Monetisation route is value-accretive, says PGCIL Chairman & MD K Sreekant

Power Grid Chairman & MD K Sreekant tells Shreya Jai and Jyoti Mukul that transmission assets are better placed than road and real estate InvITs

PowerGrid launched its much-awaited infrastructure investment trust (InvIT). In an interview, its Chairman and Managing Director K Sreekant tells Shreya Jai and Jyoti Mukul that transmission assets are better placed than road and real estate InvITs. Edited excerpts:
 
Is this the right time for an InvIT, considering the current Covid-19 situation?
 
It is not going to impact us, according to the feedback we have received from bankers. We are currently in discussion to finalise the anchor bid and the response has been very strong.
 

How would you compare transmission InvITs with others?
 
The nature of transmission projects is different and makes it attractive for the InvIT format. They are bid under transmission service agreement for 35 years and the tariffs are fixed. There is, therefore, a commitment and predictability of the cash flow. There is no volume risk here. In REITS, for instance, there can be occupancy risk and traffic risk in roads. Transmission is low maintenance and unlike roads, where you have to continuously undertake maintenance. Even after the end of the agreement period, the asset life goes up to 50 years. These assets are suitable for InvIT kind of structure given the regulatory and tariff structure.

 
Will you add more of the projects that you have got under tariff-based competitive bidding (TBCB) route to the InvIT?
 
We have 18 other TBCB assets that are under operation with Rs 5,000 crore investment and the rest 16 are under construction with Rs 17,500 crore of investment. They will be available for monetisation once the lock-in period under contract is over. We will monetise according to our requirement.
 
What kind of impact will hiving off assets have on disinvestment?
 
The monetisation route is value accretive to my current shareholders. This is a method for recycling operational assets. The government holds 51.3 per cent of the PowerGrid equity, so bringing down its holding further would not be possible. We are in one of those sectors where the government will not go for outright sale and where government presence will continue.

 
Will reduction in work-in-hand impact your income and profitability as the thermal sector is witnessing a slowdown?
 
Investment in transmission has come down in the last few years. However, there is significant investment expected in the renewable energy sector. The renewable energy target is 450 Gw by 2030, from 90 Gw now. There is significant investment required in the evacuation of RE power from pockets in western or northern region. There will definitely be investment in the transmission sector, but not at the same pace as earlier. In the last decade, we have created assets worth Rs 2.5 trillion – the same pace will not be there, but there will be significant investment.

 
What is the status of flagship projects –green energy corridors, connectivity with 10 Gw solar power project in Ladakh and cross-border transmission?
 
The green energy corridors, which we started, have been completed. These projects connected Gujarat, Punjab and Rajasthan and some systems in Tamil Nadu region. We are currently building projects for evacuation of renewable energy projects. This includes 8 Gw evacuation from Rajasthan.
 
With regards to cross border, we have one connection each with Bangladesh and Nepal. One more connection with Nepal is under construction for evacuation of power to Sitamarhi on the Indian side, we are building the Indian side. We are in discussions with the Bangladesh from Katihar to Assam via Bangladesh. There are also discussions with Sri Lanka for a link with Myanmar.

 
Regarding Ladakh solar connectivity, we have prepared an evacuation plan DPR and submitted it to the government. We would like to do the transmission part for the 10 Gw Leh solar project, but a decision has not been taken.
 
What are your expansion plans in telecom and using power infrastructure?
 
We have created a prototype for using induction current from power transmission lines for providing power to telecom charging equipment. However, that has not taken off as much interest was not shown by telecom companies. We are now going to focus on other business aspects in telecom, one being data centres.

 
Is there any scope of including telecom assets in the InvIT?
 
The existing transmission towers were to be converted to telecom towers. We had created a prototype to abolish the use of diesel gensets at telecom towers. In telecom we are using optical fibres on the existing transmission system. There is no question of monetising these assets.