Canada's Pension Plan to Buy Laricina Stake for $237 Million

(July 7, 2010) — Canada Pension Plan Investment Board (CPPIB) is acquiring a 17.1% stake in Calgary oil sands company Laricina Energy for $237 million.

The purchase represents the fund’s first venture into northern Alberta’s oilsands industry, giving CPPIB, one of Canada’s largest institutional investors that invests surplus cash from the national Canada Pension Plan, the right to nominate a board director at the company. The purchase follows CPPIB’s decision not to support shareholder resolutions seeking environmental reports on the controversial tar sands projects at BP and Shell earlier this year.

“We are pleased with the endorsement and look forward to the partnership. This will fully fund our next project, the 5,000-barrel-per-day Germain demonstration project,” said Laricina chief executive Glen Schmidt. “The investment is a very important endorsement for Laricina and we are excited CPPIB has shown confidence in Laricina’s management team and development strategy. This is a strong testament to Laricina’s growth potential and continued progress towards building a leading in situ oil sands company,” he said.

Under the deal, privately held Laricina, which is looking to establish its first commercial oilsands production later this year, issued about 8.3 million common shares to the investment board at $30 apiece. Laricina is also selling nearly 1.7 million common shares for $48.3 million to a syndicate co-led by Peters & Company and RBC Capital Markets.

CPPIB, a member of the U.N. Principles for Responsible Investment, adopted its policy on responsible investing in 2005, considering ESG factors from a risk/return point of view.