Sterlite considers pension fund route to raise $500mn

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    Sterlite Power, one of the biggest private developers of power transmission lines in India, is in discussions with pension funds and sovereign wealth funds to raise $500 million to $1 billion, said two people aware of the development.

    Sterlite Power has a portfolio of 28 projects covering approximately 13,950 circuit kms of transmission lines in India and Brazil. It also has a portfolio of high-performance power conductors, extra high voltage cables and optical ground wires.

    “Sterlite has been meeting investors to raise funds. It will look to raise between $500 million and $1 billion, which will help them bid for projects and grow their portfolio both in India and in Brazil,” said one of the two people seeking anonymity.

    In December 2020, Sterlite Power and investment manager AMP Capital had announced plans to set up four power transmission projects worth $1 billion, with both parties agreeing to invest $150 million each.

    According to the second person, foreign investors, especially patient capital investors such as pensions and sovereign funds, are keen to invest in transmission projects in India as the asset class has several advantages over other infrastructure projects.

    “Transmission lines have a longer concession tenure of 35 years compared to roads or renewables where you have 20-25 years concessions. This makes the sector more attractive to long-term investors such as pension funds and sovereign funds. Additionally, unlike power generation, where you have payment issues with state discoms, the transmission sector doesn’t have a similar challenge considering that the counterparty is PowerGrid Corp,” he said.

    “There are enough investment opportunities in the transmission sector in India as only a few private sector players are active in the space,” he added.

    Most transmission assets in the private sector are held either by Sterlite or Adani Transmission. A few other smaller companies own one or two assets. Adani Transmission has a portfolio of more than 18,500 circuit km of transmission lines. “Given the sector’s attractiveness and few investment opportunities, Sterlite’s fundraising plans are likely to see strong interest,” he added.

    Queries emailed to Sterlite Power did not elicit any response.

    Sterlite Power had sponsored IndiGrid, the country’s first power sector Infrastructure Investment Trust (InvIT), which went public in 2017. In 2019, private equity investor KKR and Singapore’s sovereign wealth fund GIC invested over 2,000 crore to pick up a 42% stake in Indigrid. Earlier this year Sterlite exited from the InvIT.

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