Canada’s Ontario Teachers’ Pension Plan Board has signed a binding agreement to acquire a 30% stake in the Indian renewable energy company Mahindra Susten for a consideration of $300m.
As per the terms of the agreement, the two companies have agreed to set up an Infrastructure Investment Trust (InvIT), with a 1.5GWp renewable energy portfolio seeded by Mahindra Susten.
Ontario Teachers’ Asia Pacific Infrastructure and Natural Resources senior managing director Bruce Crane said: “We are pleased to continue making significant investments in India and to acquire a meaningful stake in Mahindra Susten, one of India’s leading renewable energy platforms.
“As part of our climate change strategy, we have committed to continue growing our portfolio of green assets around the globe with investments like Mahindra Susten.
“This strategic partnership marks the beginning of what we hope will be a long-term and mutually beneficial relationship with the Mahindra Group.”
Under the proposed transaction, shareholder loans worth Rs5.75bn ($73m) advanced by Mahindra Group to Mahindra Susten will be repaid.
With this deal, Mahindra Group would receive an inflow of nearly $165m.
By 31 May 2023, Mahindra Group and Ontario Teachers’ will also explore the sale of an additional 9.99% stake in Mahindra Susten.
Over the next seven years, Mahindra Group will invest up to Rs1.75bn ($220m) in InvIT, while Ontario Teachers’ has committed Rs.35.5bn ($450m).
The deal will allow Mahindra Susten to build a strong renewable energy business in the country that will focus on solar energy, hybrid energy, integrated energy storage as well as the round-the-clock green energy plant.
Subject to regulatory approvals and closing conditions Ontario Teachers’ acquisition of 30% stake in Mahindra Susten is expected to close over the next few months.
The creation of InvIT is also expected to be formed during FY2024 subject to requisite approvals.
Mahindra Susten managing director and CEO Deepak Thakur said: “This partnership with Ontario Teachers’ syncs with Mahindra Susten’s plan to substantially grow our green energy portfolio across solar PV, wind, and energy storage.
“This platform will leverage our proven experience in development and deep knowledge of the Indian energy market. “Our in-house EPC capabilities honed across renewable energy projects executed globally ensure Mahindra Susten engineers and delivers superior performing assets, thereby enabling our energy platform to provide clean, reliable power to millions of people across India.”
Money Control also reports Mahindra Group and Ontario Teachers' announce strategic partnership:
The Mahindra Group and Ontario Teachers' on Saturday announced forming a strategic partnership under which they will invest around Rs 4,550 crore to grow future portfolios of Mahindra Susten Private Ltd (MSPL), a renewable energy platform of the former.
"Mahindra Group and Ontario Teachers' have agreed to invest an amount of around Rs 4,550 Crores to grow MSPL's future portfolio," a regulatory filing said.
The filing showed that under MSPL, a subsidiary of Mahindra Holdings Ltd (MHL) and 2452991 Ontario Ltd (2OL) have inked share purchase agreement and shareholders' agreement under the strategic partnership.
The agreements provide for selling 30 per cent equity by MHL in MSPL to 2OL for a cash consideration of Rs 711 crore, it showed.Mahindra Holding Ltd (MHL), a subsidiary of Mahindra & Mahindra Ltd, will sell additional 9.99 per cent of the paid-up equity share capital of MSPL to any other investor(s) or 2OL or any of its affiliates (Ontario Teachers') by 31th May, 2023, showed a regulatory filing.
It also stated that the pacts also provide for formation of an Infrastructure Investment Trust (InvIT) with MSPL and Ontario Teachers' as Sponsors, which will own identified operational assets housed in Special Purpose Vehicles (Project SPV).Mahindra Group and Ontario Teachers' Pension Plan Board (Ontario Teachers') have formed a strategic partnership to capitalise on the growing renewables opportunity in India and contribute towards the country's decarbonization ambitions, a company statement said.
The parties have signed binding agreements pursuant to which Ontario Teachers' will acquire a 30 per cent equity stake in MSPL at an equity value of Rs 2,371 crore (USD 300 million).
The InvIT is initially proposed to comprise renewable power assets seeded by Mahindra Susten with operational capacity of around 1.54 GWp.
As part of the proposed transaction, shareholder loans of Rs 575 crore (USD 73 million) advanced by Mahindra Group to Mahindra Susten will be repaid.
As a result of this transaction, Mahindra Group will receive an inflow of approximately Rs 1,300 crore (USD 165 million), it stated.
Mahindra Group will deploy these funds, plus an incremental amount of up to Rs 1,750 crore (USD 220 million), into the business & InvIT over the next seven years, it stated.
