Global investors looking for ready-made assets with long-term cash flows: Sterlite Power MD Pratik Agarwal

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Published: April 16, 2020 9:17:39 AM

Despite the ongoing crisis related to the coronavirus, Partik Agarwal doesn't see the focus getting shifted away from renewable energy.

sterlite power, sterlite power managing director, pratik agarwal, greenfield power transmission, private sector development, pratik agarwal interview, expert opinionPratik Agarwal, Managing Director of Sterlite Power

As an infrastructure developer in the electricity transmission sector, Sterlite Power is focusing on India and Brazil. As much as 80% of the upcoming greenfield power transmission lines in the world, open for private sector development, are being set up in these two countries. Pratik Agarwal, managing director, Sterlite Power, speaks to FE’s Anupam Chatterjee via video-conference about the prospects of the business in the current scenario. Edited excerpts:

Have infrastructure investment trusts started to show benefits in the country?

Global investors are showing more interest in this front. The size of IndiGrid, where Sterlite offloads its transmission assets, has been gradually increasing. Starting with asset monetisation of about `3,800 crore in 2017, Sterlite Power has sold eight assets worth about `11,500 crore to IndiGrid to date. Another `6,500 crore is likely to be transferred in the current financial year. Especially in the current low-interest regime, people are looking for investments that can provide long-term cash flows. Transmission projects in India are contractually tied up for 35 years with regulated returns, and, as opposed to airports and highways, the revenue is not contingent on flow of traffic. This is the reason why so many partners like KKR and GIC have invested in IndiGrid.

Sterlite recently sold three of its transmission assets in Brazil, in line with its ‘asset flip’ strategy. How does this benefit the company?

This strategy helps us free up capital to invest in other upcoming assets. Investors around the world are looking for opportunities which allow them to invest in ready-made infrastructure projects minus the usual risks associated with the construction process. This is the same strategy we apply in India through IndiGrid. We have monetised constructed assets at a premium and have used the capital in other transmission projects. To date, we have monetised three assets in Brazil, and eight in India.

How do you think the country is developing its green energy corridors?

Despite the ongoing crisis related to the coronavirus, I don’t see the focus getting shifted away from renewable energy. This is getting more attractive due to the lower tariffs from large-scale centralised renewable energy plants. And building such plants will require new transmission projects. I congratulate the government for keeping its word and allowing competition in the power value chain, in line with the letter and spirit of the Electricity Act, 2003. A majority of the projects for the green energy corridor have been awarded through tariff-based competitive bidding, with utmost focus on accountability and transparency. Sterlite Power won the Lakadia-Vadodara transmission project in 2019 worth `2,024 crore under green energy corridors. We have tied up with partners such as GE T&D India, Unitech Power Transmission, Tata Projects. Keeping in mind the short construction periods required for building renewable energy plants, transmission projects should ideally be awarded before generation projects.

With stress rising due to the lockdown, do you think discoms would reduce the pace of their infrastructure augmentation activities?

It is evident that the discoms now need some kind of stimulus package. If they do not get it, there is a risk of power distribution getting compromised. Even after getting some monetary relief, there would a greater need for discoms to cut their losses. If they do not upgrade their infrastructure, there is no way to reduce loss and pilferage. So, I think, in the near future, discoms will expedite their initiatives to augment their system and infrastructure.

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