Cabinet okays PowerGrid InvIT; assets worth Rs 7,000 cr to be monetised

• This is the first time any PSU in the power sector will undertake asset recycling by monetising its assets through the InvIT model

• The Cabinet approval will help PowerGrid to monetise assets with gross block value of more than Rs 7,000 crore in the first lot

New Delhi: The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, has approved monetisation of assets of PowerGrid through Infrastructure Investment Trust (InvIT) model. This is the first time any PSU in the power sector will undertake asset recycling by monetising its assets through the InvIT model and will use the proceeds to fund the new and under-construction capital projects. The Cabinet approval will help PowerGrid to monetise assets with gross block value of more than Rs 7,000 crore in the first lot. Based on the experience gained, further asset monetisation shall be carried out in future.

These assets, which are mainly High Voltage Transmission lines and substations, are held by PowerGrid in the form of Special Purpose Vehicles (SPVs). The proceeds from the asset monetisation would be deployed by PowerGrid for funding its capex incurred in new and under-construction projects and augment its net worth.
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Govt stresses on asset monetisation through InvITs

The Budget 2019-20 had emphasised investment-led growth and indicated that new and innovative financial instruments, including Infrastructure Investment Trusts (lnvITs), have been launched as part of the brown field asset monetisation strategy for augmenting infrastructure investment. Asset recycling is a key strategy of the government to release the capital invested in operational assets and the proposed InvIT of POWERGRID would attract both domestic as well as global investors, including Sovereign Wealth Funds, said an official statement. 

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Sale of assets to InvITs is a way of accessing long term, relatively cheap finance required to fund infrastructure projects in the transmission sector. The capex plan of PowerGrid for the next two years (2020-21 and 2021-22) is Rs 20,500 crore. The government has enacted an enabling regulatory and taxation framework for InvITs and the proposed InvIT by PowerGrid would deepen this market, said the statement.

The InvIT would provide an opportunity to the general public and institutional investors such as Pension Funds, Mutual Funds, to benefit from this investment opportunity and participate in the growth of Indian infrastructure sector, it added.

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