PowerGrid and Infrastructure Leasing and Financial Services Ltd will form a joint venture company for developing sub-transmission projects.
New firm to take up sub-transmission projects within and outside the country
MUMBAI: State-run Power Grid Corporation of India Ltd (PowerGrid) and Infrastructure Leasing and Financial Services Ltd (IL&FS) will form a joint venture company for developing sub-transmission projects.
The boards of the two companies have given their approval for the tie-up and an agreement to float the new company will be signed by the first week of October. The new entity would be called PowerGrid IL&FS Transmission Pvt Ltd, a source close to the development said.
Both PowerGrid and IL&FS will have a 50% stake in the JV, which will take care of the development of transmission and sub-transmission projects in various states as well as outside India.
“With the new company in place, PowerGrid will be able to extend its technical expertise to the state electricity boards (SEBs) for development of state transmission line projects, which was erstwhile under the purview of SEBs only,” the source said.
IL&FS will be extending legal, regulatory and financial support to the projects being taken up by the new company.
The JV will have three major functions - bid process management, trade development facilitation and project development facilitation to the SEBs for development of new transmission projects.
“Till now, the state transmission utilities (STUs) had to pump in their own funds to develop transmission projects or even upgrade the existing ones,” he said.
However, once the JV is in place, the STUs will not spend on development of new transmission systems. Instead, the JV company will call for public private partnership bids, and thereby improve the cost-effectiveness and efficiency of the transmission system, the source said.
While PowerGrid will provide technical expertise, IL&FS will support the company financially. “Though the kind of work the new company will be doing is not very capital intensive, still, if some funds are required, it will be routed through IL&FS’ dedicated power fund, which it has earmarked for all power initiatives in the country,” the source said.
IL&FS has earmarked funds amounting to Rs 25,000 crore for spending on the power sector for the next 3-4 years in the country.
The source said, once the new company establishes its base in India, it will go for projects outside the country, too. “Currently, we are planning to concentrate on state utilities, which have a weak infrastructure and are finding it hard to implement improvised systems in the state. Once the company is well established and gains good experience, it will foray into Nepal and Bangladesh as well,” he said.
He said the new company will only be focusing on neighbouring countries for its foreign forays and has no plan to go to overseas locations like Nigeria and Philippines in which PowerGrid has lately evinced interest.
PowerGrid, whose IPO closed on September 13, will debut on stock exchanges on October 5.
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