TABLE of CONTENTS

2 40 Years of Service 2 The Beginnings 2 Highlights 3 Statistical Comparisons

4 President’s Message and Performance Review 5 The Commercialization Mandate 6 State of the Organization at Handover 9 Financial Matters

11 The Financial Year in Review

14 Management’s Report

15 Auditor’s Report

16 Consolidated Financial Statements

19 Notes to Consolidated Financial Statements

26 Management Executive Officers Offices Governance The St. Lawrence Seaway Authority: 40 YEARS OF SERVICE

THE BEGINNINGS… THE ST. LAWRENCE SEAWAY – SOME HIGHLIGHTS 1951 1959 he St. Lawrence Seaway Authority Act T and the International Rapids Power On April 25, the “D’Iberville” Development Act allow Canadians to begin begins the first through transit of the St. navigation works on the Canadian side of Lawrence Seaway, officially opened by the river from Montreal to Lake , as Queen Elizabeth and President Eisenhower well as in the Welland Canal. At the same on June 26. time, a joint U.S. Canadian project begins power works in the International Rapids 1973 section of the St. Lawrence. The U.S. also The Welland Canal realignment to bypass begins work on the Wiley-Dondero Canal the City of Welland opens to navigation. that will bypass the International Rapids. Co-operation and consultation on the ele- 1978 ments of the modern Seaway commences. Seaway operations become self-supporting, 1954 depending on revenue from tolls and invest- ments. The federal government still con- The St. Lawrence Seaway Authority is tributes to major capital works. established by an Act of Parliament, with the mandate to acquire lands for, construct, 1983 operate and maintain a deep waterway The Seaway carries its billionth tonne of between the port of Montreal and Lake cargo. Erie, along with the international bridges that cross it and other lands and structures. 1986 Work on the Seaway begins in September. Four Montreal area bridges are modified The Authority begins a seven-year program without disrupting traffic, new channels are to rehabilitate the Welland Canal, at a cost dug and existing ones dredged. The related to the federal government of $175 million. power development will flood 259 square 1991 km (100 square miles); land is expropriated and entire communities are resettled. Some The Authority starts a land disposal pro- 6,500 people are moved to new homes and gram, selling off land holdings not required some 550 dwellings are transported to wait- for operations or future expansion. ing foundations in the new towns of Long Sault, Ingleside and Iroquois. 1993 The Seaway’s draft increased from 26 feet 1958 (7.90m) to 26 feet, 3 inches (8.0m), enabling The new Iroquois Lock is in regular use by vessels to carry more cargo per voyage, and May. On July 4, the Snell and Eisenhower wide- vessels, exceeding the 76 foot Locks built by the U.S. at Massena, New (28.8m) limit by up to 2 feet are first admit- York are opened and the power is switched on ted through the locks. The transfer of non- at the international Moses-Saunders generat- navigational structures such as bridges to ing station. other jurisdictions begins. 2 The St. Lawrence Seaway Authority: 40 YEARS OF SERVICE

