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Canada Infrastructure Report Q4 2011
Business Monitor International, Oct 2011, Pages: 66
Business Monitor International's Canada Infrastructure Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada Infrastructure's industry.
The construction industry in Canada continues to outperform its developed state peers, buoyed by a particularly healthy public private partnership (PPP) sector. The level of PPP involvement is considered world leading and we expect this to have a positive effect on baseline indicators. Data from Statistics Canada has revealed that the construction industry growth figures for 2010 were even more impressive than previously anticipated – recording real growth of 8.1% year-on-year (y-o-y).
For 2011, BMI remains positive in its outlook, with real y-o-y growth of 4.1% forecast, valuing the industry at US$92.5bn. Moreover, stable growth of over 3.5% is expected throughout the 2011-2015 period, when the industry value will be an estimated US$110.2bn.
Key developments include:
- In September 2011, there were 73 PPP projects either in the construction phase or the pre-construction phase, according to the Canadian PPP Council. PPPs continue to be an area of strength for the sector. The continual improvements being made to the country's PPP model and regulatory framework, as well as the large size and number of contracts that are awarded, highlight the growing attractiveness of the market to international investors. A major deal was concluded in June 2011 as an OHL and Laing O'Rourke consortium reached financial close on the US$2.15bn Montreal University Hospital PPP.
- In May 2011 an ambitious CAD80bn plan to develop northern Quebec was unveiled by Quebec's Premier Jean Cherest. The plan will support the expansion of the region's mining sector. Plan Nord promises to transform northern Quebec's economy, by creating 20,000 new jobs, overseeing economic and social infrastructure improvements, and bolstering state coffers through royalties. However, the plan must be viewed within a political context. With Jean Cherest's Liberal Party looking shaky ahead of the 2012 provincial elections, many have dubbed it a ploy to appease voters and secure the premier's legacy. BMI notes that despite major fanfare in announcing the huge development plan, the likelihood of it being implemented in any comprehensive manner, at least in the short term, is slim.
The upcoming elections in four Canadian provinces create some short-term uncertainty over contracts for public projects, with a slowdown in the procurement process expected during the election period. Indeed, in Ontario, the looming provincial election (to be held October 6 2011) has significant implications for the province's renewable energy market. Ontario has the potential to develop 2,000 megawatts (MW) of offshore wind power over the next 15 years and is currently the Canadian province with the highest installed onshore wind capacity.
However, one of the main factors behind the high installation rate has been the provincial government's attractive renewable energy policy, which would be potentially threatened were the Conservative party to replace the incumbent Liberal government. Nevertheless, in the longer term BMI's outlook for onshore wind energy development in Canada remains very positive.
Canadian energy & utility companies have witnessed share price outperformance in recent months compared to their counterparts across the Atlantic, which have struggled with huge debt, exposure to policy uncertainty and weak electricity demand. Hydropower companies in particular continue to perform well, reporting strong financial results so far in 2011. A slew of recent hydropower project announcements have added confidence to the sector. Amongst these a new CAD6.2bn (US$6.1bn) hydropower project is likely to change the landscape of electricity politics in eastern Canada.
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