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Engie & Abraaj Partner to build Indian Wind Farm

French energy firm Engie SA and Dubai’s private equity firm Abraaj Group on Wednesday announced a partnership to build a wind power platform in India.

“Together, Abraaj and Engie have identified a robust pipeline of wind power projects representing over 1 GW (gigawatt) in several key states,” the companies said in a joint statement.

Foreign investments are crucial for India’s renewable energy industry as the lower cost of foreign capital and the size of the market has helped bring down tariffs.

“Energy demand is growing tremendously in India, and Engie is investing in green energy sources as part of supporting the country with its sustainable development plans,” said Sébastien Arbola, chief executive of Engie Middle East, South and Central Asia and Turkey in the note.

The National Democratic Alliance government has set an ambitious clean energy target of 175GW by 2022. Of this, 100GW is to be generated by solar projects and 60GW by wind projects.

Wednesday’s announcement comes in the backdrop of India’s wind sector transitioning from a feed-in tariff regime to tariff-based competitive auctions. While feed-in tariffs ensure a fixed price for wind power producers, wind power tariffs in India followed the solar route and hit a record low of Rs3.46 per kilowatt hour (kWh) in a February auction conducted by Solar Energy Corp. of India.

In such a scenario, obtaining finance at the lowest cost has become key to success, resulting in record low solar and wind energy tariffs.

“In line with our commitment to addressing the Sustainable Development Goals, our partnership with Engie marks Abraaj’s second investment in the clean energy sector in India,” said Saad Zaman, partner at Abraaj Group, in the statement while adding, “wind power generation is approaching grid parity and offers a competitive solution to lower average power pool prices.”

Prior to this joint venture, both Abraaj and Engie have had a presence in the Indian solar space. While the Abraaj Group with $11 billion under management announced a partnership with the Aditya Birla group in October 2015 to build a renewable energy platform focused on developing solar power plants, Engie with €66.6 billion in revenue has been trying to expand its presence in India’s clean energy space.

After selling its Meenakshi Energy coal-fired thermal plant in Andhra Pradesh last year to India Power Corp. Ltd, a Kanoria family trust entity, Engie (formerly GDF Suez SA) sought to exit all coal-fired projects. It has been actively eyeing the Indian clean energy space. It plans to set up a 2GW capacity by 2019 with its subsidiary Solairedirect actively bidding for solar power projects, and has a 810 megawatt (MW) portfolio.

Engie has been in talks with the country’s largest roof maker Everest Industries Ltd for a partnership for solar-ready roofs, Mint reported on 11 August. The largest independent electricity producer globally with 112.7GW capacity is also exploring the acquisition of projects from Singapore-based renewable energy developer Equis Energy’s India portfolio, which comprises green energy platforms Energon and Energon Soleq.

The group has been active in the Indian deal space. Abraaj’s investments in the country include a majority stake in Hyderabad-based hospital chain Quality Care India Ltd for an estimated Rs1,700 crore. Last year, Abraaj also led a $150 million funding round in online grocer BigBasket.

EY was the transaction advisor for the partnership. “The Indian wind sector today is at an inflection point,” said Srishti Ahuja Taneja, director, transaction advisory services, EY. “As the underlying sector economics remain strong, this platform is well poised to add capacity on the ground and create value for both shareholders.”

India’s green energy play is expected to grow substantively with federal policy think-tank Niti Aayog projecting a 597-710 GW capacity by 2040 in its draft energy policy.

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