Michael Sabia's Return to Infrastructure Bank?

The Canadian Press reports that Canada Infrastructure Bank CEO Pierre Lavallée is out, Michael Sabia in as new chair as Liberals shake up infrastructure bank:
The federal government is shaking up the top spots at the Canada Infrastructure Bank, including saying goodbye to the chief executive and installing a new board chair.

Out is Pierre Lavallee, the first CEO of the infrastructure financing agency that the Liberals created two years ago.

In as the new board chair is Michael Sabia, who was on an advisory group that recommended creating the agency, and a former chief executive of the Caisse de depot et placement du Quebec that is behind an electric-rail project in Montreal that the bank is backing.

In a statement, the Liberals say the changes “signal a new phase” for the financing agency and come at a “critical time” to address the “health and economic consequences” of Covid-19.

The Trudeau Liberals created the bank in late 2017 to use $35 billion in federal financing over a decade to help governments at all levels partner with the private sector to build revenue-generating roads, highways, bridges and electricity and water systems.

About $15 billion of that is money the government doesn’t expect to get back.

The agency faced political opposition at its creation, and then criticism for the slow pace at which it was evaluating and signing deals.

In a statement, Finance Minister Bill Morneau said Sabia’s experience with infrastructure would be “a critical asset as the bank accelerates its activities.” Sabia becomes chair on April 15 to replace former RBC executive Janice Fukakusa, who signalled her interest in stepping down months ago.

The agency had told Finance Department officials last year that it had 25 projects on the verge of being announced by early 2020 and was looking to engage with investors in Canada, the U.S., the U.K., Japan and China.

The update, from a briefing note and accompanying presentation provided to the top civil servant at the Finance Department, also noted a need to effectively tell Canadians about the agency’s work.

The Canadian Press obtained a copy of the document under the Access to Information Act.

One presentation slide says the bank should “demonstrate the public benefit” — the words are underlined — from projects to back up its investment decisions, and the benefits “clearly communicated to Canadians.”

The rest of the page, discussing communications, has been blacked out.

The document also says that the agency should “lead in disrupting” how things get built in this country, as well as how governments cover the cost.
On Friday, the Canada Infrastructure Bank put out a press release announcing leadership changes:
Today, the Canada Infrastructure Bank Board of Directors announced a change in leadership that will position the Bank to build on its strong foundation to support more revenue generating infrastructure projects in the public interest.

As part of this transition, Canada Infrastructure Bank CEO Pierre Lavallée, who served as the Bank’s CEO since June 2018, is stepping down effective immediately. Canada Infrastructure Bank CFO and CAO Annie Ropar will oversee the operations of the Bank and report to the Board until a new CEO is appointed.

We wish to thank Mr. Lavallée for his committed service and for his vision and foresight in building the Bank’s capacity to attract investment, engage private sector partners and explore new and innovative approaches to finance and deliver projects that benefit Canadians.

“I am proud of the progress that CIB has made and of the team of dedicated experts that we have assembled. CIB has already committed $3.6B to projects valued at $20B. In addition, CIB is working on a large pipeline of new projects in collaboration with over 100 public sponsors from coast to coast to coast at the federal, provincial, territorial, municipal and Indigenous government levels”, said Pierre Lavallée.

In addition, the Chair of the Board, Janice Fukakusa has decided to step down from her position as of April 15, 2020. Ms. Fukakusa advised the government last fall that she would like to complete her service as Chair in early 2020 so that she could focus on her other commitments in the public and private sectors. She has agreed to remain on hand at the organization over the coming weeks to ensure a seamless transition and provide the Bank with stable oversight as it navigates various challenges posed by the COVID-19 outbreak.

“It has been a great privilege to serve as the founding Chair of the Bank and I am grateful to the Government of Canada for the opportunity. The Canada Infrastructure Bank is critically important, and I am proud of the work we have done to stand up the Bank to support Canada’s 21st century infrastructure needs. As I step down, the Board and the Bank as a whole are ready to step up to serve Canadians well,” said Janice Fukakusa.

The Board wishes to thank Janice for her exceptional leadership and commitment. We are all very proud to have served with her.

