India offers unmatched scale: Nawal Saini

Brookfield has stepped up investments in India, especially on renewables. How has the business shaped up?

We have been growing very consistently in the last four or five years. We’ve had a bit of a step change in our growth, as it’s publicly known, especially in the last six months. So, at least when I started, we were at around 300MW of operating assets, around $170-200 million of assets under management (AUM). Today, money has gone through various sorts of deals that we’ve done, and various structures and platforms are operating or have development capacity under construction and pipeline in total aggregates roughly about 16,000MW. In terms of AUM (assets under management), I think we are close to $3 billion now. And this doesn’t include the follow-on capital that we have earmarked. Even six months back, we were about a billion dollars. So, it’s been quite a steep growth.

How does the near-term pipeline look? What would the AUM target be 2-3 years from now?

Given our nature, we don’t put targets on ourselves in terms of growth. We look for discipline and an opportunistic way to grow. But I think now that we have developed operating engines, which will continue to sort of build on this, I think I’d see the significant scale going forward. So, I don’t have a number. But I think just going by what we’ve done in the past, we will continue to deploy at the same pace.

From a global standpoint, how do you perceive the maturity of the Indian market in terms of infrastructure investments and its viability?

India will continue to be a key market for our growth strategy globally. The opportunities here are at scale. The laws work. You have the regulatory frameworks to operate it. And for a large-scale investor—as I take the number of opportunities that we can get to deploy capital at scale and make our sort of infrastructure or infrastructure-like returns—I think they’re phenomenal. We know how to be a long-term partner in a country. And I think, we’ve been doing it fairly successfully across the five continents that we operate in, and it’s no different in terms of an approach that we’ve followed in India.

What are the opportunities within renewables that you are pursuing?

The Indian government has set a target of 500GW by 2030. So, that just sets the level-playing field. How many markets are there globally with that kind of scale available? India’s got at least the big picture scale in place and a very stated, very clearly stated intent that they want to decarbonize at the central level and at the state level. So, I think because of that, we are either directly or through our platforms, direct beneficiaries of participating in that scale.

One big component that has been added to this effort by the government is the corporate sector in India that also wants to decarbonize and has set net-zero targets.

Also, India has around 75GW of captive power consumption, which is largely thermal. Now, as that moves to renewable, that itself is a 200-250GW of opportunity. And the biggest difference that I see now versus a decade ago is earlier investors really tried to push renewable, try to make a case for renewable. We don’t have to do that anymore. It’s the customers who want to go green because it’s economically cheaper. It is one of the lowest cost of power available. I think this is a big shift.

So, will solar continue to drive investments?

Globally, we are across all renewable technologies. So, we are aware of all technologies. Some technologies are more suited for one jurisdiction versus the other. And again, we remain opportunistic. Solar and wind are going to be the bedrock for sure. Over time, we expect storage to get added. Now, we are also waiting and watching which form and shape it will be.

While the India opportunity is huge, it also presents several legacy challenges. We have seen state discoms struggle financially. Private players have suffered too, making it an unviable investment opportunity. What is your view on this?

The government has multiple objectives. One must appreciate the challenges that they have to go for. But having said that, I think the reforms that have been happening in India, they’re quite noteworthy, you know, wherever, whether it’s the LPS (late payment surcharge) key, or the green-open-access rules, or what the government is trying to do for green ammonia. I think we are on the right track. There is always room for improvement. But I think something as simple as LPS, if implemented, will mitigate the payment risk to a large extent.

Look, challenges will always be there. And there is no running away from the challenges. But I think the intent of the government is to try and find solutions to the challenge in a sector, which is a dual subject. I think they both—the Centre and a number of states—have done quite a commendable job on that front. And that’s what keeps us going. It’s not like we don’t face these issues in other parts of the world, by the way. So, it’s not like India is unique. So, but the laws work, you know, there is an Electricity Act, there is a regulator, there is a forum to go and appeal. We would want justice to happen faster. I think that’s probably one feedback that we would we have given to the government, but the mechanisms are there. So, you know, things work.

India often invites criticism for being a very expensive market in terms of valuations. What is your view?

To be honest, I don’t know too many cheap markets. And, look, valuation is a nuanced function of interest rates at the time. It’s a function of how the financial sector is doing.

What is the status of the current deal pipeline?

There is hardly a large opportunity that is out there that we would not look into. The market recognizes we are a serious significant player in anything, which is large, which requires operating expertise and large-scale capital.

Are you exploring opportunities outside solar and wind?

We are exploring investments across new-age technologies such as blue hydrogen, decarbonization and green energy, among other things.

Updated: 05 Jul 2023, 12:43 AM IST