CPPIB is investing in Sempra Infrastructure Partners one month after selling its stake in Transportadora de Gas del Peru S.A.Chris Young/The Canadian Press
The investment arm of Canada Pension Plan is writing a multibillion-dollar cheque to buy a minority stake in Sempra Infrastructure Partners alongside private equity giant KKR, showing its commitment to natural gas assets for years to come.
Based in San Diego, Sempra SRE-N is spinning out the infrastructure arm by selling a 45-per-cent stake to KKR and Canada Pension Plan Investment Board for US$10-billion in cash. The division develops, owns and operates natural gas pipelines, power generation assets and liquefied natural gas export facilities in the United States and Mexico.
After the sale, KKR, which is already a minority investor in the business, will become the majority owner and CPPIB will own a 13-per-cent stake in the entire business worth US$3-billion.
The deal illustrates CPPIB’s belief in natural gas as a fuel for the future.
“Natural gas has an important role to play in the global energy transition, and LNG infrastructure is central to meeting rising global demand and supporting long-term transition goals,” Max Biagosch, CPPIB’s global head of real assets, said in a statement.
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This belief is common among institutional infrastructure owners, and consultancy Wood Mackenzie summarized the appetite for the fossil fuel in a report earlier this year.
“Surging electrification, increasingly met by renewable power sources, will lead the charge to curb CO2 emissions. Electrification can only move so fast, however, and the adoption of emerging low-carbon technologies, such as hydrogen, is currently too slow to achieve net-zero emissions by 2050,” Wood Mackenzie wrote. “With coal still accounting for 30 per cent of the world’s energy needs, shifting to gas as a transition fuel is a compelling option.”
For Sempra, the infrastructure sale is part of a corporate reorganization designed to simplify its business model, after the company’s shares have struggled. The deal allows Sempra to focus more on Texas, where it has also greenlit the expansion of its Port Arthur LNG facility.
CPPIB, meanwhile, is investing the money one month after selling its 49.87-per-cent equity stake in Transportadora de Gas del Peru S.A., a natural gas business in South America. TGP operates the main natural gas and natural gas liquids pipelines in Peru, which supply roughly 40 per cent of the country’s power generation.
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CPPIB invested in TGP in 2013 and added more money in 2014 and 2017, eventually investing a total of US$1.4-billion.
Based in Houston, Sempra Infrastructure is investing in and owns LNG projects on two coasts, including the Cameron LNG facility in Lousiana and the Energia Costa Azul facility in Mexico.
The business also has 8,200 kilometres of natural gas transportation and distribution pipelines, as well as refined products terminals, in the U.S. and Mexico.
After the sale, KKR’s consortium, which includes CPPIB, will own 65 per cent of the business. Sempra is keeping a 25-per-cent stake, and Abu Dhabi Investment Authority, the sovereign wealth fund, is also keeping its existing 10-per-cent stake.