CPPIB edges ahead in race for SoftBank stake in SB Energy

Mumbai: The Canada Pension Plan Investment Board (CPPIB) is closing in on SoftBank’s majority stake in SB Energy Holdings, said several people with knowledge of the matter. The five-year-old renewable energy company is a joint venture between SoftBank and Bharti Enterprises.CPPIB, one of the world’s biggest retirement funds, has entered into exclusive negotiations with SoftBank Group International to acquire its 80% stake in SB Energy, said the people cited above. CPPIB’s offer, submitted earlier this month, values the company at $720-750 million and SoftBank’s stake at $585-600 million, excluding debt, and is the most aggressive among the three final bids, the others in the race having been Actis and Brookfield. The bids are all below the $800-820 million book value (equity invested) and a far cry from the original ask of $1.2 billion, said the people cited above.“We confirm that we have identified an investment partner to accelerate growth of our leading renewable energy platform, SB Energy,” SoftBank and Bharti said in a joint statement to ET.Looking for Funds“Given recent and growing interest in environmental, social and corporate governance (ESG) investments at scale, SoftBank and Bharti have decided to take steps towards identifying a growth investor,” the statement said.ET was the first to report that CPPIB, Actis and Brookfield were the final contenders for the stake in its October 12 edition.There is a possibility that Bharti Enterprises too might exit the venture, said people close to the group. SB Energy had a lofty target of setting up 20 GW of clean energy projects with an investment of $20 billion over a 10-year period when it was set up in 2015. Bharti, which has a 20% stake, has the right of first refusal. It had earlier tapped a few strategic and sovereign wealth funds and evaluated the option of making an offer.SB Energy CEO Raman Nanda told employees in a townhall earlier this week that the management team is expected to continue for at least one more year.CPPIB declined to comment.Since the beginning of the year, SB Energy has been seeking emergency funding to complete its operating portfolio and pipeline after SoftBank founder Masayoshi Son decided against further capitalising the venture. From attempting to bring on board a strategic partner for growth equity to a failed attempt to raise $600 million through a maiden dollar bond in the middle of the pandemic, SoftBank eventually had no choice but to sell. Bank of America and Barclays were mandated to help SoftBank find a buyer. Citi is advising CPPIB. The company says it has a 7.7 GW pipeline of projects in India and the US and will reach its 20 GW target within the next five years. It has nearly 2 GW operating renewable energy capacity in the country, 2 GW under construction, and an additional 3,700 MW under “active development,” with contracts in hand, according to the management.CPPIB has been betting aggressively on the clean energy sector in India. Its first large investment was in ReNew Power Ventures, in which it has invested close to $500 million and holds a 16% stake. In May 2019, CPPIB joined hands with Piramal Enterprises to set up India’s first renewable energy focused infrastructure investment trust (InvIT) by raising $600 million, with the Canadians agreeing to contribute $360 million. CPPIB will have 60% stake and Piramal Enterprises 15% in the InvIT, which is the first of its kind in India’s renewable space.It is among the contenders for Mahindra Susten's 617 MW assets, also up for grabs. CPPIB’s initial focus was on toll roads when it invested in L&T IDPL. Along with German insurer Allianz Group, it owns 55% in the L&T sponsored trust, now called IndInfravit. It invested about $156 million for 30% of units.Under the leadership of its British chief executive Mark Machin, CPPIB has been building its exposure in Asia, particularly China. Last year it revealed plans to allocate up to a third of assets to emerging markets, including China, by 2025. India, where it opened an office in Mumbai five years ago, is another promising market for the pension fund. Some of its other marquee investments in the country include a stake in Kotak Mahindra Bank, Byju’s, National Investment and Infrastructure Fund (NIIF) and India Resurgence Fund, which invests in distressed assets.78838763Son teamed up with Bharti’s Sunil Mittal and Taiwan’s Foxconn Technology Group in 2015 to form a 70:10:20 alliance to build solar and wind parks and subsequently start manufacturing panels in India to promote Prime Minister Narendra Modi’s clean energy and Make in India initiatives. Plans by Foxconn to set up a manufacturing base went nowhere and it exited without putting in any equity, making the company an 80:20 venture between SoftBank and Bharti.“It bid very aggressively for several contracts by Solar Energy Corporation of India (SECI) and NTPC and even made forays in the US,” said the CEO of a rival company. “But today the buyers are not paying the premium that SoftBank is typically used to for its investments. From high-cost structures or a middling portfolio, there are significant headwinds for a new buyer.”

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