ARM Ch. 12 Pension Plan Report, January 2022


Pension Report

 

 

January, 2022

 

OTPP has created a Global Investment Department that will develop investments globally. Our pension plan has made several investments in the last quarter of 2021. It has acquired a 50% interest in New Era Energy Resources, a subsidiary of Next Era Energy Resources. This includes a portfolio of high quality solar and wind and energy storage assets in the US. The assets include 2,520 mega watt portfolio of 13 high quality long term renewable assets. The initial cost is US $449 Million. It will also purchase 25% of a US $824 million convertible equity issue from the company.

 

Next Era Energy Resources LLC is one of the world’s largest operators of renewable energy from wind and the sun, and is also a world leader in battery storage.

 

A second investment occurred when OTPP and CPP increased their investments in a company called Ideal, a large Mexican Infrastructure Company with investments in Mexico and Latin America. The investments include toll roads, water treatment plants and logistic terminals. Under this new agreement OTPP will acquire another 8.4% in Ideal and CPP Investments. OTPP and CPP will now each own 24.8% of the outstanding shares of the company. CPP Investments and OTPP initially invested in the company in 2020.

 

The largest investment was in Spark Infrastructure. This was a takeover of the company by an investing consortium led by a US global based investment company called KKR. OTPP and PSP were the other participants. PSP is the public pension for our Armed Forces public servants and the RCMP. Spark Infrastructure is involved in the essential energy infrastructure businesses in Australia. The all-cash purchase was Australian $5.2 Billion. Spark Infrastructure invests in Australian energy infrastructure business and serves over 5 million homes and businesses. It has been heavily involved in the transition of Australia’s electricity grid from coal etc. to renewable energy.

 

Last year was a good year for Defined-Pension Plans. Slightly rising interest rates and excellent investment returns have significantly improved their solvency. Two different pension consulting firms have stated that the returns have increased the solvency rate for the plans as high as 97.2% and 103%. In the year 2020 the solvency rates ranged from 89.4% to 96%. The returns for 2021 for our Pension Plan is not available yet. In Ontario the regulations require that the solvency rates must be at least 85% or the employer is required to make extra contributions. Many plans may be in a surplus position in 2022. Bankruptcy has a detrimental effect on pension plans as the Sears retirees found out.

 

 

Paul Headdon

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