Summer Break and Latest News from AIMCo, CPP Investments, CDPQ, and More
First, CPP Investments, AIMCo and Manulife announced they will increase their commitment to BAI Communications to support acquisition-led growth plans. You can read the full press release for details and I note the following:
“CPP Investments sees significant opportunities as global digital infrastructure develops in scope and complexity, driven by consumer demand for connectivity and rapidly-growing data rich content,” said Scott Lawrence, Managing Director and Head of Infrastructure, CPP Investments. “As a leading provider in the space, BAI is very well placed to capture these market opportunities, and we believe our increased financial commitment to BAI will continue to generate long-term and sustainable returns on behalf of the CPP’s contributors and beneficiaries.”
Since 2009, CPP Investments has been a majority shareholder in BAI (with an 86% position) and has committed approximately C$3 billion to the BAI platform, with AIMCo as a minority investor. In the fourth quarter of 2021, Manulife Investment Management, on behalf of its clients, partnered with BAI to acquire a minority interest in its digital infrastructure assets in the United States.
“AIMCo is proud to support BAI in its agreed acquisition of ZenFi Networks, a recognized innovator in the provision of digital infrastructure solutions, on behalf of our clients,” said Ben Hawkins, Head, Infrastructure, Renewables & Sustainable Investing, at AIMCo. “The demand for these solutions in the United States shows no signs of slowing. This latest transaction is the realization of BAI’s management team positioning the company for sustainable growth. We are pleased to have this opportunity to partner with CPP Investments and Manulife Investment Management to drive long-term value.”
“We continue to see strong tailwinds for the digital infrastructure sector with increased mobile and fixed data usage requiring considerable investment in communications infrastructure to enabling better connectivity,” said Daniel Neil, Director, Infrastructure Investments, Manulife Investment Management. “Manulife Investment Management is pleased to support the growth of BAI’s platform. We believe that the agreed acquisition of ZenFi strengthens BAI’s position as an innovator of digital infrastructure in the United States.” The ZenFi transaction is subject to customary regulatory clearances and is expected to close in the fourth quarter of the calendar year.
Digital infrastructure is critically important and a function of increased mobile and fixed data usage and CPP Investments has led the way on the BAI platform:
Since 2009, CPP Investments has been a majority shareholder in BAI (with an 86% position) and has committed approximately C$3 billion to the BAI platform, with AIMCo as a minority investor. In the fourth quarter of 2021, Manulife Investment Management, on behalf of its clients, partnered with BAI to acquire a minority interest in its digital infrastructure assets in the United States.
Next, AIMCo and Railpen announced they will acquire a 94% stake in Constantine Energy Storage:
Alberta Investment Management Corporation, (“AIMCo”), on behalf of some of its clients, and Railpen – the investment manager responsible for managing over £37 billion AUM on behalf of several pension schemes – have jointly acquired a 94% percent stake in Constantine Energy Storage (“CES”). CES, a grid-scale battery energy storage platform supporting the energy transition, will invest more than £400m to build out a pipeline of battery energy storage projects in the UK. These projects form an important part of the UK’s plans to transition to net-zero and are currently under development by Constantine Group subsidiary Pelagic Energy Developments.
Ben Hawkins, Head of Infrastructure, Renewables and Sustainable Investing at AIMCo, said: “The acquisition of CES is an ideal fit for our growing global portfolio of high-quality infrastructure assets. Grid-scale batteries are a critical enabler of the UK energy transition, and the country’s net-zero ambitions. We look forward to leveraging our deep asset expertise, working closely with the management team to build and grow this business that will support Britain’s energy needs and transition over the long term.”
Lewis Vanstone, Investment Director at Railpen, said: “We are delighted to acquire a significant stake in CES, as part of our commitment to investing in innovative assets that grow our members’ capital over the long term. This acquisition marks Railpen’s first direct investment into battery storage and reflects our ambition to drive positive change through our portfolio, working with management to develop the critical infrastructure needed to support the UK’s transition to net zero. Railpen’s scale and long-term approach makes us an ideal partner for CES’s ambitions to improve battery energy storage capabilities and enhance energy security.”
