Key comparison of revised RFPs for Jharkhand Distribution Franchisees

Recently (20th June 2012), Jharkhand has revised its Distribution Franchisee (DF) RFPs for 3 locations namely Ranchi, Dhanbad and Jamshedpur. See our previous blogs on Jharkhand:

• Jharkhand Distribution Franchisee first pre-bid meeting
• Relative DF Attractiveness Matrix for Jharkhand and Mumbra RFPs

DF Attractiveness Matrix, benchmarking old and revised RFPs is shown in the diagram below. Some major changes in revised RFPs (dated 20th June) compared to old are as follows:

Jharkhand DF Attractiveness Matrix - Revised vs. Old RFPs (Source: pManifold)

1. The base year for the RFP baseline continues to be 2010-11. This is most surprising part of this bidding, with bidders to take a call on future with lagging past baseline information.
2. The current DF scope has been extended to entire District level for all 3 areas. Geographical area of all 3 regions - Ranchi, Dhanbad and Jamshedpur, has increased multiple times by approx. 17, 5 and 27 times respectively. This is huge increase, with not much corresponding change in no. of customers and assets variations  (see 2nd and 3rd figure here), creating questions on authenticity of the RFP baseline. 
3. Number of Divisions has increased in Dhanbad from 3 to 4, while remaining the same for other 2 regions. Again increase in Dhanbad divisions, is not correspondingly matching with increase in assets in revised RFP (see 2nd figure here), suggesting inconsistency. 
4. Number of Electricity consumers in Dhanbad has increased by 34%, while it has increased by 3% in Ranchi and slightly reduced in Jamshedpur. 
5. With sharp increase in area, there is average 88% reduction in electricity consumer density across all the 3 regions.
6. Connected Load (KW) has increased by 31% in Jamshedpur, whereas it has reduced by 29% and 6% in Ranchi and Dhanbad respectively. Again this reduction in connected load, with increase in consumer load, is hinting another inconsistency. 
7. Electricity Sales (LUs) in Dhanbad has increased by 24%, while it is almost same in other 2 circles.
8. Average 16% & 11% increase in Revenue Assessment and Revenue Realization respectively across 3 regions.
9. Average 5% reduction in Collection Efficiency.
10. AT&C Losses has reduced considerably in Jamshedpur from last 54% to now 33% (sharp 21% low). This again is difficult to explain with Jamshedpur undergoing highest increase in revised DF area, no change in customer numbers & sales units and highest increase in connected loads. The other 2 areas,  Ranchi and Dhanbad has increased revisions in AT&C losses to 40.55% and 44.66%, with respective increase of 4.55% and 1.66% compared to old RFP.
11. Across all the 3 revised DF regions, Input Energy (MUs) has increased by 32% for Dhanbad, while it is same for other 2 regions.
12. Revised Average Billing Rate (ABR) is highest for Dhanbad and lowest for Ranchi. ABR has increased for Dhanbad & Jamshedpur by 6% & 3% respectively, while it has reduced by 4% for Ranchi.
13. Asked Levelized Input Price (LIP), at (assumed) Discount Factor of 11% as per the minimum benchmark input price provided by JSEB, it's coming in descending order - highest Rs. 2.876/unit for Dhanbad, Rs. 2.866/unit for Jamshedpur and lowest Rs. 2.487 for Ranchi. This again is little surprising for JSEB to claim such high min. input prices for Dhanbad, which otherwise is ranking lowest as per pManifold's DF attractiveness matrix.
14. Ratio of ABR to LIP is 1.231 for Dhanbad, 1.226 for Ranchi and 1.176 for Jamshedpur. This ratio is static indication of profit margin for bidders, with close to 1.00 value is indication of lower margins and higher risks. Surprisingly Dhanbad is ranking highest on this metric, inspite of various other odds. Its lowest area, highest consumer density and highest AT&C losses, can put it higher amongst the bidders. 

This significant (unexplained) variations in the revised baseline relative to old one, is leading to lot of confusion amongst potential and even very experienced bidders. Below brief comparison of asset details and consumer mix further highlights various baseline inconsistencies, that bidders are advised to cautiously verify, rather rushing into 10th July bid submission timeline. 

Jharkhand Distribution Asset comparison (Source: pManifold)

'Distribution Infrastructure' details as per the RFPs (old and revised) are shown in the Figure 2. Few observations are as follows:

1. The number of divisions in Dhanbad has increased to 4, with reflection of these changes on few asset only. Assets like LT poles, 11KV poles are showing no change compared to old RFP, hinting another possible source of inconsistency.   

Customer Segmentation comparison on the basis of revised and old RFPs are shown below. Key points are mentioned below:

Jharkhand Electricity Customer segmentation comparison (Source: pManifold)

1. Overall, Dhanbad has 34% increase in customer base, Ranchi has 2.59% increase, while Jamshedpur has reduction by 0.3%
2. HT customers in Ranchi and Dhanbad has increased by approx 15%, while it has reduced by 5% in Jamshedpur.   

An ideal situation would have been JSEB developing fresh 2011-12 audited baseline data, re-organizing a second pre-bid meeting, and taking forward the bid procedure by giving sufficient atleast 45 days time for on-site due diligence post pre-bid meeting. Its risk of rationale bidding, and later contract litigation and/or non-performance could have been better mitigated that way. With above identified limited inconsistencies, and possible more, the risks of delays seems higher. It is noteworthy to remember MP Distribution Franchisee bids, that were changed from District level to town levels, to make it compact, viable and more favorable to bidders. There were in total 3 revisions in RFPs, with 3 pre-bid meetings, and approx timing of 8 months from first RFP release to bid win announcement. 

Post by: Kunjan Bagdia @ pManifold