By Pam Martens and Russ Martens: July 15, 2021 ~
According to the Merger and Acquisition database at PitchBook, entities tied to JPMorgan Asset Management have been buying up energy and infrastructure assets around the world including solar power plants, wind farms, airports, water companies and the 120-year old El Paso Electric which provides electricity to approximately 437,000 retail and wholesale customers in west Texas and southern New Mexico.
The acquisitions can be traced back to an entity called the Infrastructure Investments Fund (IIF). When IIF is seeking regulatory approval, as in the case of buying El Paso Electric, it contends it is not controlled by JPMorgan. But when JPMorgan is pitching the fund to institutional investors around the globe, the bank points out that 50 of the bank’s employees are actively engaged in the fund – along with “70 independent portfolio company directors.”
The brochures (flipbooks) for IIF are marked “Strictly Private/Confidential” but one dated 2019 used to pitch California’s Mendocino County Employees Retirement Association and another from 2020 that was used to pitch a pension fund in the U.K., are available for anyone to read on the Internet.
The 2019 flipbook states that IIF was founded in 2006 and “grew out of the JPMorgan Real Estate Group.” At that time, according to the flipbook, IIF included $6.1 billion in 15 portfolio companies in 15 countries. The 2020 flipbook states that IIF has 17 portfolio companies in 22 countries with a net asset value of $12.4 billion.
The 2019 flipbook also shows that foreign investors owned 73 percent of the fund. Foreign ownership interest became a problem in 2019 when the U.S. Nuclear Regulatory Commission (NRC) had to approve IIF’s purchase of El Paso Electric, which owned part of the Palo Verde nuclear power plant in Arizona. Under federal law, nuclear power plants are to remain under the control of U.S. entities. The NRC approved the El Paso deal despite the foreign ownership interests.
According to IIF’s flipbook, companies in which IIF held a 100 percent control include Värmevärden, a heating company based in central Sweden; Summit Utilities, which owns natural gas distribution and transmission subsidiaries that operate in Arkansas, Colorado, Maine, Missouri and Oklahoma; SouthWest Water Company, which owns and operates regulated water and wastewater systems serving over half a million residential and business customers in Alabama, California, Florida, Oregon, South Carolina, and Texas. According to PitchBook, a subsidiary of SouthWest Water Company, via JPMorgan Asset Management, last year acquired the South Carolina wastewater utility operations of Ni Pacolet Milliken Utilities (Ni) from Pacolet Milliken, LLC. Ni owns regulated wastewater and water utility companies serving customers in South Carolina and Florida. Ni’s holdings include Palmetto Utilities, Palmetto Wastewater Reclamation, and Ni Florida.
IIF’s 2020 flipbook for investors brags about the monopolistic aspects of its portfolio companies, writing that: “Essential services that often operate on a monopolistic basis either by regulatory structure or long-term contract, which drives visibility into strong EBITDA [earnings before interest, taxes, depreciation, and amortization] margins & cash yield.”
IIF also has 66.1 percent control of North Queensland Airports (NQA) in Australia, which currently owns and operates Cairns and Mackay Airports, which service approximately five million passengers each year. IIF also owns Nieuport Aviation which owns and operates the Billy Bishop Airport in Toronto, Canada, which services 2.8 million passengers according to its website.
IIF’s 2020 flipbook says that it has control of 100 percent of the power being generated by Sonnedix Power Holdings, which owns solar plants, and Ventient Energy, a portfolio of wind farms.
The Sonnedix website indicates that it “currently has over 300 power plants in operation, construction or the initial stages of planning in 8 countries.”
On April 1 of this year, elEconomista reported the following regarding Sonnedix:
“Sonnedix, the renewable arm of JP Morgan’s institutional investors, has just closed the acquisition of a 5.1MW solar photovoltaic portfolio from Diversis Energía and the Enerpal Group.
“The portfolio is made up of two photovoltaic plants on land, located in Spain. Both facilities are remunerated under the Spanish regulatory regime and have been in operation since 2008 and 2006 respectively.
“Sonnedix currently has 4GW of total capacity controlled through eight countries. In Spain, the company has 138 projects in operation, with a total capacity of 361MW.”
In 2016, Reuters reported that JPMorgan Asset Management, not IIF, “has acquired nearly all of solar power developer Sonnedix Group.”
IIF’s purchase of Ventient Energy is raising eyebrows in Europe. According to Ventient Energy’s website, it “currently owns and operates onshore wind farms in Belgium, France, Germany, Portugal, Spain, and the UK, with a total installed capacity of 2.5GW.”
