Sembcorp Establishes First Power Project in India
May 25, 2010
Sembcorp Industries (Sembcorp), a leading energy and water company, today announces that its fully-owned utilities subsidiary, Sembcorp Utilities has entered into an agreement to acquire a 49% stake in Thermal Powertech Corporation India (TPCIL), which is set to build, own and operate a coastal power plant in Krishnapatnam, SPSR Nellore District, Andhra Pradesh, India.
Sembcorp Utilities signed a joint venture agreement with Gayatri Energy Ventures (GEVL) to invest in a 49% stake in TPCIL. The consideration for this equity stake is about Rs 1,042 crores (S$319 million), to be funded through internal funds and / or borrowings. Completion of the acquisition is expected to take place in mid-2010 upon the satisfaction of conditions precedent typical for the implementation of power projects in India. This investment by Sembcorp is one of the largest by a Singapore company in India and amongst one of the more major foreign direct investments into the Indian power sector in recent times.
GEVL, a wholly-owned subsidiary of Gayatri Projects, an established construction company which is publicly listed on the Bombay Stock Exchange, will continue to hold the remaining 51% stake in TPCIL. TPCIL will invest approximately Rs 6,869 crores (S$2.1 billion) to build, own and operate a 1,320 megawatt coal-fired power plant in Krishnapatnam. The plant will be operated and maintained by an O&M company, which will be 70% owned by Sembcorp and 30% owned by GEVL, and for which Sembcorp and GEVL also signed a separate joint venture agreement today. The project will be well-positioned to meet the growing power demand in the southern, western and northern regions of India, which the Central Electricity Authority of India expects to increase at a compounded annual growth rate of 9% over the next 10 years.
The signings took place in Hyderabad today, in a ceremony witnessed by India’s Union Minister for Power Mr Sushil Kumar Shinde, the Chief Minister of Andhra Pradesh Dr K Rosaiah, the founder of GEVL and Member of Parliament (Rajya Sabha) Dr T S Reddy and Sembcorp’s Group President & CEO Mr Tang Kin Fei.
Expected to begin the full commercial operation of its two 660-megawatt units by end-2013, the power plant will be 70% fuelled by low sulfur non-coking coal allocated by a wholly-owned subsidiary of Coal India, a public sector undertaking under India’s Ministry of Coal. The remaining coal will be sourced from overseas. The plant will utilise supercritical technology which allows for enhanced efficiency, thereby reducing emissions of carbon dioxide and other pollutants by consuming less fuel per unit of electricity generated compared to conventional sub-critical coal-fired generating units. The first unit of 660 megawatts is expected to be completed by the mid-2013.
75% of the project cost is expected to be funded through debt financing and the remaining 25% through shareholders’ equity. The funding will be in Indian Rupees and commitments from Indian financial institutions for a substantial portion of the total debt have already been received. The signing of the financing documentation is expected to take place by end-June 2010. Capital Fortunes is the project financial advisor appointed by the project company, the sole arranger of project financing with the domestic financial institutions and banks as well as the arranger of Sembcorp’s participation in the project as a foreign investor.
The major part of the plant’s power output will be sold to various state electricity boards through long-term power purchase agreements secured via competitive bidding, while the remaining output will be sold in the merchant market.
Mr Tang Kin Fei, Sembcorp Group President & CEO, said, “This project is a major strategic milestone for Sembcorp and marks Sembcorp’s entry into the fast-growing Indian energy market.
“With its increasing industrialisation and development, India is experiencing strong growth in power demand, driven by rapid growth in its manufacturing sector and increasing development. With our proven track record in the energy sector spanning Singapore, the UK, Vietnam, China, the UAE and Oman, Sembcorp looks forward to working with our partner Gayatri Energy Ventures to help to meet these needs and support India’s continued prosperity.”
Mr T V Sandeep Reddy, Managing Director of Gayatri Projects said, “This is a memorable moment for the Gayatri Group as well as for the people of Andhra Pradesh. Our partner Sembcorp brings with it global experience in setting up and running power projects across many countries. We are confident that together, we can deliver the power plant according to schedule and help to address the power supply shortage in the country.”
The above transactions are not expected to have a material impact on the earnings per share and net tangible assets per share of Sembcorp Industries for the current financial year. None of the directors or controlling shareholders of Sembcorp has any interest, direct or indirect, in the acquisition.
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ABOUT SEMBCORP INDUSTRIES
Sembcorp Industries is a leading energy, water and marine group. With facilities with over 3,800 megawatts of gross power capacity and over 4 million cubic metres of water per day in operation and under development, Sembcorp is a trusted provider of essential energy and water solutions to customers in Singapore, China, Vietnam, the United Kingdom, the UAE and Oman. In addition, it is a world leader in marine & offshore engineering, as well as an established provider of environmental services and developer of integrated townships and industrial parks in the region.
Sembcorp Industries has total assets of over S$9 billion and employs more than 6,700 employees. Listed on the main board of the Singapore Exchange, it is a component stock of the Straits Times Index and several MSCI indices.
Note to Editors:
Following a company rebrand, please refer to the company as “Sembcorp” (with “S” in upper case and “c” in lower case), or “Sembcorp Industries” in full. Please also note that “Sembcorp” is not an abbreviation of “Sembawang Corporation” but a brand name in itself, and it is therefore incorrect to refer to our company as “Sembawang”, “Sembawang Corporation” or similar.
ABOUT GAYATRI PROJECTS LTD
Founded four decades ago, Gayatri Projects is a reputable player in India’s construction industry, engaged in the execution of major civil works with a key focus on road and irrigation projects in the states of Andhra Pradesh, Assam, Uttar Pradesh, Madhya Pradesh, Karnataka and Gujarat in India. GPL was founded by Dr T Subbarami Reddy, an eminent parliamentarian who has been representing Andhra Pradesh in the upper and lower houses of the Indian Parliament since 1996. The management of GPL is led by Dr Reddy’s son Mr T V Sandeep Reddy, who is the Group’s Managing Director. Gayatri Projects Limited is listed on the Bombay Stock Exchange.