Canada Infrastructure Report

Q1 2016
www.bmiresearch.com
CANADA
INFRASTRUCTURE REPORT
INCLUDES 10-YEAR FORECASTS TO 2024
Published by:BMI Research

Canada Infrastructure Report Q1 2016
INCLUDES 10-YEAR FORECASTS TO 2024
Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: October 2015
ISSN: 2044-5792
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CONTENTS
BMI Industry View ............................................................................................................... 7

Table: Infrastructure - Construction Industry Forecasts (Canada 2014-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table: Canada Infrastructure Risk/Reward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SWOT .................................................................................................................................... 9
Infrastructure SWOT .................................................................................................................................. 9
Industry Forecast .............................................................................................................. 11

Canada - Liberal Victory Supports Forecast Upgrade - Q1 2016 ...................................................................... 11
Table: Construction And Infrastructure Industry Data (Canada 2014-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Transport Infrastructure - Outlook And Overview .......................................................................................... 14
Table: Transport Infrastructure Industry Data (Canada 2014-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Major Projects Table - Transport .............................................................................................................. 21
Table: Key Transport Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Energy And Utilities Infrastructure - Outlook And Overview ............................................................................ 22
Table: Energy And Utilities Infrastructure Data (Canada 2014-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table: Key Projects: Energy & Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Residential & Non-Residential Building - Outlook And Overview ...................................................................... 26
Table: Residential and Non-Residential Building Industry Data (Canada 2014-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table: Construction And Social Infrastructure Key Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Industry Risk Reward Ratings .......................................................................................... 34

Canada – Infrastructure Risk/Reward Index ................................................................................................. 34
Rewards ............................................................................................................................................... 34
Risks .................................................................................................................................................... 34
NAWE Infrastructure RRI: Limited Rewards Growth Places Pressure On Margins .............................................. 35
Table: Western Europe And North America: Infrastructure Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Market Overview ............................................................................................................... 44

Competitive Landscape ............................................................................................................................. 44
Table: Key Company Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Table: Notable Sector Players - Canadian Pension Funds Infrastructure Portfolio, CADmn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Company Profile ................................................................................................................ 48

SNC-Lavalin ........................................................................................................................................... 48
Table: SNC-Lavalin Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Methodology ...................................................................................................................... 55
Industry Forecast Methodology ................................................................................................................ 55
Sector-Specific Methodology .................................................................................................................... 56
Risk/Reward Index Methodology ............................................................................................................... 60
Sector-Specific Methodology .................................................................................................................... 61
Table: Infrastructure Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
© Business Monitor International Ltd Page 4

Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

BMI Industry View

BMI View: The Canadian construction industry will contract 0.5% in 2015 as cuts to private cap-ex in the
primary sector and a H215 slowdown in residential construction weigh on growth. We expect the entire
industry as a whole to recover in 2016, driven by the new Liberal government's fiscal stimulus plan, which
will double public infrastructure spending over the next 10-years.
Latest Updates
■ The Liberal government's victory in the October federal election is a win for infrastructure development.
The Liberal fiscal stimulus plan will double public spending into infrastructure over the next 10 years.
■ The Liberal government also plans to create a Canada Infrastructure Bank to help municipalities finance
infrastructure projects by providing debt financing, loan guarantees, and bundling smaller projects to
make them more attractive to institutional investors.
■ Transport infrastructure and renewable energy will outperform over the next four years, as the Liberals
intend to promote export competitiveness through transport infrastructure development and have stressed
their commitment to 'green infrastructure'.
■ We expect the construction industry to contract 0.5% in 2015 due to private sector cuts to capital
investment and slowing residential sector. However, the stimulus package and strong pipeline of social
infrastructure and transport projects will help the construction industry return post 2.5% real growth in
2016 and then average 2.9% from 2016 to 2019.
Table: Infrastructure - Construction Industry Forecasts (Canada 2014-2020)
2014 2015f 2016f 2017f 2018f 2019f 2020f
Construction industry value, CADbn 139.81 140.39 146.04 153.72 161.75 170.04 177.77
Construction Industry Value, Real Growth, % y-o-y 0.69 -0.48 2.52 3.06 3.02 2.93 2.34
Construction Industry Value, % of GDP 7.2 7.0 7.1 7.1 7.2 7.3 7.3
Statistics Canada
Risk/Reward Index
■ Canada's RRI has remained steady this quarter at 64 out of 100.
■ While Canada receives high marks for low levels of industry and country risk, it falls short on potential
returns due to muted industry growth and public sector investment.
■ We highlight the upside potential for future rewards score as a result of the increases to public sector
spending beginning in 2016.

Table: Canada Infrastructure Risk/Reward
Risk/Reward Index Rewards Industry Rewards Country Rewards Risks Industry Risks Country Risks
64 58 45 84 79 85 75
BMI

SWOT
Infrastructure SWOT
SWOT Analysis
Strengths ■
Strong Industry Risk score on the Infrastructure Risk/Reward Index score of 85 out of
100.
■
Plentiful natural resources for power generation, especially hydropower and coal.
■
Highly attractive public-private partnership market.
■
Consistent and strong growth forecast for the country's construction sector over the
medium term (an annual average of 2.2% is forecast for the period
2015-2019). Construction accounts for a high portion of GDP when compared
globally (over 7%).
■
Large project pipeline across residential, utilities and transport infrastructure sectors.
Weaknesses ■
Developed market with limited need for greenfield infrastructure.
■
Construction industry dominated by domestic companies, leaving little opportunity for
international investors.
■
Concerns over graft in the construction sector, especially at a local level.
Opportunities ■
Government focus on reducing fossil fuels in energy mix means attractive incentives
for renewables and plentiful opportunities for power producers.
■
Liberal infrastructure plan aims to almost double infrastructure investment, up to
CAD125bn from CAD65bn, over the next 10 years.
■
The Liberal government plans to establish a Canada Infrastructure Bank, which will
probide debt financing and loan guarantees for infrastructure projects at the
municipal level.
■
Canada's rail sector is booming, supported by strong public investment and the
successful use of the PPP model.

SWOT Analysis - Continued
Threats ■
The importance of the resource industry for infrastructure demand leaves Canada
vulnerable to a sustained global economic weakness, especially in China.
■
Oil sands investment is only viable with oil above certain prices. If oil prices remain
low, this will hit contract opportunities (with infrastructure bottlenecks already
weighing on prices).
■
Complex regulatory environment and staunch environmental opposition is delaying
projects.
■
Housing market is beginning to cool, with leading indicators suggesting a gradual
slowdown.

Industry Forecast
Canada - Liberal Victory Supports Forecast Upgrade - Q1 2016
BMI View: Canada's construction industry will recover from 2016, following a contraction in 2015
resulting from low private sector capital expenditure and an H215 slowdown in residential building. The
Liberal Party victory in the October federal election will see a sizeable increase in funding for
infrastructure projects through a boost in public spending and the creation of a new Canada Infrastructure
Bank.
Latest Updates
■ We have revised down our forecast for the Canadian construction industry for 2015. Our view for a
slowdown in the Canadian residential building sector in H215 is playing out, but at a faster rate than
anticipated, causing us to downgrade our forecast from 1.5% to -0.5% real growth for the year.
■ The Liberal Party's victory in the October federal election will bring a significant boost in funding
availability for infrastructure projects, with a pre-election plan outlining an additional CAD65bn over the
next ten years. The party also plans to create a new Canada Infrastructure Bank and streamline the
approval process for the New Canada Building Plan.
■ We increased our forecasts for the next four years by an average of 0.5% per year to reflect the Liberal
agenda and now expect the Canadian construction industry to grow to 2.9% on average from 2016-2019.
Table: Construction And Infrastructure Industry Data (Canada 2014-2024)
2014e 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f
Construction industry 139.81 140.39 146.04 153.72 161.75 170.04 177.77 184.72 191.45 198.38 205.50
value, CADbn
Construction Industry
Value, Real Growth, % 0.69 -0.48 2.52 3.06 3.02 2.93 2.34 1.71 1.44 1.42 1.39
y-o-y
Construction Industry 7.2 7.0 7.1 7.1 7.2 7.3 7.3 7.3 7.2 7.2 7.1
Value, % of GDP
Infrastructure industry 25.87 26.22 27.59 29.24 30.94 32.62 34.17 35.53 36.82 38.15 39.50
value, CADbn
Infrastructure industry
value real growth, % y- 1.4 0.5 3.7 3.8 3.6 3.2 2.6 1.8 1.4 1.4 1.4
o-y
e/f = BMI estimate/forcast. Source: Statistics Canada, BMI

Slowing Residential Construction Dragging On 2015 Growth
An H215 slowdown in residential construction, coupled with continued poor performance in the non-
residential building sector, will cause the Canadian construction industry as whole to contract in 2015. Our
view that a hot Canadian residential construction industry would slow in H215 is playing out, however, at a
faster rate than previously anticipated (see, Hot Residential Building Market To Cool In H2, 29 July 2015).
After a strong start to the year, residential building has tapered off as economic headwinds, high levels of
household debt, and overvalued housing prices are dampening appetite for new units. Non-residential
construction continues to struggle, as Canada's extractive industries slow their fixed capital investment
along with commodity price weakness. As such we revised down our forecast for 2015 from 1.5% real
growth to a contraction of 0.5%.
Public Spending To Boost Construction Growth From 2016
Canadian Construction Industry (And Sub-Components) Real Growth % y-o-y
2.5
-2.5
-5
2013e 2014e 2015f 2016f 2017f 2018f 2019f
Construction Industry Value, Real Growth, % y-o-y
Infrastructure industry value real growth, % y-o-y
Residential Building Industry Value Real Growth (%)
Non-residential Building Industry Value Real Growth (%)
e/f = BMI estimate/forecast, Source: Statistics Canada, BMI

2016-2019: Liberal Win Means Big Gains For Infrastructure
The new Liberal government will boost construction industry growth by increasing public spending on
infrastructure development, streamlining the approval process under the New Building Canada Plan, and the
creation of the Canada Infrastructure Bank. As we highlighted prior to the election, a win from the Liberal
Party offered the biggest upside for the construction industry (see, Election: A Win For Infrastructure,
Regardless of Outcome, 9 Oct 2015). The party's infrastructure plan outlines a considerable boost - from
CAD65bn to CAD125bn over the next ten years - to the already sizeable spending under the existing New
Building Canada Plan (NBCP). The new Prime Minister, Justin Trudeau, has emphasized measures to jump
start the economy by doubling current infrastructure investment over the next two years, and by speeding up
the implementation of the NBCP through a faster approval process. As such, we believe the Canadian
construction industry will return to growth in 2016, and then average 2.9% real growth over the 4-year
period until the next election (2019). While we have not yet factored it in, we emphasize the upside
potential to our 10-year outlook if the Liberals continue the infrastructure agenda after winning the election
in 2019.
Liberals To Double Infrastructure Spending

Current And Additional Public Infrastructure Spending As Projected By Liberal Party
Source: Liberal Party of Canada

New Infrastructure Bank Will Add To Financing Availability
The creation of a new Canada Infrastructure Bank (CIB) by the Liberal government will also add to
infrastructure growth by helping to extend credit to municipal level projects. The new bank will work with
municipal governments and Canada's financial community to raise funding for projects across the country.
Through the issuance of loan guarantees, the CIB will be able to leverage the federal government's credit
rating to provide cheaper financing to municipal level projects. The bank will attempt to entice larger
institutional investors into the municipal market by bundling multiple low-value projects together.
Additionally, the bank will have the authority to issue "green bonds" in an effort to raise financing directly
from the public.
Transport, Renewables, and Social Infrastructure To Get Biggest Boost
We expect transport, renewable energy and some segments of social infrastructure to outperform under the
auspices of the new Liberal government. The Liberals' agenda aims to jump start the transport focused
NBCP, as well as add an additional CAD19.7bn in financing. We already expected the industry to expand
significantly in the coming years, driven by a booming rail sector. Large-scale projects like the USD4bn
Eglinton Crosstown Light Rail Project, one of the largest public-private partnerships globally, continue to
gain traction in Canada and the additional funding will only increase transport growth rates. Along with
public transit, the Liberals have also outlined plans to increase investment into "social" and "green" projects
by CAD19.7bn each over the next 10 years. We expect these additional funds to spur sizeable growth rates
in social infrastructure and renewable energy projects. Specifically, funding will target low-income housing,
cultural and recreational facilities, schools, and clean energy.
Transport Infrastructure - Outlook And Overview
BMI View: Transport Infrastructure growth is set to get a sizeable boost from increases in government
spending, with the Liberal's infrastructure plan outlining an additional investment of CAD20bn over the
next 10 years. This will add to a large number of projects already planned or under way. Canada currently
has USD54.9bn worth of transport projects in the pipeline according to BMI's Key Infrastructure. The
Liberal investment plan will go into roads, ports, and rail projects aimed at increasing efficiency and
promoting exports. As such, we revised up our forecasts for transport infrastructure industry growth, and
expect it to jump up to 4.4% in 2016 and then average 2.5% annually until 2024.

