FSC owed $3 million for Russian apartments
NNSL (Sep 16/98) - The cheque is not in the mail. There is no cheque because there is no money. At least not right now.
That's the situation engineering and architectural firm Ferguson Simek Clark faces when it comes to getting paid for apartments it built in the city of Yakutsk, Sakha Republic, Russia.
"We've run into problems with payment. They owe us over $2 million US ($3 million Cdn)," FSC President Stephen Simek said.
The buildings are standard Canada Mortgage and Housing Corporation apartment buildings built to Canadian codes.
FSC built the apartments, through contractors, for about $730 per square metre, or about $75 a square foot.
Final payments for the apartments was first delayed by massive flooding in the Sakha region followed by political and financial turmoil in Russia.
The flooding did not damage the apartments -- it occurred in another part of the republic -- but did put financial burden on Sakha's government which owes FSC the money.
"In November we finished the 18th building. They were supposed to pay us at the end of the year. Then they said they would pay us in May. Then there were floods. Then they said they would pay in September."
Simek also said Sakha's financial situation changed after it was required to divert diamond-mining money to the central Russian government. Previously, Sakha had enjoyed the direct financial benefits making it a well-off republic.
Despite FSC's financial setback, Simek remains optimistic he will someday get paid the outstanding amount. Sakha Republic's government has appealed to the GNWT and FSC for patience.
FSC has so far been paid about $25 million for the $28 million project.
Aside from the apartments, FSC is know for its Canadian village project, a group of homes and a music school near Yakutsk. That project was prepaid.
"(Still) $2 million US missing from our cash flow is a significant strain on our business," Simek said.
The firm has not cut any staff because of the unpaid bill.
Simek's hope is that the Russian economy will stabilize and with the latest political developments, like the election of Yevgeny Primakov as prime minister last week, he is optimistic.
After completing its work in Sakha, FSC had planned to shift its focus to Moscow.
But, said Simek, "we will not operate (in Russia) without Canadian government insurance or government guarantee."
Simek said FSC tried to get government guarantees for the apartment buildings but their was nothing available.
"If the federal government wants to have sales missions (to Russia), they should be prepared to back it up."