Structuring successful P3s
Experts on the frontline of the sector discuss the P3 market in Canada including the introduction – and impact – of the progressive model and the advancement of much-needed change in the space
More
FOR THE LAST 50 years, Canada has faced an acute infrastructure shortage, with the concept of the public-private partnership coming to the fore about 25 years ago. And while governments are responsible for addressing this gap, they’ve faced significant challenges delivering projects that were on budget, on time, and offered corresponding value for money.
“Governments govern, they don’t build bridges,” says Brian Kelsall, partner at Fasken Martineau DuMoulin LLP, adding that this lack of expertise coupled with insufficient capital and the long timelines for these projects in relation to a government’s time in office meant “infrastructure development needs were kicked down the road – and they’ve continued to be.”
It’s of significant debate whether the shift was worth it, and it remains to be seen what the impact will be, but Templeton identifies one area of friction right off the bat. From the authority’s perspective, he says the new model will undoubtedly result in better infrastructure at the end – but on what timeline and at what cost?
“How can you have price competitiveness with one bidder? That’s a key issue,” he says. “But the idea is as your pre-development phase progresses, contingencies are taken off the table so there potentially are cost savings there.”
Another benefit could be the ability to negotiate better pricing with subcontractors and lending groups, but the reality is it’s too early to tell on that point, Templeton notes, adding there’s another issue progressives don’t address.
“We’re busy – there are huge, complex projects being procured in this
“We need to be mindful of what we’ve got next door to us,” he says, in reference to the decarbonization agenda and US President Joe Biden’s recent changes. “We’ve got to make sure Canada still has an attractive P3 landscape.”
So where will the Canadian market go from here? Potentially an engineered swing-back, Kelsall says, reintroducing greater competition and more players without throwing out the collaborative approach to scope and price, which “has a lot of legs.”
“I certainly wouldn’t say it’s not working – it is. But it’s much easier to look back at the old methodology and come up with five reasons why they needed to change it. Here, it’s early days.”
Value (millions of dollars) $15,441
millions
Investment in Canada, total assets and industries
way – but you add them all up, I’m not sure from a volume perspective and from a contractor involvement perspective we are where we were 10 years ago.”
As Templeton’s watched the process of developing pricing methodologies, Kelsall too sees the lack of competition as an area of concern. Though at times the traditional model may have driven undesirable results – i.e., low balling – “here it’s gone almost the other way,” he says.
“The entity holding the stick is the authorities – they’re the ones taking that responsibility. Do they have the horses to do that? And is it going to create the kind of dynamic value that was present at least in some periods of the prior methodology?”
Progressive models are meant to bring more participants to the market, but that hasn’t come to fruition, Kelsall says, pointing to the UK’s White Frasier Report, which discusses the loss under the progressive model of expertise and oversight that equity players and funders have historically brought to the table.
Templeton says more can be done, but it’s got to strike the balance of getting the risk allocation right, achieving authority policy objectives, and giving equity participants enough incentive. As we’ve seen in Canada and around the world, it’s easier said than done, but otherwise, Templeton predicts a scarcity of resources on the horizon.
Fasken is an innovative and forward-thinking business and litigation law firm, founded in Canada in 1863. As the largest law firm in Canada, our team of over 950 lawyers provides expertise in every sector, including complex and high-profile matters across more than 130 practices and industry specialties. We are a bilingual firm, operating in both English and French and practising both common and civil law. With regional representation in 10 offices in Canada, the United Kingdom, and South Africa, we provide a global reach across three continents.
Find out more
Stikeman Elliott LLP is a global leader in Canadian business law, offering creative solutions to clients across Canada and around the world. The firm provides the highest quality counsel, decisive advice, and workable solutions through offices located in Montreal, Toronto, Ottawa, Calgary, Vancouver, New York, London, and Sydney. With an exceptional track record on multijurisdictional matters in the US and internationally, Stikeman Elliott ranks as a top firm in its primary practice areas, including mergers & acquisitions, securities, business litigation, banking and finance, competition and foreign investment, tax, restructuring, energy, real estate, project development, employment and labour, and pensions.
