Under the first option, a 100 per cent subsidiary of PowerGrid would be formed and selected assets of the corporation would be transferred to this company. The capital structure of the company would be drawn up based on liability allocation mechanism after a detailed analysis of the asset and liability structure of PowerGrid is carried out. A stake in this company would then be offered to the private sector.

The second option calls for splitting PowerGrid into more than one entity and sale of equity in one of the entities.

Under this option, the existing financial statements of PowerGrid would be disaggregated between one company consisting of assets and liabilities relating to the identified sale and another company containing the balance assets and liabilities. As per the report, once the newentities are formed, a strategic stake in one of such entity could be offered to the private sector. Hence under this option, the government would directly offload its equity stake in the entities to the private sector entity. ICICI's third option is the sale of PowerGrid's assets along with transmission license to carry out the business. Under this option, identified transmission assets will be sold directly to interested parties without creating a separate entity. The assets would then be offered for sale along with the licence to carry out the transmission business but without any of the associated liabilities. The licence to operate the grid would still remain with PowerGrid under this option.

The fourth and the final option is the sale of assets to private sector, with PowerGrid retaining the licence to carry out the transmission business. It is suggested that PowerGrid could consider an option wherein an identified block of assets could be sold to the private sector operator with the license tooperate in a particular area being retained by Powergrid.

For this, ICICI has suggested that a suitable agreement can be entered into by PowerGrid with the private sector entity under which the former would pay the latter for usage of the asset. The private sector operator would be responsible for the maintenance of the asset, ensuring its availability. The license to operate the grid would still remain with PowerGrid.

While working out these options, ICICI has also listed the advantages and disadvantages of each of these options and has asked PowerGrid to discuss all these in detail with the power ministry before a final selection is made.For instance as per the first option, whereas even if PowerGrid forms a 100 per cent subsidiary, it will still have a say in the operation of the new company.

However, this option to corporatise and invite the private sector would be time consuming and may not adhere to the deadline set out by the government. Besides the allocation of liabilities done under thisoption may not be commensurate with the identified assets.

Similarly, whereas the second option will result in a direct interface between the government and the private investors besides the fact that the flow of transaction proceeds would be to government directly without PowerGrid as the go-between. However, the process and the basis for disaggregation would need to be decided and hence the process would be time consuming and may once again not adhere to the deadline set by the government for disinvestment.

The third option would although help in easy structuring of the transaction besides the fact that the realisation of monies from the transaction could be done within a reasonably short period of time. However, once the sale is completed, PowerGrid will have no control over the assets and corresponding liabilities would remain with PowerGrid. This would not only lead to an asset-liability mismatch but will also have an adverse impact on PowerGrid's future earnings.

While if Powergrid goes in for thefourth option, no licence sale is envisaged and hence PowerGrid retains full control over the operations. Moreover, this option will also provide ease in structuring the transaction and a quick recovery of proceeds. But at the same time, there is also a possibility of lower degree of interest from the private sector investors. Also the sale proceeds may be lower than in other options since the private party may perceive that PowerGrid would be in a better position to realise dues from SEBs than it itself could and also on account of access to funds from the Central Plan allocation. Besides, more adequate security mechanism would need to be provided to the private party in order to make the transaction saleable.