Thursday, May 25, 2023

Substations for First US Offshore Wind Farms Ready for Installation

US offshore wind substations — Substation for South Fork Wind became the first to be built in the U.S. and has now departed Texas (Orsted)

The first substations of the U.S.’s commercial offshore wind farms have been completed and are being moved from Texas and Denmark to the locations for their installations. These projects signal several key milestones in the U.S. offshore wind sector including the completion of the first American-built substation. They are also a significant step for the offshore projects in New York and Massachusetts both of which are scheduled to be the first to be completed in the United States and generate power this year.

The first American-built offshore wind substation departed a Texas fabrication facility on May 24. The substation is transiting across the Gulf of Mexico and then up the East Coast for installation at the South Fork Wind project site off New York in a few weeks. Designed and built by Kiewit Offshore Services, the 1,500-ton, 60-foot-tall substation left Kiewit’s Ingleside facility near Corpus Christi, Texas.

“The completion of South Fork Wind’s offshore wind substation is yet another first for this groundbreaking project and moves us one step closer to the project’s first ‘steel in the water’,” said David Hardy, Group EVP and CEO Americas at Ørsted.

South Fork Wind, which is a project from joint development partners Ørsted and Eversource, is now in its offshore construction phase, first with work to install the project’s 68-nautical mile submarine cable from its landfall below Wainscott Beach, in East Hampton, New York to the wind farm site roughly 35 miles east of Montauk. Cable laying is underway and installation of monopile foundations will begin in the coming weeks. Vessels from several Gulf ports are supporting the construction of South Fork Wind.

According to the companies, South Fork Wind is on track to be the first completed utility-scale offshore wind farm in federal waters, with the project expected to be operational by the end of 2023. The project consists of 12 turbines to provide 132 MW.

Substation for Vineyard 1 departed from Denmark today (Semco Maritime)

Today, May 25, in Denmark, they also marked the departure of the substation for the Vineyard Wind 1 project to be located approximately 35 miles offshore in Massachusetts. Sail-away for the 3,200-ton substation is reported to be on time according to the original schedule and is a major milestone for the project team from Bladt Industries, Semco Maritime, and ISC Consulting Engineers. The project is being developed in a 50-50 partnership between Copenhagen Infrastructure Partners and Avangrid Renewables.

Vineyard Wind 1 is carried out as an EPC contract, with ISC as a subcontractor, covering the design, procurement, and construction of the 3,200 tons offshore substation and a 2,000 tons jacket foundation with four piles, which form the permanent anchorage to the seabed. Bladt handled the steel manufacturing of the substation. Design and engineering were carried out by Semco Maritime and ISC, and installation of the electrical system was also carried out by Semco Maritime.

After arrival at the installation site, Vineyard Wind will install the substation. Semco Maritime and Bladt Industries will oversee the offshore commissioning during the summer.

Vineyard Wind 1 will consist of an array of 62 wind turbines, which will generate 800 MW of electricity annually. It is also scheduled to deliver the first power to the grid in 2023.

BOEM Completes Environmental Review for New Jersey Offshore Wind Farm

environmental review NJ offshore wind farm — Ocean Wind 1 will be located off the Southern New Jersey coast near Ocean City and Atlantic City (Orsted)

The Bureau of Ocean Energy Management (BOEM) reported that it has completed its environmental analysis of the proposed Ocean Wind 1 wind project offshore New Jersey. The bureau plans to issue its decision this summer to approve the project, which would be New Jersey’s first commercial-scale offshore wind farm.

Eleven months ago, BOEM published its draft of the Environmental Impact Statement for the project. It was followed by a public comment period as well as three virtual meetings to solicit additional feedback on the draft. BOEM reports it received a total of 1,389 comment submissions from government agencies, non-governmental organizations, and the public during the comment period and considered these comments and stakeholders’ feedback when developing the final EIS.

The final EIS is available on BOEM’s website and as required by law a notice will be published on May 26. The report analyzes the potential environmental impacts of the activities laid out in Ocean Wind’s Construction and Operations Plan.

“BOEM continues to make progress towards a once-in-a-generation opportunity to build a new clean energy industry in the United States,” said BOEM Director Elizabeth Klein.

Ocean Wind proposes to construct up to 98 wind turbines and up to three offshore substations within its lease area with an estimated capacity range will be from 1,215 to 1,440 megawatts, capable of powering up to 504,000 homes per year. At its closest point, the Ocean Wind 1 project will be at least 13 nautical miles southeast of Atlantic City, New Jersey. Export cables are anticipated to make landfall in Ocean County and Cape May County, New Jersey.

