CPP Investments Bolsters European Renewable Energy Platform

 

Today, CPP Investments announced its support for Renewable Power Capital’s new investments in European onshore renewables:

• Renewable Power Capital (RPC) entering the Swedish market with 100% acquisition of onshore wind farm from OX2
• CPP Investments is committing approx. €260 million to support RPC’s growth strategy
• RPC forms a core part of CPP Investments’ multi-billion Sustainable Energies investment strategy and invests in solar, onshore wind and battery storage across Europe

Canada Pension Plan Investment Board (CPP Investments) has committed a further €260 million to Renewable Power Capital Limited (RPC), in support of RPC’s ongoing investment strategy, including its initial investment in Swedish onshore wind and recent investments in Spanish solar projects.

RPC, CPP Investments’ U.K. based onshore renewables platform, has recently committed to acquire the Klevberget onshore wind farm, with a capacity of 146 MW, in their first Swedish deal. OX2, a leading developer and constructor of large-scale onshore wind power in Europe, is constructing the wind farm under their construction & asset transfer agreement. Once commissioned, OX2 will be responsible for the technical and commercial management of the wind farm. It will provide clean energy equivalent to the consumption of approximately 46,000 households.

Bruce Hogg, Managing Director, Head of Sustainable Energies, CPP Investments, said: “RPC has significantly expanded its footprint across European renewables with this entry into the Swedish market. We continue to support the business with additional long-term capital to invest in attractive renewables opportunities across our target markets.

RPC is partnering with OX2, delivering additional energy capacity which will compete without subsidies in the Nordic region.

The deal builds on the ongoing relationship between RPC and OX2. In 2021, RPC acquired a 171MW portfolio of Finnish onshore wind projects from OX2. RPC was launched by CPP Investments in December 2020.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At December 31, 2021, the Fund totalled $550.4 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

Renewable Power Capital also put out a press release n this deal:

• Renewable Power Capital has committed to acquire the Klevberget onshore wind farm, with a capacity of 146 MW, in their first Swedish deal.  
• OX2 is constructing the wind farm under their construction & asset transfer agreement (“CATA”) and will, once commissioned, be responsible for the technical and commercial management of the wind farm.
• The deal builds on the ongoing relationship between RPC and OX2. In 2021, RPC acquired a 171MW portfolio of Finnish onshore wind projects from OX2.
• The decision marks a strategic move by RPC to enter the Swedish market as it continues efforts to accelerate decarbonisation across Europe.

 Renewable Power Capital (RPC) has made its first investment in Sweden by committing to the acquisition of a 100% ownership interest in a 146 MW onshore wind project from OX2, a leading developer and constructor of large-scale onshore wind power in Europe. The transaction is valued at €190 million. 

Klevberget onshore wind farm is located near Sundsvall, in the Medelpad province of Sweden, and has an expected annual net production of 417 GWh. It will provide clean energy equivalent to the consumption of approximately 46,000 households. OX2 will build the wind farm and will take care of their technical and commercial management following completion. Construction will begin immediately after closing, with electricity planned to be available to market in November 2023.

The deal reflects a strong partnership between RPC and OX2. RPC’s first investment as a company in January 2021 was the acquisition of an 100% ownership interest of three onshore wind farm projects in Finland with a combined capacity of 171 MW from OX2, in a transaction valued at €245 million. 

RPC’s deep capability and flexible capital have allowed it to make this second acquisition from OX2 unlevered and unhedged. Their strong execution capabilities took the deal from exclusivity to signing within two months, showcasing the speed and certainty with which RPC can make deals. The expansion into Sweden signals RPC’s commitment to the Nordic region as a key part of their European strategy. 

Bob Psaradellis, CEO, Renewable Power Capital, said: “OX2 are a market leader in large-scale wind development and construction, and we are thrilled to expand our relationship with another long-term investment that can compete without subsidies in the Nordic region. This deal marks RPC’s expansion into Sweden as we build our onshore renewable generation platform and aim to become a key contributor to Europe’s decarbonisation.”

