Canada Pen­sion Plan In­vest­ment Board In­vests in Brazil Wind Power

Trillions - - In This Issue -

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.

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