The Réseau express métropolitain (REM) will ultimately cost nearly eight billion dollars, an increase of 45% compared to the initial estimate of the project. Unsurprisingly, CDPQ Infra cites the pandemic, the war in Ukraine and the discovery of century-old explosives in the Mont-Royal tunnel to explain the increase.
“We spent almost more than half of the project in extraordinary construction conditions and with a lot of impacts. […] “, explained Wednesday President and CEO of CDPQ Infra, Jean-Marc Arbaud, during a public update on the project on Wednesday. Precisely, the current cost is set at around $7.95 billion.
A recent estimate of the project was around $7 billion, but earlier in 2018, when the first bidders were submitted, the estimated cost was $6.3 billion. The year before, in 2017, the cost was set at around 5.9 billion. But at the very beginning, namely during the launch of the REM in 2016, the bill was 5.5 billion.
In seven years, the price of REM has therefore been inflated by around 45%, in total, in other words 2.45 billion. If we compare ourselves to 2018 and the stage of choosing bidders, however, the increase is 26%, or 1.65 billion.
For Mr. Arbaud, the 2016 version is however “not the same project” as today. “There was a lack of stations and trains. There have been a lot of changes since then,” he argued.
A pandemic of 800 million
Three major factors explain this increase in costs, according to CDPQ Infra: the pandemic and the war in Ukraine, first, account for 800 million alone due to the significant impacts on supply chains and availability of the work force.
The century-old explosives that were discovered in the Mont-Royal tunnel in 2020 also weigh heavily in the balance. The Fund estimates that the delays and changes to working methods caused by this event result in additional costs of 350 million.
The critical path, clearly, goes through the tunnel. This is an area in which the installation of railway tracks is starting. It’s a very difficult place. You have to go in from one side and the other.
Jean-Marc Arbaud, President and CEO of CDPQ Infra
Several “optimizations” to the project that were made along the way also increased the bill by 500 million. Work aimed at infrastructure “operated” by third parties cost 350 million, and requests aimed at improving developments around the stations, 150 million.
All costs “absorbed”
In May, The Press revealed that a 30% increase could not be excluded in the final financial package. At that time, CDPQ Infra wanted at all costs to ensure that the increase in the cost of its project did not cross the 30% threshold, which would be roughly the average increase for similar projects in Canada and elsewhere in the world.
The increase in the bill will be entirely “absorbed” by the Fund, Mr. Arbaud confirmed on Wednesday. His group still expects an 8% profit on its investment. In the short term, there would also be no change to the fee of approximately 75.3 cents per passenger-kilometer for 2023 that the Regional Metropolitan Transport Authority (ARTM), financed by Quebec and Greater Montreal, must pay to CDPQ Infra. “We are still in these figures,” said Mr. Arbaud.
So far, only one section of the REM is in service, the one linking the South Shore to downtown Montreal with five stations, since July 31. In June 2022, the Caisse de dépôt announced that the delivery of 18 REM stations, in the city center, in the west and in the north, would have to be postponed again.
For the moment, we will therefore have to wait at least until the end of 2024 to see another branch other than that of the South Shore, a date that the Caisse de dépôt is maintaining for the moment. Tests will be held from spring 2024. “From that point on, we will have a clear idea of when we can set the commissioning date,” said Mr. Arbaud.
As for the route to connect the airport to the city center, delivery is still scheduled for 2027 only, with construction work on the station first scheduled to take place until 2026. Once all its segments have been delivered, the REM will 67 km and will have 26 stations in total.
With Tommy Chouinard, The Press