Pratt & Whitney launches two R&D gas turbine engine projects worth $1.5 billion

TPC invests record $350 million

Pratt & Whitney Canada (P&WC) will receive $350 million in federal assistance from Technology Partnerships Canada (TPC), the largest single R&D investment in the aerospace and defence sector in Canadian history. The investment in two massive gas turbine R&D projects tops the previous TPC record of $207 million, which was also made to P&WC in early 2005 (R$, January 24/05). The Longueuil QC-based firm has now received federal assistance totalling more than $1.7 billion since 1982 (see chart on page 2), with more than $1 billion invested through TPC since 1997.

The TPC investments launch two R&D projects worth $1.5 billion over five years. The Gas Turbine Engine Technology Research Program is worth $367.5 million and will receive $137 million in TPC support. The Pre-Competitive Technology Development Program for Gas Turbine Engine Applications is even larger ($1.2 billion) and will receive $213 million in TPC support.

The projects will take P&WC's gas turbine engine development from the research phase through to demonstration, with 55% of the work conducted in Longueuil and the balance at the company's Mississauga facility. The technology research program will be undertaken with the assistance of researchers at several Canadian universities and the National Research Council's Institute for Aerospace Research. As part of its agreement with TPC, the company will spend $75 million in collaboration with university-based researchers at about 20 universities.

"These investments will allow us to develop the next generation of made-in-Canada engine technologies for future business aircraft and helicopters," says P&WC public affairs manager Annick Laberge. "This $1.5-billion strategic investment is the most important announcement in the history of P&WC and certainly one of the most important announcements in Canada."

It's unclear whether the $1.5 billion investment is the total R&D spending P&WC plans to spend over the next five years or represents the value of the new projects independent of other R&D projects. A Government of Canada press release describes its investment as "part of a $1.5 billion program" while a company press release states that it "will invest $1.5 billion in R&D over the next five years to create the next generation of made-in-Canada engine technologies". Neither party would provide clarification. In the three years between FY03 and FY05, P&WC has spent nearly $1.4 billion, easily the largest amount spent by any Canadian-based aerospace firm, placing it within the top five of all corporate R&D spenders.

UNIQUE R&D PROGRAM

The Gas Turbine Engine Technology Research Program is the only R&D project of its type in canada. It will focus on developing analytical tools for predicting noise levels generated within combustors and exhaust ducts and developing lighter materials for building more durable, fuel efficient engines. The project will also seek to reduce waste products and eliminate toxic compounds in advance of more stringent legislative and regulatory requirements.

The larger Pre-Competitive Technology Development Program for Gas Turbine Engine Applications will aim to reduce engine development cycle time to 24 months by demonstrating a range of technologies and then validating and integrating those technologies. Improvements will be achieved using applied R&D and system integration, drawing on industry and university-based expertise.

TOUGHER REPAYMENT TERMS

Typically, TPC investments are repayable from revenues based on sales a company generates from the projects in which TPC has invested. In the case of latest P&WC investments, TPC requires that royalties be paid on gross business revenues, not just from revenues generated from the projects and related technologies. All other financial details remain confidential.

It's also unclear when the TPC investment was actually approved and signed. An Industry Canada spokesperson acknowledged that there was a lag between the signing and the official announcement and that the project was the subject of an 18-month review. But he would not elaborate on how long the gap was between the signing and the announcement. TPC officials were not available for comment.

Aerospace and defence (A&D) proposals are the only projects that TPC is currently accepting. The Conservative government froze all other types TPC investments after taking power early this year. Prior to the defeat of the Martin government, TPC was split into two separate programs. The furthest advanced was the Transformative Technology Program, which was slated to handle all non-A&D projects (R$, September 20/05). Less advanced was the proposed Aerospace & Defence Technology Development program, which was never officially launched. The Conservative government has not provided any details on what it plans for TPC or its successors, but its antipathy towards programs that support the private sector is well known.

Industry Canada minister Maxime Bernier has generally avoided commenting on the TPC file, although he has expressed support for the A&D industries on at least one occasion (R$, October 4/06). As an MP from the Beauce QC riding, Bernier is aware of TPC's importance to the A&D sector, which is primarily based in Quebec. In the months since the Conservatives took power, five of the seven announced TPC investments have been in Quebec-based firms. Quebec is shaping up as a key battleground in the Conservative's bid for a majority government.

R$