MARKHAM,
ON, June 26, 2024 /CNW/ - Today, Canada Growth
Fund Inc. ("CGF") and Markham District Energy Inc. ("MDE"), an
operator of district energy networks in the City of Markham, Ontario, announced they have
entered a financial hedge to enable new investment in Ontario's energy sector. This 10-year contract
for difference ("CfD") enables MDE's investment in a new heat pump
system that will provide residents in the City of Markham with reliable, efficient, and
cost-competitive low carbon energy services.
MDE supplies homeowners and businesses in Markham with heating and cooling services. MDE
is building an innovative heat pump system which harnesses the
steady temperature of a nearby sewer as a heat sink for thermal
energy (the "Project") and replaces existing technologies that burn
natural gas. During its construction period, the Project is
estimated to support up to 200 jobs in Ontario. The Project has the potential to
reduce approximately 177,400 tonnes of CO2e emissions
over the 10-year CfD term.
"This agreement with Markham District Energy advances CGF's
mandate to establish innovative financial instruments to support
Canadian businesses and projects as they adopt key emission
reduction technologies," said Patrick
Charbonneau, President and CEO of CGF Investment Management.
"Through this contract for difference, CGF is enabling a project
that will lower the carbon footprint for heating and cooling energy
supplied to customers connected to the district energy system in
Markham."
This transaction advances important heating and cooling
technologies, which could unlock further decarbonization
opportunities across Canada in the
hard-to-abate low-grade heat sector. CGF has a mandate to
accelerate emissions reduction technologies in Canada, including by providing CfDs to
mitigate policy risk and price volatility and by improving economic
outcomes associated with decarbonization projects.
"With the help of Canada Growth Fund, Markham District Energy is
now in a position to make a final investment decision on our
innovative wastewater heat recovery project," said Bruce Ander, President and CEO of MDE. "This
project will materially reduce our carbon emissions and will
support our path to becoming a net-zero carbon utility while
providing our customers with competitively priced and reliable
thermal energy. A winning outcome for Canada, Markham and our customers."
CGF's CfDs are designed to be replicable and scalable over time,
which enhances their potential for broader market applications. By
seeking to create a standardized financial instrument, CGF aims to
promote price discovery, market liquidity, and capital recycling,
allowing for greater investments in decarbonization projects across
Canada.
Transaction Highlights
- A carbon policy CfD is a financial instrument that provides
certainty related to the financial impact of future carbon policy
prices, measured against specified volumes of carbon emissions
reductions.
- The benchmark for the CfD is based on the Ontario industrial carbon pricing system,
known as the Emissions Performance Standards.
- The carbon policy CfD is structured as a two-way contract. This
means that if the actual carbon policy price exceeds the specified
strike price, MDE will make payments to CGF. Conversely, if the
carbon policy price falls below the strike price, CGF will pay MDE
for the difference.
- Two-way contracts are consistent with CGF's preservation of
capital mandate.
- The CfD is set at an initial strike price of $100 per tonne of CO2 with escalation,
for a 10-year term commencing at the Project's commercial operation
date.
- The Project utilizes Noventa Energy Partners Inc.'s Wastewater
Energy Transfer (WET™) technology, a cutting-edge solution for
extracting thermal energy from wastewater.
About MDE
MDE, an energy company owned by the City of Markham, is a leading developer of
municipally-owned district energy systems providing strategic
foundations for Markham's
sustainability and economic development objectives. MDE owns and
operates award-winning community energy systems serving buildings
in the developing urban centres of Markham Centre and Cornell
Centre.
About CGF
CGF is a $15 billion arm's length
public investment vehicle that helps attract private capital to
build Canada's clean economy by
using investment instruments that absorb certain risks in order to
encourage private investment in low carbon projects, technologies,
businesses, and supply chains.
CGF makes strategic investments to help Canada to meet the following national economic
and climate policy goals:
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a) reduce emissions and
achieve Canada's climate targets;
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b)
accelerate the deployment of key technologies, such as low-carbon
hydrogen and CCS;
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c) scale-up companies that
will create jobs, drive productivity and clean growth across new
and traditional sectors of Canada's industrial base;
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d)
encourage the retention of intellectual property in Canada;
and
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e) capitalize on Canada's
abundance of natural resources and strengthen critical supply
chains to secure Canada's future economic and environmental
well-being.
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Further information on CGF's mandate, strategic objectives,
investment selection criteria, scope of investment activities, and
range of investment instruments can be found on www.cgf-fcc.ca.
About CGF Investment Management
In Budget 2023, the Government of Canada announced that PSP Investments, through
a wholly owned subsidiary, would act as investment manager for CGF.
CGF Investment Management has been incorporated to act as the
independent and exclusive investment manager of CGF.
Advisors
BMO Capital Markets is acting as advisor to CGF with respect to
the CfD with MDE.
PSP Investments' Conflict of Interest Policy
PSP Investments has established a policy to address the risk of
any real, potential or perceived conflicts of interest in the
context of the services provided by Canada Growth Fund Investment
Management Inc. to Canada Growth Fund Inc., requiring PSP and CGF
to disclose where they have overlapping investments.
At the time of the approval of the transaction, PSP Investments
held a passive limited partner interest, representing less than 9%
of fund commitments, with no investment discretion or
decision-making ability, in Ancala Infrastructure Fund III, the
majority shareholder of Noventa.
The foregoing is being disclosed in accordance with PSP
Investments' Conflicts of Interest Policy.
SOURCE Canada Growth Fund Inc.