Purchase powers CLP into transmission sector

CLP Sterlite Power

CLP India has entered the country’s power transmission sector with a ₹32 billion (US$476 million) acquisition of three transmission assets of Kalpataru Power Transmission Limited (KPTL) and Techno Electric & Engineering.

The assets are Kalpataru Satpura Transco in Madhya Pradesh, Alipurduar Transmission in Bihar and West Bengal, and Kohima-Mariani Transmission in Manipur, Nagaland and Assam. The agreements are to purchase equity stakes in three special purpose vehicles (SPVs) owning power transmission assets.

“The asset mix was of inter-state as well as infra-state projects,” said Shardul Amarchand Mangaldas partner Deepto Roy, adding that state-level regulations played an important role in the transaction. “As per the transmission agreement entered into with the authority, prior approval is required for the transfer of 26% of the equity shareholding of the target, and also from the perspective of national security interest.”

Central power regulations also played an important role on the deal from the perspective of transaction structuring, understanding existing regulatory claims and estimating revenue streams.

Techno Electric & Engineering will be selling its 26% stake in Kohima-Mariani Transmission to CLP India as part of the transaction. The estimated amount of debt at the SPV would be about ₹20 billion on the commercial operation date.

On the business rationale for making this acquisition, Roy said: “The transmission assets have good EBITDA [earnings before interest, taxes, depreciation and amortization] margins with a remaining concession period of about 30-35 years.”

The Hong Kong-based company has entered the transmission sector to expand its geographical reach across India, and considers the country as a primary growth market. “CLP has been operating in India since 2002, but only in generation [until now], although it manages transmission in distribution assets in Hong Kong and mainland China,” said Roy.

The transaction is subject to requisite approvals and compliance, and is expected to be complete within 12 months.

The project and project finance practice group at Shardul Amarchand Mangaldas & Co acted as legal counsel and adviser for CLP India on all aspects of the transaction. Apart from Roy, the transaction team included senior associates Dnyanraj Desai and Abhijit Mukherjee, and associates Pranav Nanda, Kranthi Mamidanna and Manushi Desai.

Khaitan & Co advised KPTL on the structuring aspects of the transaction, drafting and negotiation of all transaction documentation. The core team included partner Shivanshu Thaplyal, principal associate Swathy Ramanath and associates Abhinav Mishra and Bhagirath Ashiya.