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  • Transportation infrastructure: A pillar of economic recovery

    Like many other governments, the Government of Quebec decided to invest in infrastructure to help mitigate the impact of the COVID-19 pandemic and stimulate Quebec’s economy. A significant number of investments will be made in the transportation sector, and the government wants to accelerate the realisation of several previously announced transportation infrastructure projects in the greater Montréal area. This focus on construction as a way of speeding up the recovery from the crisis arises in a context where construction contractors’ and professionals’ interest in public contracts has fallen sharply. According to a recent study conducted by three Raymond Chabot Grant Thornton professionals1, mandated by six major players in the Quebec construction industry, this lack of interest in public contracts can be explained by a number of factors: poorly structured payment terms, unappealing contract clauses, issues related to the tender process, cumbersome contract management, and, as far as construction professionals are concerned, hourly rate ceilings set out in existing government regulations. The Quebec government is acutely aware of this decline in interest for public contracts and tabled an action plan for the construction industry in late March 2021 to address it. Four categories of measures are included in this action plan. First, the government has reiterated its desire to accelerate the realisation of a number of projects already included in the Québec Infrastructure Plan and to implement this plan more effectively. The Act respecting the acceleration of certain infrastructure projects introduced in June 2020 and adopted in December 2020, even before the action plan was tabled was a concrete example of the government’s intent. The other two categories of measures in the action plan aim to implement solutions to reduce the current labour shortages and to increase productivity in the construction industry. The Act respecting the acceleration of certain infrastructure projects covers approximately 180 projects, most of which are in the transportation, education and health and social services sectors. It focuses, in particular, on a number of transportation infrastructure projects in the greater Montréal area, such as the projects that will  link the east, northeast and southwest of Montréal to the city’s downtown area by way of an electric public transit system (including the REM de l’Est and the first phase of the pink metro line), to improve access to the Port of Montréal, to rebuild the Île aux Tourtes Bridge, to build the Longueuil tramway, to extend the REM to Laval and to implement an express bus service in Laval. The Act focuses onfour main areas. First, if expropriation required to carry out a particular project, its procedure has been simplified. Second, in connection with compliance with environmental legislation provisions, the requirement of a certificate of authorization will waived for certain projects; for others, the BAPE project assessment procedure has been simplified. An expedited process to authorize the use of governmental property is provided for projects where such use is necessary. Lastly, city or municipal authorizations have been simplified for projects that require such an authorization. Extraordinary measures were required to deal with the unique situation caused by the COVID-19 pandemic. We applaud the Quebec government’s efforts to address the impacts of this pandemic. The chosen approach, however, is not without risks. Some critics have warned the government about the risks of possible collusion between tenderers, as collusion is thought to be more likely to occur in a context where projects are being accelerated. To mitigate this risk, the Actconfers on the Autorité des marchés publics more oversight functions, and in clear cases of collusion, the power to suspend the performance of contracts. Concerns have also been raised as to the quality of the constructed works, thereby underscoring the importance of maintaining and not ditching adequate public consultations. Finally, the Act addresses the issue of delays in payments by the government that was not only raised in the Raymond Chabot Grant Thornton report, but also during public consultations preceding the adoption of the Act. The Act extends the existing pilot project to facilitate payment to enterprises applicable to all projects covered by the Act. Hopefully, the Act respecting the acceleration of certain infrastructure projects, paired with the other measures announced in the government’s action plan for the construction industry, will make infrastructure a key component of Quebec’s economic recovery, as we finally start to see the end of the COVID-19 pandemic. A short version of this publication was published as an open letter in La Presse. Click here to read it. Plante, Nicolas, Jean-Philippe Brosseau and Marie-Pier Bernard, Consultation visant à évaluer le niveau d'intérêt des entrepreneurs et des professionnels envers les marchés publics [French Only], Montréal, Raymond Chabot Grant Thornton, April 2021, 85 p. (see in particular pages 17 to 34).

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  • Bill 37: What changes can be expected for Public Contracts?

    On September 18, 2019, the Minister Responsible for Government Administration and Chair of the Conseil du trésor introduced Bill 37, An Act mainly to establish the Centre d’acquisitions gouvernementales et Infrastructures technologiques Québec1 As its name suggests, this bill is intended to implement the restructuring of government procurement announced in the 2019–2020 budget2. If the bill is passed, the Centre de services partagés du Québec (CSPQ), as well as some other procurement organizations, will be replaced by two bodies: the Centre d’acquisitions gouvernementales will be the organization responsible for meeting the government’s general procurement needs, and Infrastructures technologiques Québec will handle its digital procurement. In 2017–2018, information technology contracts accounted for 17% of public body contracts3. Some administrative functions of the CSPQ would also be transferred to the Agence du revenu du Québec and the Conseil du trésor. Bill 37 also makes a number of amendments to the Act respecting contracting by public bodies, CQLR c. C-65.1, and its regulations, two of which are noteworthy. It is planned that, as of April 1, 2020, information relating to contracts involving an expenditure of more than $10,000, whether reached by mutual agreement or following a call for tenders, will have to be published in the electronic tendering system. The current limit is $25,0004. The bill also provides that, as of the date its assent (currently scheduled for the end of 2019), the imposition of a penalty for a final reassessment under the general anti-avoidance rule regarding an abusive tax avoidance transaction5 on the part of a company or related person will be recorded in the Register of Enterprises Ineligible for Public Contracts for five years. Such penalties will also be considered by the Autorité des marchés publics in its decision to authorize a contract with a public body. A 60-day transitional period is provided for in Bill 37, during which a taxpayer may make a late preventive disclosure to the Minister of Revenue6 by filing the form Mandatory or preventive disclosure of tax planning (TP-1079.DI-V). However, this type of disclosure will not be accepted if an audit by the Agence du revenu du Québec or the Canada Revenue Agency is already ongoing with respect to such a transaction. This measure is part of the current fight against aggressive tax planning7.   Quebec (National Assembly), Bill 37, An Act mainly to establish the Centre d’acquisitionsgouvernementales and Infrastructures technologiques Québec, 42nd Legislature, 1st Session. Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. H.61. Québec (Conseil du trésor), Statistiques sur les contrats des organismes publics 2017–2018 (Québec, Direction de la reddition de comptes et du soutien à l’encadrement des contrats publics, March 2019), p. 1. Sections 22 and 23 of the Act respecting contracting by public bodies, CQLR c. C-65.1; sections 39 and 39.2 of the Regulation respecting supply contracts of public bodies, CQLR c. C-65.1, r. 2; sections 52 and 52.2 of the Regulation respecting service contracts of public bodies, CQLR c. C-65.1, r. 4; sections 42 and 42.2 of the Regulation respecting construction contracts of public bodies, CQLR c. C-65.1, r. 5; sections 73 and 75 of the Regulation respecting contracting by public bodies in the field of information technologies, CQLR c. C-65.1, r. 5.1. Sections 1079.13.1 and 1079.13.2 of the Taxation Act, CQLR c. I-3. Section 1079.8.7.1 of the Taxation Act, CQLR c. I-3. See, in particular, Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. D.81.

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  • Infrastructure Insider: What essential news and transactions occurred in the infrastructure market?

    To download the Infrastructure Insider To download the Infrastructure Insider 1. Setting up the Autorité des marchés publics — Practical consequences on the call for tenders process in Quebec The Autorité des marchés financiers is now replaced by the AMP for the authorization to contract with a public body. This new body, which is responsible for overseeing all public contracts, also has the power to audit, investigate, order and recommend.   2. The latest news in the infrastructure market Among the highlights from the last few months: The production of more than 2.305 GW of renewable energy, confirmed in new contracts 3 major transportation projects are progressing rapidly in North America The Olympic Stadium Roof Rehabilitation Project is moving forward The PPP model is considered for the implementation of 2 new transportation projects A major bank ceases to finance coal, oil and gas energy projects To download the Infrastructure Insider

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  • Latest developments in the Canadian infrastructure market

    The Canadian infrastructure market has had a busy few weeks! The industry's latest news, from new funding policies to major transport and energy projects, is identified in this edition of the Infrastructure Insider. 1. The latest developments in the Canadian infrastructure market New developers admitted to SaskPower’s 200 MW wind energy call for tenders Colas acquires Miller McAsphalt Corporation DONG Energy forms a partnership for the British Columbia offshore wind project SNC-Lavalin invests in the Carlyle Global Infrastructure Fund InstarAGF acquires Skyservice Northland Power refinances a portfolio of solar projects in Ontario A hyperloop link contemplated between Montréal and Toronto ... and many more Click here for all the latest developments 2. Hyperloop: Hypercool? Or Hyperflop? A system like this installed between Los Angeles and San Francisco would make it possible to connect the two cities in less than 30 minutes, faster than a plane that travels the same distance in 35 minutes at a speed of 885 km/h. Eventually, this mode of transport could connect multiple countries, even the world, by connecting the biggest cities like a kind of subway, but on a global scale. Read the full article here 3. Renewable energy: an update on market trends For several years now, renewable energy can no longer be considered as developing technology, but rather as a mature industry, competitive with fossil fuels, subject to economic cycles and consolidation movements, which is gradually moving away from the backing of public authorities. Discover the industry’s main trends

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  • The public tendering process: are there alternatives to the lowest bidder rule?

    In Québec, both at the provincial and municipal levels, the awarding of contracts by government bodies for construction work and material supply seems, for the most part, to be governed by the lowest bidder rule. Nevertheless, the Charbonneau Commission highlighted the many drawbacks to this method: risk relating to the quality of infrastructure and services, undue pressure on bidders’ margins, incentive to generate “extras”, risk of collusion, etc. Despite the debate surrounding the Commission, there does not appear to have been any fundamental change in this practice, with authorities focusing more on the transparency of the identity of the parties, the source of funds and the frequency of requests for “extras” by individual bidders. But in the final analysis, are public bodies actually required to use this method of selection? Could there be other alternative options? We thought it would be interesting to present a summary of the methods of awarding public contracts in Québec . In 2015-2016, the total value of public contracts in Québec was approximately $8 .5 billion . The contracts are mainly supply contracts, service contracts and construction contracts awarded by government bodies, including ministries, school boards, Crown corporations, health and social services agencies and municipal bodies . The bodies on the list, other than municipal bodies, are governed by the Act respecting contracting by public bodies and its regulations . Municipal bodies are governed by the Cities and Towns Act. The lowest bidder rule is frequently prescribed in legislative provisions, as described below . Generally, the rule applies in situations where the government or municipal body manages to clearly state its requirements at the time of the call for tenders . The Secretariat of the Conseil du trésor has established that in such a situation, lowest price is the only basis for awarding a contract . However, the lowest bidder rule is not systematically employed for all public contracts . There are three other methods: “minimum quality and price”, “lowest adjusted price” and “quality only” . Municipal bodies may also apply a bid weighting system for evaluating offers . “Price only” method of awarding contracts This is the method of awarding contracts that uses the lowest bidder rule solely . Type of public contract Legislative source Supply contract Regulation respecting certain supply contracts of public bodies, s. 13 Service contract of a technical nature Regulation respecting certain service contracts of public bodies, s. 13 Construction contract of a public body public body Regulation respecting construction contracts of public bodies, s. 16 Supply contracts, service contracts and construction contracts awarded by municipal bodies involving an expenditure of $100,000 or more Cities and Towns Act s . 573 (7) “Minimum quality and price” method of awarding contracts A public body uses this method when it is essential for the public contract to have a minimum quality threshold, but the public body does not wish to pay a premium for higher quality . Tendering is then a two-step process . The first step consists of selecting bidders only after proof of quality . For example, for construction contracts, a minimum of three criteria is required for a quality assessment . The criteria must be specified in the tender documents and must state the elements required for the quality to be considered acceptable . This is the “acceptable level of performance” . A bidder rejected at this stage is considered to be an ineligible or non-compliant bidder . The second step consists in inviting the bidders selected in the first step to submit a price . The lowest bidder wins the day . Type of public contract Legislative source Supply contract (awarded at the discretion of the public body) discretion of the public body) Regulation respecting certain supply contracts of public bodies, s . 26 .1 Professional services contract Regulation respecting certain service contracts of public bodies, s . 25 Construction contract or mixed contract for construction work and professional services of public bodies (awarded at the discretion of the public body) Regulation respecting construction contracts of public bodies, ss . 22 and 26 “Lowest adjusted price” method of awarding contracts A quality-price formula prescribed in the schedules of each respective regulation allows for a score out of 100 to be given for bid quality . That score is then used as the adjustment factor for the bid price . The contract is still awarded to the lowest bidder, whose price has been adjusted by applying the formula . Type of public contract Legislative source Supply contract (awarded at the discretion of the public body) Regulation respecting certain supply contracts of public bodies, s . 23 and Schedule 2 Professional services contract (awarded at the discretion of the public body) Regulation respecting certain service contracts of public bodies, s . 21 and Schedule 2 Construction contract or mixed contract for construction work and professional services of public bodies (awarded at the discretion of the public body) Regulation respecting construction contracts of public bodies, s . 24 and Schedule 5 “Quality only” method of awarding contracts Public bodies must award their contracts solely after soliciting a demonstration of quality . Municipal contracts are awarded randomly among bidders that have met all the quality criteria . When a bidder is selected, it cannot be selected again until the list has been exhausted . Municipal bodies also benefit from a rule that allows for rejection of a bidder that, in the two years preceding the selection date, had an unsatisfactory performance evaluation . Type of public contract Legislative source Professional services contract for an architecture or engineering contract, excluding a forest engineering contract Regulation respecting certain service contracts of public bodies, s . 24 Contract for services rendered by an architect, engineer, land surveyor or chartered professional accountant; contracts involving an expenditure of $100,000 or more awarded by a municipal body Regulation respecting the awarding of contracts for certain professional services, s . 19 Bid weighting system For bid evaluation purposes, municipal bodies may also establish a criteria evaluation grid with a certain number of points given for price and others for quality . The grid must also comply with the conditions prescribed in the Cities and Towns Act . For example, for the awarding of professional services contracts, the evaluation grid must have a minimum of four criteria . Type of public contract Legislative source Supply contract, services contract and construction contract involving an expenditure of $100,000 or more awarded by municipal bodies Cities and Towns Act, s . 573 .1 .0 .1 Conclusion This portrait of Québec government contracts serves to illustrate that the predominance of the lowest bidder rule is not the result of a legal obligation, but rather the result of the exercise of discretion by the public body concerned . Most likely the complexity and more subjective nature of the other methods of awarding contracts make the “price-only” a simpler method to apply . However, the trend noted among project owners elsewhere in Canada and other countries is that “value for money” (also called “quality/price ratio” or “cost/benefit ratio”) is the increasingly preferred concept, as it further promotes quality and sustainability, with a view to improving long-term return on investment . In this context, “price only” is obviously no longer an adequate method, and hence methods comparable to bid weighting are used . In the case of Québec, the following issues arise: are the public service employees responsible for tendering properly aware of the various options available? Have they received the training and tools for determining the most appropriate method to apply in awarding contracts? Would they need special technical assistance? Is the decision-making process sufficiently transparent and structured? Failure to give due consideration to these issues amounts to misunderstanding the context . The issue is whether it is realistic to require that a generalist civil servant, who is paid a respectable but modest salary but has no special legal immunity from liability claims, make discretionary decisions concerning projects of significant financial value . Apart from these functional aspects, consideration should be given to the appropriateness of formulating a general strategy for tender criteria for public investment, applicable to both the provincial and municipal levels, as well as to the allocation of an adequate budget for proper analysis by appropriately qualified persons at the preparatory stage . Consideration should also be given to reviewing the most preferable method that should be applied by our public bodies in awarding contracts to ensure that Québec’s infrastructures are built in the best interests of the general public, both in terms of quality, longevity and optimization of public funds .

