Singapore-based Sembcorp Industries, which maintains holdings in the infrastructure, utilities and the maritime and energy sectors, is looking to invest more than $1 billion over the next 5-7 years, doubling its renewable energy portfolio in India, according to the Economic Times.
With $11.97 billion (S$16 billion) of assets across the utilities value chain, it’s also a global leader in offshore rig and ship construction. This investment apparently reflects increased wariness and a shift away from large greenfield thermal coal projects in India, which have faced land acquisition and fuel linkage logjams. Confusion over fixed tariffs in the aftermath of recent coal auctions has increased Sembcorp’s wariness of investing in such projects.
February 2015 saw Sembcorp Utilities acquiring 60 per cent in Green Infra from IDFC Alternatives for $168 million. This was their first investment in the Indian power sector in India, after having backed two coastal thermal coal projects in Andhra Pradesh in 2011. The acquisition was conducted to expand its renewable energy footprint. It added solar energy assets and almost tripled clean energy generation capacity in excess of 1000 MW.
Tan Cheng Guan, executive VP and head of group business development & commercial at Sembcorp Industries, explained: “Compared to China, we were late in entering the Indian market because it took it took us a few years to understand the amendments in Indian Electricity Act amendments of 2003. But in the last five years, we have increased our overall power generation capacity to 2640 MW in two projects. With Green Infra, we now have 3340 MW in our portfolio here,”
Tan is currently heading Sembcorp’s investment push into India, with a focus on renewable energy assets. This coincides with an Indian government initiative to boost clean energy technologies. In itself, this is reflective of a larger global trend towards low-carbon economies. According to Tan,”…market dynamics appear favourable. Wind power is almost close to grid parity. It is almost comparable to imported coal in terms of cost.
Noting the decline in the prices of wind and solar energy infrastructure, Tan felt that solar energy investments would yield greater returns than those in wind energy. Sembcorp will have capacity of 700 MW of wind parks commissioned by the Q32015 and total renewable energy capacity for Green Infra is projected at 1400 MW by 2022.
A forecast for additional capacity in solar and wind by Sembcorp is 300-400 MW and 1,100 MW, respectively. Sembcorp also plans to add 200-250MW of capacity annually.
Based on investment needed per megawatt, Tan quoted a quantum of $200 to 250 million per annum for the next few years. In addition, the connective infrastructure linking wind and solar farms to the power grid will require significant investment.
“We hope solar will allow us to grow faster. We will keep adding to our current portfolio and are happy to see the government’s ambitious 100,000 MW solar target by 2022, but will look into details about where the potential is coming from and expect the government to look into power evacuation” added Tan.
Sembcorp to develop largest independent independent gas power plant in Myanmar
In addition to investment made in the Indian market,Sembcorp subsidiary, Sembcorp Utilities, has been granted a contract to develop and operate a 225-megawatt gas-fired power plant in central Myanmar by Myanma Electric Power Enterprise (MEPE), a division under the Ministry of Electric Power of Myanmar (MOEP). Sembcorp will have an 80 percent stake in this asset.
The build-operate-transfer project was awarded after an international bidding process called by MEPE and advised by International Finance Corporation (IFC) of the World Bank Group. Myanmar has one of the lowest electrification rates globally and the lowest among ASEAN countries. Approximately a third of the country’s population of ~50 million have electricity access.
This marks Sembcorp’s entry into Myanmar’s fast-growing power market, where electricity demand is expected to increase at a compounded annual growth (CAGR) rate of 13 percent over the next 15 years, according to Myanmar government estimates. The project will supply power to MEPE under a 22-year power purchase agreement (PPA).
Total project investment is estimated at $300 million (~S$418 million) and to be funded through a mix of limited recourse project financing and equity. The financial close of the project is forecast to be 2H2015.
This latest asset is sited in the Myingyan district of the Mandalay division and valued at $300 million. The power plant is set to be the largest gas-fired independent power plant in Myanmar. Completion in 2017 will help to ease Myanmar’s severe power deficit, estimated to be approximately 500 megawatts during peak periods.
Tang Kin Fei, Group President & CEO of Sembcorp Industries, said, “Sembcorp is well-positioned to cater to Myanmar’s increasing power needs and support its economic growth. The new facility will provide a reliable source of power which is integral to the country’s economic development and electrification efforts. This investment not only enables Sembcorp to establish an important beachhead in Myanmar, but also gives us a foothold to potentially develop other businesses in the country, such as water and urban development.”