NZ Super Fund eyes North American energy market with US$250 mln investment

Friday 21st March 2014

The New Zealand Superannuation Fund will invest up to US$250 million with New York Stock Exchange-listed KKR to gain exposure to the growing disruption in North American energy markets created by shale oil and gas resources.

The so-called Cullen fund, named after former Finance Minister Michael Cullen who designed it, will invest up to US$175 million in KKR energy private equity investments ranging from natural gas exploration, production, and upstream, midstream and downstream activity, with the remainder going into the KKR Energy Income and Growth Fund, which focuses on unconventional gas and oil resources in North America.

Matt Whineray, the fund's general manager of investments, told BusinessDesk the move seeks to latch on to the opportunity thrown up in North America where gas increasingly replaces coal as an energy source as a result of the increasing use of hydraulic fracturing, or fracking.

"The opportunity we see provides capital for that transition to gas and gives more control and information over the investment," he said. "We don't want to force particular allocations to it, we want to take advantage of KKR's expertise from this particular opportunity."

The other leg of the Super Fund's energy strategy is in alternative energy investments, such as its stakes in US wind turbine maker Ogin.

Whineray said KKR is a signatory to United Nations-backed principles for responsible investment, and that the mandate gives the fund the ability to manage and measure the environmental, social and governance risks.

The mix of assets across the sector meant the investment was more a medium-risk, he said.

KKR Australian head Justin Reizes said the increase in gas supply and subsequent fall in price meant the sector was hungry for capital to fund new initiatives, with the growing potential for the US to become a net energy exporter.

While the sector is still developing, shale gas differs from oil exploration in that it's easier to determine the size of potential gas finds, Reizes said.

KKR has been an investor in the energy sector for more than 20 years, and has been at the forefront of the shale gas transition since 2009, he said.

BusinessDesk.co.nz

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