CDPQ Acquires a 50% Stake in Montreal Toll Bridge A25 Concession
The Caisse de dépôt et placement du Québec has signed an agreement with Transurban to acquire a 50 per cent stake in the A25 Concession, a toll road and bridge network in Montreal. The deal is valued at $355 million.
The deal is valued at $355 million.
The A25 toll bridge serves northeastern Montreal and eastern Laval.
The 50 per cent stake will give CDPQ co-control of the A25 Concession.
CDPQ says it is its second major partnership with Transurban following its 2021 investment in WestConnex, an Australian road infrastructure project.
The A25 deal is expected close by March 31, subject to closing conditions.
SWFI also reports CDPQ acquires 50% of Montreal’s A25 concession from Transurban:
Caisse de depot et placement du Quebec (CDPQ) reached an agreement with Transurban for the acquisition of a 50% interest in the A25 Concession, a 7.2-kilometer toll road and bridge network which serves as a vital component of the Greater Montréal transportation network. The A25 includes six kilometers of four-lane road and a 1.2 kilometer, six-lane bridge over the Rivière des Prairies.
The transaction, valued at $355 million, allows CDPQ to acquire a asset that plays a central role in the transportation of residents of Greater Montréal, as well as for the movement of merchandise in Québec and Eastern Canada. With a 50% stake, the CDPQ will have co-control of the A25 Concession. This is the second major partnership between CDPQ and Transurban, one of the world’s largest operators in the sector, following CDPQ’s 2021 investment in WestConnex, Australia’s largest road infrastructure project. A25 customers will not be affected by the transaction. Payment methods and customer support channels such as the website and service center will continue to operate as usual, as will the Government of Québec’s free toll measures for electric vehicle owners. Financial close is expected by March 31, 2023, subject to customary closing conditions and relevant consents and approvals. The A25 is under concession until September 2042. The concession agreement is with Ministère des Transports, de la Mobilité durable et de l’Électrification (MTQ)
The A25 opened in May 2011. This road was bought by Transurban from Macquarie Infrastructure Partners in March 2018. Transurban acquired 100% of the equity interests in the A25 for C$ 840 million plus acquisition costs of C$ 18 million.
CDPQ put out a press release stating it has acquired 50% of Montreal's A25 Concession from Transurban:
CDPQ, a global investment group, today announced it has reached an agreement with Transurban for the acquisition of a 50% interest in the A25 Concession, a 7.2 km toll road and bridge network which serves as a vital component of the Greater Montréal transportation network.
The transaction, valued at $355 million, allows CDPQ to acquire a high-quality asset that plays a central role in the transportation of residents of Greater Montréal, as well as for the movement of merchandise in Québec and Eastern Canada. With a 50% stake, the CDPQ will have co-control of the A25 Concession. This is the second major partnership between CDPQ and Transurban, one of the world’s largest operators in the sector, following CDPQ’s 2021 investment in WestConnex, Australia’s largest road infrastructure project.
Serving north-eastern Montréal and eastern Laval, this toll road is notable for its sustainable approach, offering faster and more efficient routes by car, public transit, bicycle and foot.
Emmanuel Jaclot, CDPQ’s Executive Vice-President and Head of Infrastructure, said: “The A25 plays an essential role for many residents of Greater Montréal, providing faster routes, easing congestion on other arteries and facilitating public transit between Montréal and the North Shore. With this investment, CDPQ is excited to play a structuring role in the mobility of people and goods in Québec, and we look forward to working with Transurban to ensure the best possible experience for users of A25.”
Transurban Chief Executive Officer, Scott Charlton, added: “This is the second partnership between Transurban and CDPQ since the recent WestConnex transaction. We have found them to be a constructive, knowledgeable and collaborative partner and we are excited to continue the excellent working relationship. Both parties are aligned on the long-term aspirations for the North American market, and we look forward to pursuing new opportunities together.”
A25 customers will not be affected by the transaction. Payment methods and customer support channels such as the website and service centre will continue to operate as usual, as will the Government of Québec’s free toll measures for electric vehicle owners.
Financial close is expected by March 31st, subject to customary closing conditions and relevant consents and approvals.
ABOUT CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public retirement and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at As at June 30, 2022, CDPQ’s net assets totalled CAD 391.6 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.
Just to refresh your memory, in September 2021, CDPQ joined a consortium led by Transurban that included the Sydney Transport Partners (STP), making a AU$2.3 B investment in WestConnex, Australia’s largest road infrastructure project.
In total, the consortium paid A$11.1 billion ($8.06 billion) for a near half stake of the country’s longest auto tunnel network, giving it full ownership of the asset and dominance of Sydney’s toll road network.
I covered this deal here.
Now, Montreal isn't Sydney and the A25 Concession isn't WestConnex which is why the sums involved in this deal are much smaller.
According to SWFI, the A25 Concession was bought by Transurban from Macquarie Infrastructure Partners in March 2018. Transurban acquired 100% of the equity interests in the A25 for C$ 840 million plus acquisition costs of C$ 18 million.
CDPQ is acquiring a 50% stake for C$355 million, valuing the toll bridge concession at C$710 million, or a 17% discount at what Transurban acquired it for.
Keep in mind, this acquisition in March 2018 was two years before the pandemic, so it makes sense that its total value got hit as less people were using it during the pandemic and even after as more people were working from home.
But pensions don't buy toll roads/ bridges, airports, ports and other infrastructure assets for a quick flip (except if the price is really right), they buy them as long-term investments that match the duration of their long-dated liabilities, providing them with regular cash flows (like bonds) and embedded inflation protection.
For CDPQ, which has a dual mandate to also invest in Quebec, this investment makes sense.
In December, it announced it is targeting $100 billion in Quebec assets by 2026.
I covered this announcement here and noted most the new investments will be in infrastructure and real estate.
So I expect CDPQ to start ramping up these investments over the next two years and the timing isn't fortuitous.
We are heading into the worst global economic recession in decades which will impact Quebec and rest of Canada, so CDPQ needs to ramp up its investments in Quebec during the next three years.
Again, it has a dual mandate, to maximize returns without taking undue risks (like its peers) and to invest and promote Quebec's economy.
"But Leo, CDPQ hasn't said anything about the worst global economic recession in decades, those are your words, not theirs."
Yes, this is my dire prediction and if you've been reading my blog carefully and paying attention, you'd also be extremely worried right now as we enter the brutally cold phase of the bear market.
I'm confident Charles Emond, Marc-André Blanchard, Maxime Aucoin, Emmanuel Jaclot, Nathalie Palladitcheff, Kim Thomassin, Rhana Ghorayeb, Martin Longchamps, Vincent Delisle, Marc Cormier and the rest of the Executive Committee will be extremely busy over the next three years.
They're not stupid, they know exactly what lies ahead.
And just to be clear, it's really going to get ugly.
If you don't believe me, listen to Francois Trahan explain it in French during this recent TVA Nouvelles interview below where he clearly states "the world is upside down", the upcoming economic crisis will have "apocalyptic" effects.
He also rightly notes:
“Several things will flow. We have an inflationary problem. The FED is absolutely incapable of forecasting inflation and has absolutely no idea what will happen. It is just reacting and raising interest rates at a time when the United States has a huge deficit and a huge debt that compares to the debt we had at the end of the Second World War."
And imagine, he's still a bull in my eyes!
Alright, enough on the coming apocalypse, let me go watch President Biden's State of the Union address and I'll watch Trahan again later and have a shot of single malt Talisker to help me sleep (joking, don't need booze, I'm 100% cash and sleeping like a baby).
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