Alternative Investments

Ontario Teachers’ Pension Plan investing US$1-billion in U.S. alternative energy assets

Ontario Teachers’ Pension Plan will put more than US$1-billion into a U.S. renewable-energy company to acquire part ownership of a collection of wind and solar assets.

Teachers said Tuesday it will pay US$849-million for a 50-per-cent share of 13 generation plants and storage facilities in nine U.S. states currently owned by NextEra Energy Resources LLC. The assets generate or store a total of 2,520 megawatts of energy, with about one-third of the capacity coming from two wind farms in Texas.

NextEra is selling the other half of the assets to NextEra Energy LP, an affiliated, publicly traded partnership. In a complicated second step, Teachers said it will also provide at least one-quarter of a US$824-million financing commitment made in October by Apollo Global Management Inc. that is helping the publicly traded partnership make its purchase. That will add more than US$200-million to Teachers’ financial commitment.

NextEra Energy Resources will manage the properties and collect fee income from the new owners. The company says it is the world’s largest generator of wind and solar energy and a world leader in battery storage.

Chris Ireland, managing director of greenfield and renewable investments at Teachers, said the investment “marks the beginning of what we expect will be a long-term partnership with NextEra Energy.”

Investors can expect similar deals from Teachers and other big Canadian pension plans as they look to green up their portfolios, especially if they’ve made a pledge to become “net zero” – or have their carbon emissions from companies they invest in completely offset by investments in renewable energy or other means – by 2050.

Teachers is one of several major Canadian pension plans to have made a Net Zero 2050 commitment, along with Caisse de dépôt et placement du Québec, Ontario Municipal Employees Retirement System and Investment Management Corporation of Ontario. Teachers, however, says it has the most aggressive interim targets in the Canadian industry, planning to reduce portfolio carbon emissions intensity by 45 per cent by 2025 and two-thirds by 2030, compared with a 2019 baseline.

Shift Action for Pension Wealth & Planet Health, an advocacy organization that pushes pensions on climate matters, said in September that Teachers’ interim targets represented “the strongest climate commitment we’ve seen yet from a Canadian pension fund.”

But Shift says pension funds must not only invest in solutions to the climate crisis, but also eliminate exposure to fossil fuels. “A two-thirds reduction in portfolio emissions intensity by 2030 will require significant restrictions on high-carbon investments in oil, gas and coal. A further tightening of these commitments, and a focus on absolute emissions reductions, is required.”

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