Tata, Reliance, Bses Start Due Diligence Of Dvb Units

Tata Power, BSES, CESCON (RPG group) and Reliance Power have initiated the due-diligence process of three distribution companies of the Delhi Vidyut Board (DVB). Two other companies, China Light and Power and AES, also in the fray for a 51 per cent stake in DVB's distribution utilities, are yet to approach the board for starting due-diligence.

DVB had issued request for qualifications (RFQs) to the six companies last month.

The board had proposed a novel scheme for divesting the government stake in the three distribution companies, whereby, players guaranteeing maximum improvement in efficiency norms would be handed over management control of the utilities.

Bids would be evaluated on the basis of the amount of losses proposed to be brought down for each distribution utility over a time frame.

Even though AES has not yet come forward for conducting due-diligence of the distribution utilities, officials said that the US energy giant had evinced interest in the new distribution model proposed by the board and was likely to come forward for conducting due-diligence soon.

According to state government officials, the four players had started the process of due-diligence from December 10. The government is planning to divest equity in all three distribution companies, each of which comprise two distribution circles, by end-February 2001.

SBI Capital Markets, consultants to the state government on the privatisation process, has valued DVB at Rs 3,160 crore using the business valuation model.

The assets of the three distribution companies have been valued at Rs 290 crore for the Central-East company, Rs 920 crore for the North-NorthWest company and Rs 1,150 crore for the South-West company.

The private players are expected to submit their bids by January 31. The state administration would initiate talks with all prospective bidders from next week to address the concerns of bidders and to provide adequate comfort to them, officials said. The generation and transmission entities would still remain under government control, with private players taking up distribution. Despite reduction in transmission and distribution (T&D) losses over the last couple of years, the losses still hover around 47 per cent, officials said.