Piramal and CPPIB to launch India's maiden Renewable Energy focused InvIT.

CPPIB has committed $360 million while Piramal will provide $90 million

Piramal Enterprises Limited (“PEL”) has signed a Memorandum of Understanding with Canada Pension Plan Investment Board (“CPPIB”), a Canadian pension fund, to co-sponsor a renewable energy-focused Infrastructure Investment Trust (“InvIT”). With an initial corpus of US$ 600 million, and the option to scale further, the InvIT would seek to acquire up to 1.5-2GW 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.

"Piramal is pleased to partner with CPPIB on the launch of the first ever InvIT in India, focused on renewables. 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 PEL’s long term strategy and goodwill in India. We are enthusiastic about the opportunity as it is truly scalable and continue to remain committed to creating value for our shareholders." - Ajay Piramal, Chairman, Piramal Group.

Mumbai based Piramal Enterprises Limited (PEL) is one of India’s large diversified companies, with a presence in Financial Services, Pharmaceuticals and Healthcare Insights & Analytics with a consolidated revenue of over US$1.9 billion in FY2019, with ~40% of revenues generated from outside India.

Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, São Paulo, and Sydney, Canada Pension Plan Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments. In mid-2018, CPPIB announced that it would foray in Green Bonds.

Both PEL and CPPIB will act as Co-Sponsors of the proposed InvIT and hold up to 75% of the units (with CPPIB committing US$360m and holding up to 60%; PEL committing US$90m and holding 15% ) and seek to raise capital from other like-minded investors for the remaining 25%. In the interim and prior to its launch, PEL and CPPIB will jointly warehouse seed assets for the proposed InvIT. PEL would act as the sole Investment Manager as well as Project Manager for the proposed InvIT.

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.  The timing of the issue 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 with a strong record of corporate governance. Renewable InvITs can serve as a strong catalyst for the Green Energy sector as a whole.