Hermes hits back at pension fund in $136mn legal claim
The asset manager has said the legal claim by the North East Scotland Pension Fund - which centres on investments in wind farms which lost 83 per cent - is based “entirely on hindsight”
Federated Hermes has pushed back against a $136mn legal claim by the North East Scotland Pension Fund over an investment in wind farms, claiming its case is based “entirely on hindsight”.
The fund management company acknowledged the investment had “not performed as expected” but said this was down to “a combination of extreme and unprecedented adverse conditions which were neither foreseen nor reasonably foreseeable”.
To recap: AOX readers may remember that following an 83 per cent loss to NESPF’s investment in the Ventus Portfolio, administering authority Aberdeen City Council claimed “this was an investment which no competent infrastructure investment manager would have made”.
It is taking Hermes to London’s High Court after the fund manager invested $121mn in a portfolio of five wind farms which NESPF described as an “existential gamble on power generation risk and electricity price risk”.
According to High Court documents, Hermes, alongside leading global renewable energy investor CGN, carried out “extensive and detailed due-diligence investigations” to identify risks including wind farm availability, generation output, capture prices, wholesale prices and operational expenditure.
It concluded the portfolio was forecast “to earn positive returns that were materially higher than local and UK government bond yields available at the time”.
Aberdeen’s claims that the manager considered “irrelevant factors” when assigning the investment to the NESPF’s core portfolio are “vague and unparticularised”, according to Hermes.
Conditions include the underperformance of capture prices in the region caused, in part, by additional onshore wind capacity being installed. This was accentuated by below-forecast wind-power generation, with the Ventus Portfolio generating 11 per cent less energy than forecast to date.
“These factors together constituted an extreme downside scenario… which was materially outside the range of the reasonable market-standard sensitivities undertaken by the manager when analysing the investment,” the defence states.
Hermes also claims that the amount of compensation being claimed by Aberdeen City Council is based on “double-counting”.