CPPIB invests $250 million in oil sands company

The Canada Pension Plan Investment Board has purchased a 17% equity stake in Alberta’s Laricina Energy in a deal worth $250 million.

Laricina is a privately-held, Calgary-based company concentrating on the oil sands areas of western Canada.

“The investment is a very important endorsement for Laricina and we are excited CPPIB has shown confidence in Laricina’s management team and development strategy,” said Glen Schmidt, President and CEO of Laricina. “This is a strong testament to Laricina’s growth potential and continued progress towards building a leading in situ oil sands company.”

“Laricina has an experienced and proven management team and has strong growth potential from its world class resource base,” added André Bourbonnais, Senior Vice-President, Private Investments, CPPIB. “We are pleased to be making an investment that we believe will deliver attractive returns over the long term.”

In a press release, Laricina stated that “Alberta’s oil sands will continue to play an important role in the global energy mix for the foreseeable future and are vitally important to the Canadian economy, Canadian jobs and energy security. The oil sands industry as a whole is making dramatic progress in environmental management by developing practical technologies and the application of best practice.”

However, the Laricina deal is bound to be controversial, considering the CPPIB uses public dollars, in the form of funds not needed by the Canada Pension Plan to pay current benefits, for its investments. Industry news website Responsible Investor notes that earlier this year, the CPPIB opted not to support shareholder resolutions seeking environmental reports from BP and Shell on their oil sands projects. “It will come as a snub to campaigners who have urged large Canadian public pension plans to be more visible in addressing the whole tar sands issue,” Responsible Investor added.

The CPPIB is a signatory to the UN Principles for Responsible Investment and adopted its own responsible investing policy in 2005. At March 31, 2010, the CPP fund totalled $127.6 billion of which $22.8 billion was invested in private investments.