Law Times

PAGE 10 FOCUS July 27/August 3, 2009 • lAw times P3 projects look to ride out credit crunch BY IAN HARVEY For Law Times investing capital into Canadian infrastructure, it turns out for- eign investors are not just at- T ake a bow, Canadian legal system, you deserve it. When it comes to was discovered the underlying as- sets were worthless Asset-Backed Commercial Paper and partly because what's left is a precious resource, which must be jealously and conservatively guarded. Simply put there just isn't that much cash to go around anymore. targeting "shovel-ready" projects. It really doesn't do much for the larger infrastructure project and the option, the Public-Private Partnership, which cash-strapped governments have been increas- ingly relying upon to build health centres, schools, ports, border crossings, roads, and bridges. The lending community is also vocal in saying funds are available, though not at the terms and conditions we've seen in the past. tracted by our stable economy and political system, it's our ju- diciary they also love. In the fallout from the global credit crisis there's been a massive retrenchment of capital, partly be- cause much of it vanished when it While the recent stimulus packages announced by the federal and provincial govern- ments are expected to bootstrap the construction sector back into action later this year and early next year, that money is Get 2 years (80 issues) of information packed issues for only $175.50 Save 35% This offer expires: September 15, 2009 Subscription Special! Summer Make the time for Law Times and keep up with all the developments in Ontario's legal scene. Now, you can save 35 percent off the regular price when you take advantage of our special two-year-rate! Subscribe today and get: • A 2-year subscription to Law Times (That's 80 "must-read" issues, delivering news, features and analysis by some of the province's most trusted legal writers and columnists)... $175.50 — That's a 35% savings! • Unlimited access to the Law Times digital edition and to our digital edition archives...FREE • Canadian Legal Newswire, a weekly e-newsletter from the editors of Law Times and Canadian Lawyer delivered to your inbox every week...FREE As a result P3 projects not yet green-lighted have been sit- ting on the sidelines waiting for the dust and smoke to clear and to see what kind of funding is available since without the in- vestors, moving ahead will be problematic to say the least. And there's some good news, says Jane Peatch, executive direc- tor of the Canadian Council for Public-Private Partnerships. "It hasn't been a huge slow- down but it has slowed," she says. "But there is a good news story and that's foreign inves- tors are not abandoning North America and Canada." She said P3 sector meetings last April in Toronto were partic- ularly gloomy with a lot of un- certainty about how much capi- tal would be left in the market available for investment, particu- larly among foreign investors. "Th ey've been hit hard, especially in Europe and they've had to pull back in many cases," she says. But the most recent sum- mit of stakeholders in the Ca- nadian P3 landscape in Van- couver last month was much diff erent, she says. "It was much more buoyant," she says. "So then we sat down with the foreign investors and asked them why they were not pulling back from Canada and what attracted them to stay." Th e answers were interest- ing, she says, and highlight things we Canadians simply take for granted. "Th ey said they were attracted q YES! 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L4G 3S9 Tel: (905) 727-0077 Fax: (905) 841-4357 by our stability and our banking system which was robust com- pared to other countries," she says. "Also, they liked the stability of our government which was also seen to be managing the economy prudently. Th ey don't like part- nering with a government which is about to go bankrupt." Finally, she says, the foreign investors also liked the inde- pendent judiciary. "In many countries around the world the judiciary is politicized," she says. "Th at results most often in the judges siding with the gov- ernment if the wheels fall off the bus. In Canada they are confi dent they can go to court if a dispute arises and get an independent deci- sion free of political interference." Still, there are still many challenges in the new reality, SubAd_LT_July13/20_09.indd 1 7/22/09 4:51:55 PM she says, not least of which are that loans are not going to be for 35-year terms and that there just isn't the same amount of money available. "Th at means there are going to be some risks for refi nanc- ing after fi ve to seven years on some of these P3 projects," she says, noting the next six to eight months will also be critical in getting a clearer picture. In the interim, notes Ian Hous- ton, a construction law specialist at Borden Ladner Gervais LLP in Toronto, the support from ju- risdictions like British Columbia and Quebec for P3 is a welcome boost to the sector which has been feeling the pinch of late. "Certainly, Quebec Premier Jean Charest paying at least lip service," he says, noting the de- parture last month of Quebec P3 president Pierre Lefebvre and the departure of half the board casts a shadow over the province's com- mitment to the concept, which has been under unfl agging at- tack by trade unions. Faced with higher fi nancing costs, Alberta has also thrown in the towel and will build four new high schools on the public tab, scrapping plans for a P3 ar- rangement which also included maintenance and, according to some reports, would have cost twice as much as credit costs rise and terms shrink. Th e slowdown in P3s might in fact be welcome, Houston says, with the sector becoming somewhat overheated in the last couple of years, especially in Ontario and B.C. "Th e lending community is also vocal in saying funds are available, though not at the terms and conditions we've seen in the past," he says. Th e projects moving ahead under the stimulus packages are the shovel-ready jobs, he says, and many had been moth- balled because of lack of funds until the governments made money available. P3s on the other hand, are of- ten design-build and the process is much longer. 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