It was billed as a “win-win-win” proposition. An agreement between the Quebec government and the Caisse de dépôt et placement du Québec, calling upon the Caisse to become the province’s go-to contractor for infrastructure projects, aims to resolve problems on several fronts.

The Caisse, Quebec’s independent manager of public-sector pension and insurance contributions and Canada’s largest institutional investor, already has massive infrastructure investments in London, U.K.’s Heathrow Airport; the port of Brisbane, Australia; and the Canada Line extension of Vancouver’s Skytrain to that city’s airport.

Now, Caisse CEO Michael Sabia has been campaigning to do the same in Quebec.

Two years of hearings by Quebec’s Charbonneau Commission into corruption and price fixing in the construction sector have demonstrated that public- sector managers have lost control of spending on major infrastructure projects.

The creation of CDPQ Infra, as the new partnership between the Caisse and the province is called, recently was announced jointly by Premier Philippe Couillard and Sabia. In promoting the deal, they noted that it will benefit the Caisse while lowering borrowing costs for the province, which is struggling with a $200-billion debt.

The Caisse invests contributions made to the Quebec Pension Plan, the counterpart to the Canada Pension Plan for Quebec residents, and to Quebec’s no-fault car insurance plan, among other payments.

With the Caisse’s huge appetite for investment returns – it has $294.5 billion in assets under management – CDPQ Infra offers the Caisse a new source of stable, predictable income over the long term.

The Charbonneau Commission has yet to deliver its conclusions in its investigation into corruption in the construction industry, but testimony showed that municipal and provincial politicians sought “contributions” from engineering and construction companies, then subsequently awarded lucrative public contracts to them.

The Caisse, with experience in financing and managing sophisticated international infrastructure projects, will become “project manager” for Quebec’s major infrastructure projects, taking the place of private-sector players who made decisions without adequate government supervision. Quebec is planning about $90 billion in new projects over the next decade.

The Caisse guards its independence jealously. Couillard says it would be up to the Caisse to decide whether government proposals make business sense.

In the past four years, the average return on the Caisse’s portfolio of stocks, bonds and real estate has been 11.1%. But the infrastructure portfolio has returned 16.8% in the same period. The CDPQ Infra model looks like a series of public/private partnerships (PPPs), but, as Sabia points out: “We’re a public institution.” Call it “a PPP with a twist.” Like a regular PPP, a consortium led by the Caisse will be project owner and operator. Investments will be for profit.

Sabia says CDPQ Infra is open to similar partnerships in other provinces. Vancouver’s Canada Line is the CDPQ Infra model project, he adds. The Caisse/SNC-Lavalin Group Inc. consortium put up $750 million, with British Columbia, the CIty of Vancouver and the federal government contributing $1.25 billion.

“There is [in CDPQ Infra],” says Sabia, “a natural convergence of interest.”

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