EXECUTIVE SUMMARY... 1 PART ONE: OVERVIEW MANDATE PURPOSE AND VALUES... 3

TABLE OF CONTENTS

EXECUTIVE SUMMARY ... 1

PART ONE: OVERVIEW ... 2

1.1 MANDATE ... 2

1.2 PURPOSE AND VALUES ... 3

PART TWO: 2013-14 - A YEAR IN REVIEW ... 3

2.1 2013-14PERFORMANCE:ACHIEVING CORPORATE OBJECTIVES ... 3

PART THREE: ENVIRONMENTAL SCAN ... 5

3.1 GOOD GOVERNANCE AND ACCOUNTABILITY ... 5

3.2 GOVERNMENT OF ONTARIO PRIORITIES AND COMMITMENTS TO INFRASTRUCTURE INVESTMENT ... 5

3.3 REAL ESTATE PORTFOLIO ... 6

3.4 WORKFORCE AND TALENT MANAGEMENT ... 6

3.5 FEDERAL AND MUNICIPAL GOVERNMENT PRIORITIES ... 6

PART FOUR: STRATEGIC DIRECTIONS ... 7

4.1 STRATEGIC OUTLOOK ... 7

4.2 2014-15CORPORATE OBJECTIVES ... 8

4.3 INFRASTRUCTURE ONTARIO’S BUSINESS UNITS’PRIORITIES... 8

4.3.1 MAJOR PROJECTS ... 8

4.3.2 REAL ESTATE ... 10

4.3.3 LENDING ... 12

4.3.4 COMMERCIAL PROJECTS AND ASSET OPTIMIZATION ... 12

PART FIVE: FINANCIAL FORECAST AND PROJECTIONS ... 12

5.1 BUDGET APPROACH ... 12

5.2 STATEMENT OF OPERATIONS &ACCUMULATED SURPLUS ... 13

PART SIX: GOVERNANCE AND RISK MANAGEMENT ... 14

6.1 GOVERNANCE ... 14

6.2 ACCOUNTABILITY ... 15

6.3 RISK MANAGEMENT FRAMEWORK ... 16

6.3.1 RISK MANAGEMENT POLICIES,PROCESSES AND STANDARDS ... 16

6.4 KEY RISKS ... 17

6.4.1 STRATEGIC ... 17

6.4.2 OPERATIONAL ... 17

6.4.3 FINANCIAL ... 18

6.4.4 REPUTATIONAL ... 18

PART SEVEN: HUMAN RESOURCES PLAN ... 19

7.1 CORPORATE STRUCTURE ... 19

7.2 ORGANIZATIONAL CHANGES TO IMPROVE EFFECTIVENESS AND EFFICIENCY ... 19

7.3 HUMAN RESOURCES PLAN ... 20

PART EIGHT: INFORMATION TECHNOLOGY PLAN ... 20

PART NINE: COMMUNICATIONS PLAN ... 21

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UMMARY

Infrastructure Ontario (IO) is a Crown corporation that reports to the Minister of Economic Development, Employment and Infrastructure (Minister) and is governed by a Board of Directors. IO’s purpose is to manage, build, finance and enhance the value of Ontario’s public assets. IO’s corporate objectives and values are aligned, and the organization aspires to be people oriented, innovative, client focused, execution driven and diligent.

Infrastructure Ontario has a presence in many communities across Ontario and is an important tool for the Government to deliver better public services, including public infrastructure and realty assets. IO plays four main roles as the Modern Procurement and Project Manager for large, complex infrastructure projects, Real Estate Manager for a large and aging real estate portfolio, Infrastructure Lender to eligible public sector and not-for-profit organizations, and Commercial Project Advisor to government clients. As outlined in the 2014 Ontario Budget and 2014 Ontario Economic Outlook and Fiscal Review, the Government of Ontario has committed to invest more than $130 billion in public infrastructure over the next 10 years. This includes investment in public transit, highways, roads and bridges, healthcare facilities and education infrastructure. The investment in 2014-15 is anticipated to be $12.8 billion, which will translate into ongoing infrastructure and realty projects for Infrastructure Ontario.

IO will continue to implement social infrastructure projects (such as hospitals, courthouses, facilities for Pan / Parapan American Games) and civil infrastructure projects (like large public transit and

transportation projects). In addition, IO will continue to manage a diverse real estate portfolio on behalf of the government, ensuring that government buildings and office space are managed cost effectively and used as efficiently as possible. IO will also continue to provide long-term financing, particularly to municipalities and others in the broader public sector. Lastly, IO will continue to advise on commercial transactions on behalf of the government, protecting the public interest and maximizing value for money. IO’s 2014-15 corporate objectives build on its strong track record of executing projects and managing assets. IO remains committed to being innovative and continuing to look for new opportunities to add value to the Provincial infrastructure and realty landscape. IO strives to deliver major infrastructure projects and real estate capital projects on budget and completed on time. IO will also measure success through timely and cost effective lease transactions, realty sales and liability reduction, sector loans, real estate development projects, and commercial and land transactions that are effectively advanced. IO will focus on diligence and enhance risk management through proactive identification and mitigation of significant risks to the organization. This involves updating the Enterprise Risk Management framework, ensuring credits are managed effectively and managing audit related activities. Finally, to continue to successfully deliver value to the Province, IO will develop and maintain collaborative relationships with clients and stakeholders.

In order to achieve these objectives IO will continue to build and measure employee engagement, the clearest evidence of which is the ability to deliver on IO’s mandate.

IO’s results in fiscal 2013-14 once again demonstrate that the organization is delivering on our mandate to the Province and corporate objectives set by the Board of Directors. In 2014-15, IO is continuing momentum from 2013-14, during which it achieved all of its annual corporate objectives as determined by the IO Board of Directors.

Looking ahead, IO anticipates meeting the goals outlined in this plan and achieving major accomplishments in this planning cycle.

