New Delhi: Power trader PTC India Ltd may jointly enter the electricity distribution business with CESC Ltd as part of its diversification strategy.
The PTC India “management is evaluating the proposal. We want to get into electricity distribution either through the franchise route or through the distribution licences,” said Deepak Amitabh, chairman and managing director. CESC is the RP-Sanjiv Goenka group’s flagship electricity generation and distribution firm.
“We are looking at a larger group as a business case. It’s not that we want to enter with only CESC. Whether we can go with A, B or C is being evaluated,” Amitabh said. “The viability of the business proposal is being ascertained.”
Another person aware of the situation confirmed the development. A CESC spokesperson declined to comment.
CESC, which currently distributes power in Kolkata and its suburbs, earned Rs.6,024 crore in consolidated revenue in fiscal 2012.
Of this, Rs.4,782 crore came from its power business while the rest came from its subsidiary Spencer’s Retail Ltd.
PTC has signed power purchase agreements (PPAs) of around 14,402 megawatts (MW). India has a power generation capacity of 207,876MW.
However, PTC’s earlier strategy of entering the coal import market by securing long-term supply deals is yet to produce results.
PTC’s diversification plans stem from the 4 paise-cap on each unit of electricity traded.
PTC’s electricity distribution strategy also comes in the backdrop of the government’s ambitious plan to bail out beleaguered state electricity distribution companies, or discoms, through restructuring their short-term loans, which will help infuse capital into a sector that desperately needs funds, and boost the net worth of the state electricity boards (SEBs).
Mint reported on 25 September that Indian bank loans outstanding to the power sector rose 17.2% to Rs.3.4 trillion, as of July, from Rs.2.9 trillion in the year earlier, according to Reserve Bank of India (RBI) data.
“Due to the plea by many companies, the ministry of power has agreed to include arrears from short-term trade in the recently announced SEB restructuring. UP (Uttar Pradesh) and TN (Tamil Nadu) are expected to avail the bailout package; however, more clarity will emerge by March 2013 as this includes a budgetary provision for the respective states and needs legislative consensus,” Antique Stock Broking Ltd said in a 5 December report.
The cumulative losses of the distribution utilities increased to Rs.1.9 trillion as of March 2011 from Rs.1.22 trillion in the year earlier. Interestingly, according to a study conducted by energy consulting company Mercados EMI Asia for the 13th Finance Commission, the projected losses in 2014-15 were expected to be Rs.1.16 trillion.
“Unlike in the past, PTC has now adopted a cautious approach while building the short-term trading portfolio and it executes such trades only when the SEBs provide a letter of credit,” added IIFL Institutional Equities in a 9 November report.
Analysts are upbeat about PTC, with the company reporting a 16.9% growth in revenue for the second quarter after five consecutive quarters of revenue decline.
“Outstanding from TN has decreased from INR 8bn (billion) to INR 3.7bn in 2QFY13 and PTC expects this to be repaid fully by Mar’13. Arrears from UP stands at INR 4.5bn and is expected to be repaid only in FY14e,” the Antique Stock Broking Ltd’s report added.
PTC shares rose 3.22% to Rs.76.90 on Thursday on BSE. CESC rose 1.66% to Rs.324.40. The benchmark Sensex rose 0.49% to 19,486.80 points.