A new train system launching today in Montreal is set to reshape how people get around the city—and could become a proof of concept for a new way of building infrastructure elsewhere in the country.
Catch up: The first phase of the Réseau Express Métropolitain (REM) will whisk riders from the suburb of Brossard to Montreal’s central station—a trip that takes up to 40 minutes in rush hour traffic—in just 18 minutes.
- Once complete, the REM network will be one of the largest automated light rail systems in the world.
Why it matters: The REM was built and will be operated by the Caisse de dépôt et placement du Québec, the province’s largest pension fund manager, and will be watched closely as a test case for future pension-owned infrastructure projects.
Pension funds do invest in infrastructure, but typically only once it is already built and operating, and therefore less risky.
- In this case, the Caisse took on the risk of cost overruns and constructions delays in exchange for a higher share of profits generated by fares.
Yes, but: Transit projects are risky because ridership—and therefore fare revenue—is difficult to predict, and most pension funds have little appetite for projects that come with a serious risk of losing money.
With shifting work and commuting habits, transit ridership forecasts have become even hazier in recent years.
- “I think the risk profile on [the REM investment] is very, very high,” Leo de Bever, former chief of the Alberta Investment Management Corporation told Reuters.
What’s next: The Caisse isn’t done with transit projects—it’s among the three finalists selected by the federal government to bid on a High Frequency Rail line between Québec City and Toronto due to be awarded next year.—TS