The sun rises on renewable energy in India
India aims to generate 275 Gigawatts (GW) of renewable energy capacity by 2027, up from 136 GW today. Societe Generale is supporting this critical energy transition goal, as illustrated by recent financing of SB Energy and ENGIE’s solar projects.
A growing population and economy have dramatically increased demand for energy in India: electricity consumption has soared by over 450% since 1990, according to the International Energy Agency1. This growth has come at an environmental cost, with India becoming the world’s third-largest source of carbon dioxide emissions, leading the country to prioritise renewable energy development to meet its commitments under the Paris Agreement. As a result, the sector has attracted over USD 64 billion of investment over the last six years2.
Among the dynamic players on the India market, Japan’s SB Energy has committed to developing its renewable energy portfolio, especially in India where it has commissioned six projects with a production capacity of around 2,000 Megawatts Peak (MWp). It has further projects with capacity of around 5,500 MWp in the pipeline, to be developed in the next two years. In total, SB Energy has plans to deliver 20 GW of electricity sourced from renewables in India.
French multinational ENGIE is the world’s largest independent power producer and has been a pioneer in Indian solar energy. It has more than 1.5 GW of electricity generation capacity in its portfolio in India3. Today, 30%, or 26.9 GW, of its capacity comes from renewable sources – and ENGIE has committed to adding 9 GW of renewable capacity over the next three years.
As multinational companies continue to invest in India and are working towards the national target, Societe Generale is ideally positioned to assist in making this ambition a reality. Solar projects by SB Energy and Engie demonstrate the ability of the Bank to leverage its expertise to support the transition away from coal-fired energy, as well as mobilise its global network to deliver US dollar (USD) and Indian Rupee (INR) financing solutions for these two landmark projects.
An Indian first: financing SB Energy’s solar project in USD – and a local-currency first: financing ENGIE’s solar project in INR
Societe Generale’s first-ever renewable energy project financing in India is a USD 333 million loan for the 900 MWp solar farm in Rajasthan. Societe Generale acted as Mandated Lead Arranger and Bookrunner, Hedge Provider and Letters of Credit Provider. Alongside the financing, the bank also provided SB Energy with a currency hedge in the form of a USD/INR green cross-currency swap: Societe Generale’s first green cross currency swap in India in the renewable energy sector.
Solar is also flourishing in the neighbouring state of Gujarat, where ENGIE is building a solar photovoltaic power plant with the capacity to generate 200 MW of electricity. The Gujarat project is its 13th solar project in the country – as well as India’s second largest so far4. Societe Generale, alongside the Asian Development Bank (ADB), is also providing capital for this project, leading a INR 7.7 billion (USD 105 million) local-currency green loan. The project financing conforms with the Loan Market Association (LMA)’s Green Loan Principles, a framework intended to support environmentally-sustainable economic activity, and was issued under ENGIE’s own Green Financing Framework5. Societe Generale is Mandated Lead Arranger, Green Loan Co-ordinator and Letter of Credit Lender for its first transaction in local currency for a renewable energy project in India.
Daniel Mallo, Head of Natural Resources and Infrastructure, Asia Pacific at Societe Generale, said: These two pioneering Indian renewable energy deals showcase our ability to support our multinational clients in increasing their renewable energy capacity, expanding their footprint in Asia and contributing to India’s renewable energy targets. We are able to provide both local-currency and US dollar green financing instruments in India, increasing the choice available for our clients so they are able to select the most suitable solutions for their needs. We look forward to applying this winning formula again in the future to help deliver on the bank’s commitment to contributing to the energy transition in the region.
Following the sun for a greener and better future
ENGIE’s solar project is expected to generate around 440 gigawatt-hours of electricity a year, which would replace nearly 385,000 tons of carbon dioxide emissions. As well as generating green power, the project is expected to create about 1,200 jobs, both directly and indirectly. In addition to reducing India’s carbon footprint, contributing to building renewable energy generation resources is an essential factor in delivering energy security and affordable power to support the country’s economic growth and raise the living standards of all segments of the population.
India has emerged as one of the global leaders in renewable energy. As part of its Paris Agreement commitments, India has set an ambitious target of achieving 175 GW of renewable energy capacity (including 100 GW of solar and 60 GW of wind) by 2022 and 275 GW by 2027, up from 136 GW6 in November 2020. The 2027 goal would increase renewables’ share to an estimated 44% of installed capacity and 24% of electricity generation7.
Despite the Covid-19 crisis, renewable energy projects in India have been accorded ‘must-run’ status by the government. The Prime Minister of India, Shri Narendra Modi, announced a new target of 450 GW of renewable energy capacity8. The target has spurred growth in solar projects in the country, with increased opportunities for international players. Societe Generale will continue to serve its renewables clients and support their business development in India, while helping the country capture the benefits of the sun shining on clean energy.