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VIA Rail

While I agree that the commuter rail will take over more of certain short-haul VIA markets, I think VIA will still play a veryimportant role, especially as GO will not go to Quebec City, nor AMT will go to London.

It's sort like longer distance Eurostar trains transiting through shorter-haul TGV lines...

It is not very profitable for VIA to lose a few seats on a long-haul train to satisfy low-priced short-haul, lest these seats stay empty for the rest of the long haul.
VIA will continue in a role to service centres 'off the beaten path'. D-S himself has made no bones about the fact that Montreal to Toronto would have to be run as a (gist) "separate division within the corporation". That is to hive it off from the rest of the loss plagued corporation. So why stop there? Why not see if the provinces (Ont, Que) are ready, willing and able to do it themselves, and fully meshed with their commuter operation, such that these runs are integral with commuter runs, and *run by the same staff*. No more sheds in Mimico either side of the tracks, doing almost the same thing, and sales, service, operating staff overlap. Eurostar, btw, is private, albeit with good chunks of the national rail companies owning it, and running over private tracks once in the Chunnel and on HS1.

Alors!

Eurostar:
[SNCF (55%) Caisse de dépôt et placement du Québec (30%) Hermes Infrastructure (10%) SNCB (5%)
https://en.wikipedia.org/wiki/Eurostar_International_Limited

Eurotunnel issues shares (as to who owns what is vague)

HS1:
The concession was awarded to a consortium of Borealis Infrastructure (part of Ontario Municipal Employees Retirement System) and Ontario Teachers' Pension Plan in November 2010,[14] but does not include the freehold or rights to any of the associated land.[15]
https://en.wikipedia.org/wiki/High_Speed_1

Any of those names sound familiar?
 
Eurostar: [SNCF (55%) Caisse de dépôt et placement du Québec (30%) Hermes Infrastructure (10%) SNCB (5%) https://en.wikipedia.org/wiki/Eurostar_International_Limited

HS1: The concession was awarded to a consortium of Borealis Infrastructure (part of Ontario Municipal Employees Retirement System) and Ontario Teachers' Pension Plan in November 2010,[14] but does not include the freehold or rights to any of the associated land.[15]
https://en.wikipedia.org/wiki/High_Speed_1
How Canadian! The future investors of TOM HFR.
 
The UK newspapers were awash with headlines to the effect of "Canadians buy our railways" at the time, (the concept of British retirement funds doing same is alien to them) but here's Heather Mallick (usually of TorStar) writing in the Guardian on it:

[It is ironic to hear Brits bemoaning the possible sale of their one rather dishy fast railway track – High Speed One from St Pancras International to the Channel Tunnel – to a bunch of retired Canadian teachers. It's too late for Britain now. Any society that would allow the sale of its phone, electricity, gas and water to private companies, particularly foreigners, decades ago and then complain about losing Cadbury chocolates... well, your values are skewed.
[...]
The attempt to purchase the 30-year concession for the High Speed One route is part of a trend.][...]
http://www.theguardian.com/commentisfree/2010/jun/27/rail-link-sale-canadian-teachers

That was six years ago. Things have changed for Canada, and the more I read and delve, the more obvious it becomes that D-S is out in front on this. There's huge pools of money sitting idle in this nation, losing value unless it's invested. What Alexander posted yesterday is indication that it's being seriously discussed. I'm optimistic we're on the edge of a major shift.
 
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How Canadian! The future investors of TOM HFR.

People forget that those investments are made in a completely different regulatory, financial and operational environment.

I'm surprised by the assumption here that they'd accept just interest on a $2-4 billion loan. In the UK, they actually own the infrastructure (as in the rail corridor).
 
Are you sure it will ultimately just be interest?

VIA has shown some suggestive flexibility on terms of HFR investment. They might change things around and the corridor might actually be owned by a consortium this time around to sweeten the deal a little bit.

The Ontario Teacher's Pension Fund has been powerful enough to lobby foreign governments and government-owned corporations into changing rules for them....sometimes. Almost a fifth of a trillion dollars already. It is right up there in one of the world's biggest gorillas, virtually in the same leagues as Norway's trillion dollar sovereign wealth fund and other world's biggest pots-at-end-of-rainbows.

(Interesting tidbit: Consider, there's only 183,000 teachers alive administered by this fund, retired AND non-retired, at a million dollar invested assets per teacher, that's far more "per-capita" than Norway's much storied sovereign wealth fund of lore!)

I suspect they're certainly capable of pulling out a very favourable compromise out of VIA/federal that's still far more politically palatable to Canadians than the opportunity loss of 407 West (R.I.P.). And still domestically owned for the win.

