Wednesday, December 22, 2010

Teachers’ pension plan invests $75 million in alternative energy firm

The Ontario Teachers’ Pension Plan this week announced an equity investment worth up to $75 million in BluEarth Renewables Inc. (BluEarth). The Calgary-based private company develops, constructs and operates hydro, wind and solar power projects in North America.

The money is being funneled through Teachers’ Private Capital, the pension plan’s private investment department, and will be used to fund renewable power opportunities.

BluEarth was created by the founders and senior management of Canadian Hydro Developers Inc., and has now raised over $160 million in equity from ARC Financial, Teachers and other investors.

“We are pleased to be partnering with ARC Financial and a proven and experienced management team in the renewable power sector,” said Jane Rowe, Senior Vice-President, Teachers’ Private Capital. “BluEarth’s principals have a strong track record of success and we look forward to supporting their efforts to create another leader in the growing market for renewable power.”

“We are excited to be working once again with both the BluEarth team and Teachers’. With this investment, the team has both the operational expertise and the financial foundation to pursue a growth strategy in the renewable power market,” said Brian Boulanger, an ARC Financial Managing Director.

“With the great support of our investors, Teachers’ and ARC, we are well positioned to acquire and develop renewable power projects and operating assets that may be lacking capital and experience,” said Kent Brown, President & CEO of BluEarth. “With the capital to support our growth strategy and Canada’s most experienced renewable energy team, we have a powerful combination to propel BluEarth into a leading renewable power producer.”

Teachers is one of the largest pension plans in Canada, with more than $96 billion in net assets. The plan was somewhat slow off the mark in developing a responsible investing plan but now includes environmental, social and governance (ESG) matters as risk factors, weighing their potential impact on long-term performance.

"We don’t use non-financial criteria to create “screens” that include or exclude certain investments – we make choices based on anticipated risk-adjusted performance," Teachers says on its website. "Avoiding specific sectors or investments for non-financial reasons could reduce the fund’s long-term investment return."

Thursday, December 9, 2010

U.S. looks closer to home for fuel options

In the wake of the oil spill disaster off the Gulf of Mexico, U.S. researchers are seeking new unconventional fuel sources. However, a new report warns that some of these new projects face significant environmental and financial problems.

The report, commissioned by Ceres and written by David Gardiner and Associates, notes that the major oil companies are all researching at least 24 coal-to-liquid projects; one-half of those projects could generate 170 million barrels of liquid fuels per year. But it’s a costly plan, with estimates ranging from $2 billion to $7 billion per plant.

“There are costs that go along with the benefits of extracting and exploiting these unconventional fuel sources,” said New York State Comptroller Thomas DiNapoli. “Before investors can fully assess the benefits of developing oil shale and liquefied coal projects, we need full disclosure of the environmental, regulatory and technological risks surrounding these unproven reserves. Every investor has to take a strong look at these risks.”

The U.S. government is increasingly concerned about conventional oil and gas energy sources and the country’s slow progress in its development of unconventional liquid fuel, environmental group Ceres noted in a press release issued today.

That’s why more than 25 companies are involved in another pricey project: oil shale development. “With technologically recoverable reserves estimated at about 800 billion barrels in the U.S. — three times the size of Saudi Arabia’s proved reserves — oil shale offers vast development potential. Shell’s recent agreement to develop oil shale in Jordan at a projected cost of $20 billion illustrates the potential cost of these projects,” Ceres said in its release.

Coal-to-liquid production is projected to rise in the U.S. from virtually no production today to about 91 million barrels per year by 2035, according to the Energy Information Administration. Major companies involved in CTL development include Shell, Rentech, Baard and DKRW.

Ceres is calling on those firms to provide more information on just how coal-to-liquid might work, and any potential dangers involved. “Investors with holdings in companies involved in coal-to-liquids and oil shale projects should ask these companies to open their books and explain their strategies for managing these risky projects,” said Mindy Lubber, president of Ceres and director of the $9 trillion Investor Network on Climate Risk. “The energy- and water-intensive nature of both coal-to-liquids and oil shale, combined with technological uncertainties and state and federal requirements for low carbon fuels spell diminishing returns for investors.”

“We are leery of investing in oil shale and coal-to-liquids, and have turned down specific opportunities to invest in CTL developers in the past,” said Steven Heim, Managing Director and Director of ESG Research and Shareholder Engagement, Boston Common Asset Management, LLC. “The energy resource seems promising but huge obstacles may be regional water scarcity and the lack of large-scale carbon capture and sequestration infrastructure.”

For example, oil shale and CTL development may be constrained by each technology’s need for large amounts of water. Oil shale production requires 1.5 to 5 barrels of water for every barrel produced while CTL requires 5 to 7 barrels of water for every barrel of produce produced. Water constraints are especially problematic for oil shale production, because the reserves are located in the water-stressed states of Colorado, Wyoming and Utah. Then the question becomes: Would the U.S. look north of the border for Canada’s vast water supplies? In a dire situation, the answer to that question seems obvious.

