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Public Private Partnership (P3) is having a difficult birth in Canada. But change is on the way. By Louise Bowman
Infrastructure has traditionally taken a back seat in Canadian project finance - with the utilities and oil sectors providing the most deals. But changes now underway at both federal and state level may pave the way for a surge in infrastructure-related deals over the next few years.
It is tempting to think that the implementation of initiatives such as Public Private Partnerships (PPPs) mean that there will be an explosion of opportunity for project financiers in Canada, but that may be being overly optimistic. "We are only a small country [the total population is around 30 million, 10 million of which live in Ontario]," warns one financier. "There are only so many deals to be done."
To date, there have only really been four infrastructure deals of any size in Canada. They include the C$2 billion redevelopment of Toronto's airport, the C$4 billion development of Highway 407 in Ontario, the construction of Confederation Bridge, which links Prince Edward Island with New Brunswick and the C$3 billion privatisation of NAVCAN, Canada's air traffic control system. NAVCAN was the first of these deals to go through and was signed off in December 1996. It was a landmark transaction - marking the first - and still the only - privatisation of an air traffic control system worldwide. The structure was fairly simple. NAVCAN raised finance via a non-recourse term loan, which enabled it to buy the air traffic control system from the government. There was no equity participation in the deal. The debt was secured on certain income flows to NAVCAN - namely terminal charges and navigation and communication charges. During the first two years of private control, the Canadian government guaranteed revenue of C$1.44 billion to NAVCAN. The deal was arranged by Royal Bank of Canada and sold down to nine co-arrangers - all big name project finance banks: Bank of Montreal, CIBC, Societe Generale, Chase Manhattan, JP Morgan, Bank of Nova Scotia, Toronto Dominion, National Bank of Canada and Dai-Ichi Kangyo Bank.
Confederation Bridge was completed in 1997 to provide a l3km connection between Prince Edward Island and the mainland. It was built, managed...