Québec’s public pension fund on Thursday said the expected cost of building one of the world’s biggest light rail systems in Montréal had risen for a second time and was now $800 million above its initial forecast.
Caisse de dépôt et placement du Québec also said a consortium led by SNC Lavalin Group Inc had won a contract worth around $5 billion to provide engineering, procurement and construction on the project. A consortium led by Alstom and including SNC Lavalin will provide rolling stock and systems through a contract worth more than $1 billion.
The Caisse said the project was now expected to cost $6.3 billion and would not be completed until the summer of 2021, a year later than originally planned. It had said in November 2016 the project would cost $5.9 billion, of which it would provide $3.1 billion with the remainder coming from Québec’s government and the Canadian government. That was an increase of $400 million from when the project was first announced.
The Caisse is both financing and overseeing the construction of the 67-kilometre public transit system in Montréal. The project breaks with a tradition of pension funds preferring to invest in infrastructure which is already built and is seen as a test case by other funds mulling whether to develop skills to manage the building of new infrastructure.
The Caisse will own and operate the track which will link several Montréal suburbs to downtown and Montréal’s Trudeau International Airport once it has been built.
Shares in SNC Lavalin were up 1.1 percent at 1110 EST (1610 GMT). Alstom shares were down 2.1 percent.
Bombardier Inc, the plane and train manufacturer based in Québec, was not selected in the process which was overseen by an independent committee having tendered to supply the rail cars. The Caisse is one of SNC-Lavalin’s largest shareholders and holds a 30 percent stake in Bombardier’s rail business.
Shares in Bombardier were down 1.2 percent.
The Caisse said that construction will begin in April with initial testing of the track to be conducted at the end of 2020.
(Reporting by Matt Scuffham; Editing by Susan Thomas and James Dalgleish)
Photo courtesy of Caisse de dépôt et placement du Québec