Very recently, India Grid Trust (IndiGrid), the country’s first infrastructure investment trust (InvIT) in the power transmission sector, winning its first greenfield project.
The project, understood to be “Kalam Transmission Ltd” will develop evacuation infrastructure for upcoming renewable energy projects in the Osmanabad area of Maharashtra. The project was won under the tariff-based competitive bidding (TBCB) route.
This is the first instance where an InvIT has bid for and won a power transmission project. So far, all the projects owned by InvITs have been acquired from its original developers. Today, there are two power transmission-based InvITs – IndiGrid and Power Grid InvIT.
Greenfield projects in the portfolio of an InvIT represent a very interesting phenomenon. It means that an InvIT will operate as an independent power transmission developer, and will compete with those very developers whose projects were acquired to build the InvIT’s portfolio!
From 2011 in particular, the power transmission space has seen much policy-related development. There was a time when Power Grid Corporation of India Ltd (PGCIL) was the lone developer for interstate/interregional transmission lines, and the mode of implementation was always the “cost-plus” route. The TBCB modality changed matters significantly. Projects had to be bid for with annual tariffs quoted as the criteria. This gave EPC contractors a platform to turn into developers. This also gave rise to the situation where EPC contractors that built projects for PGCIL now competed with PGCIL to win projects under the TBCB route. This created some sort of equalizer between developers and contractors.
Also read: PGCIL debuts in intrastate power transmission
With InvITs now, a similar situation is unfolding. There appears to have been created a similar “equalizer” between developers and InvITs.
As it appears today, InvITs will go on to play a very dominant role in the power transmission industry. The two InvITs in operation – IndiGrid and PGInvIT – today have a portfolio of the best and most profitable power transmission systems. Over a period of time, InvITs will have a domineering portfolio of quality assets and managerial expertise.
Leading developers like PGCIL, Sterlite Power, Adani Power, etc have an excellent opportunity to recycle their assets by transferring them to InvITs. This recycling of assets can help these developers unlock funds that can be channelized into other projects.
All in all, it is very exciting time for InvITs given that India has lined up huge investment in setting up interstate lines, mainly to evacuate upcoming renewable energy. Incidentally, the power ministry recently cleared projects worth Rs.16,000 crore to come up for award under the TBCB route. This means that the TBCB route, which had slightly dulled over the past two years, will also be looking up in the medium term.
The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. Views are personal.