Teachers’ buying another Chilean water operator

The Ontario Teachers’ Pension Plan continues its focus on inflation-sensitive infrastructure assets, with its plans to buy Chilean public water and wastewater company Esval, its third such investment.

The Ontario Teachers’ Pension Plan plans to acquire Chile’s third largest water operator, Esval, from banking and insurance company Consorcio Financiero. It will put the Canadian pension in control of three Chilean water utilities.

“We like infrastructure investments, such as water utilities in regulated industries,” said Ontario Teachers spokeswoman Deborah Allan. “They provide reliable returns at a low level of risk, and can withstand economic downturns better than other types of investments. They also tend to keep pace with inflation, which is ideal for a pension plan like ours that is indexed to inflation.”

Chile, in particular, is an inviting market, Allan said, because it is open to foreign investment, has a mature regulatory environment and is politically stable.

The pension plan has already agreed to pay C$348 million ($365 million, €270 million) for 48.92 percent of Esval, and plans to launch a tender offer for all of Esval’s remaining shares, in accordance with Chilean securities law.

The entire offer is conditional on acquiring at least 50.1 percent of Esval, according to a statement. Of the remaining shares, 29 percent are held by the Corporación de Fomento de la Producción (CORFO), a government agency, and the remainder by public shareholders.

Esval is Ontario Teachers’ third investment in a Chilean water operator. In May the pension plan bought Aguas Nuevo Sur Maule, and took a 50.1 percent stake in Empresa de Servicios Sanitarios del Bio-Bio before launching a tender offer for the remaining stake.

At the end of 2006, Ontario Teachers had $35.4 billion invested in inflation-sensitive assets, including real estate, Real Return Bonds, infrastructure and commodities, Allan said.

Latin America has attracted record levels of private equity capital this year: Advent International and GP Investments, formerly GP Investimentos, raised the first-ever megafunds for the region last month, closing on $1.3 billion and $1 billion, respectively.

Ontario Teachers is the largest professional pension plan in Canada, with C$106 billion in net assets.