Infrastructure development finance: a legal guide

Get to know more about Canada’s infrastructure development finance through its different funding and investment programs in this article
Infrastructure development finance: a legal guide

When an infrastructure project is being planned, the most common concern—sometimes the deal breaker—is the cost required for infrastructure development. This includes the start of the construction, its operations, and even its maintenance costs. Infrastructure projects require huge amounts of money which makes it different from other development projects. In these scenarios, infrastructure investment or infrastructure finance comes into play. 

Infrastructure investment or infrastructure finance provides funding for infrastructure projects or infrastructure developments. Although these terms may be interchangeably used, infrastructure investment may refer to the funding provided by the private sector, usually through a Public-Private Partnership (also called PPP or P3 for short).   

Infrastructure finance may also refer to funding provided by the private and public sectors through investments or financing programs implemented by their departments, agencies, or government-owned banks. The goal is the same – to provide resources to jump-start and finish an infrastructure project. 

One feature of infrastructure development finance is that investors are guaranteed a return of what they invested. The manner of payment, the interest rate involved, and other terms and conditions are stated in the infrastructure contract.  

To learn more about infrastructure development finance and infrastructure contracts, talk to a lawyer in your province or territory. If you live in Toronto, consult one of the best infrastructure lawyers in Ontario

Canada’s infrastructure development finance 

In Canada, sources of infrastructure development finance come from the private sector and government-handled funds such as Investing in Canada Plan and Canada Infrastructure Bank. 

1. Investing in Canada Plan (ICP) 

The Investing in Canada Plan (ICP) was launched by the federal government in 2016. It aims to provide infrastructure development financing to provinces and territories over 12 years for over C$180 billion.  

Interested implementors of infrastructure projects, such provincial and territorial governments and qualified private sector institutions, may apply for funding through ICP and the Investing in Canada Infrastructure Program (ICIP). 

Applications are received from municipalities and Indigenous communities, then submitted to provincial or territorial governments. These governments then forward the applications to Infrastructure Canada

These five investments streams apply under both ICP and ICIP:  

  • Public Transit Investment Stream: transit or transportation lines; modernization of carriers (e.g., bus fleets); creation of multipurpose paths; 
  • Green Investment Stream: water, wastewater, and solid waste facilities; disaster mitigation and adaptation projects; electric vehicle charging or refueling stations; 
  • Social Investment Stream: repair or construction of low-cost housing facilities, early learning or childcare programs, community spaces, cultural centers, heritage places, or recreational facilities; 
  • Trade and Transportation Investment Stream: constructions of trade corridors and border facilities; 
  • Rural and Northern Communities Investment Stream: energy sources, community infrastructures, and structures for internet connectivity of rural and northern communities; 
  • COVID-19 Resilience Stream: ventilation improvement projects and COVID-19 response infrastructure. 

Here’s an example of a project funded by Infrastructure Canada in Airdrie, Alberta: 

If you live in Edmonton and would like funding for your project, consult one of the top-ranked infrastructure lawyers in Alberta for guidance on how to proceed. 

2. Canada Infrastructure Bank (CIB) 

Established in 2017 through the enactment of Canadian Infrastructure Bank Act, the CIB is a federal Crown corporation whose main purpose (Section 6, CIB Act) is to attract investments from the private sector. These investments will be used to finance infrastructure projects in Canada.  

With this purpose, the CIB administers the infrastructure development finance of the ICP through facilitating of PPPs between all levels governments and the private sector. This is in line with the investment streams prioritized by the ICP. 

The CIB also performs other functions (Section 7(1), CIB Act) in line with infrastructure development finance, such as: 

  • receiving proposals for infrastructure projects from the private sector or institutional investors; 
  • providing financial advice to the federal, provincial, and territorial governments regarding infrastructure projects; and 
  • helping the Canadian government monitor and assess the general state of the infrastructure industry to craft better policies and programs on infrastructure development. 

What does infrastructure development do? 

Infrastructure is important to ensure the development of countries and the well-being of their citizens. It includes all assets, services, and facilities that countries provide. These include educational and health facilities, roads or highways, power supplies, public utilities (water, electricity, sanitation), disaster and calamity response, and such.  

Advantages of infrastructure development 

Infrastructure development is tied to improving the quality of life of local communities. Hopefully, in the hopes that it will directly affect the economic health of a country. 

Over the course of a country’s implementation of its infrastructure development, employment is generated by providing jobs for workers. This happens not just in the industrial sector during construction, but also in other sectors once the infrastructure development project is completed.  

Economic activities in the area will also improve due to the enhanced production of goods and services brought in by the new infrastructures. The distribution of local products to external markets will also be facilitated by these new infrastructures. Technological advancements (e.g., internet and broadband connectivity) will flourish because of infrastructure development. 

Canada’s infrastructure development 

Canada’s long-term infrastructure development plan is laid out in Investing in Canada Plan (ICP), specifically in Investing in Canada Infrastructure Program (ICIP), which is one of ICP’s funding components. 

Investing in Canada Infrastructure Program (ICIP) 

Among the numerous funding components of ICP, ICIP is the funding component specific to infrastructure projects and infrastructure development finance of Canada. 

In ICIP, bilateral agreements are made by the implementing party (the province, territory, or municipality) and the funding party (the federal Canadian government) once an application from the province or territory is approved.  

One aspect of ICIP is the cost sharing arrangement between the parties in a bilateral agreement.  This means certain project costs of the infrastructure development not covered by the federal government will have to be shouldered by the implementing province or territory. 

Want to learn more about Canada’s infrastructure development finance? Ask us by commenting below or by consulting with Lexpert-ranked infrastructure lawyers in Canada