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Selling off airports, major highways, utilities and Canada Post could net over $200 billion: Government report

People carry luggage at Toronto Pearson International Airport, one of the federal assets considered most valuable according to a government report. FILE: Friday December 20, 2013. Source: THE CANADIAN PRESS/Mark Blinch
People carry luggage at Toronto Pearson International Airport, one of the federal assets considered most valuable according to a government report. FILE: Friday December 20, 2013. Source: THE CANADIAN PRESS/Mark Blinch
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Canada could make over $200 billion by selling off airports, highways, utility companies and crown corporations, according to an internal government report.

The federal government has been quietly studying the idea of privatizing significant assets for at least the past two years, but has offered little public information about what might actually be sold and has never disclosed how much money they think they could make.

Confidential documents obtained by The Logic, however, list the expected sale price of about two dozen public assets, including Canada Post, Hydro-Québec and airports in Toronto, Montreal, Vancouver and Calgary.

The documents, which were prepared by Finance Minister Bill Morneau’s Economic Growth Council, also estimate how much money could be made by placing tolls on the Don Valley Parkway and the Gardiner Expressway in Toronto, as well as on Montreal’s Champlain Bridge.

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Talking Point

Selling off 23 of Canada’s largest public infrastructure assets—including utility companies, airports, and highways—would generate between $197 billion and $233 billion for public coffers, according to a report prepared for Finance Minister Bill Morneau. Finance said the government won’t put tolls on Montreal’s Champlain Bridge, but did not rule out the sale or placement of tolls on any other asset.

The Economic Growth Council is a group chaired by Dominic Barton, former global managing partner of McKinsey & Company, tasked by Morneau with boosting Canada’s long-term economic growth.

The Logic obtained six reports prepared by the council between July 2016 and March 2017, via an access to information request. The reports lay out the council’s ambitious vision of using the funds raised by partial or full sales of government assets for significant new infrastructure projects like high-speed rail and smart cities, that could be built with funding from the Canada Infrastructure Bank.

According to an August 2016 report from the council, those new projects could be paid for from the sale of assets like the Calgary International Airport, which they estimate would bring in $4.3 billion, or the Vancouver Port Authority, whose price they put at about $3.8 billion.

The most valuable federal asset listed is the Toronto Pearson International Airport, which they estimate could be sold for $11.2 billion.

Of note, the report also calculates how much money could be made by selling off assets the federal government does not own, including a number of utility companies and highways overseen by provincial and municipal governments.

For example, the most valuable provincial asset is Hydro-Québec, which the council estimates could be worth between $74.7 billion and $91.3 billion.

The most valuable municipal asset is Enmax, the utility company owned by the City of Calgary, which the report estimates could sell for between $8.1 billion and $9.9 billion.

Finance Minister Bill Morneau did not respond to a series of questions, including whether the federal government has discussed any of these sales with provincial or municipal counterparts.

“In regards to your specific questions, the government does not discuss its ongoing policy deliberations,” said Jack Aubry, director of media relations at the Department of Finance, in an email.

Aubry said the government will not be implementing tolls on Montreal’s Champlain Bridge, which the report estimates could bring in $200 million annually.

In April, Transport Minister Marc Garneau said the government’s review of privatization of airports was not under active consideration and his office said seaport privatization was similarly on hold.

When asked whether the government was still considering the sale of any of the 28 assets listed in the report, however, Aubry did not rule any asset out.

The list prepared by the council is marked “preliminary,” and there is evidence to suggest the government is looking at the sale of additional assets.

About the Numbers

The council estimated the value of each asset by taking the earnings before interest, tax, depreciation and amortization (EBITDA) of each one and multiplying it. Toll roads are calculated to be worth 12 times EBITDA; airports 17 times EBITDA; utilities nine to 11 times and Canada Post six times. The following assets were listed as potentially for sale, but lacked a suggested price and so are not included in any charts or totals: the Canada Mortgage Housing Corporation, Via Rail, Go Transit, the Calgary Ring roads and the Don Valley Parkway and the Gardiner Expressway. According to council estimates, the lowest sale price possible for the 23 assets is $197 billion, but it could go all the way up $233 billion.

For example, CBC reported in July 2017 that PricewaterhouseCoopers had been hired by the federal government to examine the potential sale of 26 Canadian airports. The council report, on the other hand, only lists the four largest airports in the country.

The council uses the phrase “asset recycling” when discussing potential sales, a process by which a government raises capital from existing assets, either by selling or leasing them, and then uses that money to build others.

The council lists three options for how assets could be disposed of by the federal government: lease, sale-leaseback and full or partial divestiture. A divestiture could take the form of a direct sale or an initial public offering, according to the council. 

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Once a sale is made, a key question for private buyers is how they’d be able to turn a profit. For highways and bridges, the answer is simple: implementing tolls. The council’s report estimates that tolls on the Don Valley Parkway and the Gardiner Expressway in Toronto would bring in $120 million in annual revenue.

Tolling Toronto’s 407 East Extension would bring in $250 million in annual revenue, according to an estimate based on the revenue of the 407 ETR, which is already privatized.