In December, Montreal-based CDPQ agreed to acquire an additional 15% stake in Transportadora Associada de Gás (TAG) from ENGIE Brasil Energia, the renewable energy firm, in a deal valued at about $C848 million ($632 million).
TAG owns and manages Brazilian natural gas transportation assets, spanning more 2,800 miles and 10 states across the vast country.
As a result of the deal, CDPQ will own a 50% stake in TAG, which CDPQ initially invested in about five years ago.
Emmanuel Jaclot, executive vice president and head of infrastructure at CDPQ, stated in a news release Dec. 28 that this deal is "consistent with our infrastructure strategy: in this instance, reinvesting in a portfolio company with well-contracted assets, led by a seasoned management team, and in Brazil, a country where we intend to keep growing our portfolio in the next few years."
In November, CDPQ agreed to acquire Integracao Transmissora de Energia, a strategic power transmission network in central Brazil, from Equatorial Energia for C$108.5 million. Intesa's transmission network "extends across central Brazil, where significant renewable electricity output is generated for consumption in the south and south-east of the country," CDPQ said in a Nov. 1 release.
Eduardo Farhat, the Sao Paulo-based managing director, infrastructure-Latin America at CDPQ Brasil, said that CDPQ currently has C$19 billion of assets in Latin America, including C$7 billion invested in Brazil, representing about 2% of CDPQ's global portfolio. CDPQ had total net assets of C$424 billion as of June 30.
"Our strategy for Brazil is mainly focused on infrastructure investments, as they provide long-term, stable and predictable returns," Farhat said. "Brazil also displays a solid regulatory framework supported by a well-functioning legal system, which has helped provide a strong and diversified pipeline of opportunities."
Aside from TAG, CDPQ also has major investments in power transmission firm Verene Energia; and FiBrasil, a fiber optic infrastructure company. CDPQ also holds stakes in joint ventures focused on real estate in Brazil.
CDPQ has been present in Brazil since 2006, having initially invested in government bonds and publicly listed equities. "In 2015, we made our first investments in the real estate sector — via our subsidiary Ivanhoe Cambridge — and we opened a physical office in the country in 2018," Farhat noted. "CDPQ currently has eight employees based in our Sao Paulo office."
Farhat also said that CDPQ plans to invest an additional C$4 billion to C$5 billion in Brazil by 2027.
"While our ambition is to continue growing rapidly, it always depends on finding the right transactions, the maintenance of a high-quality regulatory framework and the stability of the country's economy," he cautioned. "Today, Brazil has by far the most active pipeline of projects in Latin America and we are actively analyzing several different opportunities."
Brazil has many advantages as an investment destination, Farhat noted.
"From a macro perspective, it's a vibrant democracy with strong institutions," he said. "It's also a modern country and has been implementing structural reforms around social security, independence of the central bank — combined with stable borders and sectors like agriculture and energy production, which are experiencing strong tail winds — that will all help support growth."
Regulatory stability is no more of a concern in Brazil than anywhere else in the world, Farhat asserted.
"We are comfortable with this market, and we have a productive dialogue with the government," he added. "On a comparative basis, Brazil is well positioned globally to attract new investment, something that has been challenging in several geographies given the context of high global interest rates and the intense demand for capital in the energy transition."
CDPQ's strategy is to invest for the long term, he added, and "we are confident that we will be in Brazil for a long time."