1995 55% fewer vessels, they each carry on aver- age 3.5 times more cargo. The Welland Canal section of the Seaway had the longest operating season ever – 280 Cargo days, from March 24 to December 28. There Total cargo tonnage on both sections of the were 277 days of navigation on the Seaway rose from 30.6 million in 1960 to a Montreal/Lake Ontario section. high of 74.3 million in 1979. As transporta- tion trends and needs changed over time, the 1996 amount of cargo passing through the Seaway May 10 marks the passage through the decreased, and tonnage in recent years have Seaway system of two billion tonnes of cargo, settled consistently in the 48 to 50 million valued at more than $400 billion. The ship tonne range. that puts the cargo statistics over the two bil- Various types of cargo have also undergone lion tonne mark is the Canadian self- fluctuations over the years. Agricultural prod- unloader Algosoo, carrying a load of iron ore ucts formed 31.6% of cargoes in 1960 and from Quebec to Ohio. 28.3% in 1997. Mine products also remain In June 1996, the Canada Marine Act that will fairly consistent – 45.5% of cargoes in 1960 commercialize the Seaway is first introduced and 47.2% in 1997. Manufactured and mis- in the House of Commons. Parliament is dis- cellaneous products (mostly steel and related solved for a federal election before the Act products) have taken an increasing share of passes, it is reintroduced in August 1997, and overall traffic, from 18.8% in 1960 to 24.3% receives royal assent in June 1998. in 1997. The key individual commodities passing through the Seaway and their relative 1998 share of cargoes in 1960 and 1997 are as On October 1, operational control of the follows: coal – 14.4% and 9.4%; iron ore – Canadian portion of the Seaway is officially consistent at around 24%; fuel oil – 5.2% and transferred from The St. Lawrence Seaway 2%; manufactured steel – 2.2% and 6.8%. Authority to The St. Lawrence Seaway Revenue Management Corporation, a new not-for- profit corporation. In 1959, the Canadian portion of the Seaway generated revenues of $8.3 million; in 1997, SOME STATISTICAL revenues were $73.2 million. A more mean- COMPARISONS ingful comparison results if both figures are adjusted to August 1998 dollars, using the Vessel Transits Consumer Price Index. The revenue in 1959 The total number of vessel transits through then becomes $49.7 million, and average the Seaway system decreased from 9,078 in costs to shippers are $1.50 per tonne. In 1960 to 4,061 in 1997, reflecting the disap- 1997, although adjusted revenue has risen to pearance of small canalers. However, in $74 million, the average costs to shippers 1960 the average vessel had a gross regis- have dropped to $1.39 per tonne – a remark- tered tonnage (GRT) of 2,800 and carried able achievement after nearly 40 years of ris- 3,400 tonnes of cargo. Today, the average ing prices in every other sector of the GRT is 12,250, and the average cargo is economy. The outlook for toll revenue in 12,000 tonnes. While the Seaway processes 1998 is very promising. 3 PRESIDENT’S MESSAGE AND PERFORMANCE REVIEW

Under the terms of the new management agreement, the Authority’s responsibility for the international bridges on its route, the tunnel at Melocheville, and the Pilotage Authority ended with its dissolu- tion. The Great Lakes Pilotage Authority became a crown corporation in its own right. The Melocheville Tunnel and the Mercier Bridge were transferred to The Jacques Cartier and Champlain Bridges Incorporated, which in turn, together with The Seaway International Bridge Corporation, Ltd., and the Canadian side of the Thousand Islands Bridge now operates under The Federal Bridge Corporation his report, covering the period Limited. The St. Louis de Gonzague Bridge, April 1, 1998 to September 30, 1998, is the Valleyfield Bridge, and the Townline T the last annual report of The St. Tunnel remain government-owned assets, Lawrence Seaway Authority. It marks a and are managed by The St. Lawrence major milestone in the history of the Seaway Management Corporation on behalf Canadian operations of the Great Lakes / St. of Transport Canada. Lawrence Seaway System: the transition from stewardship by a crown corporation to In the last year of its operation as a crown management by the private sector. corporation, to meet the requirements of the Canada Marine Act, The St. Lawrence Canada’s new national marine policy, first Seaway Authority carried a double workload. announced in 1995, called for the commer- We dealt with business as usual, enabling the cialization of the Seaway. The Canada smooth passage of vessels through the Marine Act, the legislation that gave life to Seaway System and continuing to implement this policy, received royal assent in June planned operational improvements. In addi- 1998. Official transfer of responsibility for tion, we had to prepare for life as a new pri- the Canadian operations of the St. Lawrence vate sector corporation. We accomplished Seaway to a not-for-profit corporation estab- both sets of tasks efficiently and on schedule, lished by Seaway users, under a renewable thanks to a spirit of co-operation and good- 20-year agreement with the Canadian gov- will among management, unions and staff ernment, took place in a ceremony in that cannot be commended enough; and Welland, Ontario, on October 2, 1998. The thanks also to the generous help and advice management agreement for the new not-for- from Transport Canada. profit corporation includes incentives to encourage greater efficiency without reduc- This report winds up the business of the ing the quality of service. The federal gov- Authority and documents the state of the ernment continues to act as regulator for the organization at handover. Seaway System and retains ownership of the Seaway’s infrastucture. 4 PRESIDENT’S MESSAGE AND PERFORMANCE REVIEW

