In a key development this month in an effort to privatise distribution, Tata Power has won the bids for two more discoms in Odisha. The company has received the letter of intent (LoI) for Western Electricity Supply Company of Odisha Limited (WESCO) and Southern Electricity Supply Company of Orissa Limited (SOUTHCO). With this, Tata Power will now own a 51 per cent stake in the two discoms. Earlier, in December 2019, the company had won the distribution licence for Central Electricity Supply Utility of Odisha (CESU), another Odisha discom.
Power Line takes a closer look at the recent development…
Win details
A consortium of India Power Corporation Limited and French government-owned power utility Electricite de France was the only other bidder for WESCO and SOUTHCO. However, its bid reportedly did not qualify technically.
With the win, Tata Power has received the LoI from the Odisha Electricity Regulatory Commission (OERC) for the distribution and retail supply of electricity in Odisha’s five WESCO circles and six SOUTHCO circles.
“It is a proud moment for us. We are thankful to the Odisha government and the OERC for giving us this opportunity. We are committed to providing reliable, affordable and quality power supply along with superior customer service, backed by innovative technology. We constantly strive to be the most preferred distribution company in the country. The success of our Delhi, Mumbai and Ajmer distribution operations, and improvements in central Odisha in a short span of time are winning the hearts of people in Odisha,” commented Praveer Sinha, chief executive officer and managing director, Tata Power, on securing the LoI.
Tata Power is also reportedly the only bidder left for North Eastern Electricity Supply Company of Odisha Limited (NESCO). The discom supplies electricity in the districts of Baleswar, Mayurbhanj, Keonjhar, Jajpur and Bhadrak.
New licences
The five circles of WESCO are Rourkela, Burla, Bhawanipatna, Bolangir and Bargargh, while the six circles of SOUTHCO are Ganjam City, Berhampur, Aksa, Bhanjannagar, Jeypore and Rayagada.
As per the conditions of the bid document, Tata Power will hold 51 per cent equity along with management control of the discoms, and state-owned Grid Corporation of Odisha will hold the remaining 49 per cent. The licence period for the two discoms will be 25 years. WESCO and SOUTHCO have a geographical spread of more than 47,000 square km each. The licence enables Tata Power to manage a network of more than 100,000 ckt. km for each of the utilities.
WESCO serves close to 2 million consumers with an annual input energy of 7,520 MUs, while SOUTHCO serves close to 2.3 million consumers with an annual input energy of 3,470 MUs. With the addition of the two discoms, Tata Power’s consumer base will grow to 10 million from the present base of 5.7 million, across Mumbai, Delhi, central Odisha and Ajmer. To recall, CESU has five electrical circles comprising the areas of Bhubaneswar (Electrical Circles I and II), Cuttack, Paradip and Dhenkanal, with a consumer base of 2.5 million.
During 2018-19, the four Odisha discoms had recorded a loss of Rs 15.39 billion, of which NESCO’s losses comprised only Rs 20 million. Tata Power has committed to make a capital expenditure of Rs 28.3 billion cumulatively between 2021-22 and 2025-26 on WESCO and SOUTHCO. Further, the company aims to reduce the aggregate technical and commercial losses of SOUTHCO from 35.3 per cent at present to 14.8 per cent, and of WESCO from 27.6 per cent to 9.1 per cent within 10 years.
Conclusion
Following the sale of Odisha’s discoms by the state government, the power distribution segment is now looking at the next set of bids for private participation with the kick-off of the union territories privatisation exercise in Chandigarh recently. Bids for Daman & Diu and Dadra & Nagar Haveli are also expected to be called shortly. Clearly, these developments herald new and promising changes for the power distribution segment, going forward.