Piramal, CPPIB to sponsor renewable energy focussed InvIT

Piramal Enterprises on Tuesday signed a memorandum of understanding (MoU) with Canada Pension Plan Investment Board (CPPIB) to co-sponsor a renewable energy-focused infrastructure investment trust (InvIT).

With an initial corpus of 600 million dollars and the option to scale further, InvIT will seek to acquire up to 1.5 to 2 gigawatt of stable and cash-generating renewables assets on a hold-to-maturity basis, with a firm focus on diversification of both asset type as well as off-taker profile.

"The foundation of this partnership is based on a shared ethos and values that leverage CPPIB's global track record of value creation in the infrastructure space with Piramal Enterprises Ltd's long term strategy and goodwill in India," said Piramal Group Chairman Ajay Piramal.

 

Both Piramal Enterprises and CPPIB will act as co-sponsors of the proposed InvIT and hold up to 75 per cent of the units, with CPPIB committing 360 million dollars and holding up to 60 per cent, and Piramal Enterprises committing 90 million dollars and holding 15 per cent. They will seek to raise capital from other like-minded investors for the remaining 25 per cent.

In the interim and prior to its launch, Piramal Enterprises and CPPIB will jointly warehouse seed assets for the proposed InvIT. Piramal Enterprises will act as the sole investment manager as well as the project manager.

"The renewable energy sector is at an inflection point and is witnessing significant consolidation, the pace of which is likely to increase in the near future," said Piramal.

The timing is therefore opportune for aggregating assets in this sector, given that the existing players are willing sellers in light of 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 as a whole," he said.

Piramal Enterprises' consolidated revenues were over 1.9 billion dollars in 2018-19 with 40 per cent of them generated from outside India.

CPPIB is a professional investment management organisation that invests funds not needed by the Canada Pension Plan (CPP) to pay current benefits in the best interests of 20 million contributors and beneficiaries. In December-end, the CPP fund totalled 368.5 billion dollars.