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CLP India Pvt. Ltd, one of the largest foreign investors in the Indian power sector, is looking at acquisitions to enter the transmission business, said two people aware of the development.
This comes amid low green energy tariffs that threaten profitability. Also, the Indian power sector is undergoing a change with the government’s attempt to improve India’s per capita power consumption of around 1,200 kilowatt hour, which is among the lowest in the world.
Transmission projects, on their part, are considered to be a safer bet, given the annuity nature of the business and risks such as land acquisition, right of way and forest clearance are restricted to the construction stage.
“Given the uncertainties surrounding the renewable space, increasingly more large scale utilities will look at opportunities in the transmission and distribution space. CLP is trying to enter the Indian transmission sector,” said a person cited above, requesting anonymity.
The early trends are already here. Mint reported about renewable energy company Greenko Group being in talks with Essel Infraprojects Ltd to acquire its power transmission business for an estimated $1 billion on 15 January.
“CLP is actively looking at acquiring transmission assets here given the annuity nature of the business that offers a fixed return,” said another person aware of the development who also didn’t wish to be named.
With 1,000 megawatt (MW), CLP India has one of the largest wind power portfolios in the country. In addition, CLP India has an installed capacity of 2,000MW from coal, gas and solar projects. A CLP India spokesperson confirmed the development.
“We have been keen to venture into the power transmission space for a while now. We have bid for greenfield opportunities and explored the acquisition route in the past and will continue to do so,” said Naveen Munjal, director, business development and commercial (conventional) at CLP India, in an emailed response.
Mint also reported on 19 January about Canada’s second largest pension fund Caisse de dépôt et placement du Québec (CDPQ) looking to acquire a stake in CLP India Pvt. Ltd. Such an investment, if it happens, will help CLP access a large corpus that can be deployed for a longer period.
CLP Holdings, founded in 1901 as China Light and Power Co. Ltd in Hong Kong, is among the two significant overseas entrants in India’s power generation sector along with US-based AES Corp. While it had articulated its intent in 2012 about withdrawing the India operations, it later changed its plans. CLP is one of the largest investor-owned power businesses in the Asia Pacific and is present across Hong Kong, China, India, South-East Asia, Taiwan and Australia across fuel sources such as coal, gas, nuclear and renewable.
The development comes at a time when India’s energy landscape is undergoing a change, with the National Democratic Alliance government setting up an ambitious clean energy target of 175 gigawatts (GW) by 2022. While 100GW of the government’s targeted renewable energy capacity is to come from solar projects, 60GW is expected to be generated from wind power plants.
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