Ottawa's $500 billion defence bet is looking for private capital to close the gap
Bay Street is being asked to help finance what Ottawa calls the largest industrial build-up in the country's modern history, an opportunity CIBC's chief executive says is "once-in-a-generation."
Prime Minister Mark Carney made that pitch explicit at CANSEC, the country's largest defence trade show.
According to the Financial Post, the federal government expects more than $500bn in combined public and private defence investment by 2035, he told an audience of corporate defence and security leaders.
Carney also became the first prime minister to appear at the event, according to BNN Bloomberg.
Defence minister David McGuinty called on financial institutions Wednesday to "think long term" and "back Canadian innovation," telling players gathered at a CIBC-hosted defence summit: "That's where you come in," the Financial Post reported.
"A once-in-a-generation opportunity to invest in our economy" is how CIBC chief executive Harry Culham described the moment, according to the same outlet, pointing to dual-use infrastructure, cybersecurity, artificial intelligence and Arctic development as eligible investment areas.
The federal budget last fall pledged $81.8bn in defence spending over five years.
Canada's defence sector already contributes more than $9.6bn to GDP and employs approximately 81,200 people across roughly 600 companies.
The government has stated it wants to add up to 125,000 sector jobs over the next decade.
At the heart of the capital strategy is a new multilateral institution, the Defence, Security and Resilience Bank (DSRB), which Canada will host.
Business Development Bank of Canada CEO Isabelle Hudon told the Financial Post the bank is expected to launch with roughly $20bn in capital and support as much as $200bn in lending capacity, with Canada's contribution potentially exceeding $1bn.
Hudon said the DSRB could officially launch as early as the NATO summit in Ankara in July.
The BDC itself has already moved.
Hudon told the same outlet the Crown corporation found only $400m in defence sector exposure when it audited its roughly $55bn portfolio last year, prompting it to launch a $6bn defence financing and investment platform in March.
On the procurement side, Carney announced at CANSEC that Canada has entered negotiations with Swedish defence company Saab to purchase the GlobalEye airborne early warning and control aircraft, which is built on Bombardier's Canadian-made Global 6500 jet.
CBC News has reported that the Department of National Defence is seeking six systems at a cost exceeding $5bn.
At least one-third of the projected fleet is to be manufactured in Canada over 15 years, and the government said the deal could support more than 3,000 aerospace and defence jobs, according to the PMO.
Saab CEO Micael Johansson told CTV News the company intends to establish an industrial hub in Canada as quickly as possible.
Calian Group Ltd. is among the domestic companies analysts are watching most closely, the Financial Post reported.
ATB Cormark Capital Markets, whose analysts attended CANSEC, named it a top pick, citing its composite materials unit, satellite navigation work and a new Canadian Air Force communications application.
ATB carries a price target of $98.50 on the stock; shares closed Friday at $92.13, the outlet reported.
