CPPIB’s proposed US$6.2-billion acquisition of coal mine and electric utilities lacks credible climate transition plan
For Immediate Release: May 7, 2024
Statement: CPPIB’s proposed US$6.2-billion acquisition of coal mine and electric utilities lacks credible climate transition plan
Toronto, ON | Traditional territories of the Wendat, Anishnaabeg, Haudenosaunee, Chippewas, and Mississaugas of the Credit First Nation - The Canada Pension Plan Investment Board’s (CPPIB) proposed acquisition of Allete could become a smart investment in a major U.S. electric utility player– but not without a clear and credible climate-aligned transition plan for all of Allete’s subsidiaries. We are concerned that CPPIB’s announcement does not include any mention of the actions required to retire Allete’s risky and climate-polluting coal and gas assets in line with CPPIB’s net-zero commitment and global climate goals.
As part of a proposed US$6.2-billion deal to acquire Allete, subject to approval by regulators, CPPIB is planning to invest the Canada Pension Plan in a valuable and growing portfolio of renewable energy and electricity distribution and transmission assets across the U.S. Midwest. But the deal would also invest Canada’s national retirement fund in a lignite coal mine in North Dakota, a particularly poor-quality source of energy that must be phased out rapidly in line with climate obligations. In addition, CPPIB’s acquisition of Allete would include a fleet of coal- and gas-fired power plants that must also be quickly phased out to align with Paris climate goals and increasingly stringent U.S. federal and state clean energy targets.
Shift supports the use of public pension capital to increase investment in renewable energy and electrification and to accelerate the decarbonization of electric utilities. But the fossil fuel assets acquired through such deals must be rapidly phased out to align with safe net-zero emissions pathways. Allete subsidiary and lignite coal mine operator BNI Energy has no net-zero target and no phase-out plan, while other electric utilities in the Allete group of companies appear to have inadequate transition plans to phase out their coal- and gas-fired power generation assets. This exposes CPPIB to considerable stranded asset risk and keeps fossil fuel assets operating for longer than permitted to limit global temperature increase to 1.5℃.
To protect the retirement security of Canada Pension Plan members, CPPIB must quickly develop and release a credible climate plan for Allete that sets a clear, net-zero-aligned timeline for the phase-out of coal mines, fossil fuel power plants and gas pipelines. According to the International Energy Agency’s net-zero emissions scenario, the power sector must be completely decarbonised in advanced economies by 2035. This is why the Caisse de dépôt et placement du Québec (CDPQ) finalized its exit from coal mining in 2023 and excludes new investments in coal mining.
Background information - The Allete group of companies
Yesterday, CPPIB announced that it was partnering with Global Infrastructure Partners to acquire Allete, an energy company based in Duluth, Minnesota, that owns a portfolio of electric utilities and power generation companies. CPPIB refers to Allete as a “provider of safe, reliable, and competitively priced energy” that’s “at the forefront of the clean energy transition.” Allete’s subsidiaries include:
Minnesota-based wind power developer Allete Clean Energy;
Maryland-based solar energy development company New Energy Equity;
Wisconsin-based water, electric and gas utility Superior Water, Light & Power;
Minnesota-based electric transmission and distribution and power generation utility Minnesota Power;
North Dakota-based BNI Energy, which owns and operates a lignite coal mine;
An 8% equity interest in Wisconsin-based American Transmission Co., an electric transmission and distribution and power generation company
BNI Energy - Stranded coal assets and bogus carbon capture plans?
CPPIB’s news release makes no mention of Canada’s national pension manager becoming the owner of a lignite coal mine and 600 million tons of coal reserves. But Allete is the corporate parent of BNI Energy, which owns and operates BNI Coal, a lignite coal mine near Center, North Dakota. Two electric generating cooperatives, Minnkota Power and Square Butte, operate a North Dakota coal plant that burns virtually all of the coal produced by BNI Energy under long-term agreements.
According to Allete’s 2023 Corporate Sustainability Report, BNI Energy “has a rich history of responsible energy production.” But there is no such thing as responsible production of coal, which has harmful impacts on human health and the climate. Coal must be rapidly phased out to avoid catastrophic global heating scenarios. Surely CPPIB knows this, but BNI Energy has an agreement to produce and sell coal for power generation until at least 2037. Allete claims that “BNI Energy’s carbon emissions are primarily associated with emissions from gasoline and diesel engines used for mining operations, as well as acquired electricity”-- disregarding the scope 3 emissions from the coal produced at its mine.
BNI Coal claims to be working with its partners to reduce the company’s downstream emissions via “Project Tundra”, a proposed carbon capture and storage initiative that is allegedly designed to capture 90% of carbon emissions. Despite first being proposed in 2019, the carbon capture project has still not received a final investment decision. According to the Institute for Energy Economics and Financial Analysis, in the unlikely event that Project Tundra operates as claimed, a significant amount of the captured carbon would be used for enhanced oil recovery– to produce more oil.
Allete’s electric utilities
Some of Allete’s electric utilities appear to have commitments to phase out coal plants, albeit not quickly enough to align with net-zero emissions pathways. For example, Minnesota Power is planning to phase out its remaining coal-fired generation units by 2035 and increase its use of wind, solar and storage. But Minnesota Power is also trying to build a controversial new gas plant and plans to use “flexible gas generation” for decades to come. These timelines are not consistent with CPPIB’s net-zero commitments or Paris-aligned emissions reduction pathways, which require global greenhouse gas emissions to be slashed by about half by 2030.
CPPIB must use its capital, expertise and influence to stop gas plant expansion and profitably accelerate the decarbonization of Allete’s power generation assets.
Contact information for interview requests:
Patrick DeRochie, Senior Manager, Shift Action for Pension Wealth & Planet Health; patrick@shiftaction.ca; 416-576-2701
Adam Scott, Executive Director, Shift Action for Pension Wealth & Planet Health; adamscott@shiftaction.ca; 416-347-3858
Shift Action for Pension Wealth and Planet Health is a charitable initiative that works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.
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