PowerGrid's potential InvIT could be less than 20% of targeted size

The potential asset monetisation exercise of state-owned electricity transmission operator Power Grid Corporation of India  (PGCIL) could be much lower than the Rs 10,000 crore expected by the government.

Close to Rs 2,000 crore worth of its assets, the company has told its investors, would be eligible for the Infrastructure Investment Trust (InvIT) route. Proceeds from this would be used to pay higher dividend, depending on the profit recognised on such sale of assets or capital expenditure layout, the company said. 

Power Grid plans to set up a Special Purpose Vehicle (SPV) wherein it will transfer some of its assets. This SPV would be part of the InvIT to be floated by Power Grid. Sources privy to the investor concall said the firm disclosed only some projects of those acquired through the cost-plus mode (directly awarded by the government) would be eligible, as they’d lose value during the transfer. “Broad guidelines for undertaking an InvIT are with the understanding that the rate for the consumer should not go up. Given the stamp duty, there will be cost implications on transfer of assets to SPV. It seems difficult that the basket of cost-plus assets will be large at this point of time,” the firm is learnt to have told its investors.

Company executives said they, however, continue to explore the issue of transferring their cost-plus assets and have held discussions with the Central Electricity Regulatory Commission. 

Regarding the assets it has acquired via the TBCB or tariff-based competitive bidding route, executives said of the Rs 3,000 crore worth of such assets with Power Grid, projects totalling Rs 1,700 crore could comply for transfer to the InvIT. 

“Transmission service agreements have clauses which allow dilution of 51 per cent, 74 per cent and 100 per cent from the date of commissioning to two years, two to five years and beyond five years (respectively),” said an investor.

In its presentation, Power Grid said the assets transferred to the InvIT would continue to be operated and maintained by it. PGCIL expects investment of Rs 2.8 trillion between 2020-21 and 2029-30 in inter-state projects and a similar amount in intra-state ones. Put together, the investment basket is expected to be Rs 560 crore.

Following the slowdown in the power sector, the company’s capital works have been on a downslide for four years. Since 2015, this has come down by 53 per cent to Rs 34,635 crore in 2018-19, owing to the decreasing number of new projects. Apart from state-owned NTPC adding generation capacity, no private power generator has applied for ‘long-term access’ or transmission connectivity since 2013.

In 2018, the central government said it was identifying assets -- including rail lines, national highways and power transmission lines — for monetising through InvITs. The price of the units will be tied to performance of these assets and the money used for further infrastructure development. The amount earned through these units will not be part of disinvestment or non-tax revenue and, hence, will not be used for bridging fiscal gaps, this publication had reported of the intention.