CDPQ and CLP Reinforce Strategic Partnership in Apraava Energy
Renewables Now also reports CDPQ to beef up stake in India's Apraava Energy to 50%:Canadian pension fund Caisse de depot et placement du Quebec (CDPQ) has increased its stake in Apraava Energy to 50% from 40%, making it an equal shareholder in the Indian power producer. CDPQ bought the 10% stake in Apraava from existing shareholder Hong Kong-listed CLP Holdings for $83 million. The stake consolidation comes three and a half years after it first checked into Apraava. That time, it had paid $365 million for a 40% stake.
The latest move gives Canada's second largest pension fund increased governance rights — equal to those of CLP — in Apreeva. Commenting on the change in shareholding structure, Apraava MD Rajiv Ranjan Mishra said, “This is a vote of confidence from CDPQ since they have been invested in the company for almost three and a half years. Also, with the company becoming a joint venture, CLP will not be loaded with the debt of Apraava. This will give additional freedom to Apraava to increase its investment significantly so that it can double the size in the next three years."
Founded in 2002, Apraava (then known as CLP India) has an nstalled capacity of 3,150MW currently, which includes 924MW of wind and 250MW of solar. It also has two power transmission assets. Apraava has invested more than Rs 18,000 crore in the country to build its portfolio.
CDPQ, which opened its India office in 2016, has so far invested more than $7 billion here. Its investments include Piramal Enterprises, Kotak Mahindra Bank and Maple Highways.
Sustainable energy has been attracting significant investments in the recent past. IHC of Abu Dhabi invested Rs 3,850 crore for a 1.3% stake in Adani Green Energy, while BlackRock Real Assets and Mubadala Investment Company announced an investment of Rs 4,000 crore in Tata Power’s renewable energy business for a 11% stake.
Canadian investment group Caisse de depot et placement du Quebec (CDPQ) has raised its stake in India’s Apraava Energy to 50% following an agreement that will make the Mumbai-based renewables and power transmission business a 50/50 joint venture (JV).
Apraava Energy’s other shareholder, Hong Kong-based CLP Group, agreed to sell its 10% stake to the Canadian partner for a sum that amounts to a US-dollar equivalent of INR 6.6 billion (USD 83m/EUR 82.6m), the companies announced on Tuesday.
CDPQ became a strategic shareholder in Apraava Energy in 2018, after acquiring a 40% stake in the company. With an increased equity stake following the transaction, CDPQ will gain governance rights equal to those of the CLP group, according to Tuesday’s press release.
Apraava Energy has 3,150 MW of installed capacity in its portfolio, including two power transmission assets, 924 MW of wind and 250 MW of solar energy projects in India. It is currently in the process of building a 251-MW wind farm, which is set to become largest wind power asset to date, its co-owners said.
The transaction is subject to certain conditions and regulatory approval.
Power Technology also reports CDPQ will buy an additional 10% stake in India-based Apraava Energy:
Canadian investment firm CDPQ has agreed to purchase an additional 10% stake in India-based Apraava Energy for Rs6.6bn ($83m) from Chinese power company CLP.
CDPQ now owns a 50% stake in Apraava Energy, having previously bought a 40% stake in the independent power producer in 2018.
The pension fund noted that the deal will make its governance rights in Apraava Energy equal to those of CLP, one of the largest foreign investors in India’s power sector.
CDPQ Head of Infrastructure Emmanuel Jaclot said: “Ever since our investment in Apraava Energy nearly four years ago, CDPQ has strived alongside CLP to transform Apraava into a true sustainability leader equipped with a clear plan to transition to renewable energy.
“We are delighted to increase our stake in the company, helping drive this agenda forward while supporting India’s ambition of providing clean and sustainable energy to all.”
Apraava Energy’s portfolio consists of 3.15GW of installed capacity, which includes a 1.32GW coal-fired power plant in Haryana and a 655MW gas-fired power station in Gujarat.
The company also has 924MW of wind and 250MW of solar energy capacity across seven Indian states, as well as a power transmission asset.
