PSP Investments in $1.2bn hydro deal

The Canadian pension has acquired 12 conventional hydro plants generating 1.4GW.

Canada’s Public Sector Pension Investment Board (PSP Investments) has acquired a portfolio of hydroelectric assets in New England valued at $1.2 billion.

PSP Investments struck a deal with ENGIE Group, which is conditional to closing procedures, for 12 conventional hydro plants on the Connecticut River in Massachusetts and the Housatonic River in Connecticut, and for a 1,168MW Northfield Mountain pumped-storage facility. The portfolio, which totals 1.4GW, benefits from Renewable Energy Credits and is now the second largest privately-owned hydro portfolio in the power market for the region’s grid operator, ISO New England.

“There’s a combination of assets here. Some of them are continuous running river assets that fit continuously in the grid and some of them are oriented more towards peak capacity,” Guthrie Stewart, PSP Investment’s global head of private investment, told sister publication Low Carbon Energy Investor.

PSP Investments, one of Canada’s largest pension managers, has the option to shift some or all of the recently acquired hydro plants to H2O Power, its majority-owned hydroelectric platform acquired in 2007. “This is a very significant transaction,” Stewart said. “Something we still need to sort through is how we’re going to best optimise or take advantage of the expertise across the assets.”

“The structuring itself, to me, is secondary,” he said. What is important is “owning long-term assets and, alongside of that, developing operational platform expertise that enables us to be an effective steward owner of these assets over time”.

The pension manager shifted its first North American hydro assets to H2O Power earlier this month, after acquiring two plants in May 2015 generating a combined 31.5MW, along the Allegheny River in Pennsylvania.

Outside North America, PSP Investments recently joined with Ontario Teachers’ Pension Plan and Spain’s Santander to purchase two Brazilian wind farms generating a combined 392MW for 2 billion reals ($502 million; €462 million). The assets were purchased through Cubico, a global renewable energy and water investment platform between the three investors.

“The message at the moment from PSP Investments is we’re a growing institutional investor,” Stewart said. “When we look at our global portfolio, we’re still very interested in increasing our presence in North America.”