Following the inaugural Canada Investment Summit, Prime Minister Mark Carney confirmed the government would pursue private investments in the country’s four largest airports. According to Carney, these deals would see the federal government retain ownership of the land and assets, while the investing partners would help enhance the airport experience for travellers.
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Several Canadian pension funds already own stakes in airports in global markets. Now, Carney is looking to bring some of that experience back home. “Canadian pension funds are famous around the world for being absolute leaders in the infrastructure field,” Pim said. “They have been incredibly active across Europe and Asia.”
In Europe, there are a variety of examples where private capital investment has worked and not worked for public assets, he added. “When you get it right, it can work very well. We’ve seen in the U.K., the quality of our airports improved a lot — there are some issues over pricing, but generally you can see the benefit of the investment.”
The capital demands can also relate to the energy infrastructure at assets like airports and whether the transition to clean power will be achieved, which he adds will demand a significant amount of capital over the next few decades. “Governments can’t provide that. You need to stick to private capital.”
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An event like Carney’s summit can raise awareness with a top-down, overarching approach to a specific investment path, says Pim. “You have to make sure that you’ve got public support and really selling why this infrastructure investment is needed.”
The uncertainty of the current economic landscape creates opportunities for infrastructure, he adds, since it offers some inflation protection and stable and predictable cash flows. However, he said it won’t be a magic bullet for investors.
A report from earlier this year by PricewaterhouseCoopers Canada found the country has a $34 billion infrastructure spending gap compared to other peer countries, despite spending roughly US$145 billion per year in this area.
The International Centre for Pension Management had previously signalled governments need to create a positive investment environment where private capital operators can engage with desirable assets to help support the roadmap for infrastructure needs.
Pim wants to see how the deal breakdown will pan out, since Maple 8 pension funds tend to look for the biggest ticket sizes available. He notes in Europe, these investors primarily focus on large-cap space for infrastructure assets.
“I would argue a lot of the really interesting opportunities we’re seeing now is in that small- to mid-market space — that potentially is a challenge for them if they’re only able to write very large tickets [and] I think they’ll miss some of that opportunity.”
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