The project was proposed as a partnership between Ørsted and New Jersey power utility Public Service Enterprise Group (PSEG). However, in January 2023, they said that based on changes in the government financial support programs for offshore wind, they had determined that it would be best if Ørsted acquired PSEG’s 25 percent interest in Ocean Wind. PSEG said it had decided to step aside and allow for a better positioned tax investor to join the project so that it can proceed with an optimized tax structure.

Plans call for the installation of GE Haliade X 12 MW turbines. Ørsted had previously estimated that construction would take approximately two years with first operations beginning before the end of 2024 and full operations in 2025. At the end of April, the project cleared another key step with decisions from the New Jersey Department of Environmental Protection and the issuance of the first construction permits. Ørsted noted that additional federal, state, and local approvals, in addition to approval from the Bureau of Ocean Energy Management, were required before construction on Ocean Wind 1 can begin.

Ocean Wind 2 has also been proposed which would be located 15 miles off the coast of southern New Jersey, adjacent to Ocean Wind 1. The second phase project would generate an additional 1,148 megawatts of offshore wind energy, which would be enough to power more than 500,000 homes.

UK and Japan Unveil Massive Offshore Wind Trade Deals

Scottish Enterprise photo of Aberdeen Bay wind farm — File image courtesy Scottish Enterprise

The UK’s renewable energy sector has received a major boost after leading Japanese corporations committed to multi-billion investment deals in Britain’s offshore wind industry. The announcement came as the UK Prime Minister hosted a business reception event in Tokyo last week, geared towards expanding the UK-Japan trade relationship.

The new investments include funding for offshore wind, low carbon hydrogen and other clean energy projects from Marubeni. The leading Japanese trading house said it would sign an MoU with UK government laying out about $12 billion in investment over the next 10 years, including in offshore wind in Scotland and green hydrogen projects in Wales and Scotland.

Sumitomo Corporation, one of the largest general trading companies in Japan, also committed to expand its UK offshore wind projects. This will involve a total investment of $4.9 billion in projects off the coasts of Suffolk and Norfolk, alongside its partners. Sumitomo will also build a high voltage cable manufacturing plant in the Scottish Highlands, bringing more than $250 million in investment and creating 150 skilled green jobs.

Japanese companies are major investors in UK offshore wind and other clean energy technologies. At the same time, UK companies have developed considerable experience on development and deployment of offshore wind and other renewables, and are now bringing that expertise to the Japanese market. In fact, at the same reception last week, several of the UK’s renewable energy companies signed multi-million dollar projects in Japanese and Asian markets.

UK company Octopus Energy committed to invest $1.8 billion in the Asia-Pacific energy market by 2027, helping speed up the region’s transition to a cleaner and smarter energy system. Additionally, leveraging on its existing Asian headquarters, Octopus will channel $373 million to expand its tech innovation and energy retail hub in Tokyo.

UK consultancy Mott MacDonald also secured a major contract to help develop a state-of-the-art offshore wind farm in western Japan, which could power more than 175,000 homes with clean energy.

“These new investments are a massive vote of confidence in the UK’s dynamic economy, from some of Japan’s top firms. It is also great to see leading UK businesses seizing the huge opportunities for growth and collaboration in Japan. As we grow our trade ties further and join the huge regional Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade bloc, the sky is the limit for British and Japanese businesses and entrepreneurs,” said UK Prime Minister Rishi Sunak.

Rising Costs Prompt Equinor to Pull Plug on Floating Wind Project

Norwegian state oil company Equinor has pulled the plug on a floating wind-to-platform power project on the Norwegian continental shelf, citing rising costs.

In June 2022, Equinor joined with Petoro, TotalEnergies, Shell and ConocoPhillips to pursue the design of a floating wind farm in the area around the Troll oil field, about 30 nm off the coast of Bergen. The development concept called for a 1 GW floating wind farm linked to a shoreside substation. The power would help feed the nearby Troll and Oseberg offshore oil platforms, which are already linked to the grid near the same location Using that connection, the platform operators would buy as much of Trollvind's power as possible, giving it a built-in "market" for its power at a commercially viable price point.

At the time, Equinor CEO Anders Opedal said that Trollvind would help cut emissions through electrification, deliver more green power to a region that was experiencing shortages, and help Norway cement its leadership in floating offshore wind. However, even the best of plans can be put on hold by inflation and supply chain challenges. According to Equinor, rising costs in the offshore wind industry have undercut the goal to complete Trollvind without support, and "it is no longer a commercially sustainable project." Additionally, the project team had to make technical changes because of the preferred technology for the wind farm "not being available."

