Call to Rethink Private Investment in Canadian Ports

Vancouver
Port of Vancouver

By MarEx 2017-06-19 17:50:05

The Canadian government should cash in part of its $3 billion stake in major sea ports by bringing in private investors, according to a new report from the not-for-profit C.D. Howe Institute. 

In Casting Off: How Ottawa Can Maximize the Value of Canada’s Major Ports and Benefit Taxpayers, author Steven Robins suggests that major port authorities should rely on private capital to finance expansion, and the government should harvest some of the value of its equity stake for investment in other priorities.

Canada’s largest ports, including Vancouver, Montreal and Halifax, are overseen by Canada Port Authorities (CPAs), which operate at arm’s length from their owner, the federal government. CPAs’ responsibilities include managing the leases of different terminal operators, providing common safety and navigation services and issuing permits for new construction.

Canada’s major ports already operate with significant private investment from terminal operators who, along with the ports, face high competition, both within the port and with other Canadian and American ports along the same coast. 

The federal government owns port lands and leases them out in a commercial manner. However, the current model means that the profits from managing the land are solely reinvested back into the ports which generated them – which is not always the best use of our public dollars, says Robins.

The report notes that the federal government is currently considering involving private capital in the ownership of Canada’s largest ports and estimates their equity value ranges from $2.6 to $3.4 billion. “Due to the competitive landscape facing ports, users are unlikely to see significant changes in pricing and customer experience if the federal government chooses to involve private capital,” said Robins.

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.

“These changes would make little noticeable difference for shippers – competitive constraints restrict the market power of the ports – but would unlock $2.6 to $3.4 billion in equity value which could be invested in the most pressing infrastructure needs of Canadians,” concludes the report.

The report is available here.

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