Canadian pension fund OMERS has acquired a 19.4% stake in an Indian solar-energy company for US$219m (€184m) from the World Bank’s International Finance Corporation (IFC) and its infrastructure fund.
Azure Power, founded in 2008 and listed on the New York Stock Exchange in 2016, owns a portfolio of solar assets across India providing 2GW of operational capacity and a further 5GW of capacity under construction or awarded.
The acquisition is the second direct infrastructure deal in India by OMERS, following an investment in the IndInfravit toll-road platform in 2019.
“In support of our goal of prudently diversifying OMERS investments across global markets, we will continue to explore additional promising opportunities in India and throughout Asia-Pacific,” said Prateek Maheshwari, managing director for Asia at OMERS Infrastructure.
Annesley Wallace, executive vice president and global head of OMERS Infrastructure, said: “This agreement to invest in Azure Power demonstrates OMERS’s strong global interest in high-quality renewable power and energy transition assets, as well as our interest in India as an investment destination and Asia-Pacific more broadly.
“This transaction directly supports our mission of building a strong portfolio of well-run assets that will help pay pensions to our members over the long term.”
The Hindu Business Line also reports OMERS acquires 19.4% stake in Azure Power Global for $219 million:
Marks second direct infrastructure investment in India
Canadian pension fund Ontario Municipal Employees’ Retirement System (OMERS) has acquired 19.4 per cent stake in Azure Power Global for $219 million.
The stake has been acquired from International Finance Corporation and IFC GIF Investment Company.
Founded in 2008, Azure Power is an independent renewable power producer located in India, with an asset base of 2 GW of operational capacity and 5 GW of capacity under construction or awarded.
“This agreement to invest in Azure Power demonstrates OMERS’ strong global interest in high-quality renewable power and energy transition assets, as well as our interest in India as an investment destination and Asia-Pacific more broadly,” said Annesley Wallace, Executive Vice-President and Global Head of OMERS Infrastructure.
“This transaction directly supports our mission of building a strong portfolio of well-run assets that will help pay pensions to our members over the long term,” she added.
“Azure Power’s vision is to provide affordable, clean energy in an efficient, sustainable and socially-responsible manner. OMERS is proud to be working with the management and our fellow investors to help Azure Power achieve its goals,” said Prateek Maheshwari, Managing Director, Asia, OMERS Infrastructure.
“The closing of this transaction would mark our second direct infrastructure investment in India, following our 2019 investment in the IndInfravit toll road platform. In support of our goal of prudently diversifying OMERS investments across global markets, we will continue to explore additional promising opportunities in India and throughout Asia-Pacific,” he added.
OMERS Infrastructure’s global renewable energy holdings include Leeward Renewable Energy, a growth-oriented renewable energy company that owns and operates a portfolio of 22 renewable energy facilities across nine USStates, totalling more than 2 GW of installed capacity. Leeward is headquartered in Dallas, Texas.
OMERS put out a press release on this deal:
[July 30, 2021], Singapore – OMERS Infrastructure today announced that it has signed a Stock Purchase Agreement to acquire from International Finance Corporation and IFC GIF Investment Company I an approximately 19.4% stake in Azure Power Global Limited (NYSE: AZRE), for a total consideration of approximately US$219m. Founded in 2008, Azure Power is a leading independent renewable power producer located in India, with an asset base of ~2 GW of operational capacity and ~5 GW of capacity under construction or awarded.
“This agreement to invest in Azure Power demonstrates OMERS strong global interest in high-quality renewable power and energy transition assets, as well as our interest in India as an investment destination and Asia-Pacific more broadly,” said Annesley Wallace, Executive Vice President and Global Head of OMERS Infrastructure. “This transaction directly supports our mission of building a strong portfolio of well-run assets that will help pay pensions to our members over the long term,” she added.
“Azure Power’s vision is to provide affordable, clean energy in an efficient, sustainable and socially-responsible manner. OMERS is proud to be working with the management and our fellow investors to help Azure Power achieve its goals,” said Prateek Maheshwari, Managing Director, Asia, OMERS Infrastructure. “The closing of this transaction would mark our second direct infrastructure investment in India, following our 2019 investment in the IndInfravit toll road platform. In support of our goal of prudently diversifying OMERS investments across global markets, we will continue to explore additional promising opportunities in India and throughout Asia-Pacific,” he added.
