Canada Infrastructure Bank

The Canada Infrastructure Bank (French: Banque de l'infrastructure du Canada) (CIB) is a federal Crown Corporation of Canada tasked with financially supporting revenue-generating infrastructure projects that are "in the public interest" through public-private partnerships.

Canada Infrastructure Bank
Native name
Banque de l'infrastructure du Canada
TypeCrown corporation
FoundedJune 22, 2017 (2017-06-22)
Key people
Ehren Cory (CEO)
Tamara Vrooman (chairperson)
CA$3,316,000 [1]:7 (September 30, 2019[1]:7)
Total assetsCA$796,408,000[1]:6 (September 30, 2019[1]:6)
Total equityCA$796,408,000 (September 30, 2019[1]:6)
OwnerGovernment of Canada
Number of employees
46[1]:6 (November 2019)
Websitecib-bic.ca

History

The Canada Infrastructure Bank was announced by Finance Minister Bill Morneau during the 2016 fall economic update, in response to a campaign promise made by the Liberal Party during the 2015 Canadian federal election. It was officially established in June 2017 when the Canada Infrastructure Bank Act received royal assent. The bank's website used to state that it "was established in response to a market gap between government-funded and privately funded infrastructure projects".[2][3] Some speculated that the banks creation was a way to sidestep the Committee on Monetary and Economic Reform's lawsuit.[4]

A Canadian investment banker working for Bank of America Merrill Lynch helped design and set up the Canada Infrastructure Bank as an unpaid advisor.[5] In November 2016, the government held high-level meetings behind closed doors with equity investors such as BlackRock and Canada's largest pension funds concerning the bank's structure.[6]

The creation of the Canada Infrastructure Bank coincides the dissolution of PPP Canada and the PPP Canada fund, which were created under Prime Minister Stephen Harper to fund infrastructure projects with public-private partnerships.

In January 2020, following numerous criticism of the Banks' operations, the House of Commons commissioned an audit of all infrastructure projects worth over $186.7 billion, and a complete review of Bank.[7]

Pierre Lavallée was the first President, Chief Financial Officer (CFO) and Chief Executive Officer (CEO) of the Bank. He resigned from his position in April 2020. Upon his resignation, he was awarded a bonus worth $720,000, or 120% of his annual salary.[7] In October 2020, he was replaced by former McKinsey & Company partner Ehren Cory.[8]

Mandate

The 2017 Canada Infrastructure Bank Act sets out the corporation's mandate to invest, and seek to attract investment from private-sector investors and institutional investors, in revenue-generating infrastructure projects that are "in the public interest".

The CIB uses financial instruments including loans, equity, and, where appropriate, loan guarantees to deliver federal support to projects to make them commercially viable. The CIB will provide financing and investment using a combination of these instruments depending on a project's unique characteristics.[9] The model is to use private and institutional capital and to finance projects up front, while the public sector funds their return on investment over time.[6]

The Government of Canada sets the high-level policy priorities for the CIB, including:

Consideration is given to potential projects appropriate for the new partnership- and revenue-based funding model.

The CIB reports to Parliament through the Minister of Infrastructure and Communities.[9]

Funding

The Canadian Parliament has authorized appropriations of $CDN35 billion covering the eleven-year period that ends in FY 2027-2028. This includes $CDN15 billion for the fiscal framework. This financial support is to fulfill a need to "mobilize private investment" for projects that would otherwise have no private investment. This may be in the form of "financial instruments" or "loans, equity investments, and loan guarantees."[1]:11

Non-toll road public-private partnerships are generally more expensive than publicly-financed projects because they use private sector financing, which comes at a higher interest rate than public financing.[6] The CIB subsidizes this higher borrowing cost, making CIB projects more profitable for the private partners but not for taxpayers. The Bank also charges local governments for their services.[10]

Governance

The bank’s chair is a Governor in Council appointment made of the advice of the minister of infrastructure and communities. Tamara Vrooman was appointed chair on January 27, 2021.[11] Ehren Cory is the bank's Chief Executive Officer and President,[8] and Annie Ropar is the CIB's Chief Administrative Officer (CAO) and Chief Financial Officer (CFO).[12]

Most of the board members are investors who had their career in major banks or pension funds. More than half of members have ties to the Liberal Party, including former Calgary mayor and past Liberal donor Dave Bronconnier.[13] Some people argue that the board of director's private sector majority will mostly be concerned about projects' profitability, and will disregard the government's other infrastructure priorities.[6]