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  • Improvements to the tax holiday for large investment projects

    Summary A company participating in carrying out a large investment project in Québec (“LIP”) may, under certain conditions, benefit from a 15-year tax holiday on the income from its eligible activities related to the LIP, as well as a holiday from employer contributions to the Health Services Fund (“HSF”). The corporation or partnership must first submit an application for an initial certificate to the Minister of Finance before commencement of the project, and by December 31, 2020 at the latest. A corporation or partnership that obtained an initial certificate for a LIP can ask the Minister of Finance to modify the certificate to add a second LIP to be included in the extension of the first LIP. Context The purpose underlying the tax holiday for an LIP is to stimulate and accelerate significant investment in Québec in accordance with the government’s strategic objectives, create jobs and foster economic development . The tax holiday consists of a deduction in the calculation of taxable income for the taxation year, in the case of a corporation . The tax holiday also consists of an exemption from employer contributions to the HSF, with regard to the wages paid to employees for that part of their time spent on eligible LIP-related activities . The total value of the tax holiday may not exceed 15% of the total eligible investment expenditures determined on the date the tax holiday period commences . In the 2017-2018 budget, the deadline for submitting the initial certificate application for the 15-year tax holiday has been extended to December 31, 2020 . Qualification as an LIP To qualify as an LIP, a project must: concern manufacturing, data processing and hosting, wholesale trade, or warehousing and storage; satisfy a minimum investment requirement of $100 million . That threshold is reduced to $75 million for projects in certain regions (more than 150 kilometers from Montréal and more than 100 kilometers from Québec City and Gatineau) . Improvement No. 1 Deadline for submitting an application for an initial certificate extended to December 31, 2020 To benefit from the tax holiday, a corporation must first obtain an initial certificate and annual attestations issued by the Minister of Finance . The application for an initial certificate must be made before the commencement of the investment project, and by November 20, 2017 at the latest . However, in the 2017-2018 budget, that deadline has been extended to December 31, 2020 . The issuance date of the initial certificate marks the 60-month period during which the corporation must reach the minimum investment threshold . It should be noted that the tax holiday is not granted during the 60-month period . The 15-year tax holiday is granted only after issuance of the first annual attestation relating to the investment project . Improvement No. 2 Option to add an additional phase to an LIP The scale of certain LIPs may require that they be carried out in several phases . Now, a company that has obtained an initial certificate for an LIP (“Phase I”) may apply for a modification to the certificate to add a second LIP (“Phase II”) to be included in the extension of the first LIP . The application for modification must be submitted to the Minister of Finance no later than the date of the first request for an annual attestation in respect of Phase I, and by the January 1, 2021 deadline . Phase I and Phase II investments should each be clearly identified and separate accounts must be kept for each . The additional phase will also be subject to the 60-month investment period .

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  • Latest developments in the Canadian infrastructures market

    TABLE OF CONTENTS Latest developments in the Canadian infrastructures market British Columbia Throne Speech promises new public transportation and healthcare infrastructures InstarAGF completes the final close of InstarAGF Essential Infrastructure Fund First Action Plan for Québec’s 2030 Energy Policy unveiled SNC-Lavalin monetizes part of its infrastructure assets Innergex Renewable Energy inc . acquires two wind power projects in France ff Pre-qualification of bidders for Saskatchewan wind power program Infrastructure Ontario to restart procurement process for Finch West LRT project Monique Leroux joins Fiera Capital . Government of Canada commits $1 .28 billion to REM project . Call for funding for Henvey Inlet wind power project PSP Investment posts strong performance for 2017 in infrastructure sector SNC-Lavalin sells Montréal headquarters for $170 million . Brookfield Infrastructure Debt Fund I raises $US284 million Canada unveils $2 .1 billion transportation budget Janice Fukakusa joins Canada Infrastructure Bank A new PPP hospital project for Québec? Over 30 companies respond to request for pre-qualification for Southwest Ontario Broadband project bcIMC posts 9 .6% annualized return on infrastructure Petronas cancels Pacific Northwest LNG project . Cascades sells stake in Boralex to CDPQ . Hydro-Québec bids in Massachusetts RFP   Latest developments in the Canadian infrastructures market British Columbia Throne Speech promises new public transportation and healthcare infrastructures In its June 19, 2017 Speech from the Throne, the B .C . minority Liberal government’s objective was to address elector expectations, especially regarding the issues highlighted in the NDP and Green Party platforms . The Speech from the Throne included promises to increase the public transit infrastructure and improve access thereto and to accelerate the construction of new healthcare facilities . Highlights: expanding of the public transit system in the Greater Vancouver area; terminating the referendum requirement respecting new sources of revenue for public transit; working with Washington State on the high-speed rail link between Vancouver and Seattle; building light rail transit in the southern Vancouver Island area; conducting feasibility studies as part of a project to connect the Lower Fraser Valley and North Shore communities by public transit and light rail; eliminating tolls on the Port Mann and Golden Ears bridges, speeding up the replacement of the Pattullo bridge; building a new mental health and addiction treatment centre in Surrey; and accelerating the creation of a new healthcare infrastructure to meet growing demand . InstarAGF completes final close of InstarAGF Essential Infrastructure Fund In a June 27, 2017 press release, the Toronto-based asset management company InstarAGF announced that its Essential Infrastructure Fund had reached final close with $740 million in commitments from Canadian, European, UK and US institutional and high-net-worth investors . Roughly 30% of the capital raised has been invested in a passenger terminal at Billy Bishop Toronto City Airport, in a 30 MW wind power project in British Columbia, and in a stake in Steel Reef Infrastructure Corp . The Fund will focus on energy, utilities and civil and social infrastructure . According to InfraAmericas, the Fund would have a 15-year term and an IRR target of 9% to 14% First Action Plan for Québec’s 2030 Energy Policy unveiled On June 26, 2017, Pierre Arcand, who was then Minister of Energy and Natural Resources and Minister responsible for the Northern Plan, unveiled the 2017-2020 Action Plan stemming from the 2030 Energy Policy . This first plan has 42 measures representing a $1 .5 billion investment in achieving Québec’s energy transition . The 2017-2020 Action Plan presents concrete measures that will be implemented by 2020 so that Quebecers can make greener and more responsible choices in their energy consumption and their approaches to development projects for their homes, travel, businesses and organizations . It proposes a diversified offer to consumers for all energy sources, including hydroelectricity, wind power, solar power and natural gas . It also defines a new approach to fossil fuels . The Action Plan follows on the heels of numerous consultations and actions, including the unveiling of the 2030 Energy Policy in April 2016 and the enactment last December of legislation to implement the 2030 Energy Policy . The following are some of the key measures in the Action Plan: creation of Transition énergétique Québec; review of the Drive Green electric vehicle purchase rebate program; a $295 million contribution from Hydro-Québec to the Réseau électrique métropolitain (REM); implementation of a multi-fuel stations pilot project; review of the Capital Mines Énergie fund (formerly Capital Mines Hydrocarbures fund); Hydro-Québec to carry out a solar energy park pilot project; funding Énergir’s (formerly Gaz Métro) natural gas distribution network expansion projects; development of a regulatory framework governing the hydrocarbons sector in Québec . SNC-Lavalin monetizes part of its infrastructure assets To raise capital for new projects, SNC-Lavalin (TSX: SNC) decided to sell to BBGI, a Luxembourg company, an 80% interest in a number of its infrastructure assets, including the McGill University Health Centre (MUHC) in Montréal . BBGI SICAV S .A . (LSE: BBGI) is a government-owned investment firm that invests in public-private partnership (“PPP”) infrastructure projects . Established in Luxembourg, its global and geographically diversified portfolio is comprised of 39 high-quality PPP infrastructure assets . The transaction took place through a new infrastructure investment vehicle: SNC-Lavalin Infrastructure Partners LP . The initial portfolio held by this vehicle will consist of SNC-Lavalin’s interest in the following five assets: William R . Bennett Bridge in Kelowna, B .C ., Canada Line rail in Vancouver, B .C ., Southeast Stoney Trail road in Calgary, Alta, Restigouche Hospital Centre in Campbellton, N .B . and the Glen site of the McGill University Health Centre in Montréal, Québec . SNC-Lavalin has signed an agreement with a BBGI Canadian subsidiary which will purchase 80% of SNC-Lavalin Infrastructure Partners LP’s interest for CAD 208 million, and an SNC-Lavalin subsidiary will own the remaining 20%. This does not preclude other major infrastructure projects built or managed by SNC being subsequently integrated in the partnership . Innergex Renewable Energy inc. acquires two wind power projects in France On July 5, 2017 Innergex Renewable Energy Inc . (TSX: INE) announced that it had signed an agreement with BayWa r .e . for the purchase of two wind power projects in France, with an aggregate installed capacity of 43 MW . The two wind farms, Plan Fleury (22 MW) and Les Renardières (21 MW), are located in the Champagne-Ardenne region of France . All the electricity produced by these wind farms will be sold under fixed-price power purchase agreements with Electricité de France (EDF) for an initial 15-year term . The projects consist of 18 Vestas wind turbines (with an individual gross capacity of 2 and 3 MW) that will be operated by the wind turbine manufacturer under a 15-year operation and maintenance contract . Subject to customary closing conditions, it is expected that the acquisition will be concluded following completion of the construction projects which are scheduled for commissioning in the third quarter of 2017 . Innergex will have a 69 .55% interest in the wind farms and Desjardins Group Pension Plan will own the remaining 30 .45% . The equity purchase price is approximately $39 .9 million, subject to certain adjustments . With this acquisition, Innergex will own 15 wind farms in France with an aggregate installed capacity of 317 MW Pre-qualification of bidders for Saskatchewan wind power program On July 6, 2017, SaskPower announced that it had pre-qualified eight suppliers who had responded to its RFQ for its 200 MW wind generation program . The selected proponents are: NextEra Canada Development Enerfin Energy Company of Canada BHEC-RES Saskatchewan Kruger Energy Yotin Wind Power EDP Renewables Canada EDF EN Canada TransCanada Energy The proponents have until May 25, 2018 to submit proposals . SaskPower plans to announce the successful proponent(s) in fall 2018, and to begin operations in early 2021 . The utility also plans to award up to two 25-year power purchase agreements . Infrastructure Ontario to restart procurement process for Finch West LRT project After several months of interruption, Infrastructure Ontario (IO) is slated to resume procurement for the Finch West LRT project . Procurement for the $1 billion project stalled in February 2017 due to a vehicle supplier dispute between Metrolinx and Bombardier involving the Eglinton LRT and Finch West LRT projects . Metrolinx maintains that Bombardier is behind in its contractual obligations to deliver vehicles for the two projects, while Bombardier accuses Metrolinx of having repeatedly changed its criteria . In mid-May 2017, the government agency announced that it had approved Alstom as an alternate supplier for the light rail train vehicles for the Eglinton and Finch West projects . Metrolinx stated at that time that the inclusion of Alstom was intended as a safety net should Bombardier fail to fulfil its contractual obligations . The consortiums shortlisted for the Finch West LRT project are: SNC-Lavalin, Graham Bechtel, EllisDon AECON, Grupo ACS, Dufferin Monique Leroux joins Fiera Capital Fiera Capital, the Montréal-based firm that manages approximately $123 billion in assets, recently hired former Mouvement Desjardins president, Monique Leroux, as Vice-Chairman and Strategic Adviser . Ms . Leroux was President and CEO of Mouvement Desjardins from 2008 to 2016 . She has since been appointed Chair of the Board of Directors of Investissement Québec, a Crown corporation . Monique Leroux sits on the boards of Bell (BCE), Couche-Tard (ATD), Michelin (ML-France) and S&P Global in the US . Ms . Leroux is also President of the International Cooperative Alliance and Chair of the Board of Governors of the Society for the Celebrations of Montréal’s 375th anniversary . Government of Canada commits $1.28 billion to REM project The Government of Canada has decided to follow through on its commitment to invest $1 .28 billion in the Réseau électrique métropolitain (REM) . The project has a $2 .67 billion commitment from Caisse de dépôt et placement du Québec (“CDPQ”) and $1 .28 billion from the Government of Québec . CDPQ will hold a 51% equity stake in the project, while each government entity will own a 24 .5% interest . The question of whether and in what form the future Canada Infrastructure Bank will decide to invest in the LRT project remains unresolved . The light rail network will have 27 stations in a 67-km line along Highway 40 to the West Island . It will link downtown Montréal to the West Island, South Shore, North Shore, and Pierre-Elliott-Trudeau International Airport . Call for funding for Henvey Inlet wind power project The promoters of the Henvey Inlet wind project in Ontario have solicited potential lenders for funding for roughly $750 - $800 million . Henvey Inlet is a 300 MW $1 billion project to be developed jointly by Pattern Development (50%) and Nigig Power Corporation (50%) . The project is on the Henvey Inlet First Nation reserve and involves a 20-year power purchase agreement with Independent Electricity System Operator (“IESO”) . According to Pattern Energy Group’s June 11, 2017 investor presentation, the proponents hope to begin construction this year and begin operating in 2018 . PSP Investments posts strong performance for 2017 in infrastructure sector For fiscal year ending March 31, 2017, the Infrastructure Investment group of PSP Investments posted a one-year net rate of return of 14 .4% and a five-year annualized return of 11 .7%, according to the annual report released on June 14, 2017 . PSP’s performance exceeded the previous year’s one-year net rate of return for the same asset class of 12 .7% and a five-year annualized return of 9 .6% . PSP attributes the strong performance to investments in Europe and in emerging markets, particularly in the transportation, communications, and renewable energy sectors . The two largest investments for fiscal 2017 were the $1 .2 billion acquisition of the ENGIE’s 1 .4 GW hydroelectric asset portfolio in New England, and the acquisition of an additional interest in Cubic Sustainable Investments, a renewable energy investment firm, and held jointly with Banco Santander and Ontario Teachers’ . Infrastructure investments represent approximately 8 .2% of PSP’s total net assets for fiscal 2017, with the objective of allocating 10% of its assets to infrastructure in the long term . The fair value of these assets increased from $9 .5 billion in the previous year to $13 .2 billion in fiscal 2017 . SNC-Lavalin sells Montréal headquarters for $170 million On June 22, 2017, SNC-Lavalin announced that it had sold its Montréal headquarters and an adjacent vacant lot for approximately $170 million . Under the sale-leaseback agreement signed with GAL Realty Advisors, the 21-storey building is leased back to SNC for 20 years . SNC-Lavalin (TSX:SNC) had stated in November that it was seeking to reduce its costs by selling its headquarters and by grouping its activities in fewer buildings . Brookfield Infrastructure Debt Fund I raises US$284 million Brookfield raised US$283 .5 million for its infrastructure debt fund in June 2017, according to documents filed with the SEC . The fund, named Brookfield Infrastructure Debt Fund I, has a target size of US$1 billion and a focus on mezzanine debt investments globally . One of the investors is South Korea’s Military Mutual Aid Association (MMAA), which made a US$40 million commitment in August 2016 . Canada unveils $2.1 billion transportation budget On July 4, 2017, the Government of Canada announced a $2 .1 billion budget for transportation projects, and has invited proponents to submit preliminary expressions of interest for funding . The new Trade and Transportation Corridors Initiative (“TTCI”) mainly comprises the National Trade Corridors Fund (“NTCF”), which will provide $2 billion over 11 years to strengthen the efficiency and reliability of Canada’s trade infrastructure, including ports, waterways, airports, roads, bridges, border crossings, rail networks and their interconnectivity . The project budget is intended for provincial, territorial and municipal governments, indigenous groups, not-for-profit and for-profit private sector organizations, federal Crown corporations, Canadian port authorities, and national airport system airport authorities . PPP projects are eligible for NTCF funding and can request an amount that covers up to 33% of total eligible expenditures . Applicants can request up to $500 million in funding per project . Eligible projects must have commenced operations by the end of 2028 . The government will give preference to projects that help strengthen efficiency and resilience of transportation assets considered critical for Canada’s global trade and commerce . Up to $400 million dollars of the NTCF has been earmarked for allocation to Canada’s Northern Territories . Under the TTCI, the government has set aside $100 million for investment in new transportation technologies and the launch of a new trade and transportation information system . The TTCI initiative follows the Government of Canada’s November 2016 announcement that it will invest $10 .1 billion over the next 11 years in trade and transportation projects . Of that investment, $5 billion will be provided through the Canada Infrastructure Bank . Janice Fukakusa joins Canada Infrastructure Bank Former Royal Bank CFO Janice Fukakusa, who had retired in January 2017, has been appointed as the first chair of Canada Infrastructure Bank (“CIB”) . The appointment, announced on July 6, 2017 by Canadian minister of Infrastructure, Amarjeet Sohi, comes at a time when the CIB remains committed to starting operations by the end of 2017 . According to the announcement, Ms . Fukakusa will play a key role in selecting the CIB’s board of directors and its CEO . She will also take part in establishing the organization’s governance and oversight . The CIB is slated to invest $35 billion in federal funds in new infrastructure projects in the coming years . Details on what types of financing will be provided by the Bank, and how it will interact with existing entities such as P3 Canada, remain to be determined A new PPP hospital project for Québec? Québec’s Société québécoise des infrastructures intends to issue an RFP for the design, construction and financing of an expansion project for the Hôpital Fleurimont, which is affiliated with the public healthcare network of the Centre hospitalier universitaire de Sherbrooke (CHUS) . The project will involve the construction of a mother and child centre and a new emergency room . The project was initially estimated at approximately $100 million, but the latest press estimates put the cost at $198 million . The Société québécoise des infrastructures intends to identify three teams for the design, build and finance project . The project schedule should be as follows: January to September 2018: call for tenders to carry out a turnkey project October 2018 to December 2020: construction December 2020 to spring 2021: relocation of healthcare teams Spring 2021: user access This would be the first PPP project launched by the Québec government since 2015 . Over 30 firms respond to request for pre-qualification for Southwest Ontario Broadband project The Western Ontario Warden’s Caucus (WOWC) received 31 responses to its request for pre-qualification for the Southwest Ontario Broadband project . The project would expand access to broadband by delivering fiber optic coverage to more than 300 communities with a total population of 3 .5 million . The Southwest Ontario Broadband project is part of the Southwestern Integrated Fibre Technology (SWIFT) project, which will extend into counties and municipalities in southwestern Ontario . The value of the project would be approximately $281 million . The authority intends to issue the RFP to approximately 25 of the respondents between the fourth quarter of 2017 and the first quarter of 2018 . bcIMC posts 9.6% annualized return on infrastructure British Columbia Investment Management Corporation’s (“bcIMC”) infrastructure investments yielded a return of 9 .6%, well above its 7% benchmark, for fiscal year ending March 31, 2017, according to its 2016-2017 corporate annual report . bcIMC is a private investment manager founded in 1999 and headquartered in Victoria, British Columbia, which mainly provides investment management services to the province’s public sector pension plans, to government bodies and government-administered trust funds . bcIMC’s infrastructure investments, valued at $11 billion as at March 31, 2017, make up 8 .1% of the company’s total portfolio . bcIMC has entered into financial commitments with 13 infrastructure funds and has made direct investments in 15 infrastructure assets, according to InfraAmericas . As at March 31, 2017 the fund’s total net assets were valued at $135 .5 billion, making it the fifth largest institutional investor in Canada . The fund’s total portfolio reported a 12 .4% annual return for fiscal year 2017 . Petronas cancels Pacific Northwest LNG project Petronas and its partners have decided to cancel the $36 billion Pacific Northwest LNG project in Lelu Island, British Columbia . In a statement released July 25, 2017, the corporation explained that current oil and gas market conditions had created an “extremely challenging environment” that was not propitious for project continuation . The project was one of the earliest export liquefaction terminals to be proposed on the west coast of North America . The project had received approval from the federal government last year . Pacific Northwest LNG was a joint venture involving Petronas (62%), Sinopec (15%), Japan Petroleum Exploration (10%), Indian Oil Corporation (10%) and Petroleum Brunei (3%) . The joint venture began its development activity in 2012 and to date had spent around $400 million on the project . Cascades sells stake in Boralex to CDPQ On July 28, 2017, in search of funds to finance its main activities, Cascades sold its entire interest in Boralex to the Caisse de dépôt et placement du Québec (“CDPQ”) for $287 .5 million . A majority shareholder of Boralex since 1995, Cascades owned only 17 .3% of the company, but felt that this capital would be better used to finance the development of the paper mill’s activities . With this transaction, CDPQ solidifies its presence in the green energy sector . Boralex and CDPQ have also agreed to explore partnership opportunities for investing in projects to be developed by Boralex . Boralex is an independent power producer dedicated to the development and operation of renewable energy production sites . In 2016, the company operated an asset base with an aggregate installed capacity of approximately 1,400 MW in Canada, France and the northeastern US . Hydro-Québec bids in Massachusetts RFP On July 27, 2017, Hydro-Québec submitted a proposal with a view to obtaining a 20-year power supply contract with Massachusetts . According to the corporation, its proposal would be the largest bid in Hydro-Québec’s history . The bid is pursuant to an RFP launched by the State of Massachusetts on March 31, 2017 in response to a state law enacted in 2016 on the diversity of energy sources . That law obliges energy utilities to competitively solicit proposals for 9 .45 TWh of renewable energy and up to 1,600 MW of maritime wind energy . Massachusetts’ interest in having its energy supplied from outside the country is explained by its desire to reduce its energy costs, secure reliability of energy supplies and equip it to achieve its greenhouse gas reduction targets, while planning to abandon nuclear and diesel power plants in the coming years . In its proposal, Hydro-Québec undertakes to provide at least 8 .3 of the 9 .45 TWh of electricity that Massachusetts utilities wish to purchase annually . Hydro-Québec presented three different supply scenarios . Each scenario corresponds to a transmission line that it would have to install if it is awarded the contract . Northern Pass Transmission New England Clean Power Link New England Clean Energy Connect Each project involves different interconnection lines involving Vermont, Maine or New Hampshire . Each of the three transmission line projects has two variants for energy supply: 100% hydro power or a combination of hydro and wind power . Should Massachusetts choose the combined hydro-wind power option, Hydro-Québec has formulated a partnership with Énergir (formerly Gaz Métro) and Boralex that would add a fourth phase of 300 MW to the Seigneurie de Beaupré wind farms, known as the “SBx” project, as part of an investment of up to $700 million . Massachusetts, which wanted to stimulate competition with its call for proposals, has achieved its goal: no fewer than 18 players indicated their interest in bidding . Massachusetts is expected to announce its decision in early 2018 . For Hydro-Québec, an agreement with Massachusetts would be perfectly consistent with its strategy to double revenues by 2030 . In 2016, of the 32 .6 TWh exported annually by Hydro-Québec, 24 .1 were destined for the US market . Last year, exports accounted for $803 million of the $2 .86 trillion in net income generated by the Crown corporation . New England accounts for half its export market, compared to 25% for New York State .