Graham Peck, Investment Director at Constantine said: “Constantine Group has a long track record of developing and managing renewable energy platforms. During this time we have seen increasing deployment of renewable energy projects creating a large market opportunity and inherent infrastructure demand for energy storage. Through our subsidiary Pelagic Energy, CES has a robust project pipeline of large and well located battery projects, which are deliverable in the near term, and thus provide a secure pipeline of best-in-class assets. We look forward to working with AIMCo and Railpen in building this platform, and in so doing enabling and enhancing the production of renewable energy in the UK.”
I think Ben Hawkins, Head of Infrastructure, Renewables and Sustainable Investing at AIMCo, states it well: “The acquisition of CES is an ideal fit for our growing global portfolio of high-quality infrastructure assets. Grid-scale batteries are a critical enabler of the UK energy transition, and the country’s net-zero ambitions. We look forward to leveraging our deep asset expertise, working closely with the management team to build and grow this business that will support Britain’s energy needs and transition over the long term.”
Investing in the transition economy is increasingly where the focus will be among Canada's large pension investment managers and that goes for AIMCo and others as well.
Third, SNCF and DWS have begun exclusive negotiations with CDPQ on the proposed sale of Akiem:
Following a competitive auction process, Akiem shareholders have agreed to enter into exclusive negotiations with CDPQ on the proposed sale of Akiem, a leading provider of freight locomotive leasing services in France and Europe.
With revenues of nearly EUR 220 million, EBITDA of around EUR 150 million in 2021, a fleet of over 600 locomotives, 46 passenger trains and some 250 employees, Akiem is a European leader in locomotive leasing and maintenance. Headquartered in France with 7 international offices, Akiem provides local expertise to over 80 customers in 21 countries. The company has the largest fleet on the continent, of which 75% is electric, a share that is expected to increase in the coming years.
CDPQ’s offer is subject to the customary consultation with employee representative bodies within the SNCF Group and Akiem. In addition, this transaction is subject to the approvals of certain competition authorities.
Emmanuel Jaclot, Executive Vice President and Head of Infrastructure at CDPQ, states: “CDPQ is thrilled to acquire Akiem, a major European player in the rail sector, and is looking forward to working with its team to bring the company to the next stage of its growth. Akiem’s size and positioning across the entire value chain, including maintenance, give it a significant competitive edge to benefit from the expected growth in the locomotive leasing market across Europe. With three quarters of its fleet already operating on electricity, Akiem offers a sustainable response to the challenges of decarbonizing transport – a solution that appealed to us from the start.”
Laurent Trevisani, Deputy CEO Financial Strategy, SNCF Group, adds: “This plan to sell Akiem is fully in line with SNCF Group’s strategy to become a global leader in sustainable mobility for people and merchandise, with the rail industry as a core business and two strategic assets: GEODIS and KEOLIS. Once the definitive agreements are concluded, this transaction will provide financing for our core activities and the Group’s future growth while accelerating debt reduction. It also provides Akiem with the backing of a long-term partner and ensures the continued operations of this company, which will remain a business partner of SNCF. We would like to thank the Akiem teams for their involvement over the past few years and will continue to support them in the various stages of this project.”
Hamish Mackenzie, Head of Infrastructure at DWS, says: “Since becoming a shareholder of Akiem in 2016, DWS has supported management’s strategic growth ambitions through its active asset management approach combined with the rail expertise of its partner, SNCF. Akiem’s success during our investment reflects the quality of its management team and their unrivalled track record in the European locomotive leasing market, as well as the quality of our long-term partnership with SNCF. We wish Akiem and its teams every success in this project.”
Fabien Rochefort, CEO, Akiem group, affirms: “This acquisition is a new step following a very successful collaboration between Akiem and its shareholders, SNCF and DWS. We are delighted with CDPQ’s commitment, which will allow Akiem to continue investing in support of its long-term growth in the European locomotive and passenger train leasing markets. As rail operators face rising demand for more environmentally friendly transportation in a complex environment, Akiem is providing its customers with rolling stock that is sustainable, solid and reliable. We intend to continue innovating and developing our operational and industrial expertise to benefit our customers.”
