Canada doesn’t really have a shortage of ideas for enormous projects. It has occasionally suffered from the minor inconvenience of taking forever to approve them.
That problem became impossible to ignore at the Canada Investment Summit.
Blackstone president Jon Gray offered perhaps the most painful example. His firm helped develop a transmission line carrying Quebec hydroelectricity to New York.
“It took us 16 years to build a transmission line of hydro power from Quebec to Queens, New York City,” Gray told the summit.
Prime Minister Mark Carney’s answer is the Major Projects Office (MPO).
Source: Getty Images
One project, one review, one year
Canada has now referred 27 nation-building initiatives representing roughly $500 billion in private investment opportunities to the office. They span ports, mines, LNG, nuclear power, highways, critical minerals, and energy corridors. For investors, this may be one of the most important pieces of Canada’s investment strategy.
The MPO is supposed to give major projects a single route through the federal government instead of leaving developers bouncing between departments and regulatory processes. At the summit, Carney distilled the idea into six words.
“One project. One review. One year.” He continued, stating, “Speed, certainty, and predictability are themselves competitive advantages.”
That’s the financial bit. Every additional year spent waiting for a decision can mean higher financing costs, changing material prices, and billions of dollars sitting around earning precisely nothing. Ottawa says the Building Canada Act can provide more coordinated regulatory pathways and greater timeline certainty, allowing companies to make financing decisions earlier.
But some business still has to design all that stuff. That’s why I’d buy WSP Global (TSX: WSP).
WSP could win
WSP provides engineering, environmental, design and consulting services across transportation, power, mining, water, and buildings. A contractor may have to wait until a project reaches construction. WSP can earn revenue during planning, engineering, environmental assessment, and design. Precisely the stages the MPO is trying to move through more efficiently.
Investors looking at Canadian growth stocks therefore don’t need to guess which $20 billion mine or LNG terminal ultimately wins approval. WSP can participate across several categories.
The underlying business is already doing rather nicely. Second-quarter net revenue climbed 22.9% to $4.3 billion, while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 28.8% to $815 million. Most importantly, backlog reached a record $20.1 billion, up 23.2% year over year. That’s a substantial amount of future engineering work before Canada’s latest building push adds anything.
Considerations
WSP recently closed around $181.57, roughly 38% below its 52-week high of $291. The shares now trade near 15 times forward earnings. That’s considerably more appealing for investors buying stocks in Canada than paying peak prices for the infrastructure story.
There are risks. WSP’s acquisition strategy pushed its leverage ratio to 2.3 in the latest quarter, and integrating acquired businesses can dent margins. Ottawa can also shorten federal decisions without magically eliminating labour shortages, Indigenous consultation, engineering problems, or political opposition.
Bottom line
Still, the MPO changes something important. Canada’s problem has rarely been finding another billion-dollar project to announce. It has been getting from announcement to construction without everyone aging visibly in the process.
If Carney’s “one project, one review, one year” model actually works, WSP could be getting considerably busier.
