Independent power transmission line concessions, both at the regional and state level, are witnessing a phase of consolidation, notes Venugopal Pillai, in this special study.
Recent media reports suggest that Mumbai-headquartered Kalpataru Power Transmission Ltd, a leading EPC contractor in the power T&D space, was keen on selling all its power transmission concessions. This development is in line with the trend, observed over the past two-three years, where developers are seen divesting stake in their power transmission assets.
According to reports, Sekura Energy and CLP India are in independent discussions to acquire all the four power transmission assets of Kalpataru Power Transmission Ltd (KTPL). Sekura Energy is promoted by Edelweiss Infrastructure while CLP India is backed by Canadian pension fund CPDQ. The total investment involved is likely to be in the region of Rs.3,200 crore, including Rs.349 crore of equity.
KTPL owns four transmission lines—two (Haryana and Madhya Pradesh) in operation and two (West Bengal and Bihar) are under construction. In Jhajjar KT Transco Ltd (See Box: Kalpataru Power: Assets under operation, at the end of the story), KPTL has a 51 per cent equity stake while in Kalpataru Satpura Transco Pvt Ltd, it owns 100 per equity.
KTPL has also won two interregional power transmission projects awarded under the tariff-based competitive bidding (TBCB) route. Both these projects are under construction. The first is Alipurduar Transmission Ltd that is building infrastructure to transfer power from Alipurduar in West Bengal to the Eastern Region Grid. This line is associated with importing electricity from upcoming hydropower projects in Bhutan, which are being developed with assistance from India.
The second project, under construction, is Kohima-Mairani Transmission Ltd. This Rs.653-crore project involves strengthening of the 400kV network in the northeastern region. The anticipated project completion date is July 2020.
Core EPC business
Although Kalpataru Power officials were unavailable for comment, it strongly appears that the rationale behind the proposed sell-off was the company’s decision to stick to its core business of EPC contracting—not just in India but abroad as well. Cementing this proposition is the fact that in late March 2019, KTPL signed a definitive agreement to acquire 85 per cent equity stake in Linjemontage i Grastorp AB (LMG) for an enterprise value of $24 million.
LMG is an EPC firm headquartered in Grastrop, Sweden. It specializes in power supply solutions and services for electricity networks within the voltage range of 0.4-400kV. LMG has an active presence in Sweden and Norway, and this acquisition will help KPTL to gain footprint in other Nordic countries like Finland and Denmark, as well as Western Europe.
Selling power transmission assets to focus on core EPC business was also seen in the case of KEC International. In November 2018, the Mumbai-headquartered company signed a purchase agreement with Adani Transmission Ltd for selling its entire stake in KEC Bikaner Sikar Transmission Pvt Ltd (KBSTPL) at an enterprise value of around Rs.227.50 crore. KBSTPL owns an operational 400kV double-circuit transmission line of 344 ckm, running from Bikaner to Sikar, in Rajasthan, operational since December 2017. This sale was in line with KEC’s strategy to focus on its core EPC business.
Commenting on the development then, Vimal Kejriwal, MD & CEO, KEC International Ltd had noted, “We are happy to inform that in line with our strategy of being an asset light company focused on providing turnkey services to infrastructure sector, we have decided to sell our holding in KEC Bikaner Sikar Transmission Private Ltd to Adani Transmission Ltd.”
Business Restructuring
While the aforementioned cases of KEC International and Kalpataru Power represent cases of sticking to core EPC business, selling of power transmission assets was seen for very different reasons also. For instance, there are at least two instances where infrastructure developers were seen exiting the power transmission space, so as to maintain their focus on other segments.
In October 2018, Sekura Energy Ltd agreed to acquire two operating power transmission schemes owned by Essel Infraprojects Ltd, the infrastructure arm of the Essel Group. The two assets are Darbhanga-Motihari Transmission Ltd and NRSS XXXI (B) Transmission Ltd. Sekura is also set to acquire Warora-Kurnool Transmission Ltd and NRSS XXXVI Transmission Ltd—the two under-construction assets. The stake in the two will be acquired post commissioning. According to a recent report by CEA, the NRSS XXXI (B) scheme and the Warora-Kurnool project are likely to be commissioned by December 2019. The total deal is estimated to be worth around Rs.6,000 crore. According to reliable information, two transmission schemes (names unknown) of Essel have been acquired so far by Sekura Energy.
Essel Group, according to reliable media reports, is facing financial difficulties and has planned to divest its assets in the fields of power transmission, renewable energy and roads.
GMR Group, over the years, has been divesting some of its assets in the power generation and transmission space, with a view to focusing on other businesses—principally airports. During 2014, GMR Energy had developed two transmission projects in Rajasthan State of India during FY 2014 awarded on a BOOM basis by Rajasthan Rajya Vidyut Prasaran Nigam Ltd, the state transmission utility.
The first project, Maru Transmission Services Ltd, involved a 270-km network comprising 400kV and 220kV lines apart from associated substations. This system was commissioned in October 2013. The other project, Aravali Transmission Services Ltd, involving mainly the 400kV single-circuit Hinduan-Alwar transmission line (85 km) was commissioned in July 2014.
Adani Transmission Ltd, part of the Adani Group, has since acquired controlling stake in these two projects.
Conclusion
In the power transmission space, the role of the private sector has not been very widespread. Apart from Sterlite Power and Adani Transmission, there is very little private sector participation. This is especially so after players like KEC International, Kalpataru Power Transmission, GMR Group and Essel Group are seen exiting the space. Power Grid Corporation, of course, continues to remain a big public sector player—largely in the interregional transmission sector but also in a small way in intrastate power transmission. Power transmission is a B2B business and a profitable one at that. It does not have the risks and intricacies associated with a B2C business like power distribution. All the same, private sector participation has not been very forthcoming and it appears that private enterprise in this niche segment will continue to be concentrated in a handful of large players.
Kalpataru Power: Assets under operation
In March 2012, Jhajjar KT Transco (JKTPL), 51:49 joint venture between KPTL and Techno Electric and Engineering Company commissioned a 400kV intra-state power transmission project in Haryana. This project, intended to transmit 2,400 mw of power, was awarded to JKTPL under a 25-year concession period. The project was financed through equity of Rs.76 crore, debt of Rs.276 crore and a Central government grant amounting to Rs.92 crore. It represented one of the pioneering efforts in the intrastate power transmission space, under the public-private partnership philosophy.
In April 2015, Kalpataru Satpura Transco Pvt Ltd (KSTPL), a wholly-owned subsidiary of KPTL, commissioned a 400kV transmission line, spanning 240 km, to transfer power from Satpura to Ashta, both in Madhya Pradesh. The line is used to transmit power from 2×250-mw extension units at the Satpura thermal power station of state government utility Madhya Pradesh Power Generation Company Ltd. KSTPL entered into a 25-year transmission service agreement with the Madhya Pradesh state power transmission utility, effective June 2013. The estimated project cost of Rs.337 crore was financed through debt of Rs.212 crore, subordinate loans of Rs.11.7 crore, equity contribution of Rs.56.5 crore from promoters, and a grant of Rs.56.5 crore from the Central government.
