Pipelines, protests and politics are a volatile stew in western Canada. Presumably they don't make for a great investment climate for an Alberta crown corporation about to be tasked with managing considerable public pension funds.
But in December the Alberta Investment Management Corporation (AIIMCo) charged into a major ownership position in the Coastal GasLink natural gas pipeline in B.C. AIMCo and U.S.-based KKR & Co. are buying a 65-per-cent stake in the $6.6-billion pipeline designed to ship gas from northeastern B.C. to an LNG facility in Kitimat.
While the B.C. government is happy with the pipeline, the hereditary chiefs of the Wet'suwet'en First Nation are opposed. They issued a symbolic expropriation order to the company which has put a hitch in pipeline work.
And on Tuesday this week, protesters supporting the chiefs staged a demonstration at AIMCo's downtown Toronto office. It's not the sort of attention big conservative investment funds really like to have.
AIMCo's timing on this pipeline investment had some Albertans scratching their heads even before the latest First Nation's protest.
Alberta's UCP government recently passed Bill 22, which moves some provincial pension and other investment funds, including the assets of the teachers retirement fund, to AIMCo's management. Teachers are in an uproar over the decision which didn't involve any consultation with the pension holders.
There is also a government road show travelling through Alberta right now determining the public appetite for patriating the province's portion of the CPP and putting those assets under AIMCo's control as well.
Opposition is mounting to these pension moves, based on a fear that Premier Jason Kenney's government will use AIMCo's financial clout to shore up the faltering oil and gas industry in the province, thus putting pension security at risk. Critics are railing about the potential for Kenney to use the pension funds as a policy tool even as large institutional investors sound the alarm about the risk of holding positions in fossil fuel industries.
The roar of concern grew loud enough that AIMCo CEO Kevin Uebelein penned an oped for Postmedia in early December protesting that AIMCo's investment decisions are not tied to government policy.
"The Alberta government has no say whatsoever regarding where or how we invest," declared Uebelein.
But the Dec. 26th press release about the Coastal GasLink investment only reignited all the fears about pension money going into the oilpatch. AIMCo also made a $1.15 billion deal for a major stake in the Northern Courier oil sands pipeline in May.
While the government may not be calling individual investment shots, that doesn't guarantee that AIMCo will steer clear of the oil and gas sector, despite mounting financial guru opinion that the risk involved in carbon emission intensive projects must be factored into investment analyses.
Uebelein has argued that taking on the new public funds designated under Bill 22 will add $30 billion in assets to the AIMCo's $115-billion kitty and thus create a more globally competitive investment corporation.
However, AIMCo's already impressive size didn't yield a great result in 2018, with a 2.3 per cent return on investment. Granted, that was an unusually poor year when compared to the previous four years.
Kenney's trial balloon on pulling Alberta out of the Canada Pension Plan is still a ways off and may not come to fruition, given the enormous difficulties of severing Alberta's contributions from the existing fund and mounting a whole new bureaucracy in Alberta. Controversies like this latest pipeline investment only rile up already nervous seniors about the safety of their savings may also give some pause in political terms.
AIMCo generally operates under the radar of the average Albertan, but no doubt for the next few months every press release it issues about what it plans to invest in will be carefully parsed by analysts and social media pundits.
The AIMCo 2019 financial report is due out on Jan. 30, after the market closes. If the rate of return isn't relatively hefty it will further reinforce the gathering opposition to Kenney's plan to centralize public fund investments and pension plan assets under the crown corporations umbrella.
Photo Credit: Calgary Herald