BSES-Orissa

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The Government of Orissa divested 51% of its equity stake of the Northern Electricity Supply Company of Orissa Limited (NESCO), Southern Electricity Supply Company of Orissa Limited (Southco) and Western Electricity Supply Company of Orissa Limited (WESCO) in June 1999. Bombay Suburban Electric Supply Limited (BSES Ltd.) purchased the 51% stake of these three electricity distributors for a total of $27.4 million. The remaining 49% equity interest in CESCO is held by the State Government controlled Grid Corporation of Orissa Limited (GRIDCO). Electric power is purchased from GRIDCO. Orissa is the first state in India to set up an independent regulatory commission and unbundle generation, transmission and distribution. Privatization efforts began in 1995 through legislature introduced to establish the Orissa Electricity Regulatory Commission (OERC). OERC is an autonomous regulatory body for transmission and distribution tariffs that also is involved in authorizing licenses to companies that engage in transmission and distribution and in regulating those companies that provide these services. Four power distribution zones were formed and transferred to separate companies: Central Electricity Supply Company (CESCO), WESCO, NESCO, SOUTHCO. By the end of 1999, all four distribution companies were privatized, the first to AES and the three latter to BSES. In 2000, the IFC provided a US$ 39 million loan guarantee facility to NESCO and WESCO (the investment finances the upgrading of the electricity distribution in Orissa). The three distribution companies were incurring huge losses because of high T&D loss and lower realization of revenue prior to 2003. They were defaulting by about $3 to $4 million per month towards the payment of the bulk power bills which angered GRIDCO. At one point of time, it was suspected that BSES Ltd would wind up its business in Orissa and follow AES Corp, the US utility giant which had abandoned Cesco, the other district company in Orissa. However, things began looking up for BSES and they expected to break even by early 2004. In 2003, Reliance Group picked up a 58.2 percent stake in BSES. None None