Over the same period, Ontario Teachers' has committed to deploy an additional amount of up to Rs 3,550 crore (USD 450 million) into the business and the InvIT over the next seven years, it also said.
This transaction will enable Mahindra Susten to build a strong renewable energy business focused on solar energy, hybrid energy, integrated energy storage & round-the-clock ("RTC") green energy plants.
Puneet Renjhen, Member of Group Executive Board and EVP, Partnerships & Alliances at the Mahindra Group said in the statement, "The partnership with Ontario Teachers' will enable the Mahindra Group to unlock value in the renewable energy sector with continued joint investments towards accelerated growth."
Bruce Crane, Senior Managing Director, Asia Pacific, Infrastructure & Natural Resources at Ontario Teachers' said in the statement, " This strategic partnership marks the beginning of what we hope will be a long-term and mutually beneficial relationship with the Mahindra Group."
Deepak Thakur, Managing Director & Chief Executive Officer, Mahindra Susten said in the statement, "This partnership with Ontario Teachers' syncs with Mahindra Susten's plan to substantially grow our green energy portfolio across solar PV, wind, and energy storage. This platform will leverage our proven experience in development and deep knowledge of the Indian energy market."
Mahindra Susten is Mahindra Group's renewable energy platform, which includes one of the leading renewable engineering, procurement and construction ("EPC") businesses (capacity constructed of over 4 GWp), an independent power producer ("IPP") business with around 1.54 GWp of operational solar plants spread across several states in India, and plan to have a significant solar development pipeline.
Ontario Teachers' Pension Plan Board (Ontario Teachers') is a global investor with net assets of (Canadian Dollar) C$242.5 billion as on June 30, 2022.
India's Economic Times also covers this deal here and provides some of the key terms below:
Ontario Teachers' released a press release over the weekend on how it is forming a strategic partnership with the Mahindra Group in the renewable energy space:
Mumbai, September 17, 2022: Mahindra Group and Ontario Teachers’ Pension Plan Board (“Ontario Teachers’”) announced today a strategic partnership to capitalize on the growing renewables opportunity in India and contribute towards the country’s decarbonization ambitions. The parties have signed binding agreements pursuant to which Ontario Teachers’ will acquire a 30% equity stake in Mahindra Susten Private Limited (“Mahindra Susten”) at an equity value of INR 2,371 crore (~USD 300 million).
The proposed transaction also envisages the setting up of an Infrastructure Investment Trust (“InvIT”) in compliance with applicable regulations of the Securities and Exchange Board of India. The InvIT is initially proposed to comprise renewable power assets seeded by Mahindra Susten with operational capacity of around 1.54 GWp. As part of the proposed transaction, shareholder loans of INR 575 crore (~USD 73 million) advanced by Mahindra Group to Mahindra Susten will be repaid.
As a result of this transaction, Mahindra Group will receive an inflow of approximately INR 1,300 crore (~USD 165 million). Mahindra Group and Ontario Teachers’ will jointly explore the sale of an additional 9.99% stake in Mahindra Susten by May 31, 2023. Mahindra Group will deploy these funds, plus an incremental amount of up to INR 1,750 crore (~USD 220 million), into the business and InvIT over the next seven years.
Over the same period, Ontario Teachers’ has committed to deploy an additional amount of up to INR 3,550 crore (~USD 450 million) into the business and the InvIT.
This transaction will enable Mahindra Susten to build a strong renewable energy business focused on solar energy, hybrid energy, integrated energy storage and round-the-clock (“RTC”) green energy plants.
Puneet Renjhen, Member of Group Executive Board and EVP, Partnerships & Alliances at the Mahindra Group said: “We are delighted to welcome Ontario Teachers’ as a strategic partner in Mahindra Susten. The partnership with Ontario Teachers’ will enable the Mahindra Group to unlock value in the renewable energy sector with continued joint investments towards accelerated growth. The Mahindra Group aims to be Planet Positive by 2040 and the continued inflow of patient, long-term capital in our climate positive businesses is validation of our commitment to be a global ESG leader.”
Bruce Crane, Senior Managing Director, Asia Pacific, Infrastructure & Natural Resources at Ontario Teachers’ said: “We are pleased to continue making significant investments in India and to acquire a meaningful stake in Mahindra Susten, one of India’s leading renewable energy platforms. As part of our climate change strategy, we have committed to continue growing our portfolio of green assets around the globe with investments like Mahindra Susten. This strategic partnership marks the beginning of what we hope will be a long-term and mutually beneficial relationship with the Mahindra Group.”
