48
infrastructure
investor
may
2014
He further explains that more players
have entered the arena and been embrac-
ing P3 projects such as the province of
Saskatchewan (joining Ontario, British
Columbia and Alberta) as well as cities
such as Edmonton, Victoria, Regina and
Saskatoon.
The C$100 million threshold for P3
projects is still a bit of a sticking point,
however. Claude Dauphin, Mayor of the
Borough of Lachine (within Montreal)
and president of the Federation of Cana-
dian Municipalities (FCM), says his con-
stituents needmore clarity on the analysis
process required for P3 suitability.
“We want more clarity and flexibility,”
he explains. “We have nothing against P3s
but at the same time when you look at
their [information] it could take between
six and 18 months just to do the analysis,
so for us that is too long.”
INVESTORS AND P3
Size and scale are recurring themes in
the Canadian infrastructure discussion.
Fengate Capital Management, a Toronto-
based investment management firm, spe-
cialises in infrastructure fund manage-
ment for pension fund clients. It services
about 18 funds with between C$1 billion
and C$5 billion under management –
within the mid-size fund category. So far
it has a little more than C$700 million of
infrastructure capital undermanagement.
George Theodoropoulos, manag-
ing director, infrastructure with Fengate,
says there are essentially two types of
infrastructure. There are the large-scale
projects where large investors buy com-
plete businesses like airports and utilities.
“Those opportunities do not come up in
Canada,” he says. “Once every two years
or more something comes up for sale
that big in Canada. We are not ones to
privatise things.”
However, for smaller funds, the kind
that Theodoropoulos services, P3s are
ideal. “P3s are perfect investments for my
investors,” he adds. Deals of C$50million
or C$100 million are more in line with
most of the pension funds in Canada
seeking to explore infrastructure on a
smaller scale. One project that Fengate
has helped finance is the New Oakville
Hospital outside Toronto. Fengate has
also exposed its pension investors to other
P3 healthcare, courthouse and solar pro-
ject facilities.
“All pension funds in Canada are look-
ing for duration,” he explains – in other
words, long-term stable investments that
pay a solid return. And outside of govern-
ment bonds, Theodoropoulos says the
risk-reward ratio of infrastructure invest-
ment can be quite good and secure over
the long-term. On projects like the New
Oakville Hospital, he estimates a return
of 11 percent over 30 years.
WHERE TO LOOK
In its report,
Pension Fund Investment in
Infrastructure: A comparison between Aus-
tralia and Canada,
theOECD says: “There
have been signs of a strong pick-up of
the P3 market in the healthcare, road
and justice systems sectors which are now
considered mature and benefiting from
strong competition fromequity and debt
participants.”
Outside investors aremaking in-roads
into these “smaller” P3 investments. Fund
managers such as France-basedMeridiam
Infrastructure have invested in the Mon-
treal University Research Hospital and
the Northeast Anthony Hendey Drive
highway project in Alberta (in which
Germany-based Hochtief is also an inves-
tor). France’s Bouygues was contracted
to build and operate the Royal Cana-
dian Mounted Police’s headquarters in
Vancouver through a P3 procurement
model. Hochtief has acquired Flatiron,
a civil engineering and infrastructure
company operating in North America.
UK-based John Laing Infrastructure
Fund is invested in three projects – the
Abbotsford Hospital, the Vancouver
General Hospital and the Kelowna and
Vernon Hospitals Project.
And while investors are able to find
plenty of projects such as courthouses
and hospitals to meet their needs, other
investable areas are gaining momen-
tum. Renewable energy and assets such
as wastewater treatment facilities are
becoming a key focus on the Canadian
infrastructure front.
Much of this is happening at sev-
eral of levels of government. Jeff Mou-
land, co-head of infrastructure with
Greystone Managed Investments, says:
COUNTRY REPORT
CANADA: NUMBER AND AGGREGATE CAPITAL VALUE OF P3 PROJECTS CLOSED (2005-2011)
2005
0
0
4
10
2
8
6
12
8
4
12
18
2
10
16
6
14
20
2007
2010
CAD $bn
2006
2009
2008
Year
2011
n
Number of projects
n
Capital Value (RHS)
Source
: PPP Canada (2012)
