Evidence of meeting #161 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was investments.
A video is available from Parliament.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
I noticed online that CPPIB has shares in Kinder Morgan that predated the government's announcement. Can you tell us more about that deal? The purchase was 50 million dollars' worth of shares.
I'd also like to know if pipelines are a good investment.
President and Chief Executive Officer, Canada Pension Plan Investment Board
I will double-check and we'll come back to the clerk with the information, but I'm guessing that $50 million is in a passive or balancing portfolio. That's what those shares would be, so it would be part of an index that we are investing in as part of the balancing part of the portfolio. I don't think it's an active investment.
With respect to pipelines, we are invested in pipelines here in Canada and elsewhere in the world. We have had positive experiences and we have had negative experiences, and it really depends on the regulatory risks and—
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Could you talk more about the negative experiences? What were those?
President and Chief Executive Officer, Canada Pension Plan Investment Board
We invested several years ago in a pipeline from Norway into Europe called Gassled. We invested alongside a number of our peers. Soon after we made the investment, we were surprised by a very significant change in the tariff regime for that pipeline by the Norwegian government. This is something we've been in legal proceedings on for a number of years. It was quite a surprise to us at the time.
Conservative
President and Chief Executive Officer, Canada Pension Plan Investment Board
Yes, that's part of the regulatory risk. It is a really critical part of due diligence to understand regulatory risk for any infrastructure investments, which are by nature long-term and very sensitive to various types of risk.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
In this case you are still litigating with the governments?
President and Chief Executive Officer, Canada Pension Plan Investment Board
I believe that's the case.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Compare that to Canada. How do you find the regulatory risk here?
President and Chief Executive Officer, Canada Pension Plan Investment Board
It's very difficult to generalize. We have pipeline investments here. We're very comfortable with the pipeline investments that we have here today, but I could answer specifically only about particular situations.
Conservative
President and Chief Executive Officer, Canada Pension Plan Investment Board
As I said earlier, we haven't looked at that yet. We have been approached by the federal government's adviser, but we haven't taken on any confidential information and we haven't had any detailed discussions.
Conservative
President and Chief Executive Officer, Canada Pension Plan Investment Board
No, it's purely because it's at an early stage and we don't have any confidential information or any of the information we need to assess the situation.
Conservative
President and Chief Executive Officer, Canada Pension Plan Investment Board
We haven't decided yet. We're still evaluating the situation. We have an obligation to assess every major investment opportunity that comes along, fully understanding the risks, potential returns, and how it might fit into our portfolio.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
What are the kinds of risks that would make investing in the pipeline unacceptable to the CPPIB? What is too much risk when it comes to an asset like a pipeline?
President and Chief Executive Officer, Canada Pension Plan Investment Board
As I said, with any investment you're measuring the risks versus the potential returns, and that's the equation we look at in any investment. That's the equation we need to thoroughly understand on both sides of every single investment we make.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
CPPIB has invested in Wolf Midstream Inc., which earlier this year acquired Access Pipeline, the entire ownership. You're also invested in Star Capital Partners, which acquired TotalFinaElf Pipelines, or TPL, and the TotalFinaElf Connect pipeline between the United Kingdom and Scotland. In those cases, it had to be part of the portfolio you assessed.
Is it just diversifying, making sure you're diversified across the board in that particular sector, or is it looking at things like how much risk you're taking on? Is there too much regulatory government risk, political risk?
President and Chief Executive Officer, Canada Pension Plan Investment Board
Certainly the risks you mention are two or three of the many risks we need to look at when we make any investment. I'd say pipelines and infrastructure are very long-term investments. Always critical to our assessment, however, is thoroughly understanding every one of the risks we're taking on and making sure we're sufficiently compensated by making sufficient returns. As you said, we do have pipeline investments around the world, those you mentioned and others in other places.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Mr. Chair, and good afternoon, gentlemen.
To elaborate a little bit more, it's great to see my colleagues on the other side asking about pipelines. We're going to build that Trans Mountain pipeline from Alberta to B.C. and make sure that we diversify our export markets for Canadian resources. That $12 billion to $15 billion we're not getting for those Canadian resources needs to be captured. That will pay for more schools, more hospitals, more services for Canadians, and we'll get to narrow the discount between WTI and WCS, which will be great.
I take it once there is a data room set up for the Kinder Morgan pipeline, whenever that may happen, most likely there will be a number of institutional buyers that, I can conjecture, would be ready to take a look at such a great asset and something of significant value.
Am I off on that, or am I on the right track?
President and Chief Executive Officer, Canada Pension Plan Investment Board
We and many of our peers will have an obligation to assess precise investment opportunities in infrastructure. I mentioned before that the pipeline—with a small p, if you will—opportunities around the world are a real challenge for people. It's the same here in Canada and most countries in the world, and when a sizable opportunity comes along, we have a responsibility to evaluate it and understand the risk/return along with the fit in our portfolio.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Absolutely.
One of the attractions, and one of the difficulties, for CPPIB is size, the size of investment. Your folks' investment fund requires liquidity. It requires a sizeable investment. Making a $100-million investment for some funds is not a lot, but something like a $4.5- or $5-billion investment is attractive not only to yourselves, but also to other Canadian investment funds, be it teachers', OMERS, HOOPP, or bcIMC, and so forth. The size thing will be attractive, I think, to a lot of funds.
