Canada’s robust pipeline and EV push

Canada has presented lucrative infrastructure and renewable energy deals for the first half of 2019, each showcasing extremes of the spectrum for greenfield and secondary market opportunities, and in particular a push for EV charging. Join inspiratia in November as it brings together EV charging leaders from across the globe for key business insights at EVS Whistler 2019.

In 2018 Canadian infrastructure boasted a deal volume of over US$7.9 billion (£bn €bn) in greenfield transactions alone. Renewables reached similar levels at US$6.96 billion (£5.6bn €6.2bn) in total deal volume, led by the secondary market.

The momentum witnessed in H1 2019 is no different, as the Canadian government shifts its attention towards laying the groundwork to create a conducive environment for EVs and charging infrastructure.

According to Electric Mobility Canada – a not-for-profit organisation – in Q1 2019 EV sales increased 21% compared to Q1 2018. British Columbia recorded the largest growth of 100%.

With several projects and trials actively investigating, for instance, EV charging efficiency in very cold climates (Yukon), bi-directional EV charging capabilities (Ontario), level-two EV charging in multi-unit residential buildings (Vancouver), Canada is well placed to capitalise on the electrification of transport.

EVs

In the first half of 2019 Canada has been gearing up to deploy commercial electric bus fleets across the country.

On 28 May, Canada joined international Drive to Zero Pledge, which aims to increase the number of zero and low-emissions vehicles for the medium- to heavy-duty transportation sector.

On 25 June 2019, electric bus manufacturer Beyond Your Dreams (BYD) – headquartered in Los Angeles – expanded its operations in Ontario with a brand new 45,000 square-foot assembly plant. According to BYD, the first fleet from the new plant will be focused on supplying the Toronto Transit Commission, Canada’s largest transit operator.

In Vancouver, overhead charging systems for heavy-duty buses are due to launch over the summer. Electric bus fleets will be piloting the new overhead charging systems in Downtown Vancouver and routes to Burnaby. The US$7.8 million (£6.2m €6.95m) project forms part of the TransLink electric bus demonstration and integration trial implemented by the following partners:

· Siemens

· ABB

·  New Flyer

·  NovaBus

· City of Vancouver

· BC Hydro

· CUTRIC

Infrastructure

Infrastructure deal flow in Canada is driven by its pipeline of greenfield PPP projects. Total transaction volume for H1 2019 is currently US$1.97 billion (£1.57bn €1.76bn) according to dataLive, inspiratia’s database.

Annual greenfield infrastructure deal flow by financing mechanism, 2014-H1 2019

Source: inspiratia | datalive

The first deal to reach financial close in 2019 was the Can$173 million (£105m €117m US$131m) Tlicho road project PPP. North Star Infrastructure – a consortium consisting of Kiewet, Miller Group and EPC Thurber Engineering – was awarded the project in November 2018 under a 25-year concession contract, beating two teams led by Graham and Eiffage, respectively. Some 75% of the project is financed by the private sector, with the remaining 25% financed by Canada’s federal government via the P3 Canada fund. A total of US$173 million (£138m €154m) in debt was raised from SMBC and the National Bank of Canada.

Two other deals closed by Q2 2019, the largest of which was the second phase of the Can$1.6 billion (£920m €1.1bn US$1.2bn) Trillium Line Extension project in the city of Ottawa. SNC-Lavalin subsidiary, TransitNEXT, is the sponsor of the project and as reported raised Can$2.4 billion (£1.3bn €1.6bn US$1.7bn) for the light rail development, which includes financing for the Confederation Line extension. Financial agreements between TransitNEXT and the City of Ottawa include a fixed-priced contract worth Can$663 million (£380m €443m US$496m) in which SNC-Lavalin provided Can$136 million (£78m €91m US$101m) in an upfront private deferred contribution payment.

Secondary market

Continued success with greenfield deals has also resulted in increasing appetite for secondary transactions, particularly in H1 2019, as seen below.

Year-to-year secondary market deal flow comparison, H1 2015 – H1 2019

https://www.inspiratia.com/Content/images/view.ashx?imageID=55271694-b1cf-4863-a0ee-fa7b46dbd8e8

Source: inspiratia | datalive

The first transaction was the acquisition of Tidewater Transportation & Terminals, a multi-commodity transportation and terminal company headquartered in Vancouver. A group consisting of BlackRockUllico, private investment firm Upper Bay Infrastructure Partners and Silverfern acquired the business from New York-based private equity firm Stonepeak Infrastructure Partners for an undisclosed value.

The second deal was the Billy Bishop Airport Passenger Terminal Sale. A Nieuport Aviation Infrastructure consortium – including Instar GroupAGF as well as other unnamed institutional investors – bought the terminal from Porter Aviation Holdings, reportedly using Can$105 million (£56m €75m US$84m) in equity and the rest from debt sourced from National Bank of Canada, Desjardins and Scotiabank.

Renewables

While infrastructure was dominated by greenfield transactions, the secondary market drives Canada’s renewables deal flow.

2019 kicked-off with the 55% acquisition of the AltaGas hydro portfolio, which sold for Can$1.4 billion (£801m €914m US$1.1m) on 4 February 2019. Energy infrastructure company AltaGas offloaded its shares in three hydroelectric plants of a total combined capacity of 304MW in north-west British Columbia to an Axium Infrastructure and Manulife Financial Corporation joint venture.

Annual renewables deal flow, 2012 – H1 2019

https://www.inspiratia.com/Content/images/view.ashx?imageID=c5e1f29b-dea9-47e2-8ebf-1349301affc7

Source: inspiratia | datalive

Included in H1 2019’s deal flow is the refinancing of a solar portfolio under Canadian Solar subsidiary Recurrent Energy. Circa US$50 million (£38m €44m) was raised as a letter of credit from Natixis on 15 April 2019. According to dataLive, the debt will be used to support security obligations under power purchase agreements and interconnection agreements for development-stage projects.

In the greenfield pipeline is the 57MW Prairie Sunlight II & III solar PV portfolio in Alberta. As reported, German utility innogy took over the development of the two solar plants from Solar Krafte Utilities in February 2019.

As seen in the chart above, greenfield renewable deal flow decreased from 2015, while aggregate deal flow – including refinancing and acquisitions – fell over 90% between 2015 and 2017.

The decline in deal flow for said period is attributed to sufficient capacity being reached by respective provinces, decrease in demand, or challenges with distribution.

Additionally, prime minister Justin Trudeau’s Can$125 billion (£61.8bn €81.5bn US$88bn) infrastructure plan only allocated a third of the budget towards green infrastructure, while the definition of green infrastructure was left unclear.

However, sources point out that the definition most likely referred to carbon footprint reduction and to the development of electric transit systems.

Click here to register and find out more about inspiratia’s Electric Vehicle & Sustainability Summit in Whistler, Canada, taking place 19-22 November 2019.