AESL says Rs 1.4 lakh crore pipeline has wider drivers

Adani Energy Solutions says the roughly Rs 1.4 lakh crore national transmission tender pipeline is not dependent solely on renewable generation. AESL management cited urban electricity demand, more than 100 gigawatts of thermal additions, pumped-storage projects and state-network upgrades as separate drivers, while Mumbai electricity consumption rose by about 11% to 12% this year.

What is driving AESL's transmission opportunity?

AESL says transmission demand is being driven by several generation and consumption requirements, rather than solar deployment alone. Raj Kumar Jain said states are upgrading their networks to absorb rising electricity demand, while cities are seeking solutions to bring more power into consumption centres. He pointed to demand in Mumbai and Maharashtra, saying similar needs are being replicated in other metropolitan areas.

Management also identified more than 100 gigawatts of thermal capacity in a third phase and pumped-storage projects, or PSPs, as further sources of transmission demand. The company did not quantify the share of the Rs 1.4 lakh crore tender pipeline attributable to thermal generation, urban demand, storage, renewables or state-grid upgrades. Its point was that each category requires network capacity through a different mechanism.

AESL said a possible change in solar deployment would not mechanically determine the transmission pipeline. Responding to a question on Chinese restrictions on solar technology exports, Jain said AESL did not expect a meaningful slowdown in Indian solar, citing manufacturing capacity available under Approved List of Models and Manufacturers, or ALMM, schedules. He nevertheless described solar as only one component of the wider transmission market.

Would thermal additions require less transmission than renewables?

AESL says brownfield thermal expansions still require new transmission capacity because existing lines were designed for the plant's original generation level. Kandarp Patel said that adding capacity at an existing site requires incremental evacuation infrastructure, even where transmission lines are already present. This differs from the suggestion that a brownfield location can use its original network without further additions.

Management also rejected the view that thermal additions would necessarily favour 400-kilovolt, or kV, lines over 765 kV or high-voltage direct current, or HVDC, systems. Patel said two added thermal units can represent 1,600 megawatts, and several large projects in one vicinity may require an HVDC-like solution. He referred to a Government of India-approved east-to-north transmission corridor valued at more than Rs 80 thousand crore.

That distinction frames transmission requirements around the volume and concentration of new generation, not just generation technology. AESL's management said clusters of thermal capacity can require large-scale evacuation networks, while urban demand can require capacity near consumption centres. It did not provide project-level evidence that every brownfield expansion would require HVDC infrastructure.

How large is AESL's current transmission tender pipeline?

AESL puts the country-level transmission tender pipeline at about Rs 1.4 lakh crore, spread across central and state authorities. Jain said the current tender mix tilts towards central projects and includes some HVDC schemes. He described the interstate and intrastate split as evolving rather than providing a fixed percentage allocation.

The company clarified that Satara and Pendurthi, the two projects it won in the previous quarter, are interstate projects. Management made that correction after an analyst referred to a recently won intrastate project. AESL did not disclose the project values of Satara or Pendurthi in the supplied discussion.

Management expects more state-side opportunities as networks are expanded around rising urban and industrial demand. Jain said the recently approved GEC 2 category is more focused on intrastate networks. Patel cited data centres, manufacturing facilities and expanding cities as potential load-centre drivers, with Mumbai consumption rising by about 11% to 12% this year.

Are intrastate projects more profitable for AESL than interstate work?

AESL management said intrastate projects typically offer a somewhat better return on equity, or ROE, than interstate projects. Patel attributed the directional difference to the state regulatory landscape compared with the central regulatory framework. He said AESL would select projects it considers suitable rather than treating the location of a project as the sole bidding criterion.

The comment sits alongside a central-heavy tender mix today and management's expectation of more state opportunities over time. AESL did not disclose a target ROE or internal rate of return, or IRR, for either intrastate or interstate projects. The size of the return difference therefore cannot be calculated from the call.

The potential state-market expansion is tied to demand-led investment around cities, data centres and manufacturing sites. By contrast, central tenders include large schemes such as HVDC corridors that can link distant regions or generation clusters. AESL's distinction is between projects built near consumption centres and larger national network projects, rather than between renewable and non-renewable transmission alone.

What transmission spending and capitalisation has AESL planned?

AESL expects to incur an additional Rs 6 thousand crore of transmission capital expenditure, or capex, in the second half of this year, followed by Rs 18 thousand crore to Rs 19 thousand crore in FY28. Ashok Jagetiya described these as the projected transmission capex pipeline. The stated spending plan provides a construction timetable alongside the Rs 1.4 lakh crore market opportunity.

Management expects capitalisation, meaning additions to gross block, of about Rs 8 thousand crore to Rs 9 thousand crore this year. Patel said WRSR, Khavda Phase III and Halvad alone could account for close to Rs 9 thousand crore. Capitalisation is expected to be about Rs 10 thousand crore next year, before increasing in subsequent years as HVDC projects are commissioned in larger increments.

The capitalisation schedule differs from the capex schedule because spending and project commissioning occur at different stages. Management specifically linked the larger increase after next year to commissioning of HVDC projects, which it said would add capitalisation in lumpier increments. It did not give commissioning dates for WRSR, Khavda Phase III, Halvad or the HVDC projects discussed.

Conclusion

AESL's central argument is that the Rs 1.4 lakh crore tender market has multiple transmission drivers: renewable evacuation, more than 100 gigawatts of thermal additions, PSPs, state-network upgrades and rising urban consumption. The company also draws a distinction between a central-heavy tender mix now and a potentially larger intrastate opportunity near growing city and industrial load centres.

The next disclosed milestones are Rs 6 thousand crore of additional capex in the second half of this year, Rs 18 thousand crore to Rs 19 thousand crore in FY28, and capitalisation of about Rs 10 thousand crore next year. Management also expects capitalisation to rise further after that as HVDC projects are commissioned, while the future split between central and state tenders remains unresolved.