The recent advent of private sector participation in power transmission has been a significant milestone for the power sector. After cross-border and inter-regional lines, private sector entities are now seriously looking at opportunities in intrastate power transmission infrastructure. This special report by Venugopal Pillai takes us closer to recent developments in states that have taken the lead in ushering private investment in the power transmission sector.

The advent of intra-state power transmission lines with private sector participation is a key development in India's pursuit of galvanizing private enterprise in the power sector. Private participation in power transmission started with the Indo-Bhutan power transmission line that came up as a joint venture between Tata Power and Power Grid Corporation of India in 2006. This made way for joint ventures with PGCIL for inter-regional lines, followed by tariff-based bidding for mega transmission lines. As far as intra-state lines are concerned, the phenomenon is relatively new and is limited to few states. According to information gathered by Electrical Monitor, PPP in state-level projects has so far been observed in four states-Maharashtra, Haryana, Rajasthan and Uttar Pradesh. The following is a brief individual account.

Maharashtra: In April 2008, Maharashtra State Electricity Transmission Company Ltd (Mahatransco) entered into a minority joint venture partnership with JSW Energy Ltd to develop transmission infrastructure for evacuation of power from upcoming power plants in the Ratnagiri district. JSW's 4x300-mw Jaigad power project is also a beneficiary of this project. This joint venture Jaigad Power Transco Ltd is widely believed to the first instance of PPP in intra-state power transmission in the country. The 400kV transmission system comprising of the Jaigad-New Koyna line (55 km) and Jaigad- Karad line (110 km) along with other infrastructure, was fully completed this year.

In October last year, Mahatransco also entered into an agreement with Adani Power to form a similar joint venture for power evacuation from upcoming power plants in northeastern Maharashtra including Adani Power's own 3,300 mw Tiroda supercritical power project in the region. Accordingly, Maharashtra Eastern Grid Transmission Company Ltd, a 74:26 JV between Adani and Mahatransco was formed. The transmission network, estimated to cost 4,379 crore, will involve two 765kV single circuit Tiroda-Koradi-Akola- Aurangabad lines and 765kV/400kV substations at Tiroda, Koradi, Akola and Aurangabad. It would also entail the installation of 500MVA auto transformers and 765kV, 80 MVAR shunt reactors. The transmission lines will pass through the districts of Gondia, Bhandara, Nagpur, Wardha, Amravati, Buldhana, Jalna and Aurangabad. The project is under construction and is scheduled to commission by 2013.

Speaking about future plans in PPP-based intra-state power transmission projects, Mahatransco officials told Electrical Monitor that the state utility has created a shelf of projects that are under various stages of discussion. Mahatransco will take a call on whether they could be implemented by the JV route or the tariff-based competitive bidding route. Transmission systems associated with two of Indiabulls Group's projects— Sinnar (1,320 mw) and Amravati (1,320 mw)— are cases in point.

Private participation in intra-state power transmission
Company/SPV	Ownership	Private equity (%)	Mode	State	kV	Cost (crore)
Jaigad Power Transco Ltd	JSW Energy*	74	JV	MAH	400	488
Maharashtra Eastern Grid Transmission Co Ltd	Adani Power*	74	JV	MAH	765	4,379
Jhajjar KT Transco	KPTL+Techno**	100	DBFOT	HAR	400	450
Maru Transmission Service Co Ltd	GMR Energy	100	BOOM	RAJ	400	200
Aravali Transmission Service Co Ltd	GMR Energ	100	BOOM	RAJ	400
Shekhawati Transmission Service Co Ltd	Emco	100	BOOM	RAJ	400	---
South East UP Power Transmission Co Ltd	Isolux Corsan	100	BOOM	UP	765	870
Western UP Power Transmission Co Ltd	Cobra+MEIL***	100	BOOM	UP	765	875
*Mahatransco holds 26 per cent **Kalpataru Power Transmission Ltd + Techno Electric Engineering Ltd
***Cobra Instalactiones y Servicios SA + Megha Engineering India Ltd
Note: Compilation reflects projects awarded up to August 19, 2011, and may not be exhaustive

Officials also indicated that private sector participation will be critical to build new power transmission infrastructure in Maharashtra. Currently, over 11,000 mw of new power generation capacity is in the making, with over half of this coming through private sector plants. These projects are in farflung areas and would necessitate the creation of new and more efficient transmission infrastructure.

