Thoughts and Opinions On Today's Important Issues

Tuesday, July 13, 2010

DRIC Road/Bridge Beauty Contest Winner Announced

It's just like the Miss Universe contest.

All of those foreign companies who responded to the TC/MDOT RFPOI, wearing their finest gowns and skimpiest bathing suits as they flash their big smiles so that they could win the prize of DRIC P3 investor. The gifts are huge: billions of dollars of guaranteed DRIC availability payments (assuming they are legal) by ripping off tax-payers for 50 years or more on both sides of the border. It really is a no-brainer----for the winner. It's like money in the bank at a guaranteed rate of return with no risk, taxpayer money to boot!

Michigan represntative Opsommer has been hinting about OMERS's role in DRIC:
  • "Why risk it? All of our bridges were constructed via specific legislation that did not grant MDOT new powers. It would be bad policy to cede tolling approval for the sake of one DRIC project. Also, it is important to note there is no "free bridge" as the $550 million dollars Canada would "give" us is a loan that would be repaid through tolls on Michigan drivers. (Speculation is that the Canadian pension fund OMERS would be a 99-year investor.) The Legislature would have no say in toll increases, which would be set by MDOT and the investor."

Since the Representative has opened the door to speculation, let's close it and give the answer who the winner is.

The beauty pageant winner? Who will be named as the fairest of the fair DRIC P3 proponents and be awarded the prize of excessive billions of taxpayers dollars if DRIC-ites get their way?

It is as easy to guess as speculating that the DRIC Engineers were never going to choose the Ambassador Bridge Enhancement Project as the new crossing for our border. Except we know that Prime Minister Harper really wants to buy that bridge as the media reported on his secret mandate letter and why Transport Minister Baird supposedly offered $550M to pass the Michigan P3 legislation.

This is a public service announcement BLOG to warn two of the bidders on the Ontario DRIC road P3 project and many of the MDOT/Transport Canada RFPOI proponents to save their time, effort and money. Avoid disappointment. They have absolutely no chance of winning. So if you, dear reader, do not want to read the convoluted corporate machinations about how I came to my conclusion, then you are free to skip this BLOG.

If on the other hand, you want to understand how I can be so sure of what I am speculating, read on.

Actually, since the DRIC project is clearly now Canada's, and MDOT does what it is told, this BLOG really covers the entire DRIC Project since it will all be grouped into one big project, all of it. And the winner will take all.

The Blogmeister is pleased to be able to let you know well in advance who the winner of the beauty pageant to build the DRIC Road is. Oh sure, I know nothing is supposed to happen until the end of the year but why keep you in suspense for so long.

Here are the 3 lovely contestants who have been short-listed by our judge, Infrastructure Ontario. Well before that, as I have told you before, Gord is actually the one who gave it away a long time ago. I wonder if his provincial government insider gave him the scoop because it came in a pre-emptive strike against local contractors to make sure they do not get their hopes up:

  • "I don't know about you, but it would be this taxpaying motorist's worst nightmare if the most costly highway development in Ontario's history were to wind up being administered by some mom-and-pop Windsor company that would be in way over its head and unable to deliver the goods in a timely manner...

    Think about it. When the feds built the $1-billion Confederation Bridge linking P.E.I. with New Brunswick in the 1990s, did they hand the assignment to local boy Bud The Spud and his trusty backhoe? No. They awarded the project to a major Calgary-based firm, Strait Crossing Inc., which provided outside expertise but employed thousands of local workers and completed this remarkable link in less than three years...

    Windsor-area residents, who will have to endure a living hell during the anticipated four years of construction, with noise, dirt and traffic gridlock, have every reason to want this done by the most talented and fast-paced company, regardless of nationality, that money can buy."

Hmmm, only one company named. Interesting. And we know how well-connected Gord is.

The best a local can be as mini-Gord re-inforced is as a sub-contractor:

  • "Cocos still player in parkway

    Members of the local construction industry were shocked last week when the Coco Group of Companies was knocked out of the running to build the multibillion-dollar Windsor-Essex Parkway...

