REC's Mekhali Venture: Pioneering India's Grid Modernization Through Smart Bidding Reforms

India’s power sector is undergoing a quiet revolution, driven by regulatory reforms that are unlocking private capital and modernizing the nation’s energy backbone. At the forefront of this transformation is REC Limited, a Maharatna public sector enterprise, which has launched Mekhali Power Transmission Limited, a Special Purpose Vehicle (SPV) designed to address critical infrastructure gaps in Karnataka’s grid. This move exemplifies how strategic SPV structures, paired with revised Tariff-Based Competitive Bidding (TBCB) frameworks, are redefining opportunities for investors seeking exposure to high-growth, regulated infrastructure plays.

The TBCB Catalyst: A New Playbook for Grid Resilience

The Mekhali project is not merely a substation upgrade—it is a blueprint for how India’s power sector can attract private investment while enhancing grid stability. The SPV model, enabled by TBCB reforms introduced in February 2025, allows REC to bypass bureaucratic bottlenecks by outsourcing project execution to the highest bidder. These reforms, which now mandate stricter compliance on capacity utilization factors (CUF), shorter PPA signing timelines, and insurance surety bonds, reduce risks for both investors and utilities.

The Mekhali SPV’s mandate is clear: to replace the overburdened Narendra substation in Dharwad with a 400 kV substation at Mekhali. This will alleviate bottlenecks in Belagavi and Bagalkot districts, enabling smoother power evacuation and integration of renewable energy. Crucially, the project’s 24-month completion timeline—standard for TBCB projects—compresses traditional delays, offering investors a predictable return horizon.

Why Investors Should Pay Attention to REC’s Play

For investors, the Mekhali venture is a gateway to three compelling trends:

1. Scalability of SPV Models: Karnataka’s adoption of TBCB for intra-state projects marks a first, but it won’t be the last. States like Maharashtra have already deployed similar frameworks for seven Intra-State Transmission System (InSTS) projects, with RECPDCL (REC’s subsidiary) acting as Bid Process Coordinator (BPC). This model’s success in Karnataka could accelerate its replication nationwide, positioning REC as a critical partner for private developers.

2. Renewables-Grid Synergy: The substation’s design directly supports Karnataka’s renewable energy ambitions. By 2030, the state aims to generate 20 GW of solar and 5 GW of wind power. The Mekhali substation’s capacity to handle renewable inflows ensures that this green power reaches consumers reliably—a critical factor in India’s push to achieve 50% non-fossil energy by 2030.

3. Regulatory Tailwinds: The February 2025 TBCB amendments, which introduced cybersecurity standards and GPS-enabled weather stations, signal a shift toward modernized grid infrastructure. Projects like Mekhali, which adhere to these guidelines, are future-proofed against emerging risks like cyberattacks and extreme weather.

The Investment Case: A Gateway to India’s Energy Future

The Mekhali SPV’s structure is a masterclass in risk mitigation. By transferring the SPV to the winning bidder post-bidding, REC limits its financial exposure while retaining strategic influence. For investors, this model offers:
- Predictable Returns: TBCB’s tariff-based framework ensures revenue certainty for successful bidders.
- Low Operational Risk: REC’s role as BPC guarantees transparency and adherence to regulatory standards.
- Upside in Scalability: The Hampapura GIS substation project (also managed by RECPDCL) demonstrates how this model can be replicated, creating a pipeline of high-margin opportunities.

Conclusion: A Strategic Bet on Grid Modernization

India’s power sector is at an inflection point. The Mekhali venture is not just about building a substation—it is about proving that TBCB reforms can mobilize private capital to modernize the grid, support renewables, and deliver returns. For investors seeking a regulated, low-risk exposure to India’s energy backbone, Mekhali represents a rare opportunity to back a scalable model with clear tailwinds.

The clock is ticking: with bidding processes underway and a 24-month completion target, now is the time to act.