THE COMMERCIALIZATION handle the numerous tasks involved in mak- MANDATE ing the transition a reality. An indication of A major part of my mandate for 1998 was the amount of work these teams accom- to ensure that the myriad tasks of the com- plished is the closing agenda for commer- mercialization process were properly com- cialization, which involved the tabling of 133 pleted. The Authority was an equal partner separate documents, each of which repre- in the complex negotiation process for sented an underlying pyramid of negotia- commercialization, participating in all tions, planning and execution that involved meetings between Government and the many people and sometimes weeks and even user consortium, as well as carrying out the months of effort. Teams worked in the areas tasks that these negotiations identified as of human resources, finance, and legal crucial for the transition to new manage- issues; there was also a capital committee, ment. Our goal throughout was to hand which worked with an engineering consul- over a healthy organization, with all the tant to ensure all capital assets would be necessary new systems and procedures in properly covered. The work of the teams place so that the Seaway could function covered the whole spectrum of the organiza- efficiently in the private sector. tion’s activities and responsibilities, from the new Letters Patent and bylaws to a trans- It was a demanding and busy period for the ferred assets report, lists of motor vehicles Authority, as changes in structure and sys- and their transfer documents, and a host of tems evolved and had to be dealt with, along government certificates, permits and with the usual operational tasks, in a climate licences. Included were agreements relating of staff cuts and insecurity about the future. to Seaway management, operation and The additional pressures of the transition maintenance, to the Seaway bridges, to secu- period required a conscious and continuous rity, and to the managed assets of the new effort on our part to enhance motivation and corporation; resolutions regarding fees and productivity. One means we used to accom- tolls; financial estimates and balance sheets; plish this was to maintain an open process, bills of sale and registration certificates for concentrating on communication with staff vessels transferred to the new corporation; and with users as the commercialization start-up and business plans, matters relating agenda took shape. Staff was kept informed to leases, and funding arrangements. of developments through the Authority’s newsletter, a series of memos, and various Offers of employment from the new corpo- briefings at the regional and local levels ration to employees had to be prepared, and between March and August 1998. On several arrangements made to transfer personnel occasions during the process, I met person- files. Special negotiations with the Union ally with all employees and with Union rep- were necessary, as initially Union members resentatives to bring them up to date and were unwilling to give up their established answer questions about what was happening. benefits by transferring out of the Public Service Alliance. In the course of developing And, indeed, a great deal was happening, at a a new and more co-operative working rela- relentless pace. The Authority established a tionship among Union, management, and Strategic Committee to manage the multi- excluded employees over the last year, we layered process, and a number of teams to 5 PRESIDENT’S MESSAGE AND PERFORMANCE REVIEW

also established the parameters for agree- STATE OF THE ments that would ensure that employees did ORGANIZATION not lose out in the transition to the private AT HANDOVER sector. New employee benefits were created, For a number of years now, “business as a new pension agreement was struck, new usual” at the Seaway had involved an unusu- employment policies were developed, the al amount of change, as we experimented employee termination benefits fund was with the various stages of our Quality established, and arrangements were made for Service Initiative. The pace of change did employee group insurance, dental care, and not diminish, despite staff cuts and the pres- other benefits. sures of impending commercialization. A full As stipulated in the Canada Marine Act, The description of Seaway operations in the St. Lawrence Seaway Management 1998-99 fiscal year will follow in The St. Corporation will maintain its headquarters Lawrence Seaway Management in Cornwall, Ontario. Accordingly, the Corporation’s first annual report. In this Authority made arrangements to close its report, I will cover only events and achieve- Ottawa head office on September 30, 1998, ments during the first six months of the and selected employees were transferred to 1998-99 fiscal year, ending with the dissolu- Cornwall. tion of the Authority. I would like to express my personal thanks Traffic Management Improvement for the hard work and creativity of the Project Strategic Committee, and the teams working We continued to make progress on our qual- on human resources, finance, legal, and SAP ity service initiatives. The Traffic Manage- tasks. A heartfelt thanks goes also to the ment Improvement Project is on schedule Authority’s employees who, despite their and the projected start-up date for the new anxieties about the future, and the knowl- traffic management system (TMS) is April 1, edge that many of them would be gone by 1999. The work is being done in co-opera- March 1999, continued to offer quality ser- tion with user teams and the Saint Lawrence vice to Seaway users while implementing Seaway Development Corporation. During dramatic organizational changes. And final- 1998, a new Traffic Control Centre was ly, a very special thank you to the Minister completed in the Niagara Region, and con- of Transport, the Honorable David struction began on a new traffic centre in St. Collenette, the Deputy Minister of Lambert. Software development is being Transport Canada, the Assistant Deputy completed in phases; modules are delivered Minister, and the Transport Canada staff to project user teams as they are completed, who were always available with innovative so that they can be tested before they are ideas, information and problem-solving help required for use. A Wide Area Network throughout the whole commercialization (WAN) now links the TMS development process. centres in St. Lambert, Cornwall, St. Catharines and Toronto (where the consul- tant is located). These local development centres house operational work stations and overview display systems, so that user teams

