CPP Investments Sinks Another £300M Into Octopus Energy, Buys Huge Stake in Mortgage Portfolio
Canada Pension Plan Investment Board (CPP Investments) has backed Octopus Energy Group’s global expansion plan with a further £300m (€348m) commitment.
CPP Investments, which manages the assets of the C$576bn (€394bn) Canada Pension Plan, invested an initial $300m in December 2021 to help the renewable-energy specialist’s digital customer-services platform Kraken and boost its smart-grid capabilities. Last year it again backed Octopus Energy Group’s global expansion plan with a further $225m commitment.
The Canadian investor said the latest commitment increases its ownership of Octopus and is part of a funding round co-led by CPP Investments.
“This investment will support Octopus’ continued global growth, primarily through the deployment of Octopus’ technology platform, Kraken, and the furthering of renewable energy, heat pump and electric vehicle offerings,” CPP Investments said.
Bill Rogers, managing director and head of sustainable energies at CPP Investments, said: “CPP Investments backs leading companies across the energy transition with our flexible capital, global network and deep expertise – this follow-on investment in Octopus is an important example of this, while delivering attractive long-term, risk-adjusted returns to the CPP Fund.”
Earlier today, CPP Investments issued a press release stating it is committing an additional £300m (C$511m) to Octopus Energy Group and is co-leading the fundraising round :
London, UK, 18 December, 2023 – Canada Pension Plan Investment Board (CPP Investments) today announced it has committed an additional £300m (C$511m) to Octopus Energy Group (Octopus). This investment increases CPP Investments’ ownership of Octopus and is part of a funding round co-led by CPP Investments.
As a clean energy tech pioneer, Octopus is a significant leader in developing clean energy services and has an important role in the global energy transition. This investment will support Octopus’ continued global growth, primarily through the deployment of Octopus’ technology platform, Kraken, and the furthering of renewable energy, heat pump and electric vehicle offerings.
“Octopus plays an important role in the global energy sector, with its market leading customer proposition and pioneering technology platform”, said Bill Rogers, Managing Director, Global Head of Sustainable Energies, CPP Investments. “CPP Investments backs leading companies across the energy transition with our flexible capital, global network and deep expertise – this follow-on investment in Octopus is an important example of this, while delivering attractive long-term, risk-adjusted returns to the CPP Fund.”
Octopus is now the U.K.’s largest power retailer and globally serves 7.2 million retail customers. In addition, it manages renewable energy projects worth £6bn, including wind and solar farms in 16 countries and continues to invest in renewable energy projects. Octopus’ technology platform, Kraken, supports its own retail, generation and flexibility businesses and is licensed to other major energy players, as well as water companies, broadband providers, renewable generators and large-scale battery operators. Collectively Kraken is licensed to support 52 million accounts globally.
As of September 30, 2023 CPP Investments has committed C$32 billion to the global energy transition through its Sustainable Energies Group.
About Canada Pension Plan Investment Board
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 21 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 September 30, 2023, the Fund totalled C$576 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or on X @CPPInvestments.
There's is nothing surprising about this announcement, Octopus Energy is one of CPP Investments' most important investments in the energy transition space.
Octopus Energy has 10 businesses in 18 countries across 4 continents. They serve more than 7.2 million customers, over 40,000 business customers, with over 50 million contracted accounts for our entech platform, Kraken.
You can read their overview to learn more about them here.
As far as Kraken, their revolutionary tech platform, here is an overview:
Kraken is our revolutionary energy tech platform based on advanced data and machine learning capabilities, and built around the customer.
Kraken promotes a culture of customer centricity, grounded on delivering simple processes and straightforward interactions. Built around a scalable, cloud-based architecture running continuous deployments, Kraken’s ability to help teams innovate and accelerate is second-to-none.
Unlike most competitors, Kraken has been built specifically for the energy sector, automating much of the supply chain, and enabling previously unheard of levels of customer self-service. This in turn frees up time and resources, resulting in outstanding service and efficiency.
Kraken has been licensed to support over 50 million accounts worldwide, through deals with EDF Energy, Good Energy, E.ON energy and Origin Energy. We plan to exceed 100 million accounts on the platform by 2027.
For more information, contact bd@krakentechnologies.ltd.
As Bill Rogers, Managing Director, Global Head of Sustainable Energies, CPP Investments states:
“Octopus plays an important role in the global energy sector, with its market leading customer proposition and pioneering technology platform. CPP Investments backs leading companies across the energy transition with our flexible capital, global network and deep expertise – this follow-on investment in Octopus is an important example of this, while delivering attractive long-term, risk-adjusted returns to the CPP Fund.”