"Trollvind was a bold industrial plan to solve pressing issues concerning electrification of oil and gas installations, bringing much needed power to the Bergen-area, while accelerating floating offshore wind power in Norway. Unfortunately, we no longer see a way forward to deliver on our original concept of having an operational wind farm well before 2030,” says Siri Espedal Kindem, vice president of renewables Norway.

As Kindem suggested, the project's challenges were also stacked up against a tight deadline. In 2020, Norway set an emissions-intensity reduction target for its oil and gas operators, asking for a 40-50 percent cut by 2030. Achieving that cut will require platform electrification and new sources of green power. While Trollvind was designed to help meet this requirement, it has not achieved enough maturity as a project to reach implementation by the deadline, further reducing its attractiveness.

Equinor said that it would continue to look for future opportunities in the floating wind sector, which it pioneered through the development of the Hywind Scotland and Hywind Tampen projects.

The cancellation marks a new setback for Equinor's floating-wind ambitions. The firm lost out of the bidding in the massive ScotWind lease round in November 2021; it proposed a large-scale, one-gigawatt floating development, similar in size to Trollvind, but the offer was not accepted. "We are going to compete fiercely going forward," EVP for renewables Pal Eitrheim told Energy Voice after the auction.

Construction Begins in Sweden on Europe’s Largest E-Methanol Project

e-methanol production Europe — Building in Sweden, the plant will use natural energy and forest products to produce e-methanol (Orsted)

Construction began with a ceremonial groundbreaking for what is being called Europe’s largest e-methanol project. Due to begin production in 2025 producing around 50,000 tonnes annually, the facility is being developed by Ørsted as one of the first steps to support the large-scale use of methanol in the shipping industry.

Originally developed by the Swedish e-fuels company Liquid Wind, FlagshipONE will be located next to Övik Energi’s combined heat and power plant Hörneborgsverket in Örnsköldsvik, in Northern Sweden. According to the companies, the site is well suited to support the production with ample supply of wind energy and located near Sweden’s world-leading forest industry. The biogenic carbon needed to produce the e-methanol will come for the forest industry.

The e-methanol from FlagshipONE will be produced using renewable electricity and biogenic carbon dioxide captured from Hörneborgsverket. In addition, FlagshipONE will use steam, process water, and cooling water from Hörneborgsverket. Excess heat from the e-methanol production process will be delivered back to Övik Energi and integrated in their district heating supply.

“FlagshipONE is a pioneering project that will open a new era for green shipping, said Anders Nordstrøm, COO of Ørsted P2X during the ceremony. “FlagshipONE will be the first project in a new green industry in Sweden, which Ørsted intends to spearhead.”

The companies involved in the project point to the rapid growth in the orderbook for methanol-fueled ships. DNV currently calculates the total orderbook at 89 methanol dual-fuel vessels due for delivery by 2028. DNV has predicted that methanol will overtake LNG and become a leading alternative fuel candidate in part due to its early availability and the easy in handling versus the toxic nature of ammonia. The introduction of the EU’s Fuel EU Maritime regulations and other emission standards is expected to further strip the adoption of methanol by the shipping industry.

The project was initially developed by a Swedish startup Liquid Wind which is in strategic partnership with companies including Alfa Laval, Carbon Clean, Siemens Energy, Topsoe and Uniper as it works to develop electrofuel. Ørsted initially acquired a 45 percent stake in the project and coordinated with the decision to proceed to construction purchased the remaining 55 percent from Liquid Wind.

Klimatklivet, a part of the Swedish Environmental Protection Agency, supported FlagshipONE with $14 million during the planning phase. Liquid Wind’s strategy is to compelte plans such as FlagshipONE and attract partners to take over the projects and see them to completion.

FlagshipONE is the first e-methanol project in Ørsted’s ambitious green fuel pipeline. The company is also developing the Green Fuels for Denmark project in Copenhagen and the 300,000 tonnes per year Project Star in the U.S. Gulf Coast area. The concept for the U.S. facility calls for Ørsted to develop a 675 MW Power-to-X facility. The facility will be powered by approx. 1.2GW of renewable energy from new onshore wind and solar PV farms. The biogenic carbon needed to produce e-methanol will be extracted through carbon capture at one or more large point sources. They also have an offtake agreement with Maersk to become part of the network the Danish shipping company is building to fuel its pioneering fleet of methanol-fueled containerships.

