The Asian Infrastructure Investment Bank (AIIB) has become an anchor investor in India’s largest renewable energy Infrastructure Investment Trust (InvIT) with an investment of INR 4.86 billion (around USD 58.4 million equivalent). The InvIT, named Sustainable Energy Infra Trust (SEIT), has eight operating solar power plants with a total capacity of 1.54 gigawatt-peak across India. SEIT is co-sponsored by Mahindra Susten Private Limited, a leading renewable energy platform of the Mahindra Group, and Ontario Teachers’ Pension Plan, a global institutional investor.
What is an InvIT and why is it important?
An InvIT is a collective investment scheme that enables investors to pool funds for investing in infrastructure projects and receive income distributions from them. InvITs are regulated by the Securities and Exchange Board of India (SEBI) and are listed on stock exchanges for trading. InvITs offer several benefits for both the sponsors and the investors, such as:
- Sponsors can monetize their existing infrastructure assets and free up capital for developing new projects.
- Investors can access a diversified portfolio of infrastructure assets with stable and predictable cash flows.
- InvITs can attract long-term institutional capital and domestic retail savings to the infrastructure sector and enhance its liquidity and depth.
- InvITs can support the development of green infrastructure and contribute to the country’s net-zero targets.
How does AIIB support InvITs in India?
AIIB is a multilateral development bank that aims to finance sustainable infrastructure projects in Asia and beyond. AIIB has been supporting the development of InvITs as an innovative infrastructure financing solution in India since 2019, when it invested USD 50 million in Oriental Structural Engineers InvIT, which focuses on roads and highways. AIIB’s investment in SEIT is its second investment in InvITs in India and its first in the renewable energy sector.
AIIB’s Director General (Banking Department, Region 1) Dongik Lee said, “This demonstrates AIIB’s continued support for innovative infrastructure financing solutions, promoting green infrastructure and mobilizing private capital to deepen the breadth of financing availability to our Member’s infrastructure sector and to support their commitment in achieving Net Zero targets.”
He added, “The increasing power demand in emerging markets calls for broader private sector participation to finance growth renewable energy. AIIB continues to embark on strategic partnerships in the ecosystem to catalyze the growth of the infrastructure asset class.”
What are the details of SEIT and its sponsors?
SEIT is India’s largest renewable energy InvIT with a portfolio of eight solar power plants located in Rajasthan, Madhya Pradesh, Karnataka, Telangana and Tamil Nadu. The plants have a combined capacity of 1.54 gigawatt-peak and generate about 2,400 gigawatt-hours of electricity annually, enough to power about 1.8 million households and avoid about 2 million tons of carbon dioxide emissions per year.
SEIT is co-sponsored by Mahindra Susten Private Limited, a subsidiary of Mahindra & Mahindra Limited, one of India’s largest multinational conglomerates with interests in various sectors such as automobiles, farm equipment, financial services, hospitality, real estate and technology. Mahindra Susten is a leading renewable energy platform with over 3 gigawatts of solar assets under development, operation and management.
The other co-sponsor of SEIT is Ontario Teachers’ Pension Plan Board (Ontario Teachers’), one of the world’s largest institutional investors with net assets of CAD 227.7 billion as of June 30, 2023. Ontario Teachers’ invests globally across a range of asset classes, including infrastructure, private equity, real estate and public equities. Ontario Teachers’ has been investing in India since 2008 and has a portfolio of over USD 3 billion across various sectors such as education, healthcare, technology and renewable energy.