As I said above, not surprised in the least about this follow-on investment in Octopus Energy.
In related news, CPP Investments, Blackstone and Rialto acquired a 20% equity stake in the venture which holds approximately $17 billion senior mortgage loan portfolio retained in receivership following the failure of Signature Bank:
NEW YORK, MIAMI, WASHINGTON and TORONTO, December 14, 2023 – Blackstone Real Estate Debt Strategies (“BREDS”), Blackstone Real Estate Income Trust, Inc. (“BREIT”), Canada Pension Plan Investment Board (“CPP Investments”) through its subsidiary CPPIB Credit Investments III Inc., and funds affiliated with Rialto Capital (“Rialto”) today announced that they have entered into a newly formed joint venture with the Federal Deposit Insurance Corporation (“FDIC”) and acquired a 20% equity stake for $1.2 billion in the venture which holds a $16.8 billion senior mortgage loan portfolio retained in receivership following the failure of Signature Bank. The FDIC is maintaining an 80% ownership stake in the venture and provided financing equal to 50% of the venture’s value.
The commercial real estate loan portfolio comprises more than 2,600 first mortgage loans on retail, market rate multifamily and office properties primarily located in the New York metropolitan area. The loans are predominantly performing and encompass a wide range of credit profiles. Approximately 90% of the loans are fixed rate with low in-place coupons and strong in-place debt service coverage.
Jonathan Pollack, Global Head of Blackstone Real Estate Credit, said, “We are excited to invest in this compelling, large-scale opportunity on behalf of our BREDS and BREIT investors. Blackstone’s extraordinary real estate insights and credit expertise positioned us to underwrite approximately $17 billion of senior mortgage loans, allowing us to acquire the entire commercial real estate loan portfolio at an attractive basis. We look forward to working with our borrowers and our partners to maximize the potential of these assets.”
Geoffrey Souter, Managing Director, Head of Real Assets Credit at CPP Investments, said, “The current real estate credit market is a promising source of long-term returns for the CPP Fund and we look forward to exploring further opportunities to invest in this and other capital-constrained sectors. This opportunity builds on our longstanding partnership with Blackstone and is a testament to CPP Investments’ expertise in real estate credit, demonstrating our ability to transact quickly and at scale.”
Jay Mantz, President of Rialto Capital, added, “We are incredibly excited to invest in this historic opportunity with two of the most preeminent global investors, Blackstone and CPP Investments. The Rialto team has managed loans through multiple CRE market cycles, and we look forward to working with our partners to maximize value for all stakeholders.”
Blackstone will be the lead asset manager of the portfolio and Rialto Capital will act as the loan servicer and operating partner. Blackstone is the largest owner of commercial real estate globally and has originated or acquired more than $170 billion of real estate loans and securities since the inception of its real estate credit business. Rialto Capital has oversight of over $100 billion of commercial real estate loans and has experience managing public private partnerships.
CPP Investments invests in both public and private credit and credit-like products globally, leveraging its ability to provide scale, certainty of assets and a long investment horizon. As of September 30, 2023, CPP Investments’ credit portfolio totaled C$75 billion, including investments across corporate, consumer and real assets credit along the rating spectrum.
Advisors
Jones Lang LaSalle served as real estate advisor to Blackstone, CPP Investments and Rialto Capital. Simpson Thacher & Bartlett LLP; Gibson, Dunn & Crutcher LLP; Ropes & Gray LLP; Davis Polk & Wardwell LLP and Bilzin Sumberg Baena Price & Axelrod LLP served as legal advisors.
About Blackstone Real Estate
Blackstone is a global leader in real estate investing. Blackstone’s real estate business was founded in 1991 and has US $332 billion of investor capital under management. Blackstone is the largest owner of commercial real estate globally, owning and operating assets across every major geography and sector, including logistics, residential, office, hospitality and retail. Our opportunistic funds seek to acquire undermanaged, well-located assets across the world. Blackstone’s Core+ business invests in substantially stabilized real estate assets globally, through both institutional strategies and strategies tailored for income-focused individual investors including Blackstone Real Estate Income Trust, Inc. (BREIT), a U.S. non-listed REIT, and Blackstone’s European yield-oriented strategy. Blackstone Real Estate also operates one of the leading global real estate debt businesses, providing comprehensive financing solutions across the capital structure and risk spectrum, including management of Blackstone Mortgage Trust (NYSE: BXMT).
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 21 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 September 30, 2023, the Fund totalled C$576 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or on X @CPPInvestments.
