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

Utility Customer Monitoring & Analytics

pManifold Utility Customer Monitoring & Analytics

View more presentations from pManifold

Webinar: Market & Customer Intelligence on Gwalior for Distribution Franchisee Bidders

Webinar: Market & Customer Intelligence on Gwalior for Distribution Franchisee Bidders

View more presentations from pManifold

Webinar Brief Introduction

The revised MP Distribution Franchisee (DF) RFPs for Gwalior, Ujjain and Sagar has brought down on average coverage area by 100%, number of consumers and electricity sales by 60% and number of DTCs by 77%, with move from district level to city level. There is now mandated capex of Rs. 170 cr for Gwalior, Rs. 70 cr. for Ujjain and Rs. 30 cr. for Sagar and target ATC reductions to 15% in 2 years.

With 30+ companies in the race, already 3 RFP revisions with wider stakeholder engagement, and removal of stringent cash accrual qualification criterion, the bids will likely be more competitive and also volatile. It has become more important now to integrate various perspectives and data sets of information to validate assumptions and prepare informed bidding numbers.

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?
2. Socio Economic analysis: Which socio-economic indicators trend could give insight into future load growth of the region?
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?

Impact assessment for Open Access to 1MW+ customers

DIRECTIVE:

The Ministry of Power Govt. of India issued a directives for implementation in the all States of India, after seeking consultation with Ministry of Law and Justice and said that,

“Section 42(ii) read with the first and fifth proviso is a self-contained code with regard to consumers who required the supply of electricity of 1 MW and above and accordingly the State Electricity Regulatory Commissions cannot continue to regulate the tariff for supply of electricity to any consumer of 1 MW and above”.

“The provisions of section 42 need to be analyzed in relation to the duties of the distribution licensees and open access.  While sub-section (2) requires the State Commission to introduce open access within one year of the appointed date the fifth proviso makes it mandatory for the State Commission to provide open access to all consumers who require supply of electricity where the maximum power to be made available at any time exceeds 1 MW.  The fifth proviso was introduced by Act 57 of 2003 with effect from 27th January 2004”.

“The first issue is if open access is made obligatory whether the distribution licensees will continue to have the responsibility of universal service obligations with regard to consumers whose requirements are in excess of 1 MW.  An analysis of the various provisions (particularly section 49 of the Act) shows that if certain consumers want to have the benefit of the option to buy power from competing sources, then it is logical that DISCOMS do not have an obligation to compulsorily supply power to such consumers.  If such consumers want power from the DISCOM then  the terms and conditions of the supply would be determined in terms of section 49 of DISCOM also”.

“There is no conflict between the aforesaid conclusion and the provisions of section 42(3) of the Act which provides that a person requiring supply of electricity has to give notice in respect thereof.  If the consumer intends to use the network of the DISCOMS, he has to give notice and upon such notice to DISCOM (it) is duty bound to provide non-discriminatory open access to its network.  Section 42(3) cannot be construed to mean that giving of a notice is a pre-condition for the implementation of open access”.

The directives issued by MoP shall have great impact on power sector particularly Electricity consumers, generators, traders and power market.  There are positive as well as negative sides which are to be looked into minutely.  The Commission will have a great responsibility to implement the suggestions of MoP by making suitable Regulation as well as to protect consumers against some negative points which are elaborated below.

POSITIVE POINTS:

1. Consumers of 1 MW and above are deemed OA consumers and shall have choice of purchase of power from cheaper sources including Discom. 
2. The tariff of such consumers shall not be regulated by Commission and the heavy burden of cross subsidies shall not be loaded to such consumers. 

Ongoing survey results preview on MP Distribution Franchisee bidding

A lot anxiety is getting build amongst the bidders and general observers of Madhya Pradhesh Distribution Franchisee bidding. With expected fourth revision in the RFP, there is a silence from MP Govt. side on the topic and next steps including tentative dates. Industry internal resources have pointed that the issue is on hold for cabinet approval. While on one side there is eagerness in existing MP Govt. to see all 9 districts see bidding before next election in 2013. However on other side, there is a fear to enter newly into this very emerging DF business model, when not much of performance (both pros and cons) clearly established from existing operating DFs. Their main concern being "How to protect utility's interest in this long tenure contract with private DF operators?". See our earlier blog Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids.

Keeping this in view, pManifold team floated an online survey of top management of prospective bidder companies (some 30+) for ongoing 3 regions (Gwalior, Ujjain and Sagar) DF bidding. This is an independent survey conducted to increase the understanding of Bidder's issues for MP Distribution Franchisee Bidding and taking it rightly with the policy makers. The responses so far collected are from established companies in the power sector and who have taken this pre-bidding phase very diligently. While not all prospective bidders have responded so far, the results are looking interesting and it is requested that those remaining also take upon this survey soon to let your voice resonate and influence design of RFP revisions. (see survey link. Please note that no personal identification is requested)

Some key questions that this survey intends to find opinion of bidders keeping in mind the ongoing MP bids revisions:

1. Qualification criterion improvements
2. Top viability concerns
3. Anomalies in existing RFP and suggestive key changes
4. Improvement suggestions to baseline data
5. Overall satisfaction with MP bidding and stakeholder engagement process

The so far collected response has following highlights:

• 50% entering first time into the DF bidding
• 67% of participants qualifies both technically and financially
• Only 33% are sure for bidding, while rest are still deciding
• Most interested in Gwalior, followed by Ujjain and then Sagar
• Almost all satisfied with financial qualification criterion
• 33% dissatisfied with Technical qualification criterion
• 33% dissatisfied with the overall bidding process

Some key concerns raised by survey participants:

• Most finds high mandated capex, strict reduction target and unreliable baseline as serious viability concern. Most understand importance of improved customer services and has seeked more clarity on customer satisfaction performance and evaluation.
• Major pre-bid support request from bidders is to have certified joint audit of baseline (specially ABR) and guaranteed power supply and non-performing clauses for utility made clear. 
• Many of them find R-APDRP linkage with DF performance and evaluation not fit, given R-APDRP assets have not been kept well
• There are requests to further improve transparency in the bidding process and keep all participating pre-bidders well informed on steps, delays, and broad reