New Delhi: Singapore-based Sembcorp Industries Ltd has appointed Rothschild to find a strategic investor for its thermal power generation business in India, said two people aware of the development.
On offer is a stake sale in Sembcorp Energy India Ltd’ (SEIL) 2.64 gigawatt (GW) coal-fuelled power project in Andhra Pradesh, and comes in the backdrop of a fundamental change in the investment culture, with multilateral and bilateral agencies as well as sovereign wealth funds ceasing investments in businesses that contribute to climate change.
“India remains a key market for Sembcorp. As earlier communicated to the market, we will continue to explore various strategic options to unlock value," said a Sembcorp Energy India spokesperson in an emailed response.
A Rothschild India spokesperson in an emailed response said it refuses to comment on "market speculation".
The stake sale plan follows after the earlier plan for initial public offering (IPO) was put on hold. Mint reported on 3 October 2017 about Sembcorp Industries’ preparing to list its Indian unit.
With total assets of over SG$24 billion, the Singapore Exchange-listed Sembcorp is among the few foreign utilities that owns thermal power assets in India. Others include American firm AES and Hong Kong-based CLP Holdings.
Sembcorp’ India unit—SEIL, has a 4.3 GW portfolio of thermal and renewable energy assets, which includes the 2.64 GW coal-fuelled Andhra Pradesh project. It also has 1.7 GW wind and solar power projects across seven states in India.
Of India’s installed power generation capacity of 370.49 GW, coal-fuelled projects account for 54% or 198.52 GW. The share of clean energy capacity is rapidly increasing with it now accounting for more than a fifth of India’s installed power generation capacity. India has 34.6 GW of solar power and 38GW of wind power, and runs the world’s largest clean energy programme.
Also, during the lockdown, it was the renewable energy sources including hydropower that were catering to around 40% of India’s electricity demand. The plant load factor of thermal power units declined to 47.9% in May from 63.6% a year ago on account of lower demand. However, demand in May picked up marginally from April as the country began to emerge from one of the word’s strictest lockdown.
Sembcorp, in 2010, made its first power sector investment in India, when it acquired a stake in Gayatri Energy Ventures’ Thermal Powertech Corp. India, a 1,320MW thermal power plant. Sembcorp Industries announced in December that its wholly-owned subsidiary Sembcorp Utilities has signed an agreement with its local partner, Gayatri Energy Ventures Pte Ltd (GEVPL), a wholly owned subsidiary of Gayatri Projects Limited (GPL), to acquire the remaining 5.95% stake in SEIL.
In February 2015, Sembcorp Industries acquired a 60% stake in IDFC Alternatives Ltd-backed renewable energy firm Green Infra Ltd for S$227 million, marking its entry into the Indian renewable energy market. In August 2017, Sembcorp Industries announced the acquisition of IDFC’s remaining 28% stake in SGI (Sembcorp Green Infra) for Rs1,410.2 crore to become its sole owner.
This stake sale plan comes at a time of India’s power demand, which had nosedived, slowly returning to its pre-lockdown levels. Of India’s total electricity demand load pattern, industrial and agricultural consumption accounts for 41.16% and 17.69%, respectively. Commercial electricity consumption accounts for 8.24% of demand.
Consumption of energy—especially electricity and refinery products—is typically linked to overall demand in an economy.