As Ms. Fukakusa continues in her role over the weeks ahead, Munk School of Global Affairs & Public Policy Director Michael Sabia has been appointed to the Board as Chair-Designate. Mr. Sabia is the former CEO of Caisse de dépôt et placement du Québec. The Board welcomes Mr. Sabia’s appointment and looks forward to working with him in furthering the objectives of the Canada Infrastructure Bank.

2020 will be a pivotal year for the Bank as its leadership focuses on collaboration with provincial, territorial, municipal, federal, Indigenous and private sector investor partners, so that priority projects can move from conception to completion. As we emerge from the current crisis posed by COVID-19, the case for ambitious infrastructure planning and the role of the Bank has never been stronger.

About the Canada Infrastructure Bank

Canada Infrastructure Bank is a crown corporation focused on financing and supporting the development of revenue-generating infrastructure projects that serve the public interest. Formed in 2017, the Bank has a mandate to attract and co-invest with private sector and institutional investors, with particular focus on areas such as public transit, trade and transportation, green infrastructure and broadband.
So, Pierre Lavallée and Janice Fukakusa are out and Michael Sabia is the new chair.

I can't say I'm surprised, the Canada Infrastructure Bank hasn't been firing on all cylinders and it's been the target of heavy criticism within the financial industry and outside it.

Pierre Lavallée is a very nice and smart guy. He dresses a bit quirky (apart from Jim Grant, who wears bow ties in 2020?!?) but he knows his stuff and was trying to get things off the ground but the pace was frustratingly slow. He made some operational blunders and bad hires but overall, he did a decent job but it just wasn't good enough.

As far as Janice Fukakusa, I don't know much about her but if you ask my blunt opinion, she was in way over her head and she was not the right inaugural chair for such an important organization. It was a political appointment, and a very bad one at that.

The Liberals came to their senses and appointed Michael Sabia as the new chair of the board. Sabia has tremendous connections with the Liberals and the fact that he was appointed the new chair shows just how much power and respect he commands in Ottawa.

So what lies ahead for the Canada Infrastructure Bank? Well, knowing Michael Sabia, he's going to move very fast to recruit a new CEO and ramp up infrastructure investments very quickly.

The obvious candidate to lead the infrastructure bank is Macky Tall, someone Sabia groomed for the position of CEO of the Caisse and someone he knows very well and trusts.

Recall, Macky Tall, Head of Liquid Markets at CDPQ and President and CEO of CDPQ Infra, was the Board's initial choice to be next CEO but Premier Francois Legault decided to appoint Charles Emond.

Since that happened, speculation has run amok as to Macky Tall's next move, but with the return of Michael Sabia to the scene as the new chair of the Canada Infrastructure Bank, I can assure you conversations have already taken place between him and Macky.

The big sticking point? Compensation. The Canada Infrastructure Bank pays well but nowhere near as well as the $2 million+ compensation Macky Tall is commanding at CDPQ.

Unless, of course, Sabia changes that and gets the federal government to sign off on it, which they will in this environment.

Another potential candidate? Mark Wiseman, the former CEO of CPPIB who left BlackRock. Michael Sabia knows him well too and both men once wrote an op-ed for the Globe and Mail back in 2016 on how the private infrastructure bank will put Canada on a path to growth.

And Canada definitely needs growth. The plunge in oil prices and COVID-19 and its after-effects will profoundly shape the Canadian economy going forward. Every single sector and industry will be impacted, including infrastructure.

Sabia knows all this, he has no time to waste and he profoundly believes infrastructure is the new paradigm for growth.

So get ready, I expect operations at the Canada Infrastructure Bank are going to ramp up significantly, and since all the CEOs at Canada's large pensions know Sabia well, they too are eagerly awaiting a major pickup in its operations.

Below, Frances Donald, chief economist at Manulife Investment Management, discusses the long-term effects of the COVID-19 crisis. This is by far one of the best interviews and I urge everyone to take the time to listen to her, she provides excellent insights. Click here if it doesn't load below.

As far as Michael Sabia, he too has written his opinions on how in this pandemic, governments will face three tests —including how best to restart the economy. You can read his op-ed here.