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Abu Dhabi’s $2bn green energy splash will deepen India ties

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The new company will enhance Egypt's competitiveness as a major financial centre for trading of carbon certificates
  • IHC-Adani investment is 4.87 percent of total UAE-India trade
  • Growth plan to supply India with nine percent of its non-fossil energy
  • Empire-building Gautam Adani became Asia’s richest person this year

Abu Dhabi-based International Holding Company PJSC’s (IHC) AED 7.3 billion ($2 billion) investment in Indian multinational conglomerate Adani Group takes the UAE-India partnership to “a different level” with more deals on the horizon, market observers said. 

IHC provided capital to Adani Green Energy, Adani Transmission, and Adani Enterprises, which are all listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India – through the preferential allotment route, the firms said in a statement on Tuesday.

IHC’s investment in Adani Group represents 4.87 percent of the total trade between the UAE and India, which reached $41 billion between 2020 and 2021.

“It’s a significant amount, so that takes the India-UAE partnership in terms of investments to a different level,” Madhavan Sivashankar, founder and CEO, Gulf International Finance Limited, told AGBI.

“With the fragile environment we are in, especially with oil-rich countries having various sorts of embargos, the reliance on green energy will become more and more significant and, in that sense, this alliance and investment will hold both counterparties in good stead in the years to come.”

The Indian economy is hard pressed to reduce its dependence on importing energy, so investing in renewables is good for diversification, returns and for the world”

Ruchir Punjabi, co-founder of Distributed Energy and renewables.org

India’s total electricity generating capacity is more than 390 gigawatts (GW) and renewables exceed 100 GW.

Last year, the Indian government announced that the country’s non-fossil fuel capacity would reach the 500 GW-mark by 2030.

IHC’s investment will support Adani Group’s growth plan to supply the country with nine percent of India’s non-fossil energy (45GW) by 2030.

“IHC understands energy markets better than most, so it is not surprising for them to invest in Adani,” Ruchir Punjabi, co-founder of Distributed Energy and renewables.org, told AGBI. 

“It offers them access to a large market, equity in a major Indian operator and diversification to renewables. [The] UAE’s unique regional position will mean that we should see more such deals around the region as the world transitions towards renewable energy.”

Punjabi added that, in the current market environment, there are “few places in the world” with macro trends heading in the right direction for investment. 

“There’s not many places in the world where you can deploy this size of money and expect growth on your capital,” he said. 

“India is one of the few places where the macro trends are right. Given the demographics, especially with a rising middle class, the growth story in India has a long way to go. Also, the Indian economy is hard pressed to reduce its dependence on importing energy. Investing in renewables in India makes sense because it’s good for diversification, it’s good for returns, and it’s good for the world.”

Adani Electricity Mumbai, the distribution arm of Adani Transmission, has set a target to increase the renewable energy segment of its portfolio from three percent in FY21 to 60 percent by FY27. IHC’s investment will support this goal.

Meanwhile, Adani Enterprises, through its wholly owned subsidiary Adani New Industries, has undertaken to invest $50 billion over the next nine years forming a new green hydrogen vertical focused on decarbonisation of industrial energy and mobility.

Syed Basar Shueb, CEO and managing director of IHC, said in a statement: “This strategic expansion of our business aligns with IHC’s commitment to broadening and diversifying our investment portfolio. There is no doubt that this transaction will directly and positively impact India’s overarching ambition for long-term plans for clean energy.”

Listed on the Abu Dhabi Stock Exchange (ADX), IHC was founded in 1998 as part of an initiative to diversify and grow non-oil business sectors in the UAE.

IHC reported profit of AED3.55 billion in the first quarter of 2022, compared to AED1.5 billion in profit at Q1 2021, alongside revenue of AED10.49 billion, while total assets stood at AED 96.04 billion.

Sagar Adani, executive director, Adani Green Energy added in a statement that the transaction marked the further strengthening of the India-UAE relationship and highlights the long history of business and trust between the nations’ peoples.

This transaction reportedly comes as part of Indian billionaire Gautam Adani’s empire-building exercise. Adani, who became the richest person in Asia this year, is also said to be exploring partnerships with Saudi Aramco, according to Bloomberg.

French global giant TotalEnergies SE also invested in Adani’s companies last year.

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