AMP Capital forms $1 bn power transmission platform with Sterlite

To fund 4 transmission projects of Sterlite connecting renewable projects

Sydney headquartered-AMP Capital has teamed up with Sterlite Power - a leading private power transmission company - to set up a $1-billion platform for the development of energy transmission projects in India. 

This is the first such investment in India by AMP Capital for its global infrastructure equity strategy.

It is a 50:50 partnership, with each investing $150 million. The existing portfolio of the platform includes four under-construction projects of Sterlite Power, majorly evacuating power from renewable energy projects. 

With existing debt financing of the four assets, the total capital outlay of the platform is $1 billion.

These projects have a circuit length of nearly 1,800 km of transmission lines across the Western, Southern, and Northeastern regions of India, said Sterlite in a statement.

Sharat Goyal, India head-infrastructure equity, AMP Capital, said the transmission sector presented a sizeable, yet untapped, opportunity for AMP Capital. 

“We have been scouting for opportunities in the infrastructure space. We feel the transmission sector has advantages. It has large assets and for investors like AMP, there is opportunity to invest a sizeable amount of capital,” said Goyal. 

Since this is a relatively untapped space, there aren’t too many investors that have considered or invested in this space. 

“For transmission, we needed a partner with experience. Sterlite Power has demonstrated excellence in execution. Its financial innovation has been a driver for us to get into a 50:50 partnership and invest in this space,” added Goyal.

Pratik Agarwal, managing director, Sterlite Power, said the existing assets were more of the environmental, social, and corporate governance portfolio, given that maximum capacity would go into evacuating renewable generation.

All projects on this platform are under execution and will be commissioned in the next 12-30 months. 

Beyond these projects, AMP and Sterlite have an in-principle agreement to evaluate future opportunities as and when they arise - projects won either through auction or any other route, said Agarwal.

“Bringing foreign capital into transmission assets has not been easy, especially those with greenfield risks. This should be a beacon of hope for similar investments, given India desperately needs foreign investment in greenfield infrastructure,” added Agarwal.

“At Sterlite, we have been doing innovative structures, starting with Standard Chartered (StanChart), then the infrastructure investment trust (InvIT), and now this under-construction joint development deal with AMP Capital,” he said.

In 2018, Sterlite bought back 28.4 per cent stake of StanChart Private Equity for Rs 1,010 crore in the company. With this, Sterlite became a 100-per cent stakeholder in the business. The same year, Sterlite Power sponsored the first InvIT for the power sector - IndiGrid.

Sterlite has already divested nine assets worth $1.5 billion to IndiGrid and will divest two more under the framework agreement. 

After this, Sterlite will have no further commitment to IndiGrid since it is now an independently managed entity under new investors, clarified Agarwal.

The assets under the new platform might not follow the same InvIT route though.

“When these four projects are completed, AMP and Sterlite will look at monetising the assets in line with our strategy, and IndiGrid will be a contender. But we will have no commitment to necessarily transact with them. We will do whatever it takes to maximise shareholder return and value,” elaborated Agarwal.

He said the sector was poised for aggressive growth in the next three years, with Rs 30,000 crore worth of projects every year, from the central sector quota and additionally Rs 5,000-7,000 crore annually from states.

Existing portfolio

• Lakadia Vadodara Transmission Project: 1st green energy corridor project won in 2019
• Vapi II North Lakhimpur Transmission Ltd: Will  improve renewable power availability across 4 states in western and northeastern India
• Goa Tamnar Transmission Project: Will provide a highly reliable power feed to Goa by opening access to both western and southern grids
• Udupi Kasargode Transmission Ltd: Will help decongest the transmission corridor in southern region