Mobilise private and institutional investor financing to greenfield infrastructure through the creation of an infrastructure bank

Context

• In a 2016 Fall Economic Statement, the Canadian Government announced that it would establish a national infrastructure bank – the Canada Infrastructure Bank (CIB).
• The CIB has a mandate to invest up to CAD35 billion (USD26 billion) supported by federal funding, of which CAD15 billion (USD11 billion) will come from existing funds committed in the government’s Investing in Canada infrastructure plan to three priority areas: public transit systems, trade and transport corridors, and green infrastructure. 

Problem

• A lack of sufficient Federal financing represented a barrier to progressing infrastructure projects.
• The Government of Canada needed to attract low-cost investment from private sector investors and institutional investors, in infrastructure projects in Canada or partly in Canada that will generate revenue and will be in the public interest.

Stakeholders involved

• Government of Canada
• Infrastructure Canada

Innovation

• The CIB is structured as a Crown corporation, allowing it to pursue its public policy objectives whilst balancing commercial and financial pressures. A Crown corporation is wholly owned by the federal government but operated at arms-length from government.
• Investments (finance at below-market rates or on subordinated terms) are to be made in revenue-generating infrastructure projects in the public interest that would not otherwise be viable to attract private sector investment.

Timeline

Results and impact

• As at 31 March 2020, CIB had engaged in 13 projects with a total commitment of up to CAD2.8 billion (USD2.1 billion), of which CAD1.28 billion had been disbursed.
• The CAD10 billion, three-year Growth Plan aims to accelerate Canada’s transition to a low-carbon economy.

Key lessons learnt

• Activity: Compared to private and institutional investors, the CIB has a greater ability to take on some
  risk and provide patient capital, thus increasing the overall pool of investors for these projects. Blended finance in the form of PPPs brings new innovative partnerships and financing vehicles that are
  crowding-in private participation in large, complex, high-quality infrastructure projects.
• Governance: The CIB conducts commercial due diligence on financing, structuring, risk transfer, and more to ensure project proposals meet public interest and commercial deal structure (or bankability) requirements.
• Planning: Statements of Priorities and Accountabilities are used by Ministers to communicate government priorities and expectations to the CIB, which may change quickly. A clear mandate for the CIB and its relationship with government enables it to be nimble and provide leadership in getting transformational infrastructure projects off the drawing board and underway.