OMERS Increases Stake in Indian Infra Trust; CPPIB Increases Commitment to Brazilian Water Firm
Canadian pension fund OMERS is buying Allianz Capital Partners’ 13.5% stake in Interise Trust, increasing its ownership in the Indian road sector infrastructure trust to 34.8%.
The infrastructure arm of OMERS is investing an undisclosed amount to increase its stake in Interise from the 21.3% currently held to just over a third of the shares in the company, making it the second-largest shareholder behind Canada Pension Plan Investment Board (CPP Investments). The remaining shares of Interise are owned by domestic investors.
OMERS has been a shareholder in Interise Trust since 2019. Interise Trust, India’s first privately listed infrastructure investment trust, was previously known as IndInfravit Trust.
Interise has a portfolio of 17 road concessions in India, spread across eight states. Of these, 14 are toll roads and three are annuity roads, with a total length of around 7,300km.
Michael Hill, EVP and global head of OMERS Infrastructure, said: “We are excited to be able to increase our stake in Interise and continue our partnership with CPP Investments in this attractive sector.”
Hill said the transaction is the firm’s second in the transportation sector in six weeks, following the agreement to acquire Italy’s Grandi Stazioni Retail in partnership with DWS last month.
Christopher Curtain, the head of Asia-Pacific, OMERS Infrastructure, said: “The transaction aligns well with our infrastructure investment strategy – it increases OMERS exposure to India’s economic growth, through an asset and sector that we know well, and in line with our approach to focus on large, resilient and yielding assets in our priority markets.
“We look forward to continuing to work with the Interise team as they manage critical road infrastructure across India.”
Earlier today, OMERS Infrastructure issued a press release stating it will increase its stake in Indian roads business Interise Trust:
September 10, 2024 – OMERS has signed an agreement with Allianz Capital Partners (ACP) to acquire ACP’s 13.5% stake in Interise Trust, one of the largest Indian Infrastructure Investment Trusts (InvIT) in the roads sector. Upon completion, OMERS stake in Interise Trust will increase to 34.8% (from the current 21.3%). CPPIB will remain the largest investor, and the remainder is distributed between domestic investors. Terms of the deal are not being disclosed.
OMERS has been invested in Interise Trust, formerly known as IndInfravit Trust, since 2019. Interise Trust holds a diversified portfolio of 17 operational road concessions across eight states in India, of which 14 are toll roads and three are annuity roads, with an aggregate length of approximately 7,300 lane kilometres. Its road projects have been consistently winning awards from the National Highways Authority of India (NHAI) for Excellence in Operations & Maintenance, Toll Management, Innovation and Best Project Management.
Michael Hill, Executive Vice President and Global Head of OMERS Infrastructure, said: “We are excited to be able to increase our stake in Interise and continue our partnership with CPPIB in this attractive sector. This transaction is our second in the transportation sector in six weeks, following our signing an agreement to acquire Italy’s Grandi Stazioni Retail in partnership with DWS last month.”
Christopher Curtain, Head of Asia-Pacific, OMERS Infrastructure, said: “We’re excited to increase our stake in Interise Trust. The transaction aligns well with our Infrastructure investment strategy – it increases OMERS exposure to India’s economic growth, through an asset and sector that we know well, and in line with our approach to focus on large, resilient and yielding assets in our priority markets. We look forward to continuing to work with the Interise team as they manage critical road infrastructure across India.”
Transportation is one of OMERS Infrastructure’s three global priority sectors, the others being digital and energy. Interise Trust is one of OMERS Infrastructure’s 14 transportation investments, with the others including airports (London City and Bangalore airports), ports (Associated British Ports and Port of Melbourne), logistics (Direct ChassisLink Inc.), rail (VTG and the recently announced Grandi Stazioni Retail), and motorway service stations (Tank & Rast).
The transaction is expected to be completed by the end of the year, subject to certain customary closing conditions and regulatory approvals.
About OMERS Infrastructure
OMERS Infrastructure manages infrastructure investments globally on behalf of OMERS, the defined benefit pension plan for municipal employees in the Province of Ontario, Canada, and third-party investors through its Strategic Partnership Program. OMERS Infrastructure manages approximately C$36 billion, including capital invested on behalf of OMERS and third parties, in approximately 30 investments located in North America, Western Europe, India and Australia, and across sectors including energy, digital and transportation. OMERS Infrastructure has employees in Toronto, New York, London, Amsterdam, Singapore and Sydney.
