MP_DF_Pre_bid_PPT_17_Oct_2011

Distribution Franchisee
– Pre bid conference
Madhya Pradesh
October 2011

Agenda

Franchisee Area profile
Request for proposal (RfP)
Timelines
Distribution franchisee agreement (DFA)
Illustrations

10/17/2011
Distribution Franchisee Scheme
Slide 2

Franchisee Area profile

Distribution Franchisee Scheme 10/17/2011

Franchisee area

10/17/2011
Slide 4

Franchisee Area – Overview (2010-11)

Particulars Ujjain City Gwalior Town Sagar City

Area (Sq. Km) 92.68 174 205

RAPDRP towns Ujjain City Gwalior Town Sagar City

Consumers (Nos) 95,893 184,680 54,641

Input Energy (LUs) 3,886.96 10,313.15 1,635.67

Total sales (LUs) 2,382.16 5,422.70 954.75

Distribution Losses (%) 38.71% 47.42% 41.63%

Rev. billed (Rs. Lakh) 12,973.80 33,249.89 5,467.48

Rev. collected (Rs. Lakh) 12,526.98 29,663.88 5,136.80

Collection Efficiency (%) 96.56% 89.21% 93.95%

AT&C Losses (%) 40.82% 53.09% 45.16%

Average Billing Rate (Rs. per Unit) 4.66 5.02 4.77

10/17/2011
Slide 5

Request for Proposal (RfP)


RfP – Salient features

Cost of RFP – Rs. 10,000/- Performance Security – In the form of an
unconditional, revolving and irrevocable letter of
Document Processing Fees – Rs. 50,000/- credit (“Letter of Credit” or “IRLC”) from any
nationalized bank for an amount equal to the
sum of the following:

Earnest Money Deposit (Rs. Cr.) 1. Three and half (3.5) months estimated
amount payable to the Distribution Licensee
by the Distribution Franchisee based on the
MPPKVVCL, MPMKVVCL, MPPKVVCL, Minimum Input Energy committed by the
Indore Bhopal Jabalpur Distribution Licensee calculated at Input
Rate for the first year of Contract Period as
Ujjain City Gwalior Town Sagar City per the provisions of DFA, and
2. Three and half (3.5) times the amount of
average monthly electricity duty billed by the
1.50 3.50 0.60 Distribution Licensee in the Base Year for
Franchisee Area;

10/17/2011
Slide 7

Technical Criteria
Bidder needed to fulfill requirements stipulated below at (a), (b) and (c).

a) Experience in power sector
Experience in any of the following to be considered as eligible Minimum
experience of working in the power sector:
Name of Annual
I. Ownership of grid connected power generation project(s) Discom Franchisee contract
having an aggregate installed capacity of at least Area value
two hundred fifty (250) MW, which is either under (Rs. Cr.)
commercial operation, or under construction/development for
which financial closure has been achieved, at least seven (7)
days prior to the Bid Deadline;

II. Holder of a power distribution or transmission license MPPKVVCL, Ujjain City 130
from an appropriate commission under Section 14 of the Indore
Electricity Act, 2003 for a period of at least two (2) years as on
seven (7) days prior to the Bid Deadline;
MPMKVVCL,
III. Construction and erection of power plant(s) for a state / Gwalior Town 330
central utility or transmission and/or distribution facilities Bhopal
(which should necessarily include sub-stations and/or
transmission and/or distribution lines) for a transmission
and/or distribution licensee with an annual contract
MPPKVVCL,
value of not less than ....(as shown in the adjoining Sagar City 100
table) for every year over a period of three (3) Jabalpur
financial years preceding the financial year in which bids
are invited;

OR 10/17/2011
Slide 8

Selection criteria…Contd.
Technical Criteria…Contd.
Experience in handling
Consumer Base Name of Minimum
Discom Franchisee Consumer
The Bidder must have experience in Area Base (Nos)
handling at least ….(as shown in the
adjoining table) number of customers, in
MPPKVVCL,
retail supply / services in electricity / gas / Ujjain City 96,000
Indore
water / telecom for each of the last two (2)
financial years preceding the year of Bid
Deadline. MPMKVVCL,
Gwalior Town 1,85,000
Bhopal

Technical Criteria (a) in case of Bidding
Consortium, to be met necessarily by the MPPKVVCL,
Sagar City 55,000
Lead Member. Jabalpur