PREVENTABLE INCIDENT

NTSB: Wrong Bearing Led to Engine Fire on OSV

The NTSB has released its investigation into a catastrophic engine failure aboard the OSV Ocean Guardian during sea trials off Seattle last year, and has determined that service technicians had installed an improperly-sized main bearing in one of the engines.

In late 2021, Ocean Guardian arrived at a yard in Seattle to begin an overhaul for a new, unspecified mission in the Western Pacific. She received a shelter deck over her aft deck, two cranes, an A-frame and extra accommodations spaces. In January and February 2022, local technicians overhauled the top ends of all four of her diesel-electric main engines and replaced bearings as needed on the bottom ends.

In May, with modifications and repairs completed, the vessel conducted a sea trial to prepare for departure. On May 27, two tugs brought Ocean Guardian out through the Ballard Locks to Shilshole Bay. At about 1400, the crew began to test the ship's propulsion. At 1435, with the No. 3 engine at 30 percent load, the engineers in the control room heard a loud bang and saw smoke in the engine room.

Flames burst out next to the No. 3 engine, and the chief engineer activated an emergency stop to shut it down. The engineering crew evacuated the engine room and the captain remotely shut down ventilation, closed dampers, shut off fuel supply valves and closed the watertight doors to the compartment. Shortly after, the chief engineer activated the fixed firefighting system and effectively put out most of the blaze. The crew mopped up a few small residual fires on and under the engine room deckplates, and two tugs brought the stricken vessel back to port. (The captain did not report the incident to VTS or the local fire department, according to NTSB, as he believed it was under control.)

The damage to the No. 3 main engine was not repairable. A conn rod had gone through the side of the block, and there was extensive damage throughout the inside of the engine. The No. 3 had to be pulled out and replaced with a spare.

A forensic analysis determined that something had gone wrong during the maintenance period on the main engines.

During the overhaul, a service tech had pulled the No. 6 main bearing on the No. 3 main engine for an inspection. The bearing was within tolerances, so the rest of the main bearings on the engine did not have to be replaced. However, it was company policy to replace any bearing removed during inspection with a new one, no matter its condition, in order to prevent any alignment or torque issues with reinstalling a used part. The conn rod bearings were all standard size on inspection, so the tech believed that the main bearing journals were also standard size, as would be normal practice. He did not record the part number printed on the main bearing he removed, and he ordered a replacement in standard size. Another technician installed it.

Unfortunately, the crankshaft main bearing journals on the No. 3 engine had been ground undersized by 0.025 inches at some point in the past. No record had been kept of this service, which was nonstandard: normally all the conn rod journals and main bearing journals would be milled down at the same time during a repair.

When the No. 3 engine started up, the wrong-sized bearing shell on the No. 6 main bearing leaked out so much oil that the oil supply to the adjacent No. 9 and 10 conn rod journal bearings fell by about 80 percent. Without lubrication, the No. 9 and 10 conn rod bearings overheated until the cap bolts fractured, sending the rods, bearing caps and bolts flying about the inside of the engine.

"Vessel crews and equipment manufacturer technicians should carefully identify and document part numbers of all components removed from shipboard equipment. Tracking systems are an effective form of recordkeeping that can be used to ensure proper replacement part selection for reinstallation," advised NTSB.

After repairs, in August 2022, Ocean Guardian departed for the Western Pacific on an unspecified charter. AIS data provided by Pole Star shows that she spent long periods in strategic locations like the Strait of Luzon near Dalupiri Island; South China Sea near Manila; and East China Sea off Okinawa, where the U.S. maintains a naval base. She carried out several survey trackline patterns, one off Okinawa and another south of Chuuk, in Micronesia.

Canada Plans $1.8 Billion Investment for New Coast Guard Small Vessels

The next phase of Canada’s National Shipbuilding Strategy was announced today focusing on the Canadian Coast Guard's small vessels fleet. The federal government reports it will invest nearly C$2.5 billion (US$1.8 billion) for the renewal of its small ship fleet through the acquisition of up to 61 vessels. It is part of a strategy that was first launched over a decade ago investing in science and fisheries vessels, mid-size multi-purpose vessels, and ultimately two Polar icebreakers.

The new program focuses on small craft, barges, and work boats providing new equipment to the Canadian Coast Guard. The small vessels provide search and rescue services, assist disabled vessels, and support aid to navigation programs. So far, under the National Shipbuilding Strategy, 16 small vessels, including 14 search and rescue lifeboats and two channel survey and sounding vessels have been delivered to the Canadian Coast Guard.

