'Working power transmission projs turning attractive assets'

Operational power transmission assets in India are emerging as an attractive asset category for the private sector in infrastructure bond market, India Ratings has said.
"Power transmission is emerging as an attractive asset category for the private sector... Operational transmission projects will emerge as ideal candidates for infra bond markets," the rating agency said.
The government, realising the need for investments, has been streamlining policies and processes in the transmission sector, it added.
Inter-state transmission projects are awarded through tariff-based competitive bidding.
Transmission assets may create appetite among investors and it is a class of asset which is expected to deepen the infra bond market, given its stable and availability nature of revenue and a long licence tenor, India Ratings said.

Though the counter-parties, including generation and distribution utilities, may have stressed financial health, the agency believes that transmission assets may not suffer as significantly as generating companies. This is because transmission charges constitute a small part of power purchase costs, it added.

Also, transmission assets have a natural monopoly.
Structure of contracts, processes for collection of transmission charges and past track record would be major factors for assessing the counter-party risk, it said.
"Operating transmission assets are better suited to play a significant role in Indian infrastructure debt market, given their availability nature of revenue, predictable revenue streams, demonstrated track record of availability above the regulatory threshold, and lower operation and maintenance requirement.

"Therefore, we expect their ratings to reflect these positive credit aspects," the rating agency said.
On the basis of the robustness of their structure, coverage ratios and counter-party profile, India Ratings expects transmission projects to be generally rated in the 'High Safety' category.