Canadian Pension Board Closes Renewable Investment Deals in India, Ontario

The Canadian Pension Plan Investment Board is making headlines with two major renewable energy deals this week, including the biggest renewable energy acquisition India has ever seen and a 398-megawatt solar and wind buy in Ontario.

The CPPIB routinely comes in for criticism and cautions for its fossil fuel investments. But suddenly, Bruce Hogg, managing director and head of power and renewables, is pointing toward a different mix of investment priorities.

“Since December 2017, CPPIB has committed to wind and solar investments in Brazil, India, and now Canada,” he said. “As power demand grows worldwide, and with a focus on accelerating the energy transition, we will continue to seek opportunities to expand our power and renewables portfolio globally.”

In India, the CPPIB put US$247 million into a $1.5-billion deal by Goldman Sachs-backed ReNew Power to create the country’s biggest clean energy firm based on installed capacity. ReNew is acquiring 1,100 megawatts of mainly wind-powered electricity generation in Andhra Pradesh, Karnataka, Telangana, Rajasthan, Madhya Pradesh, and Gujarat, Quartz India reports.

“With the acquisition of these assets, ReNew Power’s capacity will now exceed 5,600 MW,” the company said in a statement. “Over 65% of the combined portfolio capacity (ReNew Power and Ostro Energy) is already operational.” The Quartz story digs into changes and challenges in the country’s renewable energy sector, driven by policy uncertainty, falling energy demand, and higher prices for solar panels.

“Consolidation is inevitable,” said PricewaterhouseCoopers (PwC) partner Amit Kumar. “Companies like ReNew Power will strengthen their portfolio, as they have shown that their assets are good” and “have been able to attract foreign money.”

ReNew’s other investors include Abu Dhabi Investment Authority, Global Environment Fund, and JERA Co. Inc., a consortium of two of the biggest Japanese utilities, Reuters reports. Goldman Sachs holds more than 50% of the $2-billion business.

In Ontario, meanwhile, CPPIB bought operating wind farms at Bluewater, Conestogo, Jericho, and Summerhaven and the Moore and Sombra solar generators from Juno Beach, Florida-based NextEra Energy Partners LP, acquiring about 396 MW of generation for US$582.3 million/C$741 million. From NextEra’s point of view, Financial Post fossil columnist Claudia Cattaneo cast the deal as a reaction to the massive tax cuts recently adopted by the U.S. Congress and the Trump administration.

“We expect the sale of the Canadian portfolio to enable us to recycle capital back into U.S. assets, which benefit from a longer federal income tax shield and a lower effective corporate tax rate, allowing NextEra Energy Partners to retain more…in the future for every $1 invested,” said Chair and CEO Jim Robo.

CPPIB “said the purchase gives it immediate scale in a sector where it wants to grow,” Cattaneo notes.

At Calgary-based Stream Asset Financial Management LP, Chief Market Strategist Dan Tsubouchi said NextEra’s departure would be the first of many, including fossils with operations on both sides of the border.

“Oil and gas companies with assets in Canada waited for the Canadian government to respond to U.S. tax reforms in the federal budget,” Cattaneo writes, and now they’re looking at redeploying their investments. “In addition to reducing corporate taxes, the U.S. is allowing companies to immediately write off the full cost of new machinery and equipment, making the U.S. advantages hard to resist,” she said, citing Tsubouchi.