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McGill University Health Centre Glen Campus P3 Project achieves Financial Close

SNC-Lavalin and the McGill University Health Centre ("MUHC") last week announced the financial closure and official signing of a partnership agreement between the MUHC and the McGill Health Infrastructure Group ("MHIG"), composed of SNC-Lavalin and Innisfree Ltd. Under the 34-year public-private partnership ("P3"), the MHIG is to design, build, finance and maintain the MUHC's new Glen Campus. Construction is underway and should be completed in Q3 of 2014. Once completed, MHIG will maintain the campus for the next 30 years.

The MHIG raised $764 million through the sale of Senior Secured Bonds, which have been assigned a rating of A- by Standard & Poor's and A (low) by DBRS. SNC-Lavalin Inc. and Innisfree Secondary Fund LP committed to invest, directly or indirectly, an amount of $192 million in equity and subordinated debt. The MUHC is also contributing to the financing, mainly through a $300-million fundraising campaign, reflecting the community's support for the project. Credit facilities have also been obtained for the duration of the construction.

Covering an area of 220,000 m2, the MUHC's Glen Campus will centralize ambulatory services for 25 departments and offer dedicated areas for world-class teaching, research and patient care, as well as 20 operating rooms, 154 paediatric and 346 adult single-patient rooms-all with private bathrooms and space for visiting family members. The New MUHC will transform health care by creating healing spaces that are respectful of the environment.

"For SNC-Lavalin and its partners, this is the materialization of a major project that carries both hope and pride for the MUHC, for Montréal and for Quebec as a whole. We are very pleased to have been awarded this key public-private partnership project, which will give us a unique opportunity to demonstrate our expertise in carrying out major infrastructure projects, particularly in the healthcare sector," stated Riadh Ben Aïssa, Executive Vice-President, SNC-Lavalin Group Inc.

"This announcement marks a pivotal step in our journey to transform health care for generations to come," added the Hon. Arthur T. Porter, MUHC Director General and Chief Executive Officer. "The Glen Campus is an exceptional parcel of land whose future vocation as one of the world's foremost academic health centres is emerging through this equally exceptional partnership."

Macquarie tops The Infrastructure Investor 30, a global ranking of the largest infrastructure investors

On June 1, 2010, Infrastructure Investor magazine released "The Infrastructure Investor 30", its global ranking of the largest infrastructure direct-investment programmes. According to the magazine, the 30 largest infrastructure investment programmes in the world formed $140.5 billion in investment capital over the past five years, with investment bank-affiliated funds raising at least $48.6 billion in the past five years for infrastructure.

The full list available on Infrastructure Investor's website can be accessed here.

The ranking, which is based on a proprietary methodology developed by Infrastructure Investor, challenges the common assertion that independent fund managers are likely to enjoy more fundraising success than captive funds managed by investment banks or private equity firms. Non-investment bank affiliated funds raised $47.9 billion, $700 million less than the bank-sponsored funds and about one-third of the $140.5 total for The Infrastructure Investor 30.

Macquarie Group, the Sydney-based investment bank best known for its infrastructure investment activities topped the ranking with $30.6 billion in direct-investment capital formed for infrastructure. Approximately $8.5 billion of that was raised across Macquarie's listed funds, $21.7 billion across its unlisted funds, and about $500 million in direct balance sheet investments by the firm over the last five years.

Goldman Sachs, the New York-based investment bank, came in second, at $9.1 billion. In April 2010, Goldman Sachs Principle Investment Area topped the list of the world's largest private equity firms, complied by Infrastructure Investor's sister publication Private Equity International.

Among pension plans, Canadian-based Ontario Municipal Employees Retirement System, at $6.2 billion, and Caisse de Dépôt et Placement du Québec, at $6.1 billion, figured prominently in the ranking, at 5th and 6th place, respectively. All together, pensions accounted for $32 billion, or about 23 percent, of the total infrastructure direct-investment capital created by the Infrastructure Investor 30.

As for infrastructure developers, which often take minority equity stakes in projects, of the three developers to make the list, conglomerate Ferrovial of Spain, UK's Balfour Beatty and Madrid-based ACS all finished in the bottom half of the list, with Ferrovial earning 16th place in the ranking at $2.9 billion.

The Infrastructure Investor 30 was created using a proprietary methodology that takes into account the total direct-investment equity created by an investor for infrastructure in the last five years. The methodology was created to measure the size of the three major investor types in the asset class, fund managers, pension plans and infrastructure developers, in an apples-to-apples manner.

Quebec 2010-2011 Budget Unveiled: Key Infrastructure Announcements

Québec's Minister of Finance, Raymond Bachand, today tabled the province's 2010-2011 Budget. Among the budget's 5 stated objectives, it proposes a set of measures to "Build the Québec of the Next 20 years". On that note, and of particular interest to those in the infrastructure world, were the following announcements:

The government is continuing to invest in infrastructure. The 2009-2014 Québec Infrastructures Plan represents investments totalling $42.6 billion. Of this amount, $28.5 billion is to be applied to maintain and renovate the province's health institutions, schools and road network, while the remaining $14.1 billion is slated for new infrastructure in the health, education and transportation sectors.

