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Canada Infrastructure Bank will attract private investors, aims to bundle retrofit loans

OTTAWA (Reuters) - The Canada Infrastructure Bank (CIB) says there will be private investors for its projects, and it is in talks with private and public landowners about financing building retrofits as part of the government’s plan to foster a green economic recovery.

FILE PHOTO: Single-family homes are seen against the skyline of Vancouver, British Columbia, Canada September 30, 2020. REUTERS/Jennifer Gauthier/File Photo

“We actually know we will be able to attract private capital (because)... we engaged in an exhaustive consultation program,” CIB Chief Investment Officer John Casola told Reuters.

The CIB has held talks with Canadian investment funds, institutional investors, private equity, and domestic and foreign banks for months, he said, without providing any names.

Earlier this month, Prime Minister Justin Trudeau launched a C$10 billion ($7.6 billion), three-year infrastructure plan to be managed by the CIB. Trudeau said it would create jobs and help Canada dig out of the economic slump caused by COVID-19.

Trudeau’s Liberal government founded the CIB in 2017 to try to leverage some C$35 billion in public money by combining it with private capital to build revenue-generating infrastructure, but it has so far struggled to attract outside funds.

In April, Trudeau tapped Michael Sabia, the former head of one of the biggest pension funds in Canada, to chair the board of the CIB. The government’s new plan sets aside money for clean power, broadband, zero-emissions buses, and building retrofits.

The CIB has earmarked some C$2 billion to help private and public real estate owners modernize their buildings, and Casola offered insight into how it will aim to generate revenue.

Real estate investment trusts (REITs), other commercial landlords and public landowners have expressed “a high degree of interest” in taking a low-interest loan for a significant portion of the needed upgrades, Casola said.

This retrofit program, which will combine with a promised cash injection for residential properties later this year, is a cornerstone of Trudeau’s plan to “build back better” after the pandemic, by lowering carbon emissions and creating new jobs.

“We’re expecting a high volume of deals,” he said. “They will be structured so that the CIB debt will be recoverable by the estimated operable savings as a result of upgrading this equipment.”

The estimated energy savings will pay back the loans, and if those savings fall short of estimates, the CIB will assume the risk. After a critical mass of C$200 million to C$300 million in loans is reached, the CIB will bundle them into pools to be syndicated or sold to the private sector.

“For the large majority of commercial deals, private as opposed to public, we’re going to fund most of (the upgrade) ourselves with no outside private capital at close, but those will be structured so that we’ll aggregate those,” he said.

Before the loan pools can be commercialized, the CIB will have to “establish a track record... (showing) that the operating savings are actually there”, and that could take between three to five years, Casola said.

($1 = 1.3160 Canadian dollars)

Reporting by Steve Scherer; Editing by Lisa Shumaker

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