6 PRESIDENT’S MESSAGE AND PERFORMANCE REVIEW

and the traffic control centre staff can review end, and often may include many partici- and comment on the latest software updates pants. Business processes were defined so as quickly and efficiently, thus eliminating the to focus all units on improved customer ser- need to travel. An added benefit in testing vice; provide a safe and reliable system at the new software in situ, using Seaway least cost; standardize structure, processes equipment and communications technology and systems, based on best practices; maxi- is that communications and other technical mize benefits and minimize duplication; pro- issues can be identified and resolved prior to mote clear accountability; and ensure the the actual system start-up. right support for teams at all levels. ISO 9002 (1994) certification The accelerated implementation process The ship inspection and marine services of took six months and involved identifying and both The St. Lawrence Seaway Authority documenting each of the Seaway’s business and the St. Lawrence Seaway Development processes, selecting and organizing the six Corporation obtained ISO 9002 (1994) cer- key processes to be used as the basis of the tification in July 1998 from Lloyd’s Register, system, creating work procedures, creating meeting the requirements of the training sessions in both official languages International Safety Management (ISM) for users, and developing a program to move Code, which was imposed for vessels effec- information from the old computer systems tive July 1, 1998, by the International to the SAP system. The system links all cor- Maritime Organization. Certification was porate divisions within a framework of six completed in six months. Lloyd’s Register business processes: Ship Transit, was chosen to oversee the approval process Infrastructure Planning and Maintenance, because of its international reputation for Customer Service, Financial Accounting and high quality standards. The quality manage- Reporting, Human Resources Management, ment initiative will now be extended to other and Governing Processes. It will also inter- areas, such as operations and traffic control. face with specialized systems such as the ISO 9002 certification reinforces the Traffic Management System, the Seaway’s commitment to a safe and reliable Infrastructure Management System, and the system, beginning with the services most Measurement System. closely linked to the operational needs of Re-engineering and Business Plan customers. Continue to Develop SAP – Integrated Management The SAP software includes a library of more Processes than 1,000 pre-defined processes spanning Development work was also completed in each function. These pre-defined processes, 1998 on SAP—the new information man- our best business practices, will help to guide agement system that integrates all the the organization as it fine-tunes and finalizes Authority’s business functions into one data- operational re-engineering. This may evolve base—and became functional in November. further under the new management, concur- With SAP, every employee’s task fits into the rently with the new job evaluation and com- framework of a defined business process—it pensation program with which it is linked. becomes part of a whole, part of a Seaway business process that has a beginning, an 7 PRESIDENT’S MESSAGE AND PERFORMANCE REVIEW

