Hyderabad: Singapore-based Sembcorp Industries Ltd has acquired a 49% share in Hyderabad-based Thermal Powertech Corporation India Ltd, which is a wholly owned subsidiary of Gayatri Energy Ventures Pvt. Ltd (GEVL), for 319 million Singapore dollar (Rs1,042 crore), becoming the third significant overseas stakeholder in India’s power generation sector.
“This is our second investment in India after a joint venture investment in Kakinada Seaports Ltd in November last year to establish and operate a marine and offshore facility,” said Tang Kin Fei, group president and chief executive of Sembcorp, a energy, water and marine solutions firm.
GEVL, a wholly owned subsidiary of the infrastructure company Gayatri Projects Ltd (GPL), is, through a special purpose vehicle, building a coal-based 1,320MW power project at Krishnapatnam in Andhra Pradesh, which involves an investment of Rs6,869 crore.
Hong Kong-based CLP Holdings Ltd through CLP Power India Pvt. Ltd, and US-based AES Corp. through AES India are two other major overseas stakeholders in India’s power generation sector.
Attracting investors: Power minister Sushil Kumar Shinde says the deal is an indicator of growing FDI interest in the power generation sector. Vipin Kumar/HT
India allows 100% foreign direct investment (FDI) in the power sector, and the Electricity Act, 2003, has opened up opportunities for private sector investments. But analysts say the reforms have failed to attract more foreign investment—until now.
“This is an indication of growing interest of FDI coming to the power generation sector,” said power minister Sushil Kumar Shinde. He said the Sembcorp deal marks the first FDI in the sector during his year-long tenure at the ministry.
The Krishnapatnam project will be operated and maintained by a 70:30 operations and management joint venture between Sembcorp and GEVL.
GPL managing director T. Sandeep Reddy said the project is being funded through a debt of Rs5,151 crore and equity of Rs1,718 crore.
A consortium of domestic financial institutions and banks, led by the Rural Electrification Corp. Ltd (REC), is lending the money.
Capital Fortunes Pvt. Ltd has acted as the sole arranger of project financing through local institutions and banks for debt and foreign investment for equity.
This is one of the largest syndication deals in the country so far by a sole arranger with the total fund of over Rs6,300 crore, said Reddy.
GPL plans to add a 1,320MW coal-based power plant at the same location in Krishnapatnam, where work will commence in a year or so.
Reddy said he is not sure if Sembcorp will pick up shares in the expansion project. “It depends on the decision of the respective boards of GPL and Sembcorp at the time of financial closure,” he said.
GPL has also received an engineering, procurement and construction contract worth Rs1,000 crore to build the power project.
India has a power generation capacity of 157,000MW. The 11th Plan (2007-12) has set a target of adding 78,577MW of capacity, requiring at current estimates some Rs10.31 trillion in investments. But, according to the power ministry, the government expects to face a Rs4.51?trillion?funding?shortfall.