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Madhya Pradesh (MP) has released the 3rd pre-bid conference minutes of Distribution Franchisee.

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  1. 1. Distribution Franchisee– Pre bid conferenceMadhya PradeshOctober 2011
  2. 2. AgendaFranchisee Area profileRequest for proposal (RfP)TimelinesDistribution franchisee agreement (DFA)Illustrations 10/17/2011Distribution Franchisee Scheme Slide 2
  3. 3. Franchisee Area profileDistribution Franchisee Scheme 10/17/2011
  4. 4. Franchisee area 10/17/2011Distribution Franchisee Scheme Slide 4
  5. 5. Franchisee Area – Overview (2010-11)Particulars Ujjain City Gwalior Town Sagar CityArea (Sq. Km) 92.68 174 205RAPDRP towns Ujjain City Gwalior Town Sagar CityConsumers (Nos) 95,893 184,680 54,641Input Energy (LUs) 3,886.96 10,313.15 1,635.67Total sales (LUs) 2,382.16 5,422.70 954.75Distribution Losses (%) 38.71% 47.42% 41.63%Rev. billed (Rs. Lakh) 12,973.80 33,249.89 5,467.48Rev. collected (Rs. Lakh) 12,526.98 29,663.88 5,136.80Collection 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 10/17/2011Distribution Franchisee Scheme Slide 5
  6. 6. Request for Proposal (RfP)Distribution Franchisee Scheme 10/17/2011
  7. 7. RfP – Salient featuresCost of RFP – Rs. 10,000/- Performance Security – In the form of an unconditional, revolving and irrevocable letter ofDocument 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 theMPPKVVCL, MPMKVVCL, MPPKVVCL, Minimum Input Energy committed by the Indore Bhopal Jabalpur Distribution Licensee calculated at Input Rate for the first year of Contract Period asUjjain 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 Distribution Franchisee Scheme Slide 7
  8. 8. Technical CriteriaBidder needed to fulfill requirements stipulated below at (a), (b) and (c).a) Experience in power sectorExperience in any of the following to be considered as eligible Minimumexperience of working in the power sector: Name of AnnualI. 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; Distribution Franchisee Scheme OR 10/17/2011 Slide 8
  9. 9. Selection criteria…Contd.Technical Criteria…Contd.Experience in handlingConsumer 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 BhopalTechnical Criteria (a) in case of BiddingConsortium, to be met necessarily by the MPPKVVCL, Sagar City 55,000Lead Member. Jabalpur 10/17/2011Distribution Franchisee Scheme Slide 9
  10. 10. Selection criteria…Contd.Technical Criteria…Contd.b) Manpower StrengthThe Bidder must have manpower strength of at Name of Manpowerleast …. (as shown in the adjoining table) Discom Franchisee Strength (onnumber of employees on the regular roles of the Area regular roles)Bidder in any one (1) of the last two (2) financialyears 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. 10/17/2011Distribution Franchisee Scheme Slide 10
  11. 11. Selection criteria…Contd.Technical Criteria…Contd.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 beblacklisted by any department or undertaking of any State Government orGovernment of India or debarred by any Court of Law from doing any businessactivity.Technical Criteria (c) to be met by all members in case of BiddingConsortium. 10/17/2011Distribution Franchisee Scheme Slide 11
  12. 12. Selection criteria…Contd.Financial CriteriaBidder 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 10/17/2011Distribution Franchisee Scheme Slide 12
  13. 13. Selection criteria…Contd.c) Turnover (Sales from core activities): Discom Name of TurnoverThe Bidder must have an annual turnover of Franchisee (Rs. Cr.)at least ….(as shown in the adjoining Areatable) for any two (2) of the three (3) MPPKVVCL, Ujjain City 130financial years preceding the year of Bid IndoreDeadline, as per the unconsolidated auditedannual accounts. MPMKVVCL, Gwalior Town 330 Bhopal MPPKVVCL, Sagar City 100 JabalpurAll Financial Criteria (a), (b) and (c) in case of a Bidding Consortium to be metindividually and collectively by the members in proportion to their equity stake in theproposed SPV.Only Lead Member permitted to use the credentials of its Affiliate(s) / Parent Company tomeet the required Financial Criteria. 10/17/2011 Distribution Franchisee Scheme Slide 13
  14. 14. Selection criteria…Contd.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. 10/17/2011Distribution Franchisee Scheme Slide 14
  15. 15. TimelinesDistribution Franchisee Scheme 10/17/2011
  16. 16. Due DatesS. 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) 10/17/2011Distribution Franchisee Scheme Slide 16
  17. 17. 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 OverDays 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 10/17/2011Distribution Franchisee Scheme Slide 17
  18. 18. Distribution franchisee agreement(DFA)Distribution Franchisee Scheme 10/17/2011
  19. 19. DFA – Key DefinitionDefinition Details “Affiliate” shall mean a Company that either directly or indirectly controls or is controlled by orAffiliate 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 theParent 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 shallEffective 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 Distribution Franchisee Scheme Slide 19
