New Delhi: Tata Power Co. Ltd. is among two bidders in the race to acquire Central Electricity Supply Utility of Odisha (CESU Odisha) in what would be the first such deal in nearly two decades in India’s power sector.

Feedback Energy Distribution Co. Ltd (FEDCO) and India Power Corp. Ltd have also placed a joint bid for the asset, the bidding companies and the manager to the sale told Mint.

The potential sale would be the first transaction since the 2003 privatisation of power distribution in Delhi. India Power is part of Kolkata-based Kanoria Foundation Group while FEDCO is a subsidiary of Feedback Infra Pvt. Ltd.

Tata Power confirmed its bid for CESU Odisha in an emailed reply to a query but did not give details.

Confirming its bid, Devtosh Chaturvedi, managing director of FEDCO, said in an email, “We are waiting to hear from OERC (Odisha Electricity Regulatory Commission) on the next step post submission of our bid."

A spokesperson for India Power said the company “remains keen to grow its core business of electricity distribution and will continue to explore opportunities across the country".

Odisha’s energy secretary Hemant Sharma didn’t respond to phone calls or to a message left on his cellphone.

CESU Odisha supplies power to around 2.2 million consumers in Bhubaneswar, Cuttack, Paradeep and Dhenkanal. PricewaterhouseCoopers is managing the sale.

“The transaction of CESU which saw bid submission by a couple of bidders is reaching an important phase with evaluation process to start by end of this month," said Sambitosh Mohapatra, partner, PwC India.

Only one bidder had emerged in an earlier attempt to privatise CESU Odisha, forcing cancellation of the process. The Central Electricity Supply Company of Odisha Ltd (CESCO), CESU Odisha’s forerunner, was privatised in 1999 with the licence granted to US-based electricity producer AES Corp. The OERC revoked the licence in 2005.

Power distribution companies have so far been the weakest link in the electricity value chain. Poor payment records of state-owned discoms have not only adversely affected power generation companies, but have also contributed to stress in the banking sector.

The interest in CESU Odisha, which has an annual revenue of about 3,200 crore, comes against the backdrop of the National Democratic Alliance government’s proposed power sector reforms such as implementing the direct benefit transfer (DBT) scheme in the sector for better targeting of subsidies and promoting retail competition. It plans also to rationalise electricity tariffs categories, simplify tariff slabs and make them more competitive.

The government is also focusing on improving electricity access through schemes such as an ambitious plan to provide induction stoves to poor households in rural and urban India and establishing a pan-India power distribution firm.

According to draft amendments to the Electricity Act 2003, the government is trying to offer a wider choice by promoting competition in power distribution and addressing issues with power purchase pacts.

The government has been pushing for separating the so-called carriage and content operations of existing power distribution companies, and electricity supply business.

The government is also working towards ensuring stable electricity supply in the country. Its aim is to provide “24X7 clean and affordable power for all" by March 2019.

India’s energy demand is likely to go up by 2.7-3.2 times between 2012 and 2040, according to the government’s policy think tank, NITI Aayog. India’s per capita energy demand is expected to reach 1,055-1,184 kilogram of oil equivalent (kgoe) in 2040 from 503kgoe in 2012.

The power distribution sector has of late been witness to some large transactions.

While Hyderabad-based Greenko Group, backed by Singapore’s sovereign wealth fund GIC Holdings Pte and Abu Dhabi Investment Authority, showed interest in Reliance Infrastructure Ltd’s Mumbai power business, it was Adani Transmission Ltd that emerged successful in a 18,800 crore deal last December.

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