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The curious case of KPS1 Transmission

PGCIL JVs with States | India Power Factor

First a bit of a background: KPS1 Transmission Ltd is a project special purpose vehicle (SPV) that was incorporated by bid process coordinator REC Power Development & Consultancy Ltd (RECPDCL) to develop an interstate transmission system (ISTS) scheme officially termed as “Transmission scheme for injection beyond 3 GW RE power at Khavda PS1 (KPS1)”.

 

After adopting the regular tariff-based competitive bidding (TBCB) procedure, Megha Engineering & Infrastructures Ltd (MEIL) was declared as the successful bidder, and the project SPV “KPS1 Transmission Ltd” was transferred to MEIL The transfer of the SPV took place around April 21, 2023, and this transfer symbolizes the formal “zero date” for the project that was expected to commissioned in 21 months thereafter.

 

In August 2023, Adani Energy Solutions Ltd (AESL), formerly Adani Transmission Ltd, announced that its board approved the proposal to acquire “KPS1 Transmission Ltd” from its original owner MEIL. As of September 30, 2023, this acquisition was complete as AESL showed KPS1 as one of its under-construction transmission projects, in an investor presentation filed on stock exchanges.

 

The takeover of TBCB assets is not new but the acquisition of KPS1 Transmission is unique in many respects. It is for the first time that a TBCB project has been acquired so early in its life. As of September 2023, when the acquisition was completed, MEIL had barely begun pre-project activities.

 

So far, acquisitions of TBCB projects are seen to have taken place after project was operational. Developers like Larsen & Toubro, Kalpataru Projects International Ltd, Techno Electric & Engineering have sold their operational TBCB assets as they wanted to exit the power transmission development space, and focus on EPC contracting.

 

There have also been cases where developers have sold their operational TBCB assets to infrastructure investment trusts like India Grid Trust (IndiGrid) and Powergrid Infrastructure Investment (PGInvIT).

 

There have also been instances where the developer was fraught with financial difficulties and the projects were stranded. This was the case with Essel Infraprojects, for example. These stranded assets were then acquired by other developers as part of the debt restructuring package worked out by lenders.

 

The acquisition of KPS1 Transmission by AESL, barely when the project has taken off, therefore stands out remarkably.

 

This acquisition has another dimension to it. In the initial bidding stage of KPS1 Transmission, four bidders had qualified – MEIL, Adani Transmission, Power Grid Corporation of India Ltd and Sterlite Power. However, in the final bidding stage, only three were qualified for submission of final bids, and in this, Adani Transmission did not feature. It is therefore interesting to see that a company that did not qualify to submit its bid for a project ultimately ended up acquiring it from the winning bidder.

 

In many respects, therefore, the case KPS1 Transmission AESL is strangely unique.

 

The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. Views expressed here are personal.

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