Canada’s biggest public pension fund CPP Investments has boosted its exposure to India’s burgeoning renewables sector with the acquisition of Goldman Sachs’ stake in ReNew Power for US$268 million.
CPP now has a 51.6% stake in ReNew Energy Global Plc, which operates 7GW of solar and wind capacity. The company listed on Nasdaq via a SPAC, RMG Acquisition Corp II, in August. Since then, Goldman Sachs has steadily divested its stake, with CPP buying US$139 million of shares. The Canadian fund first invested in ReNew in 2018 when it snapped up shares held by the Asian Development Bank. ReNew is now transforming itself from an independent renewables producer to a broader green energy company, with a presence throughout the supply chain with exposure to green hydrogen and energy storage.
Conscious of both rewards and risks of investment in India, CPP Investments is seeking partnerships and investments in funds to enable it to share risk and intelligence with experienced market players and choose assets that best meet its risk/reward profile. The Canadian fund says that altogether it has invested US$9 billion in India and “the country is core to our global, long-term investment strategy.” Last year, the public pension fund committed itself to achieving net zero by 2050 by “increasing investment in green and transition assets to at least C$130 billion by 2030 and building on our decarbonization investment approach.”
CPP’s latest investment follows the decision by Singapore’s GIC and the Abu Dhabi Investment Authority (ADIA) to participate in a US$700 million raise in primary equity to fund Indian renewable producer Greenko’s development of pumped storage projects. Greenko Group had installed capacity base of 13.4GW across solar, wind and hydro generation technologies, a 30.2% increase year on year, of which 7.8GWs were commissioned and 5.6 GWs are committed.
In January, the group launched new projects to boost green hydrogen production, including 140MW of generation capacity to produce 300 tonnes per day of green ammonia from mid-2024. The Greenko order builds on existing exclusive partnership with John Cockerill, including joint development of a 2GW electrolyser manufacturing plant.
As well as ReNew and Greenko, Azure Power with 7.4GW of installed renewables capacity has also won Canadian backing. However, it has suffered a massive attrition on its stock price, which is currently trading at US$2.80 on the Nasdaq, down a third since the start of the year and 83% lower year-on-year. It has delayed the filing of its 2022 annual report and failure to meet NYSE milestones could result in the suspension of trading in July and potential for delisting.
The situation is concerning for Canadian public pension funds OMERS and CDPQ, which have stakes of 21.4% and 53.4% in the company. The producer has been rocked by a whistleblower complaint over “potential procedural irregularities and misconduct by certain employees” in May, a delay in its company's annual report, and the sudden departure of CEO Harsh Shah after just two months in the post. The company’s own investigation revealed into the complaint found non-adherence to safety and quality standards and “evidence of the manipulation of project data and information by certain employees”.
Azure Power’s problems highlight the governance and regulatory weaknesses of the Indian market. While India’s renewable sector is growing fast, investors are faced with a challenging environment. Capacity expansion has tracked below government targets due to grid bottlenecks and a lack of power purchase agreements. Solar power is also faced with constraints to growth caused by restrictions on imported solar equipment and the demand for renewable power equipment is growing faster than the domestic manufacturing sector can supply. As a result, India missed its 2022 target of 175GW of renewables capacity.
India plans to install 450GW of renewable energy capacity by 2030 and is hungry for inward investment, relying heavily on the patient capital of global sovereign wealth funds and public pension funds. Currently, renewable generation is at least 160GW, suggesting an average of more than 40GW needs to be added every year to reach the end-decade target.
The government is seeking to offset these downsides with the passing of the Energy Conservation (Amendment) Bill by parliament in December, which seeks to support growth by mandating non-fossil fuel use for energy consumers. In November, the Ministry of New and Renewable Energy launched a draft tender for the offshore wind sector with a view to leasing seabeds off Tamil Nadu, providing an estimated total capacity of 4GW of offshore wind power project potential across five blocks.