Written by Sharon Singh, Radha Curpen, Paul Blundy, Will Osler, Thomas McInerney, Jason Roth and Rita Cherevychko
On October 1, the Government of Canada announced the Canada Infrastructure Bank’s (CIB) $10-billion plan to invest in major infrastructure initiatives (the Growth Plan), as a part of the $35 billion allocated to the CIB under the Federal Investing in Canada Plan.
Formed in 2017, the CIB invests, and seeks to attract investment from private sector and institutional investors, in infrastructure projects with revenue generating potential. Since its establishment, the CIB has chosen a select number of projects, including in the sectors now covered by the Growth Plan.
The Growth Plan focuses on investments in clean energy, broadband, retrofits and agricultural irrigation. It aims to attract private and institutional capital to assist Canada's post-COVID-19 economic recovery.
Details of Funding
The Growth Plan concentrates on five priority sectors:
- Clean Power – $2.5 billion of investments in clean power generation, inter-provincial and territorial transmission (including to Northern and Indigenous communities), and storage.
- Agriculture Infrastructure –$1.5 billion of investments in "transformative" irrigation infrastructure projects intended to help alleviate private sector lenders’ concerns surrounding the risks associated with financing such projects.
- Broadband – $2 billion in competitive, accommodative financing to broadband projects through the CIB: (1) collaborating with other government programs designed to encourage greater broadband connectivity; and (2) continuing direct engagement with Canadian Internet Service Providers on projects excluded from those programs mentioned above, that can still be feasible with CIB's funding.
- Zero-Emission Buses (ZEBs) – $1.5 billion to fund the high upfront cost differential of ZEBs is intended to create long-term operating savings. The funding also seeks to address challenges relating to transition and procurement by facilitating Canada-wide participation, knowledge sharing and potentially large-scale purchasing.
- Energy Efficient Building Retrofits – $2 billion to modernize and improve the energy efficiency of existing buildings by working with large private and public sector real estate owners. The investment in large-scale projects seeks to attract private capital by helping mitigate the uncertainty regarding cost savings relating to such investments.
The CIB will invest the remaining $500 million in due diligence and early construction works in order to expedite high-impact infrastructure projects in which the CIB expects to make a long-term investment.
Opportunities
The Growth Plan allows the CIB to provide low-cost and long-term capital, which creates opportunities for investors to participate in projects that would otherwise be not viable. Through well-structured projects, CIB has the opportunity to lever private investment to multiply the aggregate capital investment in priority projects and generate long-term stable returns for both private investors and the government. For the provinces and territories, the Growth Plan means new opportunities to collaborate on extra-provincial projects, including energy transmission.
The CIB also has the ability to accelerate its collaboration with Indigenous communities, more particularly on clean power, broadband, and energy efficient building retrofits investments. Further details are needed to assess whether the CIB will have the ability to facilitate Indigenous equity investment in projects by Indigenous communities by providing access to much needed capital for these communities.
Takeaways
Although the announced funds are not new, by identifying certain discrete areas of interest, we can draw the conclusion the CIB and the Government of Canada will likely move quickly to fund projects in these priority sectors. The CIB's new chair is clearly taking an active role in project development and with the announcement of the new CEO to fill the current vacancy for the CIB, momentum appears to be gaining within the CIB.
We also note with interest the new emphasis on due diligence and early construction works. Although we await with interest to see what is funded, the initiative suggests the CIB is establishing the processes to accelerate its decision-making and help projects move forward.
The CIB is set to implement the Growth Plan over the next 24-36 months, and expects to begin investing in projects before the end of 2020 while working in close co-operation with provinces, territories, municipalities, and Indigenous communities across Canada.
If you have a project or are interested in a project that aligns with the Growth Plan and the CIB's framework for selecting projects, please contact our team.
Bennett Jones