CDPQ-Québec agreement ‘new solution to old problem’

La Caisse’s Michael Sabia this week supported the business model that would allow the pension to carry out major infra projects in front of the province's Public Finance Committee.

Michael Sabia, president and chief executive of La Caisse de dépôt et placement du Québec, one of Canada’s leading institutional fund managers, appeared before the National Assembly’s Public Finance Committee on Wednesday to present the merits of a business model that would allow La Caisse to work closely with the government of Québec on major infrastructure projects.

“Bill 38, which is before you today, paves the way for major infrastructure projects to be carried out through the use of an innovative business model. This is good for La Caisse, but, above all, it’s good for Québec,” Sabia told members of the Public Finance Committee, which has begun public consultations on Bill 38 (an Act allowing Caisse de dépôt et placement du Québec to carry out infrastructure projects).

Under the terms of the agreement, announced last January, the government will identify projects that may be of interest to La Caisse. Once La Caisse confirms interest, it will coordinate calls for tender, effectively developing and managing the project from start to finish.

If Bill 38 is approved, the Canadian pension intends to establish a new subsidiary that will carry out these projects.

According to Sabia, this new business model is clearly aligned with La Caisse’s mission of growing the assets of its depositors as well as contributing to Québec’s economic growth.

“Seeking returns for a secure retirement is easy to say,” Sabia remarked. “But it’s quite a challenge in today’s environment.

That’s why “infrastructure is an ideal asset class” in a low-interest environment, according to La Caisse’s chief executive.

“The assets are tangible, things that we use every day. Infrastructure investments are low risk and generate stable returns. If we’re to meet the needs of our clients, it is crucial to increase our exposure to infrastructure,” Sabia said.

Sabia also addressed possible concerns legislators or other stakeholders may have, underscoring La Caisse’s independence from political interference; the expertise the organisation has gained in the asset class, having first invested in infrastructure in 1999 and built a portfolio that currently stands at around C$11 billion (€8.1 billion; $9.1 billion); and ensuring that user rates remain low through cost control and competitive international tenders.

“I hope that you, the members of this committee, will appreciate the importance of adopting this bill. Quebecers have been waiting a long time for new, quality infrastructure projects. We are anxious to roll up our sleeves and get to work,” he concluded.

Once the consultation period ends May 19, members of the National Assembly will debate the bill on principle followed by a detailed study, article by article, in committee, a spokesperson for Jean-Marc Fournier, Quebec's minister of intergovernmental affairs, said in an e-mailed response. 

The National Assembly will finally vote on the bill, though the ministry spokesperson could not provide a specific date.

“We hope that opposition parties will cooperate during the process leading to the adoption of the bill,” the spokesperson said. 

Established in 1965, La Caisse now serves 32 depositors, primarily public and private pension and insurance funds in Québec. According to its website, it is one of the largest institutional fund managers in Canada and North America and the leading private equity investor in Canada.

As of December 31, 2014, La Caisse’s net assets totalled C$226 billion, with infrastructure accounting for about 4 percent of the overall portfolio.

Assets the pension has invested in include the Canada Line, the rapid-rail service connecting Vancouver Airport with downtown Vancouver, which La Caisse backed as lead investor in 2005. It is also a shareholder in the UK's Heathrow Express, the rail service linking London Paddington Station to Heathrow Airport as well as Gatwick Express, the fast train connecting central London to Gatwick Airport.