Exclusive: GIB eyes Indian solar for debut overseas deal

The UK lender’s £200m emerging market pilot fund aims to complete its first transaction before the end of the financial year.

One of the UK’s Green Investment Bank’s (GIB) first investments overseas will likely target Indian solar assets, according to people with knowledge of the institution.

The move would follow the creation of the International Climate Fund (ICF), a £200 million (€275 million; $308 million) vehicle the lender will deploy through a joint venture with the Department of Energy and Climate Change. The structure, which has now been established, is already seeing transactions coming through its investment committee, sources told Infrastructure Investor.

It is understood that appointments have been made internally to invest and manage the fund, with the intention to close a first deal by the end of March 2016. GIB declined to comment.

The creation of ICF follows a period of extensive research during which the bank thought to identify emerging markets offering a friendly environment for investors and with potential for being transformed by the bank’s involvement. The fund’s target list now comprises India, South Africa, Guinea and East Africa.

“India and Indian solar are the biggest market at the moment,” said a person close to the fund. “The expected deployment of solar there is very rapid. We’ve gone from a relatively low base to a very elevated target in a short amount of time.”

The stated intention of the vehicle’s sponsors, through the creation of ICF, is to demonstrate that the model developed by the world’s first green bank can be successfully applied to emerging markets. It will remain a one-off initiative, according to sources, with no further money to be raised once the initial pool is fully deployed.

GIB expects to be making up to a dozen investments through the fund, meaning an average equity cheque size of between £10 million and £20 million. The bank primarily looks for minority stakes in renewable energy and energy efficiency projects, with leverage applied to some of them.