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Canadian Pension Board Becomes Lead Shareholder in India’s Biggest Renewables Company

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The Canadian Pension Plan Investment Board (CPPIB) is about to become the largest shareholder in ReNew Power, India’s biggest renewable energy company, a business with 3.1 gigawatts of wind and 1.9 GW of solar generation currently in operation.

The CPPIB “is looking to raise its stake to over 40% by buying an additional 24% stake from Goldman Sachs Group, which had backed first-generation entrepreneur Sumant Sinha to create a green energy platform in 2011 with a $200-million commitment,” the Times of India reports [1]. The paper says the deal has been in the works for several months.

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The Board “first invested US$144 million in ReNew in January 2018, and since then its total commitment has gone up to over $400 million,” the publication says, adding that the latest purchase may close in the range of $500 to $520 million. With shares valued at Rs 415, the Times says the CPPIB deal sets ReNew’s total value at about $2.3 billion.

That’s considerably less than the $4-billion threshold ReNew and its backers tried to set before it was forced to cancel plans for an initial public offering (IPO) in mid-2018. Still, “ReNew is among the top two independent power producers in the country, with 4.9 GW of operational wind and solar capacity and over 3.2 GW in the pipeline,” the Times states. “Analysts feel the company’s large size and diversified renewable asset portfolio provides economies of scale and operating leverage,” with projects spread out geographically and across multiple equipment manufacturers.

“We believe the long-term power purchase agreements (PPAs) for the group’s operating assets offer price certainty and long-term cash flow visibility,” said Fitch Ratings analyst Girish Madan. “The majority of the assets, representing 96% of group capacity, have PPAs with tenors of around 20 to 25 years, and a long remaining life.”

CPPIB’s vote of confidence in India’s renewable energy sector comes at a time when the country’s coal industry is hurting, with power plants run by Adani Power and others accepting the lowest tariffs in years. “Experts said the tariff, lowest ever for medium-term power contacts, was a desperate move by the stressed thermal power sector, which is facing intense competition from solar and wind power plants, but the contracts will help them repay a portion of their debt,” the Times reported [3] earlier this month.

A couple of days later, the same news outlet pointed [4] to reliable solar+storage as a source of fierce competitive pressure for coal.

“When the solar power tariff dropped to Rs 2.44 (3.4¢ U.S.) per unit for the first time in May 2017, it set a record for cheap electricity, busted the myth of renewable power being unaffordable, and opened a Pandora’s box for conventional power plants by challenging coal’s dominance as the primary source of energy,” the Times said.

“In an eerie feeling of déjà-vu some 20 months on, the latest auction of storage-based solar projects with assured peak-hour supply may have driven another nail into the coffin for coal by setting a world record for cheapest solar storage power—with the added commitment of almost round-the-clock supply costing 8% less than thermal power.”

“If a carbon price was added to the coal power, solar power would be even more favourable,” the Aarhus, Denmark-based International Network for Sustainable Energy (INFORSE [5]) noted in a Facebook post.