CDPQ In Advanced Talks To Pick Up To 40% In CLP India
MUMBAI: Caisse de dépôt et placement du Québec (CDPQ) is in advanced negotiations to invest $400-450 million in CLP India Pvt. Ltd for a significant minority stake of up to 40% in what would be the largest fund raising through private investment in the Indian renewables sector, said several people with knowledge of the matter.
This will also be CDPQ’s biggest direct bet in India, overshadowing its $225 million investment in Kotak Mahindra BankBSE 0.33 % last March. A formal announcement is expected by the end of this month or in April. CLP India is the local arm of Hong Kong-listed CLP Holdings Ltd (formerly China Light and Power) and is one of the largest foreign investors in the Indian power sector.
It entered the country in 2002 with the acquisition of a 655 MW gas-fired power plant in Gujarat and has since expanded its portfolio of operating conventional and renewable assets to 2.9 gigawatts, making it one of the largest in the country. The money will largely be used to fund acquisitions and bulk up the portfolio in a generation as well as transmission and distribution. While sections of the senior management in Hong Kong have been bullish on India, the parent’s board has not been willing infuse additional equity to fund growth, sources said. CLP India was one of those in the race to acquire Anil Ambani’s Mumbai distribution business for over $2 billion but had to eventually withdraw. The company is currently one of the suitors for the Essel Group’s renewables portfolio.
Both CLP India and CDPQ spokespersons declined to comment on market speculation. CDPQ has already backed NYSE-listed, solar energy developer Azure and is banking on the ambitious clean energy target of the National Democratic Alliance government of 175 GW by 2022. While 100 GW of the government’s targeted renewable energy capacity is to come from solar projects, 60 GW is expected to be generated from wind. CDPQ is Canada’s second-largest pension fund with $286 billion of assets under management.
“Renewable energy would lead the next phase of growth in power capacity addition, as the government would be keen to gradually cut the import of fuel for generation of electricity,” said Ashish K Nainan, an analyst at CARE Ratings. “The magnitude of success and achieving set targets would solely depend on government’s timely intervention and provision of incentives.”
The pension fund manager has been evaluating the Indian power sector for a while now. It wanted to fund Tata Power’s Welspun acquisition and also formed an $850 million joint platform with Tata, ICICI Venture, Kuwait Investment Authority and State General Reserve Fund of Oman called Resurgent Power Ventures to acquire distressed thermal power assets.
But two years since formation, it is yet to close a single transaction. Since opening its India office in 2016, CDPQ has backed TVS Logistics and Edelweiss ARC, playing catch up with peers like CPPIB that have invested about $5 billion in India in both public and private market transactions. CDPQ like CPPIB is also a limited partner in several India-focussed alternative investment funds (AIFs) like Kedaara Capital.