Latest Updates
■ We upgraded our forecast for the transport infrastructure industry on the back of the election of a Liberal
government, which plans to invest heavily in transport projects.
■ We expect transport sector real growth to increase significantly to 4.4% in 2016 from a muted 0.4% in
2015, and then average 2.3% annually from 2015 to 2024.
Large-scale urban transit projects will see the rail sector outperform in the transport industry, with road and
bridges also posting substantial growth rates over our forecast period.
Table: Transport Infrastructure Industry Data (Canada 2014-2024)
2014e 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f
Transport infrastructure industry value -0.4 0.4 4.4 4.1 3.8 2.9 2.2 1.5 1.1 1.1 1.1
real growth, % y-o-y
Roads and Bridges Infrastructure -0.7 -0.3 4.4 4.5 4.1 2.9 2.0 1.4 1.2 1.2 1.2
Industry Value Real Growth, % y-o-y
Railways infrastructure industry value -0.4 5.8 7.5 4.9 4.5 4.2 4.4 2.8 1.5 1.5 1.4
real growth, % y-o-Y
Airports infrastructure industry value 0.9 -0.7 0.7 0.7 0.7 0.8 0.5 0.1 0.0 0.0 0.0
Ports, Harbours and Waterways
Infrastructure Industry Value Real 2.4 -2.4 1.5 2.2 3.1 2.9 2.2 1.4 1.1 1.0 1.0
Growth, % y-o-y
e/f = BMI estimate/forecast. Source: BMI, Statistics Canada

Investing To Ease Bottlenecks

Transport Infrastructure Value By Sector (2013-2019)
20
15
10
0
2013e 2014e 2015f 2016f 2017f 2018f 2019f
Ports, Harbours and Waterways Infra Industry Value
Airports infra industry value Railways infra industry value
Roads and bridges infra industry value
e/f = BMI estimate/forecast. Source: Statistics Canada, BMI
Rail On Track For Growth Boom
Railways infrastructure industry value will post the strongest growth of any of the transport sub-sectors over
the forecast period. This growth is mainly due to several high value urban rail projects which have recently
commenced or are set to do so. A project pipeline worth almost USD40bn is guiding our forecast for
industry value real growth of 5.8% in 2015 and average growth of 3.9% per year between 2015 and 2024,
with the strongest growth expected in the early part of our forecast period.

Rail Projects To Drive Infrrastructure Growth

Annual Real Growth for Infrastructure, Transport, and Rail Sectors
10
7.5
2.5
0
2015f 2016f 2017f 2018f 2019f 2020f
Transport infrastructure industry value real growth, % y-o-y
Infrastructure industry value real growth, % y-o-y
Railways infrastructure industry value real growth, % y-o-Y
f = BMI forecast. Source: BMI, Statistics Canada
A USD4bn contract for the Eglinton Crosstown Light Rail Transit (LRT) Project was awarded in June and
reached financial close in July, showing major projects are advancing. The project, which includes two
tunnelling contacts, will cost a total of USD5.4bn, making it one of the largest Public Private Partnerships
(PPP) projects globally. With many more projects either under construction or at the planning or tendering
stage over the next five years, we forecast strong 5.23% average real growth rate from 2015 to 2020 for the
rail sub-sector. In contrast, the infrastructure sector in general will grow at a more modest 2.66% per annum
over the same period.
Other major urban transit projects include the USD2.2bn Toroto-York Spadina Subway Extension Project.
The Toronto Transit Commission awarded an up to CAD80mn project management contract to Bechtel
Canada for the project with works including an 8.6km, six-stop extension of the Yonge-University-Spadina
line from Downsview to Vaughan. The project was initially estimated to cost CAD2.63bn . However, an
additional CAD150mn will now be required, and the City of Toronto will contribute CAD90mn and the
Regional Municipality of York will provide CAD60mn. The project is expected to be completed by end-
2017.

Improving rail access across the country is also planned: the provincial government of Ontario reportedly
hopes to develop a high-speed rail line between Windsor and Toronto. The Chinese ambassador to Canada,
Luo Zhaohui, has been talking to the Premier of Ontario, Kathleen Wynne, about China offering help with
the design, construction and operation of the line. The project is estimated to cost about CAD2.5bn. The
project's environmental impact assessment was launched in late 2014 and will take from four to six years to
complete.
Growing demand from the oil sector, and delays to new pipelines which are caught in regulatory hurdles
could see rail companies adjust their infrastructure to pick up the slack. In addition, rail loading terminals
are being developed by midstream pipeline companies. However, there are some risks to this investment
owing to several crashes, the most significant being the devastating rail crash at Lac-Mégnatic in Quebec in
July 2013. In the wake of the accident, Canada announced more stringent safety regulations including
updating safety reporting requirements for rail companies operating in Canada and the need for tank cars
carrying volatile crude to be built with thicker steel walls.
As well as moulding and upgrading existing infrastructure to cater to the oil industry, there are also plans to
build a new railway, which creates substantial upside to our already optimistic forecasts. The proposal, from
a group of Canadian businessmen called G Seven Generations (G7G), includes a 2,400km railway that will
link Fort McMurray with the Delta Junction in Alaska, where it will connect with the Trans-Alaskan
Pipeline System (TAPS) to transport crude to the Port of Valdez for export. With a single track, it will have
1.5mn b/d capacity, increasing to 5mn b/d if twin tracked (Financial Post). The estimated cost of the railway
is CAD8.4bn for a single track and CAD10.4bn for a double track. G7G have secured support for the
railway from First Nations and Alaskan tribes. This is critical in easing the approval process.
Another proposed rail project is that of the government of British Columbia's Surrey city, which plans to
build its first light rail by 2018, according to Mayor Linda Hepner (International Railway Journal). Hepner
promised to initially build a CAD2bn (USD1.8bn), 10km railway connecting Guildford with central Surrey
and Newtown. The project's second 16.8km phase will extend the line to Langley. Funding has not been
decided yet, although the mayor suggested a public-private partnership option.
Highways Remain Stable
Highways are also seeing investment across the country, although this is primarily in brownfield projects
and expansions to existing roads, meaning the overall impact is less notable on the industry value. The
investment is a combination of engineering, procurement and construction projects and public-private
partnerships for developing toll roads.

Many of Canada's expressways are tolled and the country is home to one of the most profitable toll roads in
the world - the 407 Express Toll Road (ETR) in the Greater Toronto Area (GTA), in Ontario. The highway
is owned by a consortium comprising: Cintra Infraestructuras S.A. (43.23%) (a wholly owned subsidiary
of Ferrovial S.A), Canada Pension Plan Investment Board (total 40%) and SNC-Lavalin (16.77%).
The 407 ETR is due to undergo a CAD1bn extension, which will be built in two phases, with the first phase
extending the existing highway by 22km east to Harmony Road in Oshawa. The second phase will link the
highway up to Highway 35/115 by 2020. In March 2015 the consortium, comprising transport infrastructure
developer Cintra Infraestructuras and construction firm Holcim Canada, reached financial close on the
second phase of the Highway 407 East Phase 2 project in Ontario. The project, to be developed by the
consortium, is estimated to cost CAD880mn. Civil engineering construction firm Ferrovial Agroman and
Holcim's Canadian subsidiary Dufferin Construction Company will carry out the design and construction of
the toll road. The project includes a 22km extension, with two lanes in each direction, which will start from
Highway 407 East at Harmony Road in Oshawa and connect to the Highway 35/115 in Clarington. The
project also includes a 10km link, which will connect the toll road with Highway 401. The 30-year
concession will be developed on a design, build, finance and maintenance basis. The first section of the
project is expected to open to traffic in late 2017.
Blackbird Infrastructure has also secured a CAD1.2bn contract from the provincial government of Ontario
to build a provincially owned stretch of Highway 407 East in Canada. The project aims to relieve
congestion and will offer emergency detours for travellers in Durham. Blackbird will design, build, finance
and maintain the highway. Construction from Harmony Road to Taunton Road/Highway 418 is scheduled
to start later in 2015. The project's first section is expected to be opened in 2017 and the entire project is set
to be completed in 2020.
Canada's road network is set to benefit from considerable investment under the 2015/2016 budget, with
some CAD409.5mn allocated for bridges, highways, buildings and equipment. Much of the investment will
be focused on road and bridge maintenance, with funds allocated to, among others, the upgrade of Route 17
and Route 11, the replacement of Kouchibouguacis River Bridge and Benjamin River Bridge and
rehabilitation of Centennial Bridge.
Conversely, we see very few airport or port projects of any note. There are a few exceptions: the first being
the USD1.3bn redevelopment of Calgary Airport, where the Runway Development Project is complete and
started operating in June, 2014. The runway is the longest in Canada. Expansion of Calgary Airport is
ongoing and in April 2015 The Calgary Airport Authority delayed the opening of the international terminal

at the airport until Q316, according to CEO Garth Atkinson (Airport Technology). The CEO noted
construction of the exterior of the terminal will be mostly complete by end-2015, but the interior will need
another six months to accommodate the requirements of the airlines and 70 retail tenants. The authority
claims the terminal will double the size of the existing terminal and add about 22 aircraft gates for US and
international flights. The terminal will also save 4,900 tonnes of CO2 a year.
Discussions are under way regarding the potential CAD300mn expansion of Billy Bishop Airport in
Toronto, which, located downtown on Toronto Island, would provide more direct access to the city. The
proposal, from airline Porter, was approved during a City Hall April vote, but with a long list of stringent
pre-conditions, with a final proposal expected to be voted on in 2015. If approved it could provide upside to
our muted forecasts for the sector, with growth of 0.3% expected on average between 2015 and 2024.
Porter Aviation Holdings (PAHI) recently sold its passenger terminal at Billy Bishop Airport to Nieuport
Aviation Infrastructure Partners, a consortium of Canadian and global infrastructure equity investors.
PAHI disclosed plans in August 2014 to sell the terminal to focus on its airline business. It was estimated
the sale raised more than CAD750mn.
Several other smaller scale airport projects are under way. The Kelowna International Airport in British
Columbia plans to invest around CAD55.6mn in 2015 to develop and expand the airport. Project work will
include the development of the departure lounge, construction of a new airport plaza and expansion of the
outbound baggage hall and aircraft apron. The airport's single runway will be further expanded to 10,000ft
by 2025. The departure lounge will be expanded in phases, while the airport plaza will be expanded in
collaboration with PatAIRa Holdings. The airline offices and the check-in area will be renovated in 2016-17
and 2017-18, respectively. The total project is expected to cost around CAD150mn.
The second substantial project is the potential upgrades at the Port of Montreal. Canada's ports are already
of a high quality, with little new capacity needed. The Port of Vancouver, the country's biggest, will be
capable of handling the oil tankers to ship increased volumes of Canadian crude to Asia if the planned
pipelines to the port go ahead. The Port of Montreal, the second largest container port in Canada, will
benefit from expansion, and it was announced there are plans to expand container capacity, deepen vessel
births and improve traffic flow in and around the port. The project will receive funding of around
CAD43.mn from the National Infrastructure Component of the New Building Canada Fund. The Montréal
Port Authority will fund the bulk of the upgrade works, estimated at a further CAD132mn.

