Tata Power’s Odisha win positive but debt reduction remains key

Tata Power Co. Ltd emerged as a successful bidder to distribute electricity in five regions in Odisha. Tata Power will own a majority stake (51%) in the venture with the Odisha government owning the rest.

Distribution businesses require lower capital than a power generation plant. Further, licence holders are allowed to earn fixed returns on investments. They can optimize the returns by reducing the aggregate technical and commercial (AT&C) losses, which in the current case is as high as 33%.

Tata Power has a proven track record of successfully lowering the AT&C losses in the Delhi power distribution business and can replicate its expertise in Odisha thereby optimising its returns.