“I sincerely want to thank the team at Renewable Power Capital for a great collaboration once again. This is the fourth wind farm we will realize together in less than two years, demonstrating the high level of trust between the companies.” says Paul Stormoen, CEO, OX2.

I've already discussed why CPP Investments launched a European renewables platform Renewable Power Capital Limited (RPC), a little over a year ago here. 

Bob Psaradellis, CEO of Renewable Power Capital, and his team are busy acquiring and developing renewable assets on that platform.  

OX2 represents a strong partner and this is reflected in the fact that this deal represents the fourth wind farm they realize together. 

Also recall, it was just under a year ago that CPP Investments created the then C$18bn (€12.1bn) Sustainable Energy Group (SEG) led by Bruce Hogg as managing director.

He reports to Deborah Orida, Global Head of Real Assets and the Chief Sustainability Officer who I spoke with back in December. 

Earlier this month, CPP Investments committed to net zero by 2050 and stated:

To meet this commitment, CPP Investments will:

• Continue to invest in and exert our influence in the whole economy transition as active investors, rather than through blanket divestment.
• Achieve carbon neutrality for our internal operations by the end of fiscal 2023¹.
• Increase our current investments in green and transition assets from $67 billion to at least $130 billion by 2030².
• Build on our new decarbonization investment approach that seeks attractive returns from enabling emissions reduction and business transformation in high-emitting sectors.

“The impacts of climate change on the investment landscape are undeniable and have fundamentally transformed the nature of business risks and opportunities. As a capital provider and partner, and with our experience, expertise and financial resources, we recognize the valuable contribution we can make to this challenge,” said John Graham, President & Chief Executive Officer. “Committing our portfolio and operations to net zero by 2050 will help us manage the risks, capture the opportunities, and deliver on our public purpose – to help generations of Canadians build financial security in retirement.”

This commitment is made on the basis of, and with the expectation that, the global community will continue to advance towards the goal of achieving net-zero GHG emissions by 2050. These advancements include the acceleration and fulfilment of commitments made by governments, technological progress, realization of corporate targets, changes in consumer and corporate behaviours, and development of global reporting standards and carbon markets, all of which will be necessary to help enable us to meet our commitment. CPP Investments is dedicated to staying ahead of these developments that will impact our portfolio’s path to net zero.

“Our commitment to achieving net zero by 2050 is aligned with how CPP Investments has been incorporating ESG considerations – in particular climate change – into our investment decisions for more than a decade,” said Deborah Orida, Global Head of Real Assets & Chief Sustainability Officer. “We believe the performance of our portfolio and the generation of long-term investment returns relies upon our ability to adapt to a global economy that is moving toward net zero.”

Fulfiling this net-zero commitment will be done in accordance with CPP Investments’ Climate Change Principles which are focused on a sophisticated, long-term approach:

1. Invest for a whole economy transition;
2. Evolve our strategy as transition pathways emerge and global standards for decarbonization materialize;
3. Exert influence to create value and mitigate risk;
4. Support a responsible transition based on our Investment Beliefs and expertise; and
5. Report on our actions, their impacts and our portfolio emissions.

This commitment follows significant advancements made by CPP Investments in 2021 including the appointment of the organization’s first Chief Sustainability Officer, the proposal of a reporting framework that guides companies to project their capacity to abate GHG emissions, and the launch of our investment approach focused on attractive opportunities to support the decarbonization of essential, high-emitting businesses.

The key point I stress is to achieve this goal, CPP Investments will invest more in green assets and it even states one of its goals is to increase its current investments in green and transition assets from $67 billion to at least $130 billion by 2030.

Clearly, Renewable Power Capital will figure prominently in this strategic goal and I expect that platform to grow considerably over the next decade, along with CPP Investments' Sustainable Energy Group.

Europe's renewable power opportunities are attractive right now for a lot of reasons:

• rule of law
• tight regulatory framework with clear rules on subsidies
• currency attractiveness as the euro is weak relative to the USD
• Policies promoting acceleration of energy transition to limit dependence on foreign oil and gas, namely that of Russia. 

