Two years since it launched, the nascent Canada Infrastructure Bank (CIB) is moving forward with what could be its first investment in B.C.
At this stage, the federal Crown corporation will help the City of Richmond develop the largest district energy system in North America – one that services 50 million square feet of residential and commercial spaces with energy from geothermal, sewer and other sources, and will reduce greenhouse gas emissions by up to 80%.
“That’s a big move,” said Clay Adams, director of communications and marketing for the city. “The next step is how we make that happen.”
The city has signed a memorandum of understanding (MOU) with the CIB to further develop the project, which involves Lulu Island Energy Co. – the city’s wholly owned municipal corporation – and Corix Utilities, part of Corix Infrastructure Inc., which is owned by the British Columbia Investment Management Corp.
Under the plan, the city would raise the amount of space connected to district energy systems by 1,289%. The current systems, which produce centralized energy for the heating, cooling and domestic hot water of 3.6 million square feet of residential and commercial space, rely largely on geothermal energy sources. Expansion plans include the creation of a major energy plant that can extract heat from the Gilbert Road sewer, which could generate enough energy for most of the heating needs of communities around the Richmond Olympic Oval.
Details about the project’s timeline and potential cost have not been disclosed. The size of the CIB’s potential investment depends on the financial structure of the project, which is one of the areas to be explored further under the MOU.
Pierre Lavallée, CEO of the CIB, said the Lulu Island Energy investment will fall somewhere between the bank’s smallest and largest investments to date – up to $20 million to upgrade water and waste-water infrastructure in Ontario’s Township of Mapleton, and $2 billion to expand regional transportation in Greater Toronto and Hamilton.
“It fits squarely with our strategy,” Lavallée said. “I think the Lulu Island Energy Co.’s project to massively increase the reach of the district energy footprint is a really interesting, innovative way to deliver low-greenhouse-gas-emission heat and cooling services to a broad segment of the population in Richmond. So really exciting.”
To date, the bank has committed nearly $3.4 billion of its $35 billion, 10-year investment mandate in four projects. Three of those four projects – all of which are tied to infrastructure in Ontario or Quebec – were announced within the last three months.
Critics have called the CIB out for delays in deploying its capital. Lavallée sees progress.
In its first quarter this fiscal year, the CIB has assessed 39 infrastructure projects with an estimated capital value of $17 billion. Twenty-five of them are undergoing reviews or active due diligence, including nine green infrastructure projects and seven broadband-related proposals. They are located across the country, Lavallée said, including B.C.
The bank expects to evaluate about 100 projects this fiscal year, and it now has a “significantly larger” team of 40 with the capacity to review projects simultaneously – a capability it didn’t have a year ago.
“We are still getting up and running,” said Lavallée, who has been in his role as CEO for a little over a year. A large part of the past year has involved communicating with governments and investors about the role of the bank and the function it can serve. (He noted “strong receptivity” from all levels of Canadian governments, and “strong interest” among international investors about investment opportunities in Canada.)
What the bank does and how it does it will necessarily vary project to project. The bank has the capacity to invest anywhere in a project’s financial structure, allowing it to balance a project’s risk-reward equation to further attract private-sector and institutional investment – part of the bank’s mandate – which may not otherwise flow to a particular project.
Lavallée previously told BIV that the bank’s goal is to attract a multiple of its investment in any given project, which needs to be a project that generates revenue. Its ultimate goal, he said, is to help get key Canadian infrastructure built.
“Part of our role is to understand that dynamic and potentially find a solution where our capital and our positioning in the capital structure and our risk-reward equation – which is different [than that of] private-sector investors – can help bring a project to life that otherwise would not come to life.” •