Attracted by proposed power sector reforms and India’s potential, Italy’s Enel Group is exploring the possibility of entering India’s electricity distribution business, two people familiar with the development said.
The interest from the European utility in India’s electricity distribution sector comes against the backdrop of the government’s measures including the proposed separation of the wire and electricity supply business.
“Distribution has been a chaotic space given the losses borne by the state electricity distribution companies (discoms). However, we have been seeing interest from international majors of the likes of Enel trying to enter the Indian distribution and retail supply space,” said one of the two people cited above, requesting anonymity.
To tide over the debts of around Rs4.3 trillion, the Indian government launched the Ujwal Discom Assurance Yojana (UDAY) in November 2015 to improve operational and bill collection efficiency of power discoms. Also, the government plans to leverage the recently launched Rs16,320 crore Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) for universal electricity access.
“Enel wants to be present in the customer facing businesses,” said the second person aware of Enel’s interest who also didn’t wish to be named.
Queries emailed to Enel Group on 1 January remained unanswered till press time.
Listed on the Milan stock exchange, Enel is present in 37 countries and has 2.1 million km of electricity and gas network. With 84 gigawatts (GW) of installed capacity, the utility generated €70.6 billion revenue in 2016.
Italy’s largest utility has been present in India’s renewable energy sector since 2015 when Enel Green Power (EGP) acquired a majority stake in Indian renewable energy company BLP Energy for about €30 million. Enel had articulated its strategy at that time.
“In its 2015-2019 Strategic Plan, EGP announced its intention to broaden its international footprint by expanding into new markets, including countries in the Asia-Pacific region. Among those, India is well positioned for rapid expansion in the renewable energy industry owing to its high population and economic growth,” Enel Group said in a 24 September 2015 statement.
The Indian government has been promoting the separation of the so-called carriage and content operations of existing discoms, with the onus now on the states to firm up their own roadmaps. Carriage refers to the distribution aspect and content to power. The separation will allow consumers in India to buy electricity from a power company of their choice.
The government is also pushing for steps such as direct benefit transfer (DBT) for better targeting of subsidies and separation of wire and supply operations. Also, it is pressing for tariff slabs rationalization and limiting cross-subsidy to 20% to usher in efficiency.
This in turn is expected to boost electricity demand in the country and improve India’s per capita power consumption of around 1,200 kilowatt-hour (kWh), which is among the lowest in the world. According to federal think tank NITI Aayog’s draft national energy policy this is expected to go up to 2911-2924kWh in 2040.
“In 2015-16, our per capita energy and electricity consumption at 670 kilogram of oil equivalent (kgoe) and at 1075KWh (kilowatt hour)/year, respectively, are just one-third of the world average. Nearly 25% of our population today is without access to electricity and 40% without access to clean cooking fuel. In 2014, the share of electricity in final energy demand was only 17% compared with 23% in the member countries of Organization for Economic Cooperation and Development (OECD),” said the draft national energy policy.
The interest in the electricity distribution space has been picking up with India’s clean energy firms such as ReNew Power Ventures Pvt. Ltd and Greenko Group looking at diversifying across the electricity value chain to derive better value.
Source: Mint