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Home News Power Sector News OERC renews efforts to sell off CESU, invites expression of interest

OERC renews efforts to sell off CESU, invites expression of interest

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OdishaAfter managing the operation of the distribution company (discom), Central Electricity Supply Utility of Odisha (Cesu) for more than eight years, the Odisha Electricity Regulatory Commission (OERC) has renewed efforts to sell off the utility.

OERC has kickstarted the exercise by floating an expression of interest (EoI) for appointment of a transaction advisor. The regulator has invited EoI from financial institutions, reputed merchant bankers, investment banks and consulting firms with experience in privatisation or strategic sale.

The onus will be on the transaction advisor to offer advice, prepare a detailed Information memorandum, market the offer, invite and evaluate the bids, assist OERC during the negotiation with prospective bidders, draw up the agreements and the documents for the transaction and help Cesu/OERC and the successful bidder in post transaction activities including accounting and tax matters, said a notification by OERC.

Based on the parameters provided by the transaction advisor, OERC will short-list the prospective advisors and thereafter issue a 'Request for Proposal' from among these advisors. It may be noted, OERC is managing Cesu (earlier known as Central Electricity Supply Company of Odisha Ltd) ever since the US utility major, the majority stake holder of the company unilaterally withdrew from its management in 2001. However, OERC has revoked the distribution of licence of Cesu under Section 19 of the Electricity Act, 2003 (the Act) with effect from April 1, 2005 and allowed the company to distribute power in the region allotted to it through a special scheme under Section 22 of the Act.

Initially the tenure of the scheme was two years. The tenure has been further extended periodically by the commission and presently the scheme is extended till September 2015.

After revocation of the license, the commission initiated the process of sale of the discom. However, it could not be sold off. "One of the possible reasons for the poor response to the earlier efforts to sell the utility was the condition of transferring its liabilities along with the assets. Further, methods other than sale of the utility were not explored," said a OERC official.

Hence, OERC has now gone for a broad based approach including selection of a transaction advisor.

The sale of Cesu may include acquisition of the whole of the assets, taking over the employees at existing terms of employment, settlement with the employees not taken over and assumption of the whole or part of the liabilities and exclusion of some liabilities in the scheme of acquisition.

A status paper on Cesu has pegged the discom's total revenue requirement for 2015-16 at Rs 3,591.99 crore which includes power purchase cost of Rs 2,742.33 crore. The expected revenue earning for the utility is Rs 2,980.75 crore, leaving a shortfall of Rs 611.24 crore. Cesu's AT&C (aggregate technical & commercial) loss has been estimated at Rs 33.80 per cent in this fiscal. Since 1999-2000, Cesu has piled up a cumulative loss of Rs 2,058 crore till the end of 2013-14. Cesu is also saddled with arrears of Rs 784.66 crore towards bulk supply tariff dues. Distribution franchises are working in 14 divisions of Cesu with effect from February 2013 on the principle of input based franchisee operation with investment on build operate transfer (BOT) model.

The franchisees are to make investment to the tune of Rs 750 crore in technology induction in meter reading, billing and collection.

Source- Business standard


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