Minister Bachand noted: "The Québec Infrastructure Plan has generated substantial economic benefits in all regions. It has been one of the cornerstones of economic recovery [...] our investments in infrastructure and the energy sector have enabled us to create and support 100,000 jobs a year,"

Bachand went on to explain that in 2009, the government had injected $6.8 billion in the economy pursuant to its Recovery Plan. "We are now deploying the second part of the plan and will commit $8.2 billion in 2010. We are also continuing the investments stipulated in the Québec Infrastructures Plan, which will reach $9.1 billion in 2010-2011,"

On the theme of "Building the Québec of the Next 20 Years" the minister made reference to the province's economy having to become more productive and more competitive, as well as to the pursuit of its "green shift".

Announcements specific to the Greater Montreal Area were the extension of the government's support for the Imagining-Building Montréal 2025 development strategy until 2017 through funding of $175 million and investments of $200 million for the creation of an express rail link between the airport and downtown Montréal.

As for tax increases related to infrastructure, the minister announced sustainable funding for the Road and Public Transit Infrastructure Fund through an increase in the fuel tax. As such, the metropolitan communities of Montréal and Québec City will be entitled to raise the tax on gasoline by 1.5 cents per litre on their territory in order to invest in their respective public transit systems.

Bids accepted for McGill University Health Centre and Research Centre of the University of Montreal Hospital Centre Projects

The Government of Québec announced today that it had accepted revised bids following the expiry of an extended deadline on tendering parties in which to do so.

On January 13, 2010, the government had provided a 60-day extension for bidders on the McGill University Health Centre (MUHC) and Research Centre of the University of Montreal Hospital Centre (CRCHUM) projects to review their previous tenders in order to respect budgetary constraints of 1,343 B$ and 470 M$ respectively.

The government is now reviewing tenders and expects to have completed the process and announced the successful proponents in the upcoming weeks. Construction on the projects is expected to begin in the Spring of 2010, as per the original project schedule.

Pan-Canadian P3 Report released by the Canadian Conference Board

The Conference Board of Canada recently released a report entitled "Dispelling the Myths: A Pan-Canadian Assessment of Public-Private Partnerships for Infrastructure Investments" which will undoubtedly be of interest to private and public sector participants in the Canadian infrastructure projects world.

The report assesses the benefits and disadvantages of using public-private partnerships (P3s) as a procurement vehicle for Canadian governments seeking to build or upgrade infrastructure assets. It does so by using empirical and anecdotal data gained from P3 projects in Canada executed from 2004 onward under the auspices of PPP Canada, Partnerships BC, Infrastructure Ontario, the Alternative Capital Financing Office of the Alberta Treasury Board and the recently re-named Infrastructure Québec (or the so-called "second wave" P3s).

The report's highlights include a conventional-to-P3 efficiency comparison for Canadian infrastructure project procurement, using value-for-money studies ("VfM studies") and studies of the ex post performance of P3s ("ex post studies"), an efficiency analysis of the second wave P3s and an analysis of the factors responsible for efficiency gains in P3 projects.

Among the factors deemed responsible for P3 efficiency gains are upfront risk allocation optimization, as well as the incentivising of construction phase efficiency as a result of private financing and the ensuing private sector partner's responsibility for a large portion of debt. The report also cites private sector innovation, whether in proposed outputs pursuant to performance-based contracts or relative to total project life cycle costs. The report however points out that innovation is not exclusive to the P3 model.

With regards to the second wave P3 projects, the report estimates the value of the P3 efficiency gains from between a few million dollars per project to over $750 million, which represents taxpayer savings of between 0.8% and 61.2% per project when compared to conventional contracting.

A copy of the report can be obtained from the Canadian Conference Board's website by clicking here.

Montreal Métro invites bids for 765 cars with an option for up to 288 more - Total Contract Value could top $3 billion

The Societe de transport de Montreal ("STM") and Transports Quebec recently announced that the procurement of a new fleet of rubber-tyred Métro cars would be put out to tender again. The tendering period is to last 30 days, in compliance with World Trade Organisation rules.

The international public notice of the invitation to bid can be found at the following link: http://www.stm.info/english/en-bref/a-avisdintention_mr-08.pdf

The timing of the STM's decision to re-bid has been criticized by many as a result of sole-source negotiations having been nearly completed with a consortium formed by Bombardier and Alstom. However, the STM justifies its decision as a result of significant changes to the scope of the contract. Several new contenders may decide to bid for the contract, including Siemens and Chinese manufacturer CSR Zhuzhou.

The acquisition of a new fleet of cars by the STM has been a lengthy and troubled process. Following the STM's first announcement in July 2005 that it would issue a tender for 342 new cars, it then decided to negotiate exclusively with Bombardier in May 2006. The STM's reasoning was that Bombardier was the only company equipped to supply the cars. Bombardier competitor Alstom challenged this in June 2006, and its case was upheld 18 months later by the Québec Superior Court. This could have forced STM to re-bid the $1.2 billion acquisition but, following pressure from various levels of government, Bombardier and Alstom decided in November 2008 to work together and submit a joint bid.

Whereas the STM originally wanted to replace only the 45-year-old MR-63 cars, the increased size of the tender will now allow the replacement of the more recent MR-73 cars as well. The optional cars would be required if the proposed 20 km expansion of Montreal's subway network goes ahead.