Akiem fits perfectly into CDPQ's infrastructure investments where they are looking to decarbonize transport.
Emmanuel Jaclot, Executive Vice President and Head of Infrastructure at CDPQ, states it well: “CDPQ is thrilled to acquire Akiem, a major European player in the rail sector, and is looking forward to working with its team to bring the company to the next stage of its growth. Akiem’s size and positioning across the entire value chain, including maintenance, give it a significant competitive edge to benefit from the expected growth in the locomotive leasing market across Europe. With three quarters of its fleet already operating on electricity, Akiem offers a sustainable response to the challenges of decarbonizing transport – a solution that appealed to us from the start.”
All these deals above are impressive and show you how Canada's large pension funds are very much focused on capitalizing on long-term secular trends through strategic investments.
In my absence, I invite you to read the latest pension news here from the Maple Eight:
- AIMCo's latest news here
- BCI's latest news here
- CDPQ's latest news here
- CPP Investments' latest news here
- OMERS' latest news here
- OTPP's latest news here
- PSP Investments latest news here
- HOOPP's latest news here
There are others and I am tracking all of them including CAAT Pension Plan where Derek W. Dobson, CEO and Plan Manager wrote an excellent piece on The Social Value of Pensions which you can read here and below:
All over the world, citizens, investors and politicians are calling on corporations to demonstrate that business is about more than just the bottom line. They are holding corporations accountable for the well-being of our society and planet, ensuring that a commitment made will be a commitment kept.
In the pension industry, the commitment to look after our larger responsibilities falls under Responsible or Sustainable Investing initiatives, which outline the integration of Environmental, Social and Governance (ESG) factors into investment decision making. As ESG increasingly becomes a household term, employers can enhance their social contributions, or ‘S’ pillar of ESG, by recognizing the social value of offering their employees sustainable retirement savings programs.
The social or ‘S’ pillar refers to the social value that a company’s products and services provide and the effects of its behaviour concerning social issues. The concept is built on the truth that a business can make a wider contribution to society through its products, the benefits it provides its staff, and its actions in local communities.
Social value refers to the quantitative and qualitative
contributions that a business makes to society. It serves as a
framework to measure the impact of a company’s activities
in improving the quality of life of people.
By design, pensions reflect a responsible, long-term investment in the well-being and financial security of workers and can be considered one of the key drivers of the ‘S’ pillar. Today, Canadians of all demographics and, more recently, all sectors have access to retirement security (with DB plans like CAAT Pension Plan open to Canada’s private and non-profit sectors, and OPTrust to the Ontario non-profit sector). The pension industry’s efforts to improve workplace access to affordable plans is an advantage for all of Canada with broader societal benefits.
A growing body of research has found that pensioners rely less on social assistance programs and enjoy more financial security to live independently as seniors. This in turn helps to protect the country’s social security, health care, and talent systems – a long-term outcome that is good for workers, businesses and Canada overall.
I and the CAAT team have long said that sustainable pensions and the lifetime retirement income they provide improve the quality of life for retirees, employees, and their families and networks. Why are more stakeholders recognizing the social value of pensions now? Because, amid headlining market volatility and inflation, Canada is facing a retirement savings crisis that is in need of a solution.
Retiring at a Time of Rising Health Care and Living Costs
The vast majority of Canadians are not saving enough for retirement and are at risk of outliving their savings. Most Canadians save for retirement without fully knowing the true cost of health care and living comfortably in retirement. A study commissioned by the Canadian Public Pension Leadership Council shows that those without any workplace pensions have a median savings of just over $3,000. On average, 70% of Canadians are worried that they aren’t saving enough for retirement and 62% are concerned they will outlive their retirement savings.
Workers who depend on CPP/QPP and OAS to supply their retirement income often don’t realize until they have already entered retirement that these programs are meant to cover basic living expenses only, not the quality of life that many may wish or expect to live in retirement. Now, amid of market uncertainty, geopolitical risks, rising living and health care costs, the outlook is even more concerning for those without a secure and sustainable retirement income plan with cost-of-living adjustments.
