InvIT: New-age Funding for Grand Old Power sector | Episode 20

The India Energy Hour Presented by 101Reporters

The power transmission network is the backbone of any nation's electricity grid. India needs to rapidly expand and overhaul its electricity grid network to undertake a successful energy transition and ensure reliable power to all.

While state-owned Power Grid Corporation of India (PGCIL) has led the growth of power transmission in India, a handful of private companies entered the fray in the last decade. But the expansion of India's power transmission network for growing renewable energy capacity would need immense capital, more than what the traditional financing routes could offer.

Alternative funding avenues are now emerging in India. IndiGrid, India’s first listed power transmission infrastructure investment trust or InvIT is aspiring to become one such innovative financial model.

To understand how routes such as InvIT can facilitate global investment in the Indian power transmission and green energy sector while also creating value for investors, we interviewed Harsh Shah, Chief Executive Officer of IndiGrid. Harsh has extensive experience in the infrastructure sector across financing, operations, M&A and regulatory policy.

This episode was recorded before Union Budget

Suggested Readings:

"Section 54EC states that if the profit made on sale of a long-term capital asset – whether an immovable property or shares and stocks – is invested by the taxpayer in 'long-term specified assets' within 6 months of the sale, then the capital gains are exempt from taxation."

1. Harsh Shah profile: https://www.linkedin.com/in/harsh-shah-8634bb6/

2. IndiGrid website: https://www.indigrid.co.in/

3. SEBI guidelines: https://www.sebi.gov.in/legal/circulars/may-2016/guidelines-for-public-issue-of-units-of-invits_32500.html

Timestamp:

0:00 - Podcast intro

0:48 - About Harsh Shah and his professional journey

6:42 - Story of IndiGrid - how it started, key factors and people who shaped it.

14:12 - Status of power transmission infrastructure in India. How it could be enhanced to meet Climate targets and the role of InvIT in it?

20:38 - Functioning InvIT, key investors, regulations that make the market and type of assets.

28:02 - How are new assets acquired if 90% of the profits are returned back?

What type of investors InvIT attracts in general and at IndiGrid?

34:57 - Reason for insurance companies and pension funds to show interest in InvIT.

39:21 - Global examples of such financing instruments such as InvIT.

42:06 -: Can InvIT build assets? How are renewable assets suitable to InvIT?

46:03 - Indian renewable assets are low in return. Why then it's compatible with InvIT like model?

49:24 - Is the competitive tariff wars happening in the renewable energy space bad news for investment companies? Should InvIT be used for refinancing rather?

54:46 - When renewables will become a game of financing in the longer run, do you think we should have more actions on financing instruments?

59:21 - How the financial markets have matured in the past decade vis-a-vis regulations and quality/confidence of investors and instruments.

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