Completion of the deal is subject to several conditions being met, including the receipt of approvals from the regulatory bodies.
Apraava Energy managing director Rajiv Mishra said: “We will continue to focus on building a sustainable power company that will invest only in low-carbon growth areas, including renewable generation, transmission, distribution, as well as other customer-focused energy businesses.
“As we move forward, all of our decisions and efforts will epitomise energy in action, thereby creating value for all our stakeholders.”
In May this year, CDPQ finalised a deal to purchase Terna Group’s power transmission network in Latin America for more than €265m ($278.7m).
CDPQ put out a press release stating it is strengthening its strategic partnership with CLP in Apraava Energy:
CDPQ, a global investment group, and CLP Group (CLP), one of the largest investor-owned power businesses in Asia, today announced they have reached an agreement for the sale by CLP of a 10% stake in Apraava Energy to CDPQ, bringing their respective stakes in the company to 50%.
This transaction reinforces CDPQ’s and CLP’s joint commitment to supporting the acceleration of the transition to a greener economy in India. CDPQ first became a strategic shareholder in Apraava Energy in 2018, with the acquisition of a 40% stake in the company. Since then, Apraava Energy has successfully undertaken a number of energy transition related investments. Building on this, Apraava Energy will have a sharper and dedicated focus in the investment and development of clean energy and power transmission projects. Following this transaction, CDPQ will also have increased governance rights, equal to those of CLP, with respect to Apraava Energy.
Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at CDPQ, said: “Ever since our investment in Apraava Energy nearly four years ago, CDPQ has strived alongside CLP to transform Apraava into a true sustainability leader equipped with a clear plan to transition to renewable energy. We are delighted to increase our stake in the company, helping drive this agenda forward while supporting India’s ambition of providing clean and sustainable energy to all.”
Richard Lancaster, Chief Executive Officer at CLP Holdings, said, “This transaction underlines the success of our partnership with CDPQ that has been built since 2018, and reflects the strategic alignment and commitment shared by us. We are aligned in seeking investment opportunities for zero-carbon infrastructure projects to support India’s energy transition, and strongly believe this change creates a stronger platform for capturing these opportunities.”
Rajiv Mishra, Managing Director at Apraava Energy, said, “We are grateful to our shareholders, CLP Group and CDPQ for their unwavering support and trust in Apraava Energy. Together with them, Apraava Energy will support India’s ambitions of providing clean and reliable energy to all in the development of a greener economy. We will continue to focus on building a sustainable power company that will invest only in low-carbon growth areas, including renewable generation, transmission, distribution, as well as other customer-focused energy businesses. As we move forward, all of our decisions and efforts will epitomise energy in action, thereby creating value for all our stakeholders.”
The total consideration for the transaction is the US$ equivalent of INR 6.6 billion (approximately HK$653 million or US$83 million at the current exchange rate conversion). Completion of the transaction is subject to the fulfillment of various conditions precedent including regulatory approvals.
ABOUT CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public retirement and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2021, CDPQ’s net assets totalled CAD 419.8 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.
ABOUT CLP GROUP
The CLP Group is one of the largest investor-owned power businesses in Asia Pacific with investments across Hong Kong, Mainland China, Australia, India, Southeast Asia and Taiwan. Hong Kong-listed CLP Holdings Limited is the holding company for the CLP Group, which has a diversified portfolio of generating assets that uses a wide range of fuels including coal, gas, nuclear and renewable sources.
Through CLP Power Hong Kong Limited, the Group operates a vertically integrated electricity supply business that provides a highly reliable supply of electricity to 80% of Hong Kong’s population. In Mainland China, the CLP Group is the largest external independent power producer with a focus on low-carbon energy. In Australia, the Group’s wholly-owned subsidiary EnergyAustralia is a leading integrated energy company, providing gas and electricity to about 2.44 million households and businesses. Apraava Energy (formerly known as CLP India) is one of India’s biggest renewable energy producers with operations in power generation and transmission.
