The Canadian government is talking to the country’s largest pension funds about purchasing billions of dollars worth of infrastructure projects to assist stimulate the economy, the Infrastructure Ministry told Reuters on Wednesday.
Prime Minister Justin Trudeau’s Liberals won an election in October around the back of a promise to operate three consecutive annual budget deficits of up to $10 billion to help fund investment in infrastructure and can seek to boost that with private funding, sources told Reuters.
The money is fiercely protective of their independence from political interference and wouldn’t be compelled to invest, but their backing for that projects would be a major boost for Trudeau.
“We are engaging pension funds along with other potential partners to locate areas of alignment,” a spokeswoman for Infrastructure Minister Amarjeet Sohi said. She did not give further details.
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Executives at the pension funds, that are one of the world’s biggest infrastructure investors, say that the projects will need to be structured in a way that limits the risk they take if they’re to be lured into backing them.
Traditionally, funds like the Canada Type of pension Investment Board (CPPIB) happen to be unwilling to back ‘greenfield’ projects, that are constructed from scratch, because of the risk they carry.
Funds usually prefer investing in ‘brownfield’ infrastructure, projects which have already been constructed, executives said.
Mark Wiseman, leader of CPPIB, which has $283-billion in assets under management and invests with respect to the federal plan that covers most working Canadians, told Reuters projects would need to have sufficient scale to become interesting, be overseen with a predictable regulatory regime and carry limited risk.
“That means projects where we’re not going to have to take the build-out, greenfield-type risk because we aren’t good at having the ability to assess those. There’s methods to structurally de-risk these opportunities for institutional investors,” he explained.
Bankers say private funding for the projects could add up to several times in addition to that coming from the public purse and Canadian pension funds, already among the world’s biggest infrastructure investors, could be a clear source of capital.
One government source familiar with the problem said officials had also had conversations with institutional investors for example Canada’s Brookfield Asset Management, along with the major Canadian pension funds.
“We’ve talked to Teachers’, we’ve spoke with Caisse, we’ve spoke with OP Trust, we’ve talked to OMERS, we’re speaking with CPPIB, the majority of the Canadian ones. I believe the conversations go well and there is plenty of interest on both sides to find away out to partner,” the origin said.
The source said the talks were exploratory and particular projects hadn’t yet been discussed. Officials have sought suggestions about establishing the Canada Infrastructure Bank, which Trudeau had discussed creating during the election campaign to supply low-cost financing for infrastructure projects.
? Thomson Reuters 2016