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    TABLE OF CONTENTS Latest developments in the Canadian infrastructure market Ontario introduces a balanced budget which includes $30 billion in infrastructure investments Nova Scotia introduces its second balanced budget and increases investments in highways New LNG production capacity in Montréal resulting from a strategic partnership between Gaz Métro and Investissement Québec SNC-Lavalin purchases British engineering firm WS Atkins The Canadian parliament introduces a bill authorizing the establishment of the Canada Infrastructure Bank The Canadian government launches the process for recruiting the management team of the Canada Infrastructure Bank . Rumours concerning the sale of the Toronto Pearson airport intensify Waterloo launches a call for tenders for a PPP transit centre Infrastructure Ontario issues request for qualification for the Rutherford Station project The AMT grants a contract to Chinese firm CRRC . The U.S. transport Secretary, Elaine Chao, unveils the Trump Administration’s infrastructure plan Call for financial proposals for the Québec Nicolas-Riou community wind project Pattern and Samsung close the financing of the North Kent Wind project Metrolinx adds Alstom as supplier for the light-rail project in the Toronto area Brookfield to launch a new infrastructure mega fund in 2018 Concert Infrastructure Fund closes its fourth round of funding Ontario closes its second offering of Hydro One shares. Blackstone lance un fonds d’infrastructures de 40 G$ US Offshore wind projects to launch soon in Canada? Governments of Canada and Nunavut announce funding for 9 community infrastructure projects benefitting 19 communities . Innergex completes the acquisition of three wind projects in France The privatization of Canadian airports: Why, how and what is at stake? Canada Infrastructure Bank Act: highlights   Latest developments in the Canadian infrastructure market Ontario introduces a balanced budget which includes $30 billion in infrastructure investments The government of Ontario introduced a balanced budget for 2017, which increases by $30 billion the investments pertaining to the 13-year infrastructure plan. The most significant investments relate to transportation projects across the province, with a focus on public transport. Major infrastructure investments totalling $156 billion over the next decade include: $56 billion for public transport; $26 billion for highways; in excess of $20 billion for hospitals, including $9 billion for the construction of new major hospital projects; nearly $16 billion in capital grants for school boards. The new public transit systems previously announced will be built using Ontario’s Alternative Financing and Procurement (“AFP”) approach, including: Eglinton Crosstown LRT, Finch West LRT, Hamilton LRT, Hurontario LRT (Mississauga), ION Stage 1 LRT (Waterloo), Confederation Line (Ottawa), Ottawa LRT Phase 2, York Viva (vivaNext), and several GO stations. Furthermore, design and planning work is currently underway for operating a new high-speed rail system running from Toronto to Windsor. Lastly, some road projects that use the AFP approach are at various stages of completion. They include Highway 401 expansion to Regional Road 25, Highway 407 East Phase 2 (under construction); and Highway 427 expansion (under construction). Nova Scotia introduces its second balanced budget and increases investments in highways The government of Nova Scotia introduced its second consecutive balanced budget which includes a $136.2 million surplus. The 2017 budget includes a supplementary $390 million investment over the next seven years to twin three highway segments in the province. The highway projects are as follows: twinning the 38 km section of Highway 104 from Sutherlands River to Antigonish; twinning the 22 km section of Highway 103 from Tantallon to Hubbards; twinning the 9.5 km section of Highway 101 from Three Mile Plains to Falmouth, including the Windsor causeway; construction of the divided Burnside Expressway. No new toll will be implemented to finance these projects. The tolls on Highway 104 (Cobequid Pass) will be removed. The budget also reaffirmed the undertaking to redevelop the QEII Health Sciences Centre, possibly on a public-private partnership (“PPP”). basis. Nova Scotia has two other operational PPP projects: the Central Nova Scotia Correctional Facility and the East Coast Forensic Hospital. New LNG production capacity in Montréal resulting from a strategic partnership between Gaz Métro and Investissement Québec On April 24, 2017, Sophie Brochu, President and CEO of Gaz Métro, and Pierre Gabriel Côté, President and CEO of Investissement Québec announced that the new liquefied natural gas (“LNG”) production capacity of Gaz Métro GNL, a subsidiary of Gaz Métro and Investissement Québec, is now available at the Gaz Métro liquefaction plant located in Montréal.. Announced in September 2014, the project aimed to equip the plant with new loading facilities and a new liquefaction train that would triple the total annual LNG production and deliveries. The Gaz Métro liquefaction plant — the only one of its kind in Eastern Canada — now boasts a total annual production capacity of over nine billion cubic feet of LNG. It is thus able to meet the growing demand from a variety of markets for LNG, a competitive and cleaner energy source than petroleum-based products The provision of LNG constitutes an advantage for all the companies that do not benefit from proximity to a pipeline network. It is worth noting that Gaz Métro LNG already supplies Stornoway’s Renard mine, the heavy trucks of several transportation companies such as Groupe Robert, Transport Jacques Auger and Transport YN.-Gonthier, and the ferry F.-A.-Gauthier operated by Société des traversiers du Québec. For its part, Groupe Desgagnés has also ordered four ships that can run on LNG. Lastly, ArcelorMittal has announced an LNG pilot project at its Port-Cartier pelletizing plant. The LNG comes from Gaz Métro’s liquefaction plant in the East of Montréal, in operation for 45 years. It is stored in the plant’s cryogenic tanks. The plant has two loading docks for filling tanker trucks, which supply refuelling stations or service customers directly. LNG can then be distributed to customers within a radius of over 1,000 km from the liquefaction, storage and regasification (LSR) plant or quickly vaporized and injected in the gas network to meet balancing needs during winter peaks. SNC-Lavalin purchases British engineering firm WS Atkins SNC-Lavalin completed the acquisition of British engineering firm WS Atkins for a consideration of $3.6 billion, $1.9 billion of which was financed by the Caisse de dépôt et placement du Québec (“CDPQ”). With this acquisition, the Québec engineering firm hopes to generate annual revenues of $12.1 billion. Founded in 1938, WS Atkins is a consulting firm specializing in design, engineering and project management which generated revenues of £1.86 billion in 2016. Based in the United Kingdom, the firm has 18,000 employees and maintains offices in Europe, North America, the Middle East and Asia. It is the largest engineering firm of the United Kingdom, the 4th largest specialized in engineering and architecture in Europe and one of the 10 firms most present in the Middle East and the U.S. Its clients include companies such as Airbus, BP, EDF, Rolls Royce and Hitachi as well as many governments, including England, the United States, Denmark and even China (China Harbourg Engineering). SNC-Lavalin completed the purchase of the entire share capital of the company for a cash consideration of $3.6 billion, that is, £20.80 per share, which gives WS Atkins an enterprise value of $4.2 billion. The $1.9 billion financing from CDPQ includes a private placement of $400 million in equity and a $1.5 billion loan secured by the shares and proceeds of tolls of SNC-Lavalin from Highway 407 in Toronto. The remainder of the financing will be obtained through $1.2 billion in warrants, a draw in the amount of £350 billion on its existing credit facility and a £350,000 unsecured term loan from a North American bank syndicate. SNC-Lavalin will henceforth have 53,000 employees worldwide (compared to its current workforce of 35,000 employees), which will make it one of the largest engineering firms in the world. The Québec multinational wishes to expand into Europe, where its market share has reached a ceiling of 5.3%. The Canadian parliament introduces a bill authorizing the establishment of the Canada Infrastructure Bank On April 11, 2017, the House of Commons proceeded with the first reading of Bill C-44 pertaining to the Canada Infrastructure Bank (“CIB”). The Bill establishes the Infrastructure Bank of Canada as a Crown corporation which will invest and seek to attract private sector investments in revenue-generating infrastructure projects in Canada. All bills must undergo three readings in the House. The House debates the bill on its second reading and votes on the third reading. If the House passes the bill, it is then sent to the Senate and undergoes a similar protocol. In order to come into force, the bill must be approved by both the House and the Senate. The Minister of Finance, Bill Morneau, declared in March that the CIB would become operational by late 2017. The Canadian government launches the process for recruiting the management team of the Canada Infrastructure Bank The Canadian government launched the process for recruiting the management team of the Canada Infrastructure Bank (“CIB”). In a press release dated May 8, 2017, the Canadian government mentioned that it would first choose a chairman of the board. The board of directors and CEO will be chosen later. The Government expects the CIB to be fully operational by late 2017. The Canada Infrastructure Bank will invest up to $35 billion in federal money in infrastructure projects as part of the Government’s 12-year, $180 billion investment plan. According to the Government’s press release, the head office of the CIB will be located in Toronto and the new institution should have Crown corporation status. The Bank will collaborate with provincial, territorial, municipal, aboriginal and private investment partners to encourage pension funds and other institutional investors to invest in revenue generating infrastructure projects. The Bill establishing the CIB is now at second reading in the House of Commons. Rumours concerning the sale of the Toronto Pearson airport intensify InfraAmericas reports some rumours – unconfirmed by Transport Canada – according to which the assets of the Toronto Pearson International Airport are up for sale. However, Canadian pension funds acquiring a minority interest would seem to be a more likely scenario It is to be noted that following the report of the federal Minister of Finance’s Advisory Council on Economic Growth, published in October 2016, which proposed the privatization of airports in the cities of Toronto, Vancouver, Montréal, Calgary, Edmonton, Ottawa, Winnipeg and Halifax, the federal government engaged Credit Suisse in 2016 to study the cost-benefit of privatizing Canada’s eight largest airports. The federal government has been analysing this possibility for over a year but has yet to announce its position on the issue. Waterloo launches a call for tenders for a PPP transit centre On April 28, the Region of Waterloo launched a call for tenders for establishing a new multi-modal transport hub in downtown Kitchener, in Ontario. The King Victoria Transit Hub infrastructure should be divided into two lots, the first one including a transit hall, 100 parking spaces, a public area and a transit area and the second one, GO and Via rail platforms located in the Metrolinx rail corridor Interested parties are required to submit their qualifications for the project no later than June 30, 2017. The municipality plans to announce its choice of up to three teams on August 31, 2017 Infrastructure Ontario issues request for qualification for the Rutherford Station project On May 2, 2017, Infrastructure Ontario (“IO”) issued a request for Qualification (“RFQ”) for selecting private sector promoters to design, build and finance the Rutherford Station project, which includes the expansion of the rail corridor and parking infrastructure at the facility. The project is part of the IO and Metrolinx Regional Express Rail joint project, which aims to improve transit infrastructure throughout the Greater Toronto and Hamilton areas. Other projects recently launched under this program include the Cooksville Station, Union Station and the Stouffville Station. The RFQ should be issued this fall. The RFQ is IO’s first PPP operation this year. According to the 2016 fall report of the Crown corporation, approximately nine PPPs should be entered into during calendar year 2017. The AMT grants a contract to Chinese firm CRRC The Agence métropolitaine de transport (“AMT”) opted to have Chinese company CRRC build 24 commuter train vehicles instead of Bombardier Transport. The Chinese state corporation has been making a breakthrough in North America since 2014, having won rolling stock contracts in Boston, Chicago and Philadelphia, for which Bombardier was also bidding. However, the AMT contract is CRRC’s first major contract in Canada. According to Les Affaires, CRRC proposed to build for $69 million the 24 two-story vehicles, for which the AMT had budgeted $103 million. CRRC likely benefitted from the decision of the AMT to lower from 25% to 15% the Canadian content requirement in order to attract more bidders. The first commuter train vehicles must be delivered to the AMT in 24 months, that is, in spring 2019. It is to be noted that in 2009, Zhuzhou Electric Locomotive, a subsidiary of CRRC, had wanted to participate in the call for tenders for the cars of the Montréal metro, which had been refused. The contract has finally been granted to a consortium formed by Bombardier and Alstom. The U.S. transport Secretary, Elaine Chao, unveils the Trump Administration’s infrastructure plan During various interventions, particularly in a May 15, 2017 speech at the U.S. Chamber of Commerce and on May 17 in a testimony before the U.S. Senate Committee on Environment and Public Works, the U.S. transport Secretary, Elaine Chao, declared that the Trump Administration intends to release its infrastructure plan in the next several weeks. Ms. Chao declared that the plan would concentrate on “principles” rather than on specific projects. The plan is expected to include $200 billion in direct federal funding, which would allow the raising of US$1 trillion (thousand billion) in investments in infrastructure over the next decade. She did not explain the process through which states could obtain federal funds, but noted that the Administration sought to associate public and private financings for future projects. The Secretary said that 16 different departments, including the Treasury, the Department of Labor and the Department of Defense are looking beyond the transportation sector to explore opportunities for private investment in energy, water and broadband Internet and even veterans hospitals. Although recognizing that there is no “one size fits all” solution to meet the infrastructure needs of the U.S., she declared that the authorization process required to be reformed for the Administration to carry out its plan. She particularly noted that the Federal Highway Administration established a working group whose mission is to explore means to streamline the process for approving infrastructure projects. “Private-public partnerships will be one of numerous financing options that the Administration would consider” said Elaine Chao. According to Ms. Chao, “It is not the location of the project that’s determinative in a VFM (Value for money) but the availability of economies of scale and opportunities for private sector innovation and efficiency”. In other words, she states that the issue is not whether projects must be financed by tolls but rather whether the potential for financial partnership between the federal government, the states, the local communities and the private sector would provide the taxpayers with better value than the conventional way of carrying out projects. Call for financial proposals for the Québec Nicolas-Riou community wind project EDF Énergies nouvelles (“EDF EN”) launched a call for financial proposals aimed at commercial banks and institutional investors for financing the Nicolas-Riou wind project in Québec. It must be noted that the Nicolas-Riou wind project is a community project carried out through a partnership between EDF EN Canada, the Bas-Saint-Laurent RCMs, the Maliseet of Viger First Nation and the Régie intermunicipale de l’énergie – Gaspésie-Îles-de-la-Madeleine. EDF EN Canada holds 50% of the project. Located in the Bas-Saint-Laurent region, on private and public lands, the Nicolas-Riou project will be comprised of 65 Vestas wind turbine generators for a total installed capacity of 224.25 MW. It will benefit from a 25-year power purchase agreement with Hydro-Québec. The approximate cost of the project is estimated to be $500 million. Nicolas-Riou is one of the three wind projects granted by Hydro-Québec as part of the December 18, 2013 450 MW community call for tenders. It is the eighth wind project obtained by EDF EN in Québec following the 2008, 2010 and 2013 calls for tenders. It is also the fourth project held by EDF EN in partnership with RCMs. The project is currently in the construction phase – entirely selffinanced by the sponsors – and the beginning of commercial operations is scheduled for December 2017. The financing sought will therefore only apply to the operations phase. The form of the financing sought is not specified as of yet: commercial bank debt, institutional long-term loan or hybrid structure, all options are on the table. Pattern and Samsung close the financing of the North Kent Wind project Pattern Development and Samsung closed on the $300 million financing for the 100 MW North Kent Wind project in Ontario in May 2017.  