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MOSL: UTILITIES-RE transmission pipeline strong but timelines may get deferred

In 2018, the government had envisaged construction of transmission projects related to 66.5GW of renewable (RE) generation capacities. Its intention was to ensure adequate transmission evacuation for RE capacities as and when they come up. In view of that, a plan was put in place to award transmission projects worth INR480b, and works worth INR320-350b were to be commissioned by Dec’21 (original plan was to complete entire pipeline by Dec’21). Assuming an execution period of 18 months, awarding for the corresponding works would have to be done by Jun’20. We met CEA to get an update on the progress of these projects.

According to our interaction, ~INR145b of works have been awarded. However, (a) changes in the approval process, (b) revised land allocation and (c) uncertainty over RE generation capacities could lead to deferment in the awarding process. Currently, projects under the bidding process remain low at ~INR14b. Thus, completion of the envisaged projects by Dec’21 appears to be a challenging task..

Projects under bidding are currently low
Awarding of projects under the first phase (INR110b), which are scheduled to complete by Dec’20, was successfully completed last year. However, the progress on subsequent projects (completion by Dec’21) appears slow. We note that just INR14b of projects corresponding to ~5GW of capacities within the southern region (Koppal and Karur) are under bidding (Exhibit 1). Another INR170-195b of works – which were set to be completed by Dec’21 – are yet to be put up for bidding.

Targeted commissioning by Dec’21 a challenging task
Of the ones yet to be awarded, ~INR120b of works relate to solar projects in Rajasthan (8.1GW). However, there is uncertainty on the timing of their awarding, given the change in the approval process. Based on our interaction, the mode of implementation of the project (TBCB or RTM) will now be decided by the Ministry of Power and not on the NCT/ECT recommendation. For example, the Kurnool project was recently allocated on an RTM basis (v/s NCT recommendation of allocation on TBCB). Furthermore, even if one expects approval for these projects and appointment of bid process coordinator (BPC) in the next one month, the timeline for RfQ issuance and SPV transfer has been 8-11 months (Exhibit 2). Thus, the start of work can happen only from Dec’20-Jan’21. While our interactions have suggested that transmission line length for these projects is smaller than traditional projects, executing within 12 months will be a challenge.