Sterlite Power Transmission (SPTL), a private company owned by the Vedanta Group, has joined with Singapore-based sovereign wealth fund GIC to create a USD one billion joint venture (JV) platform. The new alliance aims to capitalize on the growing demand for power evacuation networks in India.
Both entities signed the JV agreement and are awaiting the mandatory regulatory, lender and customer approvals. Deutsche Bank is the adviser to the transaction. Currently, SPTL is in the process of demerging into two businesses, of which, one part will house the infrastructure division, which would develop and operate power transmission assets on a build-operate-transfer (BOT) basis, typically in 30-year concessionaire agreements.
Moreover, the other vertical 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 conditions completed, or under execution, with 108 critical corridors across 15 states.
GIC is planning to deploy USD 500 million in the infrastructure business for a 49 percent stake. The investment will take place in tranches, with an initial USD 100 million and USD 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. In addition, there is also a commitment to deploy capital beyond the USD 500 million initially earmarked.
Meanwhile, Sterlite Power will transfer four assets with an enterprise valuation of Rs 6,000 crore (USD 722.60 million) into this JV. Additionally, the company is likely to invest approx. Rs 1,700-Rs 2,500 crore (over USD 300 million) over a similar two to three-year timeline, as well as deploy its capabilities to maintain its 51 percent stake in the alliance.
Among these four, two 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.
Based on this USD one billion equity funding, the plan is to raise three to four times the debt to fully capitalize the platform into a USD four billion scaled operation. The JV seeks to win projects worth Rs 10,000 crore annually, which would need Rs 3,000 crore (nearly USD 361 million) of equity every year.