Major Projects Table - Transport
Table: Key Transport Projects
Time-
Value frame
Project Name Sector (USDmn) Size Unit Companies End Status
St. Lawrence In tender/
Corridor Bridge, Roads & Tender
Quebec Bridges 5,000.00 3.4 km Government of Canada[Sponsor]{Canada} 2018 launched
Grupo ACS[Construction]{Spain}, SNC-
Lavalin[Construction]{Canada}, Dissing
St Lawrence River +Weitling[Design/Architect]{Denmark},
New Bridge PPP Provencher Roy Associes[Design/
Project, Montreal, Roads & Architect]{Canada}, Arup Engineering Contract
Quebec Bridges 4,500.00 3.4 km firm[Design/Architect]{United Kingdom} 2018 Awarded
Aecon Group[Construction]{Canada},
EllisDon[Construction]{Canada}, ACS
Infrastructure Development[Construction]
{United States}, SNC-
Lavalin[Construction]{Canada}, CH2M
HILL Constructors[Consultant/Project
Management]{United States}, Hatch Mott
MacDonald[Consultant/Project
Management]{United States}, The Toronto
Eglinton Transit Commission[Operator]{Canada},
Crosstown Light Metrolinx[Sponsor]{Canada}, Technicore
Rail Transit (LRT) Underground[Construction]{Canada},
[Kennedy Station Obayashi Canada[Construction]{Canada},
to Mount Dennis Kenaidan Contracting[Construction]
(Weston Road)], {Canada}, Kenny Under
Ontario Rail 4,380.00 19 km Construction[Construction]{United States} 2020 construction
Government of Canada[Sponsor]
{Canada}, SNC-Lavalin[Construction]
{Canada}, ACS Infrastructure
Development[Construction]{United
States}, Hochtief Group[Construction]
{Germany}, Flatiron
Construction[Construction]{United
States}, Dragados Canada[Construction]
{Canada}, MMM Group[Construction]
{Canada}, TY Lin
New Champlain International[Construction]{United States},
Bridge, Montreal, Roads & International Bridge Technologies Under
Quebec Bridges 3,462.00 3.4 km Canada[Construction]{Canada} 2018 construction
Ministere des Transports du
Quebec[Operator]{Canada}, Kiewit
Corporation[Construction]{United States},
Turcot Parsons Corporation[Construction]{United
Interchange States}, WSP Group[Construction]
Reconstruction {Canada}, Holcim Limited[Construction],
Project, Montreal, Roads & AECOM[Consultant/Project Management] Under
Quebec Bridges 2,997.00 21 km {United States} 2016 construction
Source: BMI's Key Project Database

Energy And Utilities Infrastructure - Outlook And Overview
BMI View: Growth in the energy and utilities sector will speed up from 2016 as the new Liberal
government increases public spending into the sector. The pro-environmental policies of the Liberals will
see the power sector and in particular renewable energy outperform, while oil and gas pipeline projects
will continue to face approval challenges.
Latest Updates
■ We expect the energy and utilities sector to recover from 2016, with growth quickening to 3.2% from a
weak 0.5% in 2015. This will be driven by investment into the power plants and transmission grids sector
and renewable energy in particular.
■ The Liberal win in the October federal election will increase funding availability for renewable energy
projects, which already benefit from a robust pipeline, and also for water and sanitation investment.
■ Growth in the oil and gas pipelines sector will continue to be subdued, with the election of the Liberal
government unlikely to change the prospects of approval for a number of projects currently being held up
by regulators.
Table: Energy And Utilities Infrastructure Data (Canada 2014-2024)
2014e 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f
Energy and utilities infrastructure 3.0 0.5 3.2 3.4 3.5 3.6 2.9 2.0 1.7 1.6 1.6
industry value real growth, % y-o-y
Power plants and transmission grids
infrastructure industry value real 3.5 -0.4 3.6 4.4 4.3 4.1 3.3 2.5 2.1 2.1 2.0
growth, % y-o-y
Oil and gas pipelines infrastructure 1.9 -3.9 1.0 1.2 2.9 2.5 2.5 1.4 1.0 0.8 0.7
industry value real growth, % y-o-y
Water infrastructure industry value 2.2 3.5 2.8 2.1 2.0 2.8 2.0 1.3 0.9 0.9 0.8
Solid Growth From 2016
The energy and utilities sector stands to benefit substantially from increases in infrastructure spending under
Trudeau's Liberal government. The Liberal infrastructure development plan includes CAD20bn for 'green
infrastructure', bringing additional funding for water and sanitation and renewable energy projects. As such,
we have upgraded our forecast from 2016, and expect growth in energy and utilities construction to increase
3.2% in 2016 and average 2.6% annually from 2016-2024.

We expect the power sector, driven by renewable projects, to outperform within the energy and utilities
sector due to the new government's commitment to environmentally friendly policies. Correspondingly, we
expect the Liberal government to give limited support to the oil and gas pipelines sub-sector, where
continued regulatory issues and environmental concerns will hold up projects.
O&G Underperformance
Energy And Utilities Infrastructure Value By Sector (2013-2019)
20
15
10
0
2013e 2014e 2015f 2016f 2017f 2018f 2019f
Oil and gas pipelines infrastructure industry value, CADbn
Power plants and transmission grids infrastructure industry value, CADbn
Water infrastructure industry value, CADbn
Power Sector To Outperform
A large hydroelectric and renewable project pipeline will be bolstered by strong support from the Liberal
government, causing the power sector to outpace pipeline and water infrastructure development over our
10-year forecast period. The Liberal government will target clean energy development as part of its 'Climate
Change Action' strategy. While the Conservatives had been backtracking on emissions targets and other
climate change mitigation strategies, the new Liberal government has announced plans to reintroduce
measures domestically and enter talks abroad. The power plants and transmission grids infrastructure
industry currently accounts for 60.2% of total energy and utilities construction activity in Canada, and we
expect this to expand to 63.2% by 2024 as the industry expands at an average real rate of 2.8%.

We have long held the view hydropower will outperform in Canada and this will only be further supported
by the Liberal victory (see 'Hydropower Will Continue To Dominate', 12 June 2015). Our positive outlook
rests on a foundation of high-value hydropower projects underway or set to commence across Canada.
Currently there are USD15.7bn worth of projects under construction and an additional USD8bn have been
approved or awarded. The largest of these is BC Hydro's USD7.9bn 1,100MW Site C hydropower project.
Morgan Construction and Environmental Ltd. won the contract for preparation activities in August, and
is expected to be finished in June 2016, in order for the main civil works to commence. Other hydro projects
include the USD5.1bn Lower Churchill Project in Newfoundland and Labrador (construction of phase one
began in March 2015) and the USD1.2bn John Hart Station replacement in British Columbia (construction
under way and completion is expected in 2018).
Power Sector To Dominate Industry

Power Plants and Transmission Grids Value, and % of Total Energy and Utilities
15 64
63
10
62
5
61
0 60
2013e
2014e
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
Power plants & transmission grids infra. value, CADbn (LHS)

Power plants & transm. grids infra. value, % of total energy & utilities (RHS)

Regulatory Issues Holding Back Midstream Development
We believe the newly elected Liberal government will not alleviate regulatory holdups, which have long
plagued midstream development in Canada (see 'Trudeau Administration Will Not Revive Upstream
Development', 22 Oct 2015). Demand for midstream remains high as the country's deficit of pipeline
capacity weighs on upstream development. While the fall in oil prices has dampened demand for upstream,
regulatory issues remain the major obstacle to a number of key pipeline projects. According to BMI's
Infrastructure Key Projects Database, there are USD33.3bn worth of oil and gas pipeline projects in the pre-
construction phases of development, however, very little is currently under construction. As such, we expect
the oil and gas pipelines infrastructure industry to contract by 3.9% in 2015, and then only grow at a muted
pace, 1.0%, over our 10-year forecast.
This negative outlook for midstream development includes the Keystone XL project, which we do not
expect to gain approval under a Democratic government in the US. While Trudeau supports the pipeline
megaproject, he also aims to improve bilateral relations with the US and will not expend vital political
capital by pushing the Obama administration on this issue. Within Canada, a number of pipeline projects
have been delayed for years, awaiting regulatory approval. These include Enbridge's USD7bn Northern
Gateway and Kinder Morgan's USD5bn Trans Mountain expansion plan. Applications for regulatory
approval for the Northern Gateway were submitted in 2010, with the Government of Canada announcing a
decision for approval in June 2014; however, it came with 209 conditions. Construction is currently pending
additional approvals. The Trans Mountain project will likely not move forward after being blocked by the
indigenous First Nations, citing environmental concerns.
Water Sector To Receive More Funding
We expect to see additional funding and growth potential for water infrastructure under Trudeau's Liberal
government. Water and sanitation have been earmarked for development within the "green infrastructure"
section of the Liberals' infrastructure development agenda. The increased spending will target local water
and wastewater facilities, improved storm water systems, and additional dams and dikes to prevent flooding.
The plan has specifically named an upgrade to the wastewater plant in St. John's Newfoundland, improving
the Maples and Cardinal-Roy reservoirs in Trois-Rivieres, Quebec, and investments into flood mitigation
projects in Calgary and Southern Alberta.

