Canadian pension funds ponder $6 billion sale of renewable energy company

Success of the potential deal contingent on market conditions

Canadian pension funds ponder $6 billion sale of renewable energy company

In a recent development, two Canadian pension funds have initiated discussions about potentially selling Cubico Sustainable Investments, a major player in the renewable energy sector. Sources familiar with the matter have indicated that the valuation of this renewable energy firm could surpass $6 billion, factoring in its debt, as reported by Reuters.  

According to Reuters, the Public Sector Pension Investment Board (PSP Investments) based in Montreal and the Ontario Teachers' Pension Plan (OTPP) are in the process of selecting a financial advisor. While the sale could span several months, insiders have cautioned that the outcome remains uncertain and could hinge on market dynamics. 

The sources, who opted to remain anonymous due to the confidential nature of the discussions, have highlighted that the success of the potential deal is contingent on the prevailing market conditions. 

It has come to light that Cubico's owners have set their sights on achieving a valuation that corresponds to approximately 10 times their earnings before accounting for interest, taxes, depreciation, and amortization (EBITDA). This valuation aspiration is based on the firm's performance metrics, with an EBITDA figure of $641 million recorded in 2022. 

This potential sale has emerged at a time when businesses engaged in renewable power development and other energy transition services have garnered interest as attractive targets for investment by infrastructure entities and corporate utility providers. 

OTPP manages an asset portfolio valued at C$247.2 billion ($184.31 billion), while PSP Investments supervised assets worth roughly C$243.7 billion. 

PSP Investments boasts a portfolio encompassing hydroelectric, wind, and solar assets, totaling $1 billion within Canada. Moreover, the fund has made investments in offshore wind initiatives spanning the United States, Europe, and Asia. 

OTPP has collaborated with US utility company NextEra Energy (NEE.N) and reached an agreement to fund offshore wind projects in partnership with Australia's Macquarie Group (MQG.AX). 

Back in 2015, the two pension funds joined forces with Banco Santander SA (SAN.MC) to establish Cubico. They subsequently achieved full ownership after acquiring Banco Santander's stake in the venture the following year. 

Cubico currently operates wind and solar farms across a dozen countries in Europe and the Americas. The company is also actively engaged in concentrated solar power and transmission line technology operations, boasting a capacity of 2.8 gigawatts (GW). In addition to its existing operations, the company is in the process of developing and constructing an additional capacity exceeding 2.2 GW, as stated on its official website.