Proposal to hive off central hydro projects into special purpose vehicle companies

The government is exploring hiving off constructed central hydro power plants into special purpose vehicle companies under their existing developers to maximise their valuations during stake sale.
A senior government official said as per the proposed national assets monetisation pipeline, Niti Aayog has proposed segregating constructed projects and transferring them to an SPV, under the CPSU that owns the projects.

“The SPVs consisting constructed projects will be subsidiaries of their respective CPSUs. The move ensures that the aggregate value of the parent and subsidiary company is more than the current developer of the project,” the official said.

He said risk profile is different when under construction and constructed projects are put together, so they don’t get the full value. “If you segregate the assets then the projects may attract different investors. There are investors interested in higher interest rates or those looking at stable earnings,” the official said.


Finance Minister Nirmala Sitharaman had in her budget speech announced that a national monetisation pipeline will be launched with a dashboard to track the progress and provide visibility to investors. "Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction," she had said.

The pipeline has plans to monetise assets including roads, electricity transmission, hydro and solar power plants, oil and gas pipelines, and telecom towers, sports stadia, worth Rs 2.5 lakh crore this fiscal.

The plan includes awarding 150 passenger trains to private players, divestment of stake of Airports Authority of India in the joint ventures operating Delhi, Mumbai, Bangalore and Hyderabad airports and leasing out sports stadia.

State-owned Power Grid Corp had in April launched its Infrastructure Investment Trust (InvIT) - first by any public sector company — offering five ‘initial portfolio assets’ of Rs 10,384 crore value.

InvITs are instruments on the pattern of mutual funds and are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time.