Canada Pension Plan's Investment Arm Ups Stake in 407 Toll Route

(October 6, 2010) — The Canada Pension Plan Investment Board (CPPIB) has purchased a 10% stake in a Toronto toll road, and its holding could increase to 40% if CPPIB’s planned acquisition of Intoll Group proceeds.

The purchase comes comes nearly six weeks after the fund agreed to a $3.4-billion takeover of Intoll Group, which owns 30% of the road.

According to the CPPIB, the board will acquire 10% of the 407 Express Toll Route (ETR) near Toronto for $879 million (C$894 million) from Spanish owner Cintra Infraestructuras S.A., a subsidiary of Ferrovial. After the acquisition, Cintra will own 43.23% of the road; Intoll Group, 30% and SNV-Lavalin, 16.77%.

“Consistent with our investment thesis for our proposed acquisition of Intoll Group, we believe 407 ETR is an attractive infrastructure asset and is a strategic fit with CPPIB’s portfolio and long-term investment mandate,” said André Bourbonnais, senior vice-president of private investments at CPPIB in a statement. “As an essential toll road in the Greater Toronto area, Highway 407 ETR is situated strategically to ease traffic congestion and to benefit from future urban growth in Toronto.”

Last year, the 407 reported revenues of $560 million compared with $548-million for the year ending December 31, 2008, and that is expected to increase, the Vancouver Sun reported. Traffic volume increased 6% during the first half of 2010 compared with the same period in 2009, and on June 30 this year, the 407 ETR set a new traffic volume record when it was used by 454,275 vehicles.

As a long-term investor, CPPIB invests in global infrastructure assets. CPPIB’s infrastructure portfolio includes gas and electric transmission systems, water utilities, toll roads and communications facilities.