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OMERS to buy 19.36% in Azure Power Global

OMERS Administration Corp. is one of the few pension funds India has granted income tax exemption in May this year for infrastructure investments in India (Photo: Pradeep Gaur/Mint)Premium
OMERS Administration Corp. is one of the few pension funds India has granted income tax exemption in May this year for infrastructure investments in India (Photo: Pradeep Gaur/Mint)

  • Canadian pension funds have been placing significant India bets and represent the so-called patient capital, which seeks modest yields over time. India fits the risk profile given that the markets here have matured from the early risk stage.

New Delhi: In what may rank among the largest clean energy deals in India, Canadian pension fund Ontario Municipal Employees’ Retirement System (OMERS) is set to buy around 19.36% in NYSE-listed Azure Power Global Ltd.

“CCI receives notice of acquisition under Green Channel of 19.36% (approx.) in Azure Power Global Limited by OMERS Infrastructure Asia Holdings Pte. Ltd., from its existing shareholders," the ministry of Corporate Affairs said in a statement on Friday.

Canadian pension funds have been placing significant India bets and represent the so-called patient capital, which seeks modest yields over time. India fits the risk profile given that the markets here have matured from the early risk stage. This interest also comes amid a growing focus on environmental, social and governance (ESG) investing.

OMERS Administration Corp. is one of the few pension funds India has granted income tax exemption in May this year for infrastructure investments in India. The fund’s earnings from infrastructure investments made in India between then and March 2024 will be exempt from tax. The investor will get full tax exemption on income from interest, dividend and long-term capital gains.

Mint earlier reported about German development finance institution Deutsche Investitions- und Entwicklungsgesellschaft (DEG), World Bank’s private-sector development arm International Finance Corporation (IFC) and Canadian pension fund CDPQ exploring a sale of their stakes in Azure Power, India’s first renewable energy company to list on the US stock market. Founded in 2008, Azure Power has a 7 gigawatt (GW) portfolio and had developed India’s first utility-scale solar project.

This deal received deemed approval from the competition regulator on filing itself under the green channel approval facility.

“The Acquirer is an investment entity of OMERS Administration Corporation (OAC). OAC is the administrator of Ontario Municipal Employees Retirement System (OMERS) primary pension plan and trustee of the pension funds thereunder. OMERS is one of Canada’s largest defined benefit pension plans. It is a jointly-sponsored pension plan, with 1,000 participating employers ranging from large cities to local agencies, and over half a million active, deferred and retired members," the statement added.

Overseas investments in India’s green energy space have been growing. Recently Thailand’s state owned energy major PTT Group announced its acquisition of 41.6% stake in Avaada Energy Pvt Ltd for around $454 million.

OMERS has been scouting for acquisition opportunities in India attracted by the presence of other Canadian investors in India such as Canada Pension Plan Investment Board (CPPIB), CDPQ and Brookfield Asset Management. OMERS had also submitted bid to buy Japan’s SoftBank Group Corp’s stake in SB Energy Holding as reported by Mint earlier.

In December 2015, New Delhi-based Azure Power had filed for an IPO to raise $100 million by selling 6.8 million shares at $21-23 apiece. It sold 3.41 million shares in its IPO, including 2.24 million new shares and 1.16 million shares of existing shareholders, to raise $61.36 million. Ahead of Azure’s IPO, CDPQ had picked up a stake worth $75 million as part of a private placement. In a first, Azure Power had raised $500 million through green bonds in August 2017.

OMERS earlier announced an investment of $121 million for a 22.4% stake in IndInfravit Trust, an infrastructure investment trust (InvIT), marking its first infrastructure deal in India. OMERS global portfolio includes large-scale infrastructure assets in sectors such as energy, transportation, and government-regulated services. The infrastructure projects that OMERS has invested in include the London City airport, nuclear power station Bruce Power—Canada’s private nuclear generator—in Ontario, and the port of Melbourne in Australia.

The global major pension funds interest comes in the backdrop of India running the world’s largest clean energy programme to achieve 175 gigawatts (GW) of renewable capacity, including 100GW of solar power by 2022.

According to the Central Electricity Authority, by 2030, the country’s power requirement would be 817GW, more than half of which would be clean energy, and 280GW would be from solar energy alone.

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