Indian energy security a strong boost from Blackstone

One of the world’s leading private equity investment firms, the Blackstone Group could put itself into the spotlight, says IEEFA’s director of energy finance studies Tim Buckley and former CEO Praveen Gupta. Blackstone claims a focus on sustainability is at the core of its global business. For a more sustainable economic growth platform, it is critical that India improve its energy security by reducing its reliance on ever-larger fossil fuel imports.

Significant recent commitments from the world’s biggest equity manager BlackRock and the world’s biggest bank, JP Morgan Chase to both better align with the Paris agreement and invest in zero emissions renewable energy systems of the future is putting pressure on other significant financial institutions to alter their business models away from fossil fuels and accelerate zero emissions renewable energy alternatives.

Blackstone is the world’s leading private equity investment firm with assets under management (AuM) of US$571bn as at December 2019 (up 21 percent year on year) split between property, private equity and credit, including over US$13bn invested in India.

The world’s largest investment bank Goldman Sachs is already the biggest foreign investor in Indian renewable energy; through the country’s leading renewable energy company ReNew Power.
It would be a huge endorsement of India’s globally important energy transformation were Blackstone to announce it is bringing its global firepower to help accelerate investment in this sustainable, profitable domestic energy solution for India.

It would indeed be commendable if Blackstone also continued avoiding any fossil fuel investments in India. While portfolio investments like warehousing and logistics tend to have a large carbon footprint, they also bring the possibility to leverage behind-the-meter distributed rooftop solar, electric vehicles and energy efficiency solutions, which Blackstone could develop as a concurrent, aligned investment strategy.

Prime Minister Narendra Modi’s vision of 450 gigawatts (GW) of renewable energy by 2030 requires a total generation and grid investment of US$500-700bn to build out a zero emissions, domestic, low cost and sustainable electricity system. This in turn would permanently improve India’s air pollution and put the country on a world leading path to progressive decarbonisation.

Blackstone in India
Blackstone claims it is seeking “to create positive economic impact and long-term value for our investors, the companies in which we invest, and the communities in which we live and work.” This includes a stated core objective of being more environmentally sustainable.

While India accounts for low per capita carbon dioxide emissions, given the sheer size of its population, it stacks up as the third most polluting country in the world. With an assured growth pipeline over the coming decades driven by a large, aspiration, well-educated middle class population, the Indian economy deserves a quick course correction — a pathway founded on sustainable, domestic renewable energy.

Last year Blackstone acquired Aadhar Housing Finance Limited with AuM of Rs100bn (US$1.4bn) in February 2019 for US$500m and then Aakash Educational Services Limited in October 2019, a business teaching more than 250,000 students across 130 cities in India, whilst also investing US$1.4bn in Indian commercial property, including acquiring the outstanding minority stake in Indiabulls Real Estate Ltd’s commercial real estate portfolio. This follows Blackstone’s largest purchase in India in September 2016 when it invested US$870m to buy control of Mphasis Ltd., a Bangalore-based technology services provider, from Hewlett Packard Enterprise Co.

The Indian government’s long-term objective and commitment to transform its power sector with 450GW of total renewable energy capacity by 2030 provides a US$500-700bn investment opportunity for global investors.