Some of these factors (currency swings) are cyclical but others are structural and clearly Europe needs to do more to achieve energy independence as it transitions to net zero. 

Clearly, Renewable Power Corporation won't solve all of Europe energy needs (only nuclear energy will) but it's playing its part and this is a truly great platform for CPP Investments.

In other related news, RMZ Corp and CPP Investments announced a second commercial real estate joint venture in India:

RMZ Corp (“RMZ”), one of India’s largest privately-owned real estate owners, investors and developers, and Canada Pension Plan Investment Board (“CPP Investments”) announced today that they have entered into their second joint venture to develop and hold commercial office space in key cities across India.

The total aggregate capital commitment by CPP Investments into the joint venture will be up to INR 26.5 billion (C$ 449 million), to support the development and acquisition of projects across India.

Manoj Menda, Corporate Chairman, RMZ Corp said, “We are delighted to expand our relationship with CPP Investments. This joint venture will provide RMZ additional opportunities to forge new strategic financial co-investments and remain ahead of the curve whilst also significantly increasing capital allocation to the core and development asset portfolios. The two joint ventures together have been established to develop assets worth in excess of US$2.5 billion across cities. This partnership takes RMZ a step closer to our supercharge vision and growth strategy by 2032.”

The joint venture will be seeded with StarTech – a 1.37 million-square-foot Grade A office building located in Koramangala, Bangalore, which is currently co-owned by RMZ and Prestige Estates (“Prestige”). CPP Investments will acquire Prestige’s entire stake in StarTech. This is the second joint venture between RMZ and CPP Investments, following their first joint venture formed in 2021 to develop and manage approximately 10 million square feet of Grade A commercial office spaces across Hyderabad and Chennai.

Arshdeep Sethi, Senior Managing Director, RMZ Corp said, “We are pleased to broaden our relationship with CPP Investments, an organization that shares our commitment to protecting our environment and ensuring sustainabity in building and construction processes. This second joint venture builds on our existing partnership in Hyderabad and Chennai and reiterates RMZ’s strategic objective to expand the Group’s asset base and development pipelines across other cities.”

Hari Krishna V, Managing Director, Real Estate – India, CPP Investments, said, “We continue to identify high demand for premium commercial office space in top city locations in India, such as Bangalore. As the city grows as a destination for technology businesses and start-ups, we are working alongside market leaders, such as RMZ, to grow our portfolio to support the demand. Our overall focus remains to enhance our ability to deliver solid long-term risk adjusted returns to CPP contributors and beneficiaries.”

Spread across 8 acres, Star Tech is a LEED Platinum-rated green building and is a premium commercial campus with 100% occupancy.

About RMZ Corp

RMZ Corp is one of India’s largest privately-owned real estate owners, investors, and developers committed to building socially, economically, and environmentally responsible assets and communities.

The company’s Massive Transformative Purpose is to imagine, create and transform for the future. They own and operate a real asset portfolio of 67 million square feet, and are poised to grow to 350 million square feet of assets by 2032. They are amongst the only zero-debt real estate companies globally. Their innovative approach to developing and managing real estate invariably raises the industry’s bar for quality and sustainability. By taking a leap of faith and adapting to, and indeed embracing the digital universe, they are driving a sustained transformation program to deliver superior real assets with elevated member experiences.

RMZ currently owns US$12 billion worth of of real assets that are operational and under development. The organization plans to diversify into new asset classes such as Industrial, Logistics and Hospitality through new platforms and global partnerships. Additionally, the company plans to invest in and develop both brownfield and greenfield projects leveraging its strategic, development management and financial engineering capabilities, that will focus on adding value to and enhancing its development portfolios.

RMZ Corp has racked up many triumphs, and garnered many accolades – from curating the only development project from India to win the 2020 ULI Asia Pacific Awards for Excellence to being the first company globally to achieve a WELL Health—Safety Rating for Facility Operations and Management. The company has developed the largest portfolio of assets certified under LEED Arc, a building performance monitoring and scoring platform. RMZ Corp, today, ranks among the world’s flagship real estate firms.