Deepak Thakur, Managing Director & Chief Executive Officer, Mahindra Susten said: “This partnership with Ontario Teachers’ syncs with Mahindra Susten’s plan to substantially grow our green energy portfolio across solar PV, wind, and energy storage. This platform will leverage our proven experience in development and deep knowledge of the Indian energy market. Our in-house EPC capabilities honed across renewable energy projects executed globally ensure Mahindra Susten engineers and delivers superior performing assets, thereby enabling our energy platform to provide clean, reliable power to millions of people across India.”
Chris Ireland, Senior Managing Director, Greenfield Investments & Renewables, Infrastructure & Natural Resources at Ontario Teachers’ said: “We are proud to invest in one of India's leading renewable energy platforms. We believe the renewable energy sector in India is poised for significant growth in the coming years as India works towards its ambitious clean energy goals, and are excited to partner with the Mahindra Group in this initiative.”
As per the updated Nationally Determined Contributions (“NDCs”) of the United Nations Framework Convention on Climate Change (“UNFCCC”), India now stands committed to reducing the emissions intensity of its GDP by 45% by 2030 from its 2005 levels, and achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. These are concrete steps towards achieving India’s long-term goal of reaching net-zero by 2070. As a result, the Indian renewable industry is expected to continue to grow significantly in the long term.
It is expected that Ontario Teachers’ acquisition of a 30% shareholding in Mahindra Susten, which is subject to closing conditions including regulatory approvals, will complete over the next few months. The InvIT is also expected to be formed during FY 2024 subject to requisite approvals.
Avendus Capital acted as financial advisor and Khaitan & Co. acted as legal advisor to the Mahindra Group for the transaction. Ambit acted as financial advisor and Cyril Amarchand Mangaldas acted as legal advisor to Ontario Teachers’ for the transaction.
About Mahindra Group
Founded in 1945, the Mahindra Group is one of the largest and most admired multinational federation of companies with 260,000 employees in over 100 countries. It enjoys a leadership positioning farm equipment, utility vehicles, information technology and financial services in India and is the world’s largest tractor company by volume. It has a strong presence in renewable energy, agriculture, logistics, hospitality and real estate.
The Mahindra Group has a clear focus on leading ESG globally, enabling rural prosperity and enhancing urban living, with a goal to drive positive change in the lives of communities and stakeholders to enable them to Rise.
Learn more about Mahindra on www.mahindra.com / Twitter and Facebook: @MahindraRise/ For updates subscribe to https://www.mahindra.com/news-room
About Mahindra Susten
Mahindra Susten is Mahindra Group’s renewable energy platform, which includes one of the leading renewable engineering, procurement and construction (“EPC”) businesses (capacity constructed of over 4 GWp), an independent power producer (“IPP”) business with around 1.54 GWp of operational solar plants spread across several states in India, and plan to have a significant solar development pipeline. The IPP solar portfolio is spread across 5 key states in India and is backed by long-term power purchase agreements – approximately 75% of assets are backed by central government entities and the remaining with distribution companies backed by state governments. Besides its own in-house management team with extensive capabilities across both EPC and IPP domains, Mahindra Susten also benefits from solar plant operations and maintenance services and other technical expertise of Mahindra Teqo Private Limited. For more information, visit https://www.mahindrasusten.com
About Ontario Teachers’
Ontario Teachers' Pension Plan Board (Ontario Teachers') is a global investor with net assets of C$242.5 billion as at June 30, 2022. We invest in more than 50 countries in a broad array of assets including public and private equities, fixed income, credit, commodities, natural resources, infrastructure, real estate and venture growth to deliver retirement income for 333,000 working members and pensioners.
With offices in Hong Kong, London, Mumbai, San Francisco, Singapore and Toronto, our more than 350 investment professionals bring deep expertise in industries ranging from agriculture to artificial intelligence. We are a fully funded defined benefit pension plan and have earned an annual total-fund net return of 9.6% since the plan’s founding in 1990. At Ontario Teachers’, we don’t just invest to make a return, we invest to shape a better future for the teachers we serve, the businesses we back, and the world we live in. For more information, visit otpp.com and follow us on Twitter @OtppInfo
This is a significant deal for OTPP representing its fifth major investment in India over the last 12 months and its first foray into the country's renewable energy space.
