Finally, Tamil Nadu’s power utility Tangedco (Tamil Nadu Generation and Distribution Corporation) is moving in the direction of unbundling the organisation into three separate entities in order to improve financial efficiency. While all other States unbundled their electricity boards long ago, Tamil Nadu and Punjab are the two States that didn’t take up the unbundling like others.
The Tamil Nadu government had appointed Ernst & Young (EY) as consultants to submit a report on the restructuring of the power utility. EY has now submitted its report for unbundling the organisation into three entities — a generation unit for conventional power, a generation unit for renewable energy, and energy distribution.
This exercise is part of a comprehensive transformation of the energy sector in the State, according to people who have knowledge of this matter.
Unbundling of Tangedco is long pending in the State. While other States unbundled the state electricity board into generation, distribution, and transmission, Tamil Nadu and Punjab kept generation and distribution together. In 2010, TNEB was split into two entities — generation and distribution under Tangedco and transmission under Tantransco.
Energy market is different
Industry analysts point out that since the nature of businesses is different, generation and distribution had to be bifurcated by all other States during unbundling. “Today, the energy market is different from what was several years ago — energy companies can buy power in the market for short and long-term, open access, etc. Therefore, it is imperative to divide the generation and distribution businesses,” said an industry analyst.
Also, one of the additional things that is talked about is to divide generation into conventional and renewable. The reason is that renewables carry the ability to raise cheaper funds now. There is a lot more funding available for green power nowadays.
Financial restructuring
Since the financial position of Tangedco is precarious, there would be a financial restructuring exercise too after the unbundling process.
While FY23 financial details are awaited, it was announced in the assembly that the revenue loss of Tangedco was pegged at ₹7,825 crore for 2022-23. In the previous fiscal (FY22), the revenue loss was ₹11,955 crore.
Due to cumulative losses, Tangedco had availed loans from various financial institutions and banks which resulted in outstanding loans of about ₹1,44,000 crore as of March 31, 2023. It is reported to have increased to more than ₹1.5 lakh crore in FY23.
However, according to India Ratings & Research, Tangedco’s net losses narrowed to ₹5,523 crore in FY23 after the tariff revision in August 2022.