The low profile BSES is known more for its tiffs with Tata Power. But now it finds itself under media glare for two reasons: the second open offer from Reliance to take full control of the company, and the possibility of its investments in the power distribution circles in Orissa going awry. S S Dua, acting chairman and managing director of BSES, speaks to Arijit De and S Ravindran on the company's future:
Has the Reliance open offer taken you by surprise?
Reliance already had over a 43 per cent stake in BSES and was the largest shareholder. It was only natural that they would give their investment a more logical shape. After all, they too have major plans in power.
Do you see BSES benefiting if and when Reliance takes full control of the company?
We have already announced a corporate plan to set up 9,000 mw of additional capacity in the next 10 years, as well as acquire new distribution circles. With Reliance's help, this would be easier to achieve.
Not just because we are talking on transferring some of their projects to BSES, but we can also piggyback on Reliance's proven expertise in project management. I see it as a win-win situation for both the companies.
Has there been any official communication from Reliance as to what will happen post-offer?
No. But informally we are given to understand that they might want to add three more directors on the BSES board, but there is unlikely to be any change in the executive management. Operationally, I think, Reliance would want to make BSES its vehicle in the power sector.
Three years back you picked up three distribution circles in Orissa. What has gone wrong with those acquisitions that now you are threatening to pull out?
The basic problem with Orissa is that when the distribution circles were awarded to us, the government had projected a transmission and distribution (T&D) loss of around 34-36 per cent.
But now we find that the T&D losses are around 50 per cent. Moreover, the assets were overvalued by around Rs 2,000 crore resulting in delayed recovery of investments.
In short, we have been taken for a ride. AES Transpower has already walked out of the fourth distribution circle.
What about the recommendations of the Kanungo panel which was appointed to suggest remedies?
Again the problem here is that the recommendations of the panel are being implemented with prospective effect and not retrospective effect.
This in effect means that problems related with the past continue and we have to digest those losses.
Since the deal is plagued with so many problems, are you planning to take the government to court?
That option is always open to us, but such a step is not desirable. The current situation is that we are unable to raise working capital loans from financial institutions which are seeking a pari passu charge on our receivables which are deposited in an escrow account.
However, the Orissa government is not agreeing to this. Further, we are paying salaries with great difficulty.
Every time we have to seek the release of money from the escrow account to pay salaries. It seems we are being penalised for participating in Orissa's privatisation process.
You also have a contracts division. It seems to be showing considerable improvement in performance.
Yes. It is largely into equipment manufacturing and is implementing several projects across the country. It is a good revenue stream.
The Union government's thrust on the accelerated power development programme will open up new opportunities for this division.
We expect the contracts division's turnover, now at over Rs 600 crore, to cross the Rs 1,000 crore mark shortly.