    But don't go crying for the Cocos. They're going to make millions on the Parkway project anyway. They would have raked in the profits had they won the grand prize to own half of this gigantic contract, but they'll do just fine as subcontractors to whichever international consortium is chosen to helm the job."

I wonder for whom the Cocos will be a sub. Have they ever introduced a major contrator to Windsorites? If so, that would give us a big hint. Let the traditional media ask them for an answer. I can guess whom they saw, can't you, if anyone.

There, you have it. The winner is the group with Strait Crossing Inc as part of it. Straight from Gord's mouth (Oooops, sorry, bad pun). Or rather by way of the provincial government insider who really does know everything. [I wonder if you can guess who he/she is.] Only one company named in his whole column. But wait you say, you remember who the contestants are from a previous BLOG and they are not named there:

  • - Rose City Parkway Group including:
    - Aecon Concessions is a division of Aecon Construction Group Inc.
    - Fengate Capital
    - Dufferin, a division of Holcim (Canada) Inc.
    - The Miller Group
    - MMM Group Limited
    - Macquarie Capital Group Limited
    - HOCHTIEF PPP Solution North America Inc.
    - Peter Kiewit Sons Co.
    - AECOM Canada Ltd.
    - H.W. Lochner
    - Thurber Engineering Ltd.
    - Applied Research Associates, Inc.
    - RC Spencer Associates Inc.
    - West 8

    - Windsor-Essex Transportation Partners including:
    - Carillion Canada Inc.
    - The Bank of Nova Scotia
    - Stantec Consulting Ltd.
    - PCL
    - Bilfinger Berger Project Investments
    - HSBC Specialist Investments Ltd (HSBC Infrastructure)
    - John Laing Investments Limited (John Laing)
    - Walsh Construction Company, a subsidiary of The Walsh Group, Ltd.
    - Parsons Corporation
    - Trow Associates Inc.

    - Windsor Essex Mobility Group including:
    - Dilion Consulting Limited
    - RBC Dominion Securities Inc.
    - Iridium Concesiones de Infraestructuras, S. A.
    - Acciona, S.A.
    - Fluor Canada Ltd.
    - Dragados Canada Inc.
    - Acciona Infrastructure Canada, Inc.
    - Hatch Mott MacDonald Ltd.
    - AMEC Earth and Environmental, Ltd.

Don't you just love the word "including." It is who is being hidden that makes this fun.

Ahhh, but you have to do some research to find out how Strait Crossing Inc got there. And the PEI Confederation bridge is a key fact to remember.

Let's start here:

  • Strait Crossing Inc.

    In 1988 a new, special purpose corporation, STRAIT CROSSING INC. (SCI), was established to undertake the $1.0 billion Confederation Bridge Project. Nearly all the senior staff of W. A. Stephenson and SCI Engineers & Constructors were transferred to lead the complete financing, design and construction of this major project.

Then this:

  • SC Infrastructure Inc. (“SCI”) Armbro, in conjunction with Strait Crossing Inc., formed SCI as a wholly owned subsidiary of Armbro effective December 1, 1997. The transaction involved SCI’s purchase of all of the noncontract assets of Capital Projects Group Inc. (“CPGI”), the principal operating subsidiary of Strait Crossing Inc. In addition, SCI retained all of CPGI’s senior management and staff. Based in Calgary, Alberta, it operates in North America and internationally. SCI combines Armbro’s experience in the development, construction and operation of infrastructure with Strait Crossing Inc.’s expertise in infrastructure development, design, financing, construction and operations.

    Strait Crossing Inc., as the sponsoring joint venture partner, led the consortium that completed the development, financing, design, construction and commissioning of operations of the awardwinning $1.0 billion Confederation Bridge between Prince Edward Island and New Brunswick. For the past 20 years, senior management and staff of CPGI have provided project leadership for the construction of numerous high profile infrastructure projects in North America.

