jGoveramenr Ml Publicationf Government Gouvernement I 14^1 of Canada du Canada Prepared by the Receiver General for Canada ublic occounis of conoda Volume The President of the Treasury Board Annual Report to Parliament on Crown Corporations and other Corporate Interests of Canada '-v^5>n*1«^ Canada Government Gouvernement 14^1 of Canada du Canada Prepared by the Receiver General for Canada yy public occounis of conodo Volume III The President of the Treasury Board : Annual Report to Parliament on Crown Corporations and other Corporate Interests of Canada Canada ©Minister of Supply and Services Canada 1990 Available in Canada through 'W Associated Bookstores and other booksellers or by mail from Canadian Government Publishing Centre Supply and Services Canada Otuwa. Canada KIA 0S9 Catalogue No. P51-1/1990-3E ISBN 0-660-13733-X 1 ot rioqt.. For information about matters reported in this volume, contact Policy and Corporate Information Division Crown Corporations Directorate Department of Finance and Treasury Board of Canada Phone 613-957-0156 Version fran^aise est aussi disponible THE PRESIDENT'S MESSAGE I am pleased to present the seventh consolidated Annual Report to Parliament on Crown Corporations and Other Corporate Interests of Canada. Last year's report coincided with the fifth anniversary of the framework established in 1984 for the control and accountability of Crown corporations. My predecessor noted at that time that considerable progress had been made towards effective management of the Government's portfolio of Crown corporations. This view was subsequently supported by the Auditor General in a chapter in his October 1989 report to the House of Commons devoted to an assessment of the implementation of the framework. He commented on the numerous improvements since 1984 and concluded that "all the fundamental processes are in place". Much of that progress is attributable to the efforts of the employees, management and boards of directors of Crown corporations, who face unique and difficult challenges in running a diverse array of business and public policy entities on behalf of Canadians. In November 1989, the Government held the first conference of Chairpersons and Chief Executive Officers of all its Crown corporations, to provide a forum to discuss those challenges and to exchange views on how to improve productivity and better manage scarce resources in the coming years. The management of Crown corporations together with the government's privatization and rationalization efforts are contributing to greater economic efficiency and deficit reduction. As part of these efforts. Crown corporations were asked in the February 1990 Budget to return more of their income by way of dividends to the government, their shareholder, and were encouraged to function in a more commercial way. Some of the achievements in 1989/90 include: the sale on July 5, 1989 of the remaining 57% of the government's shares in Air Canada; the announcement in the February 20, 1990 Budget of the government's intention to privatize Petro-Canada, and to sell the government's shares in Telesat Canada; a major rationalization of VIA Rail; the introduction on May 31, 1990 of Bill C-73 to wind up four Crown corporations (Canadian Livestock Feed Board, Canadian Patents and Development Ltd., Harbourfront Corporation, and Mingan Associates Ltd.) and to change the status of two others from parent Crown corporations to subsidiaries (Canada Harbour Place Corporation and Canada Museums Construction Corporation Inc.); dividend payments to the government from 10 corporations, totalling $118.2 million. The overview which follows summarizes the financial and employment situation of the Crown corporations. It also highlights developments in a number of specific corporations. OVERVIEW At the end of the 1989-90 reporting period, there were 53 parent Crown corporations. Forty-five of these are listed in Schedule III of the Financial Administration Act (FAA), and their business and activities are governed by Part X of the FAA and its related regulations. The remaining eight are exempt from the provisions of divisions I to IV of Part X. In addition, three subsidiary corporations have been directed by the Governor in Council to report their affairs as if they were parent Crown corporations listed in Schedule III: Petro-Canada International Assistance Corporation and two of the three subsidiaries of Canada Lands Company Limited: Canada Lands Company (Mirabel) Limited, and Old Port of Montreal Corporation Inc. Fourteen of the 53 parent Crown corporations are listed as commercial corporations on Schedule III Part II of the FAA. Thirteen of them generated profits totalling $440.5 million, on a cash flow of $1.3 billion, in 1989-90. Total assets of the commercial corporations decreased from $20.4 billion in 1988-89 to $18.2 billion in 1989-90, and shareholder's equity declined from $9.9 billion in 1988-89 to $8.5 billion in 1989-90, mainly because of a write-down of assets in the