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Infrastructure Ontario (IO/Agency) is a Crown corporation, wholly owned by the Province of Ontario, and classified as an Operational Enterprise Agency. It was established by the Ontario Infrastructure and Lands Corporation Act, 2011, as amended June 2012 (OILC Act). IO reports to the Minister of Economic Development, Employment and Infrastructure (Minister) and is governed by a Board of Directors pursuant to a Memorandum of Understanding (MOU) with the Minister that sets out IO’s accountability framework. IO’s mandate is to provide a wide range of services to support the Ontario government’s initiatives to modernize and maximize the value of public infrastructure and realty. IO fulfills its mandate through the following roles and activities:

Modern Procurement and Project Manager

 managing large, complex public infrastructure projects through the Alternative Financing and Procurement (AFP) model, which uses private financing and expertise to strategically build high quality public infrastructure, and aspires to on time and on budget delivery, in partnership with the private sector.

Real Estate Manager

 providing strategic asset and contract management (including real estate capital planning, safe and secure operations, leasing and property acquisition, appraisal, energy management, environmental services, accommodation analysis and disposition of surplus properties) to maximize the value of public buildings and lands for the Ministry of Economic Development, Employment and Infrastructure (MEDEI), client ministries, and agencies;

 delivering capital repair projects and operational performance management of outsourced service providers through effective and efficient service delivery for Ontario’s General Real Estate

Portfolio (GREP);

 leading strategic portfolio reviews and rationalization, and alternate use planning (including real estate development, land development and master planning) on behalf of MEDEI, client ministries, agencies and the broader public sector.

Infrastructure Lender

administering Infrastructure Ontario’s Loan Program, which provides Ontario municipalities and eligible public sector and not-for-profit organizations with access to affordable loans to build and renew public infrastructure.

Commercial Project Advisor

 leveraging private sector partnerships and investments for revenue generation, liability/cost reduction and efficiency in government services and investments.

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Purpose

We build, manage, finance and enhance the value of Ontario’s public assets.

Values

People oriented We believe in fostering long term relationships with our employees and stakeholders and are committed to developing our employees’ unique talents and expertise – this is at the core of our success.

Innovative We workwith our clients and partners to identify new opportunities to work together, creating industry-leading solutions, putting them into action and continuously improving.

Client focused We know we are only successful when we work collaboratively with our clients, listening to their needs and providing honest and fact-based advice.

Execution driven We are committed to delivering high-quality advice and projects on time and on budget.

Diligent We protect the public interest by ensuring that everything we do is open, transparent and represents value for the province.

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2013-14 Performance: Achieving Corporate Objectives

In fiscal 2013-14, IO was successful in achieving all of its corporate objectives to support the delivery of infrastructure, realty and loan programs. The results of the corporate objectives are summarized below.

Corporate

Objectives 2013-14 Targets Results

1. High Client

Satisfaction Achieve 75% or higher rating to the question “How would you rate your overall satisfaction with the services provided by the Infrastructure Ontario staff?”

Infrastructure Ontario achieved a satisfaction rating of 87%.

2. High Performance Six AFP projects at one of Request for Proposal (RFP), Commercial or Financial Close.

Six projects reached RFP close in 2013-14.

AFP projects to be delivered within Treasury Board approved budget, including contingency reserve.

Seven projects achieved substantial completion and are within budget. $4.8 billion in loans outstanding at

year-end; provide other levels of government, non-government and not-for-profit organizations with loans.

$4.9 billion in loans outstanding at year-end.

Corporate 2013-14 Targets Results Objectives                  

Approved commercial projects to be delivered on time; transaction milestones reached in four commercial projects.

Transaction milestones were reached in five commercial projects.

$24 million (net) in land sales for

GREP. $52 million (net) in land sales for GREP closed in 2013-14, (exceeding target by $28 million).

Building projects to be delivered on-budget and completed on-time: - Less than 5% over (under) budget; - Achieve targeted substantial

completion date 90% of the time.

0.9% under overall budget. 91.4% within target substantial completion date.

Lease transactions to be completed

on time, 90% of the time. 95% completed on or before the current lease expiry date. 3. Exemplary

Workplace Improve overall response rate to Employee Satisfaction survey - Corporate target is 75% level of

satisfaction. 2013-14 goal is 65% (approximately a 14% increase over 2012-13) to progress to our target.

Received a rating of 66% relative to the 2013-14 goal of 65% rating.

4. Productive

Performance By Q3 2013-14, IO will have evaluated and recommended operational productivity measures relevant to establishing its value for money to the Province.

Productivity measures were completed in Q3.

5. Effective Stakeholder Engagement

 Engage and connect to IO’s vendors.  Issue IO’s biannual market update

and market consultation through the Strategic Opportunities Committee.

The biannual market update was issued in November 2013, in

connection with the C2P3 Conference. 6. New Opportunities $763 million in new loan applications. $907 million in new loan applications

were received in fiscal 2013-14, 19% above target.

12 new projects, as directed by the Minister to IO, in the 2013-14 Letter of Direction

15 Letters of Direction received during fiscal 2013-14.

Corporate 2013-14 Targets Results Objectives        

7. Risk Management Review and assess performance of the AFP project portfolio, with a focus on budget, schedule and post contract contingency (PCC). Develop a standard project review protocol to help improve future AFP delivery.

In August 2013, IO published the AFP Track Record Review report

completed by an independent third party.

Restructure capital structure with Ontario Financing Authority (OFA) to better match debt (source of funds) with loans (use of funds) and mitigate risk from use of derivatives.

OFA and IO have reached an agreement on a new structure to fund both short term and long term loans. The bylaws to facilitate the above changes have been approved by IO’s Board in fiscal 2013-14.

Review and assess credit risk policies, processes and documents and, as necessary, revise to mitigate credit risk.

Completed an external review of the lending program. An implementation plan was presented to the Risk Committee and the IO Board in March 2014.

Perform enterprise fraud risk

assessment and, as necessary, revise internal controls to mitigate risk.

Completed the initial phase of a fraud risk assessment.