The good news is that Canadians are living longer on average – a typical Canadian retiree should plan for a retirement of more than 30 years – yet the longer somebody lives, the higher their healthcare and living costs become later on in life.
The average per-person spending on health care for
Canadians aged 64 and below is $2,700. The average
per-person spending on Canadians aged 65 and over?
More than four times higher at $12,000.
According to the Canadian Medical Association, seniors now outnumber children for the first time in Canada’s history. By 2056, a third of the population will be 65 and older. The demographic shifts have already had a significant impact on the health care system. When you add it up, seniors currently make up one-fifth of the population, yet they account for nearly half of all health care spending.
The Pension Solution for Canada’s Aging Population
Pensions improve security for one of society’s most vulnerable populations, seniors, and generate social and economic good for all Canadians. A study conducted by the Canadian Centre for Economic Analysis (CANCEA) found that every $10 that a pensioner receives generates $16.72 in economic activity for the country, driving $82 billion in national GDP. That is slightly higher than the GDP of Saskatchewan, or Nova Scotia and Newfoundland combined.
In rural and urban communities across Canada, pension spending supports 877,100 local jobs, and 55,500 mostly small businesses and businesses that employ young workers, a workforce demographic that is vital as the country recovers. Spending from benefits paid contributed $21 billion in government revenue, which can then be spent to support government services aimed at improving the quality of life.
Other studies conducted by CANCEA in Ontario found that pensioners are more active in their communities, are more prone to charitable giving, and enjoy higher satisfaction with their health. In fact, the study found that 90% of retired members attribute higher life satisfaction to being part of a DB pension plan.
Across all four areas that drive satisfaction with life – financial
security, mental and physical health, community involvement
and leisure, and reduced stress – the certainty of stable
retirement income paid for life was a differentiating driver.
As many of us with children or aging parents have contemplated, financial security for seniors can drastically reduce the stress and burden on families and personal caregivers. Not only do pensioners enjoy a less stress in their working years by not needing to worry as much about their retirement savings as many Canadians without a plan do, but they are also better equipped to live financially independent lives in retirement. This takes the burden off their family and makes aging in place, affording prescriptions and maintaining a healthy lifestyle easier to achieve.
Seniors that are financially secure typically enjoy better health and rely less on social and income assistance programs. To better manage impending demographic shifts and downstream costs, Canada needs a comprehensive aging strategy that includes a strong and efficient workplace pension system as a core pillar.
Pensions are an investment in the well-being and longevity of Canadians, which provide a social value that plan sponsors and participating employers can take pride in. All of Canadian society is a beneficiary of a widely accessible pension system, within which CAAT is proud to be a provider. Sharing the tangible economic benefits and tangential social benefits of pensions that improve the lives of all Canadians – as workers, as taxpayers, and as future retirees – expands the avenues that businesses can take to build a more sustainable future.
I'll give the last word to Derek Dobson because he writes very eloquently and passionately on a subject he knows all too well.
I completely agree with him, Canada needs a comprehensive aging strategy that includes a strong and efficient workplace pension system as a core pillar.
Leaving people out to dry as they age and become more vulnerable is a policy for disaster, one that will end up costing us a lot more over the long run.
I often go over pension investments but I always emphasize pensions are about keeping a promise to workers and retirees. That's what they are all about, securing the retirement of contributors and beneficiaries so they don't have to worry about outliving their savings during their golden years.
Alright, let me end it there as I need some time to rest and recharge.
I thank all of you who support this blog, it's greatly appreciated and if you need to reach me, please email me. I'll be back on Monday August 15th.
Below, Jeremy Siegel, professor of finance at the University of Pennyslvania's Wharton School of Business, joins CNBC's 'Squawk Box' to provide a market outlook on the first trading day of August. Lots of interesting insights here and whether or not you agree with him, he raises many good points.
Still, it remains to be seen whether the Fed pivot is for real or just a pipe dream. Risk-On trades performed very well last month led by big tech and small caps as long bond yields declined but the jury is still out on the Fed pivot and many skeptics just don't buy it. Anyway, that's what makes a market!
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