Velcan uses DIFC as platform to India

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Decitre wants to list Velcan on DIFX by early next year.

A French sustainable energy company will used its Dubai-based subsidiary to invest $415 million into hydropower projects in the Indian state of Arunachal Pradesh.

Velcan Energy, which set up Velcan Energy Holdings (Dubai) Ltd in Dubai International Financial Centre (DIFC) two months ago, has won a 40-year concession to build and operate four hydropower plants with a combined generation capacity of 304 MW. The company expects the concessions to generate revenues in excess of $124 million by 2012.

"We are the only truly foreign company to win such a hydroelectric concession in India," said Velcan Energy managing director Antoine Decitre.

Though the UAE has no hydropower potential itself, Decitre sees setting up a Dubai subsidiary as a key move, although the company already has three offices in India.

"It is fairly easy to monitor India from Dubai because the Indian community is so big in Dubai that you have flights from here to every Indian city. The other reason is the might of the Dubai financial centre in Dubai."

Velcan will make use of Islamic finance to support its business. "We think Islamic finance and dams can be fairly ideally matched," said Decitre. "One of the core principles of Islamic finance is that you cannot pay a fixed interest - there has to be a risk. A dam can be used as an asset to back a sukuk. Historically, dams have been some of the safest and most profitable assets in existence. Once you have built the dam, the only risk remaining is the size of the water flow."

Decitre also pointed out that Velcan will hedged against inflation, since the price of electricity is indexed to inflation.

Velcan is concentrating on India and Brazil for its future projects, two countries "naturally gifted for renewable energy" with massive need for investment in their power industries. Already listed on the Euronext stock exchange in Paris, Decitre is targeting a secondary listing for Velcan on the Dubai International Financial Exchange (DIFX) by Q1 2008.

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