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Super Fund invests $US250m in oil and gas with PE giant KKR

The NZ Super Fund is committing up to $US250 million to invest in North American oil and gas assets alongside private equity giant KKR.

The Super Fund, which has grown funds under management to $NZ25 billion, will split the investment two ways: up to $US175 million in new KKR private equity natural gas investments, and the remaining $US75 million in a fresh $2 billion KKR fund targeted at “unconventional” oil and gas resources.

Super Fund general manager of investments Matt Whineray says the new investments will broaden and diversify the Fund’s current exposure to energy, in line with a changing global energy sector.

The KKR investment is premised on attractive long-term returns in energy and significant market changes including the rapid development of natural gas and unconventional oil assets, he says.

“Developments in North American gas and oil are profoundly changing both global energy markets and markets within North America.

“For example, there is a large and ongoing decline in the burning of coal in the US as energy utilities transition towards gas supplies.  Access to these opportunities is, however, difficult to achieve solely through listed markets.  Partnering with KKR will give us the benefit of their expertise and deep relationships in the energy sector.”

While it is better known for its leveraged buyouts of companies, KKR also has a growing business in energy and infrastructure assets.

The New York-based firm, founded by Henry Kravis and George Roberts in 1976, has $94.3 billion in assets under management, including $8.7 billion dedicated to energy and infrastructure.

KKR Australia boss Justin Reizes said the North American oil and gas sector is fast-growing but capital-starved.

“The rapid development of unconventional shale basins provides attractive development and infrastructure investment opportunities for long-term investors such as the NZ Super Fund.”

Mr Whineray said that while the Fund would continue to hold a substantial passive exposure to the energy sector, consistent with its market cap-weighted Reference Portfolio, the KKR mandate offered a number of benefits to the Fund.

“These benefits include improved expected returns, resilience in relation to a rapidly changing sector and greater insight into, and control over, our investment exposures. Our focus on responsible investment will also be bolstered by KKR’s expertise in the management of environmental, social and governance factors.”

This is the NZ Super Fund’s third investment with KKR.

More by Duncan Bridgeman

Comments and questions
14

New Zealand Super's new investment is both too late and inconsistent with its obligation to avoid prejudice to NZ's reputation. The new investments must be in shale gas -- an environmental nightmare which astute investors backed long ago.

Go read the NZ parlimentary commissioner for the environment - an exhaustive report into fracking and shale gas - before you go making those kind of statements.

The NZ Parliamentary Commissioner for the Environment. Now THERE'S an authority. The legislation is the legislation, and fracking is disgusting. Good luck to our kids.

yeah yeah, I saw the matt damon film too. So much for substance

Last in, just before someone figures out that there might not be such a great future for fossil fuels. Or have the Super Fund not heard of climate change? I guess they are confident that there will not be carbon taxes that depress the value of such assets.

New technologies have led to massive increases in recoverable natural gas reservoirs. Natural gas is the most benign of all the fossil fuels - ie it produces more energy per carbon dioxide unit than any other. If you read the statement with half a brain you will see reference to the fact that natural gas is displacing coal. Carbon dioxide emissions in the US have actually fallen by 20% as a result and the US, even then it pulled out of kyoto, now has levels below its previous 1990 levels. This is thanks to entrepreneurship and technology advances in industrial technology - NOT knee jerk reaction green party regulations, and it is a well documented fact.

The investment into shale gas will further drive the displacement of coal which will go further towards meeting your green objectives, if you would just take a moment to be sensible and do your research.

Well done NZ Super, from an informed reader.

It's still a fossil fuel, and it is still being burnt. Also, if you did thorough research 'informed reader', you would see the massive environmental and social impact that shale gas extraction is having on our landscape. If you have any doubt, just take a look at a satellite photo of North Dakota. A great place to live...NOT.

Do you not drive a car? If so, why aren't you driving a natural gas fueled vehicle?

The thermal efficiency of your vehicle engine is much lower than combined cycle natural gas fueled power stations.

I don't care much for your conclusions only for your thesis, which appears to be shaky. Please be better informed before casting an opinion in which you have no agency in.

Independent investment responsibility

"The legislated investment mandate also requires us to manage the Fund in a transparent manner, and to have regard to environmental, social and governance standards".

NZ SUPER FUND'S - How We Invest

In the New Zealand Superannuation Fund Equity Listing as at 30 June 2013, I read they invest in a number of oil and gas assets.

Aurora Oil & Gas Ltd in Australia
Advantage Oil & Gas Ltd in Canada
Legacy Oil + Gas Inc in Canada

So many Energy, mining, gas, coal companies NZ SUPER FUND invests in.

Where's the regard on environmental standards - Just fleeting I guess.

I even see RIO TINTO in there $1,979,268 and cheek of Key to give that outfit $30 million of our tax money non-refundable.

We've helped them to post a damn net profit of $US3.7 billion.

There is massive international interest in NZ frontier basins from offshore giants. The scale of the potential finds, particularly off the south island, are staggering. It would be great from NZ Super to invest into these as well, as it would be good to have more local representation.

So we are buying us carbon assets, while selling our renewable energy assets - the logic of the national party is questionable
If your selling assets - liquidate the super fund, then sell the nz power stations

When are NZ Super going to support NZ Inc
They only invest 20% of our money here in NZ. They invest in start ups in the USA ( I am not referring to this US investment but a recent windfarm start up ) but ignore supporting NZ companies and innovation.

All the NZ Super Fund staff are interested in is regular overseas travel and stroking their puny ego's or anything else puny they can get their hands on.

Whilst we all agree their fund performance is good ( not excellent ) they should have a responsibility to investing a greater portion of the fund here in NZ - in a variety of sectors and safe investments. Maybe its time for Bill English to review and amend the legislation??

Doctor - what you are proposing would be massively inflationary.

Its interesting from observing these posts that there appears to be a lot of mis-informed people individuals in New Zealand with little agency in their opinions.

Having moved recently from the States, I think what the Super Fund is doing is quite logical given the role of cleaner burning NG as a buffer until renewables can reach grid parity and the scale necessary to replace fossil fuels. There appears to be a lot of "idiots" in New Zealand without the necessary knowledge to make an informed judgement of the situation. You sir appear to be one of them