IFC invests $20.4 mn equity in Power Grid

Power Grid planned to raise $1 bn as equity through FPO

International Finance Corporation (IFC) today said it made an equity investment of $20.4 million in Power Grid Corporation of India (Power Grid). The investment was through its participation in the FPO.

Power Grid lined up a project whose cost is estimated at about $16 billion out of which $ 1 billion is funded through an equity infusion in the FPO. The project comprises of several transmission lines and sub-stations in various parts of the country.

Power Grid is country's inter-state and inter-regional transmission utility, majority owned by the Government of India. The national transmission utility has a capital expenditure plan of $16 billion during the 2013-17 period (the Project) for further development of national grid.

In order to fund the Project, Power Grid needed to raise about $1 billion of equity. Simultaneously, the Government divested 4% of its existing shareholding to help meet its disinvestment targets for the current fiscal year, reduce its fiscal deficit and help anchor the commercial orientation of a key enterprise, according to project document.

"The company had requested that IFC support the project by participating as an investor in the FPO. Accordingly, IFC made an equity investment of $20.4 million through its participation in the FPO," said IFC.

IFC said that given the tight liquidity situation in infrastructure finance in India, IFC will play an important counter-cyclical role at the request of the Government and a long standing WBG client to support public issuance of shares and increased private investment in a critical infrastructure sector. IFC financing is expected to send a strong signal to potential investors in the Power Grid FPO, said IFC.

Power Grid was incorporated in 1989 and it owns and operates a network of about 100,200 circuit-km and 167 substations, wheeling 50% of the power generated in India and has consistently maintained operational excellence with a transmission system availability of more than 99%, above the stipulated requirement of 98%.

The company also diversified into the telecommunication business in fiscal 2002 using its nationwide power transmission system to create an overhead fiber-optic telecommunication cable network. Its network is 29,279 km long connecting over 290 cities and towns across India.

Prior to the FPO, the Government of India held around 69.4% of the company's shareholding and the remaining was held by foreign institutional investors, insurance companies, retail investors and other institutional investors.

The government's shareholding has fallen to 57.89% following the FPO.