The domestic power transmission segment is expected to attract investments worth Rs 1.8 lakh crore in the next five years, according to a report by rating agency ICRA.
It said evacuation infrastructure for renewable energy (RE) projects will drive investments in the power transmission segment.
"ICRA expects an investment of Rs 1.8 trillion (Rs 1.8 lakh crore) over the five-year period from FY21 (financial year 2020-21) to FY25 in the power transmission segment at an all-India level, driven by evacuation infrastructure for RE projects," the rating agency said on Friday in the report.
It added that in line with a shift in policy focus from conventional sources (coal and gas) to renewable power sources (wind and solar), the focus of the transmission segment is towards augmenting infrastructure for evacuation of power generated by RE projects.
Sabyasachi Majumdar, group head and senior vice-president (corporate ratings) of ICRA, said the Centre has lined up 14 transmission projects under the tariff-based competitive bidding (RBCB) route for evacuating power from 25-gigawatt RE projects.
The government has also lined up another six projects in the intra-state segment, providing healthy pipeline for private sector players, he added.
There is likely to be a slowdown in electricity demand and investments in the sector in 2020-21 amid the Covid-19-induced disruption but recovery is expected from 2021-22 onwards, he said.
ICRA said the private sector's share is expected to witness a healthy growth over the next four-five years, while Power Grid Corporation of India Ltd (PGCIL) and other state transmission utilities are likely to remain major players in the power transmission segment.
On the issues in the segment, the agency said, "The key challenge for the winning bidders under the TBCB route has been delays in execution, mainly because of delays in securing right of way, forest clearances and re-routing requirements in some cases."
It added that this, in turn, results in cost overruns, thereby putting pressure on the return and debt coverage metrics for the developers. "The median delay for projects awarded under the TBCB route has been about 8.5 months."
Girishkumar Kadam, sector head and vice-president (corporate ratings) of ICRA, said the lockdown restrictions during the first quarter of the current fiscal and consequent constraints in terms of labour availability are likely to result into delays by 3-5 months for under-implementation transmission projects. He added that it will lead to cost overrun for such projects.
As a result, availability of relief under force majeure clause from the appropriate regulatory commission would be important for such projects, he said.
The lockdown induced by the Covid-19 pandemic since March 2020 led to an adverse impact on the finances of distribution utilities, leading to delays in payments to power generation and transmission companies, he added.