The fact that CPP Investments is committing roughly half a billion Canadian dollars to this joint venture tells you they believe in India's commercial real estate market and think extremely highly of RMZ Corp which they know well and have already done deals with.

No doubt, RMZ Corp's expertise in developing energy efficient properties also factors into this decision and these large investments in energy efficient properties are part of the strategy to achieve net zero by 2050.

Another huge real estate deal announced recently is the $979 million multifamily joint venture with LMC:

Canada Pension Plan Investment Board (CPP Investments) and LMC, a wholly-owned subsidiary of Lennar Corporation (NYSE: LEN and LEN.B) and a leader in apartment development and management, have formed a new joint venture to develop Class-A multifamily residential communities across high-growth metropolitan areas in the U.S.

CPP Investments and LMC have allocated US$979 million in equity to the joint venture. CPP Investments will own a 96% stake and LMC will own the remaining 4%.

“This investment is an excellent opportunity to meet the strong demand for high-quality multifamily housing,” said Peter Ballon, Managing Director, Global Head of Real Estate, CPP Investments. “We are pleased to work alongside a best-in-class partner like LMC to continue to build our portfolio of multifamily investments, which we believe will deliver steady, long-term returns for the CPP Fund.”

The joint venture will focus on urban and suburban communities across major U.S. markets exhibiting strong population and job growth. It will also leverage LMC’s extensive development and construction expertise to build multifamily communities at an attractive cost basis, and benefit from LMC’s fully integrated development management, construction management, property management and investment management platforms.

The venture will launch with five seed assets: One in Boston, one in Miami and three in Denver, together totaling 1,371 apartment homes.

“This joint venture specifically targets high-growth markets where the housing supply hasn’t kept pace with renter demand, and we are proud to be part of the solution,” said Todd Farrell, President of LMC. “Our partnership with CPP Investments enables us to deliver on our mission to create extraordinary communities where people can live remarkably. We look forward to delivering on that vision with these five initial assets, as well as all future endeavors with CPP Investments.”

LMC launched in 2011 and is among the nation’s most active developers, builders and managers. LMC is currently the eighth largest U.S. developer, according to the National Multi-Housing Council’s (NMHC) annual Top 50 list and has been on the list for seven consecutive years. LMC has been recognized on the NMHC Top 25 Builder list for five consecutive years and ranked No. 15 in 2021. LMC has also closed two previous funds, including Lennar Multifamily Venture (US$2.2 billion) and Lennar Multifamily Venture II (US$1.3 billion).

About LMC

LMC, a wholly-owned subsidiary of Lennar Corporation (NYSE:LEN and LEN.B), is a multifamily real estate development and operating company with a diverse portfolio of institutional quality multifamily rental communities across the United States. As of November 30, 2021, LMC had a 42,000-home pipeline of communities ranging from operating to under pre-development that exceeds $16.4 billion of high-rise, mid-rise and garden apartments. LMC creates extraordinary communities where people can live remarkably.
www.LiveLMC.com

If you look at how tight the US and Canadian residential real estate markets are, these mutltifamily properties can't come soon enough.

What all these deals show me is CPP Investments is dead serious about developing great platforms with great partners from all over the world which share the same values as the organization on sustainable investing and more. 

One more deal worth discussing is CPP Investments announced the completion of the acquisition of McAfee, a leading consumer digital protection provider, alongside our investment partners Advent International, Permira and Crosspoint Capital Partners. Details are available here.

Lastly, in celebration of Black History Month which just passed, CPP Investments posted this on Linkedin worth noting:

This is an important conversation, one that all organizations need to have in order to address long-standing inequities.

Below, an older clip (2017) from the World Economic Forum on how Sweden plans to run entirely on renewable energy by 2040.

I also embedded a clip on building Nysäter wind farm, one of the biggest wind farms in Europe (just like it, nothing to do with OX2). 

Lastly, Jonathan McBride, now partner in Heidrick & Struggles’ Los Angeles office talking about diversity & inclusion two years ago when he was BlackRock's Global Head of Inclusion and Diversity.

Great stuff, remember, ESG is a lot more than just the "E", we need to talk more about the "S".