No rush for next deal at new infrastructure bank: CEO
OTTAWA On the heels of its debut deal, the head of the Canada Infrastructure Bank says it’s open for business.
The bank announced Wednesday funding of $1.28 billion for a Montreal commuter rail line, in the form of a low-interest loan, essentially replacing direct federal funding that had been allotted earlier. Creating the lender was a flagship commitment for Prime Minister Justin Trudeau’s government during the 2015 election.
Three years later, the institution is only just ramping up. Pierre Lavallee, who was appointed as the bank’s first president and chief executive officer earlier this year, said in an interview there’s no timeline for their next deal and that the bank is still staffing up to full bandwidth.
Nonetheless, he hailed the rail deal as a mile-marker.
It shows “we’re in business, and that we’re able to create good, customized financing for projects,” Lavallee said.
“What we’re trying to achieve is the right balance between risk, return, various features, what happens under various scenarios. It really is a multi-part picture that we try to build.”
Infrastructure spending was a key pledge of the Trudeau government, in a bid to stoke long-term growth with a mix of direct government spending and financing from the new infrastructure bank, created with $35 billion in government funding. Things are moving more slowly than first expected — Trudeau has been deferring infrastructure spending, and the bank may still be months away from funding an original project. Its first investment simply replaces direct federal funding that had been announced a year earlier.
The bank’s mandate is to help spur large-scale projects, typically with a revenue stream. Lavallee declined to say how quickly the next investment will be announced but said it will take nine to 18 months, after his arrival this spring, to staff up the agency.
“This is still very early days, and we’re still very much in the process of building our capacity, so even if I wanted to tackle a large number of these in parallel, our capacity is constrained. We will continue to announce our investments as they take place,” he said, adding: “At this stage, our bandwidth is quite restricted.”
The bank won’t put artificial deadlines on deals, he said, and it’s unclear whether the rail deal’s size will be a benchmark.
“I think large, institutional investors will want to look at projects where they can deploy a significant amount of capital, so time will tell whether this is middle of the pack or slightly larger or slightly smaller,” he said.
The rail deal is structured as a 15year loan, starting with an interest rate of 1 per cent that will rise to 3 per cent over the term.