Table: Key Projects: Energy & Utilities
Value Timeframe
Energy East
Pipeline,
Alberta and TransCanada
Saskatchewan Corporation[Sponsor]{Canada},
- Saint John, Oil & Gas National Energy Board[Sponsor] At planning
New Brunswick Pipelines 10,741.40 4400 km {Canada} 2020 stage
Site C Clean Power Plants
Energy Project, &
British transmission
Columbia grids 7,907.00 1100 MW BC Hydro[Operator]{Canada} - Approved
Enbridge
Northern
Gateway
Pipeline Project
(Edmonton
(Alberta) -
Kitimat (British Oil & Gas
Columbia)) Pipelines 7,000.00 525000 b/d Enbridge[Operator]{Canada} 2018 Approved
La Romaine
Hydroelectric Power Plants Alstom Hydro Espana
Complex, & SL[Equipment]{Spain}, Hydro
Havre-Saint- transmission Quebec[Operator]{Canada}, Under
Pierre, Quebec grids 6,490.00 1550 MW AECOM[Equipment]{United States} 2020 construction
AECOM[Consultant/Project
La Romaine 4 Power Plants Management]{United States},
Hydroelectric & Hydro Quebec[Operator]{Canada},
Complex, transmission Alstom Hydro Espana At planning
Quebec grids 6,490.00 245 MW SL[Equipment]{Spain} 2020 stage
Source: BMI's Key Projects Database
Residential & Non-Residential Building - Outlook And Overview
BMI View: Our view that the Canadian residential construction industry would slow in H215 is playing
out, but at a faster pace than previously expected. We forecast the residential and non-residential industry
as a whole to contract in 2015 and then return to growth in 2016 as the new Liberal government's fiscal
stimulus measure take effect.
Latest Updates
■ A booming residential construction industry is cooling faster than expected and will begin to drag on the
industry growth rate in H215 and into 2016. This has caused us to downgrade our forecast to for
residential and non-residential construction as a whole to -0.7% for 2015.
■ Non-residential construction growth has been hit by private sector cuts to capital expenditure in Canada's
primary sector, and is expected to contract -3.5% in 2015.

■ We expect non-residential construction to recover in 2016, driven by the new Liberal government's fiscal
stimulus plan to increase investment in social infrastructure projects over the next 10 years.
Table: Residential and Non-Residential Building Industry Data (Canada 2014-2024)
2014e 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f
Residential and Non-residential

Building Industry Value Real Growth 1.60 -0.69 2.24 2.90 2.89 2.85 2.29 1.69 1.45 1.42 1.40
(%)
Residential Building Industry Value
Real Growth (%) 2.3 2.8 2.4 1.5 2.1 1.4 2.0 2.4 2.2 2.2 2.2
Non-residential Building Industry

Value Real Growth (%) 1.0 -3.5 2.1 4.1 3.6 4.0 2.5 1.1 0.8 0.8 0.8
e/f = estimate/forecast. Source: Statistics Canada, BMI
Structural Trends
Residential building will be a relative bright spot for Canadian construction in 2015, however a steeper than
anticipated decline in the second half of the year has caused us to revise down forecasts. The sector
surprised to the upside over H115, averaging 6.4% y-o-y growth over the first four months. However,
economic headwinds, high levels of household debt and overvalued housing prices have now begun to
dampen appetite for new units, causing the growth rate to slow as we move towards the end of the year.
These headwinds will be partially mitigated by historically low mortgage rates, supporting continued
positive, yet muted, growth. With the strong start to 2015 set to slow over H215, we forecast the Canadian
residential building industry to expand by 2.8% for the year. This slowdown will continue into 2016 (2.4%)
and coming years, averaging 2% real growth from 2015-2019.
Cuts to fixed capital investment by private firms in Canada's primary sector have taken a toll on non-
residential construction growth in 2015. We expect the industry to contract in real terms for the year as oil
and gas firms and other commodities producers react to lower prices. As such we expect the value of the
non-residential segment to shrink by 3.5% in 2015. However, the new Liberal government's fiscal stimulus
package, coupled with low base effects, will see non-residential construction return to positive growth,
posting 2.1% in 2016 before jumping up to 4.1% in 2017.

Non-Res To Pick Up Steam

Residential And Non-Residential Building Value By Sector (2013-2019)
150
100
50
0
2013e 2014e 2015f 2016f 2017f 2018f 2019f
Residential Building Industry Value, CADbn
Non-residential Building Industry Value, CADbn
.Residential Construction Slowing
Slower economic growth in Canada will mean weaker demand for new housing, and thus slow residential
building as we move into H215 and 2016. We currently forecast real GDP growth of 1.2% in 2015, the
worst performance for the Canadian economy since the crisis in 2009 (see 'Low Growth Outlook Amid
Depressed Investment Levels', 1 July). The energy sector in particular is struggling in the face of weak oil
prices, leading to increasing levels of unemployment in Alberta and oil producing regions. High
unemployment across the country - 6.8% as of June - will take its toll on demand for housing. In addition,
high levels of household debt (165% of disposable income) will limit new housing demand, as servicing
existing debt restricts household budgets.

Leading Indicators Suggest Modest Slowdown

(2012-2015)
Source: Statistics Canada
Economic headwinds will be partially offset by continued historic lows in mortgage rates, on the back of
another reduction of the national prime lending rate. The conventional mortgage five-year rate is currently
3.72%, the lowest it has ever been according to available statistics dating back to 1951. We do not expect
this rate to increase for some time and could see even more reductions. On July 14, the Bank of Canada
announced another 25 basis point cut in its prime lending rate. This follows a 75 basis point reduction in
January 2015. The low prime rate has carried over to the mortgage rate, facilitating cheap credit and
supporting demand for new housing.

Mortgage Rates At Historic Lows
Canada Mortgage and Housing Corp. conventional mortgage lending rates, 5-year
Source: Statistics Canada
We expect macroeconomic conditions to support an uptick in multi-unit construction. In one such

project UK-based architectural firm Foster + Partners have unveiled the design for The One project in
Toronto. The 318m-tall mixed-use tower will be Toronto's second tallest building after the CN Tower. The
80-storey building will be a residential tower with a retail base and will be integrated with the city's PATH
network of pedestrian tunnels.
Also in Toronto, The Daniels Corporation will develop a CAD700mn (USD510.86mn) waterfront mixed-
use condominium project comprising of office, residential, retail, academic and cultural facilities. Daniels
will develop 280,000sq ft of commercial offices in two towers during the initial phase, scheduled to start in
May. The first phase also includes building a 150,000sq ft hub to serve arts and cultural organisations, and
27,000sq ft of retail space. The second phase includes construction of 650,000sq ft of residential space, with
more than 900 suites and 240,000sq ft of post-secondary academic space. As multi unit and multi-purpose
developments gather pace, single unit dwellings are generally declining in terms of permit value or building
starts.

Public Spending Will Support Non-Residential From 2016
From 2016, we expect to see a return to positive growth in non-residential construction, propped up by the
Liberal government's fiscal stimulus plan.
From 2016, we expect a return to positive growth in non-residetnail construction, driven by the Liberal
government's fiscal stimulus plan and the New Building Canada Plan, which is already in place. Funding
will support investment in social infrastructure, particularly hospitals where a range of construction projects
are in the pipeline. These include expansion of the Milton District Hospital in Ontario, where Plenary
Health have been chosen as the preferred proponent to design, build, fund and maintain the expansion
project. The Plenary Health team includes developer Plenary Group (Canada), construction firm PCL
Constructors Canada, architects B+H Architects and RTKL Associates and financial adviser RBC
Capital Markets. The project will add 330,000sq ft of space to the existing 125,000sq ft facility. Work
involves expanding emergency, surgical services, critical care, medical/surgical inpatient units, maternal
newborn and diagnostic imaging and support services. The cost of the contract will be announced publicly
after financial close and construction is scheduled to start shortly thereafter.
Planning work has also started on Toronto East General Hospital (TEGH) New Patient Care Tower project.
Infrastructure Ontario selected CannonDesign to lead the planning, design and compliance aspects for the
hospital's 380,000sq ft patient care building. The planning, design and compliance team will establish
performance requirements that the successful building team must meet when preparing its designs. The
team will also monitor construction progress and offer coordination and oversight during the project's
commissioning and completion. The project involves building an eight-floor patient care tower, which is
scheduled to be completed by 2023, and a three-storey addition for accommodating more services. The
project also includes an underground parking lot and courtyard along Coxwell Avenue and replacing the
oldest beds in the medical/surgical and rehabilitation units.
British Colombia is also home to two hospital construction projects. Canada-based Graham Design
Builders have selected Australian information management firm Aconex to build the North Island
Hospitals Project (NIHP): the CAD606.2mn project comprises two hospitals on northern Vancouver Island
for the Vancouver Island Health Authority. The public-private partnership project is designed to build a
39,826sq m, 153-bed hospital in the Comox Valley and a 32,316sq m, 95-bed hospital in Campbell River.
Aconex will provide collaboration over document control, workflow management, communications and
other necessary design and construction processes.

Meanwhile, Canadian healthcare authority Interior Health has floated a request for proposals (RFP) to
build a patient care tower at Penticton Regional Hospital (PRH), also located in British Columbia. The RFP
follows the selection of three teams from six that responded to the request for qualifications, which closed
in November 2014. The shortlisted teams were announced in December 2014. The teams are EllisDon
Infrastructure, Plenary Health and Tandem Health Partners. The CAD325mn project is divided into two
phases. Phase one involves building the patient care tower, which will include an ambulatory care centre
and 84 medical/surgical inpatient beds in single patient rooms. The tower will be about 26,700sq m. Phase
two includes renovating vacated areas in the current hospital. The project will be developed on a design,
build, finance, and maintain basis, with a 30-year contract period.

Table: Construction And Social Infrastructure Key Projects
Time-
Value frame
Aecon Group[Construction]{Canada},
CH2M HILL Constructors[Design/
Sturgeon Architect]{United States}, Canadian
Bitumen Natural Resources[Operator], North
Refinery West Upgrading[Operator], Jacobs
Project - Phase Industrial Engineering Company[Construction] Under
I, Alberta Construction 8,000.00 50000 b/d {United States} 2017 construction
Oakville Council[Sponsor]{Canada},
Adamson Associates
Architects[Operator]{Canada}, Canadian
Hospital Infrastructure
Partners[Construction]{Canada},
Carillion Plc[Construction]{United
Kingdom}, EllisDon[Construction]
{Canada}, Fengate Capital Management
Ltd[Construction]{Canada}, Parkin
New Oakville Architects[Design/Architect]{Canada},
Hospital, Scotia Capital[Consultant/Project Under
Ontario Healthcare 2,167.26 320 beds Management]{Canada} 2015 construction
Montreal
University Meridiam Infrastructure[Sponsor](40)
Hospital {France}, Fiera Axium
Center (CHUM) Infrastructure[Sponsor](60){Canada}, Under
PPP, Quebec Healthcare 1,612.81 772 beds AECOM[Construction]{United States} 2016 construction
Nicolet Chartrand Knoll[Construction]
{Canada}, SNC-Lavalin[Construction]
{Canada}, Brisebois[Construction]
{Canada}, Leconte[Construction]{United
States}, Deslauriers[Construction]
{Canada}, AECOM[Consultant/Project
Management]{United States}, CIMA+
CHU Sainte- [Consultant/Project Management]
Justine {Canada}, Tecsult[Consultant/Project
Modernization Management]{Canada},
Project, DECASULT[Consultant/Project Under
Quebec Healthcare 824 - - Management]{Canada} 2016 construction
Williams (CNRL
Horizon Offgas
Processing),
Sturgeon, Industrial Williams Companies Inc[Operator] Under
Alberta Construction 600 - - {United States} 2015 construction
BMI

