Canada Pension Plan Investment Board (CPPIB), which is close to taking a controlling stake in SB Energy Holdings, is exploring the possibility of bringing these solar assets under an infrastructure investment trust (InvIT), said two people aware of the development.
InvITs are trusts that manage income-generating infra assets, typically offering investors a regular yield and a liquid method of investing in such projects. They can be either publicly listed on stock exchanges or privately placed to a few investors.
CPPIB’s plan comes against the backdrop of its partnership with Piramal Enterprises Ltd to co-sponsor a green energy-focused InvIT in India.
Japan’s SoftBank Group Corp. is selling its controlling stake in SB Energy, which has a 7.7GW solar power portfolio in India, for an estimated $525 million. SoftBank owns 80% of SB Energy, with the rest held by Bharti Enterprises Ltd. Bank of America and Barclays are handling the sale process.
“The plan being explored is to bring the solar assets of SB Energy under an InvIT,” said one of the two people mentioned above requesting anonymity.
Spokespersons for CPPIB, SoftBank Investment Advisers, Bharti Enterprises, Barclays Bank India and Bank of America declined comment. A Piramal Group spokesperson said in an emailed reply, “We don’t comment on market speculation.”
The joint venture pact for the SB Energy deal, one of the largest green energy transactions in India, is expected to be signed shortly. Once the sale is completed, CPPIB will become the majority owner of SB Energy.
Pension funds such as CPPIB represent the so-called patient capital, which seeks modest yields over time. India fits the risk profile given that the markets here have matured from the early-risk stage. Also, India’s green energy tariffs have hit a record low, making access to cheap funds a key criterion for success. The tariffs since then have gone up.
The Canadian pension fund manager has been investing in real estate, infra, public and private equities, funds and co-investments and credit in India. Its global net assets totalled $475.7 billion as of 31 December.
SoftBank has invested more than $800 million in the business in the past five years. The stake sale efforts follow SB Energy dropping its plan in July 2020 to raise $600 million through a dollar bond. Mint reported on 6 July 2020 about SoftBank’s plan to sell its entire stake in a shift from its earlier plan to find a significant minority investor, and its separate talks with CPPIB, Canada’s Brookfield Asset Management Inc., and Abu Dhabi’s sovereign wealth fund Mubadala Investment Co. for the sale.
There is increased interest in India’s green energy InvITs amid growing focus on environmental, social and governance investing. Private equity firm KKR’s Virescent Infrastructure has also floated an InvIT to house renewable energy assets.
The enthusiasm among global investors stems from India setting a target of 450GW renewable energy capacity by 2030.
CPPIB is also an investor in ReNew Power, one of India’s leading renewable energy companies, and has also been eyeing other clean energy assets.
CPPIB, among other firms, had earlier evinced interest in acquiring a 51% stake in Tata Power’s renewable energy InvIT and a majority stake in Finland’s state-controlled power utility Fortum Oyj’s 500MW Indian solar projects.