Power Grid Corporation of India Ltd (PGCIL) is planning to restructure some of its wholly-owned subsidiaries by way of merger or amalgamation.
In a meeting held on July 26, 2024, the board of directors of PGCIL considered and approved the following proposal:
“In order to enhance operational ease and cost effectiveness, amalgamation/merger of 17 (seventeen) wholly owned subsidiaries into 2 (two) other wholly owned subsidiaries and the scheme of Amalgamation/Merger in relation thereto subject to approval of statutory/ regulatory/Govt. bodies or institutions as may be applicable or required. Further, development in this matter would be informed in due course.”
This was communicated to stock exchange in the late evening hours of July 26, 2024.
Though no more details were spelt out regarding this proposal, it is believed that the wholly-owned subsidiaries referred here are those that are engaged in development of transmission projects (both interstate and intrastate), won under the tariff-based competitive bidding (TBCB) modality.
It may be mentioned that as per the standard procedure, the bid process coordinator (BPC) creates a project SPV (shell company) that is usually a wholly-owned subsidiary of the BPC. This subsidiary is then formally acquired by the winning developer, selected under the TBCB route. This project SPV then becomes a wholly-owned subsidiary of the developer.
According to estimates made by T&D India, PGCIL currently has around 45 wholly-owned subsidiaries that are developing interstate and intrastate transmission projects. Of these, around 17 subsidiaries have completed their projects and are in operation. This does not include five wholly-owned subsidiaries that were transferred to Powergrid Infrastructure Investment Trust (PGInvIT) in May 2021.
It is likely, but yet unconfirmed, that the 17 wholly-owned subsidiaries discussed in the proposal correspond to operational intrastate and interstate transmission schemes.
It must be appreciated that by the current policy design, each TBCB project, regardless of its size, needs to be housed under a separate entity. Hence, any winning developer will need to contend with a growing list of such subsidiaries, thereby increasing the overall complexity of administration and regulatory compliance. For PGCIL, which has the highest market share in the TBCB market, the complexity is perhaps the highest.
On the other hand, projects that PGCIL implements under the RTM (regulated tariff mechanism) route directly come under the ambit of PGCIL, without the involvement of any intervening subsidiary.
It is therefore likely, but once again unconfirmed, that the two “other” wholly-owned subsidiaries that are mentioned in the proposal could mean that PGCIL creates two new wholly-owned subsidiaries as respective nodal subsidiaries for operational interstate and intrastate projects, won under the TBCB mechanism.
It is also highly possible that going forward PGCIL could merge/amalgamate project SPVs of TBCB projects into the new subsidiaries, as and when the underlying projects become operational.
Also read: PGCIL Board To Meet Soon To Approve Fund-Raising Plan
(Editor’s Note: Views expressed in this story are those of T&D India. No PGCIL official/spokesperson was involved in this story.)
