CERC Grants In-Principle Approval For Security Interest In PPTL’s Rajgarh SEZ Transmission Project

Pachora Power Transmission Limited (PPTL), holding a transmission license under the Electricity Act, 2003, sought the Central Electricity Regulatory Commission’s (CERC) approval for creating a security interest over its project assets. This request pertained to financing the development of the transmission system for evacuating power from renewable energy projects in Madhya Pradesh’s Rajgarh SEZ Phase II. The project’s estimated cost is ₹408.16 crore, with ₹300 crore financed through loans from IndusInd Bank, for which Axis Trustee Services Limited acts as the security trustee.

PPTL requested CERC’s approval under Section 17 of the Electricity Act to hypothecate and mortgage its assets as part of its financing agreements. These agreements involve creating first-charge security over movable and immovable assets, including tangible assets, receivables, and rights under project documents, among others. Such security measures aim to mitigate credit risks for lenders by ensuring enforceable rights over the pledged assets in case of defaults.

The petition detailed the necessity of this arrangement under the Transmission Service Agreement (TSA) and highlighted compliance requirements with the Act. Article 15.2.2 of the TSA permits encumbrances over project receivables and assets, subject to prior regulatory approval. Additionally, Section 17 mandates CERC’s consent for any license transfer or asset transaction.

CERC, after analyzing the petition, acknowledged the importance of financial security in capital-intensive transmission projects. It granted in-principle approval for the creation of a security interest, conditional on submitting further documentation and securing specific approvals for any potential assignment of the transmission license. CERC emphasized the need for due diligence in case of nominee assignments, ensuring their technical and operational capability to handle the project.

With this approval, PPTL can proceed with securing its financing while adhering to regulatory safeguards. This decision underscores the regulatory body’s role in facilitating project financing while safeguarding public interest and ensuring compliance with legal and operational standards.