Avoid­ing risk

In­fra­struc­ture bank may pass on projects with too much po­ten­tial for fi­nan­cial loss, Sohi says

Cape Breton Post - - Business - BY JOR­DAN PRESS

The gov­ern­ment’s new agency for fi­nanc­ing ma­jor con­struc­tion projects might take a pass on pro­pos­als that pose too great a risk for tax­pay­ers when they’re asked to make a pri­vate sec­tor idea a re­al­ity, the in­fra­struc­ture min­is­ter says.

Amar­jeet Sohi said the key test for the so-called in­fra­struc­ture bank, which com­bines pub­lic and pri­vate funding for ma­jor projects, will be whether it is fi­nan­cially vi­able in the long run to pro­vide the nec­es­sary re­turns to pub­lic and pri­vate in­vestors.

The gov­ern­ment will be tak­ing on fi­nan­cial risk re­gard­less of what projects go ahead, but only on its por­tion of the funding, not the en­tire cost of the project, Sohi said in an in­ter­view Wed­nes­day with The Cana­dian Press.

The Lib­eral gov­ern­ment has been par­ry­ing op­po­si­tion ques­tions about the agency and just how much pub­lic money will be on the line for trans­port, en­ergy, and tran­sit projects that could cross mu­nic­i­pal, pro­vin­cial and in­ter­na­tional bor­ders.

“That is the re­view that the bank will do: is it too risky for the gov­ern­ment to get in­volved? Maybe the gov­ern­ment will not get in­volved,” Sohi said.

The Lib­er­als see the bank as a way to use pub­lic dol­lars to lever­age pri­vate funding for projects that are ei­ther too ex­pen­sive or too risky for Ot­tawa or the pri­vate sec­tor to go it alone.

The gov­ern­ment plans to fund the bank with $15 bil­lion in cash from its long-term in­fra­struc­ture plan and a fur­ther $20 bil­lion in fi­nanc­ing, the costs of which would be de­frayed through project user fees or other rev­enue streams.

The bank is not ex­actly what the Lib­er­als promised dur­ing the 2015 elec­tion.

The party’s cam­paign plat­form pro­posed us­ing the gov­ern­ment’s “strong credit rat­ing and lend­ing au­thor­ity” to pro­vide low-in­ter­est loans and “small cap­i­tal con­tri­bu­tions” to help prov­inces and cities build projects that lacked the nec­es­sary cap­i­tal.

Sohi said the Lib­er­als changed the con­cept of the bank be­cause prov­inces didn’t want Ot­tawa to com­pete with or du­pli­cate their own lend­ing agen­cies that pro­vide fi­nanc­ing to mu­nic­i­pal­i­ties.

In­stead, the Lib­er­als looked to woo pri­vate in­vestors for fi­nanc­ing help, en­list­ing the help of in­vest­ing gi­ant Black Rock to bring to­gether deep-pock­eted in­ter­na­tional in­vestors last year.


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