Mr. Raghvendra Raj Mehta Senior Executive Vice President, Reliance Infrastructure Ltd. at RPR 2012, 23-26 August, Goa, India

1. Competitive Bidding in Power Sector
– is it working or not?
- Presented by R R Mehta

2. Power Procurement – Competitive Bidding Process
Bid Evaluation
 The bids are evaluated for each escalable and non-escalable components of
capacity charge, energy charge and transportation charges
 The levelised tariff of each bidders are compared incorporating the transmission
charges from the point of injection to point of supply, accordingly, the bidders
need to adjust their escalable and non-escalable components as part of their
winning strategies
Confidential Slide 2

3. Power Procurement – Competitive Bidding Process
Key Aspects of PPA
 Risk allocation between parties
 Land Acquisition
 Fuel Supply
 Technical requirements on minimum load condition
 Assured off take levels
 Force majeure clauses as per industry standards
 Change in Law in state/country or cross country level
 Lead times for scheduling of power
 Default conditions and cure thereof, and penalties
 Payment security proposed to be offered by the procurer
Confidential Slide 3

4. Case I bidding: Observed tariff ranges…
 Evolution of weighted average Case I bids
Weighted Average Case I Tariffs (Rs./kWh)
5
4.5
4
Rs/kWh
3.5
3
2.5
2
Sept Dec Dec Nov Nov Feb Dec Aug Aug Jan Jan Jan Mar Sept Oct Oct Dec Dec
2006 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2010 2010 2010 2010 2010 2010 2010
Bids have observed a linear growth trend owing to:
o Increased costs of fuel and financing
o Higher risk perception on fuel availability and payment front
Confidential Slide 4

5. Long Term Bid Process - Tariff Quotes
Capacity Offered Levellized Tariff
Rank Name of Bidder and Project
(MW) (Rs./kWh)
L1 RPG Group - Dhariwal Infrastructure Ltd. 200 3.513
L2 Reliance Power Ltd. 1000 4.311
L3 Vandana Vidyut Ltd. 150 4.493
L4 PTC - MB Power MP 200 4.590
L5 RKM PowerGen Pvt. Ltd. 300 4.670
L6 Indiabulls Power Limited 490 4.800
L7 PTC - DB Power 150 5.593
Result of Financial Bid Opening held on 09-Dec-11
Confidential Slide 5

6. L1 Year-wise Evaluated Tariff
Dhariwal Infra.: Levellised Tariff Vs FC Component
7.0
6.0
5.0
Levellised Rs 3.513 pu
Rs. /kWh
4.0
3.0
2.0 FC Component
1.0
0.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Confidential Slide 6

7. Power Procurement – Medium Term
Tariff Components for Medium Term Power tied-up from FY12 to FY14
PPA Date: 16-Jun-10,
MTPP PPA Date: 04-Jun-10 PPA Date: 04-Aug-10
Addendum: 21-Jan-11*
KSK-WPCL (260MW) Abhijeet (55MW) VIPL (134MW)
FY-11-12 FY-12-13 FY-13-14 FY-11-12 FY-12-13 FY-13-14 FY-12-13 FY-13-14
Fixed Cost (FC) 4.00 3.90 3.00 3.414 3.001 2.47 3.194 2.945
Variable Cost (VC) 1.465 1.02 1.025 1.75 1.811 1.875 0.989 0.989
Total 5.465 4.92 4.025 5.164 4.812 4.345 4.183 3.934
Fixed Cost - % age 73% 79% 75% 66% 62% 57% 76% 75%
Low Variable Component poses risk of DTPS backing down
Confidential Slide 7

8. Success or Failure – Probably limited success –WHY?
GENERATOR:
 Fuel Availability and price uncertainity
 Project Execution risk – Land/Environment/logistics etc
 Assured off take levels
 Inability to get financing at fixed cost matching with the PPA term (Limited access to
Development Banking resources)
 Payment Security
DISTRIBUTION LICENSEE:
 Cost reflective timely tariff and Fuel cost variation recovery
 Freedom to change consumption by consumer and consequential losses (under
recovery of fixed cost for lower off take or loss on alternate disposal/sale)
 Low collection efficiency due inability to pay or due to unwillingness to pay (Socio-
political issues)
Confidential Slide 8

9. Thank You