India-based Piramal Enterprises and the Canada Pension Plan Investment Board (CPPIB) have signed a preliminary agreement to co-sponsor a renewable energy fund or Infrastructure Investment Trust (InvIT).
Under the terms of the agreement, the renewable energy fund InvIT will have an initial corpus of $600 million with an option to increase the funds further, Chairman Ajay Piramal said in a statement. CPPIB will contribute $360 million while Piramal will finance $90 million to the renewable energy investment trust corpus.
Both companies being the co-sponsors of renewable energy investment trust will cumulatively hold 75 percent of the units. Of the units, CPPIB and Piramal will hold 60 percent and 15 percent respectively. However, Piramal will be the sole investment manager and project manager for renewable energy investment trust, according to a local media report.
The proposed InvIT might be a great opportunity for both companies in the future. “The renewable energy sector is at an inflection point and is witnessing significant consolidation, the pace of which is likely to increase in the near future. We believe that the timing is therefore opportune for aggregating assets in this sector given that the existing players are willing sellers in light of a constrained capital market environment – both debt and equity,” Piramal said.
Headquartered in Toronto, CPPIB is Canada’s largest pension fund with $368.5 billion in assets under management.