Azure Power Global | New setback for the fund

Within a few months, CDPQ’s investment in a solar power producer, of which it is the majority shareholder, has melted away by several hundred million

Posted at 5:00 am

Richard Dufour

Richard Dufour
The press

After the Celsius saga, another Caisse de Depot et Placement du Québec investment is in trouble. This time, it is a large Caisse stock that is affected.

Azure Power Global’s stock lost 44% of its value on the New York Stock Exchange on Monday following the surprise departure of its CEO, who has been in office for just two months. The resigning CEO of the Indian renewable energy producer attributed his departure to “unforeseen circumstances” and causes beyond his control.

Azure also announced on Monday that it received a complaint from a whistleblower in May about possible irregularities and misconduct by certain employees.

As part of the review of these allegations, Azure says it discovered violations of security and quality standards and implemented mechanisms to address the situation and strengthen its logs.

Azure also says it has uncovered evidence of employee tampering with data and information.

La Caisse is the controlling shareholder of Azure Power Global, having increased its investment in the company this year by raising 10 million shares in the first quarter. This increased its stake to 53%.

The value of Caisse’s stake in Azure earlier this year was about CAD 1 billion. The stock’s decline over the past few months and the steep drop recorded on Monday brings the value of the Caisse’s stake to less than CAN 300 million.

A delay in releasing financial documents prompted Moody’s to put Azure under review for a downward review last week.

Azure Power Global had mentioned an overhaul of its internal control and compliance system a few weeks ago to justify a delay in the release of its financial statements. The company said Monday it could not yet say when it could release them.

Moody’s claims its review will consider the progress and conclusions of Azure’s review process, as well as the impact of any reassessment of financial actions. Moody’s specifies that the commitment of the Caisse will also play a role in its valuation due to the participation of the Quebec institutional investor. The Agency expects that the Caisse will support Azure, if necessary, according to the level of its participation.

The Ontario Municipal Employees Retirement System (OMERS) is the second largest shareholder in Azure after the Caisse. Together, the two companies hold nearly 75% of the company’s stock. They each have a representative on the board.

Caisse spokeswoman Kate Monfette says the organization has “strong long-term” beliefs in the renewable energy sector, which “plays a critical role in addressing the climate challenge”.

“As shareholders, we expect our portfolio companies to adhere to the highest standards of governance and compliance and to deal with any related questions or issues quickly and effectively,” she adds simply.

“As a member of the Board, the Caisse is aware that there have been problems for more than a year,” comments François Dauphin, CEO of the Institute on Governance.

Not the first warning

Because it is not the first time that the Azure audit committee has received warnings.

“Azure’s 2021 annual report shows that whistleblower reports continued to appear over the past year, but these warnings appear to have been unfounded,” said François Dauphin.

This expert notes that several governance changes have been made in recent months. In addition to changes among administrators, the whistleblower policy was changed last spring, notes François Dauphin.

This means that significant work appears to have been done in terms of governance and risk management. This work must have started more than a year ago.

Francois Dauphin

OMERS tells The press not to make any statement and refers us to the releases published by Azure.

Azure is the type of investment that aligns with la Caisse’s climate strategy goals, including holding $54 billion in green assets by 2025 to actively contribute to a more sustainable economy.

When la Caisse became Azure’s majority shareholder two years ago, the Indian company said that by having a majority shareholder with a long-term approach and a AAA rating, it would have better access to capital to further fuel its future growth.

After starting the year at $18 in New York, Azure stock closed at $5.85 on Monday. The stock surpassed the $50 mark in January last year.

Azure Power Global was founded 14 years ago and went public on the New York Stock Exchange in 2016. The company is developing a solar energy platform in India.

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