Saturday, November 25, 2006

P3= Public Pension Partnerships

In Canada the biggest players in the P3 racket are public pension funds. Public sector workers pensions in fact. Both the Ontario Teachers Pension fund and OMERS are funds that are wanting to invest in privatization of public infrastructure. So perhaps we should call these P3's Public Pension Partnerships.

Is there a problem with this? Well yes there is because these funds are not controled by the workers who pay into them but by professional investment managers. In Canada private sector union pension funds also look to invest in infrastructure. This would not be problematic if the workers whose pensions make up these funds actually had control of the funds, hired the managers and set the mandate for investments. But they don't. Unions need to put pension fund reform on their agenda's

With direct control of these pension funds and their investments public sector workers could use it as leverage for for social equity, environmental stewardship, job security, living wages, etc. etc.

The myth of private sector partnerships with the state is just that a myth. What this is really is public sector funding of the state. And the irony is that the whole P3 racket was supposed to be about the private sector taking a risk with it's investments. It was part of the neo-con myth that the private sector is more efficient than the public. It was an attempt by them to reduce the public sector, to contract out public sector jobs. Now that same public sector with its pension funds and public sector workers that are being used to fund government infrastructure.

So is every Canadian. When CPP was privatized, to allow an arms length investment arm to be created we now have our federal pension plan engaging in P3's as well as other questionable investments such as in the Arms Industry and Wal-Mart.

Like union pension funds, Canadians need reform of the CPP to have citizen representatives including labour, women, environmental and consumer groups, on the board with ethical guidelines for investing.

The Harper Conservative Government push for P3's is not about free market economics (ain't no such a creature in capitalism) it is just good old fashioned conservative state capitalism.

P3 or not P3? Big pension funds hope for new infrastructure opportunities

TORONTO (CP) - Canada's major pension funds, after investing billions of dollars abroad in assets ranging from British waterworks to New Zealand timberland, are hopeful that a logjam holding back their flow of money into infrastructure within Canada is giving way.

The Ontario Teachers' Pension Plan is acquiring its first piece of Canadian infrastructure - the dominant freight container terminal operation on Canada's Pacific Coast - as part of a US$2.4-billion deal announced Thursday.

The announcement coincided with indications the federal government will smooth the road for pension fund investment in public infrastructure such as highways, transport hubs and utilities.

The Advantage Canada plan outlined by Finance Minister Jim Flaherty on Thursday included a pledge to give maximum impact to government spending through public-private partnerships.

These so-called P3s "will also provide opportunities for Canadian pension funds and other investors to participate in infrastructure projects here in Canada rather than being forced to look abroad, as is often the case now," according to the finance ministry.

Flaherty plans to set up a federal P3 office, and intends to force provinces and municipalities to "consider P3 options" for all large projects that get federal funding.

"It's about time," Michael Nobrega, CEO of the Borealis Infrastructure unit of the Ontario Municipal Employees Retirement System, said Friday.

"We hope he follows through. Pension funds are looking to put money out, so until the follow-through occurs it's not real, but's certainly very, very encouraging."

At the Teachers fund, officials are "quite heartened . . . because Canada has not had a lot of infrastructure opportunity," said Deborah Allan, director of communications for the pension plan, which has $96-billion of assets under management.

Teachers announced Thursday it is paying US$2.4 billion to Orient Overseas of Hong Kong for Deltaport at Roberts Bank south of Vancouver and Vanterm in the Burrard Inlet inner harbour - which operate under long-term leases with the federal Vancouver Port Authority - as well as the New York Container Terminal on Staten Island and the Global Terminal and Container Systems complex in Bayonne, N.J.

The Canadian and U.S. port terminals are of roughly equal value, said Jim Leech, who heads the Teachers fund's private capital portfolio.

In the wider Canadian infrastructure world, "the main complaint that pension funds have had is whether or not the levels of government have the political will to have public assets owned by private enterprise," Leech said.

"You've got some people ideologically opposed, believing that all public infrastructure - highways, airports, et cetera - should be owned 100 per cent by the government, and taxes should just go up to fix them," he said.

"We've been sitting on the sidelines, waiting for the debate to be had and somebody to make a decision."

In the meantime, Teachers' foreign infrastructure investments include Scotia Gas Networks in Scotland and England, 10 power plants internationally, and the Northumberland Water Group in the U.K., along with large timber tracts in New Zealand and the United States.

Other Canadian pension funds have also gone abroad. The Canada Pension Plan Investment Board last month put $1.05 billion into a consortium bid for British water utility AWG PLC, the CPP's largest infrastructure investment to date.

The volume of pension fund money going into infrastructure is increasing globally, observed Andrew Harrison, a pension specialist at law firm Borden Ladner Gervais.

"The principal reason is that these, by their nature, are long-term assets - and that's the key in a pension fund, where you've got people who are accruing benefits today who won't see their last payment out of the fund for 50 or 60 years," he said.

Infrastructure "also tends to provide some inflation protection, in that the payments off the infrastructure tend to rise over time."

The only potential pitfall he sees is that infrastructure assets "tend to be illiquid; if something does happen it's very hard to unload one of these investments."

Rock Lefebvre, vice-president of research at CGA-Canada, observed that defined-benefit pension funds can't depend on safe fixed-income instruments such as bonds to cover their future liabilities.

"They have to risk, so this is a fairly nice risk for all the parties involved."

Domestic infrastructure would have the extra advantage of eliminating currency risk, but fund managers have been complaining for years that Canada's governments have been slow to allow private money into public projects.

"Governments are starting to realize that they can't fund all the infrastructure investment that has to happen," said Harrison, who heads the government relations committee of the Association of Canadian Pension Management.

"You've got these enormous capital pools in Canada to pay benefits to Canadians. There does seem to be a symmetry to using that money to invest in the infrastructure those same Canadians use."




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1 comment:

Larry Gambone said...

A disgusting waste of the workers money. All that potential that could be invested in a cooperative economy, gone to corrupton.