Standard Chartered in seminal Indian power deal

StanChart’s $83m injection in Sterlite is the first investment in the country’s power transmission sector by an overseas investor.

Standard Chartered Private Equity (SCPE)’s Rs500 crores ($83 million) investment in Mumbai-based global transmission solutions firm Sterlite Technologies Limited (Sterlite) will become the first foreign investment in India’s power transmission sector by the end of the month.

Sterlite told Infrastructure Investor it would issue five-year convertible securities to SCPE by the end of July, allowing for the acquisition of a minority stake.

The private equity capital injection will help finance six projects spread across 10 states and currently operated under a Build, Own, Operate and Maintain (BOOM) framework. Proceeds will be used for both new and ongoing projects.

Projects currently ongoing involve 2,000 kilometres (km) of transmission lines and two 765/400 kilovolt (KV) substations. According to the firm, out of the 12 components of the project, “one has been generating revenue for 10 months, three are energised, two are at a final stage of construction and the rest will be commissioned within the next two quarters”.

India’s transmission investment gap is estimated to be around Cr20,000 a year for at least the next decade and the government has recently announced that projects worth Cr12,500 would be put up for tender by the end of the year.

Exemption from environmental clearance makes the power transmission’s legal regime one of the most liberal of infrastructure sectors. Moreover, the government has taken measures to substantially shorten time lines to award new projects.

According to Sterlite, the risk associated with power transmission projects has a relatively short life: “In comparison to any other infrastructure asset class, power transmission BOOM projects offer a unique scenario where the project risk is limited to the three to four years prior to commissioning, at which point the operator starts receiving monthly payments from [the highly] creditworthy Power Grid Corporation of India Limited.”

Sterlite is developing several transmission infrastructure projects spanning over 5,000 circuit km, across India. Listed on the BSE & NSE stock exchanges in Mumbai, Sterlite is a public company with a broad shareholder base.

Standard Chartered Private Equity was established in 2002 as the principal investment platform of Standard Chartered Bank and has since invested more than $5 billion in over 100 companies across Asia, Africa and the Middle East.