Jharkhand releases RFPs: Quick comparative analysis with different states RFPs

Madhya Pradesh bidding saw Smart Wireless Ltd taking over as Distribution Franchisee operator for all the three locations i.e. Gwalior, Sagar & Ujjain. They have been awarded LOI and have also accepted the same for all 3 regions. They intend to start the 3 months joint operations with DISCOM by second week of May, and takeover completely before 15th August.         

Recently, Jharkhand released RFPs for 3 cities namely Ranchi, Dhanbad and Jamshedpur. The below image provides a quick study on new Jharkhand RFPs and its comparison with old one's (Nagpur, Gwalior). It depicts the brief comparison of some critical Attributes, which includes Factors like Electrical Network and Health, Consumption Patterns, Geography, etc. A coloring scheme is used for better visualization for favorable Distribution Franchisee parameters across each attributes.

MP bids took approximately 9 months from initial release of RFP in June,2011 till awarding of LOI of all the three locations in April,2012, with total 3 revisions in RFP in between. 

We hope that Jharkhand Government decision makers draws inputs from MP bids and expedites the awarding of locations by engaging all stakeholders.             

pManifold continues support Knowledge building in Power Distribution Franchisee model in India and help realise its potential. 

In continuous effort to scale Power Distribution Franchisee business model, pManifold has launched a 'Input Based Power Distribution Franchisee Market in India 2012Q1'. The report will provide detailed market, operational and financial insights into running a Power Distribution Franchisee. It will also include detailed previous bid analytics, including most recent from MP, future DF opportunities and trends. For more details and to download Executive Summary of our report, please see here. You can place your order with us at kunjan.bagdia@pmanifold.com.      

Posted by Kunjan Bagdia @ pManifold      

Review: Spanco, GTL distribution franchisees complete one year in operation

It was the summer of 2011 when both GTL (April 2011) and Spanco (May 2011) took up the distribution franchisee operations in Aurangabad and Nagpur respectively. Now in the summer of 2012, they have completed 1 year in operations.

Spanco's first year of operations in Nagpur can be termed as good as they have been able to acquire good leadership talent, arrange private equity investment (Rs. 80 Cr. from Bessemer), perform roll-out of network up-gradations (which were a little bit forced due to the storm of May 17, 2011) and establish better ways of understanding and communicating with customers and local stakeholders (including a new website, 24x7 call center, online payment facility, DF and non DF area wide independent customer surveys (twice), monsoon campaigns, door-step new connection campaign and more e.g. instituting a whitepaper promoting their newly adopted city of Nagpur as an IT/BPO destination). Although teething troubles are galore and would take a while to reach smooth operations, things seem under control on major fronts including PR, Opinion leaders and customer. The major concern still is the non-payment of over Rs. 200 Cr. to the licensee which is scheduled for hearing by MERC i.e. May 3, 2012. Spanco has customer base of approx. 4 lacs and is divided into operations into 3 Divisions, 6 Zones, 46+ payment centers and 6 customer facilitation centers. 

This is how Spanco, preferred to communicate its one year of operations at Nagpur - through advertisement in a local daily.

GTL @ Aurangabad, has similar ups and downs. The company has customer base of approx 2.5 lacs and operationally divided into 2 Divisions, 8 zones, 33+ payment centers and 2 Customer Facilitation Centers. The company has taken several initiatives - network upgradation, Electronic meter replacement with current approx. 85% connections (from last 65%), has website, launched a 24x7 call center, established online payment facility and monitored customer feedback ad-hocly. GTL also had been unable to make complete payment to MSEDCL and has due amount around Rs. 200 crore. Their parent company's struggle with downturn in the Telecom Tower business, and ongoing corporate debt restructuring could potentially shadow its DF operations.

• Both the companies have undertaken process improvement across all key business areas and are using external consultants for detailed BPR. 
• Both continue to use MSEDCL billing legacy system, inspite of some of its constraints, that impact their bill scheduling and arrears. 
• Both still continue to struggle on improving their arrears, as it continue remaining almost the same with slight different dynamics from their take over. 
• However, in terms of their core success driver i.e. AT&C loss reduction, the two companies are lower than their estimated first year projections.

As any emerging business model, there is continuing learning for Power Distribution Franchisee players. One major challenge that still remains unresolved is about funding (both debt and equity) of the Distribution Franchisees. There are rising PE players who are getting interested in this segment, but banks still needs to be convinced on the DF model's viability. There is need to educate investors on DF model and its distinction from DISCOMs, that are struggling with debt trap. Hopefully this year will see more clarity on Distribution Franchisee model with emerging new RFPs.

