Canadian Infrastructure Bank inaugural chair Janice Fukakusa delivered the keynote address at the "Canada's new Infrastructure Frontier" session at the Canadian Council of Public Private Partnerships 25th annual P3 conference on November 7 in Toronto.
Fukakusa began by saying as a former banker she understood collaboration given the need during the financial crisis between government and private industry. She also addressed the Canadian infrastructure gap, and said municipalities, provincial and the federal government have all contributed to fix infrastructure, but can't do it alone.
"There's an opportunity to go further with investors, government and others to make projects happen that couldn't be done alone," she said.
The CIB will complement existing models such as P3 and public funding and will not compete with existing funding. She also stressed that the bank will be a crown corporation operating at arm's length from the government.
"We at the bank have independence to act as counter parties to private investors and to do due diligence," Fukakusa said, and said they are fortunate to draw on a skilled group of senior leaders bringing experience from across the country and globally.
The CIB will invest "in whatever form is proper for a given project," she added.
The government will approve the CIB's corporate plan and its annual budget, as is standard with any crown corporation.
The bank's priorities are t make and manage investments in infrastructure that is in the public interest, provide expert advice on revenue-generating infrastructure, and to collect and share Canadian infrastructure data to spread expertise.
The CIB will invest $35 billion over the next 11 years for projects in the public interest, and will implement user pricing of infrastructure. The bank aims to attract the private sector to projects they would normally find challenging, she said. Investments must be in the public interest, and so they will reflect the priorities of the federal and other levels of government.
Being involved with the CIB, Fukakusa said, "is a rare chance to shape the future of Canada."
A panel also convened after Fukakusa's keynote, comprised of moderator Glen Campbell, the assistant deputy minister of the Canada Infrastructure Bank transition office. The other panelists were Nick Hann, the senior managing director of Macquarie Capital Markets and a director of the CCPPP, Jane Bird, the senior business advisor to Bennett Jones LLP, David Moore, a partner at Dentons LLP, Jordan Eizenga, a partner with Deloitte, and Eric Belman, a partner covering US infrastructure with QIC.
Bird said it is important and impressive that the Canadian government is saying it is now important to take the experience of the last 25 years to move to a more sophisticated financial structure. It is also, she said, a way to "bring Canadian money home." The bank would be well positioned to assist in that, she said. There is also a gap in expertise and capacity that is in the P3 community and within the bank and that can now be addressed.
"But the bank is just another arrow in the quiver," Bird said. "It's an opportunity to up our game."
Moore said in Europe they've had a variety of projects that have been financed by the private sector, to varying bits of success. High Speed 1, the train going from London to Paris, was a PPP project on the British side. At the same time there was an upswing in low-cost flights, which meant less interest in the London-Paris route. It was saved and restructured, and Eurostar takes the revenue risk, but it gains access to the track by paying track access charges to High Speed 1. That means a lower level of risk for High Speed 1, and the access fees are regulated. This gives the banks and others "considerable comfort" that the line will keep running.
Another project, Moore said is the Tyne Tunnel project in the northeast of England. It was previously a tolled tunnel and a bottleneck for traffic. A P3 model was used to change it to a dual carriageway, Moore said. The advantage was that as a modification to an existing project it was easier to explain the necessity of the modifications.
Hann said the UK P3 model was highly regulated, while the Australian infrastructure market grew up more form the private sector. There were huge successes with this model and also dramatic failures. He Canadian P3 market is now coming into its own, and it's "time for it to grow up a little bit," Hann said.
Some of the deals Hann has worked on, he said, didn't work because of timing problems, and there were sometimes counter-party problems.
"You need someone sophisticated and credit-worthy to work with, and you need someone disciplined to provide the structure," Hann said.
Eizenga said principally in the United States there have been a number of toll roads which went into distress, all "because of their own eccentricities," but what they all had in common is that they got their forecasts wrong. The benefit of hindsight for the CIB is to consider the examples of those US projects to avoid their pitfalls.