USS sets up subsidiary to acquire Co-Op renewable energy loan portfolio

Leading asset owner piles into wind farm portfolio

The Universities Superannuation Scheme, the £42bn (€53bn) fund for UK academics, has set up a wholly owned subsidiary to acquire a multi-million-pound renewable energy loan portfolio from the Co-operative Bank as the UK lender seeks to rebuild its balance sheet after a series of crises.
RI understands the portfolio comprises mostly wind farm assets. USS, which has invested in renewables since 2000, formed the new company – called L1 Renewables Ltd. and registered at USS’s headquarters in Liverpool [L1 is the city centre postal code] – on December 5, according to the official Companies House registry.
L1’s directors are listed as Jennifer Halliday, the former Vanguard fund manager and Global Corporate Controller who was named as USS’s new Chief Financial Officer earlier this year and Michael Powell, USS Investment Management’s Head of Private Markets. Also a director is Ben Levenstein, its former Head of UK Equities, who last November moved to the new role of Senior Investment Manager of Strategic Investments.

USS told Responsible Investor: “This investment fits very well into USS’s evolving investment portfolio; given the nature of our liabilities and the future pension payments to our members, we are seeking to increase our assets generating long term, stable returns.” It said the Co-Operative Bank would continue to service the loans on behalf of USS.The Co-operative Bank had announced in a stock exchange filing that it has entered into a “conditional sale agreement” for a portfolio of commercial loans to L1 Renewables valued at around £323m.

The bank added the deal improves its capital ratio and fits in with its strategy of getting out of “non-core assets”. The portfolio would be sold at a “marginal discount” – with proceeds to be used for general corporate purposes.
Earlier this month USS said it would survey beneficiaries about its approach to investment after being petitioned by over 3,200 of its members. The ‘Listen to USS!’ campaign was organised by campaign group ShareAction.
Elsewhere in the UK, the £14.4bn Strathclyde Pension Fund is planning to add four mandates to its New Opportunities Portfolio (NOP), boosting its exposure to renewables and real assets. The £68m commitments include social infrastructure and renewable power as well as residential real estate and real estate credit. Strathclyde has also concluded a tender for a responsible investment engagement overlay service provider. The contract has gone to incumbent firm GES Investment Services. Four tenders were received, from GES as well as F&C Management, Hermes Equity Ownership Services and Robeco Institutional Asset Management. GES’s re-appointment is from January 2015.