CLP Holdings is included in the Global Dow – a 150-stock index of the world’s leading blue-chip companies, the Dow Jones Sustainability Asia Pacific Index (DJSI Asia Pacific), the Dow Jones Sustainability Asia Pacific 40 Index (DJSI Asia Pacific 40), the Hang Seng Corporate Sustainability Index Series and the FTSE4Good Index series.
ABOUT APRAAVA ENERGY
Apraava Energy is a diversified power company headquartered in Mumbai. Founded in 2002, Apraava Energy has evolved from being a single-asset company to a forward-looking, climate-conscious organisation. Its diverse portfolio comprises 3,150 MW of installed capacity which includes 924 MW of wind and 250 MW of solar energy projects across seven states, as well as two power transmission assets. In addition, the company is currently constructing a 251 MW wind farm which, when completed, will be its largest wind asset to date.
The CLP Group also put out the same press release here which is where I got the image above.
On the image: Cyril Cabanes, Managing Director, Infrastructure, Asia Pacific, CDPQ (right on screen), Richard Lancaster, CEO, CLP (first from left), Saurabh Agarwal, Managing Director, CDPQ India; Managing Director, Infrastructure, South Asia & Middle East (second from left on screen), Nicolas Tissot, Chief Financial Officer, CLP (first from right), David Simmonds, Chief Strategy, Sustainability and Governance Officer, CLP (second from left), Rajiv Mishra, Managing Director, Apraava Energy (left on screen), Hemant Joshi, Senior Director – Business Development & Asset Management Oversight (second from right) celebrate the strengthening of CDPQ’s and CLP’s strategic partnership in Apraava Energy in a virtual ceremony yesterday.
Now, this latest transaction values Apraava Energy at US$830 million.
By beefing up its stake to 50%, CDPQ's strategic partnership with CLP Holdings effectively becomes a joint venture and gives it more governance rights on Apraava Energy.
Also, as stated by Apraava MD Rajiv Ranjan Mishra above, with the company becoming a joint venture, CLP will not be loaded with the debt of Apraava. "This will give additional freedom to Apraava to increase its investment significantly so that it can double the size in the next three years."
Clearly this partnership is successful and this is why CDPQ is upping its stake.
In fact, from CDPQ's press release, I note what Richard Lancaster, CEO at CLP Holdings, said:
“This transaction underlines the success of our partnership with CDPQ that has been built since 2018, and reflects the strategic alignment and commitment shared by us. We are aligned in seeking investment opportunities for zero-carbon infrastructure projects to support India’s energy transition, and strongly believe this change creates a stronger platform for capturing these opportunities.”
Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at CDPQ, states that alongside CLP, they want to transform Apraava into "a true
sustainability leader equipped with a clear plan to transition to
renewable energy.”
Interestingly, Apraava is currently in the process of building a 251-MW wind farm, which is set to become largest wind power asset to date, its co-owners said.
I also think it's worth reading more about CDPQ's partner on this joint venture, The CLP Group:
The CLP Group is one of the largest investor-owned power businesses in Asia-Pacific with investments in Hong Kong, Mainland China, Australia, India, Southeast Asia and Taiwan. Our business spans every major segment of the electricity value chain including retail, transmission and distribution, along with a diversified portfolio of generation assets. CLP takes a long-term view of our business and is committed to building a sustainable business fit for the future.
The CLP Group has won many more awards, I am just providing you a glimpse above (see more here).
The company focuses on every major segment of the electricity value chain including retail, transmission and distribution, and 5% of its operating revenues come from renewables (wind, solar, hydro).
Having a strong strategic partner like CLP in Asia-Pacific is essential for CDPQ and it opens the door for many more joint ventures in the region in the future. CLP also benefits from having a strong partner like CDPQ providing long-term capital, its expertise and network.
What else? CDPQ is no stranger to renewable power in India.
Back in 2018, when it first announced its stake in Apraava, it also increased its stake (to 40%) in Azure Power, one of India’s largest independent solar power producer with a pan-Indian portfolio of more than 3 GW spread across 23 Indian states.
Last year, OMERS Infrastructure announced it bought an almost 20% stake in Azure Power.