  20. 20. DFA – Supply of EnergyPrinciple of agreement DetailsArticle 2.1.2 (i) – DF DF to ensure twenty four (24) hours of power supply to the Consumers subject tosupply 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 theArticle 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 theArticle 5.1.3 – Demand commencement of each Contract Year. Such demand forecast by the DF should necessarilyForecast 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 theArticle 5.1.4 – Availability corresponding month in the ensuing Contract Year. DL shall endeavour to meet anyof Power additional requirement projected by the DF over and above the Minimum Input Energy, subject to availability of energy. 10/17/2011Distribution Franchisee Scheme Slide 20
  21. 21. DFA – Other Key FeaturesPrinciple of Detailsagreement Any amendment(s) in existing taxes, duties and levies or introduction of any new tax(es) by anyArticle 10.7 – Government Instrumentality after the Effective Date, not recovered through retail tariffs, to be borneDuties & 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 nineArticle 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 andIndependent subsequently, three (3) months before the expiry of the term of the Independent Auditor. The DL shallAuditor 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. 10/17/2011Distribution Franchisee Scheme Slide 21
  22. 22. 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 YearsDiscom Name of Franchisee Area Minimum Capex (Rs. Cr.)MPPKVVCL, Indore Ujjain City 70MPMKVVCL, Bhopal Gwalior Town 170MPPKVVCL, Jabalpur Sagar City 30 10/17/2011 Distribution Franchisee Scheme Slide 22
  23. 23. 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 10/17/2011Distribution Franchisee Scheme Slide 23
  24. 24. 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 orSAIFI lower lower lower At a value of 60 or At a value of 40 orSAIDI At a value of 90 or lower lower lowerCustomer service centre (Nos.) Atleast 4 Atleast 6 Atleast 6Replacement of failed distribution transformer(s)within time-limits specified by applicable 100% 100% 100%MPERC RegulationsConsumer Indexing (%) 100% 100% 100% 100% of the casesRectification of Normal Fuse-off calls within 95% of the cases or as 100% of the cases or or as per applicabletime-limits specified by applicable MPERC per applicable MPERC as per applicable MPERCRegulations Regulations MPERC Regulations Regulations 4 days or as per 3 days or as per 2 days or as perNo. of days required for providing response to applicable MPERC applicable MPERC applicable MPERCConsumer query (days) Regulations Regulations RegulationsCases of billing mistakes resolved within time 100% 100% 100%limits specified by applicable MPERC RegulationsFaulty meter cases resolved within time-limits 100% 100% 100%specified by applicable MPERC Regulations 10/17/2011 Distribution Franchisee Scheme Slide 24
  25. 25. 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 & Penalty16% 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 Distribution Franchisee Scheme Slide 25
  26. 26. 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 10/17/2011Distribution Franchisee Scheme Slide 26
  27. 27. Subsidy and EDProvision 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. 10/17/2011Distribution Franchisee Scheme Slide 27
  28. 28. Licensee EmployeesDeputation 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 Distribution Franchisee Scheme Slide 28
  29. 29. Thank You...
  30. 30. IllustrationsDistribution Franchisee Scheme 10/17/2011 Slide 30
  31. 31. Illustration – Penalty for delay in Mandatory Capital Works Total Cost of Penalty Contracted Work done Amount spentSr. Balance as per Month amount of the by end of for the WorkNo. mandatory Article mandatory the period done (Rs.) works ( Rs.) 14.2 works (Rs.)1 April 102 May 103 June 104 July 105 August 10 5,00,00,000 80% 4,00,00,000 1,00,00,0006 September 107 October 108 November 109 December 10 1,50,00010 January 11 0 90% 4,50,00,000 50,00,000 75,00011 February 11 0 100% 5,00,00,000 0 012 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% x10000000 10/17/2011Distribution Franchisee Scheme Slide 31
  32. 32. Illustration – Penalty for delay in Mandatory Capital WorksCost of BalanceMandatory Work after 1,00,00,000Scheduled Date (B)Total Penalty (T) 2,25,000 (T) <= 50% x (B)=Maximum Penalty (C) 50,00,000 10/17/2011 Distribution Franchisee Scheme Slide 32
  33. 33. Arrear Recovery EFFECTIVE EXPIRY DATE DATE Discom Period Contract Period Discom PeriodArrear 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 10/17/2011Distribution Franchisee Scheme Slide 33
  34. 34. Illustration - Financial Criteria (BiddingCompany) 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. 10/17/2011Distribution Franchisee Scheme Slide 34
  35. 35. 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.Distribution Franchisee Scheme Slide 35
  36. 36. Technical Criteria Technical CriteriaTech. Crit. (a) – Power Sector Experience / Tech. Crit. (b) – Tech. Crit. (c) - Customer Base Manpower Strength Blacklisting HandlingTo be met by Bidding 1) In case of Bidding Company, to be met by Bidding Company To be met by BiddingCompany/Lead and/ or its Affiliates / Parent Company/ All members ofMember of the company the Bidding ConsortiumConsortium 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 10/17/2011Distribution Franchisee Scheme Slide 36