The syndicate of lenders include BMO, CIBC, KDB, KfW, the National Bank of Canada and Sumitomo Mitsui. According to the information published by InfraAmericas, the financing is of the construction plus 12 years type and bears interest at a rate of CDOR (Canadian Dollar Offered Rate) plus 162.5 base points. The project is currently in the construction phase, and operations should begin during the first quarter of 2018. North Kent was one of the renewable projects which Samsung carries out with the government of Ontario under the Green Energy Investment Agreement (“GEIA”). Metrolinx adds Alstom as a supplier for the light-rail project in the Toronto area In a press release dated May 12, 2017, Metrolinx indicated that it had determined that Alstom has the required competence for acting as an alternate supplier to provide light rail cars for the Eglinton LRT and Finch West LRT. Alstom has been contracted to supply 61 light rail vehicles at a price of approximately $529 million. It must be noted that Metrolinx and Bombardier are going through litigation respecting the delivery schedule of the vehicles. The dispute resolution process could take from 8 to 12 months and Metrolinx wanted to have an alternate solution in the event that Bombardier would be unable to fulfill its contractual obligations Eglinton LRT is a $5.3 billion project that should be commissioned in 2021. In 2010, Metrolinx had entered into a contract with Bombardier for the delivery of 182 vehicles, including 76 for Eglinton LRT and 23 for Finch West LRT. Alstom will build 17 vehicles for the Finch West LRT project and, if necessary, 44 for Eglinton LRT. If Alstom’s vehicles are not necessary for Eglinton LRT, they will be reassigned to the Hurontario LRT project. Brookfield to launch a new infrastructure mega-fund in 2018 According to available information, Brookfield Asset Management plans to launch a new infrastructure fund in 2018, which may exceed $20 billion according to some analysts. It must be noted that in July 2016, Brookfield closed the Brookfield Infrastructure Fund III (“BIF III”) at US$14 billion with commitments from more than 120 investors. BIP III would be currently over 45% deployed. The increasing size of infrastructure funds over the last few years reflects the growing interest in infrastructure assets worldwide. More investment opportunities may arise as the U.S. market is assessing how private capital can play a role in improving infrastructure assets such as airports, toll roads and bridges. The largest infrastructure fund raised to this day remains Global Infrastructure Partners III, which closed at US$15.8 billion in January 2017. Concert Infrastructure Fund closes its fourth round of funding On May 15, 2017, Vancouver-based Concert Infrastructure Fund announced the completion of a fourth round of funding for an amount of $150 million, entirely raised from existing shareholders. This new financing raises the total capital of the fund to $505 million. It must be noted that Concert Infrastructure Fund was launched in 2010 and mainly focuses on direct, long-term investments in Canadian infrastructure assets, with an emphasis on social infrastructure and public-private partnerships. The unitholders of the Fund include ten union pension funds. The Fund holds portfolio investments with a total value of $2.2 billion. Ontario closes its second offering of Hydro One shares According to an announcement dated May 17, Ontario closed a second offering of Hydro One shares and raised $2.79 billion. The province sold 120 million common shares at a price of $23.25 per share. Ontario now owns 49.4% of the common shares issued and outstanding of Hydro One. RBC Capital Markets and CIBC Capital Markets were the lead underwriters in the context of this transaction. The province expects to raise a total of approximately $9 billion by progressively selling up to 60% of Hydro One. The provincial government intends to use $4 billion from the proceeds to finance infrastructure projects through a fund named Trillium Trust. The balance of the proceeds, that is, $5 billion, would be used to repay the existing debt of Hydro One. It is to be noted that Ontario made its first sale of 12.1% of its shares of Hydro One on the public market in April 2016. Blackstone launches a US$40 billion infrastructure fund The Blackstone investment bank intends to take advantage of the Trump Administration’s infrastructure plan and will invest US$20 billion in a fund focused on infrastructure with the Public Investment Fund of Saudi Arabia (“PIF”). With a focus on the U.S. market, Blackstone and PIF wish to build a US$100 billion portfolio in equity and debt investments. Blackstone then intends to increase the capital of the fund by approximately $20 billion by raising this amount from other investors. Offshore wind projects to launch soon in Canada? Copenhagen Infrastructure II and Canadian developer Beothuk Energy have signed a joint venture agreement to carry out wind projects off Canadian coasts. The first project under development is the 180 MW St. George Bay project, located 18 km off the shore of Newfoundland. If the new joint venture succeeds in financing the project, it may become the first offshore wind project in Canada./p> The estimated value of the St. George Bay project during construction is $555 million. According to Beothuk Energy, its pricetag may double to $1.1 billion after commissioning. The sponsors expect to obtain regulatory approvals by the fourth quarter of 2017. A power purchase agreement is expected for 2018. Construction should begin in 2019. The project is expected to use 8 MW Siemens turbines. Other projects under development include Burgeo Banks (1,000 MW), Prince Edward Island (200 MW), New Brunswick (500 MW), St. Ann’s Bay (500 MW) and Yarmouth (1,000 MW). Governments of Canada and Nunavut announce funding for 9 community infrastructure projects benefitting 19 communities The governments of Canada and Nunavut will grant joint funding of over $230 million to nine infrastructure improvement projects across the territory. A total of 19 communities will benefit from these projects for the improvement of solid waste management and water and wastewater systems throughout the territory. Federal funding is provided through the Clean Water and Wastewater Fund (“CWWF”) and the Small Communities Fund (“SCF”). These projects are in addition to the CWWF projects announced in September 2016 as part of the bilateral agreement signed by Canada and Nunavut and the SCF projects announced in February 2016 and February 2017. Innergex completes the acquisition of three wind projects in France On May 24, 2017, Innergex Renewable Energy Inc. (TSX: INE) announced that it had completed the acquisition of three wind projects in France with a total aggregate installed capacity of 119.5 MW from Velocita Energy Developments (France) Limited (a subsidiary of Riverstone Holdings LLC). Innergex holds a 69.55% interest in these projects and Desjardins Group Pension Plan holds the remaining 30.45% On May 26, 2017, Innergex further announced that two of these wind farms, namely, Vaite (38.9 MW) and Rougemont-1 (36.1 MW), which were recently acquired, have begun commercial operation. All the power produced by these wind farms will be sold under fixed-price power purchase contracts entered into with Électricité de France (“EDF”) for an initial term of 15 years, which provide that part of the price will be adjusted annually based on inflation-related indexes. Following the commissioning of these two projects, Innergex now holds 12 operating wind farms in France, just over one year after its first acquisition.   The privatization of Canadian airports: Why, how and what is at stake? On October 20, 2016, the Advisory Council on Economic Growth published its report entitled “The path to prosperity - resetting Canada’s growth trajectory” in which it recommends the privatization of the Toronto, Vancouver, Montréal, Calgary, Edmonton, Ottawa, Winnipeg and Halifax airports. This proposal aims to ensure the financing necessary to meet the maintenance, repair and improvement needs of airport infrastructure within the next ten years. Other reports on the same subject, particularly that of the Institute for Governance of Private and Public Organizations (“IGOPP”), published in 2014 and entitled “The Governance of Canadian Airports”, acknowledge that the current status of airports and their capitalization method does not adequately meet their needs. We will therefore first review the objective of such a privatization, then the legal mechanism to achieve it and, lastly, the potential positive and negative impacts of such an operation. The objectives The main objective behind the privatization concept is the transfer, from the public sector to the private sector of the economic burden of maintaining and operating these infrastructures. Furthermore, the amounts raised by the government following the privatization process can be reinvested in other infrastructure projects, a principle commonly called “asset recycling”. In Canada, in a report dated February 7, 2017, the C.D. Howe Institute estimated that the potential proceeds from privatizing Canadian airports would be between $7 and $16 billion. However, privatizing also entails several risks if the anticipated economic results fail to materialize and that the private sector is struggling to maintain and operate these infrastructures. The legal and corporate status of airports in Canada Most airports in Canada, except some small regional airports, are managed by airport authorities (“AA”), which are not-for-profit organizations, without share capital, incorporated pursuant to Part II of the Canada Corporations Act 1.The AA are the tenants of airports lands and buildings pursuant to 60-year emphyteutic leases with a 20-year renewal option. In this way, the Canadian government remains the owner of the airports and the infrastructure thus acquired during the lease by the AAs must be transferred to the Government at the expiry of the lease for a symbolic consideration of one dollar. Pursuant to section 8 of the Airport Transfer (Miscellaneous Matters) Act 2,AAs do not pay income tax but pay rent to the Government and part of the municipal taxes 3. Possible means for privatization There are many degrees of privatization of an airport infrastructure. It may be a full privatization pursuant to which the private sector entirely replaces the public authority. It then owns and manages the infrastructure. Other structures may also be considered, under which the public authority retains ownership of the infrastructure while partnering with the private sector through a management contract, a concession or a joint venture. There are many possibilities. In Canada, airport privatization would first be achieved by the “corporatization” of the AA, namely, the addition of a share capital to increase their available liquidities. This “corporatization” could be made using one of the following methods, namely: (i) the federal government could pass a special law providing for the conversion of AAs into business corporations governed by the Canada Business Corporations Act 4,or (ii) it could pass a special law transferring the assets, debts and employees of the AA to a business corporation created in parallel. These modifications to the structure of AAs would also have consequences on the rights and interests currently held by some creditors pursuant to already incurred financial debts: particularly financial institutions and bond holders. For instance, under the Master Trust Indentures, which are agreements governing the bond financings entered into by some AAs, the holders of the outstanding bonds would be required to consent to this privatization by passing a special resolution. Whether the process involves changes in structure or the transfer of assets, it would modify the corporate status of the AAs and, accordingly, require creditor approval. Furthermore, respecting air regulations, Canada is subject to the international standards governing air transport. These standards are independent from the nature or control of the airports. In fact, whether public or private, airports are required to comply with specific policies under international agreements in respect of landing, overflight and clearance charges. These international requirements impose responsibilities on the Government, even where air infrastructures are privatized. The Government remains responsible even if it no longer owns the airports. This situation results in full or partial privatizations being governed by regulations. These regulations, which are mandatory to ensure compliance of the country with international standards, reduce the management freedom which a private corporation which owns an airport would otherwise have and accordingly, impact its business model and profitability. Economic issues The privatization of an airport requires an indepth economic analysis and a rigorous implementation process to ensure its viability. In this respect, the Chicago Midway Airport provides us with an example of a failed privatization attempt. This airport participated in a privatization pilot program, namely, the Airport Privatization Pilot Program. While the transaction was to become the U.S. standard in matters of privatization, it failed due to the capital markets breakdown following the financial crisis of 2008. The City of Chicago had, at the time, spent in excess of US$13 million in the privatization process and the bidder paid a US$126 million penalty. In 2013, after relaunching the call for tenders, the City of Chicago ended up withdrawing its candidacy for the privatization pilot program due to the lack of interest of the private sector. In an article published in 2006, entitled “Airport Privatization: Ownership Structures and Financial Performance of European Commercial Airports”, Hans-Arthur Vogel describes the challenge of privatization as follows: increase airport performance, while they no longer have the financial benefits associated to the moral backing of the public sector. He concludes that public-private partnership constitutes the structure which is most likely to ensure profitability. This conclusion is in line with the 2014 report of the Canada Minister of Transport entitled “Pathways: Connecting Canada’s Transportation System to the World – Tome 1” which promotes the implementation of protection against insolvency, concurrently with private sector investments. Conclusion The privatization of airports is an idea that has been around for a long time: many European airports operate under various private holding schemes. One example is the privatization of Heathrow airport in 1986 and that of the Frankfurt airport in 1997 or, more recently (October 2016), that of the Nice airport. Nevertheless, it is clear that the situation of Canadian airports is somewhat particular. The presence of an existing operational structure requires a two-step process: discarding the former structure and implementing a new one. Experiences elsewhere in the world in that respect will be very useful to Canadian authorities for making the decisions that are the most appropriate for the Canadian market.   Canada Infrastructure Bank Act : highlights On November 1, 2016, in the wake of the announcement by the Trudeau government of major infrastructure investments, Minister of Finance Bill Morneau announced the establishment of the new Canada Infrastructure Bank (“CIB” or the “Bank”), planned for the following year. In May 2017, the designated minister, namely, the Minister of Infrastructure, Amarjeet Sohi, ultimately selected Toronto for hosting the future Infrastructure Bank, despite the Couillard government’s sustained efforts to bring the Bank to Montréal. In this context, an analysis of Bill C-44 on the Canada Infrastructure Bank Act, at first reading, is relevant to understand the true mission of the Bank, its rules of governance, management and powers. Mission The primary mission of the Bank is to invest in infrastructure, particularly using innovative financial vehicles, but also to seek to attract investment from private sector investors and institutional investors in infrastructure projects in Canada and, more generally, to promote overall economic development and support the viability of the infrastructure sector across Canada. That mission first requires the Bank to receive and structure proposals for projects and negotiate with promoters. Secondly, the Bank must act as an expertise centre for infrastructure projects, which means that it will have to provide opinions to the government on projects, as well as collect and assess data on the state of infrastructure in Canada. Governance The Bank will have a board of directors composed of 8 to 12 directors, appointed by the minister, possibly after consulting the provinces. The directors will be appointed to hold office during pleasure for renewable 4-year terms. However, the chairperson is appointed with no specific term of office. The government may terminate the appointment of a director or the board may do so, subject to the government’s approval. Moreover, under this bill, the designated minister may set up committees partly composed of members of the board of the Bank to advise him or to whom he may delegate particular powers. Management and control of the Bank As most Crown corporations, the Infrastructure Bank must submit annually a corporate plan to the designated minister for the purpose of government approval. In the same manner, it must submit annually to the designated minister an operating budget and a capital budget for the next financial year. This budget must be approved by the Treasury Board, subject to the approval of the Minister of Finance. Powers The Bank has many powers in order to protect the investments it makes. The investments of the Bank may be made under several forms; it can invest in the share capital of a business, lend money to a business, acquire derivatives, acquire and hold a security interest or acquire or dispose of rights or interests in movable or immovable property or entities. However, the Bank cannot provide loan guarantees except where the guarantees are approved by the Minister of Finance. Furthermore, the Minister of Finance is particularly authorized to pay to the Bank amounts of not more than $35 billion in the aggregate, approve loan guarantees and make loans from the Bank’s treasury. Every five years thereafter, the designated minister must cause a review of the provisions and operation of the Canada Infrastructure Bank Act for this report to be then filed with each House of Parliament. The future Infrastructure Bank will therefore have extended powers to match its ambitions: ensuring the sustainability and renewal of infrastructure in Canada while stimulating economic growth.   RSC 1970, c C-32. S.C. 1992, c. 5. An act respecting Aéroports de Montréal, L.Q. 1991, ch. 106. R.S.C. 1985, c. C-44.

