Follow the money
Institutional investors seeking long-term returns put billions into sector
Plenty of institutional investors are ready to buy renewable energy assets.
If more oil and gas companies want to follow Enbridge’s lead and sell renewable energy assets, there are plenty of institutional investors ready to pounce.
Enbridge announced an agreement last week to sell a 49 percent stake in a portfolio of wind and solar farms through a joint venture with the Canada Pension Plan Investment Board for $1.4 billion. The deal marks the largest acquisition yet for Canada’s biggest pension fund’s recently formed power and renewables division. It also underscores the demand for clean energy from funds seeking long-term steady returns.
“There is a competitive pool of buyers willing to snatch up those assets,” Rachel Luo, an analyst at Bloomberg New Energy Finance, said in an interview.
A deep-pocketed list of institutional and infrastructure funds have pushed into clean energy, thanks to long-term power-purchase agreements with utilities and corporate giants that offer steady returns over decades. BlackRock has invested at least half of a $1.6 billion fund dedicated to renewable-energy assets. Blackstone Group is raising as much as $40 billion for its infrastructure fund and may invest some of that money in renewables.
And Brookfield Asset Management has a whole publicly traded subsidiary dedicated to clean-energy investments.
Enbridge’s deal with Canada Pension Plan Investment Board is part of an effort to sell assets to reduce the debt it took on with last year’s $28.6 billion purchase of Spectra Energy Corp. The pipeline giant is hardly the only fossil fuel company with clean energy holdings that’s trying to trim debt. Earlier this year, Houston’s NRG agreed to sell its renewable business as part of the company’s plan to streamline operations and lower its debt.
For oil and gas companies, selling stakes in those wind and solar farms might make sense, since renewables are a step outside their wheelhouses.
“Oil majors are exploring renewable energy and electricity, building up knowledge and buying their way into more mature parts of the industry,” Meredith Annex, an analyst at Bloomberg New Energy Finance, said in an email. “Yet this still takes second place to their core business.”
Last year, Calary-based TransCanada Corp. sold a 105-megawatt portfolio of solar farms in Ontario to an Axium Infrastructure unit for more than $420 million.
In Europe, large oil companies are continuing to diversify their holdings and increase clean-energy investments. Royal Dutch Shell, for instance, agreed in January to buy a 44 percent stake in Silicon Ranch Corp., the Nashville-based owner and operator of U.S. solar plants. Shell also recently bought First Utility Ltd., the U.K.’s seventhlargest power provider.
Bruce Hogg, who heads that Canada Pension Plan Investment Board’s power and renewables division, said the Enbridge package was an excellent opportunity to invest in a highly diversified portfolio of North American and European renewable assets.
Hogg said the partners will be looking to expand the portfolio, particularly by investing in European offshore projects.
“It’s an existing portfolio,” he said in an interview. “And it’s running well.”
“There is a competitive pool of buyings willing to snatch up those assets.” Rachel Luo, analyst