SPTL is currently in the process of demerging into two businesses. One part will house the infrastructure division that develops and operates power transmission assets on a build-operate-transfer (BOT) basis, typically in 30-year concessionaire agreements.
The other business will house the domestic manufacturing business of cables, conductors and optical phase ground wires.
This is on a turnkey basis for third-party buyers such as state transmission utilities. This division has over 34,000 km of optical phase ground wires-based communication projects under live line condition completed, or under execution, with 108 critical corridors across 15 states.
GIC will be deploying $500 million in the infrastructure business for a 49% stake. The investment will take place in tranches, with an initial $100 million and $400 million to come in over the next two to three years on a need-to-draw down basis. This will be linked to Sterlite Power winning transmission project tenders and planned capex.
GIC’s plan is to be the exclusive partner of Sterlite in India in the transmission segment to try and gain a larger share of the market, which has seen annual cumulative projects worth Rs 10,000-12,000 crore bid out every year during 2010-22, according to industry estimates.There is also a commitment to deploy capital even beyond the $500 million initially earmarked.Meanwhile, Sterlite Power will transfer four assets with an enterprise valuation of Rs 6,000 crore ($722.60 million) into this JV. Additionally, the company is expected to invest around Rs 1,700-Rs 2,500 crore (up to $300 million) in cash over a similar two to three year timeframe, as well as deploy its capabilities to maintain its 51% stake in the alliance.
Two of the assets are in Rajasthan, and one each in Assam and Kashmir. Together, they cover 700 km, with three substations and a transmission capacity of 800-2000 MW.
“With these four seed assets, the plan is to aggressively bid and build more,” said one of the executives in the know, on the condition of anonymity as the talks are in private domain. “GIC is a permanent pool of capital and is very bullish on the Indian infrastructure story. SPTL has historically maintained 25% market share in concession projects and wants to gain a bigger toehold.”
“Transmission is a scale game, and the size and tenure of a patient capital provider like GIC is key,” said the official. “They have built similar platforms with Greenko in renewable energy and IRB in roads. So, this is familiar territory for them too.”
Raise Debt to Build Big
Based on this $1-billion equity funding, the plan is to raise three to four times debt to fully capitalise the platform into a $4-billion scaled operation. The JV is aiming to win projects worth Rs 10,000 crore annually, which would need Rs 3,000 crore ($361 million approximately) of equity every year.
SPTL – itself formed through a demerger from Sterlite Technologies Ltd in 2016 – is 75% owned by Vedanta’s Anil Agarwal family, with the remaining quarter held by minority shareholders. Pratik Agarwal, managing director, is Anil Agarwal’s nephew.
An SPTL spokesperson declined to comment. Mails sent to GIC on Tuesday remained unanswered until the time of going to press.
Both sides are believed to have signed the JV agreement a fortnight ago and are awaiting the mandatory regulatory, lender and customer approvals. Deutsche Bank is the adviser to the transaction.
In September 2022, SPTL announced that it had withdrawn its draft red herring prospectus for a listing and deferred the plans due to unfavourable market conditions. Both the GIC JV and the manufacturing business are unlikely to get listed, said officials in the know.
Larger Portfolio
Outside of the JV, SPTL is also the sponsor of the first listed power sector infrastructure investment trust (InvIT) in India – the India Grid Trust (IndiGrid) that has a market value of Rs 9,400 crore ($1.2 billion).
SPTL has transferred 11 assets to the InvIT over time, starting with just two. IndiGrid, backed by KKR, has also made independent acquisitions to grow, including the buyout of the operating solar portfolio of Virescent Renewable Energy Trust in May for a Rs 4,000-crore enterprise value. The cumulative asset base of IndiGrid is around $3 billion.
Independently, SPTL also has a $1-billion JV with Australia’s AMP Capital for a set of four transmission assets, but the venture has been capped at that number.
Since March 2022, Pratik Agarwal has also launched Serentica, a renewables-focused independent power producer catering to commercial and industrial customers.
Serentica, which has also received $650 million from KKR for a significant minority stake, has outlined a $3.2-billion capex plan. Phase one would entail supplying 1.6 GW of round-the-clock green power to Vedanta Group companies, which would require 4 GW of wind and solar assets to be developed. Of this 4 GW, 600 MW is getting commissioned in the second quarter of FY25 in Rajasthan and Karnataka.
With the push toward greener energy – with plans to have 500 GW renewable energy by 2030 – industry officials believe 80% of new generation and transmission capacity will come up in Rajasthan and Gujarat. During 2023-30, the industry estimates an average annual tender bid-out of around Rs 45,000 crore.
This pace in the electricity sector thus puts a huge premium on robust grids. As such, there would be a growing need for energy storage plants to smoothly integrate these renewable capacities in the grid and stabilise them.
The Centre has released a transmission network plan for the integration of more than 500 GW of non-fossil capacity addition by 2030. The plan details the various transmission schemes that provide connectivity from renewable energy potential zones, implementation phases, financing needs as well as a 25-year waiver of inter-state transmission system charges for sale of solar and wind power for projects to be commissioned by June 30, 2025.
