Meet Charles Emond, the Canadian backing Sizewell C with £1.7bn

Times

13 hours ago

'There's always risk in a transaction,' says Charles Emond. The chief executive of La Caisse is keen to stress that he and the other equity investors named last week in the financing of the Sizewell C nuclear power station project are not getting a completely free ride from British taxpayers and electricity billpayers.
Billpayers will have £1 a month added to their electricity bills from this autumn to help finance the gigantic project. UK taxpayers will stand ready to foot the bill if the construction costs rise above a certain point. But the equity investors putting in £8.5 billion aren't entirely free of exposure if things go wrong, he says.
Even so, analysts believe that La Caisse and other investors, which include the British Gas owner Centrica and the French energy group EDF, have got a bit of a steal as a result of the way the deal has been structured. Even Emond admits the terms have been 'de-risked to an acceptable level'.
La Caisse may be a new name to British readers, but it is a gigantic institution, one of the biggest pension fund groups in Canada with $473 billion to invest. It has just changed its name from Caisse de dépôt et placement du Québec, an institution responsible for paying pensions to six million Canadians.
When Rachel Reeves visited North America last autumn to bang the drum for the UK, Emond was one of the people she went to see. La Caisse for years was a shareholder in Heathrow, while it has also bought into the London Array, the forest of 175 wind turbines in the outer Thames Estuary.
La Caisse, which has not invested in nuclear power before, has committed £1.7 billion to Sizewell C in return for a 20 per cent stake. It will be the biggest single equity investor in the project, which when built will produce enough reliable electricity to power the equivalent of six million homes.
Emond, a former banker with Scotiabank, likes the way the financing of the Suffolk-based project has been structured, which means investors are more protected than they were in the case of its sister station, Hinkley Point C, which has already gone hugely over budget. Sizewell, he says, is 'trailblazing' because 'it institutionalises nuclear from an investor perspective'. That will make it much easier for other future nuclear projects to raise private-sector cash.
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The structuring of the deal has 'shed a different light on nuclear' as well as chiming with La Caisse's push towards net zero. It puts nuclear into 'the zipcode of reasons it is attractive to capital providers like me'.
Big, long-running infrastructure projects such as Sizewell C are perfect for pension funds which have to invest to produce income to meet defined benefit pension promises stretching decades into the future. If all goes well, Sizewell will produce inflation-protected returns for 60 years.
It also fits in well with La Caisse's plan to make the UK 'our biggest overseas investment destination outside North America,' says Emond. He's a big fan of the UK, saying 'it checks all the boxes,' especially in an era of high geopolitical risk. La Caisse already has £17.8 billion of UK assets. Emond aims to lift that by £8 billion over five years, which means that after Sizewell C, he has another £6.3 billion of net investments to make.
He gives a long list of Britain's attributes, naming rule of law, a business-friendly government and a big local financial centre as some of the factors important for foreign investors. 'There are all these things that, even before you look at a transaction, you say we like that sandbox.'
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Wasn't he put off at all by Britain's sluggish economy, low productivity growth and shaky public finances? No. 'It's not the growth in the economy that's the only criterion [for investing],' he says. The government's emphasis on infrastructure has made Britain especially attractive. La Caisse is by one measure the second biggest infrastructure investor in the world with $64 billion allocated to the asset class.
La Caisse opened an office in London in 2016, from which it manages all its European operations. Emond recently hired Dame Sharon White, the former chairwoman of John Lewis Partnership, as head of Europe, to spearhead the investment drive. 'She's been great, providing exceptional leadership,' he says, adding that her experience of running a regulator, Ofcom, was helpful because of the many regulated industries La Caisse tends to invest in.
Which sectors in the UK is La Caisse now looking at? He mentions information technology, telecoms, renewable energy, transportation, insurance, private credit and real estate. 'For us there's a pretty good set of opportunities. Our London office has teams for all asset classes.'
Insurance and real estate have been rich seams already. La Caisse has been a long-time backer of Howden Group, the privately owned insurance broker recently valued at well over £10 billion, and is a backer of Inigo Insurance. Property ventures include PLP and Greystar, and, on the debt side, a £525 million credit line to Blackstone-owned St Modwen.
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It is also a big investor in renewable energy through last year, buying a 25 per cent stake in First Hydro, the group that operates two pumped storage projects in Snowdonia, as well as the 25 per cent holding in the London Array. Other investments include a 19.3 per cent stake in Eurostar, the cross-channel train operator. Another is FNZ, a private company that provides software to wealth managers and was valued in a past fundraising at $20 billion.
It hasn't been plain sailing for Emond in his first five years. In Montreal, the company has come under heavy criticism for delays and overruns on a mass transit project Réseau express métropolitain or REM. 'We took a lot of flak,' Emond admits, but says it was funding the project at much lower cost per kilometre of track than other projects. 'Every time they [Quebecers] take the train, it helps fill their pension,' he adds.
Another potential blow is the charging by the US Justice Department of executives from La Caisse and other companies with conspiring to pay $265 million in bribes to Indian state government officials to secure solar power contracts. The Securities and Exchange Commission is also pressing civil charges in connection with the same alleged scheme. La Caisse has said it is co-operating with the US authorities.
As one of the so-called Maple Eight big Canadian pension funds, La Caisse is a role model for policymakers in the UK trying to encourage consolidation of UK funds to build scale and in-house investment expertise that is then confident about putting money into private equity and infrastructure. Reeves is introducing measures to encourage smaller schemes to merge.
Emond says that is the right direction of travel, but cautions that it took decades for La Caisse to build scale and expert teams. 'It doesn't get done over a long weekend,' he says.