At pManifold, we look forward to raise an association of all operating DFs, to be able to share best practices and also rightly advocate real issues with stakeholders to support scale-up of DF model and reforms. One of best practices for DF to follow in 'Customer Engagement' is already live, with pManifold aspiring to create an unique customer rating for Utilities pan India.

Post by: Faiz and Rahul @ pManifold

Upcoming Opportunity for Private Players: Power Generation Franchisee (PGF)

With the growing Public Private Partnership (PPP) model in power sector, there is another new opportunity for private players in Power Generation Franchisee following footsteps of Power Distribution Franchisee.

In Power Generation Franchisee model, the asset ownership will remain with generating utility itself and private player will run the unit operations to reduce the generation losses and share the profits with the utility.

This can be achieved by:

• Improving the Plant Load Factor (PLF) trajectory & Operational Norms
• Improving the sourcing of coal

Maharashtra State Power Generation Co Ltd, which is the second largest power producing company in India, after National Thermal Power Corporation (NTPC), requested interested private firms to submit Expression of Interest (EoI) for Bhusawal and Koradi thermal power plants, which was due on Jan 2012. About 3-4 companies have submitted EoI. This will be reviewed and Request For Proposal (RFP) will be released. This model is still in very nascent stage.

pManifold, has initiated a market research report on Power Generation Franchisee model for Thermal Power Plants in India, with the objective of empowering stakeholders with knowledge and insights to take informed decisions.

A LinkedIn group on PGF model for professionals has been created to bring in different stakeholders on common platform to share ideas, views and opinions on this upcoming model. Join Group   


pManifold's detailed research report in "Input Based Power Distribution Franchisee: Market in India 2012Q1" is now available for purchase at 10% discount for early bird orders for the report, which is priced at Rs. 30,000 (inclusive of all taxes) + 2 report updates free. For Executive Summary of the report, click here. You can place order with us kunjan.bagdia@pmanifold.com.  

Posted by: Kunjan Bagdia@pManifold 

Its a Hat-trick for SMART Wireless Limited - They won Sagar Distribution Franchisee also

'SMART Wireless Limited' is on a roll with its third successive bid win at Madhya Pradesh's Sagar city in Power Distribution Franchisee. The company's winning bid quote of Levelized Input Rate (LIP) was Rs. 3.726/unit. Compared to Gwalior and Ujjain, there were less number of participating companies in Sagar bids, totaling 6, out of which ACME disqualified due to some reason, against 9 in Gwalior and 10 in Ujjain      (see list of Technically qualified bidders for Sagar).

See our earlier blogs:

• Gwalior Distribution Franchisee Bid Results
• Ujjain Distribution Franchisee Bid Results

Key observations from Sagar price bid are:

• Minimum LIP was almost 35% less than the winning bid.
• Spanco, an existing Distribution Franchisee operator was 2nd with LIP of Rs. 3.050/unit, lower than  18% from the winning bid.
• Last bidder's rate was more than 30% lower than the winning bid.

Now, with the completion of Financial bid for all the three cities (Gwalior, Ujjain and Sagar), we look forward to see 'SMART Wireless Limited' taking over and managing distribution of electricity in those locations very soon to augment and catalyze the Distribution Franchisee model.  

Posted by: Kunjan Bagdia @ pManifold

pManifold's recent "Market Research Report on Input based Power Distribution Franchisee in India" is now available. The report is updated for 2012Q1. The report covers upcoming market opportunities in Distribution Franchisee, Competitive Landscape Assessment of existing operators, detailed previous bid analytics including recent MP bids, financial numbers and its sensitivity to different parameters, etc. For more details, see Table of Contents. You can place your order with us at kunjan.bagdia@pmanifold.com.          

'SMART Wireless Limited' does it again - Wins bid for Ujjain Distribution Franchisee

After winning Madhya Pradesh's Gwalior Power Distribution Franchisee bid, 'SMART Wireless Limited' has now won the bid for Ujjain city, making it two in a row winner in Madhya Pradesh DF landscape (see our earlier blog 'Gwalior Distribution Franchisee Bid Results - 'SMART Wireless Limited (Essel Group)' emerged as a Winner' for Gwalior bid analytics). The company's winning quote of Levelized Input Rate (LIP) was Rs. 3.781/unit, letting it again overtake other companies in the financial bid. Overall, there were 10 companies, who participated in Ujjain DF bids, out of which 9 were Technically qualified (see list of all technically qualified bidders for Ujjain Distribution Franchisee).

