Evidence of meeting #93 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was project.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
Mr. Poilievre, I'm going to let....
Mr. Campbell, finish your answer—
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
Whether it's an equity or a lending position, to what extent that is not repaid, then that would be deemed to be federal support into that project, and it would be recorded as expenditure against the $15 billion that the government has in the fiscal framework. That would be deemed to be federal support. It would have been loss-absorbing. Whatever the structure would be for either a loan or an equity, the design of it is to manage that risk transfer, and if that materialized, then that would then convert into federal support for that project.
Conservative
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
It would become an expenditure recorded against that $15-billion profile that we had mentioned earlier.
Conservative
Pierre Poilievre Conservative Carleton, ON
It starts out of the $20 billion of capital—and you've testified elsewhere that loans would come out of the $20 billion of capital—but in the event that there's default loss, then it would migrate over and become an expense out of the $15 billion that is also included in the infrastructure bank.
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
That's close, in the sense that the $35 billion is a balance sheet. If the infrastructure bank is investing in a billion-dollar project, and let's say, its position is $200 million in that project, there would have to be an accounting determination each and every year by the auditors to determine the level of under-market or market support. To the extent that there's some risk in the position of the infrastructure bank, it would be obligated to report back through the consolidated accounts that a certain amount of money would be expenditures.
If there is a liability asset—
Conservative
Pierre Poilievre Conservative Carleton, ON
Sorry, Mr. Chair.
It's just that you keep saying “if, if, if”. The scenario we're talking about is when the money has not been repaid. It's defaulted. In the event of a default loss, where will that loss be accounted for? Would it have originated out of the $20 billion of capital?
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
No, that's not technically correct. All of the positions from the infrastructure bank will be part of the $35-billion balance sheet.
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
The differentiation between the $20 billion and $15 billion is an accounting determination.
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
It could be made on day one. As any other asset, you put money into a project. The accountants say you can't account for that as a complete liability asset match, therefore you need 20% or 50%, which will be immediately recorded as an expense against the Government of Canada. That could go up or down over time.
Whether a loan is repaid or not, it could have a value that has to be recorded against the $15 billion. The net bases will be recorded against the $15 billion.
Conservative
Pierre Poilievre Conservative Carleton, ON
So, for example, let's say, the government makes an initial contribution to a project, and then provides a loan to the proponents to build that project. They default on that loan, then that default would be recorded as a loss that would draw against the $15 billion allocated to the infrastructure bank. Is that correct?
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
Except the infrastructure bank would not be loaning to one of the parties, it would be loaning into the pool of the project; but had that materialized, it would be counted against the $15 billion.
Conservative
Pierre Poilievre Conservative Carleton, ON
We're splitting hairs. There is an entity called a “person” under the act: “person includes a trust, a partnership, a joint venture...association of natural persons or corporations.” The infrastructure bank lends to that person. The money doesn't get repaid and it is a default loss. That would create an additional expense on the books of the Government of Canada. Is that correct?
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
You're asking me to say “correct” again. I'm not sure all those assumptions are correct. However, any position that the infrastructure bank has in an entity will be limited to the amount of its partnership agreement, regardless of whether it's a loan or an equity. The amount of its exposure will be capped by that amount into a project code. If something materializes where you actually do not get repaid that amount of money, or the equity gets a value decline and the auditors say that you can't hold that as a liability asset match, it will be recorded transparently each and every year—
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
As an expense. This would be federal support for that project that would have been built and will continue to exist.
Conservative
Pierre Poilievre Conservative Carleton, ON
An expense, okay. Will that come out of the $20 billion in capital, or the $15 billion amortized over 11 years?
Assistant Deputy Minister, Canada Infrastructure Bank Transition Office, Office of Infrastructure of Canada
Any net expense comes out of the $15 billion.