Project Finance

Project Finance may be defined as non-recourse or limited recourse financing in which debt, equity, and credit enhancement are combined for the construction and operation or refinancing of a particular facility in a capital intensive industry, in which lenders base credit risk and recourse on the asset value and projected revenues from the facility combined, in some cases, with limited sponsor support, rather than the general assets or credit worthiness of the sponsor.

P3s in Canada

With more than 220 completed and ongoing public–private partnership projects (P3s) valued at nearly C$100 billion on the books in Canada, public–private partnerships have become an increasingly entrenched way of financing infrastructure projects over the past thirty years. So much so that several provincial governments have asked for increased federal spending. As well, and after a bit of a rough start, municipalities are taking a new look at the P3 model by way of addressing the infrastructure challenges they face.

From a subject-matter perspective, P3s involving hospitals, courthouses, and roads, which drove the market recently, are experiencing reductions in activity. Still, Alberta, which not long ago rejected a P3 initiative for 10 schools because it turned out to be more expensive than a traditional approach (C$571 million as opposed to C$557 million), has undertaken a new cancer care center, the province’s first foray into P3s in the health sector. Recently, BC embarked on its P3 hydro generating facility when it signed the contract for the John Hart Generating Station Replacement Project in Campbell River. Wastewater projects appear to be the new the flavor of the month, particularly in Saskatchewan and BC.

Water, broadband, energy, transmission, renewables, urban transit, social housing, and other projects are also picking up the slack. Examples include light rapid transit projects on the drawing boards in Ottawa, Waterloo, Edmonton, and BC; a fiber-optic project in the NWT; water and wastewater projects in BC and Saskatchewan; and social housing in Alberta, BC, and Toronto. There’s also no shortage of mega-projects, including the multi-billion-dollar Eglinton Crosstown project in Toronto, the Edmonton Crosstown, transmission grids in Alberta, the Detroit River crossing, and the Champlain Bridge and redevelopment of CBC lands in Montréal. And, with the financing community becoming ever more sophisticated about P3s, smaller projects are also emerging. Federal funds have been particularly important in the growing “MUSH” sector, which comprises municipalities, universities (student residences), schools, and hospitals.

What is apparent is that the Canadian legal community is “inextricably linked to P3 projects.” As it turns out, that’s a good thing, because the country’s P3 environment has an excellent international reputation. Indeed, the Canadian market has stimulated a tide of international interest, attracting international construction companies, money, and service providers from afar, including the UK, Australia, and Europe. For lawyers and many others, all of this means increased exposure to international brands like Macquarie, Plenary Group, Bilfinger, Axiona, ACL Construction, Bouygues Construction, Balfour Beatty Construction, and Sintra. And lawyers have benefitted from the exposure.

With their increasing sophistication and the growing reputation of the Canadian P3 model, Canadian law firms have also spread their wings from the domestic to the cross-border and international markets. With Canadian companies like Ellis Don and PCL already established on the international scene and seeking more opportunities south of the border, Canadian lawyers are well positioned to follow them. 

Alliance Contracting

Alliance contracting—akin to the integrated project delivery or progressive design-build infrastructure delivery models—involves a single contract between the project owner/financier/commissioner and an alliance of parties who deliver the project or service. As reported in Canadian Lawyer, lawyers who practice in the construction and infrastructure sectors say they have seen an uptick in this model, “which is best suited to projects with considerable and ascertainable risks, and where multiple owners may be involved.”1

In this model, the alliance of parties who deliver the project assume less of the risk, and the contracts can include provisions intended to ensure there are no disputes. Alliance contracting has been used in the United Kingdom and, in particular, in Australia, though it is still “very new to the Canadian marketplace,” says Doug Younger, Chair of the Infrastructure Group at Aird & Berlis LLP in Toronto, adding that Union Station is currently the only project in Canada using it.

“Union Station is an old building; it’s been there for many decades” and is owned by the city of Toronto and province of Ontario, Younger says. “You’ve got a complex ownership structure, and it would be very difficult to do a P3 bid and ask proponents to shoulder a whole lot of permitting risk, environmental risk, geotechnical risk, and so on.” A project such as Union Station’s restoration lends itself less well to a traditional P3 model, he notes, because in that model governments typically establish value for money, or price, and attach it to the various elements of risk.


  1. Raymer, Elizabeth. “Construction and infrastructure sectors see uptick in alliance contracting.” Canadian Lawyer. July 14, 2020. https://www.canadianlawyermag.com/news/general/construction-and-infrastructure-sectors-see-uptick-in-alliance-contracting/331442.

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