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As an agency of the government, IO is required to comply with numerous Treasury Board / Management Board of Cabinet (TB/MBC) directives and related policies, procedures and guidelines, in addition to those policies established by IO.

IO’s CEO and Board will continue to work with the Minister so that IO can continue to execute its mandate to deliver results and protect the public interest.

Consistent with the Memorandum of Understanding with the Minister, IO receives direction from the Minister through annual Realty and Infrastructure Letters of Direction (LODs) which identify new infrastructure and real estate projects and programs IO is to deliver. LODs for commercial projects are also given by the Minister on a project by project basis. LODs inform IO of the Minister’s annual priorities and budgets for GREP and IO, and also shape IO’s accountability and responsibilities.

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IO’s priorities are established by a number of decisions and directions set by the Province including the Ontario Budget, the Speech from the Throne, the Ontario Economic Outlook and Fiscal Review, the Realty Directive and other directives and policies. IO is guided by provincial capital plans that build on the province’s Building a Better Tomorrow framework (2004), the success of ReNew Ontario (2005), and the more recent long-term infrastructure plan, Building Together, launched in 2011.

The 2014 Ontario Budget builds on Ontario’s infrastructure plan and includes a commitment to invest more than $130 billion in infrastructure through Ontario’s new 10-year economic plan including investments in:

 New dedicated funds that would make $29 billion available to build highways, public transit, roads and bridges;

 Commitment of $1 billion to develop strategic transportation infrastructure in the Ring of Fire; and  Approximately $500 million for new or expanded post-secondary campuses.

The 2014 Ontario Economic Outlook and Fiscal Review highlighted the government’s goal to build up Ontario while eliminating the deficit in a responsible and balanced way. This included unlocking provincial assets in a way to create new revenue that can be put towards public infrastructure, including transit. The outlook emphasizes the Province’s focus on building modern infrastructure to support economic growth, increase productivity and future demographic needs. This includes the Moving Ontario Forward Plan with dedicated funding for transit projects in the Greater Toronto and Hamilton area (GTHA), such as Union Pearson Express and the Eglinton Crosstown projects, and projects outside the GTHA such as AFP transit projects in Waterloo and Ottawa.

For the first time, the Premier made public the mandate letters delivered to Cabinet Ministers. In the letter to the Minister, there are linkages between the government’s commitments and IO’s mandate. The Minister’s mandate letter indicates the AFP model should remain the best system possible to deliver transit and other infrastructure projects on time, on budget and to specification, and that the model should continue to be refined. In addition, there was a clear indication that long-term infrastructure planning and prioritizing infrastructure investments were top priorities. The letter also called for refinement to the capital investment strategies for infrastructure including alignment with asset management planning, growth planning, economic goals and the needs of Ontarians.

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The Ontario Government, through MEDEI, holds Canada’s second largest real estate portfolio. Like many public sector realty assets, the portfolio managed by IO on behalf of MEDEI is large, old and diverse. Over the last several years, IO has identified ongoing risks with the portfolio indicating that it is at a critical stage. The condition of the portfolio has reached a crucial point as current funding levels can no longer sustain all these government assets. Compounding the reinvestment challenge is the financial

requirement in support of various initiatives such as accessibility, heritage, greening and energy efficiency and the importance of sustained funding for these priorities. In order to address this, IO has completed an analysis of the portfolio and will advance mitigation strategies in cooperation with MEDEI and client ministries.

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IO’s workforce is drawn predominately from the private sector, providing an opportunity for talented individuals to do unique, engaging, and career-building work that provides benefits to Ontario through public service. IO’s challenge is to continue to retain those employees as well as engage and retain employees in all parts of the organization during a period of continuing restraint even as their experience at IO makes them increasingly marketable. IO’s HR strategy addresses this challenge.

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Infrastructure, real estate and public asset management and renewal are priorities and challenges for all governments. IO’s relationships with partners and clients at the federal and municipal government level are critical. Collaboration will continue to be a priority.

Public Private Partnerships (PPP) Canada, a federal Crown corporation, works with provincial, territorial, municipal, First Nations, federal and private partners to support greater adoption of public-private partnerships (P3) in infrastructure procurement. The May 2013 federal budget confirmed continuation of the federal government’s infrastructure plan with an additional $1.2 billion over five years for P3

and municipalities with their business cases and applications for funding from PPP Canada and delivery of federal PPP projects.

Collaboration between governments can continue to reinforce Ontario and Canada as leaders in public infrastructure investment and modern public services.

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The Government of Ontario has announced the investment of over $130 billion to build modern

infrastructure making it one of the most active jurisdictions in the world, producing thousands of jobs for the economy and attracting investment from around the globe. IO is positioned to support Ontario to reach its budget commitments and play a leadership role in delivering these projects and their corresponding economic benefits to communities across the province.

IO’s pipeline of new AFP projects has expanded beyond social infrastructure to include major civil projects, such as light rapid transit and highway projects which align with the Province’s commitment to invest in highways, public transit, roads, bridges and the province-wide transportation network. IO will continue to deliver social infrastructure projects in support of the government’s initiatives to provide more access to healthcare through major hospital expansion or redevelopment projects and to expanding post secondary education infrastructure as well as projects in the criminal justice sector, courthouses,

detention facilities and specialized treatment facilities for children.

IO is also focusing on providing real estate initiatives to support the government’s fiscal objectives and its commitment to maximizing the value of public infrastructure in Ontario. IO will continue to work with the Ministry to rationalize and modernize the Portfolio to meet safety standards, ensure it remains in a state of good repair, achieve efficiency targets and support program needs for the next generation of use. The lending group will continue to focus on administration of the Loan Program with new and existing public sector clients, especially municipal governments.

Partnerships with municipalities are important to all of IO’s business units and particularly related to potential delivery of large, complex infrastructure projects using the AFP approach and opportunities to maximize the value of real estate assets. Leveraging expertise as well as resources, such as IO’s MOU with PPP Canada and the P3 Canada Fund, has strong potential to help deliver such projects.

