Edelweiss infra fund eyes Engie’s India solar business

Engie, the new name and logo of French utility GDF Suez, is pictured during the group's shareholders general meeting in Paris, France, April 28, 2015. REUTERS/Benoit Tessier

Edelweiss Infrastructure Yield Plus Fund is in talks with Engie SA to pick up a significant stake in the French energy firm’s Indian solar business, said two people aware of the development.

The $1 billion alternative investment fund managed by Edelweiss Alternative Asset Advisors Ltd invests in operating assets across sectors, including roads, renewables and transmission. “The Edelweiss fund is actively scouting for opportunities in the Indian renewable space and is eyeing a stake in Solairedirect,” said one of the people cited above, requesting anonymity.

Engie plans to set up 2 gigawatts (GW) capacity in India by 2019, and has an 810 megawatt (MW) solar portfolio through Solairedirect. It also has wind power generation capacity of 280MW and has mandated Rothschild to find a buyer. Mint had reported on 19 March about Engie’s plans to sell stake in Solairedirect, which has been actively bidding for projects in India.

“I don’t think we’re in a position to comment on this speculation,” said Malcolm Wrigley, country manager, India, for Engie, in an emailed response. An Edelweiss spokesperson also declined to comment.

Edelweiss sees an opportunity to aggregate good quality operating assets and is looking at opportunities in the highways, renewable and transmission space with a credible revenue counter-party, low operating costs and long residual life.

The Edelweiss group, through its asset management business, manages $9-9.5 billion across various funds to invest in equity, real estate, distressed credit and private equity. With a presence across 70 countries, Engie owns power, gas and energy services businesses. It has been active in India for the past 20 years. After selling the Meenakshi Energy coal-fired thermal plant in Andhra Pradesh in November 2016 to India Power Corp Ltd, the company had sought to exit all coal-fired projects.

Engie’s move comes at a time when financing at the lowest cost has become key to success, given the record low tariffs. Besides, the finance ministry has introduced a safeguard duty for two years on solar cells and modules imported from China and Malaysia that will impact tariffs for the ongoing solar bids and accentuate the need for competitive financing.

“The safeguard duty of 25% will be applicable for a period of one year from 30 July 2018, followed by a reduction to 20% in the first six months of the second year and further to 15% in the latter half of second year…As highlighted by Icra earlier, this would result in an increase in the capital cost for a solar power project by 15%, which in turn would result in an increase in tariff by about 30-35 paise per unit to maintain similar levels of return for project developers,” rating agency Icra Ltd said in a 31 July report. India had achieved record low solar power tariffs of ₹2.44 per unit in May 2017. Earlier in July this year, it again touched ₹2.44 per unit in an auction conducted by state-run Solar Energy Corp of India.

“The average solar tariff was aggressive, having touched ₹2.44 per unit a few times,” said Rahul Prithiani, director, Crisil Research. “But an increase in capital cost means solar becomes less competitive as compared with wind power, which averaged ₹2.80 per unit in fiscal 2018 and has also seen tariff as low as ₹2.43 per unit. However, overall capacity additions may not be materially impacted as cost competitiveness of solar with other sources, barring wind, remains high, though there could be some near-term delays in project implementation,” Prithiani said.

This article was first published on livemint.com

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.