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Sembcorp to invest $1b in Indian renewable energy sector

According to reports, 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 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.

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