10/17/2011
Slide 9

b) Manpower Strength
The Bidder must have manpower strength of at Name of Manpower
least …. (as shown in the adjoining table) Discom Franchisee Strength (on
number of employees on the regular roles of the Area regular roles)
Bidder in any one (1) of the last two (2) financial
years preceding the year of Bid Deadline.
MPPKVVCL,
The Technical Criteria (b) to be met by Indore
Ujjain City 190
(i) bidder, in case of the Bidder being a
Bidding Company, on its own or through its
Parent Company / Affiliate(s). MPMKVVCL,
Gwalior Town 370
Bhopal
(ii) any member on its own or jointly with one or
more members of the Consortium, in case of a
Bidding Consortium. In addition, the Lead MPPKVVCL,
Sagar City 110
Member can also take recourse to its Parent Jabalpur
Company / Affiliate(s) for meeting this criteria.

10/17/2011
Distribution Franchisee Scheme Slide 10


c) Blacklisting by any Department / Undertaking of Government
of Madhya Pradesh or any State Government or Government of
India or debarred by Court of Law:

Bidder or any Member of the Bidding Consortium, mandated not to be
blacklisted by any department or undertaking of any State Government or
Government of India or debarred by any Court of Law from doing any business
activity.

Technical Criteria (c) to be met by all members in case of Bidding
Consortium.

10/17/2011

Financial Criteria
Bidder required to meet following financial requirements:
a) Net Worth : The Bidder must have a Net Worth of at least ….(as shown in the
table below) as per the unconsolidated audited annual accounts for any two (2) of
the three (3) financial years preceding the year of Bid Deadline.
b) Net Cash Accrual : The Bidder must have a Net Cash Accrual of at least ….(as
shown in the table below) as per the unconsolidated audited annual accounts for
any two (2) of the three (3) financial years preceding the year of Bid Deadline.

Name of Franchisee Area
Ujjain City Gwalior Town Sagar City
Net worth
(Rs. Cr.)
100 170 100

Net Cash Accrual
(Rs. Cr.)
30 80 10

10/17/2011
Slide 12


c) Turnover (Sales from core activities): Discom Name of Turnover
The Bidder must have an annual turnover of Franchisee (Rs. Cr.)
at least ….(as shown in the adjoining Area
table) for any two (2) of the three (3) MPPKVVCL,
Ujjain City 130
financial years preceding the year of Bid Indore
Deadline, as per the unconsolidated audited
annual accounts. MPMKVVCL,
Gwalior Town 330
Bhopal
MPPKVVCL,
Sagar City 100
Jabalpur

All Financial Criteria (a), (b) and (c) in case of a Bidding Consortium to be met
individually and collectively by the members in proportion to their equity stake in the
proposed SPV.
Only Lead Member permitted to use the credentials of its Affiliate(s) / Parent Company to
meet the required Financial Criteria.

10/17/2011
Slide 13


Price bid
Bidders required to quote Input Rate(exclusive of electricity duty and subsidy)
for each year of the contract period.
Bidders must ensure that Input Rate(s) quoted in the Price Bid must be such
that ratio of minimum quoted Input Rate to maximum quoted Input Rate
during the Contract Period shall not be less than 0.70 (point seven zero).
In addition, the quoted Input Rate(s) for each year of the Contract Period must
be more than the Input Rate quoted in the previous year.
The Qualified Bidder with the maximum Levelised Input Rate in the Price Bid
will be selected for the award of the Project. The Distribution Licensee’s decision
in this matter shall be final and binding on the Bidder.
Any conditional Price Bid will be rejected.

10/17/2011
Slide 14

Timelines


Due Dates

S. No. Activities Due Dates

1 Commencement of sale of RFP 05th October, 2011
2 Pre Bid Conference 15th October, 2011
3 Last date for receiving queries/clarifications 18th October, 2011
4 Issue of Final RFP and DFA 31st October, 2011
5 Last date for sale of RFP 11th November, 2011 upto 17:00 Hrs
6 Last date of submission of Bid (Bid Deadline) 14th November, 2011 upto 14:00 Hrs
7 Opening of Technical Bids 14th November, 2011 at 16:00 Hrs
8 Opening of Price Bid (Tentative) 24th November, 2011 at 16:00 Hrs
9 Issue of Letter of Award (Tentative) 01st December, 2011
10 Execution of Distribution Franchisee Agreement
25th January, 2012
(Tentative)

10/17/2011
Slide 16

Timeframe for appointment of DF

Issue of Letter Signing Create Completion of
of Award of DFA SPV Condition Precedent

