whatever final settlement the GNWT comes to with Atcon.

GMP Reduction equity

Amendment 3 of the Concession Agreement (February 2008) refers to a "GMP Reduction Agreement" between the DCBC and Atcon, Jivko Jivkov and Andrew Gamble, and the term "Incremental Invested Equity". It also refers to a "$600,000 aggregate decrease in the GMP's [sic] pursuant to the GMP Reduction Agreement...". It would appear provision was made for the possibility of the Development, Design, and Construction partners acquiring equity in lieu of full payment. Presumably any Development or Design equity would have been part of the settlement with Gamble and Jivkov.

Amendment 3 also had wording that equity provided up until November 1, 2010 will be deemed as Invested Equity, allowing the DCBC until that time to arrange the full $5 million if they can.

Equity positions

My best information as to the equity position in late 2009 (before the departure of Atcon and the project management principals) is something like this:

• DCBC - $1.4 million
• Atcon Construction - $2.3 million
• Andrew Gamble and Jivko Jivkov - $300,000 each through GMP Reduction agreements.

for a total of $4.3 million. I don't know if this is accurate or not. Not all of the equity may have been fully funded - there was a November 30, 2010 deadline for it to be finalized. Atcon had reportedly provided $500,000 of their stake (whether cash, GMP reduction or some combination isn't known) - presumably any equity was part of whatever final settlement with Atcon is or was negotiated. Similarly, part of the other GMP reductions may have been for future, not previous, work. Presumably whatever paid-up equity stakes were held by others departing the project were resolved in those settlements as well. The DCBC's equity was absorbed by the GNWT, and its anticipated returns from the project effectively being replaced by grants over the next 35 years.

See Also

INAC grant - details of my attempts to clarify the amount received from the federal government.

This artice defines a term from the now-terminated Concession Agreement.