Canada Development Investment Corporation, reflecting lower resource prices, and a change in Petro-Canada's accounting methods. Thirty-one parent Crown corporations, listed on Schedule III Part I of the FAA, normally receive apropriations from government to cover program costs and/or capital expenditures. Total budgetary payments to these corporations and to the exempt corporations remained relatively constant in 1989-90, at $4.6 billion. Combined total assets of these corporations increased from $33.5 billion in 1988-89 to $34.4 billion in 1989-90, and shareholder's equity rose from $2.9 billion to $3.4 billion over the same time period. Total Crown corporation borrowings and other liabilities to the private sector and Canada also remained relatively stable in total for 1989-90. Major increases occurred for the Export Development Corporation ($0.6 billion) and The Canadian Wheat Board ($0.7 billion), while the Farm Credit Corporation and Canada Deposit Insurance Corporation decreased their borrowings and other liabilities by $0.8 billion and $0.3 billion respectively. Employment continued to decline to 136,000 from 142,000 the preceding year. The decline is primarily attributable to the rationalization of VIA Rail and to downsizing in Petro-Canada, Canada Post and Canadian National Railways. CORPORATE HIGHLIGHTS Highlights of the activities for specific corporations during 1989-90 include: Atomic Energy of Canada Limited (AECL): The federal government joined Ontario and other provinces in a new federal/provincial funding initiative, in response to AECL's first operating loss in twelve years of $10.2 million. Key to this decision was the commitment by Canada's nuclear utilities, led by Ontario Hydro, to bear a larger share of nuclear research and development costs. Canada Development Investment Corporation (CDIC): During 1989, the spot market prices for uranium concentrate declined significantly. In response, CDIC wrote down its investment in Cameco by $202 million. The write-down was the main cause of a shift in shareholder's equity from a positive $140 million last year to a negative $152 million this year. Canada Mortgage and Housing Corporation^ CMHC): Net earnings of $163 million achieved by the Mortgage Insurance Fund allowed CMHC to eliminate the actuarial deficit the Fund had been carrying for 10 years. Issuance of Mortgage-Backed Securities during 1989 totalled $2 billion - an amount twice that which had been expected. Canada Museums Construction Corporation Inc. (CMCC): The exhibition wing of the Canadian Museum of Civilization opened to the public in June 1989, and construction of the building was finished during the summer of 1990. With the completion of its mandate, CMCC's status will be changed under Bill C-73 to a subsidiary of Canada Lands Corporation pending dissolution of the corporation. Canada Ports Corporation and the Local Port Corporations: Revenues from operations for Canada Ports Corporation and seven local Port Corporations remained relatively stable at $170 million in 1989, despite a decline in traffic volumes. A drop in revenues from grain shipments was counterbalanced by increases in revenues from other commodities. In 1989, Canada Ports Corporation and the local Port Corporations paid dividends to the federal government totalling $13 million on a combined net income of $49 million. The February 1990 Budget announced that Canada Ports Corporation and the local Port Corporations would contribute $100 million towards deficit reduction in fiscal year 1990-91. Canada Post Corporation recorded a $149 million profit for 1989-90, the second consecutive profitable year for the corporation, and paid a dividend of $60 million in June 1990. Mail volumes increased by over 10% from 1988-89 and 97% of properly prepared letter mail was delivered on time. Canadian National Railways (CN): This year, CN's net income declined to $205.8 million from a record of $282.7 million in 1988, due primarily to slowdowns affecting a number of key resource sectors. The company again succeeded in further reducing its long-term debt during 1989, from $1.96 billion to $1.87 billion. CN paid $41.2 million in dividends in 1989. The Export Development Corporation (EDC) supported $5.7 billion worth of Canadian exports during 1989. Loans totalled $1.3 billion, an increase of 25% over 1988, and insurance exceeded $4.4 billion, 12% higher than the previous record amount signed in 1988. In addition, $300 million in loans and insurance supported Canadian exports under the Canada Account. This account is administered by EDC and funded directly by the government to support export transactions considered to be in the national interest. EDC increased its allowance for loan losses by $200 million, resulting in a reported net loss of $199 million. Farm Credit Corporation (FCC) continued to make good progress in recovering from the effects of the agricultural recession. Net loss for 1989-90 was $2.7 million, compared to $34.6 million in the previous year.