(...EDIT: apparently 407 is gradually bit-by-bit being purchased back by various domestic pension funds (CPP, OTPP) over the years [1] [2] with varying levels of successes...)

It might not happen.
But do not underestimate Ontario Teacher's Pension Fund's ability to rewrite government rules a little bit.
 
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Question: What's the delta on the interest between using a straight loan (like most infrastructure is financed by) and the interest expected from a pension plan investment? Is it about the same?
 
Question: What's the delta on the interest between using a straight loan (like most infrastructure is financed by) and the interest expected from a pension plan investment? Is it about the same?

Pension plans aren't looking for enormous rates of return. What's most important is that the asset base is protected from drops in value, and the return is stable and assured over the life of the investment. In this respect their interest in infrastructure is because it looks more like a GIC or a bond than a credit card. Pension plans have fairly long horizons. Slow and steady is good, what they don't want is to ever have to recover from a drop in value.

- Paul
 
Really? I am not aware of any huge pools of money in this country that are sitting idle.

Sure. But the taxpayer may ultimately pay more simply to have the pension plan finance this, instead of adding to the national debt.

All to avoid the optics of Ottawa investing $4 billion in VIA.
 
Pension plans aren't looking for enormous rates of return. What's most important is that the asset base is protected from drops in value, and the return is stable and assured over the life of the investment. In this respect their interest in infrastructure is because it looks more like a GIC or a bond than a credit card. Pension plans have fairly long horizons. Slow and steady is good, what they don't want is to ever have to recover from a drop in value.

- Paul

Thanks! It seems like infrastructure would definitely be a good investment for them then. I wonder what types of steps the government(s) could take to encourage pension plan investments in Canada, instead of abroad?
 
Thanks! It seems like infrastructure would definitely be a good investment for them then. I wonder what types of steps the government(s) could take to encourage pension plan investments in Canada, instead of abroad?
make the available returns equal? Even then you won't get all of the investment because geographic diversity is an important measure for any large pension plan (any large pool of capital really).
 
Sure. But the taxpayer may ultimately pay more simply to have the pension plan finance this, instead of adding to the national debt.

All to avoid the optics of Ottawa investing $4 billion in VIA.
Unless the pension plan is willing to accept a return that is lower than the government's borrowing rate....that is a given.

The reall advantage (IMO) to attracting pension fund investment is that the government can do more. If, say, a government had $100B to invest in infrastructure that would build X number of projects.....but if they took that money and spread it around to more projects to invest/subsidize them to a level that they generated returns for pension plans they would be using leverage to get more done. But, no, it is not a cheaper way to get things done.
 
Thanks! It seems like infrastructure would definitely be a good investment for them then. I wonder what types of steps the government(s) could take to encourage pension plan investments in Canada, instead of abroad?

The biggest difference is that the investment has to be proposed and operated in a way that is transparent and meets fiduciary duty to the investor. That's different than how government operates infrastructure when the only accountability is to the taxpayer. The usual management by press release and photo op approach won't suffice. Rules for documenting the investment prospectus, and performance and financial reporting such as the annual and quarterly statements would be held to standards that are closer to what you see with equity investments.

Institutional investors employ analysts whose job is to keep tabs on things, ask tough questions, and if they don't like the answers, ask tougher questions.

In the case of VIA (or Metrolinx), government would have to be transparent as to cost, project schedule, etc. Imagine if the TYSSE had been funded by pension plan investment. Or the TTC Flexity order. Or the Georgetown South project.

- Paul
 
Some excellent points!
In the UK, they actually own the infrastructure (as in the rail corridor).
Actually not with HS1:
[Milmo, Dan (28 January 2011). "Highest bidder asks why it lost Channel tunnel rail link sale". The Guardian (London). Retrieved 2 February 2011. [the] transport secretary … stressed that the deal did not include the railway's freehold or the land itself.]
https://en.wikipedia.org/wiki/High_Speed_1#cite_note-15

This is an very important point, as D-S addressed this (in gist if not detail) with using CN and CPs' RoWs. The track investors would have to come to some sort of arrangement with the two, and CN is on record as stating: "We don't have anything for sale"...."Sale" is key! This is where the Railway and associated Acts will have to be changed. Certainly precedents have been established legally in the past in Canada to doing this. Tricky....but it might be necessary unless some *fair* arrangement is bartered, which is what the Feds would prefer. In the UK's case, ostensibly the Crown owns the lands. CN and CP would also still own theirs. It's the *access* to it that an Act of Parliament can mandate. I'll delve on the Railway Act to find the relevant section, as it is a crucial point, and will come up in discussion. It has to.

