Three Tata power companies to merge

The merger proposal, to be deliberated by the board of the three affiliates on June 14, will bring the group’s power companies under one umbrella with a combined turnover of around Rs 3,000 crore. The board of directors will also take up a proposal to "raise additional capital in an appropriate form."

Tata Power, Andhra Valley & Tata Hydro operate together as bulk power supply licensees in Mumbai and share income/expenses in 5:3:2 ratio. TEC isthe largest licensee in India accounting for 50 per cent of the total installed capacity for licensees.

At the Bombay Stock Exchange, Tata Power gained marginally to close at Rs 63.90 while Andhra Valley Power and Tata Hydro Electric ended the day at Rs 42.25 and Rs 42.50 respectively.

The group top brass, which met on Thursday, deliberated threadbare the issue of making a counter bid for BSES, the Mumbai-based power utility, and decided against the move.

Sources said that meeting, which was chaired by group supremo Ratan Tata, included top group officials including N Soonwala, HN Sethna, CR Vevaina, Ishaat Hussain, Kishore Chaukar, among others, felt it would not be prudent to make a counter-bid to Reliance Industries’ open offer for BSES.

The merger proposal for the Tata Electric Companies comes at a time when the group’s power flagship is facing sharp revenue drop due to lower offtake by BSES, which has been evacuating power from its Dahanu plant. Besides, with a bulk of its industrial customers moving away from the city, TEC has been loaded with surplus capacity. However, it is believed that existing shortages and demand growth in the Western Grid will be able to absorb the new capacities planned by the company.

TEC has chalked out an investment plan of a whopping Rs 4,800 crore in IPPs and captive units which is slated to enhance generation by over 600 MW. The company is also planning to invest in modernisation of exisitng units and liquified natural gas projects.

The company has entered into a joint venture agreement with Total Gas & Power India, a wholly-owned arm of the French giant Total for the establishment of an LNG terminal at Trombay. The project will have an initial terminal capacity of 3 mtpa and TEC is in the final stages of negotiations with suppliers of LNG in the Middle East.

TEC which has a license to distribute power to bulk consumers in the city sells large amout of power to BSES and BEST. But as BSES which has its own 500 MW power plant at Dahanu and is able to bring the entire generation to its consumers in Mumbai its purchase demand from TEC is reducing every year.

The TEC merger news follows speculation that the Tata group may make a counter-offer to Reliance Industries Ltd’s open offer for electricity firm BSES Ltd. Speculation was rife that the counter-offer to shareholders for BSES would be led by Tata Electric Companies along with some group firms.

The bid by the Tatas for BSES would have to be made before June 9 when the 21-day deadline for counter bids ends. Rules of India’s stock market regulator the Securities and Exchange Board of India (SEBI) require counter-offers to be made within 21 days of the announcement of an open offer.