Sembcorp opening $4 billion India power complex

Conglomerate Sembcorp Industries will today open a major coal- fired power-generation complex in south-eastern India.

The US$3 billion (S$4.2 billion) Sembcorp Gayatri Power Complex in Andhra Pradesh has a capacity to generate 2,640mW of electricity, meeting about 40 per cent of the power demand in the Indian state. It is also the largest foreign direct investment-driven project on a single site in India's thermal energy sector, said Sembcorp in a press release ahead of the opening ceremony.

The power complex, near Krishnapatnam port about 190km north of Chennai, houses two coal-fired power plants. Construction of the first plant started in early 2011 and it became fully operational in September last year. The second plant is set to begin commercial operations in September this year.

Group president and chief executive Tang Kin Fei told the media in a briefing on Thursday that many sceptics had doubted that the project could take off.

But today, more than five years since Sembcorp invested in the project, the first plant is in "good shape" commercially, having secured long-term power purchase agreements to sell 86 per cent of its capacity. The second plant is expected to contribute to the company's revenue from next year, said Mr Tang.

The power complex's opening ceremony will be attended by Mr S. Iswaran, Minister for Trade and Industry (Industry), and the Chief Minister of Andhra Pradesh, Mr Chandrababu Naidu, along with other ministerial representatives from the Indian government.

Mr Iswaran noted that Sembcorp's thermal power plant project is a major investment that makes full use of its capabilities in the energy sector and complements its other investments in the wind and solar energy sub-sector.

"Against the backdrop of global uncertainties, we continue to see opportunities in markets like India, where the growth prospects remain positive," said Mr Iswaran at the media briefing in Singapore.

Sembcorp operates thermal and renewable energy plants in seven states in India, which generate a total of 3,500mW, enough to provide for the energy needs of slightly more than half of Singapore.

At a total project cost of around US$4 billion, Sembcorp's Indian portfolio forms about 40 per cent of its utilities business, said Mr Tang. "Based on proportional returns, we expect the income coming from these investments to be quite substantial."

Given that the cost of generating solar power has decreased "considerably", Mr Tang said Sembcorp hopes to secure some solar power plant projects in India as well as China this year.

Mr Tang said that despite a tough market outlook, Sembcorp is on track to complete 10 power and water and wastewater treatment projects this year. These investments will start contributing income in the next two years, he said.

While the exploration and production segment of its offshore and marine business is hurting, Mr Tang emphasised that it forms only one part of the entire value chain. Business activity in the non-drilling services is still available despite the oil price slump.

A version of this article appeared in the print edition of The Straits Times on February 27, 2016, with the headline 'Sembcorp opening $4 billion India power complex'. Print Edition | Subscribe