Oversight

The Bank is not subject to the government of Canada's strong accountability and transparency rules, and the Auditor General of Canada has limited oversight on the bank and its projects.[14] Under Ehren Cory, the bank streamlined its approval process. From 2021 onwards, the federal government stopped reviewing each individual projects and began approving CIB investments by sector.[15]

Leadership history

Reception

Since its inception, the Bank received sharp criticism from public-sector unions such as the Canadian Union of Public Employees (CUPE), which characterized the CIB as a "Bank of privatization" and a "Jackpot for corporations".[14]

According to CUPE, the CIB's structure represents a betrayal of Trudeau's campaign promises concerning infrastructure. On the campaign trail, Trudeau argued that the government could fund infrastructure projects leveraging the public sector's low interest rates. Combined with his promise to run modest deficits, his rhetoric was distinctively anti-austerity. Some argue this was a bait-and-switch because the CIB is designed to promote public-private partnerships and asset recycling (the selling of existing public infrastructure to fund new projects). As such, Trudeau's "efforts to transfer public assets to private actors display a degree of finesse and deception far beyond the Conservative approach to infrastructure privatization."[6]

After two years of operation, the private sector was displeased by the Bank's slow pace of project approval. According to Conservative infrastructure critic Matt Jeneroux, the CIB "was supposed to be a new way to build infrastructure, but we’re still faced with the same delays, and the issues of actually building infrastructure have gotten worse when we’re tying up this much money in the bank.”[18]

Both the Conservative Party and the New Democratic Party promised to wind down the CIB if they were elected in the 2019 Canadian federal election.[18]

Projects
Name Partner Location Sector Investment Status
Réseau express métropolitain (REM)[19] CDPQ Infra, Province of Quebec Montreal, Quebec Public Transit $1.28 billion (15-year senior secured loan) Study phase[20]
GO Expansion - On Corridor[19] Infrastructure Ontario and Metrolinx Greater Toronto and Hamilton Area, Ontario Public Transit Up to $2 billion Ongoing
Via Rail High Frequency Rail Project[19] Via Rail and Transport Canada Ontario and Quebec Public Transit $55 million Ongoing
Mapleton Water and Wastewater[21][1][19] Township of Mapleton Mapleton, Ontario Green Infrastructure Up to $20 million Cancelled[22]
Lulu Island District Energy[19] City of Richmond, Lulu Island Energy Company Richmond, British Columbia Green Infrastructure Memorandum of Understanding
Contrecoeur Port Terminal[19] Montreal Port Authority Montreal, Quebec Trade and Transportation Up to $300 million Ongoing
Taltson Hydroelectricity Expansion[19] Government of Northwest Territories Northwest Territories Green Infrastructure Advisory Services Ongoing
Pirate Harbour Wind Farm[19] Port Hawkesbury Paper Point Tupper, Nova Scotia Green Infrastructure Memorandum of Understanding
Kivalliq Hydro-Fibre Link[19] Kivalliq Inuit Association, Sakku Investment Corporation, Anbaric Development Partners and Ontario Teachers' Pension Plan Nunavut and Manitoba Green and Broadband Infrastructure Memorandum of Understanding
Calgary-Banff Rail[19] Government of Alberta Calgary International Airport to the Town of Banff, Alberta Transit Memorandum of Understanding
Alberta Irrigation[19] Government of Alberta Southern Alberta Trade and Transportation $407.5 million Ongoing
Oneida Energy Storage[23] Oneida Energy Storage LP Southwestern Ontario Clean power Memorandum of Understanding

Cancelled waste and wastewater infrastructure project in Mapleton, Ontario

On 15 July 2019 the CIB made a $CDN 20 million investment commitment township of Mapleton, Ontario's water and wastewater project.[1]:5 The financing comes in the form of a "standardized debt financing package" to "attract private capital expertise".[24] The Township of Mapleton, with a rural population of 11,000, has been seeking a consortium public-partnership to "design, build, finance, operate and maintain" a proposed 20-year project to improve and expand" the township's publicly owned water and wastewater infrastructure".[25]

The CIB said that this project is a potential pilot and model which could demonstrate to Canadian municipalities—including smaller communities—with water and wastewater challenges, how CIB can assist them in attracting private sector capital" for financing to improve publicly owned water and wastewater systems.[24][1]:5 While the water and waste-water systems will continue to be publicly owned, concerns have been raised by organizations, such as the Canadian Union of Public Employees (CUPE), that there is a risk that smaller communities may become locked into lengthy agreements with private financiers that result in higher user fees for water and wastewater services.[21]