180 days

Hand
0 20 45 180 Over
Days
of DF
10 30 70 270 Area

60 days 90 days

Acceptance Condition Submission of Completion of
of LOA by Precedent for DF Performance Joint Audit
DFA (Documentation) Guarantee Survey

10/17/2011
Slide 17

Distribution franchisee agreement
(DFA)


DFA – Key Definition
Definition Details

“Affiliate” shall mean a Company that either directly or indirectly
controls or
is controlled by or
Affiliate is under common control with
a Company and “control” means ownership by one Company of at least twenty six percent
(26%) of the paid-up capital of the other Company. Any bank or financial institution shall
not be considered as an Affiliate;

“Parent Company” shall mean a company that holds at least fifty one percent (51%) of the
Parent Company paid-up equity capital directly or indirectly, in the Bidding Company (in case of a single
company) or in the Member (in case of a Bidding Consortium), as the case may be

Shall mean the date intimated by the Distribution Licensee to the Distribution Franchisee
to commence its operations as per the Distribution Franchisee Agreement and which shall
Effective Date not be earlier than fulfillment of conditions precedent as per Article 4.3. Such date shall
also be considered as the handing over date of the Franchisee Area by the Distribution
Licensee.

10/17/2011
Slide 19

DFA – Supply of Energy
Principle of agreement Details
Article 2.1.2 (i) – DF DF to ensure twenty four (24) hours of power supply to the Consumers subject to
supply obligation availability of Input Energy from the Distribution Licensee
DL to make available Minimum Input Energy at Input Point(s) on an annualized basis. If
the first and last year of the Contract Period is a part of any financial year, the Minimum
Input Energy for that period shall be determined on the basis of Input Energy during the
corresponding period of the year which has been considered for determination of the
Article 5.1.1 – Minimum Minimum Input Energy.
Input Energy
Furthermore, the annual Minimum Input Energy to be apportioned for each month of a
Contract Year on the basis of proportion of actual Input Energy for the corresponding
month of the immediately preceding Contract Year. Monthly proportion of Input Energy
for the Base Year provided in the respective DFA.

DF to submit yearly demand forecast as per Annexure IX, sixty (60) days prior to the
Article 5.1.3 – Demand commencement of each Contract Year. Such demand forecast by the DF should necessarily
Forecast factor in energy requirement for meeting the supply hours as prescribed by DL as per the
provisions of Article 2.1.2(i).

DL to confirm the availability of power seven (7) days prior to the commencement of the
Article 5.1.4 – Availability corresponding month in the ensuing Contract Year. DL shall endeavour to meet any
of Power additional requirement projected by the DF over and above the Minimum Input Energy,
subject to availability of energy.

10/17/2011
Slide 20

DFA – Other Key Features
Principle of
Details
agreement
Any amendment(s) in existing taxes, duties and levies or introduction of any new tax(es) by any
Article 10.7 –
Government Instrumentality after the Effective Date, not recovered through retail tariffs, to be borne
Duties & Taxes
by DL.
Metering:
• DF to achieve 100% Metering in the franchisee area at the consumer end, and complete metering
of all distribution transformers and 11kV feeders within the first two (2) years of the contract
period.
• DF to achieve 100% metering at all distribution transformers and 11kV feeders within the first nine
Article 14.1 – (9) months of the contract period in the franchisee area.
Mandatory Consumer Services:
Capex • DF to establish and operationalise at least one (1) call centre with adequate work station capacity,
which shall be operated 24/7 for recording and coordinating technical & commercial complaints of
the consumers in the Franchisee Area at least thirty (30) days prior to the end of Transition
Period.
• DF also to undertake necessary capital investment to mandatorily achieve minimum levels of
performance in respect of consumer services as mandated.

Article 26.1 –
Selection of DF to provide a panel of five (5) Independent Auditors initially on the date of signing of DFA and
Independent subsequently, three (3) months before the expiry of the term of the Independent Auditor. The DL shall
Auditor select one (1) from among this panel as the Independent Auditor within thirty (30) days from the date
of submission of the panel by the DF.

10/17/2011
Slide 21

Minimum Capital Investment
The DF shall submit its proposal within the Transition Period for the entire
capital investment on the Distribution System inclusive of mandatory capital
investment mentioned for meeting the future load growth, reduction in the AT&C
Losses, improvement in the quality of supply and Consumer services in the Franchisee
Area and replacement of Distribution Assets.
Such investment plan shall factor in a minimum investment of (as shown in table
below) by the DF over the first five Contract Years, subject to an investment of at
least ten percent in each of these Contract Years

Discom Name of Franchisee Area Minimum Capex
(Rs. Cr.)

