Evidence of meeting #107 for Transport, Infrastructure and Communities in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was project.
A recording is available from Parliament.
Noon
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Duguay.
Next we have Mr. Bachrach for two and a half minutes, please.
Noon
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
Thank you, Mr. Chair.
Mr. Cory, at a previous meeting of this committee, you indicated, “In the medium term, we were going to be importing energy that would be less carbon intensive than using gas to fill baseload in Ontario. That was our analysis.”
That begs a question about the short term and the long term. After this project was set to come online if the investment had gone ahead, what were the short-term assumptions around imports and exports of clean energy and the long-term assumptions around imports and exports of clean energy?
In other words, to Professor Winfield's earlier point, at what point was Ontario going to be exporting clean energy? You say that in the mid-term they're not going to be, that we're going to be importing clean energy. I assume that's a net. When is the net export of clean energy from Ontario going to happen, in the bank's initial analysis?
Noon
Chief Executive Officer, Canada Infrastructure Bank
I will for sure turn to my colleague, Mr. Guneratna, to help answer that question, and I appreciate the question from the member.
In general terms, and Sashen can help me, in the immediate term, this is for sure a net exporter. There is more power flowing from Ontario to PJM than the other way around.
Noon
Chief Executive Officer, Canada Infrastructure Bank
It's in the short term.
In the medium term, as we go through the refurbishment of nuclear facilities and, as Dr. Winfield points out, as we become tighter on supply, it becomes both an importer and exporter.
I think your point about net is incredibly important. It will continue to export, but there will also be imports. Then, in the longer term, there is the potential for the line to be used to make larger-scale clean imports from the U.S., whether that's from bilateral contracts on the nuclear fleet in PJM or with larger renewable developers.
Yes, the PJM grid is, on average, dirty, but that doesn't mean that you have to import dirty power. The IESO has talked about it, and if you speak to them, you may ask them this question. They talk about contractually signing bilateral contracts with clean producers in the U.S. so that, even when they're importing, it will be clean power.
I hope that answers your question.
Mr. Guneratna, would you like to add anything?
Noon
Sashen Guneratna Managing Director, Investments, Canada Infrastructure Bank
The only other thing I'll add is that the Ontario Society of Professional Engineers in 2021 said that Ontario wasted more than seven terawatt hours of clean electricity. They had the electricity but no demand to use that electricity. It was billed or sold to New York and Michigan at lower or negative prices.
Noon
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Bachrach.
Next we have Mr. Strahl.
Mr. Strahl, the floor is yours. You have five minutes, please.
Noon
Conservative
Mark Strahl Conservative Chilliwack—Hope, BC
Thank you very much, Mr. Chair.
Mr. Cory, earlier in your testimony today you said, about infrastructure projects, that every project “dies a few times before it really lives.” This was in response to Dr. Lewis' question regarding if it was a good use of $1 million for a project that was dead.
If every project dies a few times before it really lives, how many other projects that have been announced by the CIB are in their dying phase and have had millions of dollars thrown at them when we don't know if they are actually going to go ahead? Those are your words, not mine. How many projects do you believe are at risk that you have already done the announcements for and that you have already spent money on?
Noon
Chief Executive Officer, Canada Infrastructure Bank
I appreciate the question, and I appreciate the replay of my adage, which I heard from an old construction hand many years ago.
First, the sentiment behind it is clear. Large infrastructure projects are complex. They often take years to come together. This one has taken a decade, and it's still going through that.
To answer your question directly, there are two other projects that I'm aware of that are in a similar suspended state. One was a power project in northern Quebec. It's called the Whapmagoostui project that we announced in partnership with indigenous communities and Hydro-Québec. Again, cost escalation for that remote construction made it such that the project was paused.
The other was a project with B.C. Transit around the purchase of zero-emissions buses for B.C. Transit where we were working on a deal with all levels of government. That project has also paused.
Those are the only two that I'm aware of. I would say—
12:05 p.m.
Conservative
Mark Strahl Conservative Chilliwack—Hope, BC
I'm sorry, but I don't have much time.
