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Sembcorp to Sell SEIL to Oman’s Tanweer Infra. for Rs. 11,734 Crore

Singapore-headquartered energy and urban-development firm, Sembcorp Industries, will be selling its 100% share in Indian subsidiary, Sembcorp Energy India Ltd. (SEIL), to Oman-based Tanweer Infrastructure Pte. Ltd. This information was given by Sembcorp in a press release dated 5th September 2022.

Tanweer Infrastructure Pte. Ltd. is owned by an Omani consortium, which is led by Oman Investment Corporation S.A.O.C. (OIC). The other partners in this consortium are the Ministry of Defence Pension Fund, Oman and Dar Investment SPC.

SEIL’s Power Portfolio and Specifics of the Deal With Tanweer Infra.

SEIL’s Thermal Power Facility

SEIL owns a total thermal power generation capacity of 2,640 MW. This in the form of four 660 MW supercritical units, which are in two power plants situated close to each other in Krishnapatnam, SPSR Nellore District, Andhra Pradesh.

In addition to these two supercritical thermal power plants, SEIL also has an existing Renewable Energy (RE) portfolio of 1,730 MW. Additionally, SEIL’s RE energy projects of 700 MW generation capacity are under construction.

The S$ 2.1 billion (about Rs. 11,734 crore) deal will be through Sembcorp’s subsidiary, Sembcorp Utilities (SCU), which has entered into a share purchase agreement with Tanweer Infrastructure to sell 100% of its shares in SEIL. Tanweer Infra will pay for these shares of SEIL through deferred payments.

Sembcorp will continue to function as a technical advisor to SEIL after the deal and will offer support to reduce SEIL’s Greenhouse Gas (GHG) emissions, for which it will be financially incentivized.

Moreover, SEIL’s existing employees will continue to work for the company after its takeover. As per Sembcorp, this deal has been priced to maintain the share value of SEIL, therefore the interests of the company’s shareholders will be preserved.

This sale is expected to conclude within 6 months after SEIL’s Extraordinary General Meeting (EGM), which will be held in November 2022.

Hongkong and Shanghai Banking Corporation Limited’s (HSBC) Singapore branch is Sembcorp’s only financial consultant for this deal.

SEIL’s acquisition by Tanweer Infrastructure comes as one of the major Mergers and Acquisitions (M&A) deals in the Indian power sector in the recent past.

Sembcorp’s Decarbonisation Drive Gets a Boost

Sembcorp’s Reasons for the Deal

During the previous year, Sembcorp had set a target to halve its GHG emissions by 2030, and further to become net carbon zero by 2050. For its 2025 emissions target, the company had envisioned cutting down its GHG emissions to 0.40 tonne Carbon dioxide equivalent per MWh (tCO2e/MWh) by 2025.

As per the company, SEIL’s sale will bring down the amount of Carbon dioxide emitted per MWh of energy generation by Sembcorp to 0.32 tonne from the current 0.51 tonne. Thus, Sembcorp will fulfil its GHG emission reduction goal for 2025 ahead of time in 2023.

SEIL’s thermal energy portfolio consists of about 2.7 GW of power generation capacity. Upon the conclusion of this deal, the share of Renewable Energy in Sembcorp’s portfolio will go up to 51% from the current 43%.

Sembcorp has clarified that the sale of SEIL does not amount to the company’s exit from India and that Sembcorp is actively looking to acquire new RE assets in the country. Recently, Suzlon Group was awarded an order to set up a wind power project in Karnataka by Sembcorp.

Sembcorp’s Chief Financial Officer, Mr. Eugene Cheng stated at a media briefing on 5th September 2022 that in the current market, there is a lack of liquidity to fund coal-powered assets. Doing away with SEIL’s thermal power assets, therefore, assists Sembcorp in this regard.

Tanweer Infrastructure’s Reasons to Strike this Deal

Acquisition of SEIL helps Oman Investment Corporation (OIC) achieve its target of having international assets in its portfolio.

Commenting on this deal, Kalat al Bulooshi, CEO of OIC said, “This transaction is in line with OIC’s vision to become a global investment house pursuing fruitful investment opportunities in promising markets.”

About Sembcorp Industries Ltd.: Sembcorp Industries Ltd. was founded in 1998. It is a subsidiary of Temasek Holdings (Private) Ltd., and deals in urban infrastructure and energy business. The company reported a turnover of S$ 7.79 billion (approximately USD 5.57 billion) during 2021.