BCI's Infra Team Eyes 'Transaction-Rich' Europe For Growth
Canadian pension fund BCI aims to substantially increase the share of European assets in its infrastructure portfolio, as it continues to look abroad for expansion.
British Columbia Investment Management (BCI) is likely to increase its infrastructure investment in Europe by 50% over the next five years, in line with its broader strategy to grow its overall infrastructure portfolio by 60% by 2030.
BCI sees Europe as “a transaction-rich environment” with many nameplate infrastructure assets available for acquisition. It aims to increase the share of European assets to between 25% and 30% of its infrastructure portfolio – up from 21% today.
The firm set the stage for this European expansion with the opening of its London office in 2023. The office, which currently has 10 staff members, is expected to grow as BCI continues to build its investment footprint in the region.
BCI manages the investments of a number of public-sector pension and insurance funds in British Columbia. “As their long-term targets for the asset class continue to increase, we anticipate remaining a very active investor in the market,” says Jerry Divoky, senior managing director of infrastructure and renewable resources at BCI.
Divoky notes that, historically, BCI’s infrastructure programme has delivered strong returns with relatively low risk – it has been designed to deliver stable performance through different market cycles and events.
BCI’s C$32.2bn (€19.8bn) infrastructure portfolio has delivered an approximate 5% yield. “Half of our return over the last decade has effectively come from yield, and the other half from capital appreciation,” Divoky explains. “Significant capital comes back to us as yield, which we can then redeploy.”
The portfolio is primarily comprised of regulated utilities – including gas, power and water – which account for 40% of assets. Renewable resources such as timber and agriculture comprise 20%. Transportation and GDP-sensitive assets and renewable energy each account for 10%, digital/telecommunications 5%, and the balance is allocated to other assets.
At 5%, BCI’s exposure to digital infrastructure remains modest compared with some of its peers. Divoky says: “The anchor in our portfolio has always been core infrastructure – regulated utilities or highly contracted assets. Even though this space has become more competitive, we remain interested.”
Even so, BCI sees strong potential in digital infrastructure. “We remain focused on digital infrastructure opportunities, as many investors are. It is a sector with strong thematic tailwinds,” Divoky says. So far, BCI has mainly participated in digital through the debt markets.
Opportunistic approach
BCI has a wide investment scope and acquires assets opportunistically. In June, it bought a minority stake in Pinnacle Towers, the largest telecom tower platform in the Philippines, from KKR. The acquisition bolstered BCI’s existing telecom tower investment in Altius in partnership with Brookfield. “India is experiencing a tremendous expansion in data and telecommunications,” Divoky says.
Altius combines telecom tower and related infrastructure assets previously held by Summit Digitel, Crest Digitel, and American Tower Corporation’s Indian operations. The latter was acquired last September, giving the partners ownership of 257,000 telecom sites, making it the largest tower portfolio in India and the largest platform globally outside of China.
Divoky also highlights that a repricing in the renewable power sector is creating attractive new investment opportunities that are in focus in North America as well as Europe.
In June, BCI and Macquarie Asset Management acquired Renewi, a European industrial waste recycling business, in a deal valued at £707m (€816m).
“Waste is an area we’ve found quite attractive over the years,” Divoky says. “We just hadn’t found the right kind of business until now. Renewi focuses on commercial and industrial waste and holds a commanding position in Belgium and the Netherlands.”
BCI generally pursues a buy-and-hold strategy but will occasionally make strategic exits. One such divestment was its sale of US assets owned by Global Container Terminals (CGT). “We didn’t feel we could manage terminals on both coasts of the US effectively or generate significant synergies,” says Divoky. BCI, which co-owns GCT with IFM Investors and Ontario Teachers’ Pension Plan, is now focused on terminals in Vancouver.
Regarding trade tensions, Divoky remains unfazed: “So far, we’ve experienced strong trade volumes. Negotiations are ongoing and will eventually settle. If there is any shift in trade-related infrastructure, it will happen over decades.”
Already, 90% of BCI’s infrastructure assets are located outside of Canada. Given the limited size of the domestic market, Divoky expects international assets to remain the main driver of growth.
Privatisation potential
There is, however, a potential shift on the horizon. Under the Liberal government led by Mark Carney, Canada is exploring private capital participation in infrastructure to address budgetary challenges.
“But investable opportunities in Canada for large-scale brownfield operating infrastructure are relatively modest,” Divoky says. “We hope that changes going forward. Canada’s Federal Government and Provinces still own airports and most utilities. There’s tremendous potential for the government to privatise these assets, realise capital, and reinvest in greenfield projects that support GDP growth.”
Divoky adds that BCI has deployed capital effectively in the US over the years. “We’re still very interested in the US market, but with the current geopolitical climate, we’re being a bit more cautious,” he says.
