Sterlite Power has witnessed robust operational and financial performance over the past two years despite the Covid-19 pandemic. The company’s long-term outlook is all about clean and sustainable energy, keeping the transmission grid up and running in the face of drastic climate change and also creating cyber-resilient infrastructure. Excerpts from a recent interview with Manish Agarwal, chief executive officer, infrastructure and solutions business, Sterlite Power…
What have been the operational and financial highlights of Sterlite Power in the past one to two years?
The pandemic has eclipsed the past two years for most of the businesses, but for Sterlite Power, these two years have been full of positives. Despite weak market conditions, the company was able to successfully develop critical infrastructure projects in some of the toughest geographies and concluded strategic asset sales to ensure a healthy balance sheet.
During this period, we successfully completed NER-II, one of the largest power transmission projects in the country, envisaged to strengthen connections between northeast India and the national grid. Further, amidst these disruptive times, the company was able to conclude the sale of this mega project to the India Grid Trust (Indigrid) in one of India’s largest transmission project deals, within days of its commissioning. We recently commissioned the Khargone Transmission Limited project in Madhya Pradesh, which is expected to evacuate 1,320 MW of power generated by the Khargone power plant, to further distribute it downstream across the states of Madhya Pradesh, Maharashtra, Gujarat, Goa, Daman & Diu and Dadra & Nagar Haveli. In October 2021, we also won the prominent Nangalbibra-Bongaigaon interstate power transmission project. With this project, Sterlite Power now has a portfolio of 27 projects across India and Brazil, which includes projects at various stages of development and those that have been sold.
We also partner with utilities to enable power delivery to the last mile. We help them do this in the most cost-efficient and environmentally friendly manner through uprate/upgrade of the existing transmission assets. This saves them money, time and also space, as power ampacity is enhanced on transmission lines within the same corridor, without taking up any additional right of way (RoW).
On the products side, we are one of the leading manufacturers of high performance conductor solutions and underground power cables business. We are also one of the largest integrated manufacturers of optical ground wire and a prominent player in the fiberisation of existing transmission assets.
The investor committee too reposed its confidence in us, as we concluded two strategic deals with marquee investors, AMP Capital and Allianz Global Investors. We also delivered robust financial results in financial year 2020-21 by recording a consolidated profit after tax of Rs 8.7 billion and earnings before interest, taxes, depreciation and amortisation of Rs 17.93 billion.
What are the key initiatives and new technological interventions being undertaken by Sterlite Power?
Over the years, Sterlite Power has set new benchmarks in the industry, with the use of cutting-edge technologies to deliver some of the toughest power transmission projects sustainably, in record timelines. We have in-house capabilities to undertake end-to-end project design. Coupled with the use of key technologies such as robotics and aerial technology, we can execute our projects and deliver solutions promptly, with high quality and safety standards. Some of the technology-led innovative measures that we have used/are currently using are:
- Aerial technologies including helicrane-based tower erection, helicopter and drone stringing is deployed to deliver projects promptly.
- Satellite imagery and machine learning-driven software are being used to optimise transmission line routes.
- Similarly, a 400/220 kV vertical gas-insulated switchgear (GIS) substation has been built in Gurugram. A conventional GIS substation of similar capacity generally requires 12 acres of land, but this innovative solution is built on 3.8 acres, resulting in a 75 per cent reduction in the land size.
- Uprate and upgrade projects are aimed at helping the state governments to transform traditional energy delivery networks with the use of technologies such as MCMV towers, use of micro piles for tower foundations, monopoles instead of lattice and drones for conductor stringing.
- 3D design and 4D construction methodologies, which provide benefits of faster, data-driven decision-making, avoiding project delays, better safety planning and better planning for regulatory clearances.
- Quality, health safety and environment (QHSE) governance system with processes including regular process audits, a QHSE health index scorecard and a QHSE committee review.
What are the biggest issues and challenges facing the company and how are these being addressed?
Climate change is a challenge that is dominating the global political and economic discourse. Energy consumption is by far the biggest source of greenhouse gas emissions, responsible for an enormous 76 per cent of emissions worldwide. The energy sector includes transportation, electricity, heating, buildings, manufacturing and construction, fugitive emissions and other fuel combustion. Within this domain, the power sector is responsible for about 35 per cent of the total emissions and hence, this should be the focal point of all our efforts.
Any sustainable solution to reversing climate change will have to involve massive efforts towards decarbonisation and a shift to clean and green power. With the emergence of renewable energy as one of the key contributors to India’s overall energy mix, one of the challenges that the sector is now facing is that huge generation capacities are being added every year, much faster than evacuation systems can be built. As the efforts to meet the long-term renewable energy target pick up pace, it is important to expedite the construction of these transmission systems to ensure timely evacuation of renewable energy supply.
Linear projects like transmission have little leeway in negotiating forest, wildlife, defence, airport, coastal zone, etc., and are, therefore, heavily dependent on active government support and a streamlined process. The execution timelines of 18-24 months for transmission projects catering to renewable energy projects further amplify this challenge and complexity. In this context, single-window clearance for forests and RoW approvals will help in streamlining and fast-tracking project implementation. In addition to these, it would be equally important for the state authorities to support on-ground implementation of compensation guidelines. That said, we would like to applaud the GATI-Shakti initiative of the government as an effective mechanism to ensure physical and financial coordination of infrastructure development. Also, the monthly monitoring framework that has been put in place by the Ministry of Power to review the status of critical transmission projects and addressing issues with active participation of state government representatives has been a positive move to fast-track critical project implementation.
The strong appetite shown by investors for interstate transmission system transmission assets should reassure states that transmission network development could be done using private investments. The government should encourage large-scale public-private partnership programmes in power transmission, to ensure that national commitments are met without relying on states’ balance sheets for the same. To attain its true potential in the next decade, the power sector will have to move towards flexible transmission network planning. The networks will have to be planned for N-1-1 and, where appropriate, N-2 contingencies, for a truly robust transmission grid.
What is the company’s long-term outlook for the power transmission segment?
The government has been very proactive on the power sector reform agenda, which is marked by swift and strong measures taken to address various issues. This clarity of thought and intent has helped the power sector weather the Covid-19 pandemic impact resiliently. The company’s long-term outlook is all about clean and sustainable energy. Keeping the transmission grid up and running in the face of drastic climate change and creating cyber-resilient infrastructure will be key issues that will need to be addressed. The International Energy Agency (IEA) anticipates India’s power system to grow up to an installed capacity of 1,500 GW by 2040, with a target of 500 GW coming from renewable energy by 2030. India’s power sector must be both financially and physically resilient to secure the investments it needs to meet the country’s electricity demand and shift to cleaner energy. As per the National Infrastructure Pipeline, a total capital expenditure of Rs 14 trillion in power (including Rs 3 trillion-Rs 4 trillion in transmission) would be required over fiscal years 2020 to 2025 on power projects.
As per the fifth and seventh National Committee on Transmission agenda, a total transmission pipeline of Rs 700 billion has been identified. This pipeline is in addition to the Rs 100 billion worth of projects that are already under the award process. The new transmission projects are green energy corridors that would facilitate the evacuation of about 20 GW of renewable projects in Rajasthan, Gujarat, Madhya Pradesh and Jammu. The fast pace of developments at the interstate and intra-state levels is providing a healthy pipeline to transmission players and will improve evacuation for renewable energy projects under development.