Industry Risk Reward Ratings

Canada – Infrastructure Risk/Reward Index
Canada receives a score of 64.0 out of 100 in our Infrastructure Risk/Reward Index. While scoring highly
for Country Risks and Industry Risks, Canada's construction industry falls short on rewards, owing to
limited growth rates and government spending. However, we expect increases in Canada's rewards score as
new infrastructure spending measures are implemented.
Rewards
Industry Rewards
For a developed market, Canada offers significant scope for opportunities in terms of greenfield
development and high-growth investments, due to the country's size and natural resource wealth. Canada is
expected to have some of the highest industry growth rates of the developed markets over the medium term;
however, the past reliance on private investors for much of the infrastructure development pulls down its
Rewards score. The country registers an Industry Rewards score of just 45.0 out of 100. However, the new
Liberal government's infrastructure spending plan provides a potential upside to this score.
Country Rewards
Canada maintains a strong 84.0 for this indicator. Canada boasts a sophisticated financial and labour
market, which is welcoming to foreign developers. The country's utilities infrastructure is also well
developed, including an inexpensive and universal electricity supply, which ensures developers will be able
to access the grid.
Risks
Industry Risks
Canada has limited Industry Risks, demonstrated through its high score of 85.0, although this is a decrease
on the previous score of 90.0. Canada is home to a large number of construction companies demonstrating
varying degrees of expertise, including large multinational firms, as well as small local firms. International
companies are welcome and have received contract orders, although this is primarily in the public-private
partnership (PPP) sector, as the sizeable domestic construction industry dominates engineering,
procurement and construction contracts. Large contracts usually go to just a handful of big companies, with

SNC-Lavalin receiving the largest share. The tendering process is generally transparent and competitive.
The country also has some of the best PPP regulations globally and one of the most successful markets for
this type of contract. One downside risk is the level of corruption endemic in the provincial construction
sector, as evidenced by the inquiry in Quebec over the awarding of public sector contracts.
Country Risks
In terms of Country Risk, Canada offers little to concern a potential investor. Its score of 75.6 this quarter is
the result of high levels of transparency, a comprehensive legal framework, policy continuity and a well-
structured government.
One downside risk is the level of corruption endemic in the provincial construction sector, as evidenced by
the inquiry in Quebec over the awarding of public sector contracts. On the World Bank's current list of
blacklisted firms barred from bidding on projects under its fraud and corruption policy, 117 of the 250
companies are Canadian, of which the vast majority are SNC-Lavalin affiliates.
Note: Individual country scores are subject to change, based on the latest data available.
NAWE Infrastructure RRI: Limited Rewards Growth Places Pressure On

Margins
BMI View: Stable business environments coupled with capacity for infrastructure spending and relatively
well stocked project pipelines support the continued outperformance of Northern Europe and North
America over Southern Europe in our NAWE Risk/Reward Rankings. This relative attractiveness is placing
pressure on margins as the region's vast construction capacity targets limited opportunities.
Key themes:
■ NAWE offers the lowest level of risk in the Infrastructure market globally, and whilst Rewards are
limited in growth, the scale of opportunities is considerable.
■ Northern European markets are losing some of their dominance in the top spots in the region, however
retain their average outperformance. Sweden holds first position, whilst Norway has fallen to sixth from
first last quarter.
■ Southern Europe remains the underperforming sub-region in Europe weighed down by higher Risks
despite some improvements in Rewards.
■ Margins in the region will remain squeezed owing to high competition and limited Rewards growth.

Low Risks Support Overall Scores
North America & Western Europe RRI Scores
*Scores out of 100. Notes: - Red Columns = Latest Additions. Source: BMI
Low Risk, Average Rewards
The North America and Western Europe (NAWE) country grouping (hereinafter 'the region') outperforms
globally in terms of risks, offering the best scores for risk of the country groupings assessed (see chart
below). Developed regulatory frameworks, policy continuity and high levels of competition and openness to
foreign entrants all support the region's 17 point advantage over the next best region (Asia).
Improvements continue to be seen across these markets in Risk terms, with the regional average increasing
from 75.8 to 78.1 over the quarter. Notably, the US continues to refine its PPP legislation. The lack of a
national level framework does weigh on the country's Industry Risk scores (75 out of 100, below the
regional average of 84.4), however, we anticipate gains here as several of states build a strong precedent for
executing projects and the number of successes improves.

Outperforming On Risk
Risk Component Of Infrastructure Risk/Reward Index
100
75
50
25
0
NAWE Asia MENA CEE LatAm SSA
Source: BMI
The region's infrastructure market offers only limited appeal for Rewards, given the established nature of
the infrastructure network and the saturation of the competitive landscape. Whilst home to some of the
largest construction industries globally, the opportunities for growing operations in these markets are
limited. In both North America and Western Europe the construction industry accounts for a limited portion
of GDP and we see little indication that this will improve (see chart below). Although the quality of
infrastructure networks vary across the region, the sector is not a critical destination for limited government
capital at a time when austerity remains a key guiding force for much of the region.

Infrastructure Unlikely To Take Centre Stage

Construction Industry Value, % of GDP, By Region
3
2015f 2016f 2017f 2018f 2019f
North America Western Europe Emerging Europe Asia-Pacific
Sub-Saharan Africa Latin America Middle East North Africa
f=BMI forecast, Source: National Statistics, BMI
Northern Europe continues to outperform in Rewards terms, offering a larger and more dynamic pipeline of
projects than Southern Europe. North America also offers greater appeal than Southern Europe, with large
project pipelines supported by growing private sector capital. Greater government capacity to invest
complemented by a large private sector with resources for capital expenditure is bolstering the outlook for
these markets. In particular, pension funds are playing a growing role in funding infrastructure in these
regions. Canada already leads the way with its pension funds heavily invested not only in domestic
infrastructure but also across Western Europe. US pension funds are slowly following suit. The UK is
pursuing a number of methods to encourage greater pension investment into domestic infrastructure. In
Norway, the government wealth fund is increasingly looking to open up to infrastructure investment
supporting the market's growth rate despite waning government revenues from falling oil prices.

Low Growth Across The Region

Sector Growth Component Of Infrastructure Risk/Reward Index
0
Sweden
Denmark
Ireland
United Kingdom
Netherlands
Spain
Finland
Canada
Germany
Norway
Switzerland
Italy
United States
France
Austria
Belgium
Greece
*Scores Out Of 10, Source: BMI
The UK stands as the outperformer in the region, holding the largest and one of the most diverse project
pipelines in Europe. Projects under construction or at the pretender phase amount to around USD400bn,
presenting significant potential for investors and contractors. Chinese contractors in particular are targeting
opportunities in the country, and will likely be competitive given their access to cheap capital. Indeed,
infrastructure development in the UK is expensive, considering the scale and technical nature of major
projects, such as High Speed 2 and the Hinkley Point nuclear power plant, increasing the scope for delays.
A period of policy uncertainty is also tempering investor perceptions. Following the Scottish referendum,
the UK's EU membership is currently in doubt, whilst changing party leadership over the longer term could
dent infrastructure planning given the highly political nature of infrastructure development in the country.

UK & US: The Largest Project Pipelines

Construction Project Pipelines By Country And Sector (USDmn)
Source: BMI Infrastructure Key Projects database
The US, as the largest single market in the region (second only to China globally), offers considerable scale
for investors and has seen relatively buoyant growth in recent years following a six year recession
(2006-2011). We anticipate growth to remain above historic averages, supported by the housing market and
growing private and public investment into transport. Between 2015 and 2019, the industry as a whole is
forecast to grow by 1.5%, with transport infrastructure industry value outperforming with 2.6% average
growth and residential achieving a 2% over the same period.
Margins Under Pressure
Limited rewards growth is placing increasing pressure on margins across the region, especially in those
countries highlighted above as outperformers in Rewards. The competitive landscape is saturated, with
many of the largest companies globally domiciled in the region, allowing limited space for new competitors.
That said, China has been making a concerted push into the region with considerable success. The UK is a
particular target, given the pipeline of large projects (as noted above); however across the region Chinese
companies are targeting both EPC contracts and concession opportunities. China is becoming increasingly

competitive in the region, seeking to position itself as a technical expert, but also a lower cost option,
through access to cheaper capital and other inputs. The rise of Chinese companies will place even greater
pressure on European contractors in their own region.
Margins are also being squeezed in North America where European contractors have made considerable
inroads in the country's construction industry in recent years, capitalising on the relative growth
opportunities compared to domestic markets. Skanska has led the way and as of H1 2015 generates 39% of
its revenues in the US. Whilst the US does offer scale, the entrance of several new players and considerable
domestic capacity has seen the sector become increasingly competitive.
Northern Europe Over South Europe

NAWE Infrastructure Risk/Reward Matrix
Score out of 100, Source: BMI

Southern Europe Continues Underperformance
Southern Europe (including France) on average underperforms the rest of the region, owing to higher risks
and a weak growth outlook.
Greece remains considerably behind the rest of the region, with a 13 point gap between its RRI and the next
lowest scorer. Greece's poor scores reflect our bearish forecasts for the country; in 2016 we expect the
construction sector to post its tenth consecutive contraction, at -5.2% y-o-y. Severe fiscal austerity as the
country continues to struggle with its high debt burden has left the government unable to invest in
infrastructure. Although there are plans for privatisation of infrastructure which would present upside to
investment in the sector, plans have been frequently suspended and restarted, limiting investor confidence in
the scheme.
France and Italy will see their construction sectors pull out of recession from 2016, following Spain which
is estimated to have done so in 2015. All three remain underperformers, offering higher risks than their
Northern European peers. France's uncompetitive labour market and competitive landscape undermine any
Rewards improvements, whilst Spain and Italy will struggle to maintain momentum given a slim project
pipeline and limited capacity for government infrastructure investment

Table: Western Europe And North America: Infrastructure Risk/Reward Index
Rewards Risks
Industry Country Industry Country Infrastructure BE
Rewards Rewards Rewards Risks Risk Risks Rating Regional Ranking
Sweden 62.5 87.0 71.1 90.0 79.9 84.0 74.9 1
United
Kingdom 57.5 88.9 68.5 90.0 79.5 83.7 73.1 2
Denmark 52.5 89.7 65.5 90.0 84.6 86.8 71.9 3
Germany 60.0 81.5 67.5 90.0 75.4 81.3 71.7 4
Netherlands 57.5 84.0 66.8 90.0 78.1 82.8 71.6 5
Norway 55.0 85.1 65.5 90.0 81.8 85.1 71.4 6
Switzerland 45.0 91.1 61.1 100.0 82.2 89.3 69.6 7
France 60.0 78.3 66.4 75.0 72.6 73.5 68.5 8
Austria 50.0 86.2 62.7 90.0 75.1 81.0 68.2 9
Finland 47.5 86.4 61.1 90.0 74.8 80.9 67.0 10
Spain 57.5 79.7 65.3 70.0 66.7 68.0 66.1 11
Belgium 50.0 85.7 62.5 90.0 64.1 74.5 66.1 12
Ireland 40.0 88.2 56.9 90.0 83.7 86.2 65.7 13
Canada 45.0 84.0 58.7 85.0 75.6 79.4 64.9 14
Italy 55.0 79.8 63.7 70.0 61.6 65.0 64.1 15
United States 40.0 89.0 57.2 75.0 74.2 74.5 62.4 16
Greece 30.0 75.2 45.8 65.0 52.5 57.5 49.3 17
Regional
Average 50.2 84.5 62.2 84.4 73.9 78.1 67.0 -
Source: BMI Note: Individual country scores are subject to change, based on the latest data available.