Are you sure it will ultimately just be interest?
Answered by another poster, but I'll add that they can flip it at any time, albeit it would have to be run past a Federal agency to do it (approved or not, with conditions and caveats or not). As Paul discusses, done right, these folks are *extremely adept* at doing what they do. Canada is now noted for their prowess, not just in the investments, which are many worldwide, but in *accumulating the wealth to begin with*. There is a bit of stridency about them though, as other unions will attest. They're out for number one! But those are the people you want to do business with. They know how to succeed.
The Ontario Teacher's Pension Fund has been powerful enough to lobby foreign governments and government-owned corporations into changing rules for them....sometimes. Almost a fifth of a trillion dollars already. It is right up there in one of the world's biggest gorillas, virtually in the same leagues as Norway's trillion dollar sovereign wealth fund and other world's biggest pots-at-end-of-rainbows.
[...]
But do not underestimate Ontario Teacher's Pension Fund's ability to rewrite government rules a little bit.
They carry a *very big stick* and one
Governments like to swing, even by association. I'm sure if Alexander's details of back-room machinations are correct (and I have confidence they are) then most of what they will be discussing is financial and legal logistics as much as the rail logistics themselves.
Really? I am not aware of any huge pools of money in this country that are sitting idle.

I've just done a cursory dig to ascertain what many of us know: Cash is in large pools from Corporations, let alone Retirement Funds *worldwide*!. Canada is very much in that camp. That's exactly why IRs are so low, velocity of money is very slow, Central Banks are *enticing* that money to move and multiply. The Feds can stimulate fiscally by making deals exactly like this one. Good for all concerned! It's an investment in the future multiplied again by using private capital.

Pension plans aren't looking for enormous rates of return. What's most important is that the asset base is protected from drops in value, and the return is stable and assured over the life of the investment. In this respect their interest in infrastructure is because it looks more like a GIC or a bond than a credit card. Pension plans have fairly long horizons. Slow and steady is good, what they don't want is to ever have to recover from a drop in value.
Bingo! Extremely important. And that brings MD's point back into play. Gov'ts will bend over backwards to (in effect if not directly) underwrite their investment. It won't completely allay all risk, but enough to allow leveraging that investment with money borrowed (from other pools on the wholesale market) at the lowest rates possible. That's where Gov't Bonds might also come into the picture, considered the safest investment you can make. Next are projects like this one. People will always need transport. Do it right, and risk is absolutely minimal.

Thanks! It seems like infrastructure would definitely be a good investment for them then. I wonder what types of steps the government(s) could take to encourage pension plan investments in Canada, instead of abroad?
Excellent question. Finance is typically a very droll topic, but it's *key* to making this work, so the Guv will do *anything within reason* to underwrite this if need be. That will probably get nasty in the House, someone will always accuse any government of 'giving away too much'...that's just good oversight and accountability, but again, I suspect Morneau is in as deep as Garneau is on this. Remember, Transport has to "slash spending". Watch for that to be wound into this.

I forget who asked the question "What pools?".

Just realized I still have this up on the taskbar:
[...][The data herein is designed to illuminate the role that large institutional investors can play in providing a source of stable long-term capital, consistent with the objectives and directions as set for in the February 2013 communiqué from the G20 Finance Ministers and Central Bank Governors. This data will help to provide insights and detailed investment information which complement the administrative data gathered by the OECD at a national level through the Global Pension Statistics project.][...]
https://www.oecd.org/pensions/private-pensions/2014_Large_Pension_Funds_Survey.pdf

To answer another excellent question someone asked, pardon me for not referencing, rushed here: How to get that money invested in Canada? *Sovereign Tax Breaks*. I'm really out of my element now, but it's an excellent point. There are ways, and sheltering it domestically is one. We *do* have to get them interested in doing this. If they're saying nothing right now...that's actually a very good thing. They didn't say "no!". They're thinking about it, and probably waiting for sweeteners, and as Paul indicates, that's not just cash, its an *assured long term investment* with a government that will cover their backs.
 
Speaking of VIA rail, it might be that Metrolinx is already talking to Federal/VIA Rail behind the scenes, see section A.8.4 of the recent RER Business Case Appendix A, screenshotted below.

upload_2016-4-13_13-43-2.png



....You know the big recently released 180-page GO RER Business Case document? It's got an even bigger 273-page separate Appendix A document released last month. It includes small hints of long-term VIA HFR/HSR frequencies ("provisions" being the key word -- ability for the corridor to eventually accomodate). And apparently, the Peterborough corridor is still "on the table" as of 2016.

That detail about probably didn't get slipped into a Metrolinx document, without Metrolinx and VIA talking to each other already (!).
 

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