On those two projects that you just listed, how much money has already gone out the door? How many taxpayer dollars have already been spent either by the bank or by external consultants that may or may not ever be useful to Canadian taxpayers? How much have you already spent on those projects that are at risk of being cancelled?
12:05 p.m.
Chief Executive Officer, Canada Infrastructure Bank
I appreciate the question.
We've answered this in previous members' questions, an Order Paper question. I'm happy to provide the figures. Mr. Duguay has them.
12:05 p.m.
General Counsel and Corporate Secretary, Canada Infrastructure Bank
As previously reported, Mr. Chair, for the B.C. Transit zero-emissions project that Mr. Cory is referring to, those costs are close to $85,000, in total, for legal expenses and also technical advisory expenses.
On the Whapmagoostui project, as previously reported to Parliament, those costs total about $185,000, again, between legal expenses and due diligence and technical expenses as well.
12:05 p.m.
Conservative
Mark Strahl Conservative Chilliwack—Hope, BC
Okay, so it's getting close to $1.3 million among these three projects that are dead and might be revived.
Some of these questions I would prefer to ask the Minister of Housing and Infrastructure, who is the minister responsible for this, and through whom the CIB has their parliamentary accountability. However, he has declined an invitation to appear on this study even though he was invited by motion of this committee, so I'll ask you.
He provides to you a statement of priorities and accountabilities, which is interesting considering that he won't be accountable to this committee on this issue, but he has stated that he believes the Canada Infrastructure Bank should become a centre of expertise.
As Dr. Lewis has pointed out, you've gone from $17 million to $21 million to over $30 million now in staff and bonus costs. You're clearly expanding the size of the CIB's cost to taxpayers in terms of its number of employees, or salaries for those employees.
Do you believe that you are a centre of expertise on infrastructure? If so, why the need—like the government, which has expanded the use of external consultants to $21 billion a year—to use so many outside consultants if you are an infrastructure centre of expertise?
12:05 p.m.
Chief Executive Officer, Canada Infrastructure Bank
Thank you for the question.
Yes, it is a core part of our mandate, as you say, and as outlined in our statement of priorities and accountabilities. We are absolutely fulfilling a role of providing advisory support.
As I was mentioning in response to an earlier question from MP Rogers, our role starts with providing advisory support to the potential borrower in how to structure these types of investments. It could be a public...or a province, a municipality or an indigenous community, or the private sector.
We're doing that on projects like Georgina Island, where we're working with a first nation on the potential to build a new road that connects their community, or Taltson, which is a hydroelectric project in the Northwest Territories where we're working with the government.
So yes, we provide that sort of advice on how to structure a deal. When they get to the detailed stage of investment, that's when we would bring in the third party expertise and due diligence. As Monsieur Duguay was describing, that would usually be for legal, but also for market and technical support. Notwithstanding that, we have an incredible staff. There is market-by-market understanding of what the demand and the offtake are, and what the reasonable construction cost is that we would go to a third party for.
12:05 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much.
Thank you, Mr. Cory.
Next we have Mr. Bittle.
Mr. Bittle, the floor is yours. You have five minutes, please, sir.
April 9th, 2024 / 12:05 p.m.
Liberal
Chris Bittle Liberal St. Catharines, ON
Thank you so much, Mr. Chair.
I guess, looking back, we can see that the CIB isn't the first time the federal government has been involved in public-private partnerships. The previous government was involved in the P3CF, the public-private partnership Canada fund, under the previous government. I know Mr. Strahl was here at that time.
Would you be aware if due diligence had been done at those times and under similar models? Can you explain, if you are aware, what would have been done at those times?
12:05 p.m.
Chief Executive Officer, Canada Infrastructure Bank
I'm not personally aware. I joined the CIB in late 2020, but I can say that I have every belief that they would have conducted a similar type of due diligence. Certainly, when you're investing Canadian taxpayers' money and making large-scale loan agreements like we are, I think that's an expectation that you, as parliamentarians, would have of us, so I assume that they did similar due diligence.
