Etienne Massicotte, François Paradis, Natasha L. Gould
Apr 2, 2015
On March 19, 2015, the Québec Minister of Finance tabled An Act to allow the Caisse de Dépôt et placement du Québec to carry out infrastructure projects (Bill 38), which empowers the Caisse de Dépôt et placement du Québec (the Caisse) to manage and carry out infrastructure projects. Bill 38 provides for amendments to legislation that allow the Minister of Transport, with the authorization of the Government, to enter into agreements with the Caisse de dépôt et placement du Québec relating to public transit infrastructure projects (among other issues).
Amendments to the Québec Legislation
Bill 38 includes amendments to the following legislation:
- Act respecting the Caisse de dépôt et placement du Québec;
- Act respecting the Ministère des Transports;
- Transport Act;
- Public Infrastructure Act; and
- An Act respecting municipal taxation.
The Government will define the public interest objectives that each project should achieve and will select specific projects from alternatives provided by the Caisse. An independent evaluation conducted by the Caisse, for each infrastructure project, must show a potential for commercial return on its depositors’ investments given the level of risk taken on. An independent third-party expert must validate this assessment of potential through an exercise in benchmarking against current market practices. These third party experts will be selected from a predetermined list of approved third parties.
Project Implementation and Management
Once the Government has authorized a project and an agreement is entered into, the Caisse will have full authority over implementation and management of the project in question. The Caisse’s management power will extend to setting rates for the use of the public transit infrastructure it has put in place. Furthermore, the terms and conditions governing the operations of the infrastructure set forth in the agreement between the Minister of Transport and the Caisse will be binding on subsequent purchasers.
Any public transit infrastructure project undertaken by the Caisse pursuant to an agreement with the Minister of Transport will not be subject to the provisions of the Act respecting the Agence métropolitaine de transport, the Act respecting intermunicipal boards of transport in the area of Montréal or the Act respecting public transit authorities. Bill 38 also provides for an amendment to the Public Infrastructure Act which will allow a particular public infrastructure project to be excluded from the management rules set out therein.
Provisions Facilitating Projects
Through an amendment to the Act respecting the Ministère des Transports, the Minister of Transport will be granted the power to acquire by expropriation, on behalf of the Caisse, any property needed for the purpose of implementing a public transit infrastructure project for which an agreement has been entered into.
Public transit infrastructure, as well as the land on which such infrastructure is built, will be exempt from municipal and school taxes pursuant to an amendment to theAct respecting municipal taxation.
Equity Investment Capabilities of the Caisse
The Act respecting the Caisse de dépôt et placement du Québec will be amended to enable the Caisse to acquire and hold common shares of legal persons whose principal activity consists of making investments or carrying on other activities related to infrastructure. Such holdings will be subject to certain restrictions including the following:
1. If the securities are issued by a legal person whose principal activity consists of carrying on activities related to infrastructure, the Caisse may not:
- hold securities conferring voting rights issued by the legal person in excess of the following proportions:
- 51% of the issued and outstanding securities or of a class of securities at any time until the end of the fourth year after the beginning of the operation:
- 45% of the issued and outstanding securities of a class of securities at the time the operation begins as of the end of that fourth year; or
- acquire securities that bring its total investment in securities issued by the legal person or by all the legal persons whose respective principal activities relate to infrastructure to more than 3.5% of its total assets.
2. If the securities are issued otherwise than by a legal person whose principal activity consists of carrying on activities related to infrastructure, the Caisse may not:
- hold more than 30% of the common shares or of a class of common shares of a single legal person; or
- acquire securities that bring its total investment in a single legal person to more than 3.5% of its total assets in the case of a legal person whose principal activity consists of making investments related to infrastructure.
The restriction provided for in 1(a) does not apply to the holding or acquisition by the Caisse of securities referred to therein, where they are issued by a legal person whose principal activity consists of carrying on activities related to public infrastructure in Québec.
Despite the 30% limit described in 2(a) above, the Caisse may acquire and hold all (and no less than all) the issued and outstanding shares of a legal person whose principal activity consists of making investments related to infrastructure. Once it holds all such shares, the limit on total investment described in 2(b) ceases to apply.
New Approach to Financing Infrastructure
Bill 38 will create a fresh approach to financing and managing infrastructure projects relating to public transit. The task of developing infrastructure in Québec has traditionally been reserved for government but the powers granted to the Caisse under Bill 38 indicate a shift towards the privatization of public transportation infrastructure. This new model, put forth by the current government, offers a promising solution to accelerating the pace of new infrastructure investments in the province of Québec.