Mahatransco officials also alluded to the fact that preproject work involved in the structuring PPP-based projects could be time consuming as it involves concurrence of various agencies. However, the objective is to begin construction work as early as possible. Illustrating this point, officials explained that even whilst there are some pending issues related to the formation of Maharashtra Eastern Grid Transmission Company Ltd (the joint venture with Adani Group discussed above), construction work on the project has begun. "In projects of large magnitude, things have to move in parallel," an official summarized.

Haryana: This northern state takes the credit for structuring India's first intra-state power transmission line on DBFOT basis. Last year, it awarded a 382-crore transmission line using this mode to a consortium of Kalpataru Power Transmission Ltd and Techno Electric Engineering Company Ltd. The 400kV transmission system will help evacuation of power from CLP India's under-construction 2x660-mw Jhajjar supercritical power plant in Haryana.

Speaking to Electrical Monitor, a senior official of nodal agency Haryana Vidyut Prasaran Nigam Ltd said that this mode was chosen so as to avail financial assistance under the Centre's viability gap funding (VGF) mechanism. The official also noted that while Haryana has plans to develop more transmission lines using the PPP mode, there were currently no projects ready for bidding at the moment.

Dwelling on the current status of the Jhajjar transmission system, the official said that construction work was going in full swing on both the substation and transmission line components. The project involves two 400kV double-circuit lines—Jharli to Kabulpur (65 km) and Kabulpur to Dibalpur (34 km) and two 440/220kV substations at Kabulpur and Dipalpur respectively. The official noted that the substations should be ready by October this year, while the transmission lines should be completed by December. The targeted date for commissioning of the project is January 2, 2012, he noted.

The Kalpataru-Techno consortium had won the project by quoting a (positive) grant of 93.90 crore payable by HVPNL, the grantor of concession. The project is being implemented through a special purpose vehicle Jhajjar KT Transco Ltd. The SPV received transmission licence from state regulator Haryana Electricity Regulatory Commission in October 2010 and also attained financial closure shortly thereafter.

Power from this project will be purchased by Uttar Haryana Bijli Vitaran Nigam Ltd (UHBVNL) and Dakshin Haryana Bijli Vitaran Nigam Ltd (DHBVNL) for which Haryana Power Purchase Centre (HPPC), the nodal agency for both the power distribution utilities, has signed a power purchase agreement with CLP India. For the purpose of power evacuation, HVPNL invited bids for the construction of the 400kV Jhajjar transmission line and associated substations, on DBFOT basis under the PPP mode. HVPNL initiated the bidding process in January 2009.

Private transmission players*
Entity	Project
Tata Power Company Ltd	CB
Reliance (ADAG) Group	IR
Sterlite Technologies (Sterlite Grid)	IR
Patel Engineering	IR
BS Transcomm	IR
Simplex Infrastructures Ltd	IR
JSW Energy Ltd	IS
Adani Power	IS
Kalpataru Power Transmission	IS
Techo Electric Engineering	IS
GMR Energy	IS
Emco Ltd	IS
Insolux Corsan (Spain)	IS
Cobra Instalaciones (Spain)	IS
Megha Engineering Infrastructure	IS
*Across all forms--JV, BOOM and DBFOT
CB=Cross Border, IR = Inter-regional, IS=Intra-State

Rajasthan: Rajasthan has the distinction of having bid out the maximum number of intra-state power transmission projects using the tariff-based competitive bidding route. According to information with Electrical Monitor, the northern state has finalized three projects and is on the verge of tying up another two. Rajasthan is also the first state to have deployed the tariff-based competitive bidding route for seeking private sector participation in developing power transmission infrastructure.

Speaking to Electrical Monitor, a nodal officer of Rajasthan Rajya Vidyut Prasaran Nigam Ltd said that by mid-September 2011, the developer for the 400kV Jhunjhunu-Jaipur (North) Line is expected to be finalized. The response to the bidding has been encouraging, he noted, without naming the bidders in the fray. The selected developer will build the line and associated substations, and operate it under the BOOM model. RRVPNL has already formed a shell company Pink City Transmission Ltd that will be transferred to the selected developer.

Officials of the Rajasthan state utility also indicated that work has begun on selecting a developer using the same BOOM model for a 400kV transmission system involving a new line between Jodhpur and Udaipur, a 400/220kV substation at Udaipur and associated works. This would be fourth BOOM project for RVPNL.

