In a significant development, Securities & Exchanges Board of India (SEBI) very recently granted the certificate of registration to “Powergrid Infrastructure Investment Trust”, an infrastructure investment trust (InvIT) sponsored by Power Grid Corporation of India Ltd. (PGCIL)
This marks an important milestone in PGCIL’s corporate journey that began in the late 1980s. Till around 2010, PGCIL was the sole entity engaged in multifarious aspects of power transmission. Not only did it build interregional transmission lines, it was also responsible for grid load management.
In 2010, the grid management operations of PGCIL were incorporated into Power Systems Corporation Ltd, a wholly-owned subsidiary of PGCIL. Eventually, POSOCO was decoupled from PGCIL and was made into an independent subsidiary under the Central power ministry.
In January 2011, it was mandated that all power transmission lines would be built under the tariff-based competitive bidding (TBCB) route. This exposed PGCIL to competition from private sector entities. Though it was alleged that PGCIL cornered many coveted projects to itself using the “nomination” route, PGCIL ultimately had to earn its projects by virtue of tariffs quoted.
Over the years, the initial hiccups notwithstanding, PGCIL has become very successful even in the TBCB arena. According to rough estimates, PGCIL has clinched half the number of projects awarded under the TBCB route.
Now, it was time for the next step; to monetize the assets under operation and to open up power transmission assets to investors. To achieve this, the Union government, in September 2020, approved monetization of assets of Power Grid Corporation of India Ltd (PGCIL) through the Infrastructure Investment Trust (InvIT) model. PGCIL also became the first public sector undertaking under the Union power ministry to get such approval.
PGCIL has a assets with a gross block of Rs.7,000 crore, which it can readily monetize. By assets, we mean the operational power transmission lines that have been developed and are currently operated by special purpose vehicles (SPV), under a concession agreement.
The sale of these assets can help unlock funds for PGCIL; these funds can then be used for future power transmission assets. The concept of an investment infrastructure trust (InvIT) that is relatively new to India is very pertinent in the context of power transmission.
The proposed InvIT sponsored by PGCIL can make its initial public offering (IPO), followed by the listing of the InvIT on stock exchanges. This will allow even investors, both institutional and retail, to participate in the growth story of India’s power transmission.
PGCIL has crossed several important milestones in its corporate journey and the creating of this InvIT is a very interesting one indeed. India Grid Trust—whose initial sponsor was Sterlite Power, to now make way for KKR—is India’s first InvIT in the power transmission sector.
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For investors, the choice of power transmission assets for investment will significantly open up when Powergrid Infrastructure Investment Trust begins operations. The creation of two InvITs also reflects the evolving maturity of India’s power transmission sector.
The author, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. Views expressed here are personal.