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  • Latest developments in the Canadian infrastructure market / The Canada-Europe Free Trade Agreement: impacts on the infrastructure industry / Biomethanization: a fast-growing market in Québec

    TABLE OF CONTENTS Latest developments in the Canadian market Fengate acquires a solar project portfolio from Canadian Solar TerraForm Power increases the financing of its Canadian solar power portfolio SaskPower launches a call for tenders for 200 MW of wind energy Boralex closes the financing of the Port Ryerse wind farm in Ontario CPDQ posts an 11 .1% return on its infrastructure sector in 2016 Infrastructure Ontario appoints a new CEO SNC-Lavalin intends to launch a new infrastructure fund in 2017 InstarAGF raised $549M for its Essential Infrastructure Fund Bombardier and Metrolinx move toward a trial The Government of Québec confirms its support for the CDPQ’s REM project The future Canada Infrastructure Bank: a role which remains to be clarified Teacher’s former CEO to advise the Canada Infrastructure Bank Metrolinx CEO becomes an advisor to the Canada Infrastructure Bank British Columbia Budget 2017 provides for record levels of infrastructure investments Road programming 2017-2018: more than $4 .6B to be invested in the Québec road infrastructure network Alberta Budget 2017 increases infrastructure investments Québec Budget 2017 provides for massive investments in public transportation Newfoundland and Labrador Budget 2017 introduces a five-year infrastructure investment plan Innergex announces the commissioning of the 81 .4 MW Upper Lillooet River hydroelectric power plant Manitoba Budget 2017 steps up its commitment to public-private partnerships The Canada-Europe Free Trade Agreement: Impacts on the infrastructure industry Biomethanization: a fast-growing market in Québec Latest developments in the Canadian market Fengate acquires a solar project portfolio from Canadian Solar On February 1, 2017, Fengate closed the acquisition of three solar projects from Canadian Solar . The three projects, located in Sault Ste . Marie, in Ontario, represent a total capacity of 59 .8 MW . This acquisition constitutes Fengate’s largest power investment to date. The three projects each have a power purchase agreement with the Independent Electricity System Operator (IESO) with an average remaining life of approximately 15 years . These projects will continue to the operated by Canadian Solar under a long-term operating and maintenance agreement with Fengate. TerraForm Power increases the financing of its Canadian solar power portfolio On March 2, 2017, TerraForm Power announced that it increased by $114M the amount of financing dedicated to four Canadian solar projects . The group of projects includes the SunE Perpetual Lindsay (15 .5 MW), Marsh Hill (18 .5 MW), Woodville (12 .6 MW) and Sandringham (13 .1 MW) parks, which all have a 20-year power purchase agreement with IESO. Following this increase, the total financing amount for this group of projects is $234M while the initial loan was $120M . The financing term is seven years. Deutsche Bank and CIBC were joint bookrunners and joint lead arrangers for the transaction . Commonwealth Bank of Australia, Siemens Financial, the Fédération des caisses Desjardins du Québec and the Laurentian Bank are also members of the banking syndicate. SaskPower launches a call for tenders for 200 MW of wind energy On February 7, 2017, SaskPower launched a call for tenders for 200 MW of wind energy intended for independent producers able to develop, finance, build, own and operate wind power projects in Saskatchewan . The projects must be operational by April 30, 2020, in accordance with the terms of the call for tenders. Bids are expected by May 2, 2017 . SaskPower will assess the proposals based on criteria that include the proposed price, community involvement, participation of aboriginal groups, environmental aspects, etc . SaskPower intends to grant up to two 25-year power purchase contracts. Boralex closes the financing of the Port Ryerse wind farm in Ontario On February 22, 2017, Boralex announced the closing of a $33 .4M post- construction financing for the 10 MW Port Ryerse wind farm, located on privately owned lands east of the hamlet of Port Ryerse in Norfolk County, Ontario . This is a long-term financing provided by the DZ Bank AG Deutsche Zentral-Genossenschaftsbank (New York Branch) . The financing consists of a $2 .0M letter of credit facility and a long-term tranche of $31 .4M, the latter to be amortized over a period of 18 years. Note that the project is covered by a 20-year power purchase agreement with Ontario’s Independent Electricity System Operator (IESO) and that Boralex is now the sole holder of the project . CPDQ posts an 11.1% return on its infrastructure sector in 2016 The Caisse de dépôt et placement du Québec (“CDPQ”) posted an 11 .1% return on its infrastructure segment over calendar year 2016, according to an announcement made on February 24, 2017 . This same segment brought a 6 .6% return in 2015. The amount CDPQ invested in the infrastructure sector was $14 .6B in 2016 against $13B in 2015 . The pension fund invested Cdn .$1 .4B in infrastructure projects in 2016, against Cdn .$705M in 2015 . The pension fund holds 25 infrastructure assets worldwide, allocated between Australasia (10), North America (7), Europe (7) and Latin America (1) according to InfraAmericas. Transport and social infrastructures make up half of the infrastructure portfolio of CDPQ . The other half includes energy and health care. Infrastructure Ontario appoints a new CEO Mr. Ehren Cory has been appointed CEO of Infrastructure Ontario (IO) on February 2, 2017 for a 3-year term which should therefore terminate on February 1, 2020. Mr. Cory replaces the agency’s interim president and CEO, Toni Rossi. He joined IO in 2012 and recently held the position of president of the project delivery division . Prior to IO, he was a partner at McKinsey & Company, where he was a leader in the Infrastructure and Public Sector practices. SNC-Lavalin intends to launch a new infrastructure fund in 2017 At the announcement of the 2016 Q4 financial results, SNC-Lavalin’s management confirmed that they intend to finalize a new fund in 2017, which is intended for the Group’s North American operating infrastructure assets. The net book value of SNC’s investment portfolio is $417M . Its average fair market value as of March 1, 2017 was $4B . The assets include light trains, hospitals and highways worldwide . But Highway 407 will not be included in the fund. SNC seeks to entice passive investors in the fund, particularly insurance companies and small pension funds interested in investing in assets without participating in operations . InstarAGF raised $549M for its Essential Infrastructure Fund InstarAGF Essential Infrastructure Fund (“EIF”) obtained $549M in commitments to date (Source: InfraAmericas). The fund, concentrated on North America, has set a $750M target, with a maximum of $850M . The final closing of the fund is expected to occur during the 2017 fiscal year . The term of the fund is 15 years and includes a 2-year extension period . The objective is an internal return rate of between 9% and 14%. The target industries include transport, social infrastructures, renewable energies, power generation and public services . The fund seeks projects offering protection against market shifts, such as longterm contracts, concession contracts or a specific regulatory regime. Approximately 40% of the fund has been invested since January 2015 . The current portfolio of InstarAGF includes the Billy Bishop airport terminal, two wind projects totalling 30 MW in British Columbia and the Steel Reef Mainstream company, based in Calgary. Bombardier and Metrolinx move toward a trial The date of the trial of Bombardier and Metrolinx concerning the supply of light rail vehicles for the Eglinton and Finch West LRT projects should be known soon, at the conclusion of the hearings before the Superior Court of Ontario. Metrolinx blames Bombardier for the delays in delivering the 182 vehicles under the contract . For its part, Bombardier maintains that the delays are due to Metrolinx repeatedly modifying its requirements . The dispute already resulted in the postponement of the deadline for filing proposals for the $1B Finch West LRT project. The three preselected teams in the Finch West LRT project have been invited to include the supply of vehicles in their proposals, which paves the way to an alternate solution to that of Bombardier. If the supply and delivery model of the Finch West LRT project may be still modified, such is no longer the case for the Eglinton LRT contract, as the financial closing of the $5B project occurred in July 2015. The Government of Québec confirms its support for the CDPQ’s REM project According to a press release published on March 28, 2017 by the Caisse de dépôt et placement du Québec (“CDPQ”), the Government of Québec intends to invest $1 .28B in the Réseau électrique métropolitain (“REM”) project in Montréal. For its part, the CDPQ should invest $2 .67B in the project, in parallel with a $2 .28B contribution from the federal government, in respect of which discussions are still ongoing. The CDPQ’s net interest in the project should eventually be 51%, while the provincial and federal governments will each hold a 24 .5% interest. The CDPQ anticipates a return rate which should be between 8% and 9% for the project, which is consistent with the general return objective of the CDPQ, which is 6%. The federal and provincial governments will receive dividends when the 8% return rate for the project is reached . The dividends will then be paid to the minority shareholders until they reach their minimum 3 .7% target return rate . The 3 .7% target rate corresponds to the average borrowing cost of the entire debt of the Government of Québec . Once the minority shareholders reach the target return rate, the dividends will be paid in accordance with the ownership percentages. The project, which is considered to be a public-public partnership, involves the acquisition of a light 67 km railway system including 24 stations and linking downtown Montréal with the South Shore, the West Island, the North Shore and the Pierre Elliott Trudeau International Airport . The estimated cost of the REM is between $0 .69 and $0 .72 per passenger/km. The future Canada Infrastructure Bank: a role which remains to be clarified The Canadian Government recently shed some light on the creation of the Canada Infrastructure Bank (“CIB”), but many stakeholders still wonder about the functioning of the future institution and some have concerns about the consequences on the market. On March 22, 2017 in Ottawa, at the Parliament session on the budget, the Minister of Finance, Bill Morneau, stated that the CIB would commence operations by the end of 2017. The budget also referred to the status of key public transportation project which would be in the sights of the future bank, such as phase 2 of the Ottawa LRT, the Calgary Green LRT, Ontario’s RER program and Vancouver’s Millennium Line Broadway Extension, without, however, promising financing from the CIB. The launch of the process for appointing the CEO and chairman of the board of the bank has been announced. Some stakeholders in the industry wonder about the fact that the CIB could adopt a model similar to that of the CDPQ with Montréal’s Réseau électrique métropolitain (“REM”) project, which is called a “public-public” project. Moreover, many note the fact that there already is an increase of private financing and not enough investment opportunities in the infrastructure market, which calls into question the usefulness of a new player in this area. However, some stakeholders talk about major projects which would bring about broader economic benefits to the country and could justify subsidies from the bank in the form of equity investments or nonrefundable contributions. The government reiterated that it does not intend for the CIB to compete with existing provincial agencies such as IO, Saskbuilds, Partnerships BC or the Société québécoise des infrastructures. Teacher’s former CEO to advise the Canada Infrastructure Bank Jim Leech, former CEO of the Ontario Teachers’ Pension Plan (“OTPP”) will be a special advisor for the launch of the CIB. He will be responsible for setting up an implementation team, negotiating agreements with stakeholders, providing strategic advice on investments and, more directly, for specific projects across Canada. The CIB anticipates to deliver projects worth in excess of $200B over 10 years while minimizing the use of public money . The capital of the bank, that is, $35B over 10 years, would add up to the private financing provided by institutional investors in order to propose equity financings or subordinated loans in chosen projects. The federal government already courted some of the largest public pension funds of Canada, as well as foreign investors . The government wishes to attract investments of as much as four or five dollars in private capital for every tax dollar invested in new projects. In his economic statement in the fall of 2016, the government maintained that increased participation of institutional capital in infrastructures constitutes a priority. Jim Leech became president and CEO of the OTPP after having worked within the organization for six years . He retired from the fund on December 31, 2013. Metrolinx CEO becomes an advisor to the Canada Infrastructure Bank Bruce McCuaig, the CEO of Metrolinx, accepted a new position with the federal government, at the Privy Council Office, to support the launch of the CIB. Mr . McCuaig will be an executive advisor and will support the CIB special advisor Jim Leech – who was also recently appointed – as part of the process of launching the bank. Bruce McCuaig joined Metrolinx in 2010 . Under his leadership, the agency developed projects worth $8B financed by the private sector, notably the Eglinton Crosstown LRT, the new East Rail maintenance facility, Finch West LRT, Hurontario LRT and Hamilton LRT. Mr . McCuaig will be temporarily replaced by Mr . John Jensen, currently Chief Capital Officer with Metrolinx, pending the recruitment of a permanent successor. British Columbia Budget 2017 provides for record levels of infrastructure investments The 2017-2018 budget of British Columbia provides for $24 .5B investments over the next three fiscal years, that is a $1 .7B increase for the current fiscal year . This is the fifth balanced budget tabled by the liberal government, which also reaffirmed its commitment to public-private partnerships. This budget in investments and PPP projects include the following: $2.7B for hospital projects; $2.6B for post-secondary establishment infrastructure; $2B for the maintenance, replacement, renovation or expansion of educational institutions for students from kindergarten to 12th grade; $1.4B by the departments for the construction of infrastructures such as courthouses, correctional centres, office buildings and information systems; $7B for investments in transportation, including the project for the replacement of the George Massey tunnel (ongoing call for tenders). Road programming 2017-2018: more than $4.6B to be invested in the Québec road infrastructure network The Government of Québec will invest in excess of $4 .6B in the Québec road network between 2017 and 2019 in order to undertake, continue or complete 2,062 road construction projects throughout Québec and create and maintain more than 31,000 jobs. On March 3, 2017, in Montréal, the Minister of Transport, Sustainable Mobility and Transport Electrification, Mr . Laurent Lessard, announced the road programming for the next two years with the Minister responsible for the Montréal region, Mr. Martin Coiteux. The $4 .6B to be invested over the next two years are allocated as