The Canadian government is moving in the right direction with a renewed look at privatizing the country's largest airports, which are in the sweet spot for institutional investors looking to deploy more of their assets at home, says a senior executive at Canada's largest pension fund.
Michel Leduc, senior managing director at the Canada Pension Plan Investment Board, said core national infrastructure that provides an international platform, such as a hub airport in a G7 country, is a sweet spot for institutional investors like the nearly $732-billion CPP fund. We look forward to seeing the details, valuations and growth opportunities, he said, adding that flexible partnerships, predictable regulatory terms and professional fiduciary boards are among the characteristics the pensions look for in such assets. This is trending in the right direction. We stand ready.
Airports are among the highest-value federally owned assets that could be considered for sale, as much of the infrastructure owned by governments across Canada resides in either provincial or municipal hands. The latest indication Ottawa is seriously considering opening up Canada's airports to more private investment came in this week's spring economic update, which also included plans to create a $25-billion sovereign wealth fund to help finance nation-building projects alongside private sector and international investors.
Government Consultation and Legislation
Prime Minister Mark Carney's first fiscal update since last fall's budget said his government is consulting with airport authorities, airlines and municipal governments to assess opportunities to unlock the full value of airports in support of investments in Canada's long-term growth, including through alternative models of ownership. The previous Liberal government studied the idea of privatizing airports a decade ago but didn't follow through. Among the signs this government is serious is new legislation in the works that will compel entities that own or operate an airport, or individuals whose activities may affect the value of an airport, to hand over information the government requests on the transportation minister's timetable.
The government may seek such information to assess the value of airports and the capacity to develop all or part of the national air transportation system, according to an act to implement provisions of the spring economic update, which was tabled in Parliament on April 28.
Investor Interest and Asset Recycling
Carney's inner circle includes former senior pension executives, including Clerk of the Privy Council Michael Sabia and chief of staff Marc-André Blanchard, and his government has made the rounds at institutional investors including pension funds to suss out ways to entice them to invest in priority nation-building infrastructure projects. Several of these global players have told the government they are interested in buying Canadian airports, according to senior pension officials, who say their wish list of assets also includes nuclear power generation, pipelines, bridges, toll roads, electricity transmission grids and ports.
Carney has also now formally floated the idea of asset recycling, an idea popular with Canada's largest globe-trotting pension funds known as the Maple 8, in which government-owned assets are leased or sold to private sector investors and the proceeds are used by governments to invest in priority infrastructure.
