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Partnerships equal business opportunities

Author

Cheryl Petten, Windspeaker Staff Writer, Eadow Lake Saskatchewan

Volume

19

Issue

10

Year

2002

Page 26

Since its first foray into the world of business more than a decade ago, partnerships have played a major role in Meadow Lake Tribal Council's economic development initiatives.

Its first major business venture was the purchase of a 40 per cent interest in NorSask Forest Products, a stud mill located near Meadow Lake.

"We bought into it with the employees who were working in the mill," said Vern Bachiu, director of research and development with Meadow Lake Tribal Council (MLTC). "It was a failing business, and we bought into it in 1988, and were involved in the turn around of that business. And in 1998, we purchased 100 per cent of the mill. So that's really our flagship business."

While not all of the tribal council's current business ventures are partnerships-they also own 100 per cent of Polar Oils, a bulk fuel distribution company that sells home heating fuel and provides fuel to the logging industry, as well as Northern Trucking, a firm that hauls wood chips from the saw mill to Weyerhaeuser's pulp mill in Prince Albert-many of MLTC's other business ventures do involve partnership arrangements.

The tribal council has 50 per cent ownership in Ceres Fertilizers, a company that processes ammonium sulfate tailings from uranium mines into agricultural fertilizers, and is involved in a joint venture with TransGas Limited, Saskatchewan's Crown gas utility company, which involves MLTC storing natural gas in underground caverns.

Two of the tribal council's future business investments will involve partnerships as well, Bachiu explained.

"We've just made the decision to participate in two other businesses. And one is the oriented strand board (OSB) plant being proposed for Meadow Lake. And it would see us being approximately a 10 per cent participant . . . so we're hoping to not only be equity participants, we're hoping it'll be a good source of employment, as well as contracting opportunities for our First Nations," Bachiu said.

Construction of the new $220 million mill is expected to create 200 person years of employment. Once completed, an estimated 260 jobs will be created, half in the mill, and the other half in spin-off areas such as harvesting and trucking.

B.C.-based Tolko Industries will own 75 per cent of the mill. Saskatchewan's Crown Investments Corporation (CIC) will own the remaining 25 per cent, but will be making part of its share available to the MLTC, as well as to a North West Communities Wood Products Ltd., a group of five area communities that have formed a partnership in order to get involved in the mill project.

"The Northwest Communities and the Meadow Lake Tribal Council both have the opportunity to take up to just under 10 per cent of a share in this project. And that would come out of CIC's share," explained Ted Boyle, executive director of communications for the CIC. "So what they can do is get involved in it in a very small way to start with, and build up their ownership to 10 per cent over a period of time if they want to."

The other new partnership the MLTC is getting involved in is buying into West Wind Aviation. The company, founded in 1984, has charter operations in Saskatoon, Regina and Winnipeg.

Joining the MLTC in the venture is Prince Albert Development Corporation, economic development branch of the Prince Albert Grand Council (PAGC).

"So between us, we'll own 51 per cent," Bachiu said of the joint venture with the PAGC. Although the two tribal councils have worked together on programming in the past, this will be the first time they have come together for a business venture, as well as being MLTC's first business venture with any other tribal council.

So many of the MLTC's business investments are partnerships, Bachiu explained, because of the advantages a partnership offers-buying into an entity with a proven track record and the knowledge needed to run the business successfully.

"Our strategy has been to buy into existing, profitable businesses that have a stron financial track record, as well as a proven management team," Bachiu said. "We, as an example, don't have pilots, don't have the experience needed to run an aviation company. But if we're participating with a strong management group, then they can continue to operate the business that they have been doing so successfully. Over time, we learn the business and become more involved. And we also look at growth potential - would having a First Nation participant in the business give it an increased opportunity for growth? Otherwise, if you go in on your own, then you're counting on having all the experience, as well as the finances necessary to run a successful business."

Another advantage is that the partnership arrangements the MLTC has been involved in have allowed them to buy into the businesses slowly.

"We don't have a big bank account to buy into businesses and pay cash for them and so on. And the businesses we've been getting into are ones where we have the opportunity to earn in over time. So in the next five to 10 years, most of our present businesses will be paid for completely. Which will put us in a much stronger position to grow those businesses, or get involved in new ones."

The main drawback to this approach is that the tribal council's member First Nations have to wait to see business successes translate into direct benefits for them.

"And this is the difficult thing," Bachiu said. "Because a lot of the primary benefits are longer term. Because what we're looking for are businesses where we can make money without having to put a lot of money down. So that means that it'll take us a while to get profits to distribute to our member nations. Because our profits are going against our purchase price. So right now our First Nations aren't seeing sizable dividends.

"In terms of employment, we're making incremental improvements, but we're not going into businesses and making household changes. We're looking at employment through either attrition or growth but not replacement. So really, it is a strategy that demands a high degree of patience. And sometimes it is difficult, because some of the First Nations that have immediate priorities and issues to deal with sometimes don't see the profit levels that they'd like or the employment levels that they'd like in the immediate term. We're just asking for people's patience, to bear with us over the next five to seven years."

Although all the current businesses the tribal council is involved in are successful, there have been some business failures along the way. But with those failures came some valuable lessons learned.

One of the most important lessons, according to Bachiu, is the importance of keeping business separate from politics.

"The separation of business and politics is absolutely critical. When political interests start to interfere in a business, it can just be devastating." he said.

Another important lesson- don't over leverage the business.

"If you have too much debt and not enough equity in a business, you're just not well positioned to manage in the down market."

As for other First Nations thinking about getting involved in business partnerships as part of their economic development initiatives, Bachiu has a few pieces of advice.

"I think that you really have to make sure that there's some compatibility in the values of the existing business owners and yourselves; that you have a common sense of direction, and a belief in some similar things," he said.

"Go into business knowing why you're doing it. Because if you go in with the goal of making money, then that's the right motivation. If you go in saying 'well, we really don't care about making money, what we really care about is creating employment,' then chances are that business will fail, so you'll get neither. If you're in it to make money, then you usually get both the profits and the employment, or at least the chance for employment.

"Separate business from politics. And I guess, take a longterm view. There are no overnight successes. If there were any overnight sensations, then everybody would be doing it. But being in business is a lot of very hard work, and you've got to be very, very cautious and careful. But it's certainly worth it. Our business interests now, our annual revenues are about $65 million a year in gross sales. So it's really worth it in the long run to do it right."