Transport review calls for private-sector involvement in Via Rail

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The head of Via Rail welcomes a federal report he says gives new weight to the plan to build a dedicated passenger train corridor between Quebec City and Windsor, Ont.

The wide-ranging review of the country's transportation regime, which touched on everything from grain shipping to airport security, calls for increased use of "private-sector approaches" for the federally owned passenger rail service, and support for Via Rail's push to buy and build its own network in the most densely populated part of Canada.

"We see it as validation of the strategy we have developed over the last two years," Via Rail chief executive officer Yves Desjardins-Siciliano said of the Canadian Transportation Act review tabled in Parliament last week.

In his bid to build a Via-only rail corridor in the Quebec-Windsor route, Mr. Desjardins-Siciliano has been pitching the venture to private investors. Via Rail would buy the tracks and boost the number of daily trains to 18 from five or six. The better service and reliability would allow Via to compete with cars, and let the Crown Corporation post a profit in the region, Mr. Desjardins-Siciliano said by phone.

Estimates for the project, which would need to be approved by the federal government, range from $3-billion for a network that would run with traditional diesel-powered trains to $4-billion for electrified tracks.

"A dedicated track would be good for Canada: it would allow for additional passenger rail frequencies and more freight rail capacity in the long term and would help to lower highway congestion in Ontario and Quebec," the report released last week said. "However, any proposal from Via Rail would have to be carefully assessed to ensure that the elements relating to ridership and attracting private investment are viable."

Mr. Desjardins-Siciliano said he has not met with Transport Minister Marc Garneau about the proposal, but that the minister has been briefed on it. A spokeswoman for Mr. Garneau did not respond to two interview requests. Without providing details, Mr. Garneau said last week he would review the report's recommendations. It is unclear how receptive the Liberal government is to ideas proposed in a report by a Tory appointee on a Crown Corporation run by another Tory appointee.

Mr. Desjardins-Siciliano said private-sector investment could come in two forms: as a public-private partnership (P3), in which investors take on the costs and risks of construction, or in an equity investment, a form that is favoured by pension funds.

"We've been talking to Canada's public pension plans over the last 18 months and we've qualified their interest to consider both the P3 formula or the equity formula. They would favour the equity formula because they are large pension funds and they prefer equity returns. They have confirmed their interest to consider such an investment if the government allows Via to go forward with solicitation," Mr. Desjardins-Siciliano said.

The country's largest pension plans have been increasing their infrastructure investments in recent years, drawn to predictable cash flows of various assets around the world. Global competition for shipping ports, toll roads and bridges has increased as a result. Pension-fund executives say they are drawn to infrastructure projects with scale, or that can become platforms for future investments. They like high barriers to entry, a clear view of the regulatory landscape and stable returns. Some like to invest in building and developing the assets, taking on construction risk. Others prefer to acquire existing assets.

Some pension plans already have experience investing in the rail sector. Borealis Infrastructure, a division of the Ontario Municipal Employees Retirement System, and the Ontario Teachers' Pension Plan invested in high-speed rail in Britain in 2010, for example. Borealis is also the majority owner of the Detroit River Tunnel Partnership, a rail tunnel linking Detroit and Windsor. But the pension-plan's executive have stated that OMERS prefers to invest in "brownfield" projects, meaning assets that have already been built.

Except for 300 kilometres of track in Quebec and Ontario, Via does not own the rails on which it runs. It pays private railways – most often Canadian National Railway Co. – for track rights, and gets sidetracked by freight trains. This results in delays and unpredictable service. Amid a rise in grain, oil and other cargo travelling on the tracks, Via Rail's on-time performance deteriorated to 64 per cent in 2015 from 87 per cent in 2010.

"[The freight railways] not only own the track but they control the traffic. So decisions are made hour by hour on what train to let on what track," Mr. Desjardins-Siciliano said. "And on many of those tracks in many parts of the country, there's only one track, so trains are coming toward one another. … Typically, Via Rail trains are smaller than the sidings and the freight train is longer than the siding, so the passenger train waits on the siding while the freight train is slowly coming. That is a problem."