As a reminder, go back to read this press release from July 2019 when then IndInfravit Trust and Sadbhav Infrastructure Project Limited entered into agreements to acquire the entire equity shareholding of SIPL in nine of SIPL’s operational road projects:
IndInfravit Trust (“IndInfravit”) and Sadbhav Infrastructure Project Limited (“SIPL”) today executed definitive agreements whereby IndInfravit has agreed to purchase the entire equity shareholding of SIPL in nine of SIPL’s operational road projects (“Roads Portfolio”) from SIPL. The transaction values 100% of the Roads Portfolio at an enterprise value of approximately INR 66,100 million.
Upon completion of the transaction, pursuant to the definitive agreements, SIPL will receive the consideration from IndInfravit in cash as well as allotment of units of IndInfravit; post completion, SIPL will hold not exceeding 10% unitholding in IndInfravit.The transaction is subject to certain regulatory and other customary conditions precedent common in transactions of this nature, including the approval of the relevant regulatory authorities and lenders as well as unitholders of IndInfravit and shareholders of SIPL.
The Roads Portfolio comprises seven toll roads and two annuity roads, with total 2,619 lane kms in Gujarat, Karnataka, Maharashtra, Rajasthan and Telangana, some of India’s most economically vibrant states. The roads forming part of the Roads Portfolio have been operational, on an average, for approximately six years, and are used by diverse groups of road users and commercial traffic. The states in which these roads are present contribute c.39% to the GDP and c.28% to the population of India.
IndInfravit, sponsored by L&T Infrastructure Development Projects Limited (“L&T IDPL”), currently holds a portfolio of five operational toll road concessions. In addition to L&T IDPL, the other unitholders include Allianz insurance companies represented by Allianz Capital Partners, Canada Pension Plan Investment Board (“CPPIB”) and OMERS Infrastructure.
This transaction is in line with IndInfravit’s strategy to acquire additional road projects in India, and significantly expands IndInfravit’s current portfolio.
SIPL is a leading Indian road developer, majority of which is owned by Sadbhav Engineering Limited (“SEL”). Both SIPL and SEL are entities listed on the stock exchanges in India. Post the completion of this transaction, SIPL will continue to own three operational road project companies and 12 under-construction road projects under the Hybrid Annuity Model. SIPL will continue to focus on its core expertise of development of new roads and utilize the sale proceeds from this transaction to recycle capital in to bidding for new road projects, inject equity in current under-construction projects and prepay debt.
“The proposed acquisition of Sadbhav’s completed and revenue generating road assets by the IndInfravit Trust is a landmark deal, which we anticipate will generate significant economic benefits to both parties. Today’s announcement serves as a clear expression of our intentions to actively pursue growth and expand the IndInfravit Trust’s revenue base. Further, the InvIT platform clearly underlines how India remains an attractive destination for serious and committed long-term investors, and we look forward to more such transactions in the near future,” said J. Subramanian, Chief Executive, LTIDPL IndvIT Services Limited (Investment Manager-IndInfravit).
“As a long-term investor, we are very glad that our customers can benefit from the growth potential of the Indian economy while contributing to its core infrastructure. We look forward to working jointly with our partners on these assets which are crucial for the economic and social development of the region and make a strategic fit to the diversification of our portfolio,” said Christian Fingerle, Chief Investment Officer at Allianz Capital Partners.
Scott Lawrence, Managing Director and Head of Infrastructure at CPPIB, said, “Our investment in IndInfravit Trust reflects our long-term confidence in the Indian infrastructure market and our belief in the ability of these toll roads to deliver strong risk-adjusted returns. The IndInfravit Trust, established by our investment partner L&TIDPL, was the first private InvIT of its kind in India, and we have been involved since its inception. We now look forward to the growth that is expected through our additional investment in these operating road assets.”
CPPIB expects its financial commitment in connection with the proposed transaction to be up to C$220 million.
“We are proud to support this further growth of the IndInfravit platform, and look forward to working with our fellow unitholders and Sadbhav to create additional value together. Our investment in IndInfravit represents one more example of how OMERS Infrastructure continues building a diverse portfolio of high-quality global assets to pay pensions to our members,” said Ralph Berg, Executive Vice President and Global Head of OMERS Infrastructure.
Shashin Patel, Chairman, at Sadbhav said, “The transaction and partnership with IndInfravit marks a significant milestone for Sadbhav Group. This is a very exciting phase in our journey and we are very committed to delivering growth and value to our shareholders, both at SIPL and SEL. We look forward to our partnership with IndInfravit and its marquee set of unitholders. We are committed to continue providing quality maintenance services and project management services to the portfolio.”
Ambit Private Limited acted as the exclusive financial adviser to IndInfravit.
Morgan Stanley acted as the exclusive financial adviser to SIPL.
Michael Hill who currently heads OMERS Infrastructure came from CPP Investments and knows this asset extremely well so it doesn't surprise me that OMERS Infra bought out Allianz Capital Partners' 13.5% stake in Interise Trust, increasing its ownership in the Indian road sector infrastructure trust to 34.8%.