Some brief observations from the price bid are:

• Minimum LIP was Rs. 2.390/unit among all quoted LIPs.
• Margin rate between winning and 2nd price bid was Rs. 0.223, approximately 6% lower than the winning bid. The 2nd ranker in the bid is GTL, an existing DF operator at Aurangabad. Note that GTL won Auranganbad DF bid at higher bid LIP of Rs. 3.74/unit.
• 3rd and 4th bids were respectively 12% and 18% lower than winning bids.
• 4 out of 9 companies has given the price bid in the range of 2.95 - 3.35 Rs./unit. Two bidded higher  and 3 bidded lower than this range.
• The bid is aggressive as other established power players are lower by around 20%-25% than winning bid.

About Smart Wireless Ltd. 

The Smart Wireless Ltd. company is into generate new technologies in the messaging space and facilitate technology and process driven companies using cost effective data transfer solutions such as SMS. The Wire segment of the Essel group is currently one of the largest cable distribution system in India, with presence in 54 cities. It will be interesting to see their existing B2C reach also to the power distribution business. Overall the Essel group has wide portfolio in Infrastructure (roads, SEZ, power plants etc.), Media (ZEE, DNA being their leading brands), Technology, Education, and other diversified businesses.

Upcoming Results

Sagar city results are likely to be announced in next week on 12th March. With 'SMART Wireless' as the winner of 2 cities already, it is to be seen if they would do a hat-trick. It is also a question for MP policy makers if they would allow one company to do all the 3 DFs at such aggressive rates and risk non-performance.

Posted by: Kunjan Bagdia @ pManifold

In continuous effort to scale Power Distribution Franchisee business model, pManifold has launched a Market Research Report on Input based Power Distribution Franchisee in India. The report will provide detailed market, operational and financial insights into running a Power Distribution Franchisee. It will also include detailed previous bid analytics, including most recent from MP, future DF opportunities and trends. For more details, please see Table of Contents. You can place your order with us at kunjan.bagdia@pmanifold.com.

Market Report on Input based Power Distribution Franchisee Market in India

Brief Summary

Power Distribution Franchisee – evolving Public Private Partnership (PPP) model has picked traction since 2009 after successful demonstration by Torrent Power Ltd. at Bhiwandi, Maharashtra, which got operational in 2007.

The licensee (state utility) appoints a private company on the basis of rationale bidding for distribution of electricity in a specified area for specified years of contract. This Distribution Franchisee model stands midway between licensee and full PPP model and is considered as one of the major energy reforms in power distribution sector that has the potential to turnaround the sector and take electricity to rural areas as well.

Out of the variants available, ‘Input based Distribution Franchisee’ model has recently seen an increase, currently with five cities across India, out of which distribution in three cit

ies was handed over to private companies in 2011. Below shown is the indicative content of the report. Input based Distribution Franchisee, by far, has been mostly used operating model in urban areas.

Gwalior Distribution Franchisee Bid Results - 'SMART Wireless Limited (Essel Group)' emerged as a Winner

'SMART Wireless Limited', an Essel group company emerged as the winner for Madhya Pradesh's Gwalior Power Distribution Franchisee. The company quoted a Levelized Input Price (LIP) of Rs. 4.14/kWh, which enabled them to win and surpass existing DF operators like SPANCO and Torrent Power.

This rate quoted for Gwalior city is highest compared with all previous DF bids.

All 9 companies who participated in Gwalior bid were Technical Qualified (see our earlier blog Total 12 companies participated in Madhya Pradesh's DF bids for list of all received bids and participating companies for MP bids)

Some key observations from the price bid are:

• Of all quoted LIPs, minimum was Rs. 2.52/unit, coming from an existing DF operator.
• Average LIP of all quoted bids was Rs. 3.23/unit.
• Existing DF operators ranked 5th and last in the financial bid. They also quoted lower for Gwalior than their existing won areas.
• Margin between winning and 2nd price bid was Rs. 0.27/unit, a 7% lower than winning bid.
• 3rd and 4th bids were respectively 18% and 20% lower than winning bids.

Total 12 companies participated in Madhya Pradesh's DF bids

Madhya Pradesh's Distribution Franchisee bidding at last saw a progress in bidding phase with last 3-4 revisions and deferment. The bidding was closed on 16th February 2012 and total saw 12 companies. The final winners are likely to be announced by 27th or end of Feb.

