A room full of investors controlling more than $100 trillion tends to make your Tax-Free Savings Account (TFSA) feel a little underdressed, to say the least.
Yet the Canada Investment Summit wasn’t only relevant to pension funds and billion-dollar infrastructure managers. It gave ordinary Canadian investors a surprisingly useful map of where money could flow over the next decade.
Prime Minister Mark Carney came away touting nearly $500 billion of new investment and financing commitments, while maintaining his broader goal of catalyzing $1 trillion of investment over five years.
BlackRock Chief Executive Officer Larry Fink even argued Canadians themselves should be thinking about how to “grow with Canada” and “invest in Canada.”
That’s probably the most useful takeaway for everyday investors. Just don’t mistake every enormous summit number for money already spent.
Source: Getty Images
$500 billion isn’t one giant cheque
Canadian banks pledged nearly $325 billion of financing. Pension funds, insurers and institutional investors committed nearly $100 billion. Investment funds added more than $14 billion, while Bell announced an AI infrastructure project worth more than $50 billion.
Those are very different things. Some are financing commitments spanning years. Some depend on projects actually proceeding. Others represent capital investors intend to mobilize rather than cash currently pouring into corporate earnings.
The summit therefore isn’t a reason to buy every mining or AI stock with a maple leaf attached. It’s a reason to watch where actual investment begins turning into revenue.
The rules are changing, too
The more interesting part may have been what Ottawa promised to do around that investment. Carney introduced the Productivity Mega Deduction, which allows immediate tax deductions on much more business investment. The government estimates Canada’s effective tax rate on new investment will fall from roughly 13% to 6.4%.
Then there’s the Major Projects Office. Carney summarized the new approval standard in six words: “One project. One review. One year.” Energy, mines, data centres and defence projects still need to make economic sense. Yet faster decisions could reduce years of financing costs and uncertainty.
That’s why I wouldn’t obsess over guessing which individual mine or data centre gets built first. I’d look for the infrastructure almost all of them need.
Follow the electricity
Carney wants Canada to double its electricity grid by 2050. That becomes necessary rather quickly if Canada simultaneously wants more AI data centres, mines, manufacturing, electric transportation and industrial projects.
Blackstone President Jon Gray told the summit that Canada has enormous advantages in natural resources and hydro power. His larger argument was that physical infrastructure has to arrive alongside AI and industrial investment.
That points me toward Hydro One (TSX: H). Hydro One owns and operates roughly 30,000 circuit kilometres of high-voltage transmission lines in Ontario. More importantly, it’s a regulated utility. When approved investments expand its infrastructure, those assets enter its rate base, allowing Hydro One to recover costs and earn a regulated return. More grid can eventually mean a larger earnings base.
Why I’d buy Hydro One
The growth is already visible. Hydro One is advancing new transmission projects across Ontario as electricity demand increases. Its North Shore Link, for example, would add transmission capacity between northeastern and northwestern Ontario, helping support growing industrial and community electricity needs.
Another proposed line serving Waterloo and Wellington would deliver roughly 600 megawatts, enough electricity for a region approximately the size of Kitchener-Waterloo.
Hydro One shares recently traded around $52, offering a dividend yield near 2.7%. At roughly 22 times forward earnings, the stock isn’t especially cheap, which is the main risk. Utilities are also sensitive to interest rates, while large transmission projects can face delays.
Bottom line
Still, that’s why Hydro One may be one of my favourite everyday-investor takeaways from the summit. You don’t have to predict which AI company wins, which mine opens first, or whether a $20 billion mega-project survives another election.
These all need electricity. Canada wants to build considerably more of everything. Hydro One gets paid to help plug it in.