Very recently, Mumbai-based Emco Ltd was selected as the developer for a new Sikar-Nawalgarh-Jhunjhunu line with a substation at Nawalgarh. The project, the fifth BOOM venture of RVPNL, will involve 60km of single circuit lines at 220kV voltage, RRVPNL officials said. Subject to completion of formalities, Emco will be handed over the ownership of the shell company Shekhawati Transmission Service Ltd. The shell company will act as the transmission service provider. This project, it is learnt, marks Emco's entry in the power transmission segment as a developer. Emco is amongst the leading producer of transformers and a wide range of T&D equipment.

Meanwhile, GMR Energy expects to soon start physical construction work on two power transmission projects in Rajasthan that it had won in November last year under the tariff-based competitive bidding route. In an interaction with Electrical Monitor, Raaj Kumar, CEO - Energy, GMR Group, said that all development (pre-project) work including securing of clearances is complete and physical construction was expected to start in September. Regarding the transmission licence, Raaj Kumar noted that the public hearing for both the projects is complete and Rajasthan Electricity Regulatory Commission is expected to issue the licences soon. GMR Energy has taken over two special purpose vehicles formed by RVVNL - Maru Transmission Service Ltd and Aravali Transmission Service Ltd - that will act as transmission service providers. While Maru will develop the 400kV Bikaner-Deedwana-Ajmer line running 255 km, Aravali will be entrusted with the 150-km 400kV Hinduan-Alwar line. Both lines will also involve substations and associated infrastructure. GMR Energy is expected to invest 200 crore in the two projects that also mark the group's entry in the power transmission sector.

Uttar Pradesh: Uttar Pradesh has taken a big leap in attracting private investment in the power transmission sector. The northern populous state has finalized two large transmission schemes that will be developed with private investment, under the BOOM model. Speaking to Electrical Monitor from Lucknow, a senior official of Uttar Pradesh Power Transmission Company Ltd (UPPTCL) explained that while one project has been awarded to Isolux Corsan, a Spanish infrastructure-centric company, the other has been clinched by a consortium of Cobra Instalaciones (also of Spain) and Hyderabad-based Megha Engineering & Infrastructures Ltd. "This is the first time that 765kV transmission lines will be built in Uttar Pradesh, at the state level," the official elaborated. The total investment in the two projects exceeds 1,900 crore.

The project awarded to Isolux Corsan involves developing the 765kV single-circuit Mainpuri-Bara Line, an air insulated switchgear (AIS) substation Mainpuri and associated works. The project will have an estimated 1,600 km of high-voltage transmission lines facilitating power transfer worth 4,600 mw from upcoming generation plants in eastern Uttar Pradesh. The concessionaire was selected through the competitive tariff-based bidding route. UPPTCL has created a shell company South East U.P. Power Transmission Company Ltd that will be transferred to Isolux Corsan. The developer will build and operate the project under a concession period of 37 years and six months.

