CPPIB’s new European renewables platform to ‘manage risk differently’

Canada Pension Plan Investment Board has created a new independent European renewable energy platform, vowing “to do things differently and at scale”, Bob Psaradellis, the platform’s chief executive, told Infrastructure Investor.

Renewable Power Capital will invest on a pan-European basis, initially targeting the Nordics and Spain in the near-term. CPPIB said this will largely cover wind, solar and battery storage projects, although Psaradellis clarified this will not include offshore wind investments, with those the reserve of Maple Power, the pension fund’s joint venture with Enbridge.

Psaradellis, who joined CPPIB in December 2019 from his role as managing director and head of Europe in GE Capital’s energy financial services division, will be joined by Shaun Kingsbury, the former chief executive of the UK’s Green Investment Bank, who oversaw the vehicle’s investments from launch in 2012 to privatisation in 2017. He joins RPC as chairman. Mark Hanson, also a managing director at GE Capital, has joined the platform as chief operating officer.

Psaradellis emphasised CPPIB’s long-term investment nature and said this offers something different to a market that has seen a proliferation of fund involvement.

“We are truly a long-term investor, which we measure in decades. We’re not a closed-end fund that needs to realise an exit in 10 years; we invest for the long-term,” he said.

While CPPIB has already invested about C$9 billion ($7 billion; €5.8 billion) in renewables globally as at the end of September this year, Psaradellis explained the platform was set up because of the wider market opportunity opening up.

“The renewable energy industry is reaching a tipping point and business models need to adapt,” he said. “The skillsets that investors needed to be successful 10 years ago aren’t the skillsets investors need to be successful for the next 10 years.”

Part of this will be bringing what he called “flexible capital” to the market, with RPC prepared to invest in development or construction projects, as well as to acquire operational sites. It also includes bringing a range of revenue structures to projects as it adapts to dealing with merchant risk, while bringing what CPPIB described as an “innovative approach” to the market.

“We have the capabilities to manage risk differently,” Psaradellis said. “We have the ability to acquire projects unlevered and unhedged. We can acquire projects with a PPA, without a PPA, with a contract for difference. Our approach to managing merchant risk over the long-term is very much an ‘all of the above’ strategy. When the market signals we’re looking at tell us that it’s advantageous to sign a corporate PPA, we will do so. If those signals are also telling us it’s advantageous to sign up to a three-year hedge, we’ll do that. If it’s telling us to hold projects at merchant price for a period of time, we’ll also do that.”

Kingsbury added that there are very few players in the European renewables market that have this appetite and RPC is not just a “round peg looking for round holes”. The pair declined to state how much capital CPPIB will be providing to the platform, which also has a management-owned minority share, nor would they disclose what near-term targets it has in terms of the build-out of capacity.

In a statement, CPPIB said it expects to makes its first investment early next year.