Parallel drives

Canada’s provincial governments have been examining each other’s approaches in their bids to develop the use of public-private partnerships.

Parallel drives Over the past few years, the use of public-private partnership (PPP) models in infrastructure projects has grown significantly in Canada. In 2007 the federal government created a new agency, PPP Canada, to encourage the development of PPP projects and established a C$1.26bn (£630m) fund to support that initiative. However, the real drivers of PPP growth in Canada have been the provincial governments, which have taken different approaches, as outlined below.

British Columbia was the first province to get behind PPPs in a serious way, with the establishment of Partnerships BC in 2002. A number of projects, primarily in the healthcare and transportation sectors, have been completed. Many more are underway – in fact, fully 20 per cent of infrastructure procurement in British Columbia is now carried out through PPPs.

Notable successes include the Canada Line rapid transit corridor to Vancouver International Airport, as well as the Sea to Sky Highway between Vancouver and Whistler, both of which are aiming for completion for the 2010 Olympics.

One result of the strong demand for such projects is that institutional, professional and other resources in British Columbia are being stretched. In an attempt to streamline the procurement process, Partnerships BC is now moving towards more heavily standardised documentation, rather than the ‘one-offs’ that characterised the early projects in that province. Progress in Alberta and OntarioThe PPP model has been slower to gain traction in Alberta. This is due in part to the province’s significant oil and gas-driven budgetary surpluses, which made the need for alternative funding sources less pressing. Nevertheless, Alberta’s infrastructure and transportation departments have been successful in advancing or completing the construction of ring roads around both Edmonton and Calgary. More recently, Alberta has commenced a programme to procure more than 30 schools in the province using a design-build-finance-maintain arrangement.

Previously Alberta did not have a single agency responsible for encouraging the use of PPPs in procuring infrastructure, but its 2008-2011 capital plan provided significant support for infrastructure projects while establishing the Alberta Capital Financing Office, which considers alternative methods for building and financing capital projects, including PPPs. Alberta has also entered into a memorandum of understanding (MoU) with the government of British Columbia to collaborate on the development of processes for using PPP models for capital project delivery.

After a slow start, Ontario has been successful in establishing itself in the PPP area. Infrastructure Ontario, the agency charged with encouraging alternative financing and procurement (AFP) methods, was established in late 2005. Since that time it has expanded rapidly, closing approximately 15 AFP projects in 2007, primarily in the healthcare sector.

Infrastructure Ontario’s programme currently consists of two fundamental project structures: build-finance projects, where proponents are provided with a set design and then bid to build and finance the construction portion of the project; and design-build-finance-maintain projects.

Mirroring developments in British Columbia, Infrastructure Ontario has recently moved towards standardisation of its project documentation. Working in conjunction with key stakeholders in the Ontario market, the standardisation of documents has been well received and is expected to result in efficiencies in bidding and subsequently closing projects.

Quebec and Nova Scotia join inQuebec’s provincial agency, the Agence des Partenariats Public-Privé du Québec, was established in 2006 and modelled after Partnerships BC. Its mandate includes reviewing government capital projects, including all those with a capital cost of C$40m (£19.98m) or more, to determine PPP suitability. Last year was a watershed for PPP projects in Quebec. In September a Macquarie-led consortium closed the financing of the A25 Autoroute, a 7.2km toll highway and bridge linking the islands of Montreal and Laval. The A25 project is generally considered to be Quebec’s first PPP. Quebec’s pipeline of PPP projects is diverse and growing and consists primarily of highway and hospital projects.

Nova Scotia used PPPs to build eight schools in the late 1990s, but has not subsequently pursued the PPP model for its infrastructure projects. However, the province appears to be re-evaluating its stance, having entered into an MoU with Partnerships BC in early 2008. Nova Scotia’s plan is to have Partnerships BC evaluate a number of potential projects to assist in the province’s decision of whether to proceed with them as PPPs. Projects being looked at range from the construction of corrections facilities to a new water supply for an industrial development. Nova Scotia expects to receive the first series of assessments from Partnerships BC in late June 2008.

Although the development of PPPs has varied among the various provinces, there is now a growing trend towards cooperation between provincial agencies, particularly with respect to standardised documents and the approach to risk transfer. This cooperation should lead to a more predictable business environment and a wealth of opportunities for market participants and their legal counsel.

Dana Porter is a partner in Stikeman Elliott’s commercial real estate group. He was assisted with this article by associate Rosemarie Lipman