Guess who became the owner of SCI: Armbro Enterprises Inc.

  • "1999 was a year of significant achievements for Armbro. It was a year that marked Armbro’s 70th anniversary. But more importantly, it was a year that set a new benchmark for performance and created a new foundation for Armbro’s growth.

    A large part of that foundation was put in place in December 1999 with our acquisition of BFC Construction Corporation (“BFC”), the most recent in a series of strategic acquisitions that included SC Infrastructure (“SCI”) in 1997 and Miwel Construction in 1998. BFC adds its own long and proud history, dating to 1910, to that of Armbro’s. BFC was already a partner with Armbro in delivering several key projects such as the ground-breaking Highway 407 located just north of Toronto – Canada’s first all electronic toll highway and the Highway 104 toll road in Nova Scotia...

    infrastructure development _ Through SC Infrastructure Inc. (“SCI”) as well as through our interest in Canadian Highways International Corporation (“CHIC”), Armbro Enterprises is working with governments and their agencies to find new ways of conceiving, planning, financing, designing, developing, building and operating their infrastructure projects. Armbro has participated in a significant number of public-private partnerships world wide."

Then Ambro changed its name: Aecon Group Inc (formerly Armbro Enterprises Inc)

Do you remember, part of the Rose City group is Aecon Concessions, a division of Aecon Construction Group Inc. Aecon Construction Group, Inc. operates as a subsidiary of Aecon Group Inc.

  • "Aecon Concessions

    Aecon Concessions brings the specialized capabilities and diverse strengths of the Aecon Group and its strategic partners to the development of domestic and international Public-Private Partnership (P3) and Build-Operate-Transfer (BOT) projects. Within these projects, Aecon plays a pivotal role as an investor, constructor and/or operator."

In fact, I was astounded that the Aecon President knew so much about the DRIC Road and to mention it specifically in the firm's annual report:

  • June 17, 2008 ""The road building budget for the Ministry of Transportation has doubled over the last few years … and there is more work to be done.

    But while MTO is one of our most important customers, it is not the only transportation infrastructure game in Ontario.

    Plans are well advanced for the new $3 billion Detroit Windsor crossing scheduled for completion in 2014 …and we plan to be there."

And then this in June, 2009:

  • "We see an excellent bidding pipeline of new project opportunities coming on stream in 2009 and 2010. In particular, the appetite for “big transit, big highway and big energy projects” has never been stronger.

    To give you an idea of the scale of the work that is being conceived, looking out through to 2010, we have visibility on between $3 and $4 billion worth of P3 transportation projects ... and that is just in the Greater Toronto Area.

    The same thing is happening in other parts of the province– with projects like the Detroit/Windsor crossing..

    Aecon is well positioned to participate in its fair share of these projects. The field of qualified bidders for this kind of work is smaller and the margins can end up being better than what we see on smaller projects"

While not as precise, the Aecon people said in 2010:

  • "Today, Aecon is doing more work in more parts of Canada than ever before. But we believe this is only the beginning of what Aecon is now poised to achieve.

    With our added size and diversification, comes the opportunity to increase the SCALE of the projects we pursue. Canada is a very big country. When we build things, we tend to build them big.

    And when project sponsors look around for the contractors that can help them achieve these big dreams, Aecon is now clearly seen as one of a select handful of firms that makes the cut...

    This change signals an important trend.

    As Aecon has become more diversified in the scope and geographic reach of our capabilities, and as our capacity has grown, we have been successful in winning and managing larger, more complex and higher value contracts...

    As Aecon moves ‘up market’ in terms of the type of contracts that we pursue, a number of good things happen.

    First, we find the competitive field less crowded. There are only so many contractors that have the experience, resources and surety capacity to qualify for these projects.

    Second, bidding is more disciplined as these larger more seasoned competitors operate under very structured environments and stay very focused on profit.

    And third, larger projects will frequently see us participating with partners...

    The vast majority of our revenue is derived from contracts that are let either directly or indirectly by governments or large multi-national companies."

