The Ontario Teachers’ Pension Plan Board will invest up to US$1 billion over the next six to eight years in an international offshore wind development in partnership with Corio Generation, a company within Macquarie Asset Management’s Green Investment Group.
The joint venture will fund the development of 14 fixed-bottom and floating projects in South Korea, Taiwan, Japan, Ireland and the United Kingdom, all of which are currently in development by Corio with an initial target of up to nine gigawatts. The $241.6-billion Canadian pension will acquire up to half its partner’s stake in the projects, and support development, construction and operation.
“We’ve been looking at offshore wind for a number of years, and we’ve looked at it in a number of different ways,” said Chris Ireland, managing director of Greenfield Investments and Renewables, part of the infrastructure team at Teachers.
“We’ve, frankly, never been successful (until now),” he added. “The competition has been quite high. There’s just not that many projects. And there’s not that many big players in market.”
The transaction is expected to close in the third quarter, subject to regulatory approval.
Ireland, an engineer with a Master’s degree in fluid mechanics who has been at Teachers for 16 years, acknowledged that the technology is relatively new and risks are inherent in developing, constructing and operating platforms with 100-metre-high towers that will be fixed or anchored 10 to 50 kilometres offshore.
“There are risks with development, but we think the returns (will) offset that risk,” he said, adding that the Teachers’ first offshore wind projects will diversify the pension’s energy holdings and help meet carbon-reducing environmental targets.
“This is a big part of the future of power generation in our opinion.”
According to the Canadian pension, total capacity of offshore wind farms is expected to reach 228 gigawatts by 2030, a target that will require collaboration between businesses and governments around the world and investments totalling $500 billion.
Ireland, who worked at Macquarie in New York before joining Teachers’ in 2006, said the deal with Corio was complex and months in the making, and was helped along by the fact that the Canadian pension fund has done past deals with Macquarie.
“Macquarie recognizes us as a sophisticated investor that can deal with complicated (transactions),” he said.
“They also recognize that we have responsible investing goals, and that we have experience in funding development projects.”
We’ve, frankly, never been successful (until now)Chris Ireland
Teachers’ $26.1-billion infrastructure platform has made a number of recent investments to capitalize on the energy transition, such as Cubico Sustainable Developments, which has onshore renewable energy projects in a number of countries in South America, Europe and the United Kingdom, as well as Mexico, the United States and Australia.
Other infrastructure portfolio investments include Anbaric Development, which specializes in the design, development, financing, and construction of large-scale electric transmission systems, a 50 per cent interest in NextEra Energy, which has a portfolio of wind, solar and energy storage assets across the United States and Equis Development, which has infrastructure development and investments across the Asia-Pacific region, with a primary focus on Australia, Japan, and South Korea.
Jonathan Cole, chief executive of Corio Generation, said the new partnership with Teachers is a “highly significant” milestone that combines the pension plan’s investment expertise with a large-scale global portfolio and a team of industrial experts.
“With this collaboration with Ontario Teachers’, Corio will generate vast amounts of clean, affordable electricity and support thousands of green jobs, while providing attractive returns on investment,” he said.
Ireland said he hopes the latest investment in offshore wind platforms will capture the attention of other developers the pension fund hasn’t worked with and create “more opportunities in energy transition type investments” such as battery storage, sustainable hydrogen production and electric vehicles.
Construction on the first offshore wind project is expected to start in the next couple of years, and be up and running within about five years, Ireland said, noting that the investments will fit with both Teachers’ environmental commitments and its long-term investment horizon.
The Canadian pension fund has committed to achieving net-zero greenhouse gas emissions across its portfolio by 2050, with an interim target to reduce portfolio carbon emissions intensity by 45 per cent from its 2019 baseline by 2025, and 67 per cent by 2030.
The latest deal won praise from Shift Action for Pension Wealth and Planet Health, a group that is often critical of so-called greenwashing when financial institutions or money managers seek to look like they are doing more for the environment than they really are.
“This is a smart investment,” Shift said of Teachers’ deal with Corio. “It allows the fund to profit from exceptional growth in the renewable energy industry while simultaneously protecting our shared climate. We hope other pension plans will follow this example.”
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