PSP's Head of Infrastructure to Run New Canada Growth Fund

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Murad Hemadi of The Logic reports PSP Investments infrastructure head to run new $15B Canada Growth Fund:

A top infrastructure executive at the Public Sector Pension Investment Board has been appointed to lead the federal government’s new $15-billion Canada Growth Fund, The Logic has learned. 

Patrick Charbonneau—previously the pension plan’s global head of infrastructure investments—will lead the Canada Growth Fund (CGF), according to two sources with knowledge of the appointment. 

The Logic agreed not to name the sources because the move has yet to be publicly announced.

Ottawa proposed the CGF in the April 2022 budget, positioning it as a way to close an annual shortfall of up to $125 billion in climate spending needed to reach the country’s goal of net-zero emissions by 2050. The program will offer financing and guarantees for cleantech companies and decarbonization megaprojects in a bid to attract further private capital.

In March, Ottawa announced it would outsource management of the program to PSP Investments, a Crown corporation that handles $243.7 billion in federal public servants’ retirement savings.

PSP Investments did not provide comment by deadline.

The CGF is part of the Liberal government’s response to the US$369-billion U.S. Inflation Reduction Act, which officials worry could draw investment and projects to the U.S. at Canada’s expense. Ottawa has already been forced to up its subsidies for EV battery plants, while energy firms are being courted to move carbon capture builds across the border.

The federal government hopes its new fund will move projects into gear and attract follow-on private capital by providing financing on favourable terms, taking a smaller share of profits when projects succeed and underwriting more of the costs if they underperform. It could buy equity in or debt from firms; act as a limited partner backing other funds; commit to paying for set volumes of captured carbon, hydrogen and other cleantech production; and issue price guarantees.

Ottawa outsourced the CGF to PSP Investments to tap into private-sector deal making experience and quickly begin deploying capital. “PSP has a large stable of very good investors,” a senior government official told reporters during the March budget lockup, noting the fund needs such expertise to deliver on its objectives. (Finance Canada conducts such briefings on the condition that participating bureaucrats not be named.) The CGF “will begin investing in the first half of 2023,” the budget promised. It has yet to do so.

Charbonneau joined PSP Investments in May 2006 as a senior analyst in its infrastructure practice, just as it was beginning to put money into the asset class. In May 2017, he was one of four executives chosen to lead the pension fund’s new European team, based in London.

PSP Investments had $29.4 billion in infrastructure assets at the end of March, with European and Canadian holdings accounting for 37.6 per cent and 7.2 per cent of the total, respectively. The division’s five-year returns outstripped those of the firm’s real estate and natural resources units but trailed its private equity portfolio.

Since Charbonneau was named head of infrastructure, PSP Investments has acquired significant stakes in Havfram, an Oslo-headquartered firm servicing offshore wind farms; Radius, a Philadelphia-based telecom leaseholder; and Spark Infrastructure, an electricity transmission company headquartered in Sydney, Australia.

The CGF was officially incorporated in December 2022 as a subsidiary of the Canada Development Investment Corporation (CDEV), a Crown corporation that holds the federal government’s stakes in the Trans Mountain pipeline and Hibernia oilfield. Ottawa will sign an investment management agreement with PSP governing how it runs the fund. CDEV did not provide comment by deadline.

So, Patrick Charbonneau, Senior Managing Director and Global Head of Infrastructure at PSP Investments will now be the new head of the federal government’s new $15-billion Canada Growth Fund.

Even though he joined PSP back in May 2006 right before I left, I never met Patrick.

Bruno Guilmette, the head of Infrastructure back then who is now CFO of Boralex, hired Patrick as a senior analyst and since then he has taken on progressively senior roles. 

He recently took over Infrastructure after CEO Deb Orida appointed Patrick Samson to the position of Senior Vice President and Global Head of Real Assets Investments (Real Estate, Natural Resources and Infrastructure). 

PSP has not commented on the story and I am not one to speculate.

To be fair to PSP, they haven't even signed an investment management agreement with the federal government on how to run the new fund.

There are a lot of details left to iron out and as we all know, the devil is in the details.

It takes time to iron all this out but let me reiterate, it is unquestionably a good thing that PSP was asked to run the $15-billion Canada Growth Fund.

Before joining Hydro-Quebec as its new CEO, Michael Sabia was deputy minister of finance at Finance Canada and he testified at a senate hearing explaining why PSP was chosen.

Michael cited two main reasons:

  1. First and foremost, PSP Investments has a lot of expertise and is able to scale up these investments quickly.
  2. Second, he said they learned a lot of lessons with the creation of the Canada Infrastructure Bank, namely, it took a lot of time and "they lost a lot of time creating it." 

Expertise, scale and expediency were all critical reasons as to why PSP was chosen to run this fund.

Now, I understand there will be some governance issues that need to be set and that some members will be worried to see Patrick Charbonneau leave his post as head of Infrastructure.

I'm not as worried. At the end of the day, they have a team of senior people who can take over his duties as head of Infrastructure and they needed to place someone they trust as the new head of the important new growth fund.

Patrick has extensive experience, he knows all about cleantech and accelerating technological disruption across the infrastructure sector:

I'm sure he and his team have seen their share of investments that were interesting technological innovations but too small to invest at PSP's Infrastructure group.

Now they can start slowly scaling into these innovative investments to build out the Canada Growth Fund and accelerate Canada's decarbonization strategy.

It takes time to do this properly and the success of this new fund will have to be measured over many years, if not decades.

But don't kid yourselves, there are big deals on their way in Canada, and this new fund will likely take part in many of them, especially decarbonization mega projects like large scale battery plants.

Once the details are ironed out, Patrick Charbonneau and his team will be very busy meeting with cleantech entrepreneurs and helping to finance large mega projects to decarbonize Canada.

In the meantime, PSP Investments has a very clear mandate and these markets will keep them very busy over the next five years.

In my opinion, there's way too much media attention on this new Canada Growth Fund, let them do their thing, it takes time, preparation and planning to set this new fund up right.

And as I keep saying, they can't bungle it up or allow themselves to get too distracted and not deliver on their mandate for their members.

That is another reason why they placed Patrick Charbonneau there but he has to start hiring experienced people who can help him deliver and also go to Ottawa and deal with PSP's stakeholders and reassure them (not easy as I only know one person who can do this properly).

Anyway, I wish Patrick Charbonneau and his new team a lot of success and will let them set up the right foundations, it takes time but I'm confident they will do a great job.

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