The transmission segment is witnessing a growing interest from domestic and international investors. Established players are selling off transmission assets in accretive deals to pare debt and fund future capital expansion, making way for new entrants. A case in point is Kalpataru Power Transmission Limited (KPTL), which has recently entered into binding agreements with CLP India Private Limited to sell its stake in three power transmission assets at an estimated enterprise value of Rs 32.75 billion. The deal is expected to help KPTL reduce its debt, which stood at Rs 38.41 billion (net) as of June 2019.
The transaction is significant as it also marks power major CLP India’s entry into the power transmission space. CLP India is backed by Caisse de dépôt et placement du Québec (CDPQ), one of Canada’s largest pension fund managers, which acquired a 40 per cent stake in the company in September 2018. Commenting on the deal, Rajiv Mishra, managing director (MD), CLP India, said, “The Indian market is a primary growth market for CLP and CDPQ and the two companies share a vision to invest only in a low-carbon, clean energy portfolio in India. Entering the transmission sector is a landmark event for CLP India. The acquisition of KPTL’s assets will enable us to expand our geographical reach across the country and reinforce our commitment to grow our investments.”
On July 3, 2019, KPTL signed agreements to sell off its transmission assets held by three special purpose vehicles (SPVs) – Kalpataru Satpura Transco Private Limited (KSTPL), Alipurduar Transmission Limited (ATL) and Kohima Mariani Transmission Limited (KMTL). The assets were secured by KPTL under the tariff-based competitive bidding route at the interstate and intra-state levels. Under the deal, the transaction for ATL and KMTL will be effective post the commercial operation date (COD) of the associated transmission projects and the fulfilment of certain conditions. The estimated amount of debt at the SPV level would be around Rs 20 billion at the time of COD.
According to Manish Mohnot, MD and CEO, KPTL, “The sale of transmission assets is a landmark event in KPTL’s growth journey. The sale of the assets is a milestone and a testament to our ability to create, operate and hive off the assets at the right moment. The sale of the assets will lead to a significant reduction in KPTL’s consolidated debt and will help the company focus on strategic diversification within its core business. KPTL will continue to focus on sustainable and profitable growth with commitment to improve return ratios.”
The Alipurduar transmission project, being executed by ATL, has been partly commissioned. One of its elements, the 400 kV Kishanganj-Darbhanga line has been commissioned while the other element, the 400 kV Alipurduar-Siliguri line, is expected to be commissioned by September 2019. The project will facilitate the transfer of power from new hydroelectric projects in Bhutan to West Bengal.
Meanwhile, the construction works for the Kohima-Mariani transmission project, being executed by KMTL, are in full swing and are expected to be completed by August 2020. The project comprises the 400 kV Imphal-New Kohima line, the 400 kV New Kohima-New Mariani line, and a 400/220 kV 7×167 MVA substation at New Kohima. Techno Electric & Engineering Company Limited owns a 26 per cent stake in KMTL. ATL and KMTL are executing projects on a build- own-operate-maintain basis and have a 25-year concession period.
KSTPL holds the 240 km 400 kV Satpura-Ashta transmission line, which was commissioned in April 2015 at an estimated investment of Rs 3.37 billion. The transmission line was set up on a design-build-finance-operate-transfer basis for power evacuation from the 500 MW Satpura thermal power project in Madhya Pradesh. KSTPL has a 25-year transmission service agreement (extendable by another 10 years) with Madhya Pradesh Power Transmission Company Limited.
The way forward
KPTL expects the proceeds from the sale of transmission assets to start flowing in from the third quarter (October-December) of 2019-20. The company also plans to monetise its other asset, the Kalpataru Jhajjar transmission link, in the short term. KPTL also plans to develop its EPC expertise further and undertake larger projects in the future.
The deal fits perfectly with CLP India’s plans. The company was exploring opportunities to diversify its portfolio and invest in non-generation businesses such as transmission, distribution and other customer-focused segments apart from renewables. Currently, the company has a project portfolio of over 3,000 MW across the coal, gas and renewable segments.
Net, net, the transaction is a win-win deal for both the parties and will encourage investors to take part in the fast growing power transmission segment in India.