Infrastructure Financing and Infrastructure Banks

[kEiThZ]

I wanted a thread to discuss the Canada Infrastructure Bank and its effectiveness (or ineffectiveness) to date. And other infrastructure financing schemes and ideas out there. This is particularly relevant as governments around the world work on "green stimulus" packages, which often include an infrastructure component.

 

[Amare]

Why not let's start the discussion.

The Canada Infrastructure Bank established back in June 22, 2017 has participated in the private-public partnership of exactly: 0 projects since it's inception.

So in essence, we've been paying a bunch of people for doing absolutely nothing for the past 3+ years. I wish I could get a job there, I wonder how the employees pass their time there. Maybe reading books, copy/pasting and recycling the same idea over and over again using the same kind off fluff from other government reports?

 

[Northern Light]

Why not let's start the discussion.

The Canada Infrastructure Bank established back in June 22, 2017 has participated in the private-public partnership of exactly: 0 projects since it's inception.

So in essence, we've been paying a bunch of people for doing absolutely nothing for the past 3+ years. I wish I could get a job there, I wonder how the employees pass their time there. Maybe reading books, copy/pasting and recycling the same idea over and over again using the same kind off fluff from other government reports?

Overall, thus far, I think the CIB has been a dismal failure. However, 0 Projects is not accurate

They have a 15-year loan for 1.28B out on the REM project in Montreal, so its actually 1 Project.

Below is list of other projects which may have some CIB involvment. Though many appear to be advisory only; and/or prospective, but not yet realized commitments (financing).

The big prospective committment appears to be GO Expansion. (up to 2B)

Projects Page - CIB:

Map and Summary - Canada Infrastructure Bank - Banque de l'infrastructure du Canada

The CIB is focused on transformational projects that are in the public interest, linked to national economic priorities and delivered in partnership with public sector sponsors and private and institutional investors.

cib-bic.ca

 

[afransen]

What is CIB's business model anyway?

 

[crs1026]

The CIB reportedly fronted $70M for preliminary work on the VIA HFR project, which will be a roughly $5B investment opportunity.

My question is - how much money would a commercial bank normally spend to attract $1B of investor interest?

I had some experience with data rooms for outsourcing infrastructure, and it sure didn’t cost us that much to give interested parties their due diligence for some pretty big ticket opportunities.

My suspicion is that the CIB is not only a roundabout way of keeping Ottawa’s infrastructure borrowing off the national balance sheet, it’s also becoming a way to keep infrastructure program planning costs off the federal estimates also.

My preference is that government just borrow the money in the traditional way, and manage projects as such. Especially since with all the COVID related borrowing, these projects are now just a speck in the overall national deficit.

- Paul

 

[rbt]

My question is - how much money would a commercial bank normally spend to attract $1B of investor interest?

That depends on the ROI the investor expects to receive. Lower ROIs require far more work/evidence to show it is a low risk opportunity.

 

[kEiThZ]

My suspicion is that the CIB is not only a roundabout way of keeping Ottawa’s infrastructure borrowing off the national balance sheet, it’s also becoming a way to keep infrastructure program planning costs off the federal estimates also.

I think they were sincere in their interest in mobilizing institutional capital to invest in infrastructure. But it's just harder than they thought. I read one interview with the CEO where he said that they faced resistance at the local level for user fee business models. Municipal politicians were willing to go without infrastructure or let it deteriorate than agree to user fees. And so they weren't bringing up proposals. The other issue is that they don't always get the large projects that institutional investors want. Like HFR. There's not a lot of that in Canada.

Canada is genuinely behind on infrastructure investment. And we have some of the lowest fees on our infrastructure. Compare transit fares. Or highway tolls. Or utility rates. Without something like the CIB driving cultural change, I don't know how we actually catch up. Not like Canadians are willing to forego social spending for infrastructure funding. Or to tax more either.

 

[drum118]

Look who running this sector that happens to be the past CEO of Metrolinx. This person talks from both sides of his mouth as well his ass. What did he really do for Metrolinx in the first Place??

CIB and PP3 is all about keeping things off the books and to look good doing so.

 

[Amare]

Overall, thus far, I think the CIB has been a dismal failure. However, 0 Projects is not accurate

They have a 15-year loan for 1.28B out on the REM project in Montreal, so its actually 1 Project.

Below is list of other projects which may have some CIB involvment. Though many appear to be advisory only; and/or prospective, but not yet realized commitments (financing).

The big prospective committment appears to be GO Expansion. (up to 2B)

View attachment 267981

Projects Page - CIB:

Map and Summary - Canada Infrastructure Bank - Banque de l'infrastructure du Canada

The CIB is focused on transformational projects that are in the public interest, linked to national economic priorities and delivered in partnership with public sector sponsors and private and institutional investors.

cib-bic.ca

Correct me if i'm wrong, but I dont think the private sector is involved with Montreal's REM are they? I genuinely dont know the answer, but I was under the assumption that they arent.

If they aren't, that defeats the whole purpose of what the CIB was set up for, and thus there would be 0 projects of the public-private partnership variety that the CIB has presided over.

 

[Northern Light]

Correct me if i'm wrong, but I dont think the private sector is involved with Montreal's REM are they? I genuinely dont know the answer, but I was under the assumption that they arent.

If they aren't, that defeats the whole purpose of what the CIB was set up for, and thus there would be 0 projects of the public-private partnership variety that the CIB has presided over.

The Caisse is the investor in REM.

(The Quebec Pension Plan).

They are doing it as a return-producing investment; though they are a de facto portion of the Quebec government.

 

[Amare]

The Caisse is the investor in REM.

(The Quebec Pension Plan).

They are doing it as a return-producing investment; though they are a de facto portion of the Quebec government.

With the way things flow in Quebec, I wouldnt call the Quebec Pension Plan a full private entity. As you mentioned, the Quebec government still has their hands in the affairs in that company.

Therefore i'll standby my claim that the Canada Infrastructure Bank has presided over exactly 0 private-public projects of since its inception in 2017.

 

[WislaHD]

I'm pretty surprised that there are shovel-ready projects across the country (such as Hamilton LRT) and the Infrastructure Bank isn't jumping on it. Do they require their federal ministerial masters to approve it first?

 

[rbt]

The Caisse is the investor in REM.

(The Quebec Pension Plan).

They are doing it as a return-producing investment; though they are a de facto portion of the Quebec government.

It should be noted that unlike most pension plans (private or public) which have a directive to achieve the highest risk-adjusted ROI on their investments, CDPQ has a directive to expand the economy of Quebec first, and achieve highest ROI second.

Items that CDPQ invests in (such as various bits of Bombardier when there was chatter of Quebec plants closing) are not necessarily items that other pension funds would have any interest in funding.

 

[kEiThZ]

I'm wondering if something can be done with airport rents and CIB financing to advance airport infrastructure plans while traffic is down. Like Montreal's renewals or Pearson's hub.

 

[kEiThZ]

Right on time with my complaints in the VIA thread:

Farewell, then, Canada Infrastructure Bank - Macleans.ca

Paul Wells: After years of extravagant claims and no results, Ottawa's dream of a Bank that would somehow turn on a gigantic global cash spigot is over

www.macleans.ca