Ontario Teachers' Pension Plan has launched a development partnership with clean energy infrastructure company Anbaric to build up to $2 billion of projects in North America.
The joint venture is called Anbaric Development Partners and will focus on building clean energy transmission and micro-grid projects. As part of the deal, the $127 billion pension acquired a 40 percent stake in Anbaric for $75 million.
According to Anbaric chief executive Ed Krapels, OTPP's $2 billion commitment is enough to cover the construction of up to four clean energy transmission lines, which cost between $500 million and $1 billion, or up to 10 micro-grids.
Krapels told Infrastructure Investor the partnership with OTPP is “very rare” because of the difficulty finding early development money for greenfield clean energy infrastructure projects.
“Often we've had to go to private equity or to venture capital, and those investors are terrific, but they usually can't invest for five-to-ten-year periods, and that's how long our projects tend to take,” he said.
Creating a special purpose vehicle gives large institutional investors, which like to hold assets with steady returns longer than traditional private-equity firms, an opportunity to make direct investments in the asset class, Krapels said. It also makes it easier for institutions to track how much is paid in manager expenses than when investments are made to blind pool funds.
A lot of infrastructure funds today target brownfield investments, according to Krapels, but because of increased interest in the asset class, prices have gone up while returns have compressed.
Investment platforms like Anbaric Development Partners gives institutional investors a chance to get into the early stages of project development, where they believe returns will be higher and can be held for years at a time, Krapels said.
This isn't the first partnership of this kind OTPP has entered. It joined another Canadian pension, PSP Investments, and Banco Santander in 2015 to launch Cubico Sustainable Investment, another clean energy investment platform. Santander sold its stake in Cubico last July, and the platform passed 2GW of generation last August with the acquisition of a 67MW wind farm in Spain.