Market Overview
Competitive Landscape
Table: Key Company Data
Interest
Latest FY Market Cap Revenue Cap Net Income Total Debt/ Coverage
Company Earnings (USD) (USD) (USD) EBITDA Ratio PE Ratio
Transcanada
Corp 12/2014 23,888.51727 9,225.00633 1,666.569627 5.654183267 2.33973919 17.28569
Enbridge Inc 12/2014 36,401.00856 34,093.12354 1,272.570829 7.53087712 2.071197411 27.20887

Canadian
Utilities Ltd-A 12/2014 7,134.460591 3,260.679704 655.7589183 4.285128806 3.109375 19.83648
Fortis Inc 12/2014 8,355.849438 4,891.925301 343.2771133 6.86547619 1.782229965 21.96515

Snc-Lavalin
Group Inc 12/2014 4,905.081355 7,462.212233 1,207.668811 0.426383758 7.889285067 20.58812
Pembina
Pipeline Corp 12/2014 8,562.392495 5,496.962535 346.9000907 3.082974138 6.95049505 43.14892
Transalta Corp 12/2014 1,437.139724 2,375.767462 164.8454739 3.911282546 1.719844358 na
Emera Inc 12/2014 4,748.230892 2,691.78167 392.0967344 3.97739889 3.464693666 13.39868

Brookfield
Renewable
Energy 12/2014 3,897.643747 1,704.000000 58.000000 6.506779661 1.522891566 109.4687
Capital Power
Corp 12/2014 1,474.95123 1,112.254077 41.66424066 3.840193705 2.382978723 22.39535
Brookfield
Residential
Prope 12/2014 na 1,475.856 273.658 4.576933707 3.266621769 na
Algonquin
Power &
Utilities 12/2014 1,843.844937 854.6241504 68.56575397 5.088522805 2.210115672 29.65556
Aecon Group
Inc 12/2014 620.0592724 2,367.686411 27.21037213 3.495439655 1.504534291 20.94562
Alterra Power
Corp 12/2014 162.7266485 70.952 -36.34 14.75962761 0.745408045 na
Bird
Construction
Inc 12/2014 394.7230773 1,235.84833 32.82145846 0.453366127 22.09377902 12.63048
Canadian Natl
Railway Co 12/2014 49357.96089 10,990.30209 2,868.492395 1.482023264 12.46361186 20.05277
Inter Pipeline
Fund LP-A 12/2014 na 1,409.574627 303.2740078 4.70640908 3.896874694 na
Atco Ltd -
Class I 12/2014 3,448.800564 4,124.759826 380.4126321 3.915209327 3.417525773 16.79518
Veresen Inc 12/2014 2,645.646788 273.6253718 62.22463769 31.23103448 na 53.30744

Key Company Data - Continued
Interest
Latest FY Market Cap Revenue Cap Net Income Total Debt/ Coverage
Company Earnings (USD) (USD) (USD) EBITDA Ratio PE Ratio
Northland
Power Inc 12/2014 2,261.042701 688.4300232 -96.52608243 7.381594549 1.990566491 28.91508
Innergex
Renewable
Energy 12/2014 882.2851927 219.0397821 -49.6827955 8.601194959 1.460843339 751.4962
Boralex Inc -A 12/2014 691.6552253 176.8266604 -10.65789391 na 0.796746637 na

Capstone
Infrastructure
Corp 12/2014 240.5716888 399.956784 8.574681877 5.900442979 2.358352572 32.69842
Canadian
Pacific Railway
Ltd 12/2014 23,759.6805 5,996.027678 1336.878679 2.003804912 7.77076412 20.40464
na = not available. *exchange rates accurate as of October 2015. Source: Bloomberg
BMI View: Canada is home to several major construction and infrastructure firms, many of which are
world leaders with extensive foreign interests. Although the domestic market is dominated by larger
Canadian firms, the country still offers opportunities for overseas firms, particularly in the renewable
energy sector. A new Liberal Party government spending plan will double public sector investment in
infrastructure, providing additional opportunities.
In previous years, one of the sectors that has supported Canadian companies and allowed them the greatest
level of international expansion is the natural resources sector, specifically minerals and oil & gas.
Capitalising on Canada's extensive resource wealth has allowed leading domestic companies to expand
operations beyond the Canadian border and enter new markets. Canada's midstream energy companies are a
prime example of this, where companies like Transcanada and Enbridge have become important players
in the US pipeline segment.
Given the size of the shared border with the USA, transport is a key area where Canadian companies have
branched into the US. Canadian National Railway (CN Rail) has become an important player in the US
transport sector, becoming a leader in the North America rail industry. The company operates the largest
railway network in Canada, with its operations extending across Canada and into the US at Illinois,
stretching down to the Gulf coast in Louisiana. The company's main competitor domestically is Canadian
Pacific Railway.

Canada's engineering, procurement and construction sector is dominated by a number of domestic

companies. The prevalence of companies of a varying scale and level/area of expertise means that
international companies struggle to gain a foothold in this sector.
The company with the greatest market share is SNC-Lavalin (SLI), the largest construction and
infrastructure player. The company is a dominant force in the domestic construction industry and has
operations across the concessions sector, natural resources/chemicals industries, power and transport,
making it one of the few with the scale and expertise to undertake larger contracts. SLI is also the most
internationally diverse of the country's construction firms. The company generates around 60% of revenues
domestically and 40% internationally, making it a strong player in international construction, especially in
emerging markets.
Aecon, the country's largest public construction and infrastructure development company, is another
significant player in the sector. Other notable actors in the sector include listed companies, such as
Capstone and Bird Construction, as well as private companies, such as Graham Group, Hatch
Construction and PCL Construction Enterprise.
International companies have had the most success accessing the Canadian infrastructure and construction
sector through the country's popular and successful public-private partnership (PPP) programme. Used
mainly for social programmes, the sector has been a popular entry point for European companies that are
familiar with PPPs and concessions. The UK's Carillion and Germany's Hochtief have both secured a
foothold in this competitive market. Quebec has the highest number of new projects under construction or in
the planning stages, followed by Ontario. Social infrastructure will be by far the biggest focus of these
plans; however, there are also a number transport projects in the pipeline, focused primarily on road and rail
development.

Table: Notable Sector Players - Canadian Pension Funds Infrastructure Portfolio, CADmn
Total Assets Infrastructure % Infra of Total
OP Trust 14,700 1,852 12.6

CPPIB 183,300 11,181 6.1
OTPP 129,500 9,600 7.4
OMERS (Borealis) 60,800 10,000 16.4
AIMCo 69,700 3,900* 5.6
La Caisse 176,200 6,300 3.6
bcIMC 102,800 5,400** 5.3
*Infrastructure and timberland. **Infrastructure and renewable resources, correct as of latest data on September
13 2013. Source: Company reports, BMI
The strength of Canada's PPP/concession sector is also predicated on the availability of financing for
projects. Canada has the most active non-traditional infrastructure investors, with many of the country's
largest pension funds investing directly into infrastructure (OTPP, La Caisse, OMER's Borealis, CPPIB
and OP Trust are leaders in this field), and countless others investing through external managers. The
country is also home to some of the highest fundraising dedicated specifically to infrastructure through
domestic players such as Brookfield and Fengate Capital. Brookfield raised the second largest
infrastructure fund ever, closing the USD7bn Brookfield Infrastructure Fund II in late 2013. This liquidity is
crucial for catalysing the country's PPP programme. Investment will be facilitated by measures such as the
new bill introduced by the Quebec government allowing pension fund manager Caisse de Depot et
Placement du Quebec to develop major infrastructure projects in the province.
Recent months have also seen growth in infrastructure funds targeting smaller infrastructure projects which
are considered too small in scope for some of the larger pension funds. This trend will be further facilitated
by a new Canada Infrastructure Bank; which will provide loans, guarantees and bundle low-value projects
to make them more attractive to larger funds. InstarAGF Asset Management Inc, for example, is raising a
CAD750mn fund aimed at mid-sized assets and in early 2015 acquired the terminal at Toronto's Billy
Bishop island airport. Airports, schools, hospitals and renewables and power plants are generally the target
of investment.

Company Profile
SNC-Lavalin
SWOT Analysis
Strengths ■
Largest construction company in Canada.
■
One of the largest foreign engineering/construction presences in Brazil, Russia and
India.
■
Strong geographic diversification, including high-growth EMs and stable developed
markets.
■
Strong sector diversification.
■
Acquisition of CANDU reactor unit has netted CAD1bn in contracts since August
2011, with further opportunities in the pipeline.
■
Revenue backlog was up in 2014, reported as CAD12.3bn as of December 31 2014.
■
Diverse revenue streams help to mitigate downside risks during periods of high
exchange rate volatility.
Weaknesses ■
Exposure to Libya hit the company hard in early 2011.
■
Alleged ties with the Qadhafi family resulted in a media storm which led to the
departure of two executives.
■
Ongoing corruption allegations and convictions threaten reputation and government
projects.
■
Unprofitable legacy projects weighing on profits.
Opportunities ■
SNC-Lavalin's acquisition of Kentz Corporation Ltd, the biggest takeover in the
company's history, is boosting SNC-Lavalin to become a major player in the global oil
& gas sector regarding engineering and construction services.
■
SNC-Lavalin's purchase of Atomic Energy of Canada Limited (AECL)'s CANDU
reactor unit (now called CANDU Energy) will continue to provide it access to new
contract opportunities.

SWOT Analysis - Continued
■
Partnership to target Indian highway PPPs gives it access to emerging market
contract opportunities.
■
Canada's infrastructure industry posting strong growth, with SNC-Lavalin positioned
to win big from contracts.
■
Continued investment into new mining projects should provide contract opportunities.
■
Acquisition of Ontario-based DBA Engineering should also pay off with increased
access to a province which has seen strong construction sector growth.
■
New internal strategy should help maximise efficiencies and target ethics concerns.
■
New Building Canada Plan will bode well for SNC-Lavalin as the country's largest
construction company.
Threats ■
Loss of Libya contracts hit 2011 results. With no indication when projects will resume,
the suspension of work will continue to weigh on the company's performance.
■
Potential for greater costs pending investigation into miscellaneous expenses.
■
The potential of authorities charging the company with respect to corruption and
fraud allegations threatens the entire future of SNC-Lavalin - the court case has been
postponed to October 16.
■
Potential cuts to mining capex based on weaker commodity prices and rising costs.
Company Overview SNC-Lavalin is Canada's largest construction company and is one of the largest and
leading companies in its field globally. The company was established in Montreal in
1911 and has offices in 50 countries and 45,000 employees.
It has operations in every continent and is particularly active in Africa, the Middle East
and Europe. It has operations across the infrastructure field, in transport and utilities,
and is heavily involved in industrial construction. It also executes general building
construction projects.
Strategy SNC-Lavalin's focus on domestic operations, where it holds a clear competitive

advantage and a dominant market position, will provide more stability and transparency

