Four Japanese institutional investors – the Pension Fund Association, Mitsubishi Corporation, Japan Bank for International Cooperation, and Mizuho Bank – have teamed up with Canada's Ontario Municipal Employees Retirement System (OMERS) to complete the first deal out of the Global Strategic Investment Alliance (GSIA) infrastructure platform, according to a statement.
The five institutional investors, via GSIA, have together agreed to buy a one-third stake in US power plant Midland Cogeneration Venture (MCV) from Borealis Infrastructure, the infrastructure arm of OMERS. Borealis will continue to manage the asset after the equity injection, according to an OMERS statement.
The size of the deal was not disclosed, but media reports have placed it at around $1 billion. Combined, the Japanese partners will contribute about $250 million of the equity, but a Mitsubishi spokeswoman declined to provide details of leveraging.
Borealis originally bought a 100 percent interest in MCV, which is the largest natural gas fired, combined cycle cogeneration plant in the country, from EQT Infrastructure and power generation investor Fortistar for an undisclosed sum in December. If market rumours are correct, though, EQT has netted an internal rate of return of 40 percent from MCV.
Borealis will retain the remaining two-thirds stake in MCV, according to the OMERS statement.
MCV – which was conceived as a nuclear power plant when it opened in 1991 – today is a 1,633-megawatt (MW) project. The plant supplies consumers such as Dow Chemical and Consumers Energy with electricity and steam under long-term contracts, according to the Mitsubishi statement.
“MCV is an excellent facility and we are confident that together with the company’s strong management team, we will continue to deliver sustainable, long-term value for all stakeholders,” said Michael Rolland, Borealis Infrastructure president and chief executive. Media reports have placed those returns at around 8 percent to 9 percent.
The GSIA platform is the first of its kind and is a consortium of “like-minded, long-term global investors to work together in pursuit of attractive, large-scale assets including airports, railways, ports, power generation and distribution, and gas pipelines mainly in North America and Europe.”
Launched in 2009, it held a $7.5 billion first close in April of last year, and has an eventual target of $20 billion. OMERS claims that the membership of GSIA is due to expand fairly soon.
Mitsubishi had said previously that “participation in the GSIA [is] an important step in expanding the infrastructure sector’s asset management business.”
“We're very pleased to have completed our first transaction with our GSIA partners, and look forward to announcing our next acquisition in the near future,” said Jacques Demers, President and chief executive of OMERS Strategic Investments.