CPP investments remains the largest shareholder and the two funds remain committed to this asset where they will realize strong risk-adjusted returns over the long run.
I would invite my readers to learn more about Interise here to appreciate why this asset is coveted by both funds.
This platform has been growing nicely along with India's economy and it will continue to grow nicely over the long run.
In other news, CPP Investments announced today it is increasing its commitment of up to Brazilian water and sanitation company Iguá Saneamento following a concession win:
- Iguá, majority owned by CPP Investments, recently named winner of concession auction for water and sanitation services in Brazilian state of Sergipe
- New concession rights significantly increase Iguá’s customer base and expands geographic footprint
- CPP Investments equity injection of up to R$2.2 billion (C$532 million) will fund Iguá’s purchase, support capital expenditures
SAO PAULO, September 10, 2024 – Canada Pension Plan Investment Board (CPP Investments) today announced a new follow-on commitment of up to R$2.2 billion (C$532 million) to Brazilian water and sanitation company Iguá Saneamento. The additional commitment will support what is expected to be a period of transformational growth for Iguá Saneamento after it was awarded a major concession contract in the Brazilian state of Sergipe.
Iguá was announced as the winning bidder for the Sergipe concession on September 4th, following a competitive auction process. Soon to be Iguá’s second-largest concession, it will provide water distribution and sewage collection and treatment services to 74 municipalities across the northeastern Brazilian state. With the addition of the Sergipe concession rights, Iguá will be operational in seven Brazilian states, providing potable water and sewage treatment services to approximately 5 million customers and growing.
“This is a transformational acquisition for Iguá, which continues to serve as an excellent platform through which CPP Investments can identify and gain access to the most attractive investment opportunities in the Brazilian water and sanitation market,” said James Bryce, Global Head of Infrastructure at CPP Investments. “This sector has significant room for growth while also providing opportunities to invest in long-term, stable assets at scale. We expect our investment in Iguá will continue to deliver strong returns for the CPP fund and we look forward to supporting the company’s success through this follow-on investment.”
CPP Investments first invested in Iguá in 2021 as a platform for further investments in Brazil’s water and sanitation sector and holds, prior to this additional commitment, a total aggregate amount of 61.4% in the company.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 22 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At June 30, 2024, the Fund totalled C$646.8 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or on X @CPPInvestments.
James Bryce, Global Head of Infrastructure at CPP Investments sums it up well:
“This is a transformational acquisition for Iguá, which continues to serve as an excellent platform through which CPP Investments can identify and gain access to the most attractive investment opportunities in the Brazilian water and sanitation market. This sector has significant room for growth while also providing opportunities to invest in long-term, stable assets at scale. We expect our investment in Iguá will continue to deliver strong returns for the CPP fund and we look forward to supporting the company’s success through this follow-on investment.”
The Fund is committing up to R$2.2 billion (C$532 million) to Iguá Saneamento so they did their homework here and stand ready to support the company's success.
I recently discussed why CPP Investments is targeting Brazil's water and power sector here and think the scale and risk-adjusted returns in this sector make it very attractive for a large fund to invest in.
All these large infrastructure deals whether in India or Brazil demonstrate why it's important to be globally diversified in countries that are growing and in sectors where these large funds can scale into relatively quickly, enjoying solid risk-adjusted returns over the long run.
Lastly, some executive announcements at OMERS.
First, Michael Graham, EVP and Global Head of Private Equity, will be retiring from OMERS effective February 2025. Michael Block will take on an expanded mandate, leading a new group which will be called Private Capital and his title will be Head of Private Capital. Eric Haley's title will change to Head of Private Equity, Buyout and he will lead the buyout strategy and teams:
I also want to underline Michael Graham's outstanding leadership and service to OMERS and wish both Michael Block and Eric Haley much success in their respective new roles.
Second, OMERS Infrastructure announced that Tokushi Kojima has joined the organization as Managing Director in the Strategic Partnership Program headed up by Irini Kalamakis:
I wish Tokushi much success in his new role and I'm sure he will contribute nicely to SPP's success.
Alright, let me wrap it up there.
Below, unravel the mysteries behind toll-based financing, the growth of toll revenues reaching ₹48,028 crore in 2022-23, and the projected ₹1.3 trillion revenue by 2030. Learn about the pros and cons of toll roads, the various toll-based financing models like BOT, TOT, and HAM and innovative financing methods like bond issuance and InvITs. Plus, explore the evolution of tolling techniques and their impact on reducing congestion and emissions. Don't miss out on this eye-opening exploration of India's toll system.
Also, an excellent overview of the Brazilian water & sanitation sector: challenges and opportunities. You can download the presentation PDF file here.
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