The next phase calls for an investment to complete the renewal of the Canadian Coast Guard’s small vessels fleet, which plays a critical role, especially in shallow coastal waters and inland lakes and rivers. It will enable them to acquire six mid-shore multi-mission vessels and one near-shore fishery research vessel. It will also consist of 16 specialty vessels, ranging from shallow draft buoy tenders to science and enforcement vessels, air cushion boats, and search rescue lifeboats. The work will be specifically designated to smaller shipyards and suppliers across Canada to support the marine industry.

"This is a critical investment that will help modernize the Canadian Coast Guard's small vessel fleet,” said Joyce Murray, Minister of Fisheries, Oceans and the Canadian Coast Guard. “We are making sure the Canadian Coast Guard has the equipment it needs to keep Canadians and Canada's waterways safe, while also creating good-paying jobs across the country."

It is the latest piece of the government's long-term, multi-billion-dollar program focused on renewing the Canadian Coast Guard and Royal Canadian Navy fleets. Since the program was launched in 2012, the federal government reports contracts under the strategy are estimated to have contributed approximately C$25 billion to Canada's gross domestic product.

The first newly built vessel commissioned on the program came in 2019, CCGS Sir John Franklin, the first of three Offshore Fisheries Science Vessels (OFSVs). The other two OFSVs – the CCGS Jacques Cartier and CCGS John Cabot – were delivered in November 2019 and October 2020. The 16 multi-purpose vessels were also provided and they carry out multiple missions, including icebreaking in moderate ice conditions and assisting in shipping and springtime flood control in the St. Lawrence waterway and Great Lakes region. They also perform search and rescue, emergency response, and security and protection missions, and maintain Canada's aids to navigation.

Two Arctic and Offshore Patrol Ships are also planned and they will serve missions including North Atlantic Fisheries Organization (NAFO) patrols, operating as the primary conservation and protection enforcement vessels on Canada's east coast, and expanding its patrol capability into the low Arctic. In August 2019, the government also announced the planned procurement of six new program icebreakers to support year-round marine trade in Eastern Canada, the St. Lawrence Waterway, and the Great Lakes. Finally, the government plans two Polar icebreakers.

In addition to the shipbuilding efforts, the government has said it would invest C$2 billion for repairs, refits, and vessel life extension work on the existing fleet until new ships are delivered.

Vancouver Increases Container Throughput at DP World Terminal

Vancouver container terminal — DP World invested in expanded capacity at its downtown Vancouver terminal (Vancouver Fraser Port Authority)

Vancouver Fraser Port Authority joined with terminal operator DP World to mark the completion of a major expansion project at one of the port’s terminals. The increased capacity is considered critical to the near-term growth of the port while Vancouver continues a long-term process to add a third terminal and operator to the port.

Port executives noted that DP World has operated for over 20 years in British Columbia handling over 20 million loaded TEU at the Centerm Container Terminal. It is also the 100th anniversary of terminal operations overall in Vancouver. The port is a critical part of Canada’s trade handling a third of Canada’s trade in goods outside of North America.

The expansion project was designed to increase throughput at the terminal by 60 percent. Construction on the US$260 million project was completed in February 2023 and with the facilities now in operation capacity has been increased to 1.5 million TEU a year, 40 percent over the previous capacity of 600,000 TEU annually. The terminal’s footprint was increased by 15 percent.

As part of the investment, DP World also used the project to reduce the terminal’s environmental impact. Shore power connections were installed for containerships on dock. They also converted the existing diesel yard cranes to electric. The design of the expanded facility also eliminates wait times for vehicles at train crossings and used LEED standards in the construction.

Vancouver Fraser Port Authority also completed the South Shore Access Project earlier this month in partnership with the Government of Canada and with funding from the National Trade Corridors Fund. The final part of the South Shore Access Project, including upgrades to Waterfront Road and the removal of road and rail conflicts in the area to connect terminals directly to the Trans-Canada Highway are now complete.

“Expanding the footprint of the Centerm container terminal and improving road and rail links in the area will increase container trade capacity and resiliency at the Port of Vancouver in the near term,” said Robin Silvester, President and Chief Executive Officer, Vancouver Fraser Port Authority. “As recent years have shown, a robust container sector is critical for Canadian exports and for reliable access to the goods Canadians depend on every day.”

Port officials highlight Canada’s west coast marine container terminals are forecast to hit capacity by the mid- to late-2020s, following a decade of five percent average annual growth. In 2022, the port handled an actual count of just under two million containers (3.55 million TEU).

In April the port received government consent for a controversial plan to add the third terminal to the port. They have been planning and lobbying for the terminal for a decade and still need to win critical approvals. Opposition continues based on the potential impact of the site both on natural habitats of fish and wildlife as well as the potential environmental issues. Port executives highlight the design features to limit the impact while continuing to point out that Vancouver must expand its container capacity.

