MPS challenge Infrastructure Bank spending
CEO defends $900,000 bill on failed project
• The head of the Canada Infrastructure Bank defended $900,000 spent on a now cancelled power line project, arguing the project will ultimately get built and the due diligence the bank did was entirely reasonable.
Ehren Cory, the bank’s CEO, testified Tuesday in front of MPS on the House of Commons Infrastructure committee about the Lake Erie Connector project, a proposed power line underneath Lake Erie and connecting Ontario to Pennsylvania and a broader U.S. electricity system.
The bank agreed in 2021 to offer a $655-million loan to the project and spent $900,000 on due diligence involving lawyers and outside experts. The project has since been suspended and the original owner sold its interest to another company. The loan did not go through, but the $900,000 had already been spent.
Cory defended the due diligence spending, saying it represented just 0.14 per cent of the loan the bank was offering and they need to ensure they are being careful with taxpayer dollars.
“When you’re investing Canadian taxpayers money, making large scale loan agreements like we are, I think that’s an expectation that you as parliamentarians would have of us,” he told MPS.
In response to Cory, Conservative MP Leslyn Lewis argued that the project being cancelled meant the entirety of that $900,000 was now gone, spent on a project that would never be completed.
“The money is of no value now because the project is cancelled, so you’re confirming that $900,000 of taxpayers money has now been wasted because the project is now cancelled,” she said.
Cory said the new owners of the proposed line are looking closely at the project and the CIB believes it is likely construction will happen.
“It is a necessary part of the transmission grid in North America and we still think it will get built,” he said.
He said that when the new owners come up with a new cost estimate — the project was initially pegged to cost $1.7 billion — the CIB will take another look using the due diligence it has already performed and consider whether to offer the loan again.
He said the project would allow Ontario to sell electricity to Pennsylvania and several other U.S. states that are part of the largest electricity market in the world. The line would be able to operate in both directions, potentially shipping power back to Ontario when the province is in shortage.
Cory said it is also predicted to lower greenhouse gas emissions by allowing both jurisdictions to import green electricity from each other.
Mark Winfield, a professor from York University, also testified to MPS, but said he can’t understand why the CIB thought the project would be viable. He said if the line is predicated on Ontario having power to sell it would be a failure.
“The complicating factor here is the assumption that there would be significant surplus generation available for export and everything we’re seeing in Ontario suggests the opposite,” he said. “I can’t see where the surplus generation of any significance was going to come from.”
Cory also received several questions about the CIB’S compensation for employees. He said the people the bank is attracting are coming from private industry and the bank has to at least be competitive with what they would receive at banks or other investment funds.
“People who work at the CIB come because they believe in the public sector mission of the bank and they take compensation that does not match what they can get in the private sector, but it does need to be at least competitive,” he said.
The bank paid out roughly $30 million in compensation in the last fiscal year. Cory said that is a relatively small amount given the size of the deals the bank completed that year. The Liberal government launched the infrastructure bank shortly after coming to power in 2015.
He argued it’s necessary to cover Canada’s significant infrastructure needs and leverage taxpayer dollars with private ones.
“There are studies that talk about the hundreds of billions of dollars needed to be spent in this country and so the only way to do that is to find a way to draw in private and institutional pools of capital into these projects.”