MPPKVVCL, Indore Ujjain City 70

MPMKVVCL, Bhopal Gwalior Town 170

MPPKVVCL, Jabalpur Sagar City 30

10/17/2011
Slide 22

Indicative areas of capital investment by DF
S. No Particulars
1 New 33/11kV Substation
2 Uprating and Upgradation of existing 33/11kV substations

3 Formation of Ring Mains System for existing as well as new 33/11kV substations

4 Additional 11kV feeders and establishment of ring main system for 11kV network

5 Reactive Power Management

6 Revamping of Distribution Transformer(DTRs)

7 IT and Communication System
8 Call Center

9 Customer Service Centre

10/17/2011
Slide 23

Consumer Services and SoP for DF (Eg. Gwalior)
Desired Status
At end of 36 At end of 60 At end of 96
Parameters
months from months from months from
Effective Date Effective Date Effective Date
At a value of 100 or At a value of 75 or At a value of 40 or
SAIFI
lower lower lower
At a value of 60 or At a value of 40 or
SAIDI At a value of 90 or lower
lower lower
Customer service centre (Nos.) Atleast 4 Atleast 6 Atleast 6
Replacement of failed distribution transformer(s)
within time-limits specified by applicable 100% 100% 100%
MPERC Regulations
Consumer Indexing (%) 100% 100% 100%
100% of the cases
Rectification of Normal Fuse-off calls within 95% of the cases or as 100% of the cases or
or as per applicable
time-limits specified by applicable MPERC per applicable MPERC as per applicable
MPERC
Regulations Regulations MPERC Regulations
Regulations
4 days or as per 3 days or as per 2 days or as per
No. of days required for providing response to
applicable MPERC applicable MPERC applicable MPERC
Consumer query (days)
Regulations Regulations Regulations
Cases of billing mistakes resolved within time
100% 100% 100%
limits specified by applicable MPERC Regulations

Faulty meter cases resolved within time-limits
100% 100% 100%
specified by applicable MPERC Regulations
10/17/2011
Slide 24

AT & C Loss Reduction targets
DF to achieve YoY AT&C Loss levels as shown.
On achievement of AT&C Loss reduction targets,
DF to be paid an incentive of 2% of the loan converted into grant;
On non-achievement of AT&C Loss reduction targets
i. Penalty (as shown in the figure below) to be levied on the DF
ii. If DF opts to undertake the RAPDRP contracts prematurely terminated / cancelled by the
DL, then DF liable to pay penalty as provided in the original contract, in addition to (i)
above.

RAPDRP Target Loss Level & Penalty
16% 15% 15% 15% 15% 15% 15%
14%
14% 13%
12%
12% 11%
10% 10% 10% 10%
10%
8%
6% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%

4% 3%

2% 1%

0%
2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th
Penalty as percentage of cash lost due to non – achievement of target AT&C Loss level Target AT&C Loss level

10/17/2011
Slide 25

Illustration – Ongoing Works

Ongoing Capital Works

DF responsible for
Programme
Management

Terminated / cancelled

If DF undertakes to complete
the balance capital work

Same terms & conditions will be
applicable as in the Original
Contract, including incentives /
penalties applicable in the RAPDRP
contract
10/17/2011

Subsidy and ED
Provision for Subsidy
Subsidy offered by GoMP or GoI or any other agency on any category
of Consumers to be retained by the Licensee;
Provision for ED
DF responsible for the payment of ED to the State Government on
billed basis;
DF required to submit documentary evidence in support of such ED
payment;
In case of any default of payment for these, Licensee shall have the
right to invoke the Performance Security.

10/17/2011
Slide 27

Licensee Employees
Deputation of DL employees
During first 3 months from the effective Date
DL to make available all existing employees to work in the franchisee area, as prior to
Effective Date;
DL liable for payment of salaries & all employee related expenses of all such employees.
Thereafter, on the request of the DF,
DL to make available such employees, who are willing to work with the DF, on
deputation for a minimum period of three (3) years or such extended period as
considered appropriate;
DL employees provided the option of reverting back at any time to the DL on giving
three (3) month notice to the DF;
DF has the right to send back any employee on deputation with it at any time, giving a
notice period of one (1) month in exceptional cases and with due justification;
During the period of deputation, DF shall pay the entire cost of DL’s employees;
DF also mandated to contribute towards the terminal liabilities of the DL’s employees on
deputation with DF during the period of deputation;
DL employees not to lose their seniority in the DL due to such deputation with the DF;
DF to extend transition assistance for a period of 90 days after the expiry date.
10/17/2011
Slide 28

