VIA Rail looks to raise $3 billion for track construction

A VIA Rail proposal to raise $3 billion in private investment to buy and build dedicated passenger tracks along the Toronto-Ottawa-Montreal corridor has the potential to roll out as a public-private partnership (P3) says the company’s president and CEO.

"We need to increase the relevancy and usefulness of VIA Rail to Canadians in the highly densely populated area of Toronto, Ottawa and Montreal, partially in response to the huge congestion in and out of those towns," Yves Desjardins-Siciliano stated after an event presented by the Canadian Council for Public-Private Partnerships.

"The only way to do that is to build a dedicated passenger rail infrastructure, but the trick is to do it without burdening the Canadian taxpayer, and that’s where we’re looking at private market participants to finance the ‘trackage’ and the signaling systems for a dedicated corridor. Right now from a market testing point of view, we’re trying to see what the appetite is."

Today, he says, VIA Rail trains travel on average at 70 mph, but the equipment is capable of running between 100 and 110 mph.

"That 40 per cent difference is what explains the diminishing time-to-destination on some of these lines," he explains.

The trains run mostly on tracks owned by the Canadian National Railway Company and the increasing number of freight trains is impacting service.

Desjardins-Siciliano states dedicated tracks would nearly "quadruple" ridership (3.5 times), eliminate the operating deficit of the corridor, and provide investors with a possible "double-digit" return.

According to his presentation, "high-frequency rail," as it’s being coined, would reduce times from Toronto to Ottawa from three hours and 48 minutes to two hours and thirty minutes; Ottawa to Montreal from one hour and 49 minutes to one hour and 20 minutes; and Toronto to Montreal from four hours and 32 minutes to three hours and 45 minutes, preliminary estimates show.

"We needed to find another way, because the ridership is diminishing, the on time performance is worsening," he says.

One of the possible options being considered for this proposal is a P3, design-build-finance-maintain model. Construction for the track infrastructure would be "just north" of $2 billion, Desjardins-Siciliano adds.

"Timing is everything and the timing is great here in Canada because there’s been so many PPPs around transit developed over the last 10 years from Vancouver all the way to the P.E.I. bridge. Therefore there’s huge expertise here," he says.

"The creativity of professional providers who do this around the world…you get the best capabilities."

Desjardins-Siciliano was quick to point out that many options are being considered and different parties may have different options they put forth.

"It may be that some players may look at this business case, do their own analysis, and believe that the risk is worth taking and they’d rather take the whole thing and assume the risk of the business case," he explains.

"If it’s more like we’re expecting, which is that they will not want to take the business case risk…therefore they will take less of it, which brings us back to trackage and signaling, for an ongoing return, which is availability payment."

The presentation notes it is a low execution risk because three-quarters is on existing railroad tracks, but all delivery models are still being explored.

"The modelling, is the structure P3? Or, is it direct debt financing? Or, should it just be traditional appropriation from the government? We will be looking at options," he adds.

The CEO also noted this proposal is strictly a VIA Rail management initiative and not that of the federal government, the company’s main shareholder.

"By the end of the year, or early next year, we’ll go to our shareholder, the government of Canada, and say, ‘If you want to increase the relevancy of VIA…we have to build a dedicated corridor,’" he says. "We’ll see where we are next year at this time."

Creating dedicated tracks, Desjardins-Siciliano states, can also happen over time, improving travel along the way.

"Because it’s not grade separated, you’re able to incrementally improve the service," he says. "It’s not a build it and after 12 years cut a ribbon and now the service is available. It’s incrementally improve the service. In total, the whole project deployment is estimated at five to seven years."