Thursday, June 28, 2012

Price bid curves and analytics from Jharkhand Distribution Franchisee projects

Our recent blog 'Key comparison of revised RFPs for Jharkhand Distribution Franchisees' covered the baseline comparison between old and revised RFPs for 3 forthcoming Power Distribution Franchisees in Jharkhand - Ranchi, Dhanbad and Jamshedpur.

JSEB has given minimum benchmark input price curve for all the regions, mandating bidders to bid higher than given price curve for all 15 years. The bidders in pre-bid meeting has earlier requested to have no benchmarks, to allow them innovating on financial structuring. (See our blog Jharkhand Distribution Franchisee first pre-bid meeting

See below table with useful bid analytics
Jharkhand Min. Benchmark Input prices for Power procurement by DF (Source: pManifold)
Some top level observations:

  1. Steep growth rate of around 10% in initial first 2 years, with max. in first year; followed by receding growth rate to 2% by 5 years; almost stable and slow receding of around 1% until 10 years, and then another stagnant increase of less than 0.5% and below until 15 years. 
  2. Ranchi has lowest start point around Rs. 2/kWh, with Jamshedpur highest at Rs. 2.5/kWh
  3. Ranchi again has lowest end point around Rs. 2.75/kWh, with Dhanbad highest at around Rs. 3.2/kWh. Amongst 3 DF regions, Dhanbad ranks lowest in geographical area, highest in consumer density and highest in AT&C losses. This probably be the reason for its highest end point pricing, because otherwise it ranks lowest in most other metrics of pManifold's DF attractiveness matrix.
  4. The ratio of max. to min. rates for each curve is higher than 0.7. 
    • The highest ratio is for Jamshedpur, resulting into lowest delta of Rs. 0.540 between the max and min rates of price curve. 
    • The lowest ratio is for Dhanbad, resulting into highest delta of Rs. 0.938 between the max and min rates of price 
  5. The Levelised Input Price (LIP) calculated at discount rate of 11% is highest for Dhanbad at Rs. 2.876/kWh, followed by Jamshedpur, with lowest for Ranchi at Rs. 2.487/kWh. (Difference of around 40 paise).
  6. Average Billing Rate (ABR) of Ranchi is lowest at Rs. 3.050/kWh, revealing greater improvement opportunity for that DF. Dhanbad has highest ABR of Rs. 3.540/kWh, which is sort of contrasting with its highest AT&C losses, lowest revenue billing & collections, and also lower collection efficiencies (see Jhanrkhand's DF attractiveness Matrix for details)
  7. Ratio of ABR to LIP is highest 1.231 for Dhanbad, 1.226 for Ranchi and lowest 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 for DF operator)

pManifold's DF bid advisory services further augment our client's bidding strategy through consolidation of on-site (network and customer) intelligence and other secondary research on electricity value chain for the region and its customer's demographics (socio, economic, political, cultural). Also our Discom Advisory services provides support in preparation of baseline data for new coming DF regions, and integrated financial modeling of Distribution Licensee and Distribution Franchisee to study various trade-offs to design robust DF model and contract for true win-win of Discom and DF. 

Post by: Rahul Bagdia @ pManifold

1 comment:

  1. Amended Reserve Price/ Benchmark Price for all 3 regions (Ranchi, Dhanbad & Jamshedpur) is available at following link: