ADIA eyes India's burgeoning renewables sector
The sovereign wealth fund of the United Arab Emirates (UAE), Abu Dhabi Investment Authority (ADIA), is seeing strong potential in India's renewable energy sector as the South Asian country seeks to power economic growth.
“ADIA will continue to invest in Indian renewables as the country's electricity demand is likely to grow more than in any other major economy in the coming decades,” Karim Mourad, global head of infrastructure, at the sovereign wealth fund told AsianInvestor.
Despite a challenging global environment, India remains one of the fastest-growing economies in the world, supported by a relatively stable macroeconomic environment. Financial experts agree that India’s economy is in the early stages of a cyclical upswing.
ADIA
Along with its economy, India’s demand for energy is rapidly growing and the country is making a strong push to expand its renewables as seen by the emphasis in its recent budget.
“Demand is driven by its net zero goals and the government target of 500 GW of renewable energy capacity by 2030, a supportive regulatory regime for renewables, as well as highly competitive solar and wind installation costs," said Mourad.
With an estimated $790 billion in assets, ADIA’s pool of capital gives it the flexibility of being able to invest across different types, sizes and holding periods of deals, enabling it to continue to invest in and support companies as they grow from private to public companies.
DIRECT INVESTMENTS
Abu Dhabi’s sovereign wealth fund has been a long-term investor in India across various asset classes including private equity, public equities, real estate, and infrastructure.
ADIA has built dedicated teams with years of direct investing experience in India across its major asset classes with a clear focus on increasing its presence at scale. As a result of these efforts, the SWF has been one of the most active investors into India over the past three years, particularly on the direct side.
Within India, ADIA has significant minority stakes in renewable infrastructure companies ReNew Power (14.5%) and Greenko Group (14%).
ReNew power has progressed from a pioneering renewable energy development business in India to a Nasdaq-listed business with around 7.7GW of operating wind and solar capacity spread across 9 states.
Meanwhile, the Greenko Group is one of the world’s leading energy transition and decarbonization solutions company, with an installed renewable energy capacity of around 7.5 GW across wind, solar and hydro capacities with a presence in 15 states in India.
Both company’s projects and developments continue to play critical roles in India’s decarbonisation journey.
INDIA’S ENERGY TRANSITION
Renewable energy remains a focus for India as the country has committed to achieving carbon net-zero by 2070, according to James Thom, senior investment director of Asian equities at abrdn.
abrdn
“Indian demand for fossil fuels will continue to grow in the near term, as manufacturing picks up and the economy expands, potentially peaking over the next decade before coming down and being replaced by renewables,” Thom told AsianInvestor.
The direction will provide plenty of opportunity for transition capex investments as the infrastructure - for example energy storage - is gradually built out, he said.
India holds the strongest potential for energy demand growth in the region and the world. The challenge for India is to both increase the supply of energy and also diversify the sources of energy to meet its rapid demand according to Trinh Nguyen, senior economist, emerging Asia at Natixis CIB.
“Currently, India is rather dependent on coal (57% of total) but the good news is that it is also home to rapid increases of renewables as the country seeks to increase and diversify energy sources through policy support,” Nguyen said.
“This was especially useful last year where India’s higher investment in renewables helped it weather the energy crisis as fossil fuel costs rose sharply, making solar and wind projects cheaper than coal generation in the second half of 2022.”
Natixis CIB
The country has made its intentions to increase its push to expand renewables clear, as seen by the emphasis in the budget, she said.
“India will start auctioning 50 gigawatts of solar and wind power capacity for the country’s electricity grid annually until 2028, more than doubling the current pace. India wants to meet its target of installing 500 gigawatts of clean energy capacity by 2030, meeting 50% of the country’s electricity needs from renewable sources,” said Nguyen.
Adani Green and Tata Power are key to the sector and the question is whether Adani Green has the capacity to increase investment as it tries to reduce its debt burden.
“Either way, we believe this sector will continue to grow, irrespective of whether Adani Green can expand or the results of 2024 elections, as the sector isn’t just a bright spot in the short-term but in the next decade as India tries to bridge its demand gap,” she said.