Tata Power said on Monday that it received a letter of intent (LoI) for a power distribution licence in Odisha’s five circles.
The company aims to grow its power distribution business fourfold in the next three years.
“The Odisha Electricity Regulatory Commission (OERC) awarded the LoI to The Tata Power Company, informing the company’s selection as the successful bidder to own the licence for the distribution and retail supply of electricity in Odisha’s five circles,” said the company in its statement.
The five circles together fall under the ambit of the Central Electricity Supply Utility of Odisha (CESU).
The five circles will add 2.5 million consumers to Tata Power’s existing consumer base of 2.5 million through its other distribution areas — Mumbai, Delhi and Ajmer. “We are looking at 10 million consumers in the next three years,” said Praveer Sinha, chief executive officer (CEO) and managing director (MD) of Tata Power.
“The proposed sale of CESU to Tata Power will be through the formation of a special purpose vehicle (SPV) entity,” Tata Power said in its statement. Tata Power will hold 51 per cent equity in the SPV while the government of Odisha will hold the remaining 49 per cent.
Sinha added that the company will evaluate other similar licences in Odisha as and when they come up for bidding. “Those are also expected to be on the public-private partnership (PPP) model and we are looking at a similar opportunity,” he said. Outside Odisha, the company is keen on distribution opportunities across states. “We are looking at a few more places like Uttar Pradesh and Jharkhand as and when they come up with their bidding process,” Sinha said.
While Tata Power looks to grow its consumer base fourfold, Sinha expects revenue contribution from this segment to Tata Power’s financials to grow in tandem. For the quarter ended September 30, 2019, transmission and distribution contributed Rs 3,207.63 crore to its total segment revenue of Rs 7,315.43 crore.
The five electrical circles constituting the CESU are Bhubaneswar (Electrical Circle - I and II), Cuttack, Paradip and Dhenkanal.
Tata Power has been offered the licence for 25 years, initially.
Sinha said the aggregate technical and commercial losses in these five circles are around 30 per cent. Tata Power aims to reduce them to 15 per cent in the first five years and to less than 10 per cent in the long term.