Deputy finance minister tapped as next Hydro-Quebec CEO: Sources

Mathieu Dion and Brian Platt, Bloomberg News May 24, 2023

Quebec’s government has chosen former pension fund head Michael Sabia as the next chief executive officer of Hydro-Quebec, according to people familiar with the matter.

Sabia has been tapped to succeed Sophie Brochu, who left as head of the electrical utility in April. The appointment could be made official as soon as Wednesday after formal approval from Quebec’s cabinet, the people said, speaking on condition they not be named because the matter is still private.

Sabia, 69, is Canada’s deputy minister of finance, serving as the top bureaucrat to Finance Minister Chrystia Freeland. Earlier this year, he helped craft the Canadian government’s $491 billion (US$364 billion) budget for the 2023-24 fiscal year, laden with incentives for low-carbon technology, including clean electricity.

Hydro-Quebec is an important producer and exporter of hydroelectric power, pumping $6 billion (US$4.4 billion) into provincial government coffers last year. But it has major challenges ahead. After spending years working to convince US states to buy its abundant clean energy, the government-owned firm faces the prospect of future power shortfalls as the province lures more manufacturers. One of the projects Hydro-Quebec has committed to is the Champlain Hudson Power Express, Blackstone Inc.’s US$6-billion transmission line to feed New York City.

The utility is also one of the province’s largest bond issuers, with $5 billion (US$3.7 billion) in long-term debt financing in 2022, according to last year’s annual report.

Sabia was CEO of the Caisse de Depot et Placement du Quebec, Canada’s second-largest public pension manager, from 2009 to 2020, leading the institution into an investment of more than $7 billion in a light rail system in Montreal, the Reseau Express Metropolitain. Prior to his time at the Caisse, he was CEO of BCE Inc., the country’s largest telecommunications company.

“It’s nice to see someone here who understands how the business works and what needs to be done to ensure a climate of confidence in the economic sector,” said Jocelyn Allard, president of a Quebec lobbying group that represents industrial users including Glencore Plc and Rio Tinto Plc. In the past, Allard has criticized the uncertainty surrounding the price and quantity of future power supplies.

Normand Mousseau, a Université de Montreal professor and energy expert, said he wonders if Sabia is the right fit for what Hydro-Quebec needs. “The issue right now is not financial, but technological, technical, of transformation and of demand response,” he said. “We could have had someone with a background in technology, someone who has mastered in-depth technological transformations, who is capable of bringing the necessary innovation to Hydro-Quebec.”

WORKERS CAPITAL

CPPIB CEO says global growth to be

'challenging' over long-term

By David George-Cosh BNNBLOOMBERG May 24,2023

The head of Canada’s largest pension fund said there are still “outstanding questions” about how the global economy will grow over the long-term and cautioned his fund is unlikely to record the same double-digit returns it booked over the past decade.

John Graham, president and chief executive officer of the Canada Pension Plan (CPP) Investment Board, told BNN Bloomberg in an interview that he expects the U.S. to resolve its debt ceiling debacle and is looking to raise liquidity to take advantage of “opportunities” the fund sees in equity and fixed-income markets.

“What is going to drive global growth over the next 10 years? That’s one of the things that keeps us up at night,” Graham said.

Graham’s comments come in the wake of CPP Investments releasing its latest annual report for fiscal 2023 on Wednesday, in which the pension fund reported a 1.3 per cent return. That was the lowest return over the past 10 years but above the 0.1-per-cent benchmark tied to its reference portfolio measures.

Funds under CPP Investments’ management increased by a total return of 10 per cent over the past 10 years, it reported, which Graham acknowledged “would be challenging over the next 10 years to repeat that.”

Canada’s largest money manager said it has $570 billion in assets under management, up about $31 billion due to a profit of $8 billion and net transfers of $23 billion from Canadians in its last fiscal year.

The fund’s return for the year recorded a shortfall in its fixed-income and real estate investments as long-duration government bonds and higher interest rates led to a drag on those asset classes. Those declines were offset by strong gains from its private equity, infrastructure and credit investments, CPP Investments said.

Meanwhile, Graham described the fixed income markets as “interesting” as central banks around the world lifted interest rates to help combat rapidly rising inflation. CPP Investments’ booked a 0.8-per-cent decline among its fixed-income assets that it attributed to exposure to longer-dated government bonds. He noted that CPP Investments will continue to be “constructive” in its energy portfolio investments.

