August 17, 2016

Montreal embraces public-public infrastructure

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Canadian pension fund Caisse de Dépôt et Placement du Québec (CDPQ) has a track record of successfully investing in rail projects, and it is now looking to bring this to Montreal. Jean-Marc Arbaud, deputy managing director of CDPQ Infra, reveals the company’s ambitions for the 67km Metropolitan Electric Network (REM) to Kevin Smith.

SINCE Montreal’s inaugural metro line opened 50 years ago, the city has benefitted from an efficient service which has now carried well over 7 billion passengers. Yet despite a steady expansion programme in its early years, 30 years have passed since any new lines opened, with a number of projects to connect under-served areas falling by the wayside after failing to attract the financial support they need.

As well as committing the federal government to support new infrastructure investment in Canada, the Trudeau administration is encouraging the private sector to follow suit. Montreal looks likely to be one of the first to benefit with pension fund Caisse de Dépôt et Placement du Québec (CDPQ) announcing in April that it is planning to develop and operate the Metropolitan Electric Network (REM), a new 67km, double-track, fully automated light metro.

Montreal2CDPQ will contribute $C 3bn towards the $C 5.5bn line, which is labelled a public-public project with the province of Quebec and the federal government meeting the remainder of the cost.

CDPQ’s involvement continues Canadian pension funds’ recent record of investing in the railway industry: a consortium of Borealis International and the Ontario Teachers’ Pension Plan won the tender to operate Britain’s High Speed 1 for 30 years after bidding £2.1bn in 2010, while the Canada Pension Plan Investment Board was part of the consortium which secured the takeover of Australia’s Pacific National in March.

In Canada, Bombardier sold a 30% stake in its transport division for $C 1.5bn to CDPQ in November 2015, while CDPQ also has past pedigree with Canadian infrastructure projects. It is part of the InTransit BC consortium which holds a 35-year concession for the 19.5km automated light metro which is part of the Skytrain network and connects central Vancouver with the city of Richmond and Vancouver International Airport. It is also looking to invest in Via Rail’s proposed new line between Toronto, Ottawa and Montreal.

The Montreal project promises to develop the world’s third longest automated railway which is largely based on Vancouver’s Skytrain concept, the second longest. It involves reconstruction and conversion of the existing Montreal Metropolitan Transit Agency (AMT) Deux-Montagnes commuter rail line. New infrastructure in the southwest of Montreal island to Sainte-Anne-de-Bellevue will also be built while the service will provide a long-awaited rail connection to Pierre Elliott Trudeau International Airport along a new 5km branch line.

Mr Jean-Marc Arbaud, CDPQ Infra deputy managing director, says the project came about after the province of Quebec reached an agreement with CDPQ in January 2015 for the pension fund to support infrastructure projects which they deemed would be profitable to their investors. CDPQ subsequently changed its laws in order to set up a subsidiary, CDPQ Infra, which Arbaud says was done with the purpose of developing, financing, and operating infrastructure projects, much like the fund already does in real estate.

“We started in July 2015 and presented a firm plan for our project earlier this year,” Arbaud says. “We were shown two projects that the province of Quebec was hoping we could develop; one in the west Island of Montreal, and one in the south of the main island. We looked at all possibilities for both of these areas and ended up with one project. We believe a single line is the best way to meet all of the needs.”

Airport link

CDPQ Infra’s proposal for the airport link appears to have put the final nail into the coffin of AMT and Montreal Airports’ (ADM) plans to provide a rail connection to the airport after the province of Quebec allocated $C 200m to the scheme in 2010.

The two organisations could not agree on a joint plan, so came up with separate proposals in an attempt to secure the funding. ADM’s proposed express link to Central station appeared to gain the upper hand over AMT’s more modest proposal to introduce a diesel service via the Vaudreuil-Hudson commuter line, particularly after it was confirmed that a rail terminal would be built at the new Turcot Interchange, a new triple-deck highway junction, for $C 136m, although this will not be completed until 2022. A further $C 25m was invested in new station infrastructure at the airport.

However, problems accommodating the line within existing CN infrastructure meant that the AMD project lost momentum, with the REM option now offering a stronger overall business case. Yet with the station located to the south of the airport site, it seems likely that this will go unused.

“We looked at the project and decided that it made more sense to go through from the North,” Arbaud says. “The right of way they were using was difficult to implement and very expensive. It would also attract comparatively low ridership.”

REM will require 200 110km/h EMU cars which will operate as four-car trains during the peak, and two-cars at other times. The network will serve 24 stations and operate for 20 hours per day, with departures every 3-12 minutes. It will be electrified at 1.5kV dc, and utilise CBTC to enable trains to operate in driverless mode at Grade of Automation (GOA4), with train movement at safety integrity level 4 (SIL4).

Arbaud says the project is currently in the request for qualification stage after CDPQ published two notices on June 28 for two contracts to build and equip the line. They comprise the
$C 4bn engineering, procurement and construction contract and a $C 1.5bn rolling stock, systems and operation and maintenance contract. CDPQ will qualify up to three respondents to bid for each contract and the deadline for submissions is August 26.

“We hope to start the overall project before next summer,” Arbaud says. “The call for tender will go out in October and we will have more detailed information about the exact design then.”

Under the terms of the agreement with the province, the pension fund will receive first call on any profits. The Quebec and Canadian governments, as the subordinate equity investors which are funding the remaining $C 2.5bn cost of the project, will claim a share only above a clear threshold.

