A Japanese pension fund is joining a Canadian partner and other firms in a US$2 billion deal involving the purchase of a US power plant, a company involved in the deal said yesterday.
The Pension Fund Association, a federation of employees’ pension funds, and several other Japanese firms have tied up with Canada’s OMERS pension fund to invest in the Midland Cogeneration Venture in Midland, Michigan.
The move marks the first direct infrastructure investment by one of Japan’s pension funds, which are being pushed out of their usual government bond purchases partially because of the central bank’s own bond-buying stimulus drive.
The Pension Fund Association manages more than ￥10 trillion (US$100.5 billion) of assets.
Trading giant Mitsubishi said it was also involved in the ￥200 billion deal struck by the Global Strategic Investment Alliance (GSIA), an investment fund which includes Mizuho Bank and the Japan Bank for International Cooperation.
The venture is currently owned by the Canadian pension fund, which will sell part of its stake to the GSIA, with whom it will then jointly re-invest in the power plant.
Mitsubishi said the investment was also the first for the US$7.5-billion GSIA, which was formed in April last year to buy into in infrastructure mainly in North America and Europe under the leadership of OMERS.
OMERS will hold 50 percent of the plant, with 25 percent allocated to the Pension Fund Association while the remainder will be shared among the other partners, Mitsubishi said.
Japanese pension funds usually earmark a large part of their portfolio for Japanese government bonds, but the Bank of Japan is soaking up a huge proportion of the market, as part of a bid to push companies to put their money in more risky assets.
The idea is that the cash is more likely to help stimulate the economy this way and forms part of a multi-pronged approach by Japanese Prime Minister Shinzo Abe to boost growth and pull Japan out of more than 15 years of deflation.
The gas-fired thermal power plant has a 1.63 million kilowatt capacity and supplies power to Dow Chemical and other companies.
“Investments in non-traditional assets are expected to increase” a Mitsubishi spokeswoman said, citing a need for portfolio diversification as government bonds become harder to come by.