The federal Liberals are paving the way for the potential sale of government-owned shipping hubs, part of a larger strategy to encourage private-sector investment in infrastructure.
Ottawa announced late on Monday that it had hired investment bank Morgan Stanley Canada Ltd. to review ownership options for 18 Canadian ports. Canada Development Investment Corp., a Crown agency responsible for selling federal assets, hired the firm "to provide financial advice" on its port holdings, which include facilities in Halifax, Montreal, Toronto, Thunder Bay, Ont., and Vancouver.
Collectively, the 18 domestic shipping centres handle 310 million tonnes of goods annually, valued at more than $400-billion, according to the Association of Canadian Port Authorities.
Morgan Stanley has advised governments around the world on the sale of their assets, including ports in Australia and Europe. In this project, the investment bank is expected to report on the privatization experience in other countries and interview executives at the Canadian ports.
In September, the federal Liberals hired Credit Suisse AG to provide guidance on potential privatization of the country's airports. Both investment banks are expected to turn in reports by early in the new year that outline the government's privatization options, but the financiers are not mandated to talk to potential buyers. The government is expected to make a decision on the possibility of sales in the new year.
Prime Minister Justin Trudeau and Liberal cabinet ministers met on Monday in Toronto with potential institutional investors in infrastructure such as pension funds to pitch them on making major long-term investments in Canadian assets.
Canadian institutions have invested in ports across the world, drawn to these shipping hubs for their exposure to different economies and returns over the long term. The shipping business is also evolving, with many businesses using larger vessels that require deeper ports. Global operators have sought new capital to modify and add new technology to older ports, and have invested in tools such as cranes to accommodate bigger boats and their cargo.
In 2015, Canada Pension Plan Investment Board bought a large stake in a network of 21 ports in England, Scotland and Wales, and this year, the pension fund bought a 40-per-cent stake in Glencore PLC's agriculture business, which included port facilities. In 2015, an infrastructure fund managed by Morgan Stanley sold a terminal facility within the Port of Montreal to Fiera Axium Infrastructure, a consortium jointly controlled by Fiera Capital Corp. and Axium Infrastructure Management.
Earlier this year, Brookfield Asset Management Inc. led a consortium that invested $6-billion in Australian port and rail assets. The Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec have also invested in port facilities in Australia.
If the Liberals decide to sell some or all of the ports, they will be auctioning off facilities that have been run as for-profit businesses for more than a decade. Since 1998, federal rules have mandated that each of the 18 ports "be fully commercial and completely self-sufficient, with no financial support from the Government of Canada," according to the Association of Canadian Port Authorities.
The Morgan Stanley and Credit Suisse studies were undertaken after a major review of the Canada Transportation Act by former federal minister David Emerson urged Ottawa to consider privatizing government-owned assets. The former Conservative government launched that review in 2014, and Liberal Transport Minister Marc Garneau made the final report public in February of this year.
Last year, Canada Development Investment Corp. reported a profit of $2.25-billion, almost all of which came from the sale of shares in General Motors Co., which were acquired as part of the government's bailout of GM during the 2008 financial crisis.