BMI View : The award of the Ottawa Light Rail confirms our view that Canada's urban transit sector will be an area of strong growth over the medium term, providing a substantial contribution to infrastructure industry value. It also aligns with our view that SNC-Lavalin will continue to dominate large contracts in Canada ' s construction sector despite ongoing transparency and corruption issues rocking the company.
The Ottawa Light Rail Transit system is the latest in a string of urban transit projects across Canada. According to BMI's Infrastructure Key Projects database, urban rail projects worth in excess of US$35bn are underway and in the pipeline in Canada. The largest is the CAD8.2bn Eglinton Crosstown Light Rail Transit project, for which the first of two major tunnelling contracts were awarded in September 2012. Also in the pipeline are the US$2.6bn Toronto Subway Spadina line expansion and the US$1.8bn Edmonton Light Rail project.
|Urban Projects Drives Rails Outperformance|
|Sub-Sectors Of Transport Infrastructure Industry Value, Real Growth, % y-o-y|
Most recently, progress has been made on the CAD2.1bn first phase of the Ottawa Light Rail Transit System, dubbed the Confederation Line. The contract, which was tendered as a public-private partnership (PPP) on a design, build, finance and maintain for 35 years basis was awarded in early December 2012. The winning bidder has been announced as the Rideau Transit Group, a consortium comprising SNC-Lavalin, ACS, Veolia Transportation, EllisDon and Dragados. The consortium's bid has been recommended to the city council, which is expected to approve. The Ontario government has committed to providing CAD600mn in project funding. Although no details on how the consortium will raise the remaining financing have been revealed, we do not envisage any issue in the project securing financing. Canada has the most attractive project finance market globally for PPPs, with a strong precedent for securing loans for infrastructure projects.
Construction on the Light Rail line is due to begin in February 2013. The project includes construction of a 2.5km downtown tunnel, as well as widening a section of Highway 417. The construction phase is estimated to be completed at the end of 2017, with the Light Rail to enter operation in 2018.
Rideau Transit Group beat out stiff competition from Rideau Transit Partners which included Bouygues and Ottawa Transit Partners, which included Bombardier. However, the presence of SNC-Lavalin in the winning bid comes as little surprise; the company has been one of the biggest beneficiaries of the urban rail investment boom in the country. It was lead contractor on the CAD1.8bn Vancouver Light Rail line which was completed in 2010, participated in the recently completed Calgary West Light Rapid Transit Extension Project, and is currently building the Edmonton North Light Rail project. This most recent award highlights the unique position SNC-Lavalin holds in the infrastructure sector. Despite scandals which have rocked its upper management, the company is able to leverage its relatively unmatched technical and capacity position in Canada to remain at the forefront of the biggest contract awards.