Proposed regulatory changes and tepid growth in project commissioning rate are the key risks faced by state-owned power transmission company Power Grid Corp of India (PGCIL), analysts said. The Central Electricity Regulatory Commission (CERC) proposing to lower the regulated return on equity (RoE) below 14% from 15.5% can dent returns, Axis Capital said in a recent note. The regulator\u2019s new proposed tariff structure also suggests returns to be contingent on the amount of electricity flowing through transmission networks, as opposed to the existing system of asset availability. This, if implemented, could have an impact on PGCIL\u2019s earnings, analysts at Edelweiss noted. PGCIL\u2019s core RoE declined 170 basis points year-on-year to 11.2% in the quarter ended June 30. The entire Rs 1.1 lakh crore worth of total projects in PGCIL\u2019s hand will be capitalised in the next two to three years, IDFC Securities observed. Of the total projects in hand, Rs 45,000 crore was bagged on cost-plus basis while orders for Rs 16,500 crore were won through tariff-based competitive bidding (TBCB). The remaining Rs 37,000 crore of projects are under the capital work in progress account. Power transmission projects are increasingly being awarded through TBCB, marking a shift from the traditional cost-plus regime. \u201cNew projects awarded remain a key monitorable for future capex as transmission projects typically have a gestation period of two-three years,\u201d Edelweiss said. Since 40-50% of PGCIL\u2019s capex is dependent on the capacity addition of its associated generation projects, \u201cany delay in these generation assets will cascade to a delay in PGCIL\u2019s project execution slowing its pace of growth\u201d, the agency added. Capex in Q1, FY19 was Rs 6,400 crore, 1.6% higher than in the corresponding period last fiscal. PGCIL\u2019s management expects total capitalisation of Rs 28,000 crore in FY19, which would be marginally higher than the Rs 27,900 crore capitalised in FY18. Capitalisation (including foreign exchange rate variation) grew at 4% y-o-y in Q1 of FY19, with the power transmission behemoth commissioning projects worth Rs 2,500 crore in the quarter. \u201cHistorically capitalisation has been lumpy; hence, we expect it to pick up in coming quarters,\u201d Axis Capital said.