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Saturday, July 14, 2001



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Karnataka may allow IPPs to bid for distribution cos

Our Bureau


THE Karnataka Government is expected to permit independent power producers (IPPs) to bid for the distribution companies (DisCos) proposed to be privatised after unbundling of the State-owned utility.

Sources said that allowing IPPs to bid for the project would help in enlarging the number of participants in the privatisation process. Restricting the bidding process to only distribution companies, would result in a handful of companies being involved. This, the sources said, could result in under valuation of the distribution companies.

On the other hand, if the number of participants are large, the possibility of the Government realising higher value of distribution privatisation was possible, they added.

Among the companies which have already indicated that they would prefer to be involved in the distribution privatisation process include CLP Power International and GMR Vasavi group.

CLP Power operates the 655-MW Phaguthan power project in Gujarat and is one of the promoters of the 1,013-MW Mangalore Power Company. China Light and Power, the promoting company of CLP international operates one of the world's largest distribution circl es -- Hong Kong.

GMR Vasavi is the promoter of the liquid fuelled 220 MW Tanir Bhavi Power and the Basin Bridge Power in Chennai. This exercise of unbundling is expected to begin by the year-end once the consultants submit their reports.

But the privatisation is expected to take longer and is unlikely to be completed before next year-end by the most optimistic estimates.

Besides, the State Government still has not decided on the methodology to be adopted for the valuation of the distribution entities.

But sources said that the State Government was likely to adopt the method that was expected to generate the maximum value in the event of divestment of the distribution companies.

However, the Karnataka Power Transmission Corporation Ltd (KPTCL), which currently operates both distribution and transmission in the State, favours using the discounted cash flow method, as opposed to the net asset value or replacement cost value of ass ets. The DCF method, sources said, would have the least impact on consumer tariffs and would at the same time result in maximum value for the Government.

However, realising maximum value would result in the load profile of the DisCos. DisCos dominated with high tension load customers would tend to have a higher valuation.

On the other hand, DisCos with large customer base of low tension customers/agricultural customers would tend have a lower valuation. Consequently, one of the options being considered is blending of circles to maximise realisation. Such blending would be fraught with major technical problems, sources said.

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