The distribution business of CESC Ltd, the flagship of the RPSG Group, has received a boost after a wholly owned subsidiary of the company received a letter of intent to acquire a 100 per cent stake in a company that supplies electricity in the Union Territory of Chandigarh after three years of wait.

Eminent Electricity Distribution Ltd emerged as the highest bidder with a bid of ₹871 crore, against the reserve price of ₹175 crore, in the middle of 2021, leaving behind six other entities. However, the privatisation of the business was opposed by the workmen union who challenged the decision of the UT authority in the court.

Earlier this month, Punjab and Haryana High Court dismissed the petition of the employees, paving the way for the privatisation of the Chandigarh electricity provider which has a consumer base of 2.4 lakh. CESC will have a concession period of 25 years to supply power in the 114 square kilometre area with a population of over 2 million. The distribution area generates a power demand of around 400 megawatts.

According to an investor's presentation posted on the bourses by CESC, the Chandigarh distribution business billed revenue of ₹941 crore, having a collection efficiency of 98 per cent and distribution loss of 8 per cent. Out of CESC’s all distribution licence and franchises, only Calcutta and Noida have lower distribution losses.

While CESC will run the distribution, the tariff will be fixed by the regulator, as in all other areas. The Joint Electricity Regulatory Commission (JERC) is going to fix the tariff for the company. Earlier this year, JERC approved a 9.4 per cent increase in tariff in Chandigarh.

Apart from the Calcutta operation which started in 1899, the company has a majority stake in Noida Power Company Ltd, and distribution franchises in Kota, Bharatpur and Bikaner in Rajasthan and Malegaon in Maharashtra. By revenue, Chandigarh is likely to be the fourth largest distribution operation within CESC, after Calcutta, Noida and Kota.

In profitability, the integrated operations at Calcutta ranks at the top, followed by Noida. The Rajasthan DFs together are in marginal profit while Malegaon is still incurring losses. Rajasthan and Malegaon DFs were acquired over the last eight years and Noida in 1993.

Green push

While the RPSG Group adds one more distribution asset under its fold, CESC’s generation business in the future is growing under wholly owned subsidiary Purvah Green Power Private Ltd, which is targeting 3200 mega-watt (mw) hybrid renewable capacity by 2029.

The renewable mix includes 1700mw of wind and 1500mw of solar power in the first phase. While the wind energy is going to come up in Madhya Pradesh, Karnataka, Andhra Pradesh and Rajasthan, the company has identified sites in Rajasthan, MP, Gujarat and Karnataka for solar generation projects.