follows, based on the main axes of intervention established by the Ministère: $2.1B will be allocated to structures which the MTMDET is responsible for, and $252.6M will be allocated to the municipal network structure; An amount of over $1.2B will be allocated to pavement; $626.9M will be allocated to network improvement; $463.7M will be allocated to network development. From these amounts, $1.3B will be used to complete projects related in whole or in part to road safety improvement. Moreover, 90% of the amounts invested will be used to maintain assets. Alberta Budget 2017 increases infrastructure investments The 2017 budget of Alberta increases by $1.4B the infrastructure investment in addition to what had been announced in the 2016 budget, for a total of $29 .5B over the four coming years. The main areas of investment include: $7.6B in municipal infrastructure support; $4.7B for capital maintenance and renewal; $4.5B for health infrastructure; $3.8B for climate change and environmental sustainability; $2.6B for schools, including $500M for new school projects over the next four years and an additional $488M for future school projects beginning in 2018-2019; $3.1B for roads and bridges; $100M to support Albertans living on reserves who do not have reliable access to clean drinking water. Alberta’s last PPP project, the Southwest Calgary Ring road, worth $1.42B, is currently under construction and should be open to traffic in October 2021. Québec Budget 2017 provides for massive investments in public transportation The 2017 budget of Québec provides for infrastructure expenses of $91.1B over 10 years, that is a $2.4B increase over last year budget. Significant investments will be made in public transportation and in restructuring its management in the Montréal area. An additional $1.5B will be invested in public transportation for the following major initiatives: Réseau électrique métropolitain (REM) The Government of Québec intends to invest $1.28B in the Réseau électrique métropolitain (REM) project in Montréal. This contribution will be added to the $2 .67B of CPDQ and that of the federal government in the amount of $2 .28B which currently is under discussions . Calls for proposals are ongoing for the construction, rolling stock and maintenance aspects. The proposals must be submitted by the summer of 2017. Metro blue line The project includes a 5.5 km extension of the blue line toward Anjou, in the northeastern part of Montréal. The work should begin in 2021 and the investment will be described in the 2017-2027 Infrastructure Plan. Autorité régionale de transport métropolitain (ARTM) The government will create the ARTM in order to centralize the planning and delivery of public transportation in the Montréal area. This organization will be managed by the Montréal Metropolitan Community (MMC) . Its financing over five years will include $399M to [TRANSLATION] “maintain excellent financial solidity” and $587.7M for its role in the REM project. Complementary improvements to public transportation The government invests an additional amount of $333M over five years (in addition to the current amount of $1.2B) in the improvements to public transportation, adapted transportation and regional public transportation services across Québec. Newfoundland and Labrador Budget 2017 introduces a five-year infrastructure investment plan Newfoundland and Labrador budget 2017 provides for a $3B investment in infrastructure over the next five years . The government also announced that it intends to analyze all the major infrastructure projects to determine their eligibility for public-private partnerships. The major investments provided for in the infrastructure plan include the following: $330.9M for major health care projects; $53.8M for the construction of new schools and related repair and maintenance work; $44.7M for post-secondary establishments; $461.1M for municipal infrastructure, in partnership with the federal government; $372.2M for transportation infrastructure; $86.5M for the repair, maintenance and modernization of affordable housing units. Furthermore, the plan emphasizes the interest for partnerships with the private sector which stimulate innovation and allow for benefiting from the best market practices in managing operations. Innergex announces the commissioning of the 81.4 MW Upper Lillooet River hydroelectric power plant Innergex Renewable Energy Inc. (TSX: INE) has begun commercial operation of the 81.4 MW Upper Lillooet River run-of-river hydroelectric facility located in British Columbia. Innergex owns a 66.7% interest in the hydro facility and Ledcor Power Group Ltd. owns the remaining 33.3%. This is the largest hydroelectric power plant built by Innergex to this day. The facility is located on crown land, approximately 40 km north of the Village of Pemberton, in the Sea-to-Sky district of British Columbia. Construction began in October 2013 and was completed in March 2017. The facility is part of the Upper Lillooet River Hydro Project which includes two run-of-river clean energy generation facilities located in the Pemberton Valley: Upper Lillooet River (81.4 MW) and Boulder Creek (25.3 MW). On March 17, 2015, the Corporation announced the closing of $491.6M non-recourse construction and term project financing for both these projects. The commissioning of the Boulder Creek hydroelectric facility is expected in the second quarter of 2017. The Upper Lillooet River facility’s average annual production is estimated to reach 334,000 MWh, enough to power around 31,850 British Columbia households. All of the electricity it produces is covered by a 40-year fixed-price power purchase agreement with BC Hydro, granted in the context of the 2008 call for tenders for clean energy, which provides for an annual adjustment to the selling price based on a portion of the Consumer Price Index. Manitoba Budget 2017 steps up its commitment to public-private partnerships Manitoba’s budget 2007 provides for an infrastructure investment of over $1.7B in 2017-2018 and confirms the intention of the government to eliminate regulatory obstacles to private investment in public infrastructure in order to promote public-private partnerships. In the context of one of the largest infrastructure budget in Manitoba’s history, here are some of the major investments to be made in 20172018: $747M for roads, highways, bridges and protection against floods; $641M for health, education and housing infrastructure; and $370M for municipal and local infrastructure and other provincial infrastructures. The City of Winnipeg implemented several PPP projects in the areas of transportation and social assets. The Canada-Europe Free Trade Agreement: impacts on the infrastructure industry The Canada-European Union Comprehensive Economic and Trade Agreement (“CETA” or the “Agreement”) will create one of the largest free-trade zones in the world. It may come into force on a provisional basis once the Canadian Senate has validated Bill C-30. Then, only the approval of each of the member countries of the European Union (“EU”) will remain to be obtained for the Agreement to come into force on a final basis since it has already been ratified by the European Parliament. CETA will provide access to the large European market, which represents a GDP of approximately 15,000 billion euros per year and more than 500 million consumers, to Canadian businesses. The coming into force of CETA will have a significant impact on the infrastructure industries in Canada and Europe. We can already identify four aspects of the Agreement which will have direct consequences on same. Access to the European public market The European infrastructure public market represents between 2,000 and 3,000B dollars per year, which is even more than that of the United States. With CETA, Canadian firms, working particularly in the areas of engineering, project management and construction, will gain access to the national public markets of the EU 28 member States . Moreover, businesses will be allowed to participate in calls for tenders of, among others, public law bodies such as hospitals, schools and universities, European utilities (such as gas, power and water distribution) and entities responsible for urban and rail transportation. CETA will also provide European businesses with access to the Canadian public market, which has the wind in its sails since the announcement of the creation of the Canada Infrastructure Bank in the Government of Canada’s 2017 budget. Better labour mobility CETA will also increase labour mobility between Europe and Canada by facilitating the temporary assignment of some categories of persons (for example business people) . Therefore, it will be easier for businesses who bid on call for tenders to do business with the EU by having a person directly in the field. It will also be possible, in some cases, for businesses (such as those offering, for instance, installation and maintenance services), to send their own employees on site to supervise the work or train employees for this purpose. Another interesting aspect of CETA is the chapter on the recognition of the professional qualifications, which aims to establish a procedure for facilitating the potential negotiation of agreements for the recognition of qualifications of professionals and individuals working in regulated trades. Accordingly, it will be easier for Canadian and European businesses to hire qualified personnel. Elimination of tariffs The Agreement will eliminate all the tariffs currently collected on originating products used for infrastructure construction and maintenance. This includes building materials, energy production equipment, electrical equipment, railway products and information and communication technology products. The elimination of these duties represents a significant economic benefit for Canadian businesses, which had to pay high tariffs on many categories of products . For example, the customs duties on equipment for energy production and distribution could be as high as 14% and 6.5% for concrete products. European products will also enter Canada duty-free. Cooperation in regulatory matters Lastly, the Agreement will also implement the Protocol on the Mutual Acceptance of the Results of Conformity Assessment, which will facilitate the acceptance by Canada and the EU of test results and product certification from the other party, resulting in lower costs for businesses. Indeed, a business which had to go to Europe to have its products certified will be able to do so in Canada and the certification will be recognized by the EU . The same process will apply to European businesses wishing to have their products certified in Canada. This protocol applies, among other things, to building materials, machinery, electronic equipment and ATEX (“atmosphere explosive”) equipment. In closing, once CETA is in force, even on a provisional basis, Canadian and European businesses will benefit from privileged access to each others’ markets . Corporations in the infrastructure sector would be well-advised to carefully consider the new business opportunities resulting from the application of the Agreement. Biomethanization: a fast-growing market in Québec Biomethanization is a process whereby organic matter is fermented in the absence of oxygen, leading to the production of biogas (or biomethane) and a solid waste called digestate. Biogas may be reclaimed under the form of thermal or electrical energy or, once refined, it can replace natural gas. Digestate can be used as an organic fertilizer. Biomethanization is considered to be a renewable source of energy which participates in the energy transition toward a decarbonised economy. This form of energy has been around for many years in Québec with private projects such as the Gazmont power plant in 1996, located near the Miron Quarry in Montréal and EBI Energy’s power plant in 2003, located in Saint-Thomas, in the Lanaudière region . More recently, in 2017, Lavery participated in the financing of the Biomont project, a biogas cogeneration power plant located in Montréal, in the Villeray - Saint-Michel - Parc-Extension borough. The biomethanization sector has found a new impetus since 2010, with the implementation of the Program for the Treatment of Organic Matter through Biomethanization and Composting1 which encouraged municipalities and private stakeholders to undertake biomethanization projects. This initiative, which was developed by the Government of Québec and relies on the resources of the Green Fund, aims to banish any form of disposal of organic materials in landfills by 2020 . More recently, in 2016, the federal government confirmed $5B in investments over 5 years2 through the Green Infrastructure Fund, which aims, among other things, to reduce the production of greenhouse gases. The various programs offer financial support to many types of sponsors-operators, particularly cities (40%), regional county municipalities (“RCM”, 13%) and common-interest partnerships (47%) grouping cities, private businesses and RCMs . There are currently seven projects in the development phase, two in the construction phase, three in the commissioning phase and four in the operating phase. Among the largest projects in the development phase are those of the City of Montréal ($237M in investments), Québec City ($124M) and the City of Laval ($123M). The four completed and operating projects are those of Vallée-du-Richelieu, the City of Rimouski, the Rocher-Percé RCM and Multitech Environment, Rouyn-Noranda. The size of the projects varies from one community to the other based on the quantity of metric tonnes to be processed annually. The total cost of the investment is between $1 .3M and $237M (median of $27 .1M) . Both levels of government participate in the financing of the various projects in proportions varying between 20% and 70% of the total cost of the projects (53% on average) . In addition to the financing granted by the provincial and federal governments, the remainder of the financing is split between municipalities and private investors. Biomethanization is still a young technology in Québec and even in Canada. Giving time the market to adapt to this new reality will lead to its mastery, a challenge that sponsors-operators must face . Implementing these projects involves an adequate assessment of the risks related to the design, construction, technological choices and operational management, failing which costs are likely to spiral out of control . In this respect, the necessity of importing outside know-how still seems relevant, since many suppliers and operators who are involved in these projects are based in Europe or the United States . For European businesses, the new Canada-Europe free trade agreement may certainly promote their increased involvement. Lastly, another challenge brought about by these projects is that of profitability, namely, the valorization of outputs relative to inputs and the production process in a context of pressures on the price of gas and electricity. However, the growth of the carbon market, which henceforth includes Québec, the State of California and Ontario, seems to pave the way to a new source of income for sponsors and may improve the financial model of these projects. In conclusion, the program of the Government of Québec contributed to more than 16 biomethanization projects throughout the province, thereby reducing the environmental impact. The latest is the Matane biomethanization project, for which the municipality just completed a call for tenders on April 6, 2017. These projects represent many potential business opportunities for businesses operating in fields such as waste processing, waste-water treatment, renewable energies, etc., that wish to diversify their activities by taking advantage of the growth of the green economy.   Program running until December 31, 2017 (French only) www.infrastructure.gc.ca/plan/gi-iv-eng.html

