Evidence of meeting #39 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was projects.
A recording is available from Parliament.
2 p.m.
Liberal
The Chair Liberal Wayne Easter
That's what I thought. That was the previous provincial government.
We have Mr. Fragiskatos, followed by Mr. Ste-Marie.
2 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Thank you, Mr. Chair.
Thank you, Ms. Ropar and Mr. Casola, for coming today.
I always appreciate the interventions of my colleague Mr. Poilievre, as you know, Mr. Chair, but I wonder where his passion was, in terms of getting infrastructure built. I wonder where Stephen Harper's passion was, when it came to getting infrastructure built. We all know that hardly any infrastructure was built in Canada between 2006 and 2015, and perhaps if that passion and interest had been there, we wouldn't need the Canada Infrastructure Bank, but there is a dearth of infrastructure in Canada when it comes to large-scale projects. Our government has taken action on that, and that's why we moved in the direction that we did in 2017.
I have a related point. It's about timing.
In August 2019, Jim Leech—who, as I'm sure you know, is the former head of the Ontario Teachers' Pension Plan, which has a large amount of investment in infrastructure globally—said the following:
It took Teachers’ [the pension plan] more than three years to invest the amount CIB has already committed [in its first year, which is more than $3 billion]—and that was by purchasing complete projects, not building from scratch. Startup projects take considerably more due diligence and analysis. Putting money out the door is never a challenge—investing wisely for the betterment of Canadians takes time and talent.
Mr. Casola or Ms. Ropar, can you speak to the point I think Mr. Leech has made here, which is that transformational change takes time? When you introduce a new way of doing things, seeing the sort of transformational change that's intended does take time.
That's what I take from this comment, but I'm happy to hear what you think.
2 p.m.
Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank
I think what would be useful here is an example of all the work that's involved before you can get an investment to a funding-ready stage.
2 p.m.
Chief Investment Officer, Canada Infrastructure Bank
Thanks. I am happy to provide that.
I think the question states the truth of large, transformational infrastructure projects. Infrastructure is complicated. If you take the Port of Montreal, for example—which has come up already a couple of times, so I may as well stick to that—they started planning for that expansion in 2013.
These are very long-term projects. It takes time to complete engineering studies and engage in procurement processes to get the right kind of expertise on board—legal, technical and financial—to create business cases that are going to validate—or not, as the case may be—the need for additional infrastructure and the spending of taxpayer and port money.
Look at the Calgary-Banff rail line announcement last week. That didn't happen after a phone call to Alberta. We've been engaged with the Province of Alberta in a very constructive and collaborative way for over a year on that project already, and what needs to be done to bring it to the next level involves planning a route, hiring engineers to plan that route and consulting all the groups that are affected on that route. It involves negotiating agreements with other rights holders on that route. It involves assessing the technology: electrification, potentially hydrogen, in the interest of being more green.
The complexity inherent in these projects is tremendous, and the suggestion that projects could get out the door the day after we were established is doing precisely the opposite of what was intended by our creation, which is to invest money in a more accountable, transparent and intelligent way.
2:05 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Ms. Ropar, in your opening statement you said that the CIB is involved in 10 projects. Are you able to tell us how many projects the CIB is actively considering?
2:05 p.m.
Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank
There are a number of projects that the CIB has in its current pipeline. I'd say they're all at various stages of assessment. I could give you a hard number, but it's a blend of different deals that are at different stages at this time point in time. There are certainly many.
2:05 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
I'm wondering if you could also speak to broadband. I know this is a key focus, as it should be. I can't tell you the number of times this committee has heard about broadband. Mr. Chair, I think you would definitely second this—he's waving his arms, I see. No doubt in P.E.I. broadband is a concern. In rural and remote parts of the country, broadband remains a concern as well. It's great to see that the CIB has, through the government of course, prioritized this as an issue to move forward.
Where are we at in terms of the CIB's focus on broadband? Are there any thoughts or comments on that? Even though I represent an urban riding, I know that in our country we are really held back because of the lack of access that so many Canadians, particularly in rural and remote areas, have to broadband Internet.
2:05 p.m.
Chief Investment Officer, Canada Infrastructure Bank
I'm happy to answer that question.
You're absolutely right that broadband was always important. We were engaged even before COVID, but I'm sure for all of us here today and everywhere else, without exception, COVID has really underscored the incredible importance of broadband.
We have been engaged in meetings with representatives from the Inuit in the north. They have told us that one of their huge challenges is that, without a broadband connection, they can't get students to finish their high school education there. A proper broadband connection at school enables them to finish their education and not have to leave home at such an early age. That has all sorts of incredibly important and positive social spinoffs.
Broadband is a key sector for us. We are engaged very actively with the folks at ISED, who have the technology and mapping capability and have run programs like connect to innovate in the past. There is also their universal broadband fund, which is yet to come. I think Minister Monsef said it will be released later this summer.
We are also engaged with the CRTC to have a good, hard look into how we can participate in their programs and leverage their programs with CIB money to have even more of an impact. We're in discussions about creating additional and complementary programs that we would work on with the CRTC in order to have a significant impact across the country and connect homes in ways that matter, ways that are much quicker than the original target of 2030, which was ambitious. I think the COVID situation has created a greater awareness that speed is definitely of the essence.
