Denmark’s Industriens Pension is investing DKK900m (€121m) in a UK gas pipeline and processing plant, boosting its infrastructure assets to DKK15bn, or 10% of its entire portfolio.
The DKK145.5bn labour-market pension fund said it was investing in the Scottish Area Gas Evacuation (SAGE) system, which consists of a 323km gas pipeline network in the Scottish part of the North Sea, as well as a gas processing plant in the village of St Fergus 65km north of Aberdeen.
As reported last week, the asset is being sold by US oil company Apache.
The investment is being carried out in conjunction with Ancala Midstream, part of London-based infrastructure manager Ancala Partners, which has experience with gas pipelines, IndustriensPension said.
Jan Østergaard, head of unlisted investments at the pension fund, said: “This is an investment with low risk, where there is a natural monopoly with long-term inflation-protected contracts.”
He said the pension fund needed this type of investment to secure a long-term, stable and inflation-adjusted return for its members.
IndustriensPension said natural gas had been established over the last 40 years as the preferred heating fuel for British people and was now used by 80% of households.
SAGE transports around 10% of Great Britain’s gas production, it said, adding that this meant Industriens Pension’s members were now co-owners of a strategic and important infrastructure asset in the country.
Daily operations will be carried out by the listed energy service company Wood Group.
The investment is expected to be finalised in the first half of 2017, following approval from authorities and other shareholders, the Danish pension fund said.
The investment in SAGE is Industriens Pension’s second large infrastructure investment this year, after it put DKK1.1bn into Southern Water in the UK in May.
The SAGE investment brings its total infrastructure assets to more than DKK15bn, or around 10% of overall assets, the pension fund said.
“The investments are spread between infrastructure funds, co-investments with infrastructure funds and direct investments in cooperation with like-minded investors and industrial partners,” said Østergaard.
“SAGE fits well into the latter category, which now consists of off-shore wind farms in Germany, water infrastructure in Great Britain, gas transmission in Germany and public/private partnership (PPP) assets in Denmark and Spain.”
Østergaard said infrastructure investments had several good characteristics and that, for this reason, the fund aimed to build the portfolio of these assets up.
“The investment in SAGE is an important step on the way towards that,” he said.
Industrien Pension said it made its first infrastructure investments back in 2006, and that the portfolio had delivered a significant positive contribution to overall returns since then.