Find out more
When asked where the future of infrastructure lies in Canada, Templeton says the fact that P3 lawyers now call themselves “energy transition lawyers” is a big clue. Joking aside, he adds, whatever your beliefs on the transformational change that will be needed to meet climate goals, progressives should be just one form of procurement.
“If we’re going to get to the decarbonization limits we need to get to, we need a full spectrum,” he says, noting that another opportunity lies with Canada Infrastructure Bank, which is now rightly being seen as a conduit to bring in much-needed private capital.
Templeton calls for a more coordinated national infra strategy overall, with the key stakeholders of the provinces, feds, municipalities, First Nations, and private sector coming together to build an environment where foreign and domestic participants want to be involved. This is a chance to reinvigorate the whole P3 landscape in Canada.
“The entity holding the stick is the authorities – they’re the ones taking that responsibility. Do they have the horses to do that? [That’s question one.] And is it going to create the kind of dynamic value that was present at least in some periods of the prior methodology?”
Brian Kelsall,
Fasken Martineau DuMoulin LLP
In Partnership with
“Governments are trying to reduce the time of the procurement, make them less costly, and introduce more input into the design,” Templeton says, adding that while not a binary change, there’s been a marked paradigm shift. “Time will tell if they can deliver on all of those.”
Kelsall points to the COVID-19 pandemic as the catalyst for the change, exacerbating existing issues in the traditional model. Authorities faced mounting tension to balance critical factors: encouraging participants to come to the table, avoiding disputes, getting realistic and informed pricing, and finding the right risk share and best value for money. Each model is intended to strike that difficult balance, but in the wake of COVID, the progressive model emerged as the stronger solution “instead of that win or lose, winner-take-all scenario.”
“It makes sense in that a co-operative approach is something that’s ultimately flexible, so there should be, if there’s proper dialogue, a good result,” Kelsall says, but when asked about benefits and challenges of the new approach, he calls it “a 10,000-foot question.”
Environmental perspective
“It’s an exciting space, I’m not despondent about P3s – there are challenges for sure but tremendous opportunities in the sector going forward.”
Kelsall agrees, calling himself “realistically optimistic,” adding that there’s just some “tweaking around the edges as there always is when trying to adjust for chops in the market, like COVID or a slight shift in a procurement methodology that’s created an aberration you’re trying to adjust for.”
“P3 is just an acronym,” he continues. “The fundamentals of infrastructure development in this country are as good as anywhere in the world – I would argue better. There’s still the desire for stability and consistency, and there’s certainly still a robust enough capital market to fund an enormous amount of infrastructure.”
“It’s an exciting space, I’m not despondent about P3s – there are challenges for sure but tremendous opportunities in the sector going forward”
Jamie Templeton,
Stikeman Elliott LLP
Canada’s foray into the P3 space was largely based on UK structures, with some notable amendments. For example, Canada created entities within government to be the champion of infrastructure from conception to completion and focused on building stability in the market.
“Canada standardized their documentation, and I can’t stress that enough – if you do a deal in Ontario, it’s largely like a deal in British Columbia, which is largely like a deal in Alberta,” Kelsall illustrates. “People know what they’re getting into.”
The adjustments brought tremendous expertise to the sector and set Canada up as an attractive climate for investment from across the world, setting the stage for what can only be described as an infrastructure boom. Jamie Templeton, co-head of the Projects & Infrastructure Group at Stikeman Elliott LLP, arrived in Canada from the UK in 2008 and, for the first decade, experienced the robust deal flow firsthand.
But challenges soon emerged. From contractors questioning the expense to bid as well as the prohibitive risk allocation and pulling out of the space over the past five years, to rising pressure on governments to find ways to fund the gap, the deal flow started to dry up, which impacted private participants. The progressive approach came onto the scene in an effort to encourage collaboration between authorities and constructors in arriving at the proper scope and price.
Industry experts
Jamie Templeton
Stikeman Elliott LLP
Brian Kelsall
Fasken Martineau DuMoulin LLP
Industry experts
Brian Kelsall’s practice is focused on project finance and infrastructure development, banking and corporate finance, and public-private partnerships in Canada, the United States, and emerging markets. He also has extensive banking law, securitization, and mergers and acquisitions experience. He has acted as lead counsel for lenders, consortiums, and investors in a variety of sectors. Kelsall has acted as lead counsel on some of the largest and most innovative projects in Canada including The Gordie Howe International Crossing and, most recently, the Ontario Line subway project.
