A consortium of investors led by Japan’s Sumitomo Corporation is set to invest $370 million for a minority stake in an Indian city gas distribution platform backed by Miami-based infrastructure private equity firm I Squared Capital.
Japan’s Osaka Gas, Sumitomo Corp and a government-private sponsored investment fund—Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development—will acquire a minority stake in the Natural Gas Transition Platform. The Singapore-based platform has, in turn, invested in city gas distribution businesses Think Gas and AG&P Pratham, which are developing city gas networks across 19 geographical areas in India.
Osaka Gas is the second-largest city gas distributor in Japan. Sumitomo is one of Japan’s largest trading houses. The Japan infrastructure fund is a government-sponsored entity that promotes Japanese investment abroad.
Of the total investment, $70 million will come from the infrastructure fund, which will pump the capital into the AG&P Group. The fund and Osaka Gas had, in late 2021, invested $120 million in AG&P.
At present, I Squared capital owns 100% of Think Gas and 73% of AG&P Pratham. While Think Gas operates in seven geographical areas, mainly in northern India, AG&P Pratham operates 12 such areas mostly in the southern region of the country. Together, the two have a total business area of around 325,000 sq km.
"The additional capital provided will be used to support the energy transition in India through the expansion of last-mile city gas distribution infrastructure," said Harsh Agrawal, I Squared Capital's senior partner for Asia Pacific.
The investment comes amid the government’s push to increase the share of natural gas in India’s energy mix. In December 2019, the Indian government announced a goal of increasing the share of natural gas in primary energy consumption in India from 6% at that time to 15% by 2030.
I Squared Capital said in a press release that, in addition to gas distribution, the platform will increase investments to boost the consumption of renewable natural gas (biogas) in India. "This will support the Indian government’s vision to increase the consumption of biogas, generate employment at the local level, and reduce pollution from crop burning. Further, the platform will also look to increase the use of green hydrogen using the city gas network,” it said.
Established in 2012, I Squared has over $38 billion in assets under management and operates more than 80 companies across more than 70 countries. The businesses it backs include utilities, energy, digital infrastructure, transport, environmental infrastructure, and social infrastructure.
In India, I Squared also has a presence in roads and the growing smart metering segment. I Squared-backed Cube Highways owns one of the largest portfolios of road assets in the country.
