La Caisse de dépôt et placement du Québec, one of the world’s largest institutional investment management firms, with C$240 billion in assets, may still not be well known outside of its native Quebec. But the fund is a savvy global investor with many of those assets (C$150 billion) invested outside of Canada.
The CDPQ is looking at how best to increase revenue and pension assets for its clients now that it must go beyond the traditional fixed income and bonds it may have considered 10 or 20 years ago.
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Speaking recently at the Canadian Council for Public Private Partnership’s annual conference in Toronto, Michael Sabia, president and CEO of the CDPQ, discussed how his organization is investing in infrastructure and doing things in a slightly different way. Mainly, he stressed, infrastructure provides large-scale investors low risk, protection of capital and incremental returns. Five years ago the CDPQ had C$3 billion in infrastructure. Today it has C$12 billion invested in the asset class. And, over the next four years, the CDPQ is looking to double that number, he said.
“We have a deep belief that it’s the operations of businesses, the operations of great infrastructure projects or the operation of buildings are the source of economic value,” he said.
The CDPQ created CDPQ Infra – a model which allows it to act as the owner-operator of infrastructure projects while assuming responsibility for the planning and financing phases and execution. In essence, acting as an exclusive subsidiary of CDPQ, CDPQ Infra will generate commercial returns for CDPQ and its partners while limiting the financial impact of infrastructure projects on the government’s balance sheet.
Eventually, noted Sabia, the focus of CDPQ is to export the CDPQ Infra model, particularly to the United States and elsewhere. “Because we have a global focus, we are confident in our ability to do this and to do it well and deliver it on time and on budget,” he said.
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What CDPQ Infra hopes to do is create a turnkey one-stop shop for infrastructure investing. He said government has the job of deciding what projects should go forward but CDPQ Infra takes on all the responsibility of financing, and determining whether they are commercially viable projects. Then CDPQ Infra provides options to governments and once decision is made, the company takes over on all stages from financing to long-term operations.
“Infrastructure is the connectivity that brings an economy to life. It’s the thing that connects people to jobs, connects people to information and broadband, the thing that connects products to markets through airports and ports. All those things contribute to the competitiveness of an economy,” said Sabia.
Sabia freely admitted that this CDPQ model may not work in all areas and the CDPQ will remain an investor for traditional projects that are outside of this scope. “We are not replacing anything, we are just broadening out what we do,” he said.
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One interesting aspect is that risk is being transferred from government to CDPQ Infra. “Why are we doing that?” asked Sabia. “We’re doing that because we think we know how to manage it. We think we have enough experience in a variety of infrastructure projects that we’ve done [that] we are in a better position that we can do the job.”
CDPQ Infra is still new and studying opportunities as a “proof of concept,” added Sabia. But as projects come online, potentially over the next 12 to 18 months, a greater push will be made to seek out more projects.
Joel Kranc is director of KRANC COMMUNICATIONS in Toronto, focusing on business communications, content delivery and marketing strategies. joel@kranccomm.com
