Alberta Invests $2 Billion Into Wealth Fund to Speed Growth Plan

Danielle Smith, Alberta's premier, during an interview in Calgary in June Photo by Gavin John /Photographer: Gavin John/Bloombe

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(Bloomberg) — Canada’s top oil-producing province of Alberta is injecting C$2.8 billion ($2 billion) into its provincial wealth fund, advancing a plan to wean itself off volatile resource revenue in the decades ahead.

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The investment brings the balance in Alberta’s Heritage Savings Trust Fund to a record C$30 billion, the provincial government said Friday. The government also appointed board members to a new corporation that will oversee the fund. 

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Premier Danielle Smith is overhauling Alberta’s investment strategy in an effort to give the government more power over the province’s financial future. 

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In addition to major changes at Alberta’s pension fund manager, Smith’s government passed legislation requiring the Heritage fund to reinvest returns rather than distribute them to the provincial treasury. The goal is to grow it to at least C$250 billion by 2050, at which point the interest can be used for government expenses while keeping taxes low.

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“We’ve long talked about Alberta’s unique circumstance of being a low-tax jurisdiction and being on this oil roller coaster,” Finance Minister Nate Horner said in an interview. “This is the best plan I’ve seen to get off that.” 

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With the new contribution, the government projects the Heritage Fund will now hit C$250 billion before 2050 and should reach C$270 billion by that date, Horner said. While the plan doesn’t require any additional investments, Horner said he hopes the province is able to make “many more” deposits to the Heritage Fund after surplus years.

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After 2050, the province would be able to pull about C$10 billion from the fund annually while still letting it grow, he said. 

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Energy Revenue

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Following a larger-than-expected C$8.3 billion surplus in the fiscal year that ended in March, Alberta is projecting a C$5.2 billion deficit for the current year. That’s driven in part by a more than 20% drop in bitumen royalties, largely due to falling crude prices. 

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Even with that projected decline, bitumen revenue is still projected to account for about 17% of the provincial government’s inflows.

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The Heritage Fund was established in 1976 by Premier Peter Lougheed to save oil and gas revenue for times when prices dropped or the resources ran dry. But governments didn’t stick to the savings plan, failing to contribute resource revenue or even withdrawing its earnings.

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Smith’s government is aiming to grow the fund by focusing on partnerships with other global investors and other strategic investments. Overseeing the fund is the new Heritage Fund Opportunities Corp., chaired by Joe Lougheed, a partner at the Dentons law firm and the son of the premier who created the fund.  

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Along with Lougheed, the new board members for that entity named Friday are Kate White, an economist and deputy minister for Alberta Treasury Board and Finance; Geneva-based Jacqueline Curzon, who holds a number of board memberships; Finland-based Jouko Karvinen, former chief executive officer of paper maker Stora Enso Oyj; Chana Martineau, CEO of the Alberta Indigenous Opportunities Corp.; and Mary Ritchie, who has held a number of board positions in Canada and elsewhere.