Sembcorp Industries planning IPO of its India business

Industry:    2017-10-03

Singapore-based power producer Sembcorp Industries Ltd is preparing to list its Indian unit, according to two people aware of the plan.

“It can be either listed here in India or elsewhere,” said one of the people, requesting anonymity. The other person, who also did not want to be named, confirmed the initial public offering (IPO) plan.

The IPO for Sembcorp India, which has thermal and renewable power assets in the country, is being planned at a time when India’s green energy tariffs have hit a record low. In such a scenario, obtaining finance at the lowest cost has become a key to success.

Sembcorp India has contributed to these aggressive bets, with its Sembcorp Green Infra (SGI) unit bidding a then-record low Rs3.46 per kWh wind power tariff in February to win contracts for 250 megawatt (MW). It was also in the fray for 750MW of solar capacity on offer at Rewa in Madhya Pradesh.

“India is an important market for Sembcorp. As previously mentioned, we may in the future consider a listing in India if and when appropriate. We do not have any further updates at this time, but in the event of any material developments, we will as a listed company update the market as necessary,” said a Sembcorp spokesperson in an emailed response.

The Singapore-based company in 2010 made its first power sector investment in India when it acquired a stake in Gayatri Energy Ventures’s Thermal Powertech Corp. India, a thermal power plant.

SGI has close to 1,200MW of wind and solar power capacity in operation and under development.

In February 2015, Sembcorp Industries acquired a 60% stake in IDFC Alternatives Ltd-backed renewable energy firm Green Infra Ltd for 227 million Singapore dollars.

In August, Sembcorp Industries announced the acquisition of IDFC’s remaining 28% stake in SGI for Rs1,410.2 crore (around S$301 million) to become its sole owner.

India has a target of installing 175,000MW of renewable energy by 2022. Of this, 100,000MW is to be generated by solar projects and 60,000MW by wind projects.

The investors’ interest also comes against the backdrop of India’s newly appointed power and new and renewable energy minister Raj Kumar Singh announcing last month that he has instructed that 20,000MW each of wind and solar power contracts be auctioned by December.

The government is in tandem also readying a raft of power sector structural reforms, including legal provisions to drive electricity demand, promoting retail competition and tariff slab rationalization to drive manufacturing, Mintreported on 26 September.

Indian power project developers are hopeful that universal access to electricity under the recently launched Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) will lead to an uptick in electricity demand and improve India’s per capita power consumption of around 1,200 kWh, which is among the lowest in the world.

However, analysts remain unconvinced about any demand boost for underutilized power plants.

“CRISIL Research believes a large proportion of coal-based power generation capacities in the private sector, stressed due to multiple factors, will remain in duress for a long time despite a raft of alleviation measures from the government,” according to a 28 September statement by credit rating firm Crisil Ltd.

“As of August 2017, about 21GW of commissioned private sector coal based capacities were under stress for lack of long-term power purchase agreements (PPAs) or because of poor/no offtake. With demand growth expected to remain tepid, the outlook for these capacities is bleak for at least next few years,” the statement added.

print
Source: