Lexpert Special Editions

16| INFRASTRUCTURE FINANCING "LENDERS HAVE SOME LATITUDE IN ASSESSING WHAT KIND OF PROJECTS THEY WANT TO PARTICIPATE IN BECAUSE WITH SEVERAL JURISDICTIONS NOW DOING P3s AND A GREATER NUMBER OF NEW VENTURES BEING DEVELOPED, THEY HAVE A GROWING VARIETY OF OPTIONS." banks, sometimes combining with life insurance companies." And there are new players with pension funds and a growing number of dedicated infrastructure funds being added to the mix. "In the past few months, we've seen some new funds being created, and we've seen a combination of life insurers and investment funds leading together on a few projects.  "We're also seeing an additional role being played by Canadian pension funds like the Caisse [de dépôt et placement du Québec] and PSP [the Public Sector Pension Investment Board]. Both have been doing more and more in Canada and abroad — we see them on both sides of bond structures and private placements. These pension funds add a lot of capacity to the market." While things are good, not everyone believes the environment is quite as good as it was prior to the global financial crisis. Before the credit market took a nosedive in 2008, project owners and sponsors actually ran financing competitions to determine the cheapest way to fund these types of large projects, says Lewis of Bull Housser. With the credit chill the rate spread soared to over 400 basis points over LIBOR, the benchmark inter-bank rate, from 100 points, making financing more expensive and dampening enthusiasm. "In some cases you couldn't even finance a project in late 2008 and 2009." While the spread doesn't look like it's going to come back under 100 points any time soon, he acknowledges, "it's now under 200, so it has come back quite nicely." One thing that hasn't come back, says Lewis, is the level of private borrowing that provincial governments and authorities are willing to do on an individual infrastructure project. No one can borrow as cheaply as governments and, when spreads soared, many started using more of the money they themselves raised to fund infrastructure and P3. Not everyone is eager to go back to the old days of paying a higher borrowing cost. "The credit crisis definitely caused public authorities to sharpen their pencils and figure out how much private money they need on each deal. Many provinces had just assumed P3 deals would all be privately financed. Not any more. "As a result of the financial crisis, governments are using only as much as they need so the first question they ask these days is likely to be: 'How much private capital do we need on the deal?''' Even though the answer may be less than five years ago, it is still enough to keep debt markets very interested. With so many aging roads, highways, power plants, electricity grids, hospitals, schools and jails around the country needing updating, there is no short "Th these the N Bord Be tricit is ex energ milli green Sh fixtur "Th in a t 5 per frastr going De of ce Penn "Is "In th proje to th which bond or $4 the d "Th when pricin Lexpert®Ranked Lawyers Gibson, QC, Byran Gilbert, Geoffrey G. McCarthy Tétrault LLP (604) 643-7941 bgibson@mccarthy.ca Norton Rose Fulbright Canada LLP (613) 780-3764 geoffrey.gilbert@ nortonrosefulbright.com Mr. Gibson advises proponents and financiers of infrastructure projects, including transportation, energy, health, justice, recreation and defence developments in BC, Alberta, Ontario, New Brunswick and the federal sector. ROB-Infrastructure.indd 16 Mr. Gilbert practises in the area of project finance, with an emphasis on publicprivate partnerships and infrastructure transactions. He regularly advises project sponsors and lenders, among others, on large and innovative projects in Canada. Gillott, Roger J. Glaholt, Duncan W. Godber, H. John Goldman, Paul L. Gran Osler, Hoskin & Harcourt LLP (416) 862-6818 rgillott@osler.com Glaholt LLP (416) 368-8280 dwg@glaholt.com Borden Ladner Gervais LLP (514) 954-3165 jgodber@blg.com Goodmans LLP (604) 608-4550 pgoldman@ goodmans.ca Stewa (902) rgran stewa Mr. Godber focuses on M&A, corporate finance, private equity, securities and international joint ventures for closely and widely held companies, and regularly advises clients on infrastructure and network transmission projects. Mr. Goldman's domestic and international corporate practice embraces PPPs, project development and financing. His clients have included the Alberta and BC governments and companies in the mining, financial and real estate sectors. Mr. G practi on co comm and a law, in appro speci and r partic He is Mr. Gillott focuses on construction litigation, arbitration and dispute resolution at all levels of court and tribunals. He advises on risk management in construction contracts, and tendering and procurement in the public and private sectors. Mr. Glaholt, FCIArb, is one of Canada's most highly recommended construction lawyers, with experience in energy, infrastructure and mining projects. He is a fellow of both CCCL and ACCL, and author of leading titles on construction law and ADR. 13-08-06 10:06 AM

• Cover