The year 2016 brought an upswing in infrastructure investments to both the US and Canada, and it seems like next year holds even more promise. How this momentum is carried forward in each country, however, will be interesting to watch.
Canada's steady focus on government-procured infrastructure projects has led to a solid pipeline of energy PPPs throughout its provinces. It has also yielded the C$5.5 billion ($4.11 billion; €3.96 billion) light rail transit project being developed in Montreal by CDPQ.
To ensure this continues, the Canadian government this autumn unveiled plans for a national infrastructure bank that started off with C$35 billion in its coffers. Financiers have long been in favour of this move as a way to boost Canada's near-term economic growth and free up federal resources for other social projects. The infrastructure bank will draw in private-sector investments by seeding projects with government commitments.
“Canada needs to improve national productivity to unlock more growth in the medium term. And we need economic stimulus to deliver growth now,” CDPQ chief executive Michael Sabia and BlackRock senior managing director Mark Wiseman wrote in a commentary in November. “Why not let private capital foot most of the bill for major projects?”
A commitment to clean energy also seems likely to continue for Canada in the new year. Catherine McKenna, the country's minister of environment and climate change, set the goal last month to completely phase out coal-fired electricity by 2030. To support provinces that still power homes and buildings on coal, the Canadian government will use its infrastructure bank to finance clean energy projects.
Infrastructure is also in the limelight in the US as the country turns the page on 2016, and that's being led by president-elect Donald Trump, who has promised to “rebuild our highways, bridges, tunnels, airports, schools, hospitals”.
Trump made infrastructure a priority on the campaign trail, promising to invest $1 trillion over 10 years. Details about how this will be funded have been sparse, but he's given hints that privatisation will play an important role. Should the incoming president hold true to his word, it seems likely the US PPP market will see more activity.
While investors are on the whole sounding optimistic, one question in particular remains: how will Trump's policies impact clean energy?
The general belief is that Trump, a climate change denier, will not help the renewables industry. However, clean energy has a lot of momentum already, supported by state-level policies and congressional bills that are enacted. States like California and New York, which have committed to transition to a low-carbon economy, are not likely to change their mind. Even in some Republican-voting states, there is a compelling business opportunity to see clean energy sources flourish. That will continue to give some fuel for thoughts to investors looking to make their mark in US renewables.