Enel Group of Italy, Torrent Power Ltd, and Greenko Group have submitted non-binding offers to buy Reliance Infrastructure Ltd’s Delhi electricity distribution businesses, said two people aware of the development.
“The next step (for the bidders) is to do due diligence,” said one of the two people, requesting anonymity. The deadline to make a non-binding indicative offer for acquiring a 51% stake each in BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL) ended on Friday.
KPMG is managing the stake sale process.
The power distribution utilities are some of the most stable and lucrative assets in India, with the national capital reporting the lowest aggregate technical and commercial loss of 9.7% in the country, where the average loss is 21.4%, among the highest in the world.
Anil Dhirubhai Ambani Group, which owns Reliance Infrastructure, is trying to sell assets to cut its debt.
Mint reported on 12 May that at least eight investors had shown initial interest in the Delhi power distribution utilities that supply electricity to around 4.4 million customers in the national capital.
The others, including Caisse de dépôt et placement du Québec (CDPQ), Actis LLP, Brookfield Asset Management, I Squared Capital, and Wade Capital Group LLC appeared to have stayed away from submitting indicative offers.
A BSES spokesperson declined to comment. A KPMG spokesperson, in an emailed response, said, “As a policy, we cannot comment on any company-specific matters.”
Queries emailed to Greenko Energy Holdings and Torrent Power on Saturday remained unanswered. An Enel Group spokesperson in Rome declined to comment.
Reliance Infrastructure sold its Mumbai city power distribution business to Adani Transmission Ltd for ₹18,800 crores in August 2018.
While announcing the March quarter earnings on 8 May, Reliance Infrastructure said it “aims to be zero debt in the next financial year based on liquidity events”.
Three of Delhi discoms were privatized in July 2002: BSES Rajdhani Power, BSES Yamuna Power, and Tata Power Delhi Distribution Ltd. The distribution firms are joint ventures with Delhi Power Co. Ltd, which owns a 49% stake in each of them. The other discoms in Delhi are Military Engineering Services (for Delhi Cantonment) and the New Delhi Municipal Corporation.
While BSES Rajdhani Power has a per capita electricity consumption of 4,771 kilowatt-hours (kWh) and a peak demand of 3,211MW; BSES Yamuna Power has a per capita electricity consumption of 3,864 kWh per year and a peak demand of 1,561MW. In comparison, India’s per capita power consumption is around 1,149 kWh, among the lowest in the world.
“The companies have put in their initial offer after they accessed the technical data room. While there is an overhang of regulatory assets, these Delhi discom businesses have tremendous growth potential,” said the second person who also did not want to be named.
A regulatory asset is created when the power regulator accepts certain expenditures but does not factor them in while setting a tariff. These expenditures are to be adjusted in future tariff changes and, in the interim, are accounted for as regulatory assets. The total regulatory assets’ claims of BRPL and BYPL are to the tune of around ₹40,000 crores.