CPPIB deal for Pattern big part of green push

TORONTO The Canada Pension Plan Investment Board’s purchase and privatization of Pattern Energy on Monday, at an enterprise value of US$6.1 billion, is a significant step into renewables for Canada’s largest pension fund.

But while CPPIB has committed to taking part in an “energy transition” as it assesses global climate change-related risks to its portfolio, Canada’s largest pension remains a major investor in traditional energy supply sectors such as oil and gas.

The newly acquired Pattern Energy, which has a portfolio of 28 wind and solar projects in North America and Japan, is to be combined with private equity firm Riverstone Holdings LLC’S Pattern Development following completion of CPPIB’S purchase.

This will create an integrated company that develops and operates power projects.

Bruce Hogg, managing director and head of power and renewables at CPPIB, said the Pattern assets will complement traditional energy supply assets such as oil and gas in the Canada Pension Plan fund’s portfolio. “We have a significant exposure to power production in the U.S. through our stake in Calpine, which is primarily gas driven,” he said. “And this business (Pattern Energy) with its focus on increased solar and wind development … is a pretty good fit or adjunct to that. It actually rounds out quite nicely our exposures we have already in the U.S.”

Pattern Energy shareholders will receive US$26.75 a share in cash under terms of the US$2.63 billion deal (before debt). In a news release, Alan Batkin, chair of the Pattern Energy’s board of directors, said a special committee of the board had reviewed “multiple” bids prior to recommending the Canadian pension fund’s offer, which offered certain and significant value for the shares.

Unlike some large institutional investors, CPPIB has not set target dates or portfolio reduction targets to trim its holdings of traditional energy assets in the face of climate change risks.

But chief executive Mark Machin pledged last year to make a “huge push” to ensure the risks embedded in its overall energy portfolio are well-understood, and that the fund is being paid for those risks.

He said if it is determined that isn’t the case, it would no longer make sense to own those assets.

The organization is understood to be assessing its holdings based on factors including global regulation and technological disruption.