Other than CDPQ and OMERS, CPP Investments is also a huge investor in India.
In April, its CEO John Graham told Mint the organization sees massive long-term opportunities as countries and companies embark on clean energy transitions, and it plans to double investments in the space by 2030:
And three weeks ago, the Economic Times of India reported Ontario Teachers' Pension Plan (OTPP) is in advanced talks to acquire a stake of about 49% in Mahindra Susten, the renewable energy unit of Mahindra and Mahindra.“A year ago, we started to evolve the narrative internally from thinking about climate, not just as a risk, but as an opportunity that is very consistent with the type of capital we have. The world will do everything it can to transition to net-zero. And that’s not just transitioning from conventional energy to renewables. That’s the entire economy having to transition, which will require significant amounts of capital to the tune of $3 trillion a year. So, we see this as a generational investment opportunity to invest in the global economy’s transition to net-zero," said John Graham, president and chief executive of CPP Investments.
Government mandates to reduce the use of fossil fuels have already driven large capital flows into renewable energy, and with scientists warning that carbon emissions must be halved by 2030 from the 2019 level to keep global warming within 1.5 degrees Celsius above pre-industrial levels, investments are only likely to accelerate.
“In India, we have a partnership with ReNew Power. We are also looking to invest with leading renewable platforms around the globe," he said.
Graham said that every asset class, whether it’s real estate, private equities, credit or public equities, will present opportunities to invest in the economic transition. Out of its Canadian $550 billion ($436 billion) assets under management, CPP Investments currently has C$67 billion in energy transition assets, including its investments in the renewables sector. The pension fund manager plans to double this by 2030.
The fund manager continues to be bullish on India, having grown its portfolio in the country despite the pandemic. It plans to increase investments across sectors such as infrastructure, real estate, and technology while also ramping up its presence in credit and pharma and healthcare, sectors where it doesn’t have significant exposure in India.
A deal will mark the debut of OTPP in the Indian renewable energy space. The Canadian fund has a strong presence in the Indian roads sector and has thus far stayed away from the booming clean tech arena, which has seen peers CPPIB, CDPQ dominate. OTPP was one of the contenders to acquire Actis' renewable energy platform in India, Sprng Energy, which was bought by Shell. OTPP, which has net assets worth $36 billion (correction: $26 billion) in infrastructure globally, plans to invest another $16 billion in the next five years.
Interestingly, three years ago, Mint discussed why Canadian funds are placing big bets in India:
“India offers scale opportunity. Canadians like to put large sums of money to work and India is one of the very few markets where the opportunity to do this exists. India also offers yield. Canadians like operating assets which can give a INR yield of 12-14% ( USd 8-9) on a long term basis," added Actis partner Sanjiv Aggarwal, responsible for its Asia energy business.
Canadian pension fund Ontario Municipal Employees’ Retirement System (OMERS) is also scouting for acquisition opportunities in India, in an affirmation of the country’s position as a green energy hot-spot Mint reported on 22 July. Also, there have been reports about Brookfield Asset Management Inc. planning to acquire a majority stake in debt-laden Suzlon Energy Ltd.
“The Canadian pension funds have found the Indian risk profile attractive," added Greenko Group president and joint managing director Mahesh Kolli.
I also noted this part:
India has become one of the top renewable producers globally with ambitious capacity expansion plans. The country has an installed renewable energy capacity of about 80 gigawatts (GW) and is running the world’s largest renewable energy programme with plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments.
“They are hungry for assets with low risk and stable returns to meet their pension obligations and hence, the interest in assets like roads, airports, power projects etc," said Vinay Rustagi, managing director at consulting firm Bridge to India.
All this to show you India still offers tremendous long-term opportunities and Canada's large pensions are investing across various asset classes, including the renewable energy sector which is growing very strongly there.
Below, Rajiv Mishra, Managing Director at Apraava Energy discusses how India will achieve 500 GW of renewable energy by 2030 (from from Business Pavilion on Climate Leadership at COP26, November 2021).
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