BCI Annual Report


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Infrastructure & Renewable Resources Managing $20.0 billion in long-life assets essential to global growth investments in timberlands, farmlands, and agri-businesses. The program is well-diversified by geographic regions and sectors, with a typical investment horizon that spans over 20 years. We aim to achieve long-term stable returns within the context of a low to moderate risk portfolio. We pursue direct investments, complemented by strategic relationships, focusing on real assets and connected, sustainable, and large-scale businesses. Investing in high-quality assets and management teams, the program seeks to deliver strong portfolio cash yields and long-term capital appreciation backed by investment-grade capital structures at the portfolio company level. We seek meaningful equity interests that enable us to adopt an active governance approach. Owning companies and assets directly allows our professionals to drive long-term value and align our portfolio company strategies and actions as much as possible with the interests of BCI and our clients. We continue to build diversity both within our investment portfolio as well as within our team, thereby positioning the program to adapt to changes in the market and provide strong future returns to our clients. For the program's investments, long-term fundamental trends remain intact. We actively invest in sectors that provide a strong defence against market cyclicity, have long contracted cash flows, or have solid thematic support such as digitalization, climate change, and resource scarcity. We continue to work closely with our portfolio companies to ensure they are well positioned to manage current and emerging risks, as well as capitalize on the opportunities presented by larger global trends such as the green energy transition. OUR APPROACH The infrastructure & renewable resources program invests globally in businesses that provide essential services and are critical to the growth and development of economies and communities. Our portfolio consists of regulated utilities (electricity, gas, and water and wastewater sectors), transportation assets (including roads, rail, bridges, and port terminals), power (hydroelectric, wind, biomass, and solar), and telecommunications. We also hold select PERFORMANCE ANALYSIS In its first year as a combined program, infrastructure & renewable resources returned 7.8 per cent 1 compared to the benchmark of 6.7 per cent. Outperformance is attributable in part to direct investments in regulated utilities, which delivered solid cash yields and capital appreciation during the period. Our investments in regulated assets performed well in the global pandemic with strong operational results and in some cases growing demand for their services. Solid annual performance from our agriculture and timber holdings also benefited the portfolio, as a rebound in commodity prices led to considerable outperformance in the second half of 2020. Distributions exceeded our expectations at the onset of the pandemic, reflecting the operational resiliency of our portfolio companies and their ability to maintain and manage cash flows and liquidity. Our portfolio companies continued to operate and provide essential services to their local communities, while prioritizing the health and safety of their staff. For example, during the peak of the pandemic, Puget Sound Energy, a Washington state-based energy utility, committed to continue providing services to all customers, including those who could not afford to make payments at the time. In general, the portfolio navigated the pandemic exceptionally well, although the appreciation of the Canadian dollar relative to some emerging market currencies affected portfolio returns. Investment sourcing and execution were challenging due to pandemic-related travel restrictions; however by collaborating closely with our advisors, and global partners, we were able to mitigate most of these impacts. 1 Assets in the infrastructure & renewable resources program are valued annually at December 31. Returns for the program are calculated on an internal rate of return basis and benchmarks are presented on a time-weighted rate of return basis. 2 0 2 0 - 2 0 2 1 C o r p o r a t e A n n u a l R e p o r t M a n a g e m e n t ' s D i s c u s s i o n a n d A n a l y s i s 3 8

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