Power Grid should sell stakes in projects, says power minister

Industry:    December, 2016

Power Grid Corp. of India Ltd, a state-run electricity transmission company, should sell stakes in its projects to unlock capital for future expansion, according to the nation’s power ministry.

The company should cut its balance sheet size to half by selling stakes in projects, power minister Piyush Goyal said in New Delhi on Wednesday.

It should consider an infrastructure investment trust, or InvIT model to monetize assets, he said. Selling stakes in projects will help the company free-up capital and raise more debt for future projects at competitive rates, federal power secretary Pradeep Kumar Pujari said.

“We want to avoid a situation where raising debt in the future becomes difficult,” Pujari said.

An asset-sale plan has been on the government’s agenda. Finance minister Arun Jaitley asked state-run companies to sell assets to unlock value and make investments in new projects in his budget speech in February. Goyal’s advise that Power Grid should reduce its balance sheet size by half is an endorsement of that plan.

Power Grid, which owns and operates more than 85% of India’s interstate power transmission capacity, plans to invest Rs1 trillion ($6.8 billion) in the next four years to build new projects, it said in November. It had fixed assets worth Rs1.58 trillion as of 30 September, including plant machinery, transmission projects, telecom equipment, buildings and land.

The company’s debt-equity ratio was 71:29 as of 30 September, compared with a 70:30 ratio recommended by power regulator Central Electricity Regulatory Commission, which determines transmission charges based on capital and operating costs.

“The minister has advised but there is no decision yet,” Power Grid chairman IS Jha said about the asset-sale idea. “We are in a regulated business, which will need to be considered. Only then we can proceed with this.”

Power Grid shares closed down 0.82% to Rs181.90 in Mumbai. They have gained 29% this year, compared with a 0.5 % decline in the benchmark S&P BSE Sensex.


Recent Articles on M&A