Framework Agreement! India Grid Trust inks largest transmission deal with Sterlite Power

India Grid Trust, India's first power infrastructure investment trust (InvIT), on Saturday signed a share purchase agreement to acquire NER-II Transmission Limited from Sterlite Power as part of the Framework Agreement.

The indicative value of the acquisition is Rs 4,625 crore and would boost IndiGrid's AUM (asset under management) by 34 per cent to over Rs 20,000 crore ($2.8 billion).

Post completion, the platform's asset portfolio would consist of 13 power transmission projects, with a total network of 38 power transmission lines and 11 substations extending over 7,570 circuit kilometers and 13,350 MVA in 17 Indian states and 1 Union Territory.

NER-II is part of Inter State Transmission Scheme (ISTS) network, and was awarded on a Build, Own, Operate, Maintain ("BOOM") basis with a contractual period of 35 years. The project has 11 elements including two substations of 1,260 MVA capacity and four transmission lines extending over 830 circuit kilometres. The asset spans across Assam, Arunachal Pradesh and Tripura and is of strategic importance for the delivery of power in one of the toughest regions in the country. This project will strengthen the power transmission network in the North Eastern States and address the of transmission, sub-transmission, and distribution system needs of the region.

IndiGrid had signed a framework agreement in April 2019 with Sterlite Power for acquisition of NER-II upon commissioning. This transaction is expected to be consummated during Q4 FY21, subject to unitholders' approval, regulatory approvals, and other customary closing adjustments. The acquisition will be funded through a combination of internal accruals, debt, equity proceeds from the preference issue done in May 2019 and forthcoming rights issue. Post this acquisition, the net debt/AUM would stand at 64 per cent.

Commenting on the acquisition, Harsh Shah, Chief Executive Officer of IndiGrid, said: "We are excited with acquisition of NER-II which is one of the largest acquisitions in Indian power transmission sector in India. NER-II fits well with our strategy of focusing on operating assets with long term cash flows and minimal counter party risk. This acquisition would be DPU accretive and augment our recent increase of DPU to Rs 12.40 per annum for a considerable period."

Commenting on the transaction, Pratik Agarwal, Managing Director, Sterlite Power said, "This mega transmission project will help deliver reliable power for 5.3 crore people in India's north eastern region."

IndiGrid has acquired Rs 8,300 crore assets since the last capital raise including Rs 7,100 crore of Framework/ROFO projects from Sterlite Power and first cost-plus transmission asset from Reliance Ifrastructure. It has also announced its foray into the renewables sector with the planned acquisition of 138 MW solar asset. Separately, in FY21, KKR was inducted as a sponsor following the Rs 2,510 crore preferential issue in 2019 which was subscribed by KKR and GIC amongst other marquee investors. KKR has also acquired majority interest in the Investment Manager