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NEW DELHI: Billionaire Gautam Adani-owned Adani Group, RP-Sanjiv Goenka group’s flagship electricity generation and distribution firm, CESC Ltd, and Tata Power Co Ltd are among those who have evinced interest in acquiring Odisha government’s three electricity distribution companies (discoms), said two people aware of the development.

The discoms that will be privatised are - Western Electricity Supply Utility of Odisha Ltd (WESCO), North Eastern Electricity Supply Company of Odisha Ltd (NESCO) and the Southern Electricity Supply Utility of Odisha Ltd (SOUTCO). This comes after Tata Power won a 25-year licence for distribution and retail supply of power in five circles of Central Electricity Supply Utility of Odisha (CESU Odisha). Tata Power plans to make a capital expenditure of Rs1,541 crore during FY21 to FY25 in CESU.

While global analytics company, Crisil, will manage the sale of WESCO and SOUTCO, Deloitte has the sale mandate for NESCO. One of the key transaction feature is improvement in efficiency and reduction in aggregate technical and commercial (AT&C) losses.

Odisha has an average power demand of 4,000 megawatts (MW). While WESCO supplies electricity to consumers in the distribution circles of Rourkela, Burla, Balgarh, Bolangir and Bhawanipatna, SOUTCO supplies consumers in the circles of Behrampur, Aska, Bhanjanagar, Jeypore and Rayagada. NESCO supplies electricity to the districts of Balasore, Mayurbhanj, Keonjhar, Jajpur, and Bhadrak. The drive is headed by Odisha Electricity Regulatory Commission (OERC).

“Among those who have evinced interest in placing bids for these discoms are CESC, Tata Power and Adani. All of them have experience in running discom businesses. WESCO and NESCO have high industrial load," said one of the two people cited above, requesting anonymity.

With their finances under immense strain due to the world’s most stringent lockdown, state governments are slowly coming round to the idea of privatising their discoms to raise resources. Also, the debt burden of discoms is expected to hit an all-time high of Rs4.5 trillion this fiscal, according to a Crisil Ratings report. This could further impact the weak financials of discoms, with states struggling to pay for electricity bought due to lower realisations.

Spokespersons for CESC and Adani Group declined comment.

A Crisil spokesperson in an emailed response said, “We won’t be able to comment on this as it is specific to a mandate."

This comes in the backdrop of India’s proposed second generation power sector reforms that also include privatising discoms in the union territories (UTs) of Dadar and Nagar Haveli, Daman and Diu, Puducherry, Chandigarh, Andaman and Nicobar Islands, Lakshadweep Islands, Ladakh and Jammu and Kashmir, and a new tariff policy that proposes a cost-reflective tariff, penalty on unjustified power cuts and limiting cross-subsidies. These UT discoms have an enterprise value of around $700 million.

Queries emailed to spokespersons for Tata Power and Deloitte on early Friday morning remained unanswered.

Discoms are the weakest link in the electricity value chain with poor payment records not only affecting power generation firms, but also contributing to the stress in the banking sector.

Interestingly, Odisha was the first state to privatise its power distribution sector into four discoms in 1999. This was followed by Delhi, which privatised three of its discoms in July 2002--BSES Rajdhani Power Ltd (BRPL), BSES Yamuna Power Ltd (BYPL) and Tata Power Delhi Distribution Ltd.

The development comes at a time when India’s largest power generation utility, NTPC Ltd, has exprssed interest in acquiring a 51% stake each in BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL). Enel Group of Italy, Torrent Power Ltd and Greenko Group have also submitted non-binding offers to pick up stakes in the two Reliance Infrastructure Ltd entities.

There is growing interest in India’s power distribution space. CESC, Adani Group and Tata Power are also among local companies such as Torrent Power, Greenko Group, National Investment and Infrastructure Fund (NIIF) who are interested in the UT discoms assets.

Large foreign utilities such as Italy’s Enel Group, Malaysia’s Tenaga Nasional Bhd, Electricite de France SA and Hong Kong’s biggest electricity provider, China Light and Power Co Ltd, are also expected to participate. The third set of probable investors include funds such as Brookfield Asset Management Inc, CDPQ, CDC Group Plc, Macquarie Group and Actis LLP.

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