Caisse, OMERS hit hard after renewables company Azure Power’s share price plummets

written by Admin September 6, 2022 

Journalists and stakeholders at Azure Solar Power Plant, New Delhi, March 2018.Money Sharma/Getty Images

The stock market crash of India’s renewable power companies has slashed hundreds of millions of dollars from the portfolios of two major Canadian pension funds.

Caisse de dépôt et placement du Québec and Ontario Municipal Employees Retirement System (OMERS) own 75% of New Delhi-based Azure Power Global Ltd. AzuleneThe company lost two-thirds of the value of its shares listed on the New York Stock Exchange last week, most of which fell on Aug. 29.

On that day, the company announced that CEO Harsh Shah had stepped down after less than two months in office. In addition, since May 2022, we have identified the existence of whistleblower complaints alleging “potential procedural misconduct and misconduct by certain employees of factories belonging to one of our subsidiaries.” did.

After reviewing the whistleblower’s complaint, Azure said it found “deviations from safety and quality standards” and “evidence of manipulation of project data and information by certain employees.” The company said it is taking corrective action and has communicated its findings to the “appropriate authorities.”

The company said on August 1 that it had not completed an assessment of its internal controls over financial reporting and said it would delay filing its annual report. (A company that cannot assess its internal controls cannot prove that its financial statements are accurate.)

On Wednesday’s conference call with investors, board chairman Alan Rosling could not comment on the magnitude of the financial impact of the project data issue, noting that Azure may have to rectify its financial situation. Said it can’t even be ruled out. Asked by analysts if the CEO’s resignation was related to the whistleblower’s report, Rosling said Shah “came to me with a very personal request.” Confidentiality contract with. ”

Over the past six years, Caisse has spent approximately US$488 million to purchase over 34 million shares of Azure Power at an average price of approximately US$14, according to trading records. He closed at $3.55 for shares on Friday and $121.6 million for Caisse shares, an unrealized loss of more than $350 million.

OMERS has purchased approximately 14 million shares of Azure Power stock for a total of US$289.2 million, spending an average of just over US$21 per share since August 2021. The stock was worth US$48.8 million as of Friday, leaving him with a loss of more than US$200 million in just over a year.

Canadian pension funds have invested in giants, with portfolios in the hundreds of billions of dollars and dozens of large investments. Many are home runs rather than strikeouts, as the fund has reported returns above its benchmarks for many years.

Similarly, Caisse and OMERS lock in losses only when you sell shares. If held and Azure Power restored, the two would be able to get their stock back and minimize the pain. Rupesh Agarwal, Azure’s acting CEO, said Wednesday:

But the timing and perspective of the controversy are poor for both Caisse and OMERS.

When Caisse reported half-year results for August featuring a loss of $33.6 billion, huge amount of time addressing US$150 million wipeout of Celsius Network, a major cryptocurrency investment filed For bankruptcy protection in July.

Caisse CEO Charles Emond said in response to a myriad of questions from the media: “Otherwise, all investments will pay off.”

OMERS, on the other hand, has reported industry-leading revenue over the last 18 months. Reversing the story from 2020 when Canada was the only major pension fund lose moneyBut OMERS lost all of its investment in Vue International Bidco PLC, Europe’s largest cinema chain, in July. When a debt restructuring wiped out capitalOMERS jointly owned the chain with Alberta Investment Management Co. (AIMCo).

Caisse spokesperson Kate Monfette said in an email that the fund manager “has strong long-term beliefs in the renewable energy sector, which plays an important role in addressing climate change. We expect to maintain the highest governance and compliance standards and to address any issues that may arise in such matters promptly and effectively.”

OMERS spokesperson Neil Hrab said in an email that pension managers are “investors in quality investments around the world. We are committed to acting with integrity and upholding the highest professional standards. We invest in companies that share our values, including: Consistent with this, we expect the companies in our portfolio to adhere to strong and effective governance and compliance practices, and to avoid related issues. We fully support the necessary and appropriate measures against

Indeed, Azure Power appears to be an ideal investment in multiple themes that are popular with institutional investors, combining the renewable power industry with India’s home to one of the world’s largest economies. rice field.

Founded in 2008, Azure Power says it installed India’s first utility-scale private solar power project in 2009. It issued India’s first ‘green bond’ and claims to own and operate the largest single-site solar power project in India.

It also said it was the first power company outside India to list on the New York Stock Exchange. This makes them subject to US securities laws and regulations, which is typically attractive to major institutional investors.

Caisse joined Azure Power from the beginning as a public company by purchasing US$75 million in shares at $18 per share in its October 2016 initial public offering. I bought more shares on the open market and even participated in several company public offerings.

OMERS was first acquired in August 2021 with an investment of US$219 million.

However, both funds may have made their most serious commitment to Azure Power earlier this year. The company has launched an equity sale called a rights offering. Caisse and OMERS have signed a “backstop agreement” to purchase unsubscribed Azure Power shares in the offering.

When Azure Power announced in January that it had only sold 78.4% of its rights, Caisse and OMERS, which had already bought nearly 11 million shares in the offering for US$15.79 each, stepped in to step in to add another $340. I bought 10,000 shares.

Overall, Caisse spent just under $158 million and OMERS spent just under $70 million, including backstop shares.

As part of their ownership of Azure Power, the two funds placed their employees on the Azure board.

Cyril Cabanes, Managing Director of Caisse’s Asia Pacific Infrastructure Investment business based in Singapore, has been a member of Azure’s Board of Directors since January 2017. November 2019.

Delphine Voeltzel, managing director of OMERS Infrastructure in Asia, joined the board in May.

“As a board of directors, we are deeply concerned, outraged, upset and deeply involved in this issue,” Rosling, chairman of Azure, said on an investor conference call. “It is clear that as a company we need to take a very hard look at ourselves and ask questions like the ones you are asking … to be able to answer quickly and confidently about our management. is needed.”

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