2:05 p.m.
Liberal
The Chair Liberal Wayne Easter
We have to move on, as we're substantially over our time on this question.
Mr. Ste-Marie, go ahead.
2:05 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
Ms. Ropar, Mr. Morley and Mr. Casola, thank you for joining us this afternoon.
I would first like to properly understand the operation of the Canada Infrastructure Bank, or the CIB. I will say what I have understood and you will correct me if needed.
Currently, 10 projects have been announced, including the REM and the Contrecoeur port terminal, which Ms. Ropar talked about. The CIB will fund a portion of those projects. That is the equivalent of a loan. As far as the REM goes, for instance, the Caisse de dépôt et placement du Québec will take the money, carry out the project and refund the money with interest. That means that the Infrastructure Bank does not own part of the project; it is just providing the funding. That is the first portion.
If I have understood your presentation correctly, Ms. Ropar, the money provided by the CIB comes from the private sector or institutional funds. Therefore, you share the amount of money in your portfolio with investors, so that they would invest money with the CIB, which would then fund projects. That is guaranteed by the state. This way, the money you are loaning to us does not come from the government, but rather from private or institutional investors, as you mentioned in your presentation.
Is that correct?
2:10 p.m.
Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank
To clarify, if I'm understanding the question correctly, we would provide a part of the financing, whether it's structured as a loan or equity with interest, but then private sector investors would invest alongside us. They may come in at a different level, and obviously potentially it could be at a different amount or at a different rate, but all those monies collectively, generally from a structural perspective, would go into a special purpose entity that's been established to ring-fence a specific project in order to ensure that all the returns and economics are captured. Obviously, it's important to do that from a control and governance perspective around the delivery of a project.
I'm not sure if that answers the question. Hopefully I understood it correctly.
2:10 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
I will clarify my questions, as there were several of them in my statement.
For example, does the CIB money that will fund, for instance, the Montreal Metropolitan Express Network, come from government coffers, or is it rather money you got from the private sector?
2:10 p.m.
Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank
I understand. Our portion of the financing, whatever CIB is participating in, does come from government, and it does come from the taxpayer. Any funds provided by third party investors are done through those institutions. Again, generally those funds are then collectively put into a special structure or financing vehicle to deliver the project.
2:10 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you.
In this case, it is hard for me to understand the CIB's value added. Why wouldn't the government fund the REM project directly instead of the Infrastructure Bank, which takes money from the government to fund the REM network? What value added do you bring to this transaction?
2:10 p.m.
Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank
I can start. John, if you want to, jump in at any time.
We need to make sure we articulate well the idea of risk transfer. A big part of bringing in private sector capital is that they take on a number of the risks associated with any given project, as a result of taking on this financing. A perfect example in a project could be taking revenue risk out of that project and taking that on directly in exchange for getting a return on their investment.
2:10 p.m.
Chief Investment Officer, Canada Infrastructure Bank
If I could, I'll just add to that.
Just to illustrate Annie's point numerically, if the cost of a project is $100, you're quite right to say that the government could fund 100%. If it's 100% in the case of the REM, private sector capital would not come in because there are too many risks inherent in that project, but if the CIB, after looking at it and doing all its financial due diligence and structuring, suggests that we would be in for 40% of the $100, or 35% of the $100, that may be enough. It's that sweet spot we're looking for to fill that gap. That may be enough to entice the private sector to then come in with 65% or 60%.
What you have at the end of the day is the very same project. In the first scenario, it gets built with 100% taxpayer money. In the second scenario, that very same value-added project gets built with 35% or 40% taxpayer money. That's the magic of crowding in private capital. If we're not there for any amount, they won't be either, so it's about getting that balance right, and that's what the team of investment professionals does on a regular basis.
2:15 p.m.
Liberal
The Chair Liberal Wayne Easter
I'll go back to Mr. Ste-Marie for one final question.
Would it not be true that the Canada Infrastructure Bank also takes the politics out of it? If it's strictly government, you might have some politics in it, where it's good politics in a certain area to do something. You look at it from a risk and long-term needs point of view. Would that be fair?
2:15 p.m.
Chief Financial Officer and Chief Administrative Officer, Canada Infrastructure Bank
Yes, that is a fair point. I can walk through the independence of our investment process if the committee would like to hear about that.
2:15 p.m.
Liberal
The Chair Liberal Wayne Easter
We'll see. We'll let Gabriel finish his questions first.
I'm sorry for interrupting there, Gabriel.
2:15 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
Thank you for your answers.
Mr. Casola, I really liked your example of 100%. The CIB is funding 45% of a project and is launching a call for funding at 55% through the private sector. In my opinion, the government could have done that. According to our committee's chair, that depoliticizes the process. However, the government does spend a tremendous amount of money on infrastructure every year. In any case, that is one argument.
If the government was funding at 45%, and if the CIB did not exist, the private sector could still provide 55% of the funding. Therefore, your value added is to network with institutional investors and the private sector, which the government is less skilled at doing.
So those are the two arguments for the CIB's value added. Is that correct?