“The path to get here was painful with discount rates rising,” said Graham. “But we’re in a better place in terms of fixed income than we were a year ago.”

A weaker Canadian dollar served as a tailwind to CPP Investments as 78 per cent of its net assets were derived in foreign currencies. CPP Investments recorded a $25 billion gain, or an annual increase of 5.1 per cent, thanks to its foreign exchange investments.

CPP Investments also said that Graham’s compensation rose slightly higher to $5.38 million last year – $4.6 million of which was tied to various annual incentives.

CPP Investments reports 1.3 per cent return

for its latest fiscal year

The Canadian Press May 24, 2023

The Canada Pension Plan Investment Board earned a net return of 1.3 per cent in its latest fiscal year as inflation and rising interest rates weighed on both stock and fixed-income markets. Information regarding the Canada Pension Plan is displayed on the Service Canada website in Ottawa on Tuesday, January 31, 2012. THE CANADIAN PRESS/Sean Kilpatrick

The Canada Pension Plan Investment Board is bracing for headwinds in the event of a recession but said a wide range of investments makes it well-positioned for uncertain economic conditions.

The CPPIB reported Wednesday it earned a net return of 1.3 per cent in its latest fiscal year as inflation and rising interest rates weighed on both stock and fixed-income markets.

The board said the investment gains combined with net transfers from the Canada Pension Plan brought its net assets to $570 billion on March 31, up from $539 billion a year earlier.

"I think we've been trying to be very clear and share the investing market has gotten more competitive and more challenging," said CPP Investments chief executive John Graham in an interview.

"We expect forward-looking returns to be down compared to where they've been historically, but we're also in a position where we're really benefiting from active management and benefiting from diversification."

Graham said geopolitical events and a potential recession could be difficult to forecast, but CPP Investments is well-prepared.

"The key is for us to build a resilient portfolio — a portfolio that will perform through a wide range of macroeconomic and geopolitical scenarios," he said. "The way we do that is diversification."

CPP Investments said the gain for its latest fiscal year reflected returns on investments in infrastructure and certain U.S.-dollar-denominated private equity and credit assets, which benefited from foreign exchange. External investment managers using quantitative, equity, and fixed-income trading strategies also contributed positively to results, the firm said.

A weaker loonie against the U.S. dollar and other major currencies also helped boost investment returns.

The increase included $8 billion in net income and $23 billion in net transfers from the Canada Pension Plan.

But its performance was partially offset by declines in both equities and fixed income across major markets as high inflation and rising interest rates weighed heavily on both asset classes.

"We had headwinds in certain parts of the portfolio and tailwinds in other parts of the portfolio," said Graham, who highlighted challenges in office real estate, retail and the technology space over the past year.

"Certain asset classes continue to be pretty robust, like renewable had a pretty robust year, conventional energy had a robust year," he said.

As of March 31, CPP Investments' portfolio included 33 per cent in private equities, 24 per cent in public equities, 12 per cent in fixed come, 13 per cent in credit investments, nine per cent in real estate and nine per cent in infrastructure.

In addition to investing across various asset classes, Graham said global diversification is key to CPP Investments' strategy for navigating a possible recession.

But amid Canada's ongoing political tensions with China, Graham said CPP Investments remains "surgical" and "selective" in determining which companies in that country to invest in.

He said CPPIB has invested around nine per cent of its funds in China and "we constantly debate whether that's the right amount."

"The right amount is really based on whether we think we're going to get compensated on a going forward basis for the risk," he said.

"We do believe that we should have exposure to China because it is the world's second largest economy. It is a fast-growing economy and it's very connected right now to the broader world. We certainly are aware and alive to some of the challenges and we spend a lot of time thinking about how one should invest in China."

On a relative basis, the fund’s net return of 1.3 per cent for the year beat the 0.1 per cent return by its aggregated reference portfolios over the same period.

The fund's 10-year annualized net return stood at 10.0 per cent.

This report by The Canadian Press was first published May 24, 2023.

Danielle Smith's gaffes put Alberta up for grabs

Kevin Orland, Bloomberg News May 25, 2023

If it’s always the economy, Alberta Premier Danielle Smith and her United Conservative Party should be cruising toward reelection on Monday.

The energy-producing province’s unemployment rate is lower than it’s been for most of the past decade. Inflation is running cooler than the Canadian average. And oil prices are higher than those the last three premiers enjoyed, keeping Alberta’s producers profitable and helping balance the budget with the spending taps still open.

