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Toronto aligned to grow as global hub for P3 transactions: report

Angela Gismondi
Toronto aligned to grow as global hub for P3 transactions: report

A new report from the Toronto Financial Services Alliance (TFSA) in collaboration with KPMG Canada indicates that Toronto is a leading international hub for public-private partnerships (P3s) and has the potential to grow further as the adoption of the P3 model continues to increase.

A survey and the subsequent report, Knowing When to Partner, ranks Toronto’s financial services sector number one in Canada and third globally behind New York and London in terms of ability to provide expertise and funding to deliver P3s, stating it is uniquely positioned to help governments across the globe leverage P3s. It also states the city can help government authorities address the growing infrastructure gap in Canada while benefiting Toronto’s financial services sector and Canadian taxpayers.

“Opportunities that will likely enhance Toronto’s position as an international P3 hub include the government is locating the Canada Infrastructure Bank in Toronto; Newfoundland, Nova Scotia and Manitoba have embarked on a new wave of P3 activity; P3s are an effective way to close the First Nations infrastructure gap; and the United States may be on the cusp of a significant infrastructure renewal, with many local governments open to using P3 models,” stated Jennifer Reynolds, president and CEO of TFSA, in an email to the Daily Commercial News.

Challenges the P3 marketplace in Canada may face in the future are the size of infrastructure projects, which are often relatively smaller, and the fact that Ontario’s hospital build-out has slowed down, explained Reynolds.

However, the report notes Canada does have a much longer track record with P3s than the United States or Mexico.

“The contribution of Toronto’s strong financial services sector, and of major contractors and service providers located in and around Toronto, make it a unique market from a P3 context,” Reynolds stated. “Canada’s design, build, finance, operate and maintain P3 model, and its variations, is a repeatable template that is highly successful and is applicable to innumerable project sponsors at home and abroad.”

She added, “Toronto has established access to long-term bond and bank financing for P3 infrastructure projects, providing access to committed, fixed-rate financing. This is unique to Canada as most other countries primarily use bank financing as a source of debt, especially since the global recession.”

The TFSA surveyed a broad sample of international finance professionals about trends and innovations in financial services, asking them to benchmark global financial centres based on their potential to gain from an increasing use of P3s in delivering the next wave of infrastructure development.

As a follow-up to the benchmarking study, the TFSA worked with KPMG to develop the Knowing When to Partner report on the role that Toronto’s financial services professionals play in supporting the city’s status as a P3 “super cluster.”

“The investments made by its banks, life insurers and infrastructure funds have helped to establish Canada as an international P3 super cluster,” the report states. “Montreal and Vancouver are also integral to this success. These two cities ranked ninth and 10th respectively in our benchmarking study of financial centres with the most potential to gain from an increased use of P3s in infrastructure financing.”

Examples of Canadian P3 projects include:

  • the Mackenzie Vaughan Hospital, Vaughan, Ont. ($1.6 billion);
  • the Valley Line Southeast Light Rail Transit (LRT), Edmonton ($1.8 billion);
  • the Highway 407 East Phase 2 in Durham Region, Ont. ($1.2 billion); and
  • the Fort McMurray West Transmission Line, Fort McMurray, Alta. ($1.6 billion).

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