Fasken Martineau DuMoulin LLP
Brian Kelsall
Jamie Templeton is co-head of the Projects & Infrastructure Group at Stikemans, and his practice includes all aspects of infrastructure investment, M&A, project finance, and banking. Since 2001, he has advised on major infrastructure projects in Europe, Australia, and Canada. His recent projects including project financings and M&A in the infra, energy/renewables, and resources sectors.
Stikeman Elliott LLP
Jamie Templeton
Jamie Templeton
Stikeman Elliott LLP
Brian Kelsall
Fasken Martineau DuMoulin LLP
Industry experts
Brian Kelsall’s practice is focused on project finance and infrastructure development, banking and corporate finance, and public-private partnerships in Canada, the United States, and emerging markets. He also has extensive banking law, securitization, and mergers and acquisitions experience. He has acted as lead counsel for lenders, consortiums, and investors in a variety of sectors. Kelsall has acted as lead counsel on some of the largest and most innovative projects in Canada including The Gordie Howe International Crossing and, most recently, the Ontario Line subway project.
Fasken Martineau DuMoulin LLP
Brian Kelsall
Jamie Templeton is co-head of the Projects & Infrastructure Group at Stikemans, and his practice includes all aspects of infrastructure investment, M&A, project finance, and banking. Since 2001, he has advised on major infrastructure projects in Europe, Australia, and Canada. His recent projects including project financings and M&A in the infra, energy/renewables, and resources sectors.
Stikeman Elliott LLP
Jamie Templeton
Share
Share
Is the progressive model having the intended impact?
Share
Brian Kelsall
Fasken Martineau DuMoulin LLP
Jamie Templeton
Stikeman Elliott LLP
Jamie Templeton is co-head of the Projects & Infrastructure Group at Stikemans, and his practice includes all aspects of infrastructure investment, M&A, project finance, and banking. Since 2001, he has advised on major infrastructure projects in Europe, Australia, and Canada. His recent projects including project financings and M&A in the infra, energy/renewables, and resources sectors.
Stikeman Elliott LLP
Jamie Templeton
Brian Kelsall’s practice is focused on project finance and infrastructure development, banking and corporate finance, and public-private partnerships in Canada, the United States, and emerging markets. He also has extensive banking law, securitization, and mergers and acquisitions experience. He has acted as lead counsel for lenders, consortiums, and investors in a variety of sectors. Kelsall has acted as lead counsel on some of the largest and most innovative projects in Canada including The Gordie Howe International Crossing and, most recently, the Ontario Line subway project.
Fasken Martineau DuMoulin LLP
Brian Kelsall
The future of Canada’s P3 market
Published June 17, 2024
HOME
Rankings
News
Awards
Methodology
Team
PRIVACY | TERMS OF USE | TERMS & CONDITIONS | ABOUT US | ADVERTISE WITH US | CONTACT US | SITEMAP
SUBSCRIBE | NEWSLETTER | DIGITAL EDITION | AUTHORS | EXTERNAL CONTRIBUTORS | TOP LAWYERS
Copyright © 2024 KM Business Information Canada Ltd.
