Canadian airports ‘absolutely’ on pension board’s radar

CPPIB mulls bidding in event of sell-off

The Canada Pension Plan Investment Board will consider bidding on Canada’s major airports if they’re put on the auction block by the federal government.

“We would look at it — absolutely,” Mark Machin, who took over as CPPIB’s chief executive in June, told the Financial Post on Friday after his first major public address. “We know airports, we like airports, we’d be interested if something happened.”

There has been speculation that the Liberal government is looking to collect billions of dollars by selling off some of the country’s large airports including Pearson International Airport in Toronto.

The Ontario Teachers’ Pension Plan owns stakes in three airports in the U.K., including London City Airport, and CPPIB teamed up with a partner in Chile a couple of years ago in an unsuccessful bid for one of the South American country’s large airports.

In the interview with the Post following his speech to a business crowd at the Toronto Region Board of Trade, Machin expressed confidence in Ottawa’s planned Infrastructure Bank, through which the government hopes to combine billions of dollars in public and private money in large-scale projects that will create jobs and stimulate the economy. Ottawa hopes Canadian pensions that invest in infrastructure around the world including toll roads, shipping ports, and airports will be key participants.

“The intent is terrific… I think it’ll come,” Machin CEO Mark Machin says CPPIB is scouring the globe for investments, including in China, India and the U.K. said, adding that it will take some time to turn the strategy into a large-scale institution with a systemic approach to infrastructure and a pipeline of deals.

Projects, however, will have to meet certain criteria including scale and an acceptable risk-adjusted return to draw interest from large institutional players such as pensions.

“Canada’s not had a lot of those,” Machin said, though he noted that CPPIB’s largest infrastructure investment is in the 407 highway near Toronto.

Machin said it is a good sign that the government has tapped former Ontario Teachers’ Pension Plan CEO Jim Leech as an adviser for the infrastructure bank, adding that this should ensure its development incorporates the needs of global institutional investors. Smaller projects could be packaged together to reach size requirements, Machin suggested, and there might be ways to structure operations to provide sufficient returns for institutional capital.

“I hope it will get off the ground soon — you can’t create a large institution overnight,” he said.

Machin said CPPIB is continuing to scour the globe for investments, including looking in China, India, and the United Kingdom, where the economy has so far shown little impact as Britain works its way toward an exit from the European Union.

At the conclusion of his speech in Toronto, he told the business crowd he hopes pragmatism prevails over protectionist policies emerging in the United States and Europe.

“CPPIB has been a huge beneficiary of globalization,” he said, adding that while he understands the urge of some countries to protect their citizens and economies, he also recognizes the benefits of open borders and open trade.