Armed with an initial corpus of $600 million (~₹41.6 billion), the newly-formed Infrastructure Investment Trust (InvIT) would seek to acquire between 1.5-2 GW of stable and cash generating renewables assets comprising both wind and solar in India. The Canada Pension Plan Investment Board (CPPIB) has inked a memorandum of understanding (MoU) with Piramal Enterprises Limited (PEL) to form this renewable energy-focused infrastructure trust.
The projects will be developed on a hold-to-maturity basis, with a firm focus on diversification of both types of assets as well as off-taker profiles.
Mumbai-based PEL is a diversified company, with a presence in financial services, pharmaceuticals and healthcare insights and analytics with consolidated revenues of over $1.9 billion (~₹131.7 billion) in FY2019, with 40% of revenues generated from outside India, according to the company.
Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, São Paulo, and Sydney, the CPPIB is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. As of December 31, 2018, the CPP Fund totaled $368.5 billion (₹26.9 billion), according to its portfolio.
Both PEL and CPPIB will act as co-sponsors of the proposed trust and hold up to 75% of the units, with CPPIB committing $360 million (~₹24.9 billion) and holding up to 60% while PEL has committed $90 million (~₹6.2 billion) and holding of up to 15% . It would seek to raise capital from other like-minded investors for the remaining 25% stake.
Before PEL and CPPIB will jointly warehouse seed assets for the proposed InvIT, while PEL would act as the sole investment manager as well as project manager for the proposed InvIT project.
Previously, Piramal finance, a subsidiary of PEL, approved additional funding of ₹7 billion (~$107.8 million) to ACME Solar Holdings. The funds were approved under a new product for the renewable energy sector, a flexi line of credit, which aims to make a line of funding available to the borrower based on operational projects and includes the flexibility to draw and repay during the tenure.
“The renewable energy sector is at an inflection point and is witnessing significant consolidation, the pace of which is likely to increase soon. We believe that the timing is therefore opportune for aggregating assets in this sector given that the existing players are willing sellers considering a constrained capital market environment – both debt and equity. This is the first truly neutral ‘white-label’ InvIT – led by a fiduciary and supported by patient capital and strong corporate governance – that we believe, can serve as a strong catalyst for the sector,” Ajay Piramal, chairman of Piramal group said in a statement issued by the company.
Previously, CPPIB was reported to invest approximately $200 million (~₹12.9 billion) in ReNew Power Ventures in the form of compulsory convertible preference shares (convertible debt) that could be converted to equity shares at the time of initial public offering. Recently, it announced its foray into green bonds. This would make CPPIB the first pension fund to issue green bonds, according to the board.