The big picture: P3 market landscape in Canada
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
2020
1990
2000
2010
1981
Value (millions of dollars) $16,681
1982
Value (millions of dollars) $15,529
1983
Value (millions of dollars) $15,931
1986
Value (millions of dollars) $16,142
1985
Value (millions of dollars) $14,779
1984
Value (millions of dollars) $22,859
1992
Value (millions of dollars) $23,839
1992
Value (millions of dollars) $23,285
1990
Value (millions of dollars) $21,231
1989
Value (millions of dollars) $18,554
1988
Value (millions of dollars) $16,795
1987
Value (millions of dollars) $33,415
2004
Value (millions of dollars) $31,105
2003
Value (millions of dollars) $29,464
2002
Value (millions of dollars) $27,333
2001
Value (millions of dollars) $24,297
2000
Value (millions of dollars) $23,047
1999
Value (millions of dollars) $21,062
1998
Value (millions of dollars) $20,813
1997
Value (millions of dollars) $21,379
1996
Value (millions of dollars) $21,225
1995
Value (millions of dollars) $21,004
1994
Value (millions of dollars) $20,431
1993
Value (millions of dollars) $70,873
2011
Value (millions of dollars) $71,146
2010
Value (millions of dollars) $59,121
2009
Value (millions of dollars) $54,559
2008
Value (millions of dollars) $48,102
2007
Value (millions of dollars) $42,533
2006
Value (millions of dollars) $37,443
2005
Value (millions of dollars) $91,782
2021
Value (millions of dollars) $86,603
2020
Value (millions of dollars) $85,193
2019
Value (millions of dollars) $83,656
2018
Value (millions of dollars) $82,229
2017
Value (millions of dollars) $77,149
2016
Value (millions of dollars) $77,608
2015
Value (millions of dollars) $77,429
2014
Value (millions of dollars) $73,289
2013
Value (millions of dollars) $72,192
2012
Value (millions of dollars) $118,445
2023
Value (millions of dollars) $108,603
2022
Source: Statistics Canada
Clean input investment, 2023:
GHC emissions, 2023:
$3,870,133
16.741 tonnes (x 1,000)
Copyright © 2024 KM Business Information Canada Ltd.
PRIVACY | TERMS OF USE | TERMS & CONDITIONS | ABOUT US | ADVERTISE WITH US | CONTACT US | SITEMAP 0SUBSCRIBE | NEWSLETTER | DIGITAL EDITION | AUTHORS | EXTERNAL CONTRIBUTORS | TOP LAWYERS
Home
Rankings
News
Awards
Methodology
Team
Copyright © 2024 KM Business Information Canada Ltd.
PRIVACY | TERMS OF USE | TERMS & CONDITIONS | ABOUT US | ADVERTISE WITH US | CONTACT US | SITEMAP 0SUBSCRIBE | NEWSLETTER | DIGITAL EDITION | AUTHORS | EXTERNAL CONTRIBUTORS | TOP LAWYERS
Home
Rankings
News
Awards
Methodology
Team
When asked where the future of infrastructure lies in Canada, Templeton says the fact that P3 lawyers now call themselves “energy transition lawyers” is a big clue. Joking aside, he adds, whatever your beliefs on the transformational change that will be needed to meet climate goals, progressives should be just one form of procurement.
“If we’re going to get to the decarbonization limits we need to get to, we need a full spectrum,” he says, noting that another opportunity lies with Canada Infrastructure Bank, which is now rightly being seen as a conduit to bring in much-needed private capital.
Templeton calls for a more coordinated national infra strategy overall, with the key stakeholders of the provinces, feds, municipalities, First Nations, and private sector coming together to build an environment where foreign and domestic participants want to be involved. This is a chance to reinvigorate the whole P3 landscape in Canada.
The future of Canada’s P3 market
“We need to be mindful of what we’ve got next door to us,” he says, in reference to the decarbonization agenda and US President Joe Biden’s recent changes. “We’ve got to make sure Canada still has an attractive P3 landscape.”
So where will the Canadian market go from here? Potentially an engineered swing-back, Kelsall says, reintroducing greater competition and more players without throwing out the collaborative approach to scope and price, which “has a lot of legs.”
“I certainly wouldn’t say it’s not working – it is. But it’s much easier to look back at the old methodology and come up with five reasons why they needed to change it. Here, it’s early days.”
Progressive models are meant to bring more participants to the market, but that hasn’t come to fruition, Kelsall says, pointing to the UK’s White Frasier Report, which discusses the loss under the progressive model of expertise and oversight that equity players and funders have historically brought to the table.
Templeton says more can be done, but it’s got to strike the balance of getting the risk allocation right, achieving authority policy objectives, and giving equity participants enough incentive. As we’ve seen in Canada and around the world, it’s easier said than done, but otherwise, Templeton predicts a scarcity of resources on the horizon.