The Seaway’s new long-term (5-year) busi- cially in 5 of the 15 factors measured: corpo- ness plan is now in place, as agreed with the rate direction, communication effectiveness, new corporation’s representatives prior to training and career development, rewards the handover. Essentially, the plan pursues and recognition, and quality customer ser- the course the Authority has so far taken, vice. It is by no coincidence that these were emphasizing quality customer service while the specific areas where the Authority was seeking cost efficiency. It will, of course, conscious of the need for improvement and continue to evolve under the new manage- had established a plan of action. ment. In particular, our work to ensure effective Human Resources Issues communication with employees over the The Authority’s departure incentive program past year has been critical to the success of has been implemented, at a cost of $5.24 the transition to private sector management, million in termination benefits. As of and this was reflected in the survey results. September 30, 1998, 74 employees have Employees felt that the Authority’s commit- already left as per the plan provisions; an ment to communicating with them had additional 31 will leave by the end of March improved. Credibility of information and 1999, for a total of 119 employees or 17% of effectiveness of upward and downward com- the March 1997 staff complement. Fourteen munication have all improved by more than employees had left through normal attrition 10 percent. Approximately half the employ- before the program was implemented. As ees felt that face-to-face meetings with the this figure more than meets the Authority’s President, discussions with regional manage- planned employee reduction commitment, ment, and written publications all helped no further large-scale staff cuts are expected, them understand the Seaway’s goals and although some minor adjustments will be plans, although some improvements are still necessary. needed, particularly in communication among the regions, and between head office A major achievement last year for both the and the field. Authority and its employees was the estab- lishment of a negotiated co-operative rela- Given the continued climate of change in tionship among management, Union and the last several years and the demands the excluded employees. This agreement, with Authority has made on its staff as a result, its well-defined areas of responsibility, inter- it is not surprising that some improve- action patterns and communication lines, has ments are still necessary. The organization increased trust and is creating more syner- has not yet reached the Hay norm on any gistic working relationships and a positive of the measured factors (though we are climate for the incoming management. close on some), and there has been a decline since 1996 in overall opinions of In August 1998, a balanced sample of team leadership, employee Seaway staff was asked to complete a survey satisfaction/commitment, management of to help assess how far the Authority had pro- change and working conditions. Once the gressed towards the employee satisfaction new corporation has become firmly estab- goals we set after the 1996 Hay Survey. The lished and the pace of change slows, some results indicated a number of significant indices should automatically rise. improvements from the 1996 results, espe- 8 PRESIDENT’S MESSAGE AND PERFORMANCE REVIEW

Customer Service Survey poration, and the Federal Bridge A survey of a different kind, undertaken Corporation Limited. The Authority dis- during the 1998 navigation season, will pro- tributed $591,698,100 in assets on dissolu- vide customer service feedback to assist the tion. The direct costs of commercialization new corporation in developing its plans for in 1998 were $1.076 million, including 1999. Survey forms were distributed to the studies of the feasibility of the not-for- shipmasters of both lakers and ocean-going profit corporation and the necessity for vessels as they exited the Seaway system, changes to the employee pension plan. from the beginning to the end of the navi- Closing gation season. Results will be tabulated and The St. Lawrence Seaway Authority has ready for the new corporation’s first annual now completed nearly 40 years of successful report, but the indications so far show operation. In our final year, we have main- improvement in several areas over the last tained and improved our high standards of survey in 1995. service, and re-organized ourselves to meet the needs of our new management. FINANCIAL MATTERS In our 1997-1998 annual report, we record- In June 1998, the Seaway implemented a 2 ed nine new organizational priorities for the percent increase in cargo tolls and vessel short- to medium-term: charges, the first such increase since 1993. • complete the commercialization of Seaway The impact on total transportation costs for operations users is minimal, adding about 2.7 cents to the average $80 cost of transporting a tonne • develop a long-term business plan with the of grain to its destination. Modest as it is, Users Group the increase will help ensure that inflation • rationalize the organization through a does not erode the Seaway’s ability to main- Departure Incentive Program tain lock facilities and navigation channels in • implement re-engineering recommenda- a safe and reliable condition. The toll tions submitted by a consulting firm increase was enabled in April 1998, when the federal government rescinded the 1959 • develop a partnership with our employees Cabinet Order that established the Canadian • implement a new integrated information toll structure and ended the requirement for technology management system U.S. agreement to revise toll charges on the Canadian section of the Seaway. This change • create a single-desk traffic control centre was considered a prerequisite for commer- • implement Phase II of the Quality Service cialization. Initiative The details of the Authority’s financial • develop a new job evaluation and global condition at handover are outlined in the compensation plan following Financial Statements. It also details the distribution of assets and liabili- ties among Transport Canada, the new cor-

9 PRESIDENT’S MESSAGE AND PERFORMANCE REVIEW

Plans for some of these priorities called for challenges, and I am confident that they will completion within the past year; others are continue to help the organization prosper in longer-term initiatives that will require more the future. My best wishes for success to the time to complete. On all of them, we have new St. Lawrence Seaway Management achieved what we promised, on time and on Corporation. budget; it is now up to the new corporation to carry on the good work. The Seaway employees demonstrated their commitment through the time and energy they have spent in the past year dealing with changes and Michel Fournier

10