No wonder Gord smashed the local contractors!

Oh and surely you did not forget this important connection between AECON's head honcho and Windsor:

  • "The tony Toronto enclave Rosedale is abuzz this week with talk of a love match between well-known financial journalist Diane Francis -she writes a column in the National Post - and building baron John Beck.

    Mr. Beck is CEO and chairman of Aecon Group, which is the largest publicly traded construction and infrastructure company..."

I explained what happened between them and Windsor's role in that in this BLOG:

Then I found this:

  • "Davies Ward Phillips & Vineberg LLP was recently involved in the following transactions:

    acting for the lenders to the Rose City Parkway Group consortium (with Macquarie, Hochtief, Aecon and Fengate as sponsors), which has been short-listed to design, build, finance and maintain the Windsor-Essex Parkway in Ontario."

Pshaw, you say. Blogmeister, you can do better than that. That is not enough information.

All right ye of little faith. Remember that the Confederation Bridge is important. Why----guess who is involved in its ownership:

  • "OMERS acquires Interest in the Confederation Bridge

    (Toronto - June 2, 2003) OMERS (Ontario Municipal Employees Retirement System), has announced today that its subsidiary, BPC Maritime Corporation, has reached agreement with Ballast Nedam Canada Developments Inc. (Ballast Nedam) to acquire a 34% share of Strait Crossing Development Inc. (SCDI)."

And guess who owns MMM Group Ltd. part of the Rose City Group:

  • "MMM president and chief executive officer Bruce Bodden said in an interview...

    his firm’s partnership with Borealis Capital Corp., which recently made a “significant” investment in MMM, together with its newly expanded capacity, will allow the firm to take on increasingly larger roles on complex projects while increasing its strength in key sectoral markets and considering new geographic ones."

I saw this on MMM's website:

  • "MMM was subsequently retained to provide due diligence technical services by Borealis Capital Corporation for its purchase of the bridge. MMM also sits on the technical review committee for ongoing bridge services."

You would not be surprised to know that:

  • "MMM is providing program management, transportation planning and design, environmental approvals, construction administration, mapping and surveying, and other services for the Detroit River Tunnel Project."

But I especially liked this connection between OMERS and AECON:

  • "The Ontario Power Authority has the job of ensuring that the people of this province have the power they need to light their homes and run their businesses.

    Aecon is part of the solution. A consortium comprised of Trans Canada, OMERS and CAMECO is investing more than $5 billion to upgrade the Bruce Nuclear plant on Lake Huron.

    Aecon’s Industrial Group is participating, together with SNC Lavalin, in a $200 million joint venture to upgrade, repair and replace numerous systems and equipment in the facility."

Bruce nuclear plant...wasn't Windsor's own Spanky the Minister of Energy at the time. The deal over Bruce was criticized by the Ontario Auditor General. But did our Dwight Duncan get upset about the extra money spent:

  • "Still, Energy Minister Dwight Duncan said he would sign the same deal all over again.

    "The trade-off is what you pay for power," said Duncan, who was energy minister when the deal was negotiated, before becoming finance minister in October 2005 for seven months and then returning to the energy job."

OMG...will he say that as Finance Minister when the DRIC Road deal costs too much too!

Don't you find it interesting that Macquarie is part of the Rose City group too. They also submitted a proposal to finance the DRIC Bridge as a P3.

Wow, aren't they lucky they sold off their interest in the Detroit/Windsor Tunnel to Alinda. They probably would not have been allowed to bid since then they might be considered to be in a quasi-monopoly position the way Moroun was accused when he made a bid to operate the Tunnel for Detroit. What an insightful move by Macquarie.

I wrote this in March, 2007:

  • "Are the City and Macquarie working together too? Are Windsor, the Feds and Macquarie working together?

    My brain was reeling. I noted that Gowlings works for competitors of the Bridge Co. I knew that at one time they were Governance Counsel for Borealis too.

