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Company Background

The POWERGRID Infrastructure Investment Trust (“PGInvIT”) was formed on September 14, 2020 by the sponsor, Power Grid Corporation of India Ltd. (“POWERGRID”) as an irrevocable trust, pursuant to the Trust Deed, under the provisions of the Indian Trusts Act, 1882.

POWERGRID is carrying out O&M of the Initial Portfolio Assets (“IPA”) since their respective Commercial Operation Date (“COD”) and has entered into O&M agreements with the IPA POWERGRID, as Project Manager, has entered into Project Implementation and Management Agreement with PGInvIT.

As of December 31, 2020, their Sponsor owned the Sponsor Tariff based competitive bidding (“TBCB”) Projects. As of December 31, 2020, 8 of these Inter-state transmission system (“ISTS”) SPVs had commenced commercial operations, comprising 39 transmission lines (6,398 Circuit kilometres (“ckm”)), with a total power transformation capacity of 9,630 MegavoltAmpere (“MVA”). The remaining Sponsor TBCB Projects are at different stages of development.

As of August 31, 2020, their Sponsor’s share in India’s cumulative inter-regional power transfer capacity was more than 85%. Of the Sponsor TBCB Projects, they propose to acquire 5 projects initially with a total network of 11 power transmission lines of approximately 3,698.59 ckm and 3 substations having 6,630MVA of aggregate transformation capacity, as of December 31, 2020, across 5 states in India.

Credit rating

They have been given a credit rating of Provisional [ICRA] AAA (Stable), CARE AAA (Is); Stable and Provisional CCR AAA/Stable by ICRA Ltd., CARE Ratings Ltd. and CRISIL Ratings Ltd., respectively.

Strengths & Strategies

Strong lineage and support from the Sponsor and Project Manager

The experience and expertise of POWERGRID, the Sponsor, provides PGInvIT with a significant competitive advantage within the Indian power transmission industry. The Sponsor is the largest power transmission company in India in terms of length of transmission lines measured in circuit kilometres. As of August 31, 2020, Their Sponsor’s share in India’s cumulative interregional power transfer capacity was more than 85%. Further, for Fiscal 2020, their Sponsor’s share in the transmission charges for ISTS billed by the CTU is over 85%.

Consistent and stable cash flows from assets with long term visibility and low counter party risks

Since transmission charges are fixed for a period of 35 years, there is minimal price risk arising from transmission charge resetting, which provides stability, consistent cash flows and long term visibility. Power transmission projects are characterized by low levels of operating risk. Once a transmission project has been commissioned, it requires low levels of expenditure for O&M. Further, inter-state power transmission projects receive transmission charges on the basis of availability, including in case of outage due to a force majeure event, subject to requisite approvals and irrespective of the quantum of power transmitted through the system.

Strong financial position

Company’s financial position will help them finance their future expansion plans. Following utilization of the Offer Proceeds, their consolidated borrowings and deferred payments net of cash and cash equivalents will be below 49% of the total value of their assets, as prescribed by the InvIT Regulations. The low debt position of their balance sheet (relative to their assets) will provide them with the ability to finance the growth of their business without substantial dilution to their Unitholders in the near future to ensure compliance with the InvIT Regulations.

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