Equity Lock-In Period Criteria Relaxed for Transmission Service Providers

The Ministry of Power (MoP) has issued amendments to the ‘equity lock-in period’ given in the standard bidding documents to select transmission service providers for interstate transmission system (ISTS) projects.

As per the amendments, the selected bidder’s aggregate equity shareholding in the special purpose vehicle (SPV) should not be less than 51% up to one year after the project’s commercial operation date (COD). Earlier, the selected bidder’s aggregate equity share in the SPV was to be at least 51% up to two years after the commissioning date and 26% for three years after that.

This amendment would help investors looking for an exit by selling their projects in the secondary market as they do not have to wait for 2-5 years from the point of award.

In case the selected bidder is a consortium, any member (other than the lead member) will be allowed to divest its equity only if the remaining members hold the minimum equity. Under the existing provision, any member was allowed to divest equity if the remaining members’ (including the lead member) aggregate share was not less than 26% for three years after the first two years, during which the members were required to hold 51% equity share in the SPV.


Further, if the equity is held by the affiliate or the parent company, such an entity would be permitted to transfer its shares to another affiliate. If the affiliate or the parent company fails to fulfill the above criteria, the shares were to be transferred to another affiliate company.

The above clause will be applicable if the bidding company or the consortium’s aggregate shareholding in the SPV’s paid-up share capital is at least 51% for one year after the project’s commissioning. The consortium’s lead member should have an equity share of 26% for one year after the project’s commissioning. Earlier, the aggregate shareholding of the bidding consortium was at least 51% up to two years, and the lead member was required to hold 26% of shares for up to five years after the commissioning of the project.

Bidder’s aggregate equity shareholding should not be less than 51% for one year after the project’s commissioning, the new clause said. If the lead member of the consortium or the bidding company holds equity through an affiliate or parent company, these restrictions will apply to such entities. The lead member of the consortium will continue holding 26% equity up to one year from the commissioning date. Earlier, the time was for five years after the commissioning date of the project.

Recently, the Ministry for New and Renewable Energy (MNRE) issued made similar amendments to its guidelines for the tariff-based competitive bidding process to procure power from grid-connected solar projects. The amendments addressed the minimum period of controlling shareholding to be maintained by the developers. Earlier, Mercom had written about the developers’ concern that the timeline to maintain the controlling shareholding (51%) for three years was too long and unreasonable, restricting short-term equity investment in the sector.

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