for the company's order backlog and future revenue stream. That said, the company
has a strong international footprint which it should leverage to realise higher growth
opportunities, as long as it improves project selection and due diligence.
Tough Adjustment And Pending Investigations
SNC-Lavalin struggled in 2013 with the fallout of ethical challenges, legacy projects and
the short term impact of structural adjustment undertaken by CEO Robert Card.
Following a profit warning in October 2013, the company released its nine month 2013
results in November 2013, reporting a loss of CAD56.8mn for the period. While the
company finished the year in the black, with net income of CAD35.8mn, it was
substantially below the CAD305.9mn reported net income for 2012. The year 2014 saw
far more positive results, with net income of CAD1,333mn and revenue backlog up to
CAD12.3bn as the company's growth strategy, discussed below, began to yield results.
Ongoing revelations and investigations into corrupt practises continue to dominate the
headlines on SNC-Lavalin; however, the biggest drag on the company's performance in
2013 was spiralling costs associated with legacy projects in North Africa. Revenues
from Africa fell by 40% in 2013 compared to 2012, and equalled just 5% of total
revenues, compared to 8% in 2012. The legacy contracts, which include a road and
hospital, were awarded on a fixed-priced basis a number of years ago, but have
experienced spiralling costs, therefore becoming unprofitable. This trend was
somewhat reversed in 2014, with Africa revenues increasing to CAD470.3mn (from
CAD396.0mn in 2013) - accounting for 6% of total revenues.
The company made provisions for these loss making contracts in its 2013 results,
illustrated through the CAD229.5mn loss reported for its Infrastructure & Environment
segment for the period. It anticipates that the full impact of these contracts has now
been accounted for on its financial position and delivered greater visibility and reduced
volatility in its earnings in 2014. This could help the company unlock the significant
value held within its operations which has been clouded by ongoing ethics issues and
the lack of clarity on loss making projects. Indeed, the company's current Price to Book
ratio is 1.81 (as of July 27, 2015), versus a 10-year average of 4.65, indicating there is
additional value to be unlocked.
In October 2014, former vice president Riadh Ben Aissa was arraigned in a Montreal
courtroom on various fraud charges after being extradited from Switzerland in early
October. He had previously admitted to funnel bribes via the Swiss banking system to
al-Saadi Qadhafi, Muammar Qadhafi's son, to help SNC-Lavalin reach contracts in
Libya. A Swiss court had sentenced him to time already served. SNC CEO Robert Card
commented in early October 2014 that a move by authorities to charge the company in
connection with an extensive bribe scandal would immediately threaten its future and
could force it to close down. Charges were brought in February 2015, and in April 2015
it was announced the court case investigating corruption in SNC-Lavalin's dealings in
Libya would be postponed until July 2015 - the company will reportedly be entering a

not-guilty plea. The case has since been pushed back to October 16 after defence
lawyers received 1,000 additional documents of evidence.
We expect the company to continue to hit the headlines with investigations still ongoing
into corruption practices, and this could continue to impact the company's share
price. Additional financial difficulties could have significant impact on investor
perception. More severely, even if acquitted, the company's loss in reputation could
impede government business, which constitutes a corner stone in the company's
structural shifts. This would be a tremendous loss, especially considering that much of
our expected growth for 2015 comes through the governmental New Building Canada
Plan.
Canada To The Rescue
In line with creating a more solid foundation for the company, expanding operations in
Canada is a key element of SNC-Lavalin's strategy. The company is well placed to
capitalise on its dominant position in the market and has already steadily increased its
operations in Canada, with revenues expanding 25% over 2012, and a further 4% over
2013. 2014 saw a slight decline in revenues from Canada, which now accounts for 60%
of revenues, compared to 66% in 2013. In line with expectations, Canada's portion of
the order backlog also increased over 2014 to account for 70% of the total, compared
to 66% in 2012. Canada's infrastructure sector is poised to continue relatively steady
growth over the next five years (averaging 2.5% between 2015 and 2019), with SNC-
Lavalin expected to be one of the main beneficiaries.
In line with this view, SNC-Lavalin - as part of a consortium including ACS, Aecon, and
EllisDon - was awarded a USD4bn contract for the construction, operation, and
management of the Eglinton Crosstown Light Rail Transit Project in June (see 'Robust
Rail Pipeline Indicates Strong Sector Growth', 17 June). The project, which will cost a
total of USD5.4bn, is one of the largest Public Private Partnerships (PPP) in the world.
Financial close was reached in July and construction is expected to begin in Q116.
The New Building Canada plan should further support SNC-Lavalin's domestic
operations. The plan, which will replace the existing Building Canada Plan (2007-2014),
outlines CAD53bn in funding for infrastructure over the next 10 years. The plan is
expected to support additional investment into PPPs, in which SNC-Lavalin has
expertise and a competitive advantage, as well as major public works projects. As the
country's largest builder with the greatest market share, we anticipate an increase in
order bookings.
Outside of Canada, the company will face a mixed outlook. It continues to perform well
in North America, with US revenues up substantially in 2014 to CAD550.0mn, increasing
its share of revenue from 5% in 2013 to 7% in 2014, indicating that the company is
capitalising on US expertise provided by CEO Richard Card, as well as the strongest
growth in a decade currently being seen in the US construction industry. Continued US

expansion is highlighted by the July 22 contract award for engineering, procurement

and construction of the 755MW Keys Energy Centre project in Maryland.
Of the emerging markets it is exposed to (Asia, Latin America, Europe and Africa), Latin
America seems to have been the most lucrative thus far. Although revenue from this
market decreased in 2014, leading to a fall in share of revenue from 10% in 2013 to 7%
in 2014. While we do see continued opportunities across the region, driven by
investment into natural resources, the slowdown in China and domestic environmental
and political issues could hamper growth. These issues are illustrated in the trouble
SNC-Lavalin has experienced in Panama at the Cobre Panama mine project, for which
its contract was terminated earlier in 2013 as the new owner sought to reduce costs.
Positioning For Growth
More broadly speaking, the company has adopted a three pronged strategy to address
cost issues and maximise potential. The plan has three pillars:
■ Growth Platforms: A focus on key sectors in key geographies. To this end, it has
integrated its Mining & Metallurgy, Hydrocarbons & Chemicals and Environment &
Water divisions under a resources hub in order to capitalise on synergies between the
teams. In aid of this goal, it is looking at potential acquisitions. It is also looking to
increase its focus on Canada (including clean energy), and PPPs in North America,
where is has a strong competitive advantage.
■ ICI Management: This includes better management of the portfolio, including
divesting assets at maturity a lot more frequently. We anticipate a quicker turnover in
assets, as the company looks to focus on greenfield concessions in North and South
America.
■ Growth Enablers: Improved efficiency in the company is the third goal, which also
includes a focus on ethics.
SNC-Lavalin has also taken a proactive approach in tackling the perception of

corruption which plagues the company. CEO Robert Card has implemented a number
of measures to improve transparency at the company, including a company-wide
Amnesty Program to encourage employees to report instances of corruption and
bribery, and a code of conduct which all employees must sign. However, the revelations
about previous incidents continue to hurt the company's reputation and present risks
for high legal and other costs. In July 2015 it was announced the court case
investigating corruption in SNC-Lavalin's dealings in Libya would be postponed until
October 2015 - the company will reportedly be entering a not-guilty plea.

Table: SNC-Lavalin Financial Data
2008 2009 2010 2011 2012 2013 2014
Revenues, CADmn 8,091 7,210 5,994 6,102 7,107 7,913 8,238

Net income, CADmn 312.5 359.4 476.7 378.8 309.1 35.8 1,333
Revenue Backlog, CADbn 7.2 8.3 9.7 10.1 10.1 8.3 12.3
Source: SNC-Lavalin
Latest Activity ■ In July 2015 SNC-Lavalin was awarded an engineering, procurement and
construction contract for the 755MW Keys Energy Center in Maryland.
■ In June 2015, Crosslinx Transit Solutions, a consortium that includes SNC-Lavalin,
was awarded a USD4bn contract for the construction of the Eglinton Crosstown Light
Rail Transit Project. The project which will cost a total of USD5.4bn is on the larges
PPPs projects globally.
■ In April 2015 a consortium led by SNC-Lavalin was awarded a contract to build and
manage Montreal's Champlain Bridge replacement - a project with an estimated cost
between CAD3bn and CAD5bn which could add up to CAD1.5bn to SNC-Lavalin's
revenue backlog.
■ In February 2015, SNC-Lavalin announced it had won two district cooling contracts in
Saudi Arabia (at the Aramco District Cooling Plant in Dhahran Jabal Omar
Development Company (JODC) district cooling scheme in Mecca) with a project value
of CAD71mn.
■ In December 2014 newly acquired subsidiary Kentz was awarded a four-year contract
by Qatar Shell to provide project management and engineering services for its Pearl
Gas-To-Liquids onshore and offshore facilities in Qatar.
■ In October 2014 SNC-Lavalin was awarded a USD37mn district cooling facilities
contract in Dubai as part of the preparations for the UAE's hosting of the World Expo
2020.
■ In September 2014, SNC-Lavalin was awarded a USD27.8mn Gas Plant contract at
Ratawi and Bin Omer Fields in Iraq.
■ In July 2014 SNC-Lavalin was awarded the engineering, procurement and
construction management (EPCM) contract for the Jimmie Creek hydro project in
British Columbia by Plutonic Upper Toba Holdings Inc. The project will consist of a
run-of-river hydro generation facility on Jimmie Creek in the Toba Valley near Powell
River, British Columbia and is valued at USD30.5mn.
■ In July 2014 SNC-Lavalin announced it has signed a formal memorandum of
understanding (MOU) with the China National Nuclear Corporation (CNNC) to jointly
develop and pursue power generation, mining and metallurgy and nuclear-related
environmental protection projects.
■ In July 2014 SNC-Lavalin was awarded a contract by Manitoba Hydro to design and
build the Keewatinoow 230-kV AC Switchyard located 775 kilometres northeast of
Winnipeg. Valued at USD112mn, this is the largest fixed-price EPC contract ever
issued by Manitoba Hydro.
■ In June 2014 SNC-Lavalin announced the reached agreement regarding the
acquisition of UK based Kentz Corporation Limited. The acquisition is part of SNC-
Lavalin's strategy of becoming a global Tier-1 engineering and construction (E&C)
services firm. The addition of Kentz's capabilities will make SNC-Lavalin a leading
global E&C player in the oil & gas sector, with a greater presence in key growth

regions, including the Middle East, North America and Asia Pacific, with a significant
presence in Australia.

Methodology
Industry Forecast Methodology
BMI's Industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry, is the use of vector autoregressions. Vector autoregressions
allow us to forecast a variable using more than the variable's own history as explanatory information. For
example, when forecasting oil prices, we can include information about oil consumption, supply and
capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of
objective views, we use a 'general-to-specific' method. BMI mainly uses a linear model, but simple non-
linear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. We select the best model
according to various different criteria and tests, including but not exclusive to:
■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account
■ Testing the directional movement and magnitude of coefficients
■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value)
■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity

BMI uses the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of our industry
forecasting. Experience, expertise and knowledge of industry data and trends ensure that analysts spot
structural breaks, anomalous data, turning points and seasonal features where a purely mechanical
forecasting process would not.
Sector-Specific Methodology
Construction Industry
Construction Industry Value
Our data is derived from GDP by output figures from each country's national statistics office (or
equivalent). Specifically, it measures the output of the construction industry over the reported 12-month
period in nominal values (ie domestic currency terms). As it is derived from GDP data, it is a measure of
value added within the industry (ie the additional contribution of the construction industry over other
industries, such as cement production). Consequently, it does not measure the nominal value of all inputs
used in the construction industry, which, for most states would increase the overall figure by 50-60%.
Furthermore, it is important to note that the data does not provide an indication of the total value of a
country's buildings, only the construction sector's output in a given year.
This data is used because it is reported by virtually all countries and can therefore be used for comparative
purposes.
Construction Industry Value Real Growth
Our data and forecasts for real construction measures the real increase in output (rather than nominal
growth, which would also incorporate inflationary increases). In short, it is an inflation-adjusted value of the
output of the construction industry y-o-y. Consequently, real growth will be lower than the nominal growth
of our 'construction value' indicator, except in instances where deflation is present in the industry.
Data for this is sourced from the constant values for construction value added, using the same sources noted
above. We use officially calculated data to accurately account for inflation specific to the construction
industry.

