Done Deals: Hohe See and Albatros

Offshore wind at scale. That was the draw when CPP Investments bought its 24.5% stake in Hohe See and Albatros in 2018.

Located about 100 km off the coast of Germany’s North Sea, the wind farms were still under construction at the time. But by early 2020, development was complete and they were pushing some 2.5 million-megawatt hours of electricity into the grid—enough to power 700,000 households per year.

Then the world changed. The war in Ukraine laid bare the European Union’s heavy dependence on Russian energy—the superpower supplied 45% of total EU gas imports in 2021—prompting member states to re-evaluate their energy supply chains. As forest fires and other extreme weather events grew more frequent, regulators began to place a more urgent focus on decarbonization. Notably, Washington’s landmark Inflation Reduction Act, containing generous subsidies for clean energy industries, was signed. And Europe soon answered with its own Green Deal Industrial plan.

In just five years, the universe of investors for renewable energy widened dramatically—and for CPP Investments, the opportunity to crystalize returns through an exit became clear.

“The appetite for renewable energy assets certainly increased given greater urgency on both energy transition and energy security,” said Barry Liang, a senior associate on the deal.

Ultimately a buyer was found close to home. In Canada’s Enbridge Inc. Already a joint venture partner with 24.9% of the assets (alongside German utility and majority owner EnBW with 51%)—Enbridge purchased CPP Investments’ stake in 2023. And CPP Investments netted $374 million in net proceeds after costs, delivering returns well above original expectations.

Alongside growing demand, Liang credits the strong return to three key points: investing early in the renewables development cycle; a lower than budgeted construction capital expenditure; and a favourable debt raise earlier on.

The transaction demonstrates that investing in the long term doesn’t always mean holding an asset long-term. But in another sense, it’s good example of how long-term thinking continues to pay off. Having identified decarbonization and renewable energy as a long-term trend, CPP Investments established an early footprint in the space.

Further growth will be financed by a variety of means including partnerships, securing additional financing at the project level and selling down de-risked assets.

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Five Minutes with Michel Leduc