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  • Artificial Intelligence and the 2017 Canadian Budget: is your business ready?

    The March 22, 2017 Budget of the Government of Canada, through its “Innovation and Skills Plan” (http://www.budget.gc.ca/2017/docs/plan/budget-2017-en.pdf) mentions that Canadian academic and research leadership in artificial intelligence will be translated into a more innovative economy and increased economic growth. The 2017 Budget proposes to provide renewed and enhanced funding of $35 million over five years, beginning in 2017–2018 to the Canadian Institute for Advanced Research (CIFAR) which connects Canadian researchers with collaborative research networks led by eminent Canadian and international researchers on topics including artificial intelligence and deep learning. These measures are in addition to a number of interesting tax measures that support the artificial intelligence sector at both the federal and provincial levels. In Canada and in Québec, the Scientific Research and Experimental Development (SR&ED) Program provides a twofold benefit: SR&ED expenses are deductible from income for tax purposes and a SR&ED investment tax credit (ITC) for SR&ED is available to reduce income tax. In some cases, the remaining ITC can be refunded. In Québec, a refundable tax credit is also available for the development of e-business, where a corporation mainly operates in the field of computer system design or that of software edition and its activities are carried out in an establishment located in Québec. This 2017 Budget aims to improve the competitive and strategic advantage of Canada in the field of artificial intelligence, and, therefore, that of Montréal, a city already enjoying an international reputation in this field. It recognises that artificial intelligence, despite the debates over ethical issues that currently stir up passions within the international community, could help generate strong economic growth, by improving the way in which we produce goods, deliver services and tackle all kinds of social challenges. The Budget also adds that artificial intelligence “opens up possibilities across many sectors, from agriculture to financial services, creating opportunities for companies of all sizes, whether technology start-ups or Canada’s largest financial institutions”. This influence of Canada on the international scene cannot be achieved without government supporting research programs and our universities contributing their expertise. This Budget is therefore a step in the right direction to ensure that all the activities related to artificial intelligence, from R&D to marketing, as well as design and distributions, remain here in Canada. The 2017 budget provides $125 million to launch a Pan-Canadian Artificial Intelligence Strategy for research and talent to promote collaboration between Canada’s main centres of expertise and reinforce Canada’s position as a leading destination for companies seeking to invest in artificial intelligence and innovation. Lavery Legal Lab on Artificial Intelligence (L3AI) We anticipate that within a few years, all companies, businesses and organizations, in every sector and industry, will use some form of artificial intelligence in their day-to-day operations to improve productivity or efficiency, ensure better quality control, conquer new markets and customers, implement new marketing strategies, as well as improve processes, automation and marketing or the profitability of operations. For this reason, Lavery created the Lavery Legal Lab on Artificial Intelligence (L3AI) to analyze and monitor recent and anticipated developments in artificial intelligence from a legal perspective. Our Lab is interested in all projects pertaining to artificial intelligence (AI) and their legal peculiarities, particularly the various branches and applications of artificial intelligence which will rapidly appear in companies and industries. The development of artificial intelligence, through a broad spectrum of branches and applications, will also have an impact on many legal sectors and practices, from intellectual property to protection of personal information, including corporate and business integrity and all fields of business law. In our following publications, the members of our Lavery Legal Lab on Artificial Intelligence (L3AI) will more specifically analyze certain applications of artificial intelligence in various sectors and industries.

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  • The latest news from the Canadian infrastructures market / Major trends in the infrastructures market for 2017

    TABLE OF CONTENTS The latest news from the Canadian infrastructures market Defense Construction Canada issues Request for Expressions of Interest for an energy performance contract Boralex completes financing of the Yellow Falls hydro project in Ontario Boralex and AWEC announce a new partnership CC&L and Desjardins acquire a majority interest in the South Fraser Road project Boralex purchases Enercon’s interest in the Niagara Region Wind Farm in Ontario United States: State officials seek abolition of the Clean Power Plan The sale of TerraForm Power moves forward CDPQ and DP World launch a US$3.7 billion port assets fund The Canadian government approves two pipeline projects TerraForm Power successfully refinances its solar power portfolio in Canada The Northwest Territories are seeking financial consulting services for PPPs Crown corporations concerned over the market’s ability to deliver all the infrastructure projects currently planned in Canada Québec is considering a PPP for the Louis-Hippolyte- LaFontaine Tunnel rehabilitation project Consortiums pre-qualified for the Montréal LRT contracts Canada’s Minister of Infrastructure and Communities, Amarjeet Sohi, outlines the federal government’s infrastructures plan Alberta approves 400 MW of new renewable energy projects procurement Refinancing of Montréal Gateway Terminals partnership completed Axium acquires its first solar assets in the U.S. PPP for île d’Orléans Bridge? Global Infrastructure Partners creates the largest infrastructure fund in the world Fiera Infrastructure acquires 50% interest in an Ontario wind farm Major trends for 2017 The latest news from the Canadian infrastructures market Defense Construction Canada issues a Request for Expressions of Interest for energy performance contract Defense Construction Canada (DCC) has issued a Request for Expressions of Interest, dated December 20, 2016, for improvements in energy efficiency contracts covering nine military facilities across Canada (Québec, Ontario, Alberta, Nova Scotia and New Brunswick). The services required include preparation of a feasibility study, financing, performance guarantees, and construction and project management. The payment mechanism, financial structure and energy-saving targets would be specific to each project. The approximate value of the contract would be $52 million, on the basis of a 10-15% reduction in service costs and a maximum amortization of 15 years from the beginning of work. Responses to the Request for Expressions of Interest had to be submitted February 1, 2017. DCC plans to finalize the process by March 31, 2018. Boralex completes financing of the Yellow Falls hydro project in Ontario On December 16, 2016, Boralex announced that it had closed a $74.3 million financing for its Yellow Falls hydro project in Ontario. The 16MW Yellow Falls hydroelectric power station is on the Mattagami River, near the town of Smooth Rock Falls. The total project cost is approximately $91.7 million. Financing was structured on the basis of a hybrid model and includes a short-term tranche of $9.1 million fully amortized over 10 years, and a long-term (39-year) tranche of US$65.2 million which will begin amortizing over 29 years after repayment of the shorter tranche, the balance being due at maturity. Together, both tranches will bear a fixed average interest rate of approximately 5% over the life of the loans. The lenders are Canada Life, The Great West Life Assurance Company and London Life. Construction of the Yellow Falls hydroelectric site has already begun, with commissioning planned for the end of the 2nd quarter of 2017. The plant will operate under a 39-year power purchase agreement with IESO. The Yellow Falls project was developed jointly with First Nation partners, the Taykwa Tagamou Nation and the Mattagami First Nation. The two First Nations, as well as the initial project proponent, Canadian Hydro Developers, hold options allowing them to acquire a participation of up to 31.25% of the project. Boralex and AWEC announce a new partnership On December 15, 2016 Boralex and the Alberta Wind Energy Corporation (AWEC) announced the creation of the Alberta Renewable Power Limited Partnership, owned respectively 52% and 48% by the two entities. This collaboration will allow Boralex and AWEC to pool their mutual expertise in developing and implementing wind and solar projects in Alberta and in Saskatchewan. This new joint venture marks Boralex’s entry into Alberta’s renewable energy market. The partnership will focus primarily on public utility wind farms with capacities greater than 5 MW and will also seek sites for potential solar projects. The partnership expects to prepare tenders for the Windy Point and Old-Elm/Pothole projects in Alberta, and for a portfolio of other projects in Alberta and in Saskatchewan. CC&L and Desjardins acquire a majority interest in the South Fraser Road project Connor, Clark & Lunn Infrastructure (“CC&L”) and the Desjardins Group Pension Plan acquired a majority interest in the South Fraser Perimeter Road project in British Columbia, a public-private partnership (PPP) project. ACS (50%), Star America Infrastructure Fund (25%) and Ledcor Infrastructure Investments (25%) were the project’s initial shareholders. ACS sold 37.5% of the total project for $24.7 million, and will retain a 12.5% minority interest in the project. The transaction closed on December 9, 2016. The project was refinanced in October 2015 for $228 million. Boralex purchases Enercon’s interest in the Niagara Region Wind Farm in Ontario In a media release dated December 8, 2016, Boralex announced its acquisition of Enercon’s 50% interest in the 230 MW Niagara Region Wind Farm in Ontario for a total cash consideration of $238.5 million. The Wind Farm, which extends over the Regional Municipality of Niagara, the Township of West Lincoln, the Town of Wellfleet and Haldimand County in Ontario, was commissioned on November 2, 2016 and comprises 77 Enercon E-101 turbines. The Wind Farm has a 20-year power purchase agreement with IESO. In October 2016, Enercon and its partner, Grand River Development Corporation, secured a $828.3 million non-recourse financing for the project. Grand River Development Corporation financed its capital investment in the project by way of a non-recourse loan from Enercon that will be transferred to Boralex. United States: State officials seek abolition of the Clean Power Plan A coalition of attorney generals and government agency representatives of 24 U.S. states have urged the Trump administration to issue an executive order declaring the Clean Power Plan unlawful. In a letter dated December 14, 2016 to Vice-President Mike Pence, House Leader Paul Ryan and Senate Majority Leader Mitch McConnell, the signatories contend that the Clean Power Plan contradicts section 111 of the Clean Air Act, maintaining that the section does not give the EPA power to regulate emissions from a source that is already regulated. They also claim that the rules subvert each state’s authority over its own sources of electricity generation. The Clean Power Plan, widely regarded as draft environmental legislation bearing President Obama’s stamp, fixes carbon emission reduction objectives applicable to power plants. One of the aims of the draft legislation was to accelerate the shutdown of coal-fired plants while increasing the share of renewal energy projects. The legislation remains suspended further to the Supreme Court’s February 2016 decision delaying implementation. In his campaign, President Donald Trump stated that he opposed the Clean Power Plan. The signatories of the letter noted that an order would not formally cancel the plan, but would however assure States that it would not be applied. The groups also suggested that Congress and the administration work together on legislation that would prevent the EPA from drafting regulations similar to the Clean Power Plan in the future. The letter was also signed by the representatives of West Virginia, Wyoming and Kentucky, the three largest coal-producing states in 2014. Industry participants stated they do not expect any significant changes in the short term if the Clean Power Plan is cancelled and noted that the growth in renewable energy production was largely stimulated by state initiatives rather than by federal mandates. The sale of TerraForm Power moves forward TerraForm Power, the yieldCo created by the US developper Sun Edison, is currently assessing preliminary offers from various strategic buyers and investors, in preparation for the next phase of the sale process, namely committed offers, which had to be submitted mid-January 2017. Pattern Energy Group, Brookfield Asset Management, a Texas-based renewable energy company and other entities established in Asia, are among the potential bidders. TerraForm Power, with a market capitalization of US$1.9 billion, manages US$3 billion in solar and wind assets in North America and in the UK. The energy company SunEdison, currently under bankruptcy legislation protection, remains the largest shareholder of TerraForm Power. CDPQ and DP World launch a US$3.7 billion port assets fund Caisse de dépôt et placement du Québec (CDPQ) and Dubai-based DP World have created a $5 billion (approximately US$3.7 billion) fund, to be used as a platform for investing in ports and terminals around the world (excluding the United Arab Emirates). DP World holds a 55% interest in this investment vehicle, and CDPQ holds the remaining 45%. This new vehicle will invest directly in equity, primarily in existing infrastructure assets, but will also invest up to 25% in projects under development. The fund has invested $865 million in two of DP World’s Canadian container terminals, located in Vancouver and Prince Rupert. CDPQ has acquired a 45% interest in the combined assets. CDPQ Infra, the infrastructure division of Caisse de dépôt et placement du Québec, currently has $13 billion in assets under management, 25% of which is invested in the United States, and 10% in Canada. In November 2013, CDPQ acquired a 26.67% interest in Global Infrastructure Partners in the Port of Brisbane in Australia. The Canadian government approves two pipeline projects According to a November 29, 2016 statement, the federal government has approved two major oil pipeline projects: the Kinder Morgan’s Trans Mountain Expansion Project and the Enbridge Line 3 replacement project. The Trans Mountain pipeline has been in existence for 63 years. It transports crude and refined oil between Alberta and British Columbia. The expansion project will increase the pipeline’s nominal capacity from 300,000 to 890,000 barrels a day. Construction of the Trans Mountain project is scheduled to begin in September 2017, with a commissioning date planned for the end of 2019. The cost of the project would be approximately $7 billion. Calgary-based Enbridge’s Line 3 Replacement Project involves replacing a 50-year old pipeline from Alberta to Wisconsin that would double its original capacity to 760,000 barrels a day. Project completion is planned for 2019. The Canadian government rejected a third pipeline project, the Northern Gateway project, also proposed by Enbridge. The project was envisaged as a twin pipeline system that would have exported bitumen and imported natural gas condensate. TerraForm Power successfully refinances its solar power portfolio in Canada TerraForm Power recently contracted a $120 million 7-year loan with Deutsche Bank to refinance its Canadian solar power portfolio. The loan bears interest at an average interest rate of 3.7%. TerraForm Power’s solar power portfolio includes the following projects: SunE Perpetual Lindsay (15.5MW) March Hill (18.5 MW) Woodville (12.6 MW) Sandringham (13.1 MW) The four projects have 20-year power purchase agreements with IESO. The financing terms and conditions give TerraForm Power the possibility of expanding the loan principal by an additional $123 million (“accordion feature”). The Northwest Territories are seeking financial consulting services for PPPs The Government of the Northwest Territories has launched a call for tenders for financial consultancy services for future PPP projects. The selected firm’s mandate would be to assist the government in developing and evaluating the call for tender process. It will also contribute to the creation of appropriate administrative structures and training programs. The province contemplates at least three potential projects being carried out in PPP mode. A first project, estimated at $700 million would to construct a section of highway in the Mackenzie Valley from Wrigley to Normal Wells. A second project involves construction of the All Season road (approximately $150 million). The third project is also a highway, extending to the Arctic Coast as far as a deep water port in western Nunavut. To date, the province has been involved in two PPPs: the Stanton Territorial Hospital which completed its financial close in August 2015, and the Mackenzie Valley fibre optic line, which finalized its closing in November 2014. Crown corporations concerned over the market’s ability to deliver all the infrastructure projects currently planned in Canada A number of Canada’s main PPP agencies appear to be concerned over the market’s ability to deliver the increasingly high number of projects that are planned across the country. Some agencies, such as Partnership BC or Infrastructure Ontario, try to structure their procurement process to maintain market competitiveness, for example by giving companies more time to assess their needs, or by saturating the market with a large number of requests over a short period of time. Public sector agencies that must manage a growing number of projects in development must also deal with this problem. Québec considering a PPP for the Louis-Hippolyte-LaFontaine Tunnel rehabilitation project In the early part of 2017, Transports Québec will assess private-sector interest in the Louis-Hippolyte-LaFontaine Tunnel rehabilitation project. The government agency is planning a major rehabilitation of the tunnel as well as related work on Highway 25. A traditional procurement model will be assessed alongside Design – Build – Finance and Design – Build – Finance – Operate options. Transports Québec will conduct a market survey of potential privatesector partners (engineering consulting firms, general contractors, investors) regarding the commercial structure, allocation of risk, and terms of remuneration for the project. The various aspects of the project include replacement of the concrete screed and installation of a surface protective coating. The project cost and project schedule have not yet been determined. However preliminary work the project is underway, and the second phase of the project is slated to begin after 2018. Consortiums pre-qualified for the Montréal LRT contracts CDPQ Infra, a subsidiary of the CDPQ, conducted a pre-selection of consortiums for the Réseau Électrique Métropolitain (“REM”) project, the cost of which is estimated at $5.9 billion. In June 2016, the CDPQ published two requests for qualification: one for the infrastructure engineering, procurement and construction (EPC) contract and the other for the rolling stock, systems and operation and maintenance services (RSSOM) contract. The cost of the EPC contract will be approximately $4.4 billion and the RSSOM contract will be approximately $1.5 billion. The following consortiums and companies were pre-selected: For the EPC contract: Groupe NouvLR: SNC Lavalin, Dragados, Aecon, Pomerleau, EBC, Aecom Kiewit-Eurovia, a partnership: Construction Kiewit, Eurovia Québec, WSP, Parsons For the RSSOM contract: Alliance Montréal Mobilité (AMM): Parsons, Hyundai Rotem Company, RATP Dev Canada and Thales Bombardier Transportation Canada Inc. Groupe des Partners pour la Mobilité des Montréalais (PMM): Alstom, SNC-Lavalin The pre-selected teams each have six months to submit a final proposal. Construction is expected to start in the spring of 2017 and the first trains are expected to be in operation by the end of 2020. The project will allow for the deployment of a new high-frequency light rail transit network by building and transforming close to 67 km of double tracks, 24 stations, 9 bus terminals and 13 park-and-ride facilities. The project will also include the acquisition of a fleet of over 200 cars. Canada’s Minister of Infrastructure and Communities, Amarjeet Sohi, outlines the federal government’s infrastructures plan In an interview granted to InfraAmericas, Amarjeet Sohi, Canada’s Minister of Infrastructure and Communities explained the federal government’s infrastructure projects and in particular the role of the future Canada Infrastructure Bank (“CIB”). The CIB’s mandate will be to advise the federal government as well as provincial and municipal authorities on building infrastructure projects through public-private partnerships. The CIB, which has received $15 billion in government funding, will review each transaction and will structure it to ensure the protection of the public interest, while seeking to attract private capital. The relevant projects are primarily in the area of transit infrastructure: building of roads, bridges, tunnels, public transit and interprovincial transit lines. The mandate of the CIB is also to promote renewable energy projects so that ultimately the use of coal will be eliminated in Canada, in furtherance of the COP21 Agreement signed in Paris in 2015. The Minister cited the REM project developed by the CDPQ in Montréal as an example of the situation where an institution dedicated to infrastructure can make a difference by mobilizing private capital for a project that would not otherwise be achievable because the investment required would be too high for government budgets. As regards asset recycling transactions – another way to fund new projects - the government is awaiting the result of a Department of Finance Canada study, which would determine the role that the CIB could play. PPP Canada will continue to play a role in formulating new infrastructure projects and will support the Government in creating the Infrastructure Bank. Alberta approves 400 MW of new renewable energy projects procurement The Government of Alberta has authorized the Alberta Electric System Operator (AESO) to launch a call for tenders for 400 MW of renewable energy in 2017. This call for tenders would be the first of a series that should span the next 14 years, in the knowledge that Alberta plans to add 5,000 MW of renewable generation capacity by 2030. The AESO would accept projects that have a capacity of at least 5 MW and that would be operational by the end of 2019. The Authority will consider new projects and expansions of existing facilities. The AESO plans to issue a Request for Expressions of Interest in the 1st quarter of 2017, a request for qualification in the 2nd quarter 2017 and a request for proposals in the 4th quarter of 2017. Renewable energy is part of Alberta’s long-term climate policy. The province plans to gradually eliminate coal-fueled electricity generation from 49% to zero by 2030. Refinancing of Montréal Gateway Terminals partnership completed A group of Montréal Gateway Terminals shareholders, led by Axium Infrastructure, closed the refinancing of the company’s bank debt, which amounted $252 million on November 17, 2016. in March 2015, a consortium comprised of Axium, Desjardins, Manuvie, FTQ and Industrial Alliance, acquired the company’s assets from Morgan Stanley’s first infrastructure fund. The transaction was initially financed by $252 million in “mini-perm” bank financing over a five-year term. The debt was refinanced via a private bond placement in which several American and Canadian buyers, such as Prudential, Barings and Manuvie participated. Axium acquires its first solar assets in the U.S. Axium Infrastructure has acquired an 84-MWac (110 MWdc) portfolio of solar photovoltaic installations in the USA and Canada from Renewable Energy Trust Capital (RET Capital). The transaction, which closed on November 17, 2016, is Axium Infrastructure’s first solar investment in the US. The portfolio includes eight solar parks in California, Georgia and Ontario. These facilities reached commercial operations between 2012 and 2015. They each have long-term fixed-price power purchase agreements with investment-grade utilities. PPP for île d’Orléans Bridge? The Government of Québec will review all possible options for carrying out the project for a new cable-stayed bridge linking the île d’Orléans to the north shore of the St. Lawrence River. Until now, the preferred option was traditional public sector construction and operation. Two other options are currently under consideration: having the project carried out either in the private sector or in a private-public-partnership (PPP). The question of a bridge toll appears to be definitively ruled out. On November 24, 2016, the ministère des Transports du Québec (MTQ) launched a call for tenders for consultants specialized in finance and economics whose mandate would be to review and analyze the various modes of delivery for the île d’Orléans Bridge project. MTQ officials have estimated the cost of traditional construction and maintenance, i.e., fully government-funded. Although that assessment has not been disclosed, there is an unofficial estimate circulating that puts the budget at $400 million. The current bridge dates from 1935. It must be replaced to conform to new seismic standards, and also because its piles are sinking into the soft bed of the river, on the north shore. The most recent schedule put forward by the government is that the bridge will be in operation by 2024. The new bridge, if built as a concrete structure would have a life-span of 75 years, and if built as a metal structure, would have a life-span of more than 100 years. Global Infrastructure Partners creates the largest infrastructure fund in the world The third fund created by Global Infrastructure Partners – baptized as Global Infrastructure Partners III (“GIP III”) – was completed at US$15.8 billion. The final amount of GIP III is bigger than that of the Brookfield Infrastructure Fund III (“BIF III”), which achieved a final closing of US$14 billion in July 2016. The GIP III will have a 10-year mandate with two options to extend, each for one year. It is planning on making 10 to 14 equity investments of approximately US$500 million to US$1.75 billion over a five-year period. Fiera Infrastructure acquires 50% interest in an Ontario wind farm On January 25, 2017, Fiera Infrastructure Inc., a subsidiary of Fiera Capital Corporation, announced that it had acquired Suncor Energy’s 50% interest in the 100-MW Cedar Point II wind facility in Ontario, through its Fiera Infra LP fund. This is Fiera Infrastructure’s first wind energy investment. Cedar Point II is located in the counties of Lambton and Plympton-Wyoming and has been operational since October 2015. It sells its entire output to IESO under a 20-year power purchase agreement. NextEra Energy Canada, a subsidiary of NextEra Energy Resources, holds the remaining 50% of the project’s assets. National Bank Financial Markets acted as Fiera Infrastructure’s adviser, financial arranger and lender. Major trends in the infrastructures market for 2017 It is interesting to note the major worldwide trends in the infrastructures sector for 2017. Below is a compilation for our readers of the recurring themes gleaned from the analyses of experts in the field. A political commitment to reviving economic growth by means of infrastructure spending Accepted by most economic analysts and political leaders across the spectrum, investments in public infrastructures are universally acknowledged as an effective tool for economic interventionism. Generally, such investments are accompanied by measures to stimulate private investment which in turn optimizes government expenditures. The proliferation of infrastructure investment vehicles accompanied by competition in the fund industry over fund size Intended to attract private capital to infrastructure projects, the number and size of investment funds should continue to grow, particularly under the influence of investors from emerging countries. In some cases, they could compete head-on with traditional developers and builders. Growing competition in the construction industry should increase pressure on sector company margins This phenomenon should stimulate cooperation among firms seeking synergies and economies of scale, and also promote technological innovation. The transportation sector should play a more important role and surpass that of energy in new infrastructure investments Growing urbanization, associated with congestion and pollution in large cities and the need to facilitate trade will push governments to prioritize urban transit projects, especially rail projects. Economic expansion in China China should accelerate its economic expansion in Asia due to the USA’s disinvestment in the region and the failure of the TransPacific Partnership. This situation will affect North American companies and small local Asian companies that cannot compete with large Chinese companies. The energy storage sector The exponential growth of the energy storage sector caused by the problem of managing an increasingly complex energy mix, including renewable energy, which by its very nature is intermittent, and fossil fuels and nuclear energy, the flexibility of which remains limited. Commercially operational technological solutions are beginning to emerge and will represent opportunities for sophisticated investors.

