Why IndiGrid Has No Plans To Include Wind Projects In Its Portfolio

India Grid Trust, or IndiGrid, has added 1 gigawatt of solar assets to its portfolio, but the country's first infrastructure investment trust in the power transmission sector has no plans to include wind farms.

Solar projects are efficient and easier to maintain, even at a smaller scale of 100 megawatt, according to Harsh Shah, chief executive officer of IndiGrid. For wind projects to be efficient, they will have to be of 500 MW to 1 GW scale. However, that adds a lot of variability to the portfolio, he said.

"Our unitholders desire stable, predictable 'AAA' returns and that becomes difficult when wind generation varies materially quarter on quarter," he told NDTV Profit in an interview. "We are not looking to add wind projects to our projects portfolio at this point because... wind projects don't provide operating synergy."

In many cases, cashflow of wind projects' power purchase agreements were with state counterparties—or distribution companies—which are a notch lower than the central counterparties like Solar Energy Corp. and NTPC Ltd. "So, both for operating, variability and credit reasons, we would not like to enter into wind sector."

Both the transmission and solar assets provide predictable cashflows to unitholders. Hence, it is feasible to have 25% of the total assets as solar, according to Shah.

"We started with only transmission projects but realised that even solar projects, if they are from strong counterparties like SECI, Gujarat discoms and NTPC, they can provide superior risk-adjusted long-term returns to unitholders."

IndiGrid is able to utilise the current manpower and skillset to have operating and financial synergy for transmission and solar, the whole-time director said. "Our current cost of capital being relatively better than the market, it allows us to acquire assets at better price, giving our unitholders an additional yield."

The CEO highlighted that the acquisition of solar projects from strong central counterparties gave better returns to unitholders, without increasing the risk factor. "So, adding 25% of solar projects on integrated scale makes sense."

IndiGrid acquired the first 100 MW of solar projects in 2020, and then took time to prove the hypothesis for two years, it said. In the last one year, the company's solar assets have grown from 100 MW to 1,000 MW. Its assets under management are Rs 28,000 crore, out of which solar constitutes around Rs 5,500 crore or roughly 20% of the portfolio size.

IndiGrid is also bullish on battery storage projects and plans to add close to Rs 1,000 crore of assets in the next couple of years.