It’s of significant debate whether the shift was worth it, and it remains to be seen what the impact will be, but Templeton identifies one area of friction right off the bat. From the authority’s perspective, he says the new model will undoubtedly result in better infrastructure at the end – but on what timeline and at what cost?
“How can you have price competitiveness with one bidder? That’s a key issue,” he says. “But the idea is as your pre-development phase progresses, contingencies are taken off the table so there potentially are cost savings there.”
Another benefit could be the ability to negotiate better pricing with subcontractors and lending groups, but the reality is it’s too early to tell on that point, Templeton notes, adding there’s another issue progressives don’t address.
“We’re busy – there are huge, complex projects being procured in this way – but you add them all up, I’m not sure from a volume perspective and from a contractor involvement perspective we are where we were 10 years ago.”
As Templeton’s watched the process of developing pricing methodologies, Kelsall too sees the lack of competition as an area of concern. Though at times the traditional model may have driven undesirable results – i.e., low balling – “here it’s gone almost the other way,” he says.
“The entity holding the stick is the authorities – they’re the ones taking that responsibility. Do they have the horses to do that? And is it going to create the kind of dynamic value that was present at least in some periods of the prior methodology?”
“Governments are trying to reduce the time of the procurement, make them less costly, and introduce more input into the design,” Templeton says, adding that while not a binary change, there’s been a marked paradigm shift. “Time will tell if they can deliver on all of those.”
Kelsall points to the COVID-19 pandemic as the catalyst for the change, exacerbating existing issues in the traditional model. Authorities faced mounting tension to balance critical factors: encouraging participants to come to the table, avoiding disputes, getting realistic and informed pricing, and finding the right risk share and best value for money. Each model is intended to strike that difficult balance, but in the wake of COVID, the progressive model emerged as the stronger solution “instead of that win or lose, winner-take-all scenario.”
“It makes sense in that a co-operative approach is something that’s ultimately flexible, so there should be, if there’s proper dialogue, a good result,” Kelsall says, but when asked about benefits and challenges of the new approach, he calls it “a 10,000-foot question.”
FOR THE LAST 50 years, Canada has faced an acute infrastructure shortage, with the concept of the public-private partnership coming to the fore about 25 years ago. And while governments are responsible for addressing this gap, they’ve faced significant challenges delivering projects that were on budget, on time, and offered corresponding value for money.
“Governments govern, they don’t build bridges,” says Brian Kelsall, partner at Fasken Martineau DuMoulin LLP, adding that this lack of expertise coupled with insufficient capital and the long timelines for these projects in relation to a government’s time in office meant “infrastructure development needs were kicked down the road – and they’ve continued to be.”
Stikeman Elliott LLP is a global leader in Canadian business law, offering creative solutions to clients across Canada and around the world. The firm provides the highest quality counsel, decisive advice, and workable solutions through offices located in Montreal, Toronto, Ottawa, Calgary, Vancouver, New York, London, and Sydney. With an exceptional track record on multijurisdictional matters in the US and internationally, Stikeman Elliott ranks as a top firm in its primary practice areas, including mergers & acquisitions, securities, business litigation, banking and finance, competition and foreign investment, tax, restructuring, energy, real estate, project development, employment and labour, and pensions.
Find out more
Fasken is an innovative and forward-thinking business and litigation law firm, founded in Canada in 1863. As the largest law firm in Canada, our team of over 950 lawyers provides expertise in every sector, including complex and high-profile matters across more than 130 practices and industry specialties. We are a bilingual firm, operating in both English and French and practising both common and civil law. With regional representation in 10 offices in Canada, the United Kingdom, and South Africa, we provide a global reach across three continents.
Find out more
Published June 17, 2024
Environmental perspective
millions
Value (millions of dollars) $15,441
Investment in Canada, total assets and industries
“The entity holding the stick is the authorities – they’re the ones taking that responsibility. Do they have the horses to do that? [That’s question one.] And is it going to create the kind of dynamic value that was present at least in some periods of the prior methodology?”
Brian Kelsall,
Fasken Martineau DuMoulin LLP
“It’s an exciting space, I’m not despondent about P3s – there are challenges for sure but tremendous opportunities in the sector going forward”
Jamie Templeton,
Stikeman Elliott LLP
