Canada Pension Plan Investment Board Invests in Brazil Wind Power
Unlike the United States’ Social Security approach, Canada has a well-funded nationwide Pension Plan that has an aggressive investment board focused on building capital for the future of the program. Also unlike the United States, the Canada Pension Plan (CPP) has not been entirely looted by greedy politicians and is in fact ranked one of the 10 largest retirement funds in the world.
The CPP’S latest investment – both in what it chose to fund and where it chose to do it – is interesting and deserves further examination.
The item selected was wind power, and the location for the investment was Brazil. Both are themselves positioned at the right place for putting money in, with wind power having matured significantly over the years as a business and with Brazil perhaps finally stabilizing after some years of corruption and internal upheaval in both its corporate and political life. From an infrastructure standpoint, Brazil is also a perfect candidate for the non-standard nature of both wind and solar options (as opposed to more conventional fossil fuel-based energy sources). Its distributed power grid is rapidly evolving across the country, with inputs from many different energy sources becoming easier to integrate as technology and infrastructure vision improve.
As Bruce Hogg, managing director of power renewables for the Canada Pension Plan Investment Board (CPPIB), said about the decision to make this investment, “This transaction enables the CPPIB to
establish a footprint in the attractive Brazilian power generation market, which fits well with our overall power and renewables strategy and further diversifies the CPP Fund.” He went on to say that “Brazil is considered among the top renewable energy markets in the world, and as demand in the country grows, wind energy is expected to be one of the largest contributors to this new supply.”
The CPPIB is not making this investment on its own – something that is also a smart move. It is doing this in partnership with Votorantim Energia, part of Brazil’s Votorantim Group, a U.S.$8.1 billion industrial conglomerate headquartered in São Paulo. Votorantim Energia is a trusted company that has kept out of the massive bribery scandals that appear to be in the process of taking down such legendary Brazilian entities as the Odebrecht Group. This gives the CPPIB a set of skilled eyes and ears to monitor investments of this kind within the country.
The CPPIB and Votorantim Energia have formed a joint venture for this project. The initial investment the CPPIB is putting up for this is C$272 million, and, together, the two entities are purchasing two wind parks in northeastern Brazil with combined net energy generating capacities of 565 megawatts.
If, over time, this first investment does well, the CPPIB expects to increase its investment in the JV and renewables in Brazil. It has the money to make that happen and the strategic backing to make decisions quickly as needed.
Many Canadians may be wondering why their retirement fund is not being invested in Canada, when so many regions need green energy options and the new jobs that go with them.
Other Canadians may be wondering why more of their rich retirement fund is not being distributed to needy retirees. Compared to other national retirement schemes, Canada’s is one of the more stingy plans and the amount paid out is often far less than what retirees contributed to it. Most Canadians need to save at least $500,000 of their own money in order to have even the most frugal retirement.
As of September 30, 2017, the CPP’S total fund assets under management were C$328.2 billion.