IO will continue to look at ways to deliver better public services with positive value for money. In many instances, this includes alternative service delivery models, innovative partnerships and financial transactions in cooperation with the private sector.

The diversity of IO’s business opportunities is matched by the diversity of IO’s skilled, efficient and experienced workforce. Approximately 75% of IO’s employees have significant experience in the private sector which is a competitive advantage for IO in delivering its mandate for the Government, often in partnership with the private sector. IO is committed to attracting new business and attracting the best talent to work on new opportunities.

With a focus on diligence, IO will enhance and update its Enterprise Risk Management framework to better identify risks and implement appropriate mitigation strategies. Following the 2014 Auditor General’s annual report, IO will develop and implement a plan to address the findings in the report. In addition, IO will continue to build its capacity and expertise around continuous improvement while better leveraging existing data to proactively identify opportunities for improvement.

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IO developed its 2014-15 corporate objectives in alignment with the organization’s values. These

objectives show how the Agency intends to continually improve and adapt, while at the same time deliver excellent results.

IO Values Outcome Markers of Success

Innovative Expand the IO service offering

around the core mandate Grow list of assignments for major projects, realty development projects, commercial projects and other small realty projects

Client focused Develop and maintain

collaborative relationships with clients

 Continue strong client satisfaction survey results

 Qualitative feedback  Client re-engagement rate Execution driven Continue to execute our mandate

in a manner that is consistent with our historically strong track record

 Major project bids are within budget  Major projects completed are within the

contractual award plus contingency  Real estate capital repair projects are

delivered on budget (plus 5% contingency) and on time (for at least 90% of projects)  Lease transactions are completed on time

(for at least 90% of projects)

 Realty development projects, commercial transactions and land transactions are effectively advanced

 Loan volume is increased Diligent Ensure proactive identification and

mitigation of significant risks to the organization

 Update the Enterprise Risk Management Framework to reflect current risks and ensure appropriate mitigation measures are in place

 Respond to the Auditor General’s report and develop a plan to address all recommendations

 Manage challenging credits and minimize loan provisions/losses

People oriented Increase employee engagement  Increase employee engagement survey scores

 Implement employee development programs

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Major Projects manages the delivery of large, complex public infrastructure projects through the AFP model. The AFP model utilizes private expertise and financing to strategically rebuild vital infrastructure,

while ensuring appropriate public control and ownership. The AFP model helps protect the public interest by integrating the design, build, finance, and maintenance components of a project, transferring

appropriate risks and providing value for money while striving to deliver projects on time, on budget and to specification. With a pipeline of projects including highways, hospitals, courthouses, transit and provincial law enforcement facilities, Infrastructure Ontario has the expertise and specialization to manage the planning, design and delivery of major projects. The work includes managing procurement, negotiating contracts with private sector consortia, and project management from procurement through to construction completion.

IO will continue to deliver strong results and publish information about its track record. The 2014 AFP Track Record Report conducted by a third-party concluded that of the first 37 completed AFP projects 36 were delivered on or below budget and almost three-quarters were completed early or within a month of the scheduled completion date.

Provincially, IO will continue to play a significant role in the delivery of Building Together, Ontario’s long-term infrastructure plan.

As part of the 2014 Spring Market Update, IO identified a strong pipeline of projects that confirms the Government’s plan to invest in AFP infrastructure projects. These projects are identified below as directed by the Minister to IO:

Requests for Qualifications:

2014-15 2015-16

St. Thomas Elgin General Hospital Brockville General Hospital Groves Memorial Community Hospital

West Park Healthcare Centre Centre for Addiction and Mental Health

Toronto East General Hospital Orléans Family Health Hub

William Osler Health System – Peel Memorial Centre

Requests for Proposals:

2014-15 2015-16

Halton Healthcare Services - Milton District Hospital

East Rail Maintenance Facility

Mount Sinai Hospital

West Park Healthcare Centre

Centre for Addiction and Mental Health

2014-15 2015-16

William Osler Health System – Etobicoke General Hospital Mackenzie Vaughan Hospital St. Thomas Elgin General Hospital Brockville General Hospital Groves Memorial Community Hospital

Orléans Family Health Hub

Market Updates will continue to be issued in order to provide guidance on projects in the future. 4.3.2 REAL ESTATE

In alignment with the Minister’s annual Letter of Direction, the Real Estate group will strategically manage the integrity and asset value of GREP and the client realty portfolios by focusing on the objectives to:

 Maintain the Portfolio in a state of good repair;

 Right size and rationalize the Portfolio in a manner that best supports government program needs; and,

 Provide government efficient and effective service delivery including realigning costs, accountability and reporting expectations.

IO’s ability to deliver on these objectives and ensure the integrity and value of the GREP portfolio is dependent on adequate funding.

There are ongoing risks with the portfolio that IO has identified and highlighted over the last several years and are identified in the environmental scan of this report. In order to address this, IO has completed an analysis of the portfolio and will advance the following mitigation strategies in cooperation with MEDEI and client ministries, subject to required approvals:

 Rationalize the portfolio using sales and community plans to consolidate the real estate while maintaining public services. This will eliminate redundant assets, generate revenue from sale of assets and reduce liability therefore allowing for investment in active assets only;

 Reduce the office foot print which will lower the overall space needs, occupancy costs and contribute to government greening programs;

 Recover full cost of accommodation in owned buildings and consolidate funds to ensure prioritization of realty spend occurs where it is most needed;

 Explore alternative funding sources to address the capital funding constraints such as Energy Service Company models; and,

 Assess and implement court consolidation and modernization.

