Sea to Sky highway changes hands as Macquaries Essential Asset Partnerships sells 100% of their stake in the project
**** Breaking News update:
In an interesting development which is relevent to the sea to sky news I posted today, I received inside information from an overseas source early this evening that Macquarie Bank has shut down Transtoll, which is a subsidiary of Macquarie Atlas Roads. I was also told that Deloitte is the receiver handling the wind-down, and that in some cases phones have been turned off and employee’s let go.
Fiera Axium Infrastructure Inc., by their own definition, is “an independent portfolio management firm dedicated to generating attractive, long-term investment returns through investing in core infrastructure assets.”
From the news release:
A consortium of Canadian investors led by Fiera Axium Infrastructure Inc. and composed of Fiera Axium Infrastructure Canada L.P., Régime de rentes du Mouvement Desjardins and Nova Scotia Pension Agency (the “Consortium”) today announced it has acquired 100% of the economic interests in the design-build-finance-operate (“DBFO”) concession rights associated with the Sea-to-Sky Highway Improvement Project (“S2S”) and Anthony Henday Drive Southeast Leg Ring Road (“AHDS”) from Macquarie Essential Assets Partnership (“MEAP”). S2S, which serves the Vancouver-Whistler corridor, and AHDS, which forms part of the ring road serving the City of Edmonton, are successful public-private partnerships (“P3s”) with the Provinces of British Columbia and Alberta, respectively. MEAP, a private unlisted fund established in 2003, is nearing the end of its mandate and is divesting of its interests in S2S and AHDS in accordance with the fund’s terms.
“S2S and AHDS are exceptional transportation infrastructure assets with an established operating history, a strong contractual framework and an attractive long-term profile, which aligns perfectly with our investment mandate,” said Stéphane Mailhot, Vice President and Senior Investment Director of Fiera Axium Infrastructure Inc., manager of Fiera Axium Infrastructure Canada L.P. “We look forward to partnering with the Provinces of British Columbia and Alberta, existing subcontractors and local communities to ensure the continuing success of these projects.”
The Province of British Columbia owns the Sea-to-Sky Highway. The S2S concession is a DBFO P3 procured by Partnerships BC to support future economic development within the Vancouver-Whistler corridor as well as transportation requirements for the 2010 Winter Olympic Games. The C$600 million project, completed in 2010, consisted of capacity and safety improvements to 100 kilometres of roadway between Horseshoe Bay and Whistler. The S2S concession also includes the continuing operations, maintenance and rehabilitation of the highway until 2030.
So how much did the consortium pay Macquarie for their stake in the Sea to Sky highway? No one knows. The company has declined to give a dollar value of the deal, the terms of which remains undisclosed, however the new investment lead Fiera states that they intend to keep the current day to day management and operating teams. This means that for now, users of the road should notice no difference.
To my knowledge, this is the first time such a large stake in a government asset has been sold in this manner, and bolsters the argument that P3 projects are only a good deal for the private partners who invest in them, since the terms of the concession agreements are long, and income from the project is nearly a guaranteed prospect.
The Sea to Sky highway deal has been the subject of much speculation and discussion since I revealed confidential documents from the concessionaire Macquarie, which indicated shadow toll payments were part of the deal. Called Vehicle Usage Payments, also known as Traffic Volume or Traffic usage payments, are in addition to the normal maintenance and availability payments made to the operator, and are based on the number of vehicles that travel the highway, the size of those vehicles and the distance they travel. Payments are made monthly from the BC government to the sea to sky operator and although they are capped at some point, the addition of these shadow toll payments beyond the regular maintenance and operation payments ensures a good return on the initial investment of the concessionaire and is an incentive to companies who wish to bid on projects like this one, or to consortiums like the one who now own that stake in the sea to sky.
In this case, the deal goes to 2030 and so Fieria, the Nova Scotia Pension Plan and the third member, Regimes de Rentes du Mouvement Desjardins( 9th largest private pension plan in Canada) stand to benefit from a stable and growing income for their funds over the next 20 years – on the backs of your hard-earned dollars.
This likely explains why Transtoll was awarded a contract earlier this year to ensure the traffic counting mechanisms and the contract, in preparation for this deal. Anyone interested in purchasing a 100% stake would require absolute assurance everything is in order and that the amount of income generated from traffic volume on the highway would meet investment requirements. Mark Hume of the Globe and Mail picked up this story and did an excellent job of covering it in the Globe and Mail.
With this development, the lucrative nature of P3’s as an investment for private companies and consortiums has never been more glaringly apparent. The question is, when they have continually been proved to cost the government, and thus, the taxpayers more than a publicly funded project, why are the BC liberals( Kevin Falcon) still pushing them as good policy? If the return on the investment is so good that pension plans are buying into it, clearly the governments rate of payment on a shadow toll is far higher than one would think makes good,fiscal sense. Will the opposition start asking questions now,
Read the entire history of the Sea to Sky series below, links that include confidential documents and never before revealed details of the deal the government tried to keep most of hidden from the people of BC, as well of the first written record of proceeds from the sale of BC rail being used to pay for the first phase of the Sea to Sky highway.
And since Macquarie has a hand in several other BC projects and seems to be the BC liberal governments pet financier/advisor/profiteer, you might be interested to see exactly what the extent of their holdings are… and ask yourself why so many are in offshore, safe haven tax free confidential countries…? My partner in crime over at Blog Borg Collective is posting a steller A-list shortly. Check it out.
The Sea to Sky Shadow Toll series:
5. Sea to Sky operator awards Transtoll technical advisory contract to ensure accurate shadow toll vehicle counts on the Sea to Sky highway – despite the government making repeated, public denials that shadow tolls even exist