Infrastructure
Borealis Infrastructure (Borealis) manages our infrastructure investments and has been a world leader in developing infrastructure investing as an asset class for institutional investors. Borealis has a proven track record in identifying, investing and managing infrastructure investments around the world and has delivered solid returns, outperforming its benchmark in each of the last three years.
Infrastructure investing involves direct investments in inflation-sensitive assets that are critical to the long-term success of a modern industrial economy. Some infrastructure investments are subject to regulatory establishment of rates, service delivery levels or both. Individual investments generally require capital commitments for a minimum of 15 to 20 years and typically generate consistent annual cash flows; a perfect fit in meeting our long-term pension obligations. Through Borealis, we have become a significant investor in the infrastructure sector. Our assets include majority or minority positions alongside other pension, corporate and government investors.
In 2007, the AC reclassified two investments from the private equity asset class to the infrastructure asset class: CEDA International, a leading industrial, mechanical and electrical services company serving the Alberta Oil Sands and OMERS Energy, an oil and gas exploration company with interests in oil and gas wells throughout western Canada. These long-term investments are managed by the infrastructure team.
Infrastructure investments generated net investment income of $595 million, compared with $388 million a year earlier. The 2007 return was 12.4 per cent, compared with 9.9 per cent for the benchmark and a 14.0 per cent return in 2006. Net investment income increased $207 million in 2007 compared with 2006 as a result of unrealized gains recognized on investments made within the past three years and additional income due to the reclassification of CEDA International and OMERS Energy to infrastructure investments, which was partially offset by lower energy sector earnings in 2007.
Visit the Borealis Infrastructure web site at http://www.borealisinfrastructure.com/