AES Corporation to get Gridco’s 51 pc stake in Cesco

AES Corporation and Gridco have worked out a formula to manage shortfalls in the revenues of the distribution company. The US company has been allowed to make deferred payments – with a ceiling of Rs 174 crore – for power bills to Gridco. AES Corporation will make quarterly repayments to clear the outstandings with interest after three years.

The interest rate will be fixed by the Orissa Electricity Regulator Commission. For payment of monthly power bills, AES Corporation will open a letter of credit (LoC)supported by an escrow mechanism in favour of Gridco.

Cesco, which distributes power in Orissa’s three prime electricity circles, Bhubaneswar, Cuttack and Dhenkanal, is facing a revenue shortfall of Rs 120 crore per annum. Cesco, despite having the largest consumer base in the state, failed to attract investors as it has a 100 per cent escrow account in favour of Orissa Power Generation Corporation (OPGC), a generating company jointly owned by AES Corporation and the state government.

Moreover, the fact that Cesco has to bear a cash loss of Rs 120 crore per annum scared away many potential bidders for the company. Gridco’s move to privatise Cesco was not successful as there were hardly any takers for the distribution company. Even BSES Ltd, Tata Electric Companies (TEC) and Grasim Industries, which had submitted bids for Nesco, Wesco and Southco, refrained from bidding for Cesco.