“We’d also like to deploy more capital in Australia but, as with Canada, quality opportunities are scarce. Beyond that, India has tremendous promise,” he says. Significantly, it is another market where BCI has on-the-ground representation. So far, the Philippines is the other market where it has invested.
Approximately 10% of the firm’s infrastructure portfolio is in Latin America, but political instability has prompted BCI to exercise “caution” on new investments.
Asked whether global geopolitical tensions have impeded investment, Divoky says that the opposite is the case: “The uncertainty is creating pricing opportunities. Assets aren’t being priced for perfection. We’re mindful of geopolitics, political risks and the potential for populism when deploying capital.”
With a growing global pool of capital targeting infrastructure, Divoky acknowledges that competition is fierce. BCI seeks opportunities in both public and private markets.
“We’ve recognised over the years that competition for private assets has intensified. So we’ve enhanced our ability to find value in listed markets,” he says.
Most recently, BCI led the £1bn take-private of Luxembourg-based BBGI Global Infrastructure. “It’s the first major take-private transaction fully led by the BCI infrastructure team. It’s groundbreaking,” Divoky says.
“We felt BBGI would continue to diversify our global portfolio.” BBGI holds more than 50 infrastructure companies and projects across sectors and geographies.
BCI has previously taken over a public timber company, now part of its Mosaic timber business. Divoky believes BCI will continue to seek opportunities to privatise listed infrastructure companies when the timing and value are right.
Great interview with Jerry Divoky, senior managing director of infrastructure and renewable resources at BCI.
He will most likely become the next head of infrastructure and renewable resources at BCI when Lincoln Webb steps down or assumes another important role at the organization (he's a strong contender to succeed Gordon Fyfe as CEO but there are others).
BCI posted this article on its website with a lag as it was published September 25th and I'm glad they did so (take note rest of Maple 8).
Jerry Divoky provides a lot of great insights on the portfolio composition and strategy.
You can read more about BCI's infrastructure & renewable resources portfolio here:
BCI’s Infrastructure & Renewable Resources (I&RR) program is a diversified portfolio of $32.2 billion of tangible, real assets. Our global program invests primarily in core infrastructure assets that operate in stable regulatory environments and renewable resources assets that are critical to meeting the demands of a growing global population.
We target privately held assets with high barriers to entry, potential for strong cash flows, and favourable risk-return characteristics. Our focus on meaningful positions with governance rights allows us to actively manage the investments with a view to increasing their long-term value. The typical anticipated holding period spans over 20 years. We also invest in publicly listed infrastructure and private infrastructure debt to complement our current holdings and deliver additional value to clients.
And read fiscal 2025 highlights here.
What struck me from the interview is that BCI's digital infrastructure exposure is modest compared to peers but they remain on the lookout for opportunities there.
Interestingly, they're not competing with giants that have entered the space bidding on private assets, they're also very skilful at taking listed infrastructure companies private to use them as a platform (look at the take private deal on BBGI Global Infrastructure S.A.).
Why do this? Why not? If there's value there, that's a smart move instead of bidding up prized assets that everyone is chasing.
Remember, just like in real estate and private equity, entry price matters a lot even if you're holding these assets for a long time.
What else? The portfolio is primarily comprised of regulated utilities – including gas, power and water – which account for 40% of assets.Yield plays an important role here just like a retail investor who invests in utilities to collect a nice yield and redeploys the dividend interest in other opportunities:
“Half of our return over the last decade has effectively come from yield, and the other half from capital appreciation,” Divoky explains. “Significant capital comes back to us as yield, which we can then redeploy.”
In general, BCI holds these assets for years but sometimes makes strategic exits when the price is right and there are reasons to divest:
One such divestment was its sale of US assets owned by Global Container Terminals (CGT). “We didn’t feel we could manage terminals on both coasts of the US effectively or generate significant synergies,” says Divoky. BCI, which co-owns GCT with IFM Investors and Ontario Teachers’ Pension Plan, is now focused on terminals in Vancouver.
As far as investable opportunities in Canada, they're hopeful but also explicit in what they're looking for:
“But investable opportunities in Canada for large-scale brownfield operating infrastructure are relatively modest,” Divoky says. “We hope that changes going forward. Canada’s Federal Government and Provinces still own airports and most utilities. There’s tremendous potential for the government to privatise these assets, realise capital, and reinvest in greenfield projects that support GDP growth.”
I've been saying this forever, privatize airports, ports, toll roads, pipelines and other important infrastructure and get on with it fast because time is of the essence.
I agree with BCI's European focus over the next five years, that's where the best opportunities lie.
Alright, let me stop there, you can read the latest news from BCI here.
Below, Sikander Rashid, Brookfield's Global Head of AI Infrastructure, sat down with Bloomberg in Paris to discuss AI and the US market vs European market.
Listen to his comments on why they remain bullish on Europe as it still "needs trillions of capital to upgrade existing infrastructure and build new infrastructure for AI."
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