Hey, Oil Giants: Want to Sell Renewables? Funds Are All Ears

(Bloomberg) -- If more oil and gas companies want to follow Enbridge Inc.’s lead and sell renewable energy assets, there are plenty of institutional investors ready to pounce.

Enbridge announced an agreement Wednesday to sell a 49 percent stake in a portfolio of wind and solar farms through a joint venture with the Canada Pension Plan Investment Board for C$1.75 billion ($1.36 billion). The deal marks the largest acquisition yet for Canada’s biggest pension fund’s recently formed power and renewables division. It also underscores the demand for clean energy from funds seeking long-term steady returns.

“There is a competitive pool of buyers willing to snatch up those assets,” Rachel Luo, an analyst at Bloomberg New Energy Finance, said in an interview.

A deep-pocketed list of institutional and infrastructure funds have pushed into clean energy, thanks to long-term power-purchase agreements with utilities and corporate giants that offer steady returns over decades. BlackRock Inc. has invested at least half of a $1.6 billion fund dedicated to renewable-energy assets. Blackstone Group LP is raising as much as $40 billion for its infrastructure fund and may invest some of that money in renewables. And Brookfield Asset Management Inc., one of the world’s largest alternative-asset managers, has a whole publicly traded subsidiary dedicated to clean-energy investments.

Cutting Debt

Enbridge’s deal with CPPIB is part of an effort to sell assets to reduce the debt it took on with last year’s $28.6 billion purchase of Spectra Energy Corp. The pipeline giant is hardly the only fossil fuel company with clean energy holdings that’s trying to trim debt. Selling stakes in those wind and solar farms might make sense, since renewables are a step outside gas and oil companies’ wheelhouses.

“Oil majors are exploring renewable energy and electricity, building up knowledge and buying their way into more mature parts of the industry,” Meredith Annex, an analyst at Bloomberg New Energy Finance said in an email. “Yet this still takes second place to their core business.”

Last year, TransCanada Corp., the Calgary-based natural gas transmission and power services company, sold a 105-megawatt portfolio of solar farms in Ontario to an Axium Infrastructure Inc. unit for C$540 million.

In Europe, meanwhile, large oil companies are continuing to diversify their holdings and increase clean-energy investments. Royal Dutch Shell Plc, for instance, agreed in January to buy a 44 percent stake in Silicon Ranch Corp., the Nashville-based owner and operator of U.S. solar plants. Shell also recently bought First Utility Ltd., the U.K.’s seventh-largest power provider.

‘Growing Market’

Bruce Hogg, who heads CPPIB’s power and renewables division, said the Enbridge package was an excellent opportunity to invest in a highly diversified portfolio of North American and European renewable assets. He said the partners will be looking to expand the portfolio, particularly by investing in European offshore projects, which the partners see as a high growth area.

“It’s an existing portfolio,” he said in an interview. “And it’s running well.”

--With assistance from Christopher Martin

To contact the reporters on this story: Scott Deveau in New York at sdeveau2@bloomberg.net, Brian Eckhouse in New York at beckhouse@bloomberg.net.

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Joe Ryan, Will Wade

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