Interview with Ved Mani Tiwari, CEO, Global Infrastructure, Sterlite Power

“BESS is our next area of investment”

What have been the key business highlights for Sterlite Power in the past six to eight months?

Sterlite Power has taken major strides in the past six to eight months. In India, we are the largest private transmission player under the public-private partnership model, with about 30 per cent market share. In Brazil, we have successfully commissioned our first project 28 months ahead of schedule, showcasing our ability to continue building high quality assets ahead of time across geographies. We continue to scout for opportunities across geographies, which help us live up to our core purpose of “empowering humanity by addressing the toughest challenges of energy delivery”. Sterlite Power is also now joined by global funds like KKR and GIC as sponsors for its infrastructure investment trust, IndiGrid.

How has Sterlite Power’s experience been in the Brazilian market? What are the other geographies that the company is interested in?

We chose Brazil as our first investment market outside India owing to the size of opportunity in the country, the need for private capital in the transmission segment and the synergies that exist with our core strengths. We established our presence in the Brazil market in April 2017 and have already committed an investment of close to $2 billion, the largest ever by an Indian company in the Brazilian power sector. Our investments in the Indian and Brazilian transmission segments have reached similar levels. In fact, we won 10 out of the 30 auctions we participated in. We plan to bid for more projects in Brazil. Going forward, Argentina, Chile, Mexico and possibly Peru, BIMSTEC and the US are potential countries of interest, and our foray could take place over a period of one to three years.

What is the idea behind the SANQALP initiative? What are the activities proposed under it?

Sterlite Power has joined hands with India’s leading power transmission players to announce common benchmark practices for quality, health, safety and environment (QHSE) in this segment. These benchmarks will focus on institutionalising quality and HSE practices. This charter will operate under the jointly created forum, SANQALP – Safety and Quality Association of Leading Partners. SANQALP is a big step towards achieving global standards in the Indian power transmission industry.

What are the company’s plans in the BESS space in India?

On the BESS front, we must emphasise that battery storage is the best solution to address peak deficits, intermittent renewable energy operations and uneven demand curves. In addition, BESS does not have locational constraints, has a low gestation period (six months to a year) and can create significant additional value through DSM penalty reduction, frequency regulation and congestion relief. Owing to these reasons, BESS has huge potential, requiring an investment of $5 billion-$7 billion over the next five to seven years. It is also our belief that BESS is primarily a transmission grid element and the benefits are accentuated by locating these closer to the load centres. We view BESS as the next area of investment for us and are assessing the available opportunities.

What are the company’s key issues and concerns? What is your wish list for the transmission segment for the new government?

The gestation period for renewable energy projects in India is 18-24 months, while the pace of adding transmission capacity to evacuate this incremental renewable energy generation has typically been 30-36 months under cost-plus. This has caused a large-scale mismatch between the generation capacity contracted and the matching availability of the evacuation system. Such transmission constraints have led to renewable energy tender cancellations, subdued responses and higher tariffs in renewable energy bids. This could be best avoided by rolling out competitive tenders under tariff-based competitive bidding (TBCB) for building the transmission system to evacuate renewable energy. Going forward, we expect the new government to have a long-term transmission plan in place wherein transmission pre-empts generation, and the planning is more participatory with the inclusion of private developers, and more flexibility is provided to developers in the designing of transmission lines. Lastly, all transmission lines being built in the country (whether interstate or intra-state) should be brought under the ambit of TBCB by the new government.

What is your growth outlook for the transmission segment in India?

The government aims to achieve 175 GW of renewable energy by 2021-22 and a further 5 GW of offshore wind and 23 GW capacity in Leh region. None of this can happen without matching transmission being built at the same pace. The government plans to award most of the transmission projects for renewable energy evacuation through the TBCB framework. Bidding for about Rs 90 billion of transmission projects is currently under way, and bidding for another Rs 300 billion would soon be announced. Overall, we are highly optimistic of the government supporting the transmission industry growth. We are also witnessing a lot of traction as states are opting for TBCB development of intra-state transmission. The states are also building transmission projects worth Rs 400 billion-Rs 500 billion annually. Already transmission projects worth Rs 120 billion are being awarded/bid under the competitive TBCB framework across Uttar Pradesh, Madhya Pradesh, Maharashtra and Jharkhand, while many other states are warming up to the idea. Overall, we see a market of more than Rs 5 trillion opening up in transmission over the next eight to ten years, which would be competitively built using the TBCB framework to the benefit of citizens.

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