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  • October news on the Canadian infrastructure market

    Creation of a Canadian infrastructure bank On October 20, 2016, the Advisory Council on Economic Growth published its report entitled “Unleashing Productivity Through Infrastructure”. One of the report’s recommendations is to create a Canadian Infrastructure Development Bank whose objective would be to deliver projects with an aggregate value of more than $200 billion over 10 years, while at the same time minimizing the use of government budgets. The new bank could grant financing in the form of subordinated debt or equity to supplement the financing provided by institutional investors in various projects. The new entity would, in fact, promote the PPP delivery model or alternative financing models, although its role would not be to replace the existing provincial bodies, such as Infrastructure Ontario or the Société québécoise des infrastructures. Moreover, the federal government will also wish to ensure that the establishment of an infrastructure bank does not discourage investments by the private sector. Finally, on November 1, 2016, the Finance Minister, Bill Morneau, confirmed the creation of the Canada Infrastructure Bank (“CIB”) in 2017. The new institution will receive an initial capitalization of $35 billion. It remains to be seen whether the CIB will be governed by the Bank Act or whether a new legislative scheme will be set up for this new institution. Project to privatize eight Canadian airports In the aforementioned report, “Unleashing Productivity through Infrastructure”, the Advisory Council on Economic Growth proposes the privatization of the airports of Toronto, Vancouver, Montreal, Calgary, Edmonton, Ottawa, Winnipeg and Halifax. The Council also recommends the use of private investment in other public infrastructures such as toll highways and bridges, highspeed railways, smart cities, broadband internet networks, power transmission lines and natural resources infrastructure. This is not the first time the federal government has considered a project to privatize airports, but no decision seems yet to have been made at this stage, nor any agenda unveiled. However, the Canada Development Investment Corporation (“CDEV”), a federal Crown corporation reporting to the Finance Minister, Bill Morneau, has been mandated to hire consultants to advise the government. On the other hand, during his speech to the Montreal Chamber of Commerce on November 2, 2016, the Minister of Transport, Marc Garneau, mentioned that privatization was only one of the options on the table. Boralex closes a €100 million wind farm project financing in France Boralex Inc. has announced the closing of financing for the Mont de Bagny (24 MW), Artois (23.1 MW) and Voie des Monts (10 MW) wind farms in France, for a total of approximately €100 million (Cdn$145 million). This financing is provided by Crédit Industriel et Commercial (Groupe Crédit Mutuel) and BPI France Financement. The construction of each of the projects is already underway and they should all be commissioned by the end of 2017. This announcement was made shortly after Boralex acquired a wind farm portfolio of nearly 200 MW in France and Scotland, in September 2016. In June 2016, Boralex also closed another financing of €20.4 million for two wind farms in France. These large transactions confirm Boralex’s position as France’s largest independent producer of onshore wind power, through its Boralex Europe subsidiary. Possible refinancing of Montreal Gateway Terminals’ debt The Montreal Gateway Terminals project is currently studying the possibility of refinancing its bank debt. This consortium, including Axium, Desjardins, Manulife, the FTQ and Industrial Alliance, acquired the company’s assets from Morgan Stanley’s first infrastructure fund in March 2015. The transaction was financed with mini-perm bank financing of $252 million over a five-year term. The banking syndicate currently consists of BMO, CIBC, MUFG & BTMU, RBC and Scotiabank. DBRS downgrades Montreal hospital bonds On October 20, 2016, the DBRS credit rating agency downgraded the rating of the senior secured bonds of the Centre hospitalier de l’Université de Montréal (“CHUM”) from BBB (high) to BBB. This downgrade was due to the postponement of the substantial completion date of phase 1 from the second quarter of 2016 to the first quarter of 2017. This represents an additional delay of 20 weeks since the date of DBRS’s last review and 48 weeks since the initial substantial completion date of April 22, 2016. The project will be in default if delays continue beyond July 2017. HSBC implements a worldwide infrastructure financing platform HSBC recently announced that it was setting up an infrastructure financing platform with a worldwide mandate, whose purpose will be to mobilize capital from institutional investors. The team will be based in London and plans to sign its first mandate with the HSBC insurance company, which seeks to invest primarily in senior, investment grade infrastructure debt. In doing so, HSBC is imitating other international institutions that are seeking to capitalize on the appetite for private capital for infrastructure debt. For example, the French bank, Natixis, has also established its own infrastructure debt platform, based on investments from insurance companies. CIBC Asset Management establishes an energy and infrastructure team CIBC Asset Management has just set up an infrastructure and power projects financing team. The team’s mandate will be to take out interests in the form of private placements or public bond issues in the Canadian infrastructure, PPP, and renewable or non-renewable power production markets. This is therefore a new player from the banking industry positioning itself in the market for long-term public and private financing of infrastructure projects. Until now, TD Asset Management and Desjardins Asset Management were the two most well-known Canadian banking institutions active in fixed income infrastructure financing, in competition with the insurance companies that traditionally dominate this market. Bond refinancing for Kingston solar park On October 19, 2016, Connor, Clark & Lunn (“CC&L”), Samsung and a group of co-investors closed a $633 million bond issue for the refinancing of the Kingston Solar project in Ontario. Kingston Solar is a 100 MW project, one of the largest in Canada, located near the city of Kingston, Ontario, which commenced operations in September 2015. The project benefits from a 20-year power purchase contract with IESO. The bond issue, which DBRS rated BBB, will mature on July 31, 2035 and bears interest at a fixed rate of 3.571%. This is CC&L’s second refinancing of a solar park through the issuance of bonds after the refinancing of Grand Renewable Solar — a project of the same size as Kingston Solar — completed in June 2016. Public bond issues are an appealing option for the refinancing of Canadian renewable energy projects. However, the number of transactions completed to date has been relatively modest, in part because of the constraints imposed by the credit rating agencies, which, until now, had encouraged promoters to turn to more traditional types of financing, such as medium-term bank loans or private placements.

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