Infrastructure Bank to embark on $10B growth plan, get creative in attracting investors

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The Canada Infrastructure Bank will get more creative in order to attract additional private-sector and institutional investors to its projects, its chair said, as the Crown corporation has been tapped to deploy billions as part of the federal government’s COVID-19 economic recovery efforts.

Prime Minister Justin Trudeau on Thursday announced a $10-billion “growth plan” for the bank, which is expected to create approximately 60,000 jobs via investments in clean-power projects and energy-efficient building retrofits, among other things.

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Infrastructure Bank to embark on $10B growth plan, get creative in attracting investors Back to video

The bank was created in 2017 and given a budget of $35 billion in federal funding to invest in “revenue-generating” infrastructure projects. Those investments were also supposed to help draw pension funds and other outside investors to the projects.

However, the federal lender has so far found only nine projects to back, including one that earmarks up to $2 billion to help expand Ontario’s GO Transit service. The infrastructure bank has also had some organizational hiccups, one of which was overhauling its senior leadership back in April.

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To aid the economic recovery from the coronavirus pandemic, which continues to sicken Canadians and drag down the country’s economy, the Trudeau government said it is aiming to create more than one million jobs, and the infrastructure bank’s three-year growth plan will now form part of that effort.

“I think as we at the bank continue and become even more creative about how to structure projects, about the nature of those projects, I don’t think the issue will be our ability to attract capital,” said Michael Sabia, the chair of the bank and the former chief executive of the Caisse de dép?t et placement du Québec pension fund, at a press conference on Thursday.

“One of the issues we have had is that we have not thought sufficiently creatively about bringing in outside capital and the power that that can bring in terms of building the kinds of infrastructure that Canada needs to prosper.”

Details of the bank’s growth plan suggest it will indeed get a bit inventive.

The $10 billion needed to fund the plan will come out of the lender’s existing $35-billion budget, and includes $2 billion for large-scale retrofitting of buildings to improve their energy efficiency.

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The Bank can accelerate the deployment of new wind energy, solar energy, energy storage and electricity infrastructure projects that will create jobs and investment

Canadian Renewable Energy Association

Private-sector firms have been wary of such investments, according to the bank, because of uncertainty about the savings they generate. Now, though, the bank is aiming to finance upfront capital costs in an effort to help prove the projects’ worth.

The lender is also creating?“a mainstream, broadly marketed debt product to attract new market participants beyond the existing large equipment manufacturers and energy services companies present in the current limited market.”

Likewise, the bank said clean-power projects often run into delays or face financing obstacles, so it will offer cheap and long-term capital tied to revenue streams that are usually not enough to entice traditional investors.

Those investments, the bank said, will be structured “to increase the use of private-sector capital, reduce the weighted average cost of capital, provide certainty on long-term debt and equity returns, and transfer more construction and operations risk to the private sector.”

The supply of capital will be there

Michael Sabia, chairman, Canada Infrastructure Bank

Investors have become more climate-conscious and focused on environmental, social and corporate governance factors in recent years. The renewable energy industry is also convinced that the infrastructure bank’s commitments could drive some of those investors to Canada.

“Through the provision of low-cost and long-term capital, the Canada Infrastructure Bank can facilitate and accelerate the deployment of new wind energy, solar energy, energy storage and electricity infrastructure projects that will create jobs and investment in the short-term while reducing greenhouse gas emissions today and in the future,” the Canadian Renewable Energy Association said in a Thursday release.

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Sabia, who was named the bank’s chair in April, has investing clout from his time running the Caisse, Canada’s second-biggest pension fund. Returns from infrastructure projects remain “highly attractive,” he said, given that the current investing environment is fraught with uncertainty and low interest rates.

The infrastructure bank expects to start investing in its growth-plan projects before 2020 is over.

“The supply of capital will be there,” Sabia said. “Our challenge is identifying the projects, structuring the projects, structuring the financing in an attractive way. The capital will be there if we do that, and that’s the job of the infrastructure bank.”

Email: gzochodne@nationalpost.com | Twitter:GeoffZochodne