The Tamilnadu Electricity Board has submitted a proposal to the state government to hive off its generation and the transmission and distribution businesses into two separate entities. The proposal envisages splitting of the generation function from the two other main activities of the board -- transmission and distribution. All three activities will, however, continue to be with the state utility.
Generation activities are proposed to be hived off into a separate entity primarily because much of the private investment in the power sector has been in generation. But, to attract more investment, the entity's balance sheet has to be made more healthy. And, this would be possible only if generation is looked at as a separate, profitable business in itself. This will enhance its ability to raise money in the markets.
TNEB will be an equity partner in the heavy-residue plant that Madras Refineries is planning to put up north of the city.
Raising funds for such ventures will then be the responsibility of the generating company, it is said. All existing generating units will also be transferred, in phases, to this entity.
With older plants that have been well depreciated, the generating company will have the advantage of low average cost per unit of power. But with the near-regular annual revision in tariffs, the generating company can only make more profits.
The transmission and distribution entity, is however likely to be the money spinner for the state power utility as more and more IPPs go on stream and pay the company for wheeling the power and distributing it across the grid.