Mahindra Susten is a leading renewable energy platform in India:
Mahindra Susten is Mahindra Group’s renewable energy platform, which includes one of the leading renewable engineering, procurement and construction (“EPC”) businesses (capacity constructed of over 4 GWp), an independent power producer (“IPP”) business with around 1.54 GWp of operational solar plants spread across several states in India, and plan to have a significant solar development pipeline. The IPP solar portfolio is spread across 5 key states in India and is backed by long-term power purchase agreements – approximately 75% of assets are backed by central government entities and the remaining with distribution companies backed by state governments. Besides its own in-house management team with extensive capabilities across both EPC and IPP domains, Mahindra Susten also benefits from solar plant operations and maintenance services and other technical expertise of Mahindra Teqo Private Limited.
Since India announced its ambitious clean energy program, its assets have been sought after by top global and local investors.
Earlier this year, Canada’s Brookfield Asset Management was looking to buy a controlling stake in Mahindra Susten but the Mahindra Group didn't want to relinquish majority control:
“Mahindra Susten is one of our growth gems. It is a key contributor to our global leadership in climate change. We have no plans to give up majority but will consider partners who can help us grow the business faster," said a Mahindra Group spokesperson in an emailed response.
Along with Adani and Tata, Mahindra Susten has emerged as part of the new leaders in India's burgeoning solar market.
The strategic partnership with OTPP comes at a time several companies have been focusing on renewable energy:
Both Gautam Adani with investment plans of $20 billion and Mukesh Ambani with plans to invest at least Rs 75,000 crore have announced massive projects.
The Tatas are also investing aggressively into the space with reports saying that it plans to deploy at least Rs 75,000 crore.
Last month, Tata Power Renewable Energy raised Rs 2,000 crore by issuing 8.36 crore shares to Blackrock-backed GreenForest New Energies Bidco.
Back in June, India's Economic Times reported that OTPP was looking to buy a 49% stake in Mahindra Suten.
Under the terms of the agreement, OTPP has a right to buy an additional 10% stake in Mahindra Susten by May 31, 2023 or jointly explore the sale of this additional stake to another investor.
The key message here is this is a mutually beneficial strategic partnership with room to grow significantly over the next decade.
I think Bruce Crane, Senior Managing Director, Asia Pacific, Infrastructure & Natural Resources and Chris Ireland, Senior Managing Director, Greenfield Investments & Renewables, Infrastructure & Natural Resources at OTPP are very clear in their respective statements:
“We are pleased to continue making significant investments in India and to acquire a meaningful stake in Mahindra Susten, one of India’s leading renewable energy platforms. As part of our climate change strategy, we have committed to continue growing our portfolio of green assets around the globe with investments like Mahindra Susten. This strategic partnership marks the beginning of what we hope will be a long-term and mutually beneficial relationship with the Mahindra Group.”
“We are proud to invest in one of India's leading renewable energy platforms. We believe the renewable energy sector in India is poised for significant growth in the coming years as India works towards its ambitious clean energy goals, and are excited to partner with the Mahindra Group in this initiative.”
Relationships in India are critical and they are built through strategic partnerships like this one.
The Mahindra Group is a great partner to have in India as it operates in several key industries where OTPP has an interest to expand and it shares its commitment to ESG.
OTPP is investing in India and if you read my last comment, CIO Ziad Hindo clearly states India is a key market they are going to be investing heavily in:
A couple of years ago OTPP did a massive deep dive into India. OTPP had already invested in the market, noting the attractive investment fundamentals contributing to increased interest in the country by sovereign wealth funds and others.
To date it has completed four major investments, and will now open an office later this year. Hindo says it is in the process of starting up a much larger presence in the country. “We were struck by how quickly the SWFs had set up shops and got on with it.”
CEO Jo Taylor has also stated India will be a key growth market for them which is why they are going to open an office there.
India is indeed a key market for all of Canada's large pension funds and this is why strategic partnerships are critical when investing in this country.
Below, CNBC-TV18 reports on how the Mahindra Group and Ontario Teachers' Pension Plan Board said on Sunday that Ontario Teachers would acquire a 30 percent stake in Mahindra Susten, the renewable energy platform, at an equity value of Rs 2,371 crore. As part of the transaction, an Infrastructure Investment Trust (InvIT) will be established. InvIT is initially proposed to comprise renewable power assets seeded by Mahindra Susten with a capacity of approximately 1.54 GW.
Also, watch Anand Mahindra, chairman, addressMahindra and Mahindra’s 76th Annual General Meeting which took place three weeks ago. Mr. Mahindra talks about the oil price hikes along with its effect on climate and the economy, the effects of war in Ukraine, the anticipated result on India of the US recession, its effect on the supply chain, and much more.