Canadian pension acquires stake in BC hydro project

The C$6bn Regime de rentes du Mouvement Desjardins pension fund has acquired a stake in a British Columbia hydroelectric project from mid-market firm Connor, Clark & Lunn Infrastructure for an undisclosed sum.

Regime de rentes du Mouvement Desjardins, the pension fund for the 43,600 employees of Québec-based Desjardins Financial Group, has acquired an interest in a hydroelectric plant in British Columbia for an undisclosed sum.

Desjardins is investing in the power plant by acquiring a 50 percent stake in an infrastructure limited partnership managed by Canadian asset manager Connor, Clark & Lunn. The partnership’s sole asset is the hydro plant, according to Matt O’Brien, president of Connor, Clark & Lunn Infrastructure.  Other investors in the hydroelectric project include Energex and another institutional fund which O’Brien declined to specify.

The operational 150-megawatt power plant, known as the Harrison Hydro Project, was first acquired by Connor, Clark & Lunn in 2007, according to O’Brien. He said the project’s power is contracted to utility BC Hydro under a 40-year off-take agreement signed in 2006.

Sylvain Gareau, executive director of Regime de rentes du Mouvement Desjardins, said the investment was attractive primarily because the Harrison plant is an operational, Canadian project with stable returns.

Gareau said Canadian projects account for about 80 percent of the infrastructure investments made by the pension fund, which manages assets of nearly C$6 billion (€4.27 billion; $6.05 billion). Previous investments include a commitment to the Fiera Axium Infrastructure Canada Fund, which closed on C$460 million earlier this year, as well as a small stake in the 407 Highway in Toronto, according to Gareau.

The fund’s targeted allocation to infrastructure is about 10 percent, Gareau said, and the current allocation stands at about 8 percent. Though the pension is close to its infrastructure target, Gareau said the fund has some “leeway” to continue investing in infrastructure projects due to growth in the overall size of the pension.

“We are looking to make one to two deals a year,” Gareau said.

Gareau said the fund began investing in infrastructure about five years ago, but “really decided to increase our presence in our market in the last two and half or three years”. He said infrastructure was increasingly attractive primarily as a hedge against inflation.

Connor, Clark & Lunn Infrastructure primarily focuses on mid-market infrastructure companies in North America, according to a statement. The firm also manages a “traditional” infrastructure fund that invests in public-private partnership and social infrastructure projects, according to O’Brien.