DBRS Releases Canadian P3 Methodology

Dominion Bond Rating Service (DBRS) has today released its approach to rating Public-Private Partnerships (P3s also known as PPPs) in Canada. The methodology is primarily intended to give investors an overview of the key factors considered by DBRS when rating Canadian P3 transactions, and offers guidance on the preferred level of various analytical quantitative indicators, based on DBRS’s internal rating criteria and industry best practices.

Although the term P3 is a relatively new addition to the Canadian lexicon, its central concept of engaging the private sector in the construction and operation of traditionally public sector assets has been in use in Canada for quite some time, especially in the area of transportation infrastructure. What is novel about the current wave of partnerships is the more structured approach toward the allocation of risks and responsibilities among project participants, as well as the expansion of private sector involvement to a broader spectrum of public sector assets, such as hospitals and courthouses.

Despite considerable interest among governments and investors alike, the Canadian P3 sector currently remains fairly modest in size, especially compared with the large and more mature P3 universes found in the United Kingdom and Australia. Looking forward, however, P3 activity in Canada is expected to markedly accelerate, with over 40 major projects currently in the planning stages. In addition to the prospect of increased deal flow, the project pipeline points to a broader distribution of P3s across Canada in the future. Until now, most P3 activity occurred in British Columbia, where the provincial government was arguably the first public sector entity in the country to fully embrace the P3 model. Although British Columbia is expected to remain a hotbed of activity, other provinces, particularly Ontario and Québec, are ramping up their P3 efforts. Moreover, the federal government recently committed to establishing an office to formally study the potential application of P3s to federal assets, such as border crossings, which could further enhance deal flow over the years ahead.

The methodology providing DBRS's processes and criteria is available by clicking on the link below or contacting us at info@dbrs.com.