In my old role—I used to work for the Province of Ontario at Infrastructure Ontario—we certainly conducted similar types of technical due diligence. For instance, if we were investing in a new highway or a new hospital, we would hire a cost consultant to help us estimate whether the cost was reasonable, for example, so it's very standard, at least from my experience. I'm sure that the P3CF did similar due diligence.
12:10 p.m.
Liberal
Chris Bittle Liberal St. Catharines, ON
I wonder if you could speak about the private sector. We're talking about the CIB like it's operating in this vacuum, like it's the only one that would hire lawyers to conduct a $600-million loan and be shocked that there would be costs coming from it.
I am wondering if you could explain, perhaps from the private sector experience that you've brought with you, how a bank would operate in a similar type of experience if loaning out hundreds of millions, if not billions, of dollars on the fly.
12:10 p.m.
Chief Executive Officer, Canada Infrastructure Bank
I appreciate the question.
I would say two things. First, let's use Lake Erie as an example. If we were structuring these legal agreements.... As committee members, you, I think, may have opportunities to ask the proponent of the project—whether that's Fortis, if you've invited them, or NextEra, which may be taking over the project—this question. However, very clearly, our lawyers were interacting with their lawyers, and our technical advisers were interacting with theirs.
There was an earlier question about not believing the marketing materials of the proponent. I want to be very clear. The proponent also did a technical study and had its own estimate of the GHG savings. It had its own third party consultant do that. Respectfully, that's its number. We need to have our own independent view of that, which is why we hire due diligence. However, absolutely, the private sector is doing the same on its side and then some. I think that's reasonable and to be expected in these types of large commercial agreements, which are what the CIB was set up to do.
12:10 p.m.
Liberal
Chris Bittle Liberal St. Catharines, ON
Do you have any sense of what the proponent spent in terms of getting this project off the ground to even get to a point where you're involved?
Perhaps that's just a better question for them.
12:10 p.m.
Chief Executive Officer, Canada Infrastructure Bank
Apparently, Mr. Guneratna does have an idea, but I will just say that, in general, before we've spent a dollar on a project, proponents have spent millions of their dollars. I could give you many examples of project proponents and the types of investments that they have to make to get a project off the ground.
In this case, Mr. Guneratna, is there anything you want to add?
12:10 p.m.
Managing Director, Investments, Canada Infrastructure Bank
Yes.
It was between $10 million and $20 million that they spent of their own money to bring the project from when they got involved until it was suspended.
12:10 p.m.
Liberal
Chris Bittle Liberal St. Catharines, ON
Thank you so much.
I know it's been touched on briefly in terms of the Ontario government bringing forward an infrastructure bank. I know our government and that government don't often see eye to eye, but I am wondering. I know the CIB has become a bit of a political football, but if it was such a failure of a model. Can you comment as to why the Ontario government set up a very similar model within the province?
12:10 p.m.
Chief Executive Officer, Canada Infrastructure Bank
I would never suppose to speak for them, but I've had a lot of discussions, I think, in their lead-up and in their planning.
I think, similar to us, what they see is that we have a very simple problem. All of us are going to need more infrastructure, at every level of government, in every.... If you're talking about a political..., it's one of the few issues that actually has unanimity. I could ask a mayor, a premier or a prime minister of any political party, and they would all agree that we need to get more built faster.
Actually, the reason we don't is very simple. It's that we can't afford it all. The costs of our infrastructure needs exceed our ability to.... There are studies that talk about the hundreds of billions of dollars needed to be spent in this country, so the only way to do that is find a way to draw private and institutional pools of capital into these projects. They're big companies, but they also make smart investment decisions based on math, so the only way to do that for many of these projects that are very long—20, 30 or 40-year lives with high uncertainties—is to find a partnership. That's the whole point of public-private partnerships. We can share with them—not take but share with them—the risks of those projects, the upfront investment hurdles of those projects.
That's what the CIB is here to do, and I think Ontario sees that as a way to similarly draw more investment and have more infrastructure built at the end of the day.
12:10 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you, Mr. Bittle.
Thank you, Mr. Cory.
Next we have Mr. Muys.
Mr. Muys, the floor is yours. You have five minutes, please.