OMERS Infrastructure’s global renewable energy holdings include Leeward Renewable Energy, a growth-oriented renewable energy company that owns and operates a portfolio of 22 renewable energy facilities across nine U.S. states, totaling more than 2 GW of installed capacity. Leeward is headquartered in Dallas, Texas.
The transaction is expected to close in early August. Ambit Private Limited acted as financial advisor to OMERS Infrastructure.
I discussed OMERS'investment in Leeward back in January.
Renewable energy is a key investment focus for OMERS and other large Canadian pensions looking to lower their carbon emissions.
This deal marks OMERS' second direct infrastructure investment in India.
And it's an excellent asset to own a stake in.
New Delhi-based Azure Power currently has roughly 2 GW of assets in operation and some 5 GW of awarded projects or schemes under construction.
But solar power in India is growing fast:
Solar power in India is a fast developing industry as part of the renewable energy in India. The country's solar installed capacity was 40.09 GW as of 31 March 2021. ... In 2015 the target was raised to 100 GW of solar capacity (including 40 GW from rooftop solar) by 2022, targeting an investment of US$100 billion.
Still, in a recent comment, Jonathan Kay of the Carnegie Endowment of International Peace argues that preparing India's power sector for a clean energy transition is full of tangled wires:
India’s spectacular embrace of renewable energy is a rare reason for optimism in the fight against climate change. The world’s third-largest carbon emitter has more than doubled its stock of wind and solar power in the last five years, making it one of the only countries in the world whose policies appear compatible with the Paris Agreement’s target of limiting global warming to within 2 degrees Celsius—a threshold past which climate disruption is projected to become even more frequent, severe, and unpredictable.1
Yet the hardest part is still to come. Fossil fuels like coal, which currently accounts for a majority of India’s power-generating capacity, produce a stable and predictable stream of on-demand power. By contrast, power generation from wind and solar energy is more variable and unpredictable: wind turbines only generate electricity when the wind is blowing, and solar panels only generate electricity when the sun is shining. As a result, grid operators may not be able to fully rely on these forms of variable renewable energy, forcing them to turn back to fossil fuel generation. This challenge increases emissions and costs in the short term and slows the buildout of renewable energy in the long term.
Coping with variable renewable energy like wind and solar will therefore require deeper changes to how India manages its grid. One of the most important solutions will also be one of the most difficult: the integration of the country’s disparate state-run electricity grids into a more coordinated system capable of using periods of surplus power in one region to compensate for deficits in another. In this way, variable renewable energy can more efficiently service larger geographic areas and more reliably displace expensive and polluting fossil fuels.
However, while such reforms would be difficult under the best of circumstances, they will be particularly challenging given the unique dysfunctions of India’s power sector. A long history of politicians manipulating power distribution companies for the sake of short-term electoral objectives has compromised utilities’ finances and the independence they need to undertake structural reform. Without addressing these more fundamental problems, clean energy–enabling solutions like regional coordination are unlikely to succeed.
Fortunately, Prime Minister Narendra Modi’s national popularity and the dominance of his Bharatiya Janata Party (BJP) at the state level offer the country’s ruling coalition an opportunity to reform the power sector where others have failed. To take advantage of this opening, however, Modi must go beyond his modus operandi, investing in incremental institutional solutions rather than one-and-done technical fixes and serving as a coordinator for India’s states rather than legislating by central fiat.
I will let you read the rest of this interesting comment here but suffice to say India's road to clean energy will be fraught with pitfalls.
But make no mistake, India, China and other so-called emerging markets are undergoing a massive energy shift right now to decarbonize and solar and wind are definitely the future.
And leading solar companies like Azure Power are going to play a huge part in this shift to clean energy:
So, I applaud Prateek Maheshwari, Managing Director, Asia, OMERS Infrastructure, for working on this deal and making it happen.
As I keep stating, you need boots on the ground in India and elsewhere to develop the right partnerships with the best of breed partners.
And that's exactly what happened here and it also fits nicely into the ESG investing which OMERS is committed to and taking very seriously.
Lastly, Annesley Wallace, Executive Vice President and Global Head of OMERS Infrastructure is spot on: “This transaction directly supports our mission of building a strong portfolio of well-run assets that will help pay pensions to our members over the long term.”
Below, learn more about Azure Power's operations and mission. Great company which OMERS and its members now own a big stake in.