Infrastructure Bank pledges up to $300-million for port expansion near Montreal

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Plans for a major South Shore expansion of the Port of Montreal received a boost Wednesday of up to $300-million from the Canada Infrastructure Bank.

The expanded port in Contrecoeur, a small town more than 40 kilometres east of Montreal on the southern flank of the St. Lawrence River, would include a rail connection to support container traffic and boost international trade.

The Port of Montreal is aiming to start construction in 2021 and to be operational in 2024. The port expects the facility would handle two to three ships a week, one train per day and 1,200 trucks a day. Its existing facilities on the island of Montreal are near capacity.

The total cost of the Contrecoeur project is estimated at between $750-million and $950-million.

Infrastructure Bank CEO Pierre Lavallée told The Globe and Mail in an interview that the bank’s pledge should convince private investors to step in and finance the rest of the project.

“It’s a costly thing to build a brand-new port from scratch, so our investment creates the conditions that will allow private and institutional investors to come in and earn reasonable returns on the investment that they’ll make," he said.

The bank first signalled its interest in August with an announcement that it would work with the Port of Montreal on the financial structuring of the project. Since then, Mr. Lavallée said his office has received plenty of interest from investors.

“It’s obviously very big for Quebec and Ontario, for Eastern Canada, for Eastern North America, but it has caught the attention of truly global players who are interested to know more," he said. "And I expect, now that they can also look at the firm cornerstone commitment that we’ve made, will think of it as even more attractive to get involved with. So those discussions will take place and we’re confident that there’s strong interest out there.”

The Port of Montreal receives about 80 per cent of Canada’s container traffic with the European Union and Canada’s recent trade deal with the EU is expected to increase transatlantic trade between the two economies. Montreal is also competing with East Coast ports in the United States that have received billions in upgrades in recent years.

“This is a big economic project, one that is sustainable and viable,” Port of Montreal chief executive Sylvie Vachon told a business audience in a speech Wednesday. “It will give Montreal but also Quebec and all of Eastern Canada a piece of strategic infrastructure for international trade.”

Contrecoeur is the port’s largest project in 50 years and the largest commercial infrastructure project currently under way in Quebec, Ms. Vachon said. Current plans call for the site to host two ship berths and terminal facilities with an initial capacity to handle 1.15 million TEUs (20-foot equivalent units per year).

The Port of Montreal has no preference on the form the bank’s investment would take but talks are currently focused on a long-term loan, Ms. Vachon told reporters. The bank’s involvement early in the process allows the port to de-risk the project and allow private investors to come in, she said. Talks with private investors, including the two main container terminal operators at the Port of Montreal, are continuing.

A public investment of this type is common in new port infrastructure construction around the world, said Ryan Dermody, vice-president of Contrecoeur at the Port of Montreal. Most new builds require such initial financing from public entities because the up-front capital costs of the infrastructure are too large for private investors to assume given that the returns come later, he said.

Ottawa created the infrastructure bank in 2017 with a $35-billion budget and a mandate to support revenue-generating projects that attract private investors and that are in the public interest. Conservative MP Luc Berthold, whose party promised during this year’s election campaign to shut down the bank, said in a statement that while the port announcement is good for the economy, details regarding the funding are lacking.