PPP in power transmission is a win-win situation

— P.P. Gupta, Managing Director, Techno Electric Engineering Company Ltd Techno Electric Engineering Ltd, in consortium with Kalpataru Power Transmission, has been awarded an intra-state power transmission line on DBFOT basis in Haryana. P.P. Gupta discusses the project and explains why Haryana's model is worth emulating by other states. Tell us about the SPV formed between Techno Electric Engineering Co Ltd (Techno) and Kalpataru. The transmission project at Jhajjar, Haryana is the first of its kind PPP project in the country. Techno Electric is working on the project along with Kalpataru Power Transmission Ltd (KPTL). The project is being carried out by an SPV, Jhajjar KT Transco Pvt Ltd in a 51:49 Joint Venture between Kalpataru & Techno. It is the first transmission project to get VGF (viability gap funding) support from the Centre. The total project cost is 440 crore with Techno putting in 38 crore as equity. The VGF provided by the central government is 94 crore. We understand that this marks Techno's entry in the power transmission business as a developer. Techno has a rich experience in the power sector with more than three decades of existence, participating in more than 50 per cent of the nation's power capacity and national grid in one capacity or the other. Techno recognized the need for having an efficient transmission infrastructure in the country in view of growing demand for power and the huge T&D losses in the sector. Growing priority to reduce transmission losses through upgradation and building new capacities made Techno enter the transmission business in 2010. What is the project scope? Techno Electric in consortium with KPTL has been awarded the project to design, build, finance operate and transfer (DBFOT) with a concession period of 25 years (extendable by 10 years) a 400kV, 100 km long power transmission link, connecting two substations at Rohtak and Sonepat in Haryana. Techno will do EPC, operations and maintenance work for the substation part of the project. What is the broad current status of the project, and what is the envisaged completion date? This unique 440 crore project is ongoing in a progressive way. IT will be completed in a record time of one year and is set to commission by December 2011. Do you think, over the years, power transmission will attract as much enterprise and equity as power generation is currently doing? The Haryana Government introduced a pioneering PPP model with viability gap funding for the establishment, operation and management of a transmission link, the first of its kind in India. This business segment is attractive from a number of perspectives as it entails design-build-financeoperate- transfer rights resulting in a wider revenue stream. The Haryana government has been engaged as a consultant by other states wanting to replicate this model. We believe other states will also follow the similar route of building transmission network. The 18th Electric Power Survey (EPS) Committee chaired by the Central Electricity Authority recommended all-India T&D losses to be brought down from 24.15 per cent to 17.09 per ent by the end of the XII Plan and further reduced to 14.17 per cent by the end of the XIII Plan. To reduce the losses we need to upgrade our existing transmission network and build new network. Building network under PPP model is a winwin situation for everyone and would attract more enterprise and equity going forward. Please summarize Techno's future plans in power transmission. Techno plans to add one transmission line to its portfolio annually, resulting in a total of five projects by the end of the XII Five- Year plan.

The project awarded to the consortium of Cobra and Megha Engineering is equally significant. It will involve setting up of the 765kV Mainpuri-Hapur and Mainpuri-Greater Noida Line and two 765/400kV substations at Hapur and Greater Noida. In all, the project will entail building of nearly 900 km of transmission lines and at least six substations, with an investment of over 800 crore.

The UPPTCL official said that the formal concession agreements with the selected developers will be signed in the coming weeks. The concessionaires are also expected to enter into transmission service agreements with distribution utilities of Uttar Pradesh, to whom power will be sold.

PRIVATE SECTOR OPTIMISTIC
Private sector participation in power transmission is slowly making a beginning. What is inspiring is that private participation has been noticed in all types of power transmission projects—inter-regional, intra-state and even cross border. An estimated fifteen entities, including consortium partners, are currently involved in private transmission infrastructure. At one end of the spectrum there are large players like Reliance Power Transmission (Reliance ADA Group) and Sterlite Technologies that are singly implementing inter-regional schemes, and at the other there are medium companies like Simplex Engineering, BS Transcomm, Emco, Techno Engineering and Kalpataru Power Transmission that have taken the consortium route. Several PPP modes have been harnessed—joint venture route, DBFOT and BOOM. It is very clear that opportunities exist for all developers depending on their financial strength, execution capabilities and risk appetite.

Private sector players are generally optimistic about their power transmission forays; this was the overall reaction conveyed by some transmission line developers that Electrical Monitor got in touch with. These developers related to both intra-state and inter-regional lines. According to Raaj Kumar, CEO Energy, GMR Group, "Private participation in transmission sector has started off well and outlook for greater role in future is positive." GMR Group is implementing two intra-state projects in Rajasthan on BOOM basis.

P.P. Gupta, Managing Director, Techno Electric Engineering Ltd, is very encouraged by the DBFOT mode. In consortium with Kalpataru Power Transmission, Techno is implementing a power transmission line in Haryana structured on this mode. In an interaction with Electrical Monitor, P.P. Gupta noted, "Haryana has introduced a pioneering PPP model with viability gap funding for the establishment, operation and management of a transmission link, the first of its kind in India. This business segment is attractive from a number of perspectives as it entails design-build-finance-operate-transfer rights resulting in a wider revenue stream." (See "PPP in power transmission is a win-win situation"). Gupta also feels that other states might be inspired to toe Haryana's line.

Rajesh Agarwal, Managing Director, BS Transcomm also exuded optimism on private sector participation in power transmission. He noted that the commitment of the Indian government towards the role of private participation is commendable and it is evident with the inclusion of private sector players in tariff-based competitive bidding for interstate transmission lines. Commenting on the need for private sector participation, Agarwal noted, "The ambitious plans of the government of adding 1,00,000 mw of power generation capacity during the XII Plan needs adequate transmission infrastructure and private sector can play a pivotal role towards establishing a power evacuation infrastructure. A number of transmission projects in different regions have earlier been awarded to successful private bidders and the further development of new projects leveraging the strength of private sector will help in strengthening power transmission system in the country and introduce competitiveness in this sector benefiting the end user."