Infrastructure Ontario develops a Realty Portfolio Plan (RPP) which is an important part of the asset management strategy and aligns decisions about acquisitions, dispositions and capital and operating investments with the government’s objectives. The RPP is a three year strategic plan for the disposition of surplus real estate assets with a focus on optimizing the relationship between net sales revenue, value enhancement, liability reduction and transaction volume. The current three year strategic plan

commenced in 2013-14 fiscal year and concludes with the 2015-16 fiscal year. IO will continue to implement the RPP to meet the objectives below:

 Over three years, meet revenue and reduced liabilities targets;

 Rationalize portfolio by 2,000 acres and one million square feet gross floor area by 2022;  Implement value enhancement on selected assets; and,

 Develop pipeline of surplus properties for the next generation of RPP (years 2016-19) and identify the possible sales and next list of prioritized demolition targets.

IO is dedicated to the creation of value in the GREP portfolio and will continue to extend real estate service offerings (Real Estate Options Analysis, Leasing Services, Capital Advisory Services, Environmental Services, Energy Management Services, Change Management, Space Planning and Project Delivery) to ministries and their agencies to create a pipeline for future growth across all lines of IO business. IO will also leverage Ontario GeoPortal Services (an integrated platform for business systems that provides government programs with affordable and intuitive services and technologies to integrate, access and better understand information) to other ministries and levels of government. IO will also continue to work with agencies and client ministries on real estate initiatives as follows:

Partner Project

LCBO LCBO Headquarters Land Disposition

Ontario Place/MTCS/MEDEI Ontario Place Urban Park and Waterfront Trail OPG/City of Mississauga OPG Lakeview Site – Inspiration Lakeview Metrolinx Port Credit GO station development

Metrolinx Eglinton Crosstown Transit Oriented Development

In addition, IO’s Real Estate Group manages and oversees the activities of the Property and Land Management Services (PLMS), Project Management Services Providers (PMSP), sales brokerage services and other vendor contracts such as general contractors, architects, engineers, appraisers, and land use planners. This year, IO will:

 Roll-out an enhanced governance and performance management strategy and framework for PLMS;

 Manage recent RFP award for Consultants Vendor of Record (VOR) for Architects, Interior Designers, Engineers and manage transition;

 Implement and monitor General Contractor VOR vendor performance program;  Manage the transition to new PMSPs from recent RFP award;

 Manage the new Health Capital with Local Health Networks MOU and deliver initial pilot projects; and,

4.3.3 LENDING

The Loan Program provides Ontario municipalities, universities and other eligible broader public sector entities with access to affordable loans to build and renew public infrastructure. The sectors served by IO’s loan program are:

 Municipalities and Local Service Boards;  Universities and Affiliated Colleges;  Municipal Corporations;

 Not-for-profit Long- term Care Facilities;  Not-for-profit Arts and Training Facilities;  Not-for-profit Social and Affordable Housing;  Hospices;

 Community and Social Services Hubs;  Aboriginal Health Access Centres; and,  Sports and Recreation Centres.

Municipalities, housing providers, universities and municipal corporations continue to make up the bulk of the Loan Program clients. While the group will continue to focus its outreach efforts on these clients, business in the largest client sector, municipalities, is expected to slow down in Q2 and Q3 of 2014-15 as a result of municipal elections, although this will not influence overall performance for the year.

A new Loan Management System that will help better manage the loan portfolio, leverage staff and bring loan servicing in-house will be implemented this year. Once established, the team will then focus on updating and re-launching the online loan application.

In addition to maintaining the current loan program, the group will also continue to focus on identifying business opportunities particularly with municipal clients. This includes collaborating with municipalities regarding infrastructure projects that could be delivered as public-private partnerships assisting PPP Canada with the intake of applications to the P3 Canada Fund from April to June of 2014.

4.3.4 COMMERCIAL PROJECTS AND ASSET OPTIMIZATION

The Commercial Projects and Asset Optimization group was created to leverage private sector partnerships and investments to help reduce costs, generate revenue and create efficiencies in government services and investments. Commercial Projects and Asset Optimization manages the assessment and transaction phases of commercial projects and provides internal advisory services to the government.

Currently IO is undertaking a number of special projects such as: o Advisory Services: OLG Modernization;

o Economic Development Opportunities: Ring of Fire;

o Divestment of Government Assets: Ontera, owned by the Ontario Northland Transportation Commission (ONTC);

o Commercial Transactions: Highway 407 East Phase 2 Tolling Negotiations; and, o Provincial Asset Review.

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IO’s approach to developing its budget reflects the fact that IO is self sustaining and the budget reflects projects assigned to IO by the Minister in Letters of Direction. In this business plan IO focuses on budget planning for the immediate fiscal year, and in the future anticipates providing a one year budget and preliminary estimates as a reference point for future medium term budget planning.

IO, through its business units, charge fees for services provided. The fees are agreed to at the on-set of a project and are charged to the client as work progresses and expenses are incurred.

IO manages its operations to enable delivery and accountability on priorities such as those set by the Minister as well as corporate objectives determined by IO’s Board. IO also assesses and anticipates future assignments and works to align its resources accordingly. As a result, IO is able to effectively allocate its resources and responsibilities in order to ensure efficiency and sustainability of operations over the period of the business plan.

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(in thousands) 2014-15

Budget

Revenue

Interest revenue $ 124,655

Investment income 17,119

Project delivery fees 48,587

Project transaction fee revenue 12,603

Management fees 40,553

Recoverable advisory costs 46,013

289,530 Expenses

Salaries and benefits 65,755

General and administration 22,984

Program Expenses

Project transaction costs

Recoverable advisory costs 56,787

Interest Expense 125,995

Loan valuation allowance 2,471

Sub-contracting fees 9,705

Project funding expenses 1,000

Total program expenses 195,958

284,697

Surplus 4,833

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IO applies a high standard of corporate governance to ensure operational efficiency and accountability. Infrastructure Ontario has a robust and well-structured governance framework. IO’s responsibilities are set out in the Ontario Infrastructure and Lands CorporationAct and IO is accountable to the Ontario Legislature through the Ministry of Economic Development, Employment and Infrastructure. A

Memorandum of Understanding (MOU) with the Minister of Infrastructure (Minister) clarifies IO’s roles and responsibilities, as well as the accountability framework between the Ministry and IO. IO receives

direction from the Minister through Letters of Direction (LOD) which specify infrastructure and realty priorities to be carried out by IO.