In November of last year, The National newspaper in Scotland reported that Ventient “has come under attack for allegedly avoiding millions of pounds of tax by being owned in the Cayman Islands.”
The newspaper described Ventient’s corporate structure as being “a subsidiary of a company registered in Luxembourg. That company is in turn owned by a firm in the Caymans…” noting further that “Luxembourg and the Caymans are both legally used as tax havens to help reduce the amount of money companies have to pay to governments – and to keep finances secret.”
While federal regulators are looking the other way at these deals, the job of blowing the whistle, as usual, is left to a nonprofit watchdog. Tyson Slocum, Energy Program Director at the public interest group, Public Citizen, filed a complaint last August with FERC. The complaint makes the following charges:
“J.P. Morgan Chase & Co. created IIF as an off-the-books private equity division one year after committing to the Federal Reserve that it would not ‘acquire or operate’ power plants. Prior to J.P. Morgan creating IIF in 2006, J.P. Morgan submitted a Notice to the Board of Governors of the Federal Reserve System on July 21, 2005, where J.P. Morgan explicitly pledged to the Board of Governors of the Federal Reserve that: ‘JPM Chase commits to the Board that it will not acquire or operate facilities in the United States for the extraction, transportation, storage or distribution of commodities.’
“One year after making this pledge to the Federal Reserve, J.P. Morgan Chase & Co. created a new lightly-regulated private equity arm of the bank’s asset management division and legally called it J.P. Morgan IIF.”
Public Citizen’s complaint notes further:
“…J.P. Morgan designed IIF’s weak corporate controls to maximize the bank’s ability to direct and manage all of IIF’s operations and investments. To deflect regulator’s curiosity of upstream control by J.P. Morgan, the bank designed a false ‘ownership’ structure consisting of three term-limited individuals who, in turn, delegate all day-to-day authorities to J.P. Morgan Chase & Co. IIF has previously acknowledged that J.P. Morgan Chase & Co. nominated current IIF ‘owners,’ and can influence the selection of new ‘owners.’
“IIF’s delegation of day-to-day authorities to J.P. Morgan extends to ensuring that J.P. Morgan executives serve on all of the board of directors of companies under the control of IIF.”
The reason that every American should be just as hopping mad as Public Citizen is that JPMorgan Chase has a serial history of rigging the markets in which it operates. Allowing a bank to exert control over critical infrastructure that has admitted to five criminal felony charges since 2014 – while its Board kept the same Chairman and CEO, Jamie Dimon, at the helm – is abject regulatory negligence.
In 2013 a unit of JPMorgan Chase was forced to pay $410 million in fines and restitution by FERC for ripping off electric utility customers in California and the Midwest. According to FERC, the JPMorgan energy unit was charging customers “as much as 80 times the prevailing power prices at certain hours of the day.” (See our report: The Missing Pieces in the Criminal Probe of JPMorgan’s Energy Trading.)
On May 20, 2015, JPMorgan Chase pleaded guilty to one criminal count brought by the U.S. Department of Justice for its role with other banks in rigging the foreign exchange market. The bank agreed to a fine of $550 million.
Four years later, on May 16, 2019, JPMorgan Chase settled charges for 228.8 million Euros with the European Commission over rigging the foreign exchange market.
Just last year, on September 29, 2020, the U.S. Department of Justice brought two counts of wire fraud against JPMorgan Chase involving “tens of thousands of episodes of unlawful trading” in the markets for precious metals futures contracts, and the second felony charge for “thousands of episodes of unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.” The bank admitted to the charges and agreed to pay $920 million in fines and restitution to various regulators.
In President Biden’s July 9, 2021 Executive Order warning federal agencies to start enforcing laws against excessive market concentration, he also mandated that federal regulators should “ensure that actors engaged in unlawful activities do not distort the proper functioning of the competitive process or obtain an unfair advantage over competitors who follow the law.”
But when it comes to JPMorgan Chase, the largest bank in the United States, that is precisely what federal agencies have allowed to happen. By not yanking JPMorgan Chase’s banking charter, by not breaking up the bank, by not forcing the removal of its serial crime chief, Jamie Dimon, federal regulators have allowed this behemoth to “obtain an unfair advantage over competitors who follow the law.”
If you have any doubt about that, just study JPMorgan Chase’s rap sheet since 2011.
