Thursday, August 16, 2018

Canadian Pensions Invest in US Utility?

Benefits Canada reports, OMERS, AIMCo and BCI take or up stake in U.S. utility company:
Several major Canadian public pensions are investing in Puget Holdings [no LLC], the parent company of Puget Sound Energy Inc., a regulated utility company in Washington state.

The Ontario Municipal Employees Retirement System’s infrastructure arm is taking on a 23.9 per cent stake, while the Alberta Investment Management Corp. is raising its previously held stake by six per cent to 13.6 per cent and the British Columbia Investment Management Corp. is increasing its stake by four per cent to 20.9 per cent. Dutch pension fund manager PGGM is also taking on an initial stake of 10 per cent. And the Canada Pension Plan Investment Board is maintaining the 31.6 per cent position it’s held since 2009.

“We are very pleased to announce our investment in Puget, which fits strongly with our strategy of acquiring assets aimed at generating steady, long-term cash flow to pay pensions to the OMERS members,” said Ralph Berg, executive vice-president and global head of infrastructure at OMERS, in a press release. “The acquisition of Puget strengthens our presence in the U.S., including our investments in the Chicago Skyway toll road and Oncor Electric Delivery, the largest transmission and distribution company in Texas,” he added.

Puget provides electricity to more than a million customers and natural gas to more than 800,000 customers in the Puget Sound area.

“An investment in PSE reflects confidence in the future of our region and the dedication and skills of our 3,100 local employees,” said Kimberly Harris, PSE president and chief executive officer, in the release. “Our investors share our values and our commitment to serving our customers and ensuring our community remains a great place to live.”

Since 2009, the company has focused on bringing more clean energy to its region with the expansion of its Wild Horse Wind Facility, the construction of the new Lower Snake River Wind Facility, as well as updating two of its hydroelectric facilities, noted the release.

“Investing in a utility means investing in the region it serves,” said Ben Hawkins, senior vice-president of infrastructure and timber at AIMCo, in a release. “We are proud of the partnership we have had with PSE for almost a decade and look forward to having an increased role in their future.”

Lincoln Webb, BCI’s senior vice-president of infrastructure and renewable resources, also described the company as well-managed and a strong fit for the pension fund’s long-term investment profile.
You can read more about Puget Sound Energy here and on its website here.

I don't know the details of this deal but it sounds like something that fits perfectly into a pension's portfolio. A regulated US utility which offers steady, long-term cash flows to pay long-dated pension liabilities.

You'll recall, I've been recommending utiities (XLU) to my readers as a way to get more defensive in this market, and they seem to be staging a comeback lately:


Now, Puget Sound Energy is a private company so it's not subjected to market beta, which works in favor for OMERS, AIMCo, and BCI.

In other pension news, Benefits Canada reports, PSP Investments completes acquisition of Quebec wind farm:
The Public Sector Pension Investment Board, alongside Pattern Energy Group Inc., is completing the acquisition of a wind power facility about 50 kilometres south of Quebec City.

Pattern Energy, which will operate the facility, has taken on a 51 per cent interest for about $52 million, with the PSP taking on the remaining 49 per cent. The Mont Sainte-Marguerite wind power facility has a capacity of 147 megawatts and is fully operational. The deal was first announced in April 2018.

“Mont Sainte-Marguerite Wind is an ideal investment from any angle, including everything from its long-term potential to its locally sourced construction and positive local impact,” said Patrick Samson, managing director and head of infrastructure investments at PSP Investments, in a press release. “We are proud to once again partner with Pattern Energy, to support its continued growth and its ability to increasingly provide renewable energy to clients throughout the world.”

The facility, which is working under a 25-year power purchase agreement with Hydro-Québec Distribution, is expected to provide power sufficient for 28,000 Quebec homes annually. Its location, on one of the higher elevations in southern Quebec, makes it well positioned to benefit from strong winds in the region, according to the release.

“This is our first wind power facility in Quebec and our third project under the joint venture agreement with PSP Investments, underscoring the strategic value of our partnership,” said Mike Garland, chief executive officer of Pattern Energy.
I've already covered PSP's push into renewables here.

This too is a great private market deal, similar to the investment in a US utility. Long-term, steady cash flows will benefit PSP and its contributors and beneficiaries for a long time.

That's it from me, it was a very long day so I decided to keep this short and sweet.

Below, how Puget Sound Energy customers get their electric energy from generation source to the home. Very interesting utilitiy which is diversified across alternative energy sources to provide its customers safe, efficient and low-cost energy.

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