Power sector has been the buzz word for the past few months with the reforms being taken up in almost all the state electricity boards. Since liberalization, there has been a huge interest of MNCs in the Indian power sector. Enron was the first MNC to set up a power generating unit in India. Many others were at its tail then, but what is the scenario now?

Tata Power, part of the Tata Electric Companies (TEC) with a total capacity of 1,778 MW (1330 MW thermal and 448 MW hydro), is the pioneer in the Indian private power sector. TEC - Tata Power, Andhra Valley & Tata Hydro, operate together as bulk power supply licensees in Mumbai and share the revenues in the ratio of 5:3:2. Its clients constitute around 150 companies in Mumbai.

TEC offers the services of building power plants on Build, Own and Operate (BOO) basis, Project Management Services and Operation & Maintenance Services. Erection, Testing, Commissioning & Trial Operations of major power projects are done in various countries like UAE, Malaysia, Saudi Arabia, Kuwait and Algeria.

With the recent developments in power sector, the merger of the three Tata Electric companies, effective April 1, 2000, to form Tata Power has gained much importance. The merger at a swap ratio of four shares of Tata Power for every five shares in each of Andhra Valley Power Supply Company and Tata Hydro-Electric Power Supply Company would result in greater leverage for Tata Power to participate in large projects. It would also improve the liquidity of the company stock. The company would also reinforce its marketing efforts, moving from being a mere supply company to a marketing one, as well as look at repowering its plants and more importantly, bid for Independent Power Projects (IPP).

The exit of Power MNCs from India has turned into a blessing for Tata Power. The Rs. 3,146 crore Tata Power is in talks to acquire four thermal IPPs, most of which owned by international power majors in Madhya Pradesh, Karnataka and TamilNadu. Tata is also planning to have a JV with China Light & Power (CLP) of Hong Kong, with whom the Tatas are already working for Mangalore Power project. Tata is planning to acquire these companies by entering into a JV with either Siemens, Germany or Tennessee valley Authority, US.

MNCs, which are very active in other sectors seem to be too weak in the power sector. The reasons being the delay at the bureaucratic level of approving the projects and better markets in other countries. The experiences of Enron with the Indian government had given a pessimistic feeling to the other MNCs.

Tata Power already has lot of plans to increase the generating capacity by a large extent. Tata power is likely to pick up a stake in Jamshedpur Power Co. Ltd., which is setting up a 300 MW thermal power plant in the steel city in collaboration with Mission Energy of the US. Other projects include a new thermal plant at Jojobera and diesel power plant at Belgaum and also eyes at using LNG. It is also planning to set up a 500 MW plant in Andhra Pradesh.

After taking over Tisco’s Jojebera plant, it acquired ACC’s unit at Wadi, Jamul and Kymore. However, the company would have an adverse impact as it cannot sell the power to any other consumer in the vicinity of ACC works or even to the State Electricity Board as it does not possess a valid distribution license for sale of energy in Karnataka.

The company has modern technology and computer based system management to achieve high levels of operational efficiency. The transmission and distribution losses of TEC has reduced to 2.7% by 1998 much better than India’s figure of above 20%.

Recently, TEC was shortlisted for the privatization of the Orissa Power Generation Corporation (OPGC). Many other state boards like AP, Rajasthan are also planning to privatize power. In these circumstances, Tata Power would definitely have an advantage over the other players. In a business dominated by economies of scale, size definitely offers Tatas an advantage.

K Venu Babu