Illustrations

Slide 30

Illustration – Penalty for delay in Mandatory Capital Works
Total
Cost of Penalty
Contracted Work done Amount spent
Sr. Balance as per
Month amount of the by end of for the Work
No. mandatory Article
mandatory the period done (Rs.)
works ( Rs.) 14.2
works (Rs.)
1 April 10
2 May 10
3 June 10
4 July 10
5 August 10 5,00,00,000 80% 4,00,00,000 1,00,00,000
6 September 10
7 October 10
8 November 10
9 December 10 1,50,000
10 January 11 0 90% 4,50,00,000 50,00,000 75,000
11 February 11 0 100% 5,00,00,000 0 0
12 March 11 0 0 0 0 0
Total (T) 2,25,000*
* The total penalty shall not be more than 50 lacs. ( 50% X 1,00,00,000= 50 lacs) or T <= 50% x
10000000 10/17/2011
Slide 31

Illustration – Penalty for delay in Mandatory Capital Works

Cost of Balance
Mandatory Work after 1,00,00,000
Scheduled Date (B)

Total Penalty (T) 2,25,000

(T) <= 50% x (B)=
Maximum Penalty (C) 50,00,000

10/17/2011
Slide 32

Arrear Recovery
EFFECTIVE EXPIRY DATE
DATE

Discom Period Contract Period Discom Period
Arrear Pre-Franchisee Management of Arrear during Franchisee Arrear Post Discom
Handover Franchisee Operation Takeover

Arrears prior to • DF authorized to retain the
DF responsible for Collection

amount collected
Effective Date
• DF not obliged to collect any

Arrears on Expiry of DF Contract
(Classified as
Connected and surcharge due after the
Effective Date. The DF shall make available
Disconnected Arrears)
the list of Consumers with
Recovery on • DF responsible for collection arrears as on the Expiry
of any amount recoverable. Date.
account of audit
• Incentive @25% of such • DF permitted to collect
and vigilance recoveries to be paid by DL to Amounts due from the
checking DF rest to be retained by DL. Consumer from the billing
cycle ending on any date prior
• The arrears shall not to be to the Expiry up to a
DL responsible for

Arrears under dealt with by the DF; it shall maximum period of three (3)
Collection

litigation on the continue to be the months after the Expiry Date
Effective Date responsibility of the Licensee
• Responsibility to recover and
retain shall rest with DL 10/17/2011

Illustration - Financial Criteria (Bidding
Company)
Net Cash Accrual:
Cr. 80

Net Worth: Turn Over:
Cr. 170 Bidding Company Cr. 330

And / Or
Parent
Affiliate 1
Company

Affiliate
Affiliate 2
...n

Networth: 170 Cr.
Net Cash Accrual: 80 Cr.
Turnover: 330 Cr.
10/17/2011
Slide 34

Illustration – Financial Criteria (Consortium)
Net Cash Accrual: 80 Cr.

Net Worth: 170 Cr. Consortium Turn Over: 330 Cr.

Member A Lead Member Member C
(25% Proposed equity) (51% Proposed equity) (24% Proposed equity)

And / Or
Parent
Affiliate 1
Company

Affiliate
Affiliate 2
...n

Networth: 42.5 Cr. Networth: 86.7 Cr. Networth: 40.8 Cr.
Net Cash Accrual: 20 Cr. Net Cash Accrual: 40.8 Cr. Net Cash Accrual: 19.2 Cr.
Turnover: 82.5 Cr. Turnover: 168.3 Cr. Turnover: 79.2 Cr.

Technical Criteria

Technical Criteria

Tech. Crit. (a) – Power
Sector Experience / Tech. Crit. (b) – Tech. Crit. (c) -
Customer Base Manpower Strength Blacklisting
Handling

To be met by Bidding 1) In case of Bidding Company,
to be met by Bidding Company To be met by Bidding
Company/Lead
and/ or its Affiliates / Parent Company/ All members of
Member of the
company the Bidding Consortium
Consortium
2) In case of the Bidding
Consortium, to be met by any or
all members. Further, recourse
can be taken to the affiliates /
parent of the Lead member
10/17/2011

MP_DF_Pre_bid_PPT_17_Oct_2011

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