CESC has scrapped the plan to unbundle the power generation and distribution business after waiting for more than two years to get an approval from the state electricity regulator.
The board of the company on Thursday decided “that it would be prudent and in the best interests of the company, its shareholders and other stakeholders to no longer pursue the said demerger”.
CESC, the flagship of the RP-SG Group, did not disclose what led to the reversal of the decision which the board took on May 18, 2017, and subsequently executed partially.
The company had proposed a four-way split of power generation, distribution, retail and new businesses (FMCG and business process outsourcing).
While the National Company Law Tribunal (NCLT) approved the plan on March 28, 2018, the split of the power business was sent for clearance to the West Bengal State Electricity Regulatory Commission (WBERC).
According to the scheme of arrangement, all power generation utilities — including the ones that serve Calcutta licence areas — would have been transferred to Haldia Energy, a wholly owned subsidiary of CESC.
CESC had sought an approval from the regulator for a power purchase agreement between CESC and Haldia Energy. But on February 16, 2018, the commission declined permission and asked the company to approach it with a fresh proposal under section 17(3) of the Electricity Act, 2003.
On October 12, 2018, the company decided to tweak the demerger plan keeping the unbundling of the power business on hold till the commission’s approval. Subsequently, Spencer’s Retail and CESC Venture started trading on the bourses. On Thursday, CESC decided to junk the plan altogether and approach NCLT.
Sources in ERC said the regulator was unaware of CESC’s plan not to go ahead with the demerger. “We had sought certain clarifications, which are still awaited. For us, the status quo remains,” sources added.
Profit up 18%
CESC has reported a healthy rise in standalone income and profit for the second quarter. Total income rose 9 per cent to Rs 2,382 crore compared with Rs 2,185 crore a year ago.
Profit went up 18 per cent to Rs 217 crore in the second quarter from Rs 184 crore in July-September of 2018-19.