    Oh no.....Were Windsor, the Feds and Macquarie working together along with Borealis?

    Were Macquarie and Borealis going to be the P3 partner for the new border crossing?"

But, but, but you say...where is the OMERS/Borealis name on the short-list?

Get real. They cannot appear there. They just announced a competitive DRTP tunnel deal that could take away a whole bunch of the DRIC traffic and could put them in a quasi-monopoly position too!

And have you forgotten what its leader, Michael Nobrega, really wants to do. He wants to be Canada's equivalent to a Macquarie Bank and be an investment manager for other pension funds because of OMERS' infrastructure skills, not just a pension fund manager for Ontario employees:

  • "The C$60billion Ontario Municipal Employees’ Retirement System is currently seeking about three partners for a C$20 billion “global strategic investment alliance with like-minded investors to jointly own large-scale infrastructure and real estate assets”. The alliance, the brain child of OMERS CEO Michael Nobrega, is set up so that the LPs can bypass the GPs but still get great access to deals by virtue of the sheer amount of capital they have to deploy...

    The fee structure is as follows: two of OMERS’ investment arms, Borealis and Oxford, will source and manage investments. In the first five years, Borealis and Oxford will receive an annual asset management fee of 50 basis points on equity under management. A management board that will oversee the alliance will charge an additional fee of 35 basis points on invested capital to reimburse expenses...

    “What we’re trying to do is get access to large-scale, alpha projects. And having an extra fee here or there really doesn’t do it for us,” Nobrega said. “We really need to get the preferential product through capital formation. And that’s where the pension fund makes its wind – not through a carried interest.”

And he wants big bucks too---to be like the Canada Pension Plan it seems:

  • "Michael Nobrega, president and chief executive of Ontario Municipal Employees Retirement System (OMERS), wants the Ontario government to enact legislative changes immediately to make it easier for people in the province to save for their retirement...

    "I never believe these things happen with a big bang; these things are always incremental," Mr. Nobrega said. But he would like to see the Ontario government, through its legislative powers on pension plans, tweak its rules and allow individuals to join major pension plans already in existence.

    OMERS and Ontario Teachers' Pension Plan, the two largest pension plans in the province, are available only to their constituents. But with a little legislative imagination, these plans could be open to anyone who wants to join, and ease the pension woes of people who are not covered by a plan, Mr. Nobrega contends."

And this

  • "OMERS is one of Canada's top pension plans, with more than C$43 billion ($41 billion) in assets under management, but Nobrega has argued it needs to be bigger to be able to take advantage of global opportunities.

    "I think anything under C$100 billion, you can't play," he told BNN television in an interview. "OMERS itself will grow organically over the next three to four years into the C$70 billion-C$80 billion range."

    Nobrega said OMERS -- the Ontario Municipal Employees Retirement System -- has not held merger talks with the country's other major pension funds, but has been approached by mid-size funds with assets under management in the C$5 billion to C$13 billion range to invest together in global opportunities.

    "Empirically, we have found that scale has worked to our advantage with respect to returns."

And just so you think I am NOT kidding, this was said back in 2009:

  • "Mr. Nobrega did not mince words when he told the audience that the government should mandate through legislation of private and public sector funds to create more such "super-funds." He argued that OMERS must be one of those funds because it was an industry leader in the area of infrastructure investing.

    Mr. Nobrega's pitch sounded like more of a plea to government. But he made a solid case.

    OMERS, he argued, "led the renaissance in the nuclear industry in this province... invested in the bricks and mortar of our healthcare infrastructure, (and) we are currently invested in the Windsor/Detroit border crossing where one of the largest infrastructure programs must take place in order to produce hundreds of thousands of jobs."

    In short, OMERS has paid its dues, he said."

Now you know why the DRTP Tunnel is so visible again. It's Nobrega's way of telling everyone the project is owed to him. Everything, the DRIC road, the financing of DRIC or rather the Ambassador Bridge purchase and the building of the twinned bridge beside it.

And the winner is....Representative Opsommer was right!