CCEA approves Power Grid’ transmission assets InvITs

As part of the new disinvestment playbook, the public sector unit will start with monetising five such tariff based competitive bidding (TBCB) assets held in existing special purpose vehicle (SPVs), through Infrastructure Investment Trust (InvIT) in the current financial year. This comes in the backdrop of the coronavirus forcing an unprecedented economic disruption.

InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.

“In the first block, POWERGRID would be able to monetize 5 TBCB assets of gross block of ₹7164 crore (as on September 2019)," the government said in a statement.

Mint reported on 20 May about PGCIL’ plans to file a draft prospectus for a $1 billion InvIT, in the first such InvIT offering from any state-owned company.

According to the government statement, the approval has been given to, “Power Grid Corporation of India Limited (POWERGRID) to monetize through InvIT, its other TBCB SPVs including those which are either under construction or shall be acquired by the company in future, as per the directives and targets fixed by the Government of India."

This will also lead to change in the central public sector enterprise (CPSE) character of Maharatna’ SPVs and follows the new public sector enterprise policy that has been articulated by the government earlier.

The InvIT was proposed by the government as an alternative fundraising route for state-owned companies to manage their funding requirements without having to depend on government support. The National Highways Authority of India is also preparing to raise funds through this route.

“The approval would facilitate POWERGRID to undertake asset monetization of its identified transmission assets through InvlT, so that the proceeds from the asset monetization could be utilized for fresh investment in the transmission network expansion and other capital schemes of the company and the premium generated would augment the net worth of POWERGRID," the statement added.

Finance minister Nirmala Sitharaman in in her maiden budget increased the divestment target to Rs1.05 trillion for FY20 from Rs90,000 crore, focusing on consolidation of public sector units (PSUs) and strategic disinvestment. While building a case for such a move, the Economic Survey for 2019-20 said post-privatisation, CPSEs performed better. The survey argued that privatisation results in higher profitability, efficiency, competitiveness and professionalism.

“The Budget 2019-20 emphasized investment led growth and indicated that new and innovative financial instruments including Infrastructure Investment Trusts (InvlTs), have been launched as part of the brown field asset monetization strategy for augmenting infrastructure investment," the government statement added.

Power Grid’ Infrastructure investment trust will only be the third such public offering in the Indian markets. In May 2017, road developer IRB Infrastructure Developer Ltd launched the first IPO for an infrastructure investment trust—IRB InvIT Fund—raising Rs5,033 crore. In the same month, transmission projects developer Sterlite Power Grid launched the IPO of its infrastructure investment trust—India Grid Trust—raising Rs2,250 crore. In the last two years, several large privately placed InvITs collectively worth around Rs38,000 crore have been set up, including Reliance Industries Ltd’s investment trusts for its telecom towers and gas pipelines.

India has added 112,000 circuit km of high-tension lines over the last five years. The country has one of the largest interconnected power grid that is capable of transferring 99 GW of electricity from any corner of the country.