The ability of electric power distribution firms (Discos) to conduct business has been granted to the private sector under a concession deal that spans 20–25 years, as approved by the Cabinet Committee on Privatization (CCOP).
A senior official who attended the meeting told The News on Wednesday that the private sector entities would be entitled to control of Discos after being chosen through bids or auctions. “The CCOP has chosen to turn over two Discos, Hesco and Gepco, to the private sector as a trial project—one that makes a loss and the other that makes a profit. With the authority to replace the board of directors, the private sector would be in complete charge of Discos’ operations.
The official stated that the Power Division would provide support, but the Privatization Commission would spearhead the process of transferring Discos to the private sector through a long-term concession deal. Transaction advisors (TAs) would be assigned in order to accomplish this, and the World Bank would oversee the entire procedure. The private businesses who place the highest bids and include investment plans for four to five years that deviate from their customers’ service delivery requirements and loss-reduction strategies will be chosen to enter into agreements. It was resolved during the CCOP meeting that provinces would not be involved in the operations of discos.
The private sector would get returns on its investment after four to five years, and the private enterprise would benefit financially from annual losses being reduced. Less losses will be viewed as a private sector benefit, which will be distributed to the government as well. In addition, private management will receive the return on assets that are developed as a consequence of private sector investment on a weighted average cost basis. Brazil, Argentina, and Turkey have all effectively embraced this concept.
The official stated that the Discos’ current state of health and environment would not fetch reasonable revenue after dolling out some shares, in response to the privatization ministry’s position that the government should allow the private sector to purchase shares of Discos along with management. Releasing the Discos to the private sector via long-term concession agreements, whereby private corporations would also engage in upgrading the distribution system and mitigating losses, is the government’s only realistic choice remaining.
He declared, “There would be an excessive amount of delay if the government decided to privatize Discos since the disputes over their land and properties would take longer to resolve. The decision has been made to transfer the Discos to the private sector under long-term concession agreements since the government cannot afford any further delays.
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