Singapore’s GIC And Vedanta Group’s Sterlite Power Forge $1 Billion JV For India’s Energy Future

Sterlite Power Transmission (SPTL), a subsidiary of the Vedanta Group, has entered into a $1 billion joint venture with Singapore’s sovereign wealth fund, GIC. This partnership aims to capitalize on the increasing demand for power transmission networks in India, driven by the rapid growth of renewable energy. 

As part of the ongoing demerger process of SPTL, the company will split into two distinct entities –

Infrastructure Division: This segment will focus on developing and operating power transmission assets on a build-operate-transfer (BOT) basis, typically under 30-year concession agreements. 

The division is also responsible for handling turnkey projects for third-party buyers, including state transmission utilities; currently, it manages over 34,000 kilometers of optical phase ground wires-based communication projects across 15 states, either completed or in progress.

Domestic Manufacturing Business: The other business entity will be responsible for the domestic manufacturing of cables, conductors, and optical phase ground wires, serving third-party buyers through turnkey projects.

GIC will invest $500 million in the infrastructure business, acquiring a 49% stake; the investment will be made in tranches, with an initial $100 million, followed by $400 million over the next two to three years, contingent on Sterlite Power winning transmission project tenders and planned capital expenditures. 

GIC aims to be the exclusive partner of Sterlite in the Indian transmission sector to gain a larger market share; the industry has seen annual cumulative projects worth Rs 10,000-12,000 crore bid out every year from 2010 to 2022.

There is also a commitment to deploy additional capital beyond the initial $500 million; Sterlite Power will contribute four assets valued at Rs 6,000 crore (approximately $722.60 million) to the joint venture. 

The company is expected to invest between Rs 1,700 and Rs 2,500 crore (up to $300 million) in cash over the next two to three years and leverage its expertise to maintain a 51% stake in the alliance. 

These four assets are located in Rajasthan, Assam, and Kashmir, covering 700 kilometers, featuring three substations, and having a transmission capacity ranging from 800 to 2000 MW.

The plan is to aggressively bid for and develop more projects based on these initial assets; thus, based on the $1 billion equity funding, the joint venture aims to raise three to four times that amount in debt to create a scaled operation worth $4 billion. 

JV’s goal is to secure projects worth Rs 10,000 crore annually, requiring Rs 3,000 crore ($361 million approximately) of equity each year.

SPTL, formed through a demerger from Sterlite Technologies Ltd in 2016, is primarily owned by Vedanta’s Anil Agarwal family, with the remaining quarter held by minority shareholders. Pratik Agarwal, the managing director, is Anil Agarwal’s nephew.

Both parties have reportedly signed the JV agreement and are awaiting necessary regulatory, lender, and customer approvals; Deutsche Bank is advising on the transaction.

As per insiders, the joint venture and the manufacturing business are not likely to be listed. In addition to the joint venture, SPTL sponsors the India Grid Trust (IndiGrid), India’s first listed power sector infrastructure investment trust, valued at Rs 9,400 crore ($1.2 billion).

SPTL has transferred 11 assets to IndiGrid over time, with a cumulative asset base of around $3 billion; SPTL also has a $1 billion joint venture with Australia’s AMP Capital for four transmission assets.

Moreover, Pratik Agarwal has launched Serentica, an independent power producer focused on renewables for commercial and industrial customers. Serentica has secured $650 million from KKR for a significant minority stake and has outlined a $3.2 billion capital expenditure plan to supply 1.6 GW of green power to Vedanta Group companies.

Given the push for greener energy and plans to achieve 500 GW of renewable energy by 2030, industry experts anticipate that around 80% of new generation and transmission capacity will be concentrated in Rajasthan and Gujarat. 

The sector also foresees an average annual tender bid-out of approximately Rs 45,000 crore from 2023 to 2030.

This increased focus on renewable energy emphasises the importance of robust power grids and the growing need for energy storage facilities to integrate renewable capacity into the grid effectively. 

The government has released a transmission network plan to accommodate more than 500 GW of non-fossil fuel capacity by 2030, with details on connectivity and financing for renewable energy projects. Additionally, there is a 25-year waiver of inter-state transmission system charges for the sale of solar and wind power for projects commissioned by June 30, 2025.

The Last Bit, 

The collaboration between SPTL and GIC, backed by a substantial investment of $1 billion, is a positive step in India’s quest for clean and reliable energy. 

As the nation seeks to achieve an ambitious target of 500 GW of renewable energy by 2030, a strong and adaptable power transmission network is crucial; the joint venture’s plan to secure projects worth Rs 10,000 crore annually aligns with the objective undertaken by the government. 

With the support of Singapore’s GIC, a formidable partner, this venture has the potential to significantly enhance India’s energy infrastructure and further solidify its position in the global renewable energy arena.