Power Grid to Float InvIT to Monetise Transmission Assets
The government's asset monetisation programme will take off from March next year when the central transmission utility Power Grid Corporation of India Ltd (PGCIL) floats an infrastructure investment trust (InvIT) - a first by a public sector undertaking (PSU) - to unlock value from its operational transmission assets and free up long-term capital for further investments.
Government sources said that the company board has already given in-principle approval for the proposed power sector InvIT and the company would now start the process of appointing a consultant to advice on the modus operandi for floating the trust and suggest a roadmap for asset monetization.
As per initial estimates made by PowerGrid, transmission assets worth Rs 10,000 crore may be monetised first. Based on the response, more assets would be put under the trust.
IANS first wrote about Power Grid's plan on InvIT this year in August.
"The InvIT route will help the company to get current value of its assets and unlock capital that could be used for further investment and faster development of projects," said a PGCIL official, who was not willing to be identified.
He, however, said that the PSU was not in a hurry to monetise its assets and would wait for the right market conditions to undertake such an exercise. The company also has over Rs 4,000 crore of surplus cash and a Rs 10,000-crore fund raising programme through bonds that is considered adequate for meeting its entire capital expenditure of about Rs 15,000 crore in 2020-21 and other greenfield investments.
"Moreover, government may not directly benefit from this asset monetisation, as the money from sale of assets may fall into the books of the PGCIL. However, the Centre can always recoup some benefits by seeking higher dividend payout from the PSU," said the source.
According to analysts tracking the company, Power Grid would use the proceeds from this monetisation primarily for investing in upcoming projects and in case of lower-than-expected investment opportunities, the available excess cash will be paid out as dividend.
The company would also be the project and investment manager of this InvIT and earn a recurring fee on it. "It (Power Grid) does not intend to have more than 15 per cent holding (minimum sponsor holding required) in the InvIT," Motilal Oswal Institutional Equities said in a report.
The InvIT route is more suited for Power Grid's tariff-based competitive bidding (TBCB) projects as these are housed in separate SPVs and don't have any stamp duty implications.
The proposed InvIT will be on the lines of a real estate investment trust (REIT) for which the market regulator, Securities and Exchange Board of India (Sebi), has already finalised detailed norms for trading of trust units.
India Grid Trust (IndiGrid), an infrastructure investment trust (InvIT) sponsored by Sterlite Power Grid Ventures Ltd, is already operational.
With a total asset size of over Rs 2 lakh crore and investment of about Rs 1 lakh crore in putting up transmission infrastructure, the proposed monetisation programme of PGCIL could provide it the necessary boost required to push up investments.
As per the plan, PGCIL would set up the InvIT and transfer or sell some of its operational transmission assets to the proposed trust. In return for such transfers, the company would get tradeable units from the trust that could be used in the market to mobilise funds.
This would allow the company to monetise its existing assets that in normal circumstances would have given it returns only after years of operation. Transmission projects are long gestation projects where returns start accruing only after a period of 20-25 years.
"The concept of InvITs is good. But it is not as much beneficial for Indians as it is for external people, say, for FIIs," said executive of an infrastructure company that is also looking at floating an InvIT.
In order to make the InvIT a monetisation tool for the sector, PGCIL may also also rope in more power companies that are looking to free up their capital to raise resources for fresh investments. This would help it attract investors into the trust that would be crucial to build a large corpus.
The PGCIL has a big investment plan for enhancing transmission networks in the country. The company is making capital expenditure annually of between Rs 15,000-20,000 crore to expand its network. It already has close to 1,58,000 circuit km of inter-state transmission lines.
The Sebi has allowed Indian firms to launch investment trusts to help cash-strapped developers get easier access to funds, while also creating a new investment avenue for institutions and high net worth individuals.
PSUs are working on asset monetisation programmes in wake of the government's decision that companies would have to mobilise resources for new investments through this route as normal channels of financing are under pressure.