Power Grid's InvIT idea to unlock value of assets

Power Grid would sell some operational transmission assets

Central transmission utility Power Grid Corporation plans to float an infrastructure investment trust (InvIT) — a first in the power sector — to unlock value from its operational transmission assets and free up long-term capital for further investments, government officials privy to the development said.

The company will shortly appoint a consultant to advise on the modus operandi for floating of the trust and suggest a roadmap for its proposed asset monetisation programme.

“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 Power Grid official, who was not willing to be quoted.

InviT will be on the lines of real estate investment trust (Reit) for which the market regulator Securities and Exchange Board of India (Sebi) has already finalised the detailed norms for trading of trust units.

With a total asset size of about Rs 1,40,000 crore and investment of about Rs 72,500 crore in putting up transmission infrastructure, the proposed monetisation programme of Power Grid could provide it the necessary boost required to push up investments.

As per the plan, Power Grid would set up 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. Listing guidelines of Sebi have come for such trust. Accounting standards are about to come. Once all the guidelines come and listing takes place, its overall benefits could be assessed," said executive of an infrastructure company that is also looking at floating an InviT.

In order to make InviT a monetisation tool for the sector, Power Grid would also rope in more power companies that are looking to unclog 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.

Power Grid has big investment plan for enhancing transmission network in the country. It has already decided to invest in excess of Rs 1,00,000 crore in the 12 th plan period (2012-17) with annual investment of over Rs 22,000 crore. This would need to be doubled, as the company would also need to develop infrastructure to provide carrier services to large-scale development of renewable projects in the country.

InviT will allow the company to get cost effective funds required hasten up implementation of large inter-state transmission projects and thereby deleverage its financial balance sheet.

Last year, the market regulator 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 programme in the wake of government’s decision that companies would have to mobilise resources for new investments through that route as normal channels of financing were under pressure. "We have to leverage the assets of CPSEs for generation of resources for investment in new projects. We will encourage CPSEs to divest individual assets like land, manufacturing unit to release their asset value for making investments in new projects," finance minister Arun Jaitley said in his budget 2016-17 speech.

subhashnarayan @mydigitalfc.com

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