The proposal attacted international attention due to the project financing's uniqueness. However, in August 2020, after reviewing financial analyses of the main proposals, the township opted to cancel the project instead. A report showed that self-financing the project would be more advantageous for Mapleton than using the CIB's model.[22]

Acts

The CIB was established by the Canada Infrastructure Bank Act (CIB Act), an Act of Parliament on June 22, 2017.[26][1]:11

References
  1. Second Quarter (Q2) Fiscal Year 2019-20 Financial Report (PDF). Canada Infrastructure Bank (Report). Toronto. November 19, 2019. p. 22. Retrieved January 14, 2020.
  2. "About Us". Canada Infrastructure Bank. Retrieved December 29, 2018.
  3. "Canada Infrastructure Bank". Liberal Party of Canada. Retrieved December 29, 2018.
  4. MacRae, Gavin. "Whose Canada Infrastructure Bank?". Watershed Sentinel. Retrieved June 10, 2020.
  5. Fekete, Jason (March 18, 2016). "Stakes are huge as Liberal government moves forward on Canada Infrastructure Bank". National Post. Retrieved June 10, 2020.
  6. Whiteside, Heather (May 4, 2017). "The Canada Infrastructure Bank: private finance as poor alternative". Studies in Political Economy. 98 (2): 223–237. doi:10.1080/07078552.2017.1343008. ISSN 0707-8552.
  7. "Canada Infrastructure Bank approved bonuses to CEO who resigned". Toronto Sun. May 27, 2020.
  8. Deschamps, Tara (October 29, 2020). "Ehren Cory appointed as new Canada Infrastructure Bank CEO". nationalpost. Retrieved January 22, 2021.
  9. "Mission and Mandate". Canada Infrastructure Bank. Retrieved July 8, 2019.
  10. "Infrastructure bank targets local water systems". Canadian Union of Public Employees. Retrieved June 29, 2020.
  11. Canada, Government of. "Orders In Council - Search". orders-in-council.canada.ca. Retrieved February 3, 2021.
  12. "Canada Infrastructure Bank CEO and chair step down - Link2Build". www.link2build.ca. Retrieved February 4, 2021.
  13. Pressprogress. "Why The Liberal Government's Infrastructure Bank is Helping Big Banks and Dumping User Fees on Citizens". PressProgress. Retrieved May 9, 2020.
  14. "Infrastructure bank a jackpot for corporations". Canadian Union of Public Employees. June 21, 2017. Retrieved June 29, 2020.
  15. Snyder, Jesse (January 13, 2020). "New head of Canada Infrastructure Bank promises more investments after Ottawa loosens reins". nationalpost. Retrieved January 22, 2021.
  16. Martha, Porado (September 13, 2019). "A profile of Janice Fukakusa, chair of the Canada Infrastructure Bank". Retrieved February 4, 2021.
  17. "Michael Sabia – Canada Infrastructure Bank – Banque de l'infrastructure du Canada". cib-bic.ca. Retrieved May 9, 2020.
  18. Curry, Bill (July 30, 2019). "Canada Infrastructure Bank executive Nicholas Hann resigns amid growing industry frustration with pace of project approvals". The Globe and Mail. Retrieved June 29, 2020.
  19. "Projects". Canada Infrastructure Bank. Retrieved July 8, 2019.
  20. "High Frequency Rail: AECOM and Arup consortium selected as Owner's Engineers" (Press release). Montreal, Quebec, Canada: Via Rail Canada, Inc. January 28, 2020. Retrieved May 5, 2020.
  21. "Federal Infrastructure Bank Says It Sees 'Potential' to Privatize Local Water Systems Across Canada". PressProgress. January 14, 2020. Retrieved January 14, 2020.
  22. Raftis, Patrick (August 5, 2020). "Mapleton drops plan to outsource water, wastewater infrastructure". Wellington Advertiser. Retrieved January 22, 2021.
  23. "Canada Infrastructure Bank signs Memorandum Of understanding for Oneida Energy Storage". www.newswire.ca. Canada Infrastructure Bank. January 12, 2021. Retrieved January 22, 2021.
  24. "Township of Mapleton receives $20 Million Investment". Township of Mapleton. July 15, 2019. Retrieved January 14, 2020.
  25. "Mapleton Water and Wastewater". Canada Infrastructure Bank. 2019. Retrieved January 14, 2020.
  26. "Canada Infrastructure Bank Act". Government of Canada - Justice Laws. Retrieved December 29, 2018.
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