While Arbaud says work is still underway on the detailed business case, which is expected to conclude by the end of the year, the added capacity available and the fact that it will reach areas not yet served by rail, including the airport, is reflected in strong initial projected ridership figures.

Around 85,000 passengers per day currently use public transport on the A10/downtown Montreal corridor, the airport 747 bus service, and the AMT Deux-Montagnes line. This is expected to increase to 150,000 per day with the introduction of the automated line, or 35 million passengers per year, encompassing 80,000 on the A10 section, 10,000 on the airport link, and 60,000 on the Deux-Montagnes section.

Fares will be in line with the new structure for the city developed by ARTM, the new body founded out of the recent reforms to public transport governance in the greater Montreal area, which reduces the number of transit agencies active in the region from 16 to five. As part of its reforms, ARTM is promising to consolidate the approximately 700 existing fares into a single integrated system. CDPQ Infra is also expected to incorporate the city’s Opus smartcard ticketing into its programme.

Real estate

While CDPQ Infra will depend heavily on farebox revenue, unlike STM, it will not receive subsidies to cover operations. As a result, it is exploring the usual non-fare revenue streams such as selling retail and advertising space at stations, and real estate development.

CDPQ estimates that up to $C 5bn in private real-estate developments could emerge alongside the corridor, part of which CDPQ, as the asset owner, could tap into, although the finer details of this arrangement has yet to be agreed with the provincial government and the municipalities.

In addition, Arbaud says CDPQ Infra is looking to introduce operational efficiencies wherever possible, and it will strive to match Vancouver’s 99-100% availability record for its service.

 “We project that our operating costs will be much lower than STM and that will be one of the main reasons why we will not require investment from the government to cover these costs,” Arbaud says. “We are not MTR in Hong Kong where they can cover 100% of the cost of the project and more through land development, but a big part of it can be. We don’t need to receive subsidies to cover our operating costs.”

One criticism of the project is the lack of integration with Montreal’s metro network, with only one connection available with the Orange Line at Central station in the current plan. Arbaud admits that this is a fair observation and says that there are provisions in the tender to add new stations at McGill to interchange with the Green Line, and Edouard-Montpetit, to connect with the Blue Line, both of which are situated in the Mount Royal tunnel.

“We are actively looking at those stations, including looking at ridership projections and the cost of implementation,” Arbaud says. “Construction is not so easy but it is part of the call for tender in this project... Hopefully it will be included in the first phase but it is a question of investment cost.”

Absent of any risk, inevitably state and city officials have been keen to embrace the project since it was announced, and they are seemingly doing all they can to help push the project along. Quebec has agreed to fast-track its environmental impact study, and other similar procedures may also be sped up in the next few months in order for construction to start next year and to meet the 2020 target.

Yet whether the entire network opens by the projected target date remains to be seen.

“The plan is for the first train to enter service in 2020, and the plan is doable in terms of schedule, but 67km is going to be very difficult,” Arbaud says. “One of the major problems we face could be the delivery of trains. We will need 50 to deliver the first service plan, which may be difficult. But so far we are doing well in terms of the schedule and are ready to go to tender.”

With CDPQ Infra taking the lead, and the need to make a return to its investors, it means that even if the 2020 target is not reached, the project is unlikely to fall by the wayside like so many other schemes for the city. Indeed, CDPQ Infra’s commitment to Montreal, and its parent company’s track record, has alerted other cities with much-needed infrastructure projects. While Arbaud says that it has received calls from domestic as well as international projects, its focus for now is to deliver the most significant contribution to Montreal’s public transport for more than half a century. And it has made an encouraging start.

“Our attention for now is firmly on this project,” Arbaud says. “This is not to say that we won’t look at other things, but until we have reached financial close here, our focus remains on Montreal.”

 

CDPQ’s proposed alignment

WHILE the final alignment has yet to be confirmed, the project has a few different elements, including the converting the existing 33km heavy-rail line between Central Station and Deux-Montagnes, into an automated, light metro system. This 12-station-section is currently used by AMT commuter services and runs via a tunnel under Mount Royal. Contractors will be required to remove 14 level crossings.

There are also several sections of new construction. This includes the South shore Branch, a 15km line from Brossard to Central station, which will have five stations and two park-and-ride facilities. From Brossard it will run along the median of Highway 10, and then along the central deck of the new Champlain Bridge to Nuns’ Island. From Nuns’ Island, the line crosses the channel via a new public transit bridge, and runs along an elevated alignment which gradually reduces in height before entering a tunnel at Fernand-Seguin Street to pass beneath CN tracks and the Lachine Canal. The line will again run on an elevated alignment joining with the existing railway overpass to the station.

From the existing route beyond Bois-Franc, the western branch will follow the existing Doney Spur railway right-of-way, running on an elevated alignment for 16km alongside Highway 40 and terminating at Sainte-Anne-de-Bellevue station.

This section will have seven new stations, including the branch to the airport, which is estimated at 3km, and will run south of Autoroute 13 to Technoparc Saint-Laurent where the line will continue in tunnel to the airport.
The western section of the route will have 11 park-and-ride facilities and seven bus terminals, while all stations on the line will have platform screen doors. Where new intermediate stations are required, they will have 80m-long platforms. 

 

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