Law dept seeks details on Gridco plan to close cases against AES

The state law department has sought specific details to help it form an opinion on the proposal of Gridco Ltd to withdraw all legal cases against AES Corporation in exchange for management control in Central Electricity Supply Utility (CESU), a power distribution company, where the US utility major has controlling stake.

In June this year, the state energy department had asked for opinion of the law department over Gridco's plan to settle decade-old legal battle with AES. The state-run power trader had proposed to drop all cases against AES, which would, in return, surrender its 51 per cent stake in CESU (formerly Cesco) to Gridco for a nominal consideration of one rupee.

The US power company will also drop all litigations against Gridco after the stake transfer and would not charge for cost of arbitration conducted for settlement of dues and assets, the proposal said.

The law department wanted specific points on which opinion was solicited.

"Law department has requested to formulate specific point on which legal opinion is necessary," the energy department recently informed Gridco.

Tussle between Gridco and AES dates back to 2001, when the US energy firm abandoned the management of Cesco citing unviable business climate in the state. The biggest power distribution company (discom) of the state is since being managed under the supervision of Odisha Electricity Regulatory Commission (OERC). AES, however, has not divested its controlling stake in CESU bought for Rs 47 crore in 1999.

Gridco, which owns 49 per cent shares in CESU, had claimed that AES must pay Rs 819 crore towards power purchase bills, employee salary and other dues for the period 1999 to 2001, when it was managing the company, for being the largest shareholder of the discom.

However, in 2010 the arbitrator rejected the claims saying AES has no dues to pay and had asked Gridco to pay the cost of arbitration amounting to $8,70,000 with interest of 7.5 per cent per year.

The relation of AES with Gridco soured over payment disputes in May 2001, when the company shut down the Banharpali thermal power plant in Jharsuguda district for a week demanding payment of Rs 1,400 crore as the cost of energy sold to the power trader.

Gridco replied the payment due notice with a counter demand on AES, saying it must pay up for Cesco's dues of Rs 2,500 crore.

The closure of the disputes means Gridco would get back the control over CESU for a nominal fee. Sources in energy department said, the peace offer proposed by the government is meant to secure funding for expansion of other thermal power units in the state where AES has stake.

AES, besides its controlling stake in CESU, has 49 per cent share in Odisha Power Generation Corporation (OPGC), a thermal power generator. In April this year, OPGC has started its expansion process to upgrade its capacity by 1,320 Mw from existing 420 Mw at Banharpali in Jharrsuguda district.