Canadian pension fund commits $150m to renewables sector
Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) on Wednesday said it has pledged an investment of US $150 million in the renewable energy sector in India, becoming the latest foreign investor to tap the growing Indian clean energy market.
CDPQ is Canada's second largest pension fund manager with C$248 billion in net assets and invests globally in major financial markets, private equity, infrastructure and real estate. The fund opened its first office in the country in New Delhi on Wednesday.
The fund said it plans to invest the amount over the next three to four years, targeting hydro, solar, wind and geothermal power assets. It also intends to partner with selective Indian renewable energy companies, CDPQ said in a statement.
Two of Canada's largest pension fundsCDPQ and the Public Sector Pension Investment Board (PSP Investments)-are looking to invest in the Indian infrastructure sector and have started scouting for assets, Mint reported in October citing people familiar with the discussions.
CPDQ's entry into India follows that of its larger peer Canada Pension Plan Investment Board (CPPIB), which has already committed substantial funds to the Indian infrastructure sector through an investment of Rs.2,000 crore in Larsen and Toubro Ltd subsidiary L&T IDPL. CPPIB opened its investment office in India in October. PSP Investments had in November said it would buy a 49% stake in Anil Ambani-led Reliance Infrastructure Ltd's electricity generation, transmission and distribution business in Mumbai and adjoining areas. Large global investors, including pension funds, have a large pool of capital and typically look at 14-15% yield opportunity in India. As Indian infrastructure assets start to mature and companies look to divest cash-generating assets, these funds are starting to evaluate possible investments. IDFC Alternatives and I Squared Capital are among the largest investors in renewable energy sector in the country.
Renewable energy in India now has a large enough portfolio of operating assets, which would attract foreign investments, said Manish Agarwal, partner and leader- infrastructure at PwC India. Availability of assets with steady cash flows is now becoming aligned with the return expectations of the investors such as the Canadian pension funds, he said.
India has a target of installing 100 gigawatt (GW) of solar power capacity and 60 GW of wind power capacity by 2022. Welspun Renewables Ltd, SunEdision Inc, NuPower Renewables Pvt. Ltd, Goldman Sachs-backed ReNew Power Ventures Pvt. Ltd, Hero Future Energies, Hindustan Powerprojects Ltd, Morgan Stanley-owned Continuum Wind Energy Ltd, and JP Morgan-backed Leap Green Energy Pvt. Ltd are some of the prominent renewable energy firms in India.
CDPQ said the $150 million investment in renewable energy was a first for the fund in growth markets. "We believe India stands out as an exceptional country to invest in, given the scope and quality of investments opportunities, the potential for strategic partnerships with leading Indian entrepreneurs, and the current government's intention to pursue essential economic reforms," said CDPQ chief executive Michael Sabia.