About Rialto Capital
Rialto is a fully integrated real estate investment and asset management platform with a dedicated commercial real estate servicer. With $15.9 billion of assets under management as of September 30, 2023 and oversight of over $100 billion of real estate loans as named special servicer, Rialto invests and manages assets throughout the capital structure in real estate properties, loans, and securities. The company is headquartered in Miami, FL with offices in New York City, Santa Monica, and 9 other locations across the US. For more information, please visit rialtocapital.com.
Cautionary Note Regarding Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward -looking terminology such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “identified,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates”, “confident,” “conviction” or other similar words or the negatives thereof. These may include financial estimates and their underlying assumptions, statements about plans, objectives, intentions, and expectations with respect to positioning, including the impact of macroeconomic trends and market forces, future operations, repurchases, acquisitions, future performance and statements regarding identified but not yet closed acquisitions. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. These factors include but are not limited to those described under the section entitled “Risk Factors” in BREIT’s prospectus and annual report for the most recent fiscal year, and any such updated factors included in BREIT’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein (or in BREIT’s public filings). Except as otherwise required by federal securities laws, BREIT undertakes no obligation to publicly update or revise any forward -looking statements, whether as a result of new information, future developments or otherwise.
What is this all about? Quite simply, US regional banks imploded and they were the largest lenders to commercial real estate, so when some regional banks like Signature imploded earlier this year, it offered huge opportunities for distressed debt investors.
For example, back in September, Bloomberg reported Marathon was bidding on Signature Bank's real estate portfolio:
The biggest opportunity in the distressed debt space right now is in commercial real estate, according to Bruce Richards, chief executive officer of Marathon Asset Management.
The New York-based global credit manager with about $20 billion in capital management will be bidding on Signature Bank’s $33 billion commercial real estate loan portfolio, which is comprised primarily of multifamily properties in New York City, Richards said in an interview with Bloomberg Television on Monday. The Federal Deposit Insurance Corporation launched the marketing process for the portfolio on Sept. 5.
“There’s lots of product coming out of the banks. Jamie Dimon is right — don’t buy the banks is a theme,” Richards said. “It’s not only stricter regulations, but it’s the higher loan loss provisions that are going to go through with the higher rates. They’re really impacting the consumer, businesses and real estate.”
Lower-rated businesses are also an attractive opportunity right now, according to Richards, who is looking for “good operating businesses with good cash flow in place that just have high debt cost service.”
With thousands of mid-sized businesses facing mounting pressures, opportunities to step in and provide capital are around the corner, Richards said.
He reiterated his call from earlier this year that the market was in a “golden era of credit,” noting the high rates of return for making investments. With the private equity market sitting on over $1 trillion of “dry powder,” Marathon is waiting for more market dislocations to deploy some of its side-lined capital, he said.
“The real dislocation hasn’t quite happened yet,” Richards said. “But it’s in the process of happening, we believe.”
It was in early September that Reuters reported the FDIC was seeking to sell off portions of Signature, one of three larger banks that failed in the spring, since the bank was closed in March after an exodus of depositors seeking higher returns and safer institutions.
Not surprisingly, Blackstone became the lead bidder for these assets so Blackstone Real Estate Income Trust, Inc. (“BREIT”), CPP Investments through its subsidiary CPPIB Credit Investments III Inc., and funds affiliated with Rialto Capital (“Rialto”) all got a chunk of those distressed CRE loans from Signature Bank for a bargain and they will hold these assets on their book and sell them when the cycle turns.
A few Canadian pension funds (namely PSP) did the same thing back in 2008, seizing loans for pennies on the dollar and made great returns back then.
Notice Blackstone chose CPP Investments as its partner because of its size and sophistication.
This deal is all about scale, you need a partner with deep pockets and strong credit knowledge to take over these loans and CPP Investments was always upfront hat it was looking to pick up distressed commercial real estate loans from the regional bank fallout.
Alright, let me wrap it up there.
Below, in an exclusive studio interview from the World Utilities Congress 2023, Julian Walker sat down with Greg Jackson, Founder & CEO, Octopus Energy to talk about how its Kraken platform, which powers 30 to 40 million accounts in global energy, acts as an operating system for energy and helps unleash the power of renewables during the energy transition.
Jackson also provides an update on Xlinks the renewable energy project it is backing alongside UAE's TAQA in Morocco. Finally, he touched on the recently unveiled partnership with Masdar who will be using the company's Kraken platform.
And four weeks ago, Bloomberg learned that Blackstone Inc. is the frontrunner to win a portfolio of commercial-property loans of failed lender Signature Bank. Su Keenan reports on Bloomberg Television.
Comments
Post a Comment