Tariffs under the ISTS project TSAs, which contribute to the majority of our Portfolio Assets, are billed and collected pursuant to the PoC mechanism. Under the PoC mechanism, payments are made to a central payment pool and the proceeds are distributed proportionately to all transmission services providers. Any shortfall in collection of transmission charges by the CTU is shared on a pro rata basis by all transmission service providers. Payment securities in the form of a revolving letter of credit, a late payment surcharge of 1.25% per month for delay in payment beyond 60 days from the date of billing, pursuant to provisions of the project TSAs (and a late payment surcharge of 1.50% per month pursuant to the Sharing of Charges and Losses Regulations) and lack of alternate power infrastructure, deter beneficiaries from defaulting. This mechanism diversifies counter party risk, ensures a stable cash flow independent of asset utilization and provides payment security.
We have consistently been given a corporate credit rating of ‘CCA AAA/Stable’ by CRISIL, ‘IND AAA’/Stable by India Ratings and ‘ICRA AAA (Stable)’ by ICRA. Following the utilization of the Issue Proceeds, our aggregate consolidated borrowings and deferred payments (net of cash and cash equivalents) will not exceed 70% of the total value of our assets. The inter-state transmission projects are largely debt financed with a standard debt to equity ratio of 70:30, according to CRISIL. We have also made continuous distributions for the past three years.
Pursuant to the Framework Agreement, among the Sterlite Sponsor, the Trustee and the Investment Manager, IndiGrid had agreed to acquire GPTL, KTL and NER from Sterlite Sponsor through separate share purchase agreements, out of which 49% of GPTL (along with 100% economic ownership) has already been acquired from SGL4. KTL and NER have a transmission network of 9 power transmission lines of approximately 1,458 ckms and 3 substations, with a transformation capacity of 4,260MVA. KTL and NER are under various stages of development.
We benefit from the skills and experience of the board of directors and the management teams of our investment manager, IndiGrid Investment Managers Limited (formerly, Sterlite Investment Managers Limited), in investing and financially managing our power transmission and renewable energy assets for the beneficial interest of our Unitholders. Some of the members of our Investment Manager’s board of directors and management teams have extensive experience in the power transmission sector and have established track records in negotiating, structuring and financing investments in power transmission assets and financially managing these assets as well as governing similar trusts internationally.
The InvIT Regulations set out the statutory requirements for, among other things, the board composition of an investment manager, which promotes strong corporate governance in IndiGrid. The key features of our corporate governance structure are as follows:
