EDF’s Joint Venture in India
French energy giant EDF has formed another billion dollar joint venture to invest in India’s burgeoning renewable energy sector. This JV formed with SITAC group proposes to invest in India’s wind energy sector, aiming to set up a capacity of 1000 MW in the coming years. Note this will be EDF’s second JV in the Indian RE market, after buying a stake of 50% in ACME which is a large ground mounted solar developer. This JV has not been too successful in my view, as the small JV partner in ACME failed to bring enough capital in a highly capital intensive business. The company has failed to really fire in India’s solar market due to capital constraints.
Though ACME has claimed a portfolio of 1.5 GW in won projects and plants to set up 7.5 GW of solar power projects by 2017, the execution on the ground has not been great. The small company has failed to match the capital strength of EDF, which can bring hundreds of millions of dollars. This means the company has to dilute the equity of ACME solar which it seems reluctant to do. This means the company has not reached its potential. It would have been probably better for ACME to go alone in the Indian market, rather than going through these small no name partners which do not have the financial strength.
One major reason why foreign players need Indian partners is to manage the Indian environment, which is basically keeping the Indian regulators, distribution companies and policy makers happy through various means. Also getting land and other approvals is not an easy process in India, where red tape and corruption rule. Despite efforts of the Indian government to ease the rules of doing business, it is hard for foreign players to do so.
In my view EDF would have been better off by partnering with a strong infra group with capital problems such as a GMR, GVK or others who are going through hard times. These companies have solid execution capabilities though capital is not their strong point. In case of groups like ACME and SITAC, I think they don’t offer either execution or financial strength.
Google+Global renewable energy company EDF Energies Nouvelles, a unit of French electric utility EDF Group, on Wednesday announced a joint venture with India’s SITAC Group for developing wind assets in India, marking its foray into India’s growing clean energy sector.
Under the equal joint venture, known as SITAC Management and Development Pvt. Ltd, the two companies plan to put up 1,000 megawatts (MW) of wind projects across India with an investment of Rs.7,500 crore over the next three to five years, the companies said in a joint statement.
