A view of the front deck of CSL St-Laurent seen from the bridge while docked at the Port of Montreal, April 1, 2015.Christinne Muschi/The Globe and Mail
A sale of Canada's four biggest ports under consideration by the federal government could fetch as much as $3.4-billion, according to a new study by the C.D. Howe Institute released Thursday.
The report examined the ports of Vancouver, Prince Rupert in B.C., Montreal and Halifax and found that selling or leasing them to private investors would have little effect on service at the shipping gateways, but would give Ottawa money to spend on other priorities.
The value breakdown of these international-trade hubs comes several months after Ottawa hired investment bank Morgan Stanley Canada Ltd. to review ownership options for 18 Canadian ports. Last November, Canada Development Investment Corp., a Crown agency responsible for selling federal assets, asked the investment bank to "provide financial advice" on its port holdings, which have operated as financially self-sufficient companies at an arm's length from the government since 1998. Canada also has 50 ports that are not part of the government's Canada Port Authority system. The C.D. Howe report only focused on the CPA's four largest ports, which handle 38 per cent of total tonnage and almost all container traffic.
The port evaluations were part of a broader federal government look at the potential to monetize some transportation infrastructure and put those funds towards new building projects. This model, called "asset recycling" has been successful in other countries such as Australia. The government examined the idea of privatizing the country's major airports.
Ottawa distanced itself somewhat from its asset sale exploration earlier this year, first avoiding mention of such activities in the budget, and later saying any future sales would not be connected to the government's primary building initiative: the Canada Infrastructure Bank. The bank is aimed at attracting large private investors to help build profitable infrastructure projects alongside government, and will be seeded with $35-billion.
But the report said that Ottawa could use this opportunity to get more out of the ports.
"The current model means that the profits from managing this land are solely reinvested back into the ports which generated them. Sometimes, these will be the highest-priority investments for Canadians – and at other times they won't," the report says. "The federal government should seek to capture greater returns from its land ownership at these ports – first by receiving dividends from the port authorities, and if there is a need for an upfront cash flow, from seeking greater involvement from private capital."
Vancouver is the most valuable port, the reports says, with its equity stake valued at as much as $2.2-billion, followed by Montreal at $500-million to $700-million. Prince Rupert is worth $300-million to $400-million while Halifax could sell for $150-million to $200-million.
Port authority user fees account for just 2 per cent of the costs of importing goods, compared with 48 per cent for the shipping line and 39 per cent for the railway, the report says. This means further public investment in the ports will have little impact on the overall costs faced by Canada's importers and exporters.
Another report, commissioned by the previous federal government and released in 2015, noted ports' abilities to handle larger ships and greater volumes are constrained by government-imposed restrictions on debts and land use. The study recommended Ottawa examine the role of private money in Canada's ports, either by selling stakes in the port authorities or long-term land leases.
The C.D. Howe report dismissed concerns private players would abuse their positions as port owners, noting freight terminals face much competition and shippers are quick to move their business.
Eric Atkins