Tata Power has received a letter of interest (LoI) in Odisha for distribution and retail supply of power in five cities. The expected annual revenue of the proposed special purpose vehicle (SPV) will be in excess of Rs 3,000 crore, according to the private sector operator. Praveer Sinha, managing director and CEO of Tata Power shared his views on the matter in an exclusive interview with CNBC-TV18.

On the expected annual revenues, he said: “This is a big move forward by the government after the initial hiccup that they had when they had the privatised the distribution in Odisha. This is like the earlier arrangement and in fact similar to what we have in Delhi whereby it is a public private partnership (PPP) where Tata Power will have 51 percent stake in the SPV and the government of Odisha will have 49 percent. The present revenue of the distribution company is Rs 3,000 crore and we expect that over a period of time we will be able to increase it.

“We are expecting that we will take over this arrangement in another 3-4 months maybe in the new financial year. We also expect that Tata Power will bring to the consumers of Odisha state of the art service, reliable power, better customer services and all the new advantages of new technologies that can come over there."

He added: “The initial investment that we will have to make for getting the 51 percent stake—the price that was bid was Rs 350 crore—we will be paying something like Rs 175 crore. Then we will have to incur capital expenditure on the improvement in the network and some of the new technology initiatives that we will implement. These are typically on return on equity (RoE) basis, so you typically get 15.5 percent RoE for any equity that you invest."

He continued: “We have targeted that in the first 3-5 years, we will be spending approximately about Rs 300-500 crore for the network and the reliability aspects of the business and also for the new metering that we will do, also the smart metering solutions. We bring down the losses, we get certain incentives on that and also the old collection. So it is a very attractive proposition and this is something similar to Delhi which gives us returns every year."

“For Odisha government, this will be a very attractive proposal for putting just 49 percent of the equity, they will start earning returns on that unlike now when they put money, they do not get any returns,” Sinha noted.