AES threatens to pull out of
Orissa power distribution company
Close on the heels of Enron Corporation threatening to pull out of the $2.9 billion power project in Maharashtra, another US company AES on Thursday also pulled strings saying it would walk out of the Orissa distribution company Central Electricity Supply Company (CESCO) unless its dues were cleared.
AES, which holds a 51 per cent stake in CESCO - one of the three privatised distribution companies in Orissa, demanded a significant rise in tariff levels to make distribution viable while also asking for clearance of all past dues of its power generating company.
"We are willing to write off our $10 million investment in CESCO. The distribution company has become unprofitable due to mismatch in the cost of distribution and tariff structure," AES Corporation president & CEO Dennis Bakke told a news conference in New Delhi.
The faulty tariff structure has resulted in CESCO accumulating a Rs 160 crore (Rs 1.60 billion) outstanding owed to GRIDCO, which the state government insists CESCO pay immediately, Bakke said.
On the reported interest evoked by AES in buying a $900 million Enron stake in the Dabhol Power Company (DPC), Bakke said, "DPC is just like any other potential business in which we might be interested in the future. But as of now we are not keen on Enron stake."
"No proposal of partnership has been made by us to anyone nor has anyone, including Enron, spoken to us about it," he said adding "We already have our own problems."
AES was willing to sell its interest in CESCO to GRIDCO, the government or any other third party, he said.
Bakke said AES first came to India in 1991, picking 49 per cent stake in Orissa Power Generation Company's (OPGC) 420 MW thermal power station in the Ib Valley.
GRIDCO, which takes the power generated at OPGC's plant, owes it around $45 million, accumulated over the past 30 months.
"GRIDCO is attempting to link payment for OPGC power to payments owed by CESCO to GRIDCO. These are standalone businesses, and there is no basis for any such linkage or offset," he said adding if that was the case AES would walk out of the distribution business.
According to AES, a flawed regulatory regime in Orissa had resulted in tariffs which are set at levels which do not make it possible to recover all distribution company operating costs, let alone service and return on equity.
AES is now being forced to deposit all revenues, collected by CESCO, into the escrow account, which would result in non-payment of salaries to CESCO's 8500 employees from July 31, Bakke added.
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