Tuesday, December 7, 2010

AGF and Acuity already talking synergies

It may have come as a surprise to industry watchers, but to hear AGF chair and CEO president Blake Goldring and Acuity president and CEO Ian Ihnatowycz tell the story, a merger between the two Toronto-based mutual fund firms was only a matter of time.

The two executives use similar terms to describe their companies, such as innovation, integrity, and most of all, independence. AGF has been around since 1957, while Acuity was established in 1990, significant periods of time for independent fund companies in Canada.

“We’re proud of what we’ve accomplished over the last 20 years, Ihnatowycz said on November 30 in a conference call after the friendly takeover bid was announced. “But we came to the conclusion that we had to rapidly increase our size to increase our competitive edge.”

“AGF is a well-respected firm and we share similar values – it’s a natural progression for us and an excellent fit.”

Despite the similarities of the two companies, there are several critial differences. Firstly, AGF is much larger, with $51 billion in assets under management (AUM), compared to Acuity’s $7 billion.

And AGF is much stronger in the retail market, which represents 63% of the company’s AUM; Acuity’s equity products make up less than one-third of its AUM. This is where the synergy starts to make sense. AGF has only 35% fixed income and balanced products compared to Acuity’s 69%.

“[The takeover] allows us to offer key products that are in demand – balanced and fixed income,” Goldring said. “Acuity’s specialty in SRI will allow us to appeal to a broader range of investors in a space that few of our competitors have entered.”

Now, that’s not quite true; a number of “traditional” mutual funds have either bought or created their own line of SRI products, with limited success, notes Toronto-based SRI advisor Sucheta Rajagopal. Remember RBC’s big splash when it announced a line of SRI products managed by Jantzi Research (now renamed as Sustainalytics)? The advertising around that particular fund family was underwhelming, to say the least. Not to be too hard on RBC, but try finding the Janzti SRI funds on RBC's website. “AGF, we’ll be watching!” Rajagopal says.

Still, AGF remains optimistic about Acuity’s product line, which includes several popular SRI funds: Acuity Social Values Canadian Equity Fund, Acuity Social Values Global Equity Fund and Acuity Social Values Balanced Fund (formerly the Acuity Clean Environment Equity Fund, established in 1991 and one of the country’s oldest SRI funds).

“SRI is experiencing significant asset growth worldwide as pensions and other institutional investors are taking note,” says AGF Senior Vice President and Chief Financial Officer Robert Bogart.

There are no immediate plans to change Acuity’s portfolio management team nor its fund lineup and the company will retain the name Acuity Funds Ltd. as a wholly-owned subsidiary of AGF.

Under the terms of the agreement, Acuity shareholders will receive a combination of 60% cash and 40% AGF Class B Non-Voting shares. A portion of the purchase price will be deferred and is subject to an AUM-based adjustment over three years from closing. The acquisition, worth about $325 million, requires regulatory approval and is expected to close on February 1, 2011. Both Goldring and Ihnatowycz admit that specific fund mergers are a possibility once the two companies are able sit down and discuss such details.

Ihnatowycz will be retiring from the day-to-day operations of Acuity but is expected to sit on the board of directors of the new company.

Saturday, December 4, 2010

New software to benefit African farmers

A new technology project could provide small African farms in Ghana with timely crop information, enabling farmers to increase their incomes.

IFC (a member of the World Bank) and Soros Economic Development Fund have both invested $1.25 million into Esoko, a Ghanaian technology firm whose new software takes advantage of the fast-growing mobile phone market in Ghana.

The technology allows farmers "affordable and timely access to market information that can help them negotiate better prices and improve the timing of getting their crops to market," according to a joint IFC/Soros press release, mainly through the use of text messaging.

"Our platform was developed by African software engineers here in Accra, Ghana and has been a totally local market-drive initiative," said Esoko CEO Mark Davies. "IFC and SEDF have a strong track record of helping local companies get this funding and advice needed to expand into new regions and markets. With their support, we hope to export this African technology all around the world."

The software allows different parties in the agricultural chain to exchange real-time market information. Farmers receive current demands, prices of crops and the location of seeds and fertilizers directly on their mobile phones. Associations and governments can share critical information with thousands using a bulk-text messaging feature, IFC and Soros added in their news release.

The technology is already being used in nine African countries.

Esoko is also publishing the first commodities indices in Africa in an effort to ensure that farmers are fairly compensated for their crops, as formal commodity exchanges are very rare on the continent. The company is initially publishing two indices for 12 agriculture commodities in seven markets in Ghana.

For a video on Esoko's work, please visist: