Canada Pension Plan Investment Board (CPPIB) is burnishing its green credentials by doubling down on its first investment in India's growing renewable energy market, underlining how investors are increasingly being drawn to the sector in the wake of the Indian government's ambitious targets.
In a release on Tuesday, CPPIB said it invested a further $247 million in the Gurugram-headquartered wind-to-solar group ReNew Power Ventures (ReNew Power), having made an initial $144 million investment in January.
The funding is to help support the purchase of another Indian wind farm operator, Ostro Energy Private (Ostro Energy), bringing ReNew’s total power output up to 5,600 megawatts from less than 100 megawatts in 2013, the CPPIB release said.
So what is driving one of the largest pension funds globally to invest in renewable energy in South Asia? In a word, potential.
India’s need for power is unremitting. Power consumption has doubled since 2000 but the fuel mix is changing. And with a dedicated Ministry of New and Renewable Power, renewables are at the heart of that change.
Thermal power generation (coal and lignite based) made up 77.5% of India's total energy production in 2010 but now accounts for less than 60%, according to data from India’s Ministry of Power. Renewables, in contrast, now account for over 30% of power generation, with the remainder coming from nuclear and biomass operations.
The private sector also provides over 44% of total power generation, with no limits on foreign ownership, the Ministry of Power website shows. This is where funds like the CPPIB and private investors see the future.
India’s government has set an ambitious target of 175 GW of capacity through renewables by 2022, up from the 65GW currently installed as the reliance on thermal power continues to decline, according to the Ministry of Power.
So there are plenty of opportunities for investors to back local players who benefit from government subsidies to help achieve the government's targets by 2022.
NOT ALONE
CPPIB is not alone in spotting the renewables opportunity in India.
Last year alone saw Macquarie invest $250 million in Hindustan Powerprojects in April, IDFC Alternatives invest $200 million in First Solar in February, and Warburg Pincus make a $108 million investment in CleanMax Enviro Energy in July, all boosting India's reputation as a hotbed for private renewable energy investment.
In 2015, a consortium of Japan’s SoftBank, Taiwan’s Foxconn, and India’s Bharti pledged $20 billion to develop solar power projects in India and secured their first project in December 2015 with a 350 megawatt solar project in the southern state of Andhra Pradesh.
For CPPIB, ReNew Power adds to its global portfolio in renewables.