The government could do well to assist the private sector, Agarwal noted, explaining, "Inclusion of transmission business under special infrastructure similar to roads, ports could pave way for addressing challenges such as right of way and offer long term financing methods, ensuring better returns on equity for private developers."

Sterilte Technologies Ltd, the world's largest manufacturer of power conductors, is now emerging as a leading power transmission developer with three inter-regional lines including some with 765kV technology. Pravin Agarwal, Whole-time Director, Sterlite Technologies Ltd, is also upbeat on the prospects of intra-state line. Agarwal notes, "Given the huge transmission capacity which is required to be built over the next 5-7 years, intra state grid strengthening would assume the same importance as inter state grid strengthening. We believe that intra state projects do not suffer any drawbacks as compared to inter-regional projects. The state governments need to be more proactive in identifying and putting up more transmission projects for competitive bidding."

EPILOGUE
Looking at PPP in intra-state transmission lines so far, one can only say that a beginning has been made. The overall progress seems highly incommensurate with the potential. To be best of Electrical Monitor's knowledge, only four states - Maharashtra, Haryana, Rajasthan and Uttar Pradesh - have made tangible progress. The list should have been bigger considering that several progressive states are nowhere close to even making a beginning. As would be case in any PPP project, there is never a dearth of private capital or enterprise. It is the ability of the government to create a shelf of bankable and profitable projects, and quickly move towards the bidding process. In this context, the progress recorded by these four states reflects their proactive attitude; it is not only about fulfilling inadequacy in power transmission infrastructure.

The need for private sector participation in power transmission cannot be overstated. There is tremendous opportunity at all levels -- inter-regional lines, intra-state lines and even cross-border lines. Over the past decade, private sector has done well in terms of setting up power generation capacity. Going forward, an increasing proportion of India's new power plants are expected from the private sector. The same culture must permeate to power transmission; the sooner the better.

Despite there being only six-odd PPP projects so far awarded for intra-state projects, there is an interesting observation— the advent of foreign investment. Isolux and Cobra, both Spanish infrastructure companies, have bagged two large power transmission schemes in Uttar Pradesh. That power transmission, even in its early years of privatization, is finding favour amongst international investors is a positive augury.

Private participation can bring much needed technological advancements. Left to themselves, state transmission utilities would prefer scaling up technology in degrees. However, private players would tend to adopt advanced technology— as it is linked to their financial returns from the project—from the very outset. A case in point is EHV lines. Maharashtra and Uttar Pradesh will see the deployment of energy-efficient 765kV lines in some PPP projects awarded. This is a major achievement given that the highest voltage seen in stateowned transmission lines thus far is 400kV.

The existing policy framework and guidelines on PPP allows for several models for state transmission utilities to choose from. States can go for the joint venture route, DBFOT model or even the tariff-based competitive bidding route. State transmission utilities need to be innovative in structuring their projects using the optimum PPP model.

As inter-regional lines get build, intra-state power transmission will need to match pace. State power transmission utilities will need to take a very proactive role in involving significant private sector participation. Sooner or later, private sector role will have to emerge in intra-state power transmission. State government transmission utilities will benefit from proactive measures like taking on the role of a nodal agency to identify, structure and bid out projects. Tariff-based bidding seems to be the way forward. Effective January 5 this year, the power ministry has mandated that all inter-regional power transmission lines will have to be awarded on tariff-based bidding route. This philosophy should trickle down to intra-state lines in future. If state transmission utilities initiate the PPP culture—even while it is not mandatory as of now—the movement to tariff-based bidding would be easier. It is also believed that tariff-based bidding can contribute to bringing down power transmission costs. Utilities have so far used the "cost plus" method, which generally means that transmission tariffs are worked out as a "mark up" over the transmission line cost. Hence any cost escalation would be reflected in the power tariffs. In the tariffbased bidding mode, the tariffs are decided upfront, and are hence insulated from vagaries of project cost escalations.

Private sector participation in intra-state power transmission lines is definitely the way forward. How rapidly one moves into this regime depends directly on how proactive and how involved state power transmission utilities choose to be in ushering the new regime.

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