Exclusive: Canada opens talks with pension funds on infrastructure funding

Wed Feb 10, 2016 3:55pm EST
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By David Ljunggren and Matt Scuffham

OTTAWA/TORONTO (Reuters) - The Canadian government is talking to the country's largest pension funds about investing in billions of dollars worth of infrastructure projects to help stimulate the economy, the Infrastructure Ministry told Reuters on Wednesday.

Prime Minister Justin Trudeau's Liberals won an election in October on the back of a promise to run three consecutive annual budget deficits of up to C$10 billion ($7.2 billion) to help fund investment in infrastructure and will seek to boost that with private funding, sources told Reuters.

The funds are fiercely protective of their independence from political interference and would not be compelled to invest, but their backing for the projects would be a major boost for Trudeau.

"We are engaging pension funds and other potential partners to find areas of alignment," a spokeswoman for Infrastructure Minister Amarjeet Sohi said. She did not give further details.

Executives at Canada's pension funds, which are among the world's biggest infrastructure investors, say that the projects will need to be structured in a way that limits the risk they take if they are to be lured into backing them.

Traditionally, funds such as the Canada Pension Plan Investment Board (CPPIB) have been reluctant to back 'greenfield' projects, which are built from scratch, because of the risk they carry.

Funds usually prefer investing in 'brownfield' infrastructure, projects that have already been constructed, executives said.

Mark Wiseman, chief executive of CPPIB, which has C$283 billion in assets under management and invests on behalf of the federal plan that covers most working Canadians, told Reuters projects would need to have sufficient scale to be interesting, be overseen by a predictable regulatory regime and carry limited risk.   Continued...

Construction cranes are seen in front of the CN Tower in Toronto December 5, 2012. REUTERS/Mark Blinch