CDPQ Infra, the new infrastructure subsidiary of Canadian pension fund La Caisse de dépôt et placement du Québec, has unveiled plans for its first project since the subsidiary was launched last July.
CDPQ Infra is proposing the development of a fully automated light rail transit system that would link downtown Montréal, the South Shore, the West Island (Sainte-Anne-de-Bellevue), the North Shore (Deux-Montaignes) and Pierre Trudeau International Airport.
In addition to the 67km of double track, the project would also involve building 24 stations and establishing connections with existing bus, metro and train networks to make travel faster and easier.
“This project is perfectly in line with our overall strategy and with our approach to investing in Québec – focused as it is on the development of high-impact, commercially sound projects,” La Caisse’s president and chief executive Michael Sabia said in a statement.
The Réseau électrique métropolitain (REM), as the project is known, is budgeted at C$5.5 billion ($4.3 billion; €3.9 billion). La Caisse is willing to commit C$3 billion to the project and is seeking the additional C$2.5 billion from the government of Québec and the federal government.
However, during a press conference, Sabia stressed several times that La Caisse is not seeking a contribution from the provincial and federal governments.
“We’re not asking for subsidies,” Sabia emphasised. “We want to offer these two government levels an opportunity to make an investment, an investment that is structured as some kind of subordinated equity model; to give them an opportunity to take advantage, let’s say, to get some returns after a certain level of time.”
Both the provincial and federal governments would share in the profits, a model Sabia described as a public-public partnership. While CDPQ Infra owns the project currently and will continue to do so during the development stage and possibly through construction, the La Caisse subsidiary will likely seek equity partners down the line, CDPQ Infra president and chief executive Macky Tall told Infrastructure Investor.
The announcement is one of several La Caisse has made within the past week beginning with the departure of Andreas Beroutsos, who until recently was executive vice president, private equity and infrastructure. Since then, La Caisse has announced that it would be moving all of its infrastructure-related activities to CDPQ Infra, which will be overseen by Tall. At the same time, Tall was promoted from senior vice president for infrastructure to executive vice president of La Caisse and now reports to Sabia. He previously reported to Beroutsos.
The light rail transit project is a combination of the projects CDPQ Infra had initially identified when it was launched last July: a public transit system on the new Champlain Bridge and a transport network linking downtown Montréal to the Montréal-Trudeau International Airport and West Island, which combined were estimated to cost C$5 billion ($3.9 billion; €3.5 billion).
These were the first projects identified by La Caisse and the government of Québec as part of an agreement reached in January 2015, whereby the Canadian pension fund, through CDPQ Infra, will be responsible for the planning, financing, development and operation of projects that the government identifies as priorities and that La Caisse deems appropriate for its risk profile.
After nine months of studies and analyses, CDPQ Infra came up with an innovative solution. “That solution was to be able to increase the volume and the flow from the West Island into Montreal,” Tall explained, adding that the unified network will cover approximately 50 percent of the island of Montreal. In addition, the firm has decided to switch from heavy rail to light rail, which according to Tall, allows an increase in capacity.
Based in Montréal, La Caisse serves 32 depositors, most of which are public and private pension and insurance funds in the Canadian province. The pension fund invests across a range of asset classes including fixed income, equities, real estate and infrastructure. As of 31 December 2015, its assets under management totalled C$248 billion.