In the pipeline
It’s a fine September morning and I am over the North Sea in a helicopter together with Geert, our bright young spark in the investment department. But it’s not just a day out and we are all dressed in hard hats and waterproofs since we are on our way visit a gas installation. Our proposed investment is nowhere to be seen, though, as it is a share in a gas pipeline network on the seabed.
‘The North Sea has a total surface area of 750,000 square kilometres and a mean depth of 90 square metres,’ Wim, the technical director of the pipeline network is telling us at the top of his voice, although we can barely hear him over the noise of the engine and the rotors.
During a tour of the rig, there is a further barrage of facts and figures about North Sea gas and oil production, and a fascinating glimpse into the working lives of the crew. Aside from the statistics, we hear about the pioneering early days of test drilling and production in the 1960s and 70s.
Clouds are gathering an hour or so later when we head back to the mainland and drive to the outskirts of Amsterdam to the offices of the pipeline consortium for a good Dutch lunch of rolls and buttermilk. Afterwards we hear another presentation about projected cashflows and move on to discuss the terms of our proposed agreement. Geert has prepared a range of questions for Wim and his team but we are impressed with what we hear from the pipeline operator.
‘One question Pieter,’ Geert says as we walk through the car park on the way back to the office. ‘We’re planning this as part of our infrastructure allocation but is that the right label?’ he asks. ‘I hear that some pension funds have a separate infrastructure allocation but others put it in the category of real assets, alternatives or private markets.’
The question is really one for the investment committee. As the investment director at Wasserdicht Pension Funds, it’s my task to carry out their instructions. In practice, though, they do listen to what the investment department has to say. ‘Strictly speaking, I suppose you could say this falls into any of those categories,’ I venture.
Towards the end of the month, Geert and I are finalising our proposal for the investment committee, with a recommendation to buy a share in the pipeline within our strategic asset allocation target of 5% to infrastructure. We need their go-ahead to enter into final negotiations, agree terms and undertake the final due diligence.
A couple of weeks later and the committee has endorsed the investment, to sit within the 5% strategic allocation to infrastructure. ‘Don’t worry too much about the labels,’ Ronald says. ‘As far as I’m concerned, this is an investment that produces a stable return above government bonds with predictable cashflows, but no government can default on it because we own it.’
Pieter Mullen is investment director at Wasserdicht Pension Funds