Construction Industry, % Of GDP/Construction Value (USD)
These are derived indicators. We use BMI's Country Risk team's GDP and exchange rate forecasts to
calculate these indicators.
Capital Investment
Total Capital Investment
Our data is derived from GDP by expenditure data from each country's national statistics office (or
equivalent). It is a measure of total capital formation (excluding stock build) over the reported 12-month
period. Total capital formation is a measure of the net additions to a country's capital stock, so takes into
account depreciation as well as new capital. In this context, capital refers to structures, equipment, vehicles
etc. As such, it is a broader definition than construction or infrastructure, but is used by BMI as a proxy for
a country's commitment to development.
Capital Investment (USD), % Of GDP, Per Capita
These are derived indicators. We use our Country Risk team's population, GDP and exchange rate forecasts
to calculate them. As a rule of thumb, we believe an appropriate level of capital expenditure is 20% of GDP,
although in rapidly developing emerging markets it may, and arguably should, account for up to 30%.
Government Capital Expenditure
This is obtained from government budgetary data and covers all non-current spending (ie spending on
transfers, salaries to government employees, etc). Due to the absence of global standards for reporting
budgetary expenditure, this measure is not as comparable as construction/capital investment.

Government Capital Expenditure, USDbn, % Of Total Spending
These are derived indicators.
Construction Sector Employment
Total Construction Employment
This data is sourced from either the national statistics office or the International Labor Organization (ILO).
It includes all those employed within the sector.
Construction Employment, % y-o-y; % Of Total Labour Force
These are derived indicators.
Average Wage In Construction Sector
This data is sourced from either the national statistics office or the ILO.
Infrastructure Data Sub-Sectors
BMI's Infrastructure data examines the industry from the top down and bottom up in order to calculate the
industry value of infrastructure and its sub-sectors. We use a combination of historic data as reported by the
central banks, national statistics agencies and other official data sources, and BMI's Infrastructure Key
Projects Database tool.
Where possible we source historic data for the relative portion of either infrastructure spend or value
generated by the various sub-sectors we classify as infrastructure. We seek to segment official infrastructure
data into pre-set categories classified by us, across all countries, in order to optimise the ability to compare
industry value across the sub-sectors of infrastructure. We then apply ratios to the infrastructure subsector
value in order to derive the value. Real growth is calculated using the official construction inflation rate.
In those instances where historic data is not available, we use a top down and bottom up approach
incorporating full use of BMI's Infrastructure Key Projects Database, in most cases dating back to 2005.
This allows us to calculate historical ratios between general infrastructure industry value and its sub-sectors,

which we then use for forecasting. Our Key Projects Database is not exhaustive, but it is comprehensive
enough to provide a solid starting point for our calculations.
The top down approach uses data proxies. We have separated countries into three tiers. Each tier comprises
a group of countries on a similar economic development trajectory and with similar patterns in terms of
infrastructure spending, levels of infrastructure development and sector maturity. This enables us to confirm
and overcome any deficiencies of infrastructure-specific data by applying an average group ratio (calculated
from the countries for which official data exists) to the countries for which data is limited.
■ Tier I - Developed States. Common characteristics include:
■ Mature infrastructure markets;
■ Investments typically target maintenance of existing assets or highly advanced projects at the top of the
value chain;
■ Infrastructure as percent of total construction averages around 30%.
■ Tier I countries: Canada, Germany, Greece, UK, US, France, Hong Kong, Taiwan, Singapore, Israel,
Japan, Australia.
• Tier II - Core Emerging Markets. Common characteristics include
■ The most rapidly growing emerging markets, where infrastructure investments are a government
priority;
■ Significant scope for new infrastructure facilities from very basic levels (eg highways, heavy rail) to
more high value projects (renewables, urban transport);
■ Infrastructure as percent of total construction averages around 45% and above.
■ Tier II countries: Colombia, Malaysia, Mexico, South Korea, Peru, Philippines, Turkey, Vietnam,
Poland, Hungary, South Africa, Nigeria, Russia, China, India, Brazil, Indonesia.
• Tier III- Emerging Europe. Common characteristics include:
■ Regional socioeconomic trajectories;
■ Development defined by recent or pending accession to European structures such as the EU.
Infrastructure development to a large degree dictated by EU development goals and financed through
vehicles such as the PHARE and ISPA programmes, and institutions such as the EBRD and EIB;
■ Infrastructure as percent of total construction averages between 30% and 40%.
■ Tier III countries: Czech Republic, Romania, Bulgaria, Slovakia, Slovenia, Estonia, Latvia, Lithuania,
Croatia, Ukraine.
This methodology has enabled us to calculate infrastructure industry values for states where this was not
previously possibly. Furthermore, it has enabled us to create comparable indicators.

The top down hypothesis-led approach has been used solely to calculate the infrastructure industry value as
a percentage of total construction. For all sub-sector calculations we apply the bottom-up approach, ie
calculating the ratios from our Key Projects Database where data was not otherwise available.
Risk/Reward Index Methodology
BMI's Risk/Reward Index (RRI) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market.
The RRI system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
■ Industry Rewards (this is an industry-specific category taking into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors).
• Country Rewards (this is a country-specific category, and the score factors in favourable political and
economic conditions for the industry).
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is further broken down into two sub categories:
■ Industry Risks (this is an industry-specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry, and the relative maturity of a market).
• Country Risks (this is a country-specific category in which political and economic instability,
unfavourable legislation and a poor overall business environment are evaluated to provide an overall
score).
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Index, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Index a weighted average of the total score. Importantly, as most of the countries and
territories evaluated are considered by us to be 'emerging markets', our score is revised on a quarterly basis.
This ensures that the score draws on the latest information and data across our broad range of sources, and

the expertise of our analysts. Our approach in assessing the Risk/Reward balance for infrastructure industry
investors globally is fourfold:
■ First, we identify factors (in terms of current industry/country trends and forecast industry/country
growth) that represent opportunities to would-be investors.
■ Second, we identify country and industry-specific traits that pose or could pose operational risks to
would-be investors.
■ Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/
trends to avoid subjectivity.
■ Finally, we use BMI's proprietary Country Risk Index (CRI) in a nuanced manner to ensure that only the
aspects most relevant to the infrastructure industry are incorporated. Overall, the system offers an
industry-leading, comparative insight into the opportunities/risks for companies across the globe.
Sector-Specific Methodology
In constructing these indices, the following indicators have been used. Almost all indicators are objectively
based.
Indicators
Table: Infrastructure Risk/Reward Index Indicators
Rationale
Rewards
Industry rewards
Construction expenditure, USDbn Objective measure of size of sector. The larger the sector, the greater the
opportunities available.
Sector growth, Objective measure of growth potential. Rapid growth results in increased
% y-o-y opportunities.
Capital investment, % of GDP Proxy for the extent the economy is already oriented towards the sector.
Government spending, % of GDP Proxy for extent to which structure of economy is favourable to infrastructure/
Country rewards
Labour market infrastructure From BMI's Country Risk Index (CRI). Denotes availability/cost of labour. High
costs/low quality will hinder company operations.
Financial infrastructure From CRI. Denotes ease of obtaining investment finance. Poor availability of
finance will hinder company operations across the economy.
Access to electricity From CRI. Low electricity coverage is proxy for pre-existing limits to
infrastructure coverage.
Risks
Industry risks

Infrastructure Risk/Reward Index Indicators - Continued
Rationale
No. of companies Subjective evaluation against BMI-defined criteria. This indicator evaluates
barriers to entry.
Transparency of tendering process Subjective evaluation against BMI-defined criteria. This indicator evaluates
predictability of operating environment.
Country risks
Structure of economy From CRI. Denotes health of underlying economic structure, including seven
indicators such as volatility of growth; reliance on commodity imports, reliance
on single sector for exports.
External risk From CRI. Denotes vulnerability to external shock - principal cause of economic
crises.
Policy continuity Subjective score from CRI. Denote predictability of policy over successive
governments.
Legal framework From CRI. Denotes strength of legal institutions in each state. Security of
investment can be a key risk in some emerging markets.
Corruption From CRI. Denotes risk of additional illegal costs/possibility of opacity in
tendering/business operations affecting companies' ability to compete.
Source: BMI
Weighting
Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal
weight. Consequently, the following weighting has been adopted:
Table: Weighting Of Indicators
Component Weighting, %
Rewards 70, of which
- Industry rewards 65
- Country rewards 35
Risks 30, of which
- Industry risks 40
- Country risks 60
Source: BMI

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Q1 2016

Published by:BMI Research

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: October 2015

BMI Research © 2015 Business Monitor International Ltd

BMI Industry View ............................................................................................................... 7

Industry Forecast .............................................................................................................. 11

Industry Risk Reward Ratings .......................................................................................... 34

Market Overview ............................................................................................................... 44

Company Profile ................................................................................................................ 48

© Business Monitor International Ltd Page 4

Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

© Business Monitor International Ltd Page 5

BMI Industry View

Table: Infrastructure - Construction Industry Forecasts (Canada 2014-2020)

2014 2015f 2016f 2017f 2018f 2019f 2020f

■ Canada's RRI has remained steady this quarter at 64 out of 100.

© Business Monitor International Ltd Page 7

Table: Canada Infrastructure Risk/Reward

© Business Monitor International Ltd Page 8

© Business Monitor International Ltd Page 9

SWOT Analysis - Continued

© Business Monitor International Ltd Page 10

Table: Construction And Infrastructure Industry Data (Canada 2014-2024)

e/f = BMI estimate/forcast. Source: Statistics Canada, BMI

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Slowing Residential Construction Dragging On 2015 Growth

Public Spending To Boost Construction Growth From 2016

Canadian Construction Industry (And Sub-Components) Real Growth % y-o-y

e/f = BMI estimate/forecast, Source: Statistics Canada, BMI

© Business Monitor International Ltd Page 12

2016-2019: Liberal Win Means Big Gains For Infrastructure

Liberals To Double Infrastructure Spending

Source: Liberal Party of Canada

© Business Monitor International Ltd Page 13

New Infrastructure Bank Will Add To Financing Availability

Transport, Renewables, and Social Infrastructure To Get Biggest Boost

Transport Infrastructure - Outlook And Overview

© Business Monitor International Ltd Page 14

Table: Transport Infrastructure Industry Data (Canada 2014-2024)

e/f = BMI estimate/forecast. Source: BMI, Statistics Canada

© Business Monitor International Ltd Page 15

Investing To Ease Bottlenecks

e/f = BMI estimate/forecast. Source: Statistics Canada, BMI

Rail On Track For Growth Boom

© Business Monitor International Ltd Page 16

Rail Projects To Drive Infrrastructure Growth

f = BMI forecast. Source: BMI, Statistics Canada

© Business Monitor International Ltd Page 17

Highways Remain Stable

© Business Monitor International Ltd Page 18

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Major Projects Table - Transport

Table: Key Transport Projects

Source: BMI's Key Project Database

© Business Monitor International Ltd Page 21

Energy And Utilities Infrastructure - Outlook And Overview

Table: Energy And Utilities Infrastructure Data (Canada 2014-2024)

e/f = BMI estimate/forecast. Source: Statistics Canada, BMI

Solid Growth From 2016

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