List of Received Bids from private players for MP Distribution Franchisees

• Ujjain received most number of bids (10), followed by Gwalior (9), and last Sagar (6). See our earlier blog "Ujjain DF Webinar: Rs. 70 cr. Capex, given AT&C loss reduction trajectory and Rs. 3.5 Levelised Input price can bring 8.79% Equity IRR"
• 5 companies bidded in all 3 areas - Spanco, Monte Carlo, Dainik Bhaskar, Essel, A2Z
• 3 companies bidded in two areas - ACME, PNC InfraTech and CESC
• 4 companies bidded in only 1 area - GTL, DPSCL, Shyam Indus and Torrent Power

R-APDRP: Missing Change Management and Capacity Building

R-APDRP As-it-is:

                       R-APDRP Updates (Source: PowerLine)

• One of the biggest IT deployment project worldwide – Rs. 30K cr. by 2012
• 1403 eligible towns with 49 utilities already sanctioned for IT enabled baseline acquisition (Phase-A)
• 60 schemes for SCADA/DMS likely to be sanctioned by Mar 2011 (5 already done)
• Strong framework for driving different functionalities:
• Process – KPMG
• IT (consultants, implementers) – many top players
• Capacity Building – Feedback Ventures
• Monitoring (TPIEA) – many players

Ujjain DF Webinar: Rs. 70 cr. Capex, given AT&C loss reduction trajectory and Rs. 3.5 Levelised Input price can bring 8.79% Equity IRR

Webinar Brief Introduction

The revised MP Distribution Franchisee (DF) RFP for Ujjain has brought down on average coverage area by 98%, number of consumers and electricity sales by 70% and number of DTCs by 90%, with move from district level to city level. There is now mandated capex of Rs. 70 cr. for Ujjain and target ATC reductions to 15% in 2 years from current 40.82%

Webinar: Market, Customer and Investment Intelligence on Ujjain for Distribution Franchisee Bidders

View more presentations from pManifold

Content Summary

The webinar cum workshop will focus on 3 important ‘perspectives’ that plays important role in overall investment analysis of DF business. pManifold ground study results with GIS visualizations from Gwalior city will be shared.

1. RFP analysis: How have been the load growth trends across different categories of consumers?
   • HT & Commercial growth has picked up well with higher sales growth rate compared to Gwalior.
   • Growth is consistent with indication of lower theft as compared to Gwalior.
2. Socio Economic analysis: Which socio-economic indicators trend could give insight into future load growth of the region?
   
   • Ujjain has higher DDP growth rate and workforce participation as compared to Gwalior.
   • Also highest literacy rate, and net sown area in MP.
   • Higher urban slum rate, but lowest ST population in MP.
3. Utility performance analysis: What key issues related to Power reliability, Metering/Billing/Payment, Customer services, and other service attributes faced by end-customers? Could this be a Lead indicator for required Capex and Opex in the region?
   • What are the major Capex component drivers? What utility performance they target to improve?
   • EUCOPS Study Framework - Further breakdown of CSFs into 27 attributes. They in turn drives to create a ‘functional role’ & ‘performance’ based DF organization
   • Category-wise & geographical localization of factor issues - Outages, Breakdown restoration & Maintenance are key issues affecting all customer categories including revenued ones.
4. Bid Investment Analysis: What are key parameters and their sensitivity to bidding?
   • Key Results
     • Equity IRR = 8.79%
     • Equity payback = 9 years
     • Avg. DSCR = 1.02
   • Key Assumptions
     • Capex - Capex Rs. 70 cr., 100% refund of depreciated terminal value
     • Opex - 60 paisa per unit employee cost (80% of O&M costs)
     • Input Price - Bid price curve with LIP of Rs. 3.52 (previous slide top green curve)
     • Loss Reduction - Technical Loss reduction rate of 16% per year (cap 6%), Non-Technical Loss reduction rate of 20% per year (cap 4%)
     • Growth - Avg. Tariff growth rate of 3%, Avg. Load growth rate of 7%
     • Investments - Equity 30%, Term Loan Interest rate 13%
     • Taxes - Tax rate 33.22%, MAT 19.93%

Live Discussion and Q&A Q&A
Their will be 45 mins of presentation followed by 15 mins of LIVE Discussion and Q&A. Please consider taking our online survey (if you already have NOT) and share your broad views on MP Distribution Francisee bids to better facilitate this discussion.

Speaker Profile
Rahul Bagdia is Co-founder and Director of pManifold Business Solutions. pManifold is an Information and Advisory services company and has positioned its 'Energy' services to support scale-up of the emerging Distribution Franchisee business model in India. Our services includes:

1. Research

• Primary: Conducted independent Electric Utility Customer Opinion, Preferences & Satisfaction study at Nagpur and 9 prospective DF regions of MP.
• Secondary: Active knowledge dissemination and networking through Distribution Franchisee blog

2. Stakeholder Engagement

• Online portal: Created Linkedin 'Community of Interest' named Power Distribution Franchisee for Utility experts to share best practices (Join group)


• Offline Events/Workshops: Conducted All India workshop on 'Utility Monitoring & Distribution Franchise – Enhancing SEB‘s performance' @ IIES 2011 (Download report)

3. Consulting

• Custom: See our overall services portfolio