P3 Trends: Municipalities and Mega Infrastructure

PressReader.com (National Post)
Sept. 24, 2015
John McBride

Canada has a reputation as one of the world’s strongest P3 markets. In the last five years, while the number of projects reaching financial close has been steady, we have seen a marked increase in the total capital value of projects in procurement. In 2015 it is estimated that more than $12 billion in projects will close, the highest in Canadian history.

Canada’s P3 strength and maturity is the result of some key factors that set the Canadian market apart from others, including the rigour of the Canadian Value for Money analysis, the strong role of provincial P3 agencies, Canada’s deep and well-functioning financial markets, and the Canadian P3 market’s ability to attract domestic and international firms to bid for projects.

Notably, the federal government has led the way on P3s, through the establishment of its own P3 agency, PPP Canada, and the establishment of the P3 Canada Fund, the Federal P3 Screen and the P3 Screen under New Building Canada Fund. With these initiatives, PPP Canada is uniquely positioned with a pan-Canadian view of the P3 market.

All of these factors contribute to the strength and diversity of the Canadian P3 market. The concerted efforts of PPP Canada and provincial agencies to extend the use of the P3 model into new sectors and jurisdictions have resulted in a balanced pipeline consisting of small, medium and large projects across a variety of sectors.

Trend spotting: municipal P3 developments

Municipalities are continually and increasingly exploring the use of P3s for their infrastructure development. In fact, municipal needs are leading the Canadian P3 agenda, with investments most urgently needed in public transit, water/wastewater treatment facilities, roads and bridges, and solid waste management infrastructure.

Canada’s municipalities own and manage more than $200 billion worth of infrastructure, representing about 60 percent of the country’s infrastructure. We are seeing a move toward very large infrastructure projects entering the market at the same time that less populated jurisdictions are beginning to explore the use of P3s through the bundling of several smaller projects.

Thinking big: mega infrastructure projects

Canada is witnessing a shift in its P3 project pipeline, with jurisdictions moving away from social infrastructure toward more economic infrastructure projects. In addition, we are seeing an increase in the number of “mega” infrastructure projects, or projects close to or over the $1 billion mark. This is especially true in the rapid transit sector, where the federal government has introduced the Public Transit Fund, which will invest in large-scale transit projects that have a minimum of $1 billion in total estimated eligible costs. There are currently eight light rail projects in various stages of procurement in Alberta, British Columbia and Ontario ranging in cost from the $800 million Waterloo to Kitchener light rail project to the $5.3 billion Eglinton Crosstown project in Toronto.

At the federal level, the Government of Canada continues to forge ahead with its own P3 procurements, with several of its own mega infrastructure projects coming to market. In particular, the $2.2 billion New Bridge over the St. Lawrence in Montreal and the $2.1 billion Gordie Howe International Bridge.

Thinking small in a big way: bundling

Given that small projects, those under $50 million, are not always viable through the P3 model due to their difficulty in attracting private financing, discussions surrounding the “bundling” of small projects into one large project are increasing across the country as small municipalities look to P3s to address their needs. A few Canadian jurisdictions have already bundled different asset classes into one procurement. For its Civic Operations Centre project, the City of Saskatoon relocated its Transit Operations and constructed a permanent Snow Management Facility for the City.

The emergence of mega infrastructure projects and bundling will continue to test the P3 model’s ability to deliver such projects and the capital markets capacity for large debt issue. As P3 expertise continues to develop and leading practices are shared, we will likely witness opportunities and successes in new cities and regions begin to unfold. There is no doubt that the demand for infrastructure by all levels of government will remain strong to ensure the continued economic growth of Canadian communities. Moving into the end of 2015 and into 2016, we will see a continued solid pipeline of projects.