But a trove of Trumpian comments from Smith’s former career as a radio talk-show host — plus a few during her time as premier — and policies that push Alberta toward Quebec-style autonomy have put control of a province that produces about as much oil as Iran within the reach of her center-left challenger.

Polls have consistently shown New Democratic Party Leader Rachel Notley, herself a former premier, neck-and-neck with Smith. “The election should not be close,” said Duane Bratt, a political science professor at Calgary’s Mount Royal University, “because conservative voting is the default option in this province and the economy is rebounding.”

A victory for Notley — whose party leans left on most issues but has adapted to the political necessities of a province that relies on oil and gas revenues — would be a boon for Justin Trudeau. While she argues federal targets for cleaning up the energy sector need to be scaled back, Notley would be a more reliable partner for the prime minister on climate policy and beyond. Still, she has distanced herself from Trudeau and her federal counterpart, NDP Leader Jagmeet Singh, due to their unpopularity in Alberta.

A poll by Abacus Data released May 22 showed Smith’s United Conservative Party leading with 40% of eligible voters, compared with 37% for Notley’s New Democrats. A poll by the same firm a week earlier had those figures reversed.

Smith has found herself in a competitive race in part because of comments that appeal to her base’s more extreme elements while alienating mainstream conservatives.

For example, on a 2021 podcast, she likened Albertans who were vaccinated against COVID-19 to followers of Adolf Hitler. As a candidate for her party’s leadership in 2022, she implied on a Twitter broadcast that cancer is largely preventable up until stage four. And just hours after taking office, she said unvaccinated people were “the most discriminated against group that I’ve ever witnessed in my lifetime,” drawing the ire of Indigenous communities in Canada. She walked back that statement the next day, saying she didn’t “intend to trivialize in any way the discrimination faced by minority communities and other persecuted groups.”

Smith has faced criticism for her actions as premier, too. An ethics watchdog found she broke the rules by involving herself in the case of a street preacher facing pandemic-related charges. And the first bill her government introduced was the Alberta Sovereignty Within a United Canada Act. It took effect in December, with Smith saying it gives the province a framework to resist federal laws or policies that hurt Alberta.

The move added “another layer of uncertainty” for businesses that want to move to or invest in Alberta, Deborah Yedlin, president of the Calgary Chamber of Commerce, told BNN Bloomberg Television at the time. Similar measures taken by separatist parties in Quebec prompted many businesses to scale down or leave the province, Yedlin added.

Smith has also floated the ideas of pulling Alberta out of Canada’s main pension plan and replacing the Royal Canadian Mounted Police with a provincial police force.

The sovereignty bill is at the center of Notley’s critique of the premier.

“It is a really damaging piece of legislation, and it’s one that was crafted in a fit of pique by a bunch of extremists in the UCP, most of whom seem to have taken over the party, much to the chagrin of many reasonable conservatives all across this province,” Notley said in an interview earlier this month.

Smith’s team hasn’t responded to emails and phone calls from Bloomberg requesting an interview. The premier has almost entirely refrained from campaigning on her marquee legislation. Instead, she has focused on tax cuts and job growth, pointing to Notley’s largest vulnerability.

The NDP leader was elected in 2015 among dissatisfaction with the conservatives that had ruled the province for decades, and with a boost from a splinter faction that sapped votes from the main incumbent party.

However, Notley’s government was hampered by low oil prices that sent Alberta’s budget into years of deficit, a departure for the fiscally conservative province. She also came under fire from many in the energy industry who saw moves such as introducing a carbon tax and raising corporate levies as hurting the province’s main economic engine.

Amid the dissatisfaction, former federal cabinet minister Jason Kenney reunited the province’s conservatives and marched to a victory in 2019. His time in office was cut short in 2022, as he took flak from a far-right caucus faction and faced broader criticism of his pandemic management.

It was in that environment that Smith’s criticism of Covid policies helped her win the UCP’s leadership contest against members of Kenney’s government, including Finance Minister Travis Toews, who has declined to run for reelection this year. Kenney’s energy minister, Sonya Savage, also isn’t seeking reelection.

Notley is attempting a rare comeback in Canadian politics. No former Alberta premier has ever won reelection after losing it, and the last time it happened in any Canadian province was in Quebec in 1985.

While she has a rich target in Smith and a relatively scandal-free four years as premier to hold up as an alternative, the weak economy of her tenure may foil her chances.

“People remember what the bad times were like and who was in charge,” said Bratt, the Mount Royal political scientist. “They remember when the good times were there and who was in charge, regardless of whether that was due to the global price of oil.”

With assistance from Robert Tuttle and Brian Platt.

LA REVUE GAUCHE - Left Comment