Project Financing for Subway Line Construction and Operation Project in Canada
Supporting Overseas Business Expansion of Japanese Railway Industry with Canadian Dollar Loan under GREEN Operations
- Region: North America
- Overseas Investment Loans
- Project Finance
The Japan Bank for International Cooperation (JBIC; Governor: HAYASHI Nobumitsu) signed on November 15 a loan agreement in project financing*1
amounting to up to CAD 450 million (JBIC portion) with Canadian company Connect 6ix General Partnership (Connect 6ix) to deliver major components of the Ontario Line subway project in Toronto, Canada. The partnership is invested in by, among others, Hitachi Rail STS S.p.A. (Hitachi Rail STS), an Italian company wholly owned by Hitachi, Ltd. (Hitachi). The loan is co-financed with Sumitomo Mitsui Banking Corporation, the Norinchukin Bank, etc., bringing the total co-financing amount to CAD 1,100 million.
This project is to construct components of the 15.6-km subway line in Toronto, Canada, and operate and maintain it for 30 years upon completion. Connect 6ix will also supply the trains and railway systems.
With the increasing number of immigrants coming into the region, the populations of the city of Toronto and its neighboring areas, known as the Greater Toronto Area, are growing year by year. This is giving rise to the need for the expansion of the transit system, which has to be addressed urgently. Given this circumstance, four new Greater Toronto Area subway projects, including the Ontario Line project, were initiated. Recognizing them as priority transit projects, the Government of Ontario is facilitating the expansion of the railway network by, for example, strengthening the legal framework to smooth the path of the projects. According to the Government, the Ontario Line will reduce traffic by 28,000 vehicles per day and lower fuel consumption by 7.2 million liters per year, helping to reduce traffic congestion and greenhouse gas emissions and contributing toward global environmental preservation.
Canada has been actively mobilizing private capital to reorganize social infrastructure, which positions Canada as one of the most important markets in the world. In October 2019, Hitachi was awarded a new LRT construction project to link the cities of Mississauga and Brampton in Ontario. The loan for the Ontario Line, which will be provided in Canadian dollars under JBIC’s GREEN operations*2
, will support Hitachi’s business activities in the Canadian railroad market, thereby contributing toward maintaining and improving the international competitiveness of Japanese industry.
In the Infrastructure System Overseas Promotion Strategy 2025 (supplemented in June 2022), the Government of Japan aims to contribute toward carbon neutrality with infrastructures of high environmental performance enabled by Japanese advanced technology, promote the creation of business models by local entities utilizing quality infrastructures, and promote the implementation of projects through global partnerships where Japanese companies assume the leadership in the core technology, value, and/or projects, which is the concept of “Core Japan.” The loan is in line with this policy of the Government of Japan.
As Japan’s policy-based financial institution, JBIC will continue to support the overseas business expansion of Japanese companies by drawing on its various financial facilities and schemes for structuring projects, including local currency loans, and by performing its risk-assuming function.
Project finance is a financing scheme in which repayments for a loan are made solely from the cash flow generated by the project.