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Abraaj raising energy fund, nears third deal

The emerging markets firm is targeting returns of up to 23% for the vehicle, which is poised to invest in an Ivorian hydro project in Q1.

The Abraaj Group has started raising a dedicated energy vehicle as part of its Thematic Funds suite that also includes healthcare, real estate and private credit platforms.

The move comes after the firm’s acquisition last March of Themis Energy, which gave Abraaj the in-house capability to develop projects. Sev Vettivetpillai, global head of the group’s thematic fund business, told Infrastructure Investor Themis was now working on a pipeline of about 10 projects across Africa, Asia and Mexico.

The firm’s equity team, designed to invest in projects at financial close, has so far backed two, using funds from Abraaj’s balance sheet. The first was an Indian solar platform, formed with the Aditya Birla Group in October 2015, followed by the acquisition earlier this week of Jhimpir Power, which owns a 50MW wind project in Pakistan. These assets are set to be passed on to the energy fund once it is fully up and running.

“The fund is still in the market. We currently invest from our balance sheet, simply because we have the ability to do so. Like any other fund Abraaj raises, we started investing about a year before the fund actually comes online. That gives investors good visibility on what they’re buying into,” Vettivetpillai said.

He added that the firm expected to post returns of between 19 percent and 23 percent on its latest energy equity investment, a range Vettivetpillai said matches the target of the energy fund at large. The equity team is poised to seal its next investment, a hydro power project in Ivory Coast, in Q1. An Indian wind deal is expected to come next, most likely in Q2.

Vettivetpillai said renewables would be an important component of the fund but that the lack of baseload capacity in emerging markets meant combined-cycle gas plants would sometimes come first. “We will push solar and wind on the back of that. If we develop 500MW of CCG, say, we will look to build at least 50MW of renewables.”