The role of the Minister includes, but is not limited to, providing direction to IO to carry out major infrastructure projects with the approval of Cabinet, as well as special projects at the request of

sponsoring ministries; reporting and responding to the Legislative Assembly on the affairs of IO; reporting and responding to Cabinet on IO’s performance and compliance with the government operational policies and broad policy directions; and consulting with the Chair of the Board of Directors and CEO as

appropriate, when significant new direction for IO is being contemplated.

Infrastructure Ontario is governed by a Board of Directors and Chief Executive Officer appointed by the Lieutenant Governor-in-Council. The Chair of the Board reports to the Minister of Economic Development, Employment and Infrastructure. IO’s Board of Directors have a wide breadth of expertise and private sector knowledge, as well as business, industry, or other relevant experience, to carry out their fiduciary duties and uphold the interests of the organization.

The role of the Board is to provide governance and stewardship and set the strategic management priorities for Infrastructure Ontario. The Board approves the corporate objectives and regularly monitors financial and operational performance, risk, and accountability. The Board has established four

committees for oversight, which include an Audit Committee, Risk Committee, Governance and

Compensation Committee, and Investment Committee. The roles and responsibilities of each committee are set out in the terms of reference. The Board meets on a monthly basis and its committees meet on a quarterly basis during the year.

As part of the Board’s commitment to good governance, an annual business plan and annual report are prepared in accordance with the government’s Agency Establishment and Accountability Directive and submitted to the Minister.

The Chief Executive Officer (CEO) is responsible for the operation of Infrastructure Ontario and other functions as assigned by the Board of Directors. The CEO provides leadership to Infrastructure Ontario’s management and employees, and fosters a corporate culture that promotes engagement, consistent execution, innovation, proper diligence, and client service. The CEO is supported by a diverse and skilled executive team which monitors corporate and business unit performance and issues through regular reporting and oversight by the five management committees (Executive Committee, Investment Committee, Major Projects Committee, Credit Review Committee, and Real Estate Committee).

Decision-making thresholds of Infrastructure Ontario management committees and individual staff members are governed by a Delegation of Authority which is approved by the Board of Directors and is aligned with the Minister’s direction and delegation of authority to the Agency.

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In all of its work, Infrastructure Ontario is disciplined regarding due diligence, accountability, transparency, and results, with a goal of ensuring real value to the Province from every transaction.

IO demonstrates accountability to MEDEI and government stakeholders and clients in the following ways:  Generates an annual report, approved by the Minister of Infrastructure, tabled in the provincial

legislature and made available on IO’s website;

 Produces an annual business plan, including performance measures, annually submitted to the Minister for approval;

 Conducts annual financial audits by an external auditing firm;

 Provides access to records under the Freedom of Information and Protection of Privacy Act;  Complies with applicable Management Board directives;

 Utilizes an Enterprise Risk Management (ERM) system to identify, assess, and mitigate risks;  Supports audits by the Office of the Auditor General, Ontario Internal Audit Division as well as

IO’s ongoing internal audit process;

 Supports the open government initiative by providing information on projects and activities on IO’s website;

 Conducts partnership meetings with MEDEI to review reporting and discuss strategic issues;  Consults and reaches out to the public through meeting and forums, such as the AFP forum,

ministry CAO forum, and industry meetings;

 Engages third-party independent advisors to maximize rigorous analysis of options, recommendations and decisions; and,

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IO has an Enterprise Risk Management (ERM) framework which helps to guide the organization in its risk management activities. This framework establishes a governance structure, specifies the approach towards risk and defines, assesses and categorizes the risks to which the organization is exposed. The ERM framework and governance structure encourage a risk-aware culture where risk management is an integral part of our strategic and operational decision-making. It helps ensure that risks are identified as well as opportunities facing the Agency, and facilitates the understanding, discussion, evaluation and management of risks at all levels of the organization. In 2014-15, IO updated its ERM framework and risk register. IO’s evolution of risk assessment in 2015 will include the use of predictive data analytics to improve insight regarding emerging risks and will be closely tied to IO’s Continuous Improvement Program.

6.3.1 RISK MANAGEMENT POLICIES,PROCESSES AND STANDARDS

The ERM policy outlines a framework for risk management, including an overall approach to identifying, assessing and managing organizational risk. The policy describes the key elements of the ERM program including the governance structure, reporting and monitoring requirements, and the roles and

responsibilities of key stakeholders. Risks are identified into four categories:

 _{Strategic Risks} generally pertain to the organization’s mandate, business environment and brand risks. These risks are managed through the risk management governance process including the Board of Directors, the Audit Committee and the Management Committees;

 Operational Risks include risks associated with people, process, technology, security, compliance and mandate execution. Operational risks can affect the ability of the Agency to achieve its corporate objectives which may create a reputational risk for the organization. Operational risks are managed through the business units and the Management Committees;

 Financial Risks include credit, liquidity, capital adequacy, and pricing risks associated with IO’s lending business and financing and market risk associated with the project delivery and procurement processes. Financing risks are managed through the business units and the Management Committees; and,

 Reputational Risks pertain to risks that can impact the organizations brand, image or reputation as the result of the actions of the organization; indirectly due to the actions of an employee or employees; or tangentially through other peripheral parties, such as partners or suppliers. These risks are managed through good governance practices and transparency and monitored by the Board of Directors, the Audit Committee and the Management Committees.

