The Canadian government plans on seeking institutional investment to help it make C$120 billion ($92.2 billion) in infrastructure investments across the country over the next 10 years. But it's uncertain whether large public plans within Canada's borders — some of the world's largest infrastructure investors — will join in.
In its 2016 budget released March 22, the Canadian Finance Ministry announced a plan to commit to projects in public transportation, water and wastewater systems, affordable housing and protecting existing infrastructure from climate change. The budget document said the government would work with “global institutional investors and older stakeholders” in plans for infrastructure investments.
The government has reached out to the large public pension plans in Canada with sizable infrastructure portfolios, including the C$282.6 billion Canada Pension Plan, Ottawa and the C$171.4 billion Ontario Teachers' Pension Plan, Toronto, as well as the C$248 billion Caisse de Depot et Placement du Quebec, Montreal, which manages provincial pension and other assets. But the pension plans' managers haven't announced any plans to participate in the new infrastructure initiative.
“Over the last few years, we've engaged with the federal government on infrastructure thinking,” Ron Mock, CEO of the Ontario Teachers' Pension Plan, said at a news conference March 30. “We're not unique. Other large Canadian plans have joined in those talks ... the federal government has talked to us all about what the right structure might be for large infrastructure investments.”
The question of structuring infrastructure investments to attract larger plan interest is a crucial one. Most of the pension plan investors have direct partial or full ownership in infrastructure, as opposed to participating in public-private partnerships, which have much more debt than equity. Infrastructure executives such as Andrew Claerhout, Ontario Teachers' senior vice president, infrastructure and natural resources, have said in the past that such partnerships, called PPPs or P3s, make large investments problematic for big plans like OTPP. Efforts to reach Mr. Claerhout for this story were unsuccessful.
Said Janet Rabovsky, Toronto-based partner at Ellement, an investments and benefits consultant: “Look at what the big plans own — the Chunnel, stakes in airports, ports. Is the government here planning to sell stuff outright, or ask for investment to build? It's still early days right now.”
There are examples of Canadian pension funds striking deals with governments for direct ownership of infrastructure. Chief among them is in Quebec, where a unit created by the Caisse last summer, CDPQ Infra, will develop and manage two public transportation projects in Montreal.
However, executives at the Caisse are tight-lipped about participating in any federal program. Maxime Chagnon, Caisse spokesman, said the Caisse does not comment on federal budgets.