CPP, Halcon deal

The Canada Pension Plan, CPP, is the Canadian federal government pension program somewhat similar to the U.S. Social Security system. In the CPP program, Canadian workers and their employers are required to pay into a fund that provides retirement, disability and survivor benefits. The CPP takes in more money than is needed to meet current benefits demands, and the excess money is turned over to the CPP Investment Board or CPPIB, which is a private professional investment management organization that is responsible for investing and growing CPP funds to meet the benefits demands of future generations of Canadian workers. CPP assets, that include employee and employer contributions as well as the return on the CPPIB investments, currently total C$168.5 billion. Over the last 12 years, the CPPIB has generated over C$60 billion and has seen a 6.6 percent average annual rate of return on its investments.

CPPIB invested in Halcon as part of its Relationship Investments program, a program intended to provide strategic capital to public companies where the CPPIB can support a company’s future success in a number of ways, including the financing of acquisitions, funding organic growth, or helping to recapitalize the balance sheet. According to the CPPIB, its goal is to act as a constructive partner and provider of capital on a long-term basis.

With the CPPIB’s $300 million equity investment in Halcon, the CPPIB acquires an approximately 10 percent stake the company and will be offered one seat on the board of directors. “CPPIB’s investment aligns with our strategy to provide strategic, long-term capital to well-positioned companies like Halcon and work with management to help create value now and in the future,” said CPPIB Vice President Scott Lawrence, who heads the CPPIB Relationship Investments program.

While the Halcon investment represents the CPPIB’s first direct investment in the U.S. oil and gas sector, the CPPIB has invested in a number of oil and gas firms in Canada, with commitments exceeding C$ 1.2 billion since 2010.

—Mike Ellerd