KKR, GIC betting on India’s power sector with $400 m investment

Wednesday, 1 May 2019 00:00 - - {{hitsCtrl.values.hits}}

Hong Kong (Reuters): Global investment firm KKR & Co Inc. is leading a deal to acquire a controlling stake in India Grid Trust (IndiGrid), in a bet on the country’s rapidly growing power sector, people familiar with the transaction told Reuters.

KKR, together with Singaporean sovereign wealth fund GIC, will acquire up to 57% of IndiGrid for about $400 million, the people said. IndiGrid’s current market value is about $332 million.

The deal would mark KKR’s first infrastructure investment in Asia since it set up a team late last year that focuses on the sector in the region.

The pair will invest 20.64 billion rupees ($295 million) for a 42% stake in the trust via a preference equity issuance, the people said.

KKR, having applied to become sponsor of IndiGrid, will then acquire a 15% stake from its current sponsor, Sterlite Power Grid Ventures Ltd, pending regulatory approval.

The infrastructure investment trust, the first of its kind in India, will separately raise around 4.5 billion rupees ($64.6 million) from other investors including Sterlite Power as part of the equity issue, the people said, declining to be named as the information is confidential.

GIC is contributing $140 million to the deal while KKR is investing the rest from its own balance sheet, according to the people. KKR declined to provide comment for the story. GIC did not immediately respond to a request for comment.

India’s power demand grew at about 3.6% in 2018/19, lagging overall economic growth.

However the world’s third-largest emitter of greenhouse gases aims to double its clean energy capacity to 40% of total power capacity by 2030, requiring new grid infrastructure, most of which is expected to be funded by foreign money.

The energy-hungry nation will launch $5 billion of transmission line tenders, beginning in June, to deliver 175 gigawatts of power from renewable sources by 2022, government officials told Reuters last month. Sterlite Power, a major private transmission developer, created IndiGrid in 2016 to run its asset operations. The trust raised $350 million in an initial public offering a year later.

IndiGrid owns five assets developed by Sterlite and one from a third party and 13 transmission lines.

With the capital injection, it plans to acquire five more electricity transmission assets worth 115 billion rupees from Sterlite Power, which will more than triple its assets under management to 170 billion rupees, according to the people. KKR will separately acquire a majority stake in Sterlite Investment Managers Ltd, IndiGrid’s investment manager, from Sterlite Power, they said. KKR hired David Luboff, former chief executive of Macquarie Group’s Asia Infrastructure Fund, as its head of Asia Pacific Infrastructure from the beginning of this year.

It is considering launching an Asia-focused infrastructure fund which could be as large as $1.5 billion, Reuters has reported.