Norfund and KLP Invest NOK 1.1 Billion in Power Grid Development in India

December 9, 2024

The Climate Investment Fund and KLP are using the climate summit in Baku to announce a billion-dollar investment in a new platform for power grid development and energy storage in India.

“The investment is a good example of the type of international cooperation we need going forward to address climate challenges,” says Development Minister Anne Beathe Kristiansen Tvinnereim, who is representing Norway at the UN Climate Conference in Baku.

Climate financing and support for developing countries are key components of the cooperation under the Paris Agreement and a central focus of this year’s climate summit, nicknamed the “Finance COP.” A crucial factor is mobilizing more private capital through profitable investments. The Climate Investment Fund, managed by Norfund since 2022, is Norway’s most important tool for contributing to this effort.

“There will be no energy transition without investments in energy transmission. To succeed in replacing coal with solar and wind, we need both better grids and more storage. It is crucial that we succeed in mobilizing private capital for these types of investments, as the Climate Investment Fund is doing here,” says Tvinnereim.

170,000 Kilometers of Power Grid Needed

A new IEA report warns that up to 15% of global solar and wind power production may remain unused by 2030 without increased investment in grids and storage.

India is among the countries where the need for such investments is particularly pressing. According to recent estimates from India’s Central Electricity Authority (CEA), the country will require 170,000 kilometers of transmission lines and 47 GW of energy storage capacity (BESS) over the next eight years to integrate increased renewable energy production.

India is set to build as much new power capacity in the next 20 years as the entire EU has in place today (IEA).

“If India does not succeed in expanding its grid sufficiently, it will be impossible to meet this enormous demand with renewable energy, making it extremely difficult to mitigate the climate crisis,” says Tellef Thorleifsson, CEO of Norfund.

The new platform, EnerGrid, will focus on developing power grids and battery storage. The capital injected into the collaboration will enable EnerGrid to develop projects valued at approximately USD 1.2 billion over the coming years. Once commercial operations commence, the projects will be acquired by IndiGrid at a pre-agreed enterprise value.

KLP Brings in Private Capital

KLP, Norway’s largest pension company, has made several investments alongside Norfund, including through the joint investment venture KNI India AS, where Norfund holds 51% and KLP 49%.

KNI India is now investing NOK 1.1 billion (USD 100 million) to establish a new platform for investments in power grids and storage in India. The investment is being made in collaboration with British International Investment (BII), Norfund’s British counterpart, and IndiGrid, one of India’s leading power sector investors, each contributing USD 100 million.

“We firmly believe this project will generate strong returns for KLP’s owners while delivering significant benefits for the global climate,” says Sverre Thornes, CEO of KLP.

Since its inception in 2022, the Climate Investment Fund has achieved an impressive annual return of 24.4% (IRR) in investment currency (20.4% in NOK).

“To successfully mobilize private capital, it is essential to develop profitable investments. While these return figures reflect a short period and we expect them to decrease somewhat over time, both the numbers and KLP’s experiences demonstrate that climate investments can deliver an acceptable risk-adjusted return over the long term,” says Tellef Thorleifsson, CEO of Norfund.