Ease of doing Distribution Franchisee business - Muzaffarpur Local Intelligence

Muzaffarpur located at  26°07′N 85°24′E. The district occupies an area of 3173 km. Muzaffarpur lies between the Burhi Gandak River and Furdoo nallah. Muzaffarpur is one of the many gateways to Nepal.

Region	Muzaffarpur
Municipal Corporation	Muzaffarpur Municipal Corporation
No. of Household	650,882(2001)
Male population	2,517,500
Female population	2,261,110
Total population	4,778,610
Density(peoples/sq.km)	1,506
Slum population	77456 (2011)

Ease of doing Distribution Franchisee business - Gaya Local Intelligence

Gaya is located at 24.78°N 85.0°E. Gaya is the second largest city of Bihar. Gaya is 100 kilometers south of Patna, the capital city of Bihar. Situated on the banks of Phalgu. It is surrounded by small rocky hills by three sides and the river flowing on the fourth (eastern) side.

Region	Gaya
Municipal Corporation	Gaya Municipal Corporation
No. of Household	510,968(2001)
Male population	2,266,865
Female population	2,112,518
Total population	4,379,383
Density(peoples/sq.km)	880
Slum population	26620(2011)

Ease of doing Distribution Franchisee business - PESU Local Intelligence

Apart from technical & financial parameters it is important for the bidders to evaluate the local intelligence for its operation & ease of setting up a business. pManifold has developed a process to research on the local intelligence through its network & secondary research to provide bidders with glimpse of the region on Demographics - Social & Economical, Political stability & activities & enable them making right decisions. Below is the quick snapshot from the local intelligence report from pManifold on Ease of Operationalizing Distribution Franchisee.

Patna is the capital city of Bihar state. It is located on the south bank of the Ganges River. The city is approximately 35 km long and 16 km to 18 km wide. The table below shows the quick facts about the region

	Patna
Municipal Corporation	Patna Municipal Corporation (PMC)
No. of Household	726,364 (Census 2001)
Male population	3,051,117
Female population	2,721,687
Total population	5,772,804
Density(peoples/sq.km)	1,803
Slum households	15163
Slum population	63.5% (Census 2001)
Literacy Rate	72.47%

Bid Analytics for JNNSM Batch-1 Solar PV projects

1000 MW Phase-1 under JNNSM by 2012

Under the Jawaharlal Nehru National Solar Mission (JNNSM), the total aggregated capacity of grid connected Solar Projects in Phase-1 shall be 1000 MW. The deployment of Solar PV and Solar Thermal projects shall be in the ratio of 50:50. The allocation of capacities in Phase-1 is done in two batches and over two financial years  i.e., 2010-2011 and 2011-2012. The total capacity of Solar PV projects to be selected in First Batch i.e., in FY 2010-11 was limited to 150 MW. The Projects for remaining capacity of 350 MW for Solar PV Projects will be selected in current Second Batch i.e., in FY 2011-12 (See detailed guidelines from earlier post 'Solar JNNSM Batch-2 pickup - RfS deadline 23 Sep').  Grid connected Solar Thermal power projects of an aggregate capacity of 500 MW have already been selected in FY 2010-11.

Bid Analytics of Batch-1 JNNSM Solar PV Projects

The mission has designated NTPC’s Vidyut Vyapar Nigam Limited (NVVN) as the nodal agency for procurement of solar power. On 18th August 2010, NVVN invited Request for Selection (RfS) from interested developers to develop 150 MW solar PV projects with a capacity of 5 MW each, and 500 MW solar thermal projects with a minimum capacity of 5 MW and maximum of 100 MW each. The last date for receiving the RFS was September 24, 2010. NVVN received 418 RfS from both PV and Solar Thermal project developers. Out of the total of 418 requests, 343 were applications for solar PV and 55 for Solar Thermal.

The interest in investor community was high with Solar PV receiving 343 applications (x 5MW = Total 1715 MW) against requirements for 30 projects (total 150 MW) i.e. 11.43 times higher application. The process then went into 'reverse bidding' to select only 30 bidders, with winner being the company that can offer highest discount to base set tariff rate of Rs. 17.91 per kWh. 

The 'winner' 30 bids for solar PV under Batch-1 varied from Rs. 10.95/kWh to Rs. 12.76/kWh, at an average bid price of Rs. 12.15/kWh.

Limitations of existing baseline data shared for Power Distribution Franchisee bidding

The current approach to furnish baseline information for Distribution Franchisee (DF) RFP undertaken by the utility has following limitations:

1. Very high level indicators (on distribution losses; collection efficiencies; customer mix and connected load distribution, arrear’s for each consumer class, brief count of network assets) are shared with no systematic causal analysis to allow bidders to diagnose network's status-quo for capital investment projection. This hampers calculated and informed bidding to happen.
   
   
2. With highly fragmented databases and lack of integrated measurements & good practices on utility's side, the integrity of the top-level data provided is looked upon with doubt, thus making it highly risky investment for the bidders.
   
   
3. In lack of measurements and system level analysis before bidding, the utilities themselves do not have right judgment about the required expenditure and potential revenue increase the area could give under able DF project time. The arising low confidence let them compromise on various aspects of good contract design and post monitoring and not able to get full benefits of the DF model.

Lack of good baseline data & reporting leads to irrational Power Franchisee bidding

The reported success of Bhiwandi Power Franchisee model has attracted more private players and has increased competition for good of the sector (see our earlier blog on 'Many new corporates entering into emerging Power Distribution Franchisee race'). However the very basis of the Power Distribution Franchisee (DF) contract, the baseline data ('information') provided as part of the RFP (Request for Proposal) is not trusted by the bidders driving  irrationality in the bidding. 

Impact on Bidders:

1. High business risk for the DF due to non-trust worthiness of the baseline data provided by the utility: Crompton Greaves Ltd. (CGL) backed from awarded Nagpur DF tender and in the process wasted 2 years. Company quoted that the base line data provided to them was not correct and its not viable for them to service at their quoted input rates.
   
2. Repeated efforts by all bidders to gain confidence on baseline data: Since utility does not take responsibility of the data it provides in the RFP, it is left to the bidders to figure out this information and speculate their bid with little confidence on their business plan and projected returns.

Trends in Power Distribution Franchisee bidding RFPs - Qualifications and Bidding model

The Franchisee model in Power Distribution has picked up well with many RFPs post Bhiwandi pilot. Below is a comparison across different RFPs and states to enable a easy comparison around bidding qualification requirements and bidding structure. This should help bidders to form macro perspective of blocking their investment and efforts for new Distribution Franchisee bids. Earlier blog 'Market Status - Ongoing and coming projects in DF' discuss new prospective bids. MSEDCL (Maharashtra) has next potential DF sites in Malegaon, Ahmednagar, Beed, Parbhani and Hingoli.

Power Distribution Franchisee RFPs comparison (Source: pManifold)

(Click on the image to see the enlarged view)