IO has a structured process to ensure the quality and consistency of risk management activities are reported to the Board:

 The Audit Committee and the Board review the ERM policy annually to ensure it continues to be appropriate and reflect best practices;

 The Board reviews and approves all major projects at milestone dates; the Investment Committee of the Board examines complex projects requiring in-depth review prior to the Board reviews;  The risk register is updated annually by the Risk Management and Internal Audit department with

extensive participation from senior management across the organization. The Risk Management and Internal Audit department is responsible for the ongoing identification and monitoring of risk and to identify key performance indicators for reporting and monitoring to senior management, the Audit Committee and the Board;

 An ERM report is provided quarterly to management and the Audit Committee; and,

 The risk register is utilized by Internal Audit to update the rolling three-year Internal Audit Plan. The Internal Audit Plan includes quarterly reviews of operational controls to ensure compliance against set policies and procedures. It also incorporates a strategic risk-based approach to the internal audit role.

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Regulatory risk is related to the consequences of failing to comply with legislation, regulations, directives and policies in executing its operations. As an Operational Enterprise Agency of the Province of Ontario, IO is required by statute and MOU to comply with certain regulations in its operations. In addition, IO is responsible for the implementation of diverse government programs and policies which adds another layer of regulatory compliance. IO takes the steps necessary to successfully manage a wide spectrum of requirements, such as duty to consult, heritage and culture, accessibility, security, and environmental considerations.

Market Capacity to Deliver Infrastructure Priorities

IO is a significant player in Ontario’s and Canada’s infrastructure market. It is important for IO to

understand the ability of industry to deliver projects. IO conducts a market capacity assessment at least every three years to provide an outlook for construction markets in Ontario that directly and indirectly affect both large scale projects and commercial and institutional building. Research presented in the report reviews conditions in labour, financial, material and equipment markets, and assesses the capacity of suppliers to manage the demands of new infrastructure construction.

IO continues to stage its projects to ensure that there is sufficient industry capacity before going out to market.

New Business/Expanded Mandate

IO’s mandate and role may expand as directed by the Province to work with public sector entities such as provincial ministries, agencies and municipalities. In order to ensure IO’s ability to engage with public sector clients each potential engagement is assessed by Management and MEDEI to ensure that IO has the authority, capacity and required expertise to fulfill any additional mandates.

6.4.2 OPERATIONAL Health & Safety

IO is committed to the health and safety of our employees, our contractors and subcontractors, and everyone working at or visiting our workplaces and worksites. In 2015, IO implemented a Health and Safety Policy for employees that addresses site access requirements, personal protective equipment, health and safety training and awareness, joint health and safety committee requirements, instillation of automated external defibrillators, workplace safety and insurance and fire safety. In addition, IO has developed and is rolling out three main components related to site safety and prequalification using nationally recognized Certificate of Recognition Program, mandatory site safety inspections & demolition standards. Activities will be updated on a quarterly basis.

Capital Expenditures Asset Integrity

Capital improvements and maintenance capital are incurred in irregular amounts over the lifecycle of an individual property, but the funding requirements are constantly exceed the portfolio of properties. Funding requirements may exceed cash available from operations or portfolio appropriations. Properties not maintained deteriorate exponentially over time, resulting in more costly improvements.

At the portfolio level, IO has proposed a strategy of Rationalize, Reduce and Redeploy whereby: IO identifies assets for increased utilization and consolidation (Rationalize); identifies surplus and not in program use assets for disposition/sale (Reduce); and identifies ways to fund initiatives (i.e. cost savings, sales revenue, etc) to minimize and avoid any fiscal impact (Redeploy).

6.4.3 FINANCIAL

Project Financing Risk

AFP projects are financed by the project consortium using third party debt financing (typically a bank or bond solution). IO projects have benefited from competition as well as a growing interest from a broad range of financial institutions offering innovative and cost-effective financing tools.

The quantum of private sector financing required and interest rates impact the affordability and

marketability (deal attractiveness) of a project. IO seeks to mitigate this risk in a variety of ways, including but not limited to the use of milestone and substantial completion payments (SCP). Setting the SCP needs to balance risk transfer and financing costs as well as take into account competing factors such as deal marketability. The following principles are followed when establishing the SCP:

 Ensuring competitive financing solutions by not structuring a transaction that will attract a premium for being too small or too large;

 Ensuring sufficient debt and equity throughout the 30-year concession period to ensure compliance with maintenance and lifecycle obligations; and

 Size and complexity of the project compared to IO precedent projects.

IO continues to manage project finance risks by offering market-proven risk mitigation tools such as the Indicative Credit Spread Reset (ICSR) process, performing rigorous financial due diligence at the

Request for Qualification (RFQ) and Request for Proposal (RFP) stages and by continuing to maintain an open and responsive relationship with the various bank and bond stakeholders.

Credit

Credit risk is the risk of a financial loss if a borrower does not fully honour its contractual debt obligation to IO. Credit risk is one of the risks facing the Agency in the normal course of business. IO manages credit risk as part of its lending activities and transactions.

IO’s credit risk assessment and rating systems are overseen by the management Credit Review Committee, Investment and Risk Management Committee (loans over $50 million) and the Risk Committee of the Board of Directors and are an integral part of a comprehensive credit risk oversight framework.

A policy framework governs the lending activities that generate credit risk for IO and is supplemented by a series of subordinate sectoral policies and guidelines. IO has numerous tools and approaches to mitigate its credit risk. One of the main risk management tools is the Agency’s intercept mechanism which allows for Provincial transfer funds owing to a borrower to be redirected to IO. Loans to non-government borrowers are subject to restrictive covenants on assets and the borrower may be required to provide security agreements and loan insurance.

6.4.4 REPUTATIONAL

Execution Risks/Performance Management

Risk events that may negatively affect project or program success, or create potential erosion of IO’s reputation during either the transaction or implementation phase, can come in many forms. Effective management of risk events requires their prompt identification and reporting to the project stakeholders. Various business unit specific monitoring documents are in place to report risks, to assess their potential impact on the project and to develop plans to control or mitigate the risks. Risks are monitored by the executive and senior management team and reported to the Board on a monthly basis.

Value for Money

Ensuring value for money is obtained on all public sector infrastructure projects is a fundamental principal at IO. IO is continually refining its value for money methodology to ensure that all major risks are

accurately reflected and effectively transferred through its procurement and contract documents. Infrastructure Ontario relies on the expertise of external cost consultants in the development of value for money assessment to ensure that its process and methodology align with industry best practice. In 2015, IO will be publishing an updated value for money methodology that reflects changes to the market place and lessons learned from executing over 80 projects.

Unethical or Illegal Contractor Practices

An unethical or illegal practice (fraud) conducted by a major contractor or their employee may result in restrictions placed on the project participant or service provider for violating laws (e.g. Foreign Corrupt Practices Act). This may also prevent such firms from bidding on public infrastructure projects and substantial reputation damage to IO and the Ontario Government. It may also lead to project delays, financial losses, legal action and sustained negative media attention. IO has extensive policy, process and audit controls to protect the organization against potential fraud and has planned to complete a Fraud Risk Assessment in 2014-15.

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President and CEO

EVP and Group Head, Major Projects

EVP and Group Head, Real Estate &

Lending

EVP and Group Head, Transaction Structuring, Risk and Commercial Projects EVP, General Counsel & Corporate Secretary EVP, Human Resources

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In May 2014, Infrastructure Ontario announced a number of organizational changes which resulted in re-alignment of departments and a reduction of the Executive team, better positioning IO to more efficiently achieve project and corporate goals as well as fulfill its mandate.

The changes include consolidation of the Corporate Services and Transaction Structuring divisions. This change improves the functionality and alignment of these support functions by integrating all of the finance and accounting professionals, as well as Risk & Internal Audit, Continuous Improvement, Business Planning, Information Technology and Program Management teams. This group also includes the Commercial Projects division as well as the Business Strategy and Communications team.

The other major organizational change is the formation of the Real Estate and Lending division. This involved integrating the Real Estate Management and Realty Planning and Development divisions as well as Lending and Land Development. The groups are now positioned to provide additional services to municipal and broader public sector partners and clients.

Finally, Records Management, Policy and Procurement have been moved to the Legal Services division. These changes build on previous restructuring that took place as part of and following the merger of two agencies, Infrastructure Ontario and the Ontario Realty Corporation, into one organization. The merger restructuring resulted in the reduction of two CEO offices to one, two Boards of Directors to one and two Executive teams to one.

the budgeted complement of 560 at March 31, 2011, prior to the merger. The need for resources is evaluated on a case by case basis relative to IO’s resources and responsibilities.

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IO’s longer-term HR vision to become the employer of choice for talented professionals with the expertise and experience required to fulfill IO’s mandate and a deep commitment to public service. IO’s HR strategy is to develop, implement, sustain, and evolve the culture, organization, people, and programs required to effectively build, manage, finance, and enhance the value of Ontario’s public assets. Key priority areas over the next three years include:

 Continuing to develop a culture of engagement, transparency, inclusion, client-focus, execution excellence, innovation, and diligence;

 Bringing people with the right skills and value-based behaviours onto our team quickly and effectively as needs emerge;

 Providing effective learning and growth opportunities for IO staff, particularly experiential learning through special projects and developmental assignments;

 Building leadership bench strength at all levels of the organization; and,

 Aligning all IO HR programs and practices in a manner consistent with Government policy and best practices.

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Infrastructure Ontario’s Information Technology (IT) group has developed a four year strategy focused on several areas that will allow it to meet or exceed the expectations of business units:

 Continuity of Operations - implement infrastructure, applications and processes essential to secure effective and efficient operations;

 Information Management and Applications - retire, enhance, merge, and acquire applications that will provide efficient access to information and enhance collaboration and productivity;

 Knowledgeable Team - ensure that IT professional and technical skills align with business processes and meet business units’ requirements; and

 Good Governance - the IT Steering Committee continues to develop processes and standards to ensure the reliable delivery of IT solutions through internal budget controls, project reporting, and reduced total cost of ownership.

Having consistent tools used across the entire organization for collaboration, workflow and process creation will create valuable efficiencies for all departments within IO.

Specific initiatives IT is undertaking include:

 Workflow automation of key business processes to improve efficiency;

 Development of a Business Intelligence platform to enhance analytical capabilities;

 Development and Enhancements to primary business applications such as the loan management system and records management platform;

 Infrastructure enhancements to improve capacity, access and security; and,  Development of an IT disaster recovery plan.

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IO is committed to achieving our mandate and corporate objectives and enhancing confidence and trust in the brand. IO’s communication objectives are to:

 Articulate our purpose, values and results in order to increase awareness of IO’s accomplishments and value among key audiences and influencers;

 Build the resilience of IO’s brand, protect against reputational risks and sustain and strengthen our corporate reputation;

 Manage short-term challenges through issues management;

 Provide clear direction regarding communications, marketing and media priorities and outcomes; and,

 Refresh the tactics and update the tools that are used to connect with target audiences. Specific initiatives engage industry, stakeholders and employees as follows:

 Increasing information available on the IO web site;  Hosting Quarterly Real Estate and AFP industry meetings;

 Conducting market research such as market soundings and bi-annual market capacity studies;  Participating in industry conferences, events and awards; and,

 Facilitating internal communications.

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The business plan reflects the projects as directed to IO by the Minister in the fiscal 2014-15.

The business plan is reviewed by the Senior Management Team and approved by the Board of Directors, after which it is submitted to the Minister for review and approval.

The business plan was prepared in consultation with senior management and will be communicated to the employees of IO after Board and Minister approval.

Aligning Services to Plan Goals

Each business unit has aligned its opportunities and activities to the corporate objectives and values. Business unit plans will be monitored at the senior management level.

Monitoring Progress

IO’s performance against the corporate objectives is reported on a quarterly basis to the Executive Management Team and the Board of Directors. The corporation uses a performance measurement system to ensure projects and processes are consistent with the corporation’s strategic direction, and that senior management is kept abreast of organization-wide progress against key performance indicators (KPIs). The senior executive team and the Board will monitor progress using a quarterly report and dashboard which provides plan priorities, the current status of performance measures along with discussion on specific issues and accomplishments.