April 8, 2009
The Globe and Mail reported on March 26 that Canada’s Pension Plan Investment Board plans to venture into debt markets by selling up to $5-billion in bonds to cut borrowing costs and increase its flexibility to make new investments.
Going to the bank and borrowing to buy the assets that CPPIB loves, such as office buildings, bridges and airports, is expensive in current markets, said Don Raymond, CPPIB’s senior vice-president of public market investments. Since the fund has an ‘AAA’ credit rating, it expects to be able to raise funds more cheaply by going directly to investors.
According to the Globe story, CPPIB will start as early as this month to issue very short-term debt known as commercial paper. After establishing a track record with debt investors, the fund will begin selling longer-term bonds that will enable the CPPIB to take advantage of the drop in global markets to snap up new assets.
“We are seeing some very good investment opportunities in this kind of market environment, particularly in real estate, infrastructure and private debt,” Mr. Raymond said.
One such infrastructure investment that CPPIB is considering, but environmentalists are opposed to, is the world’s longest transmission corridor to bring power from five, as yet unbuilt and fiercely opposed, hydro dams in Chile’s ecologically fragile Patagonia region. The 5,000 high voltage towers and lines would slice through seismically active zones, over fjords and through volcanic areas.
“This is an extremely risky way to attempt to bring power to markets,” says Patricia Adams of Probe International whose organization evaluates international power investments. “It is not an economically prudent investment for Canadian pensioners and CPPIB should consider more reliable alternatives,” she adds.
CPPIB is a co-owner of the Transelec, along with Brookfield Asset Management and the British Columbia Investment Management Corporation.
Categories: By Probe International