Global investment manager AMP Capital has established a 50/50 partnership with Sterlite Power Transmission Limited (Sterlite Power) for the development of energy transmission projects in India. This marks the first investment in India for AMP Capital's global infrastructure equity strategy.
AMP Capital and Sterlite Power will each invest an initial amount of approximately USD 150 million in the development of four transmission projects, and have put in place debt financing, which represents a total capital outlay of around USD 1 billion. These projects have a circuit length of nearly 1800 kilometres of transmission lines across the Western, Southern and North Eastern regions of India. They will provide the critical infrastructure required for evacuating power from multiple renewable energy generation projects and will strengthen the power delivery infrastructure in the country.
The partners may in the future contribute further capital for new inter-state transmission projects which are expected to be tendered by the government of India. Therefore, the partnership has the potential to reach an overall investment size of USD 500 million.
Transmission infrastructure has underpinned the rapid growth seen in the generation capacity of India over the last decade. This growth has been led by renewable energy, where India is rapidly becoming recognised as a global leader, having surpassed its ambitious Paris Agreement targets with 38% of generation capacity currently from clean energy. The Indian power market still has huge potential for expansion, with low relative per capita power consumption in the country. Due to years of underinvestment in transmission capacity there is significant demand for investment, and the Indian government has been actively promoting the participation of the private sector in transmission line development through the continued implementation of supportive regulatory reforms.
Sterlite Power is a leading developer of transmission projects with a robust execution record across India and Brazil. It has won a third (by tariff) of all inter-state private transmission projects awarded in India under competitive bidding since 2011, and has successfully established its unique asset flip business model across both markets. Sterlite Power has completed and sold nine transmission assets to date in India.
Sharat Goyal, Head of India, Infrastructure Equity at AMP Capital said: "AMP Capital and Sterlite Power believe that this is a unique partnership bringing together operational and investment expertise to support the hitherto under-invested construction phase of power infrastructure in India. Our investment will create a pool of valuable transmission assets, with long-term contractual arrangements and a robust payment security framework, which are extremely attractive to yield-seeking investors.
"India is a key target market for AMP Capital and we have dedicated time and resource to finding a compelling investment opportunity suited to our clients. This investment capitalises on the opportunity presented by the Indian infrastructure sector at this time, as well as benefitting from policy initiatives like Infrastructure Investment Trusts (INVITs) which have created transparent, market-driven exit opportunities for investors willing to invest capital in the development of greenfield infrastructure projects in India."
Commenting on the transaction, Anuraag Srivastava, CFO Sterlite Power said "We are delighted to enter into a partnership with AMP Capital - a leading global infrastructure private equity firm. This investment is another testimony of continued trust reposed on us by the investor community."
Pratik Agarwal, Managing Director, Sterlite Power said: "We are driven by our core purpose to enable access to reliable power while minimizing the impact on climate change. The world is undergoing a clean-energy revolution and India is leading this effort with its mammoth target of 450GW by the year 2030. Sterlite Power will contribute towards this noble cause by creating the required transmission infrastructure so that green energy can reach the most underserved households. We are happy to have like-minded partners like AMP Capital who believe in our core purpose and in our model of sustainable development."
AMP Capital was advised by Citigroup (financial), PwC (commercial and tax) and AZB (legal). Sterlite was advised by Moelis & Company and Credit Suisse (financial), Khaitan & Co (legal), and EY (tax).