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$175-bln Canadian pension fund Caisse De Depot open to investing in Indian renewable energy assets

According to reports, Quebec-based Caisse De Depot, one of the world’s largest pension fund managers with over $175 billion in assets, has put India on its priority list for infrastructure investments, preferring the country over China for long-term core sector bets.

Last Friday, Caisse De Depot et Placement du Quebec announced a nearly billion-dollar investment in the Brisbane port, with an eye on capturing the growth in Asia-Pacific markets like India who increasingly rely on Australia for critical energy and mineral resources. Now, the investment manager for millions of employees in Canada’s Frenchspeaking province of Quebec wants to invest directly in the Indian market, instead of taking indirect wagers like the Brisbane investment.

“There is a limited list of countries where we see GDP growth and the need for infrastructure investment is high and we believe that is the case in India. So, we have prioritised India among the target markets we are looking at, where we want to deploy capital,” said Macky Tall, senior vice-president (infrastructure) at Caisse De Depot.

Caisse is examining “quality” investment opportunities in India’s infrastructure space and is looking for a good domestic partner, Tall told ET, stressing that other Asia-Pacific markets, including China, are not on its hit list yet. “We don’t expect to be directly active in China in the foreseeable future. As of now, we are looking only at India and Australia where we see growth opportunities,” he said.

Caisse hopes to announce a “concrete transaction” in India in the near future, which could be in sectors like airports, toll roads, power generation or renewable energy, but is spending time to understand the business and regulatory environment.

Caisse De Depot is Canada’s second largest pension fund manager and has investments in 53 countries across asset classes. Its $6.5 billion infrastructure portfolio includes a stake in London’s Heathrow airport, public-private partnerships in Australian hospitals, natural gas pipelines in Belgium and US and wind energy assets of 2,000 mw in North America.

The fund manager’s interest in India assumes significance, following last week’s announcement by the country’s largest retirement fund — Canada Pension Plan Investment Board (CPPIB) — to tie up with Shapoorji Pallonji group for a commercial real estate venture. CPPIB has taken a 80% stake in the joint venture with an initial investment of $200 million.

“Based on our homework, India clearly needs more time to understand. The stability of business environment is very important to us and volatile currency movements are also an issue, from an administrative perspective,” Tall explained.

The investment firm, which usually keeps a time horizon of at least 10 years for its infrastructure portfolio, is also worried about the stability of India’s policy and regulatory framework. “We would definitely need good comfort on the regulatory system, especially whether independent regulators’ decisions are stood by, in the years to come.

This is very critical for us due to our longer-term horizon,” Tall said, adding that the issues vary from asset to asset. For instance, in real estate, the concern is that foreign investors can’t invest in land parcels or banks in the form of FDI. In unregulated toll roads, the ability to collect toll from users would matter.

While airports are regulated, it wants to be sure the regulator is independent and is allowed to stick to a consistent view. “Our approach to infrastructure investments is to team up with a leading quality local partner with a track record of successful investments and a good understanding of the sector. If we are looking at an airport investment, we would like to partner someone who understands the dynamics of that business,” Tall said, adding that the fund has also developed expertise across sectors due to its global investing experiences. The fund is also open to investments in India’s renewable energy space but wants to ascertain if there is good quality data about past wind conditions in such projects.

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