A $350 billion Canadian fund manager wants to help fund, build and operate Auckland's proposed light rail network. Photo: supplied

A huge Canadian fund manager says it will bring considerable practical expertise (as well as funding) to the multi-billion dollar Auckland light rail project, if it is chosen as the preferred supplier.

The New Zealand Super Fund has teamed up with Canadian institutional investor CDPQ, which manages approximately $350 billion of funds worldwide. The consortium today submitted its model to the New Zealand Transport Agency – the first step in the process.

CDPQ Infra, which invests in infrastructure projects, told BusinessDesk its proposed build, fund, operate model gives it a long-term commitment to the success of the project, and could also keep debt off the government’s balance sheet.

The light rail project involves tram-like carriages running on dedicated rail lines, often down the middle of existing roads. The government is proposing two routes initially – the first between the city and the airport along Dominion Road, and the second between the CBD and Kumeu northwest of the city, following state highway 16.  

NZTA says it wants construction to start in 2020.

CDPQ Infra managing director Jean-Mark Arbaud is in New Zealand this week, because the two partners will today submit written responses to a set of market questions NZTA has provided to every interested participant.

NZTA says those answers will then help inform its preferred procurement operating model for the Auckland light rail project.

Arbaud told BusinessDesk the CDPQ model is new in New Zealand. It involves a partnership with Government (as with the public-private partnership model) but differs from PPP in that it could be structured so that the debt does not need to be held on the government’s balance sheet.

This could be politically attractive to the Labour Government, which has committed to stay within a fixed debt ceiling.

Arbaud said the model also minimises the chance of the project being a lemon.

“Because we are a pension fund, we are long-term investors, and because we are going to invest long-term in a project, we must make sure it will be a good project, and well-received by the population, so it will be a success in the long term.”

Arbaud said CDPQ also brings expertise to the table. The company’s infrastructure division built the 20km light rail line between the Vancouver CBD and the city’s airport, before the 2010 Winter Olympics there. And earlier this year it started construction of a 67km light rail network in Montreal.

Arbaud says the Vancouver line has been a good investment for CDPQ Infra, and being involved in the two Canadian projects has highlighted a number of issues that will be relevant to Auckland light rail.

For example, Arbaud says effective bus networks around the light rail backbone are critical to getting people to use the trains. Without frequent buses feeding the light rail network, people will be reluctant to get out of their cars.

“In Montreal the buses [on one key route] were originally every 30 minutes, but we recognised if people were going to have to wait that long for a bus, it wasn’t going to be an efficient journey, even if our trains were every 3-4 minutes. So we changed our vision so there are buses every 10 minutes.”

And Arbaud says you can’t underestimate the amount of development which will happen around light rail hubs once they are built. So his advice to NZTA: build in capacity for growth.

“In Vancouver we already have the number of passengers using the light rail system that we originally projected for 2040. This is because having a convenient, efficient network has attracted way more development around the stations than we were expecting.”

And that can have unforeseen consequences, he says.

“One of our stations on the Vancouver line was originally in the middle of nowhere – lots of car dealers and not much else. Eight years later there’s a small town there – houses and apartments, schools. We had to protect the network with a net after someone had an argument and threw a TV out of the window.”

In April, the NZ Super Fund and CDPQ Intra submitted an unsolicited proposal to the government to invest in the light rail project. Super Fund CEO Matt Whineray told BusinessDesk the fund was already a big investor in New Zealand, with around 15 percent of its portfolio here, or around $5 billion. However, while the fund has overseas infrastructure investments, taking a stake in a major NZ-based infrastructure project would be a first, he said.

Meanwhile, it’s clear the Super Fund-CDPQ Infra consortium won’t be the only ones bidding for the light rail project. An NZTA engagement meeting at the end of July was standing room only, NZTA says, with 450 industry representatives turning up.

The transport authority said its procurement strategy should be in place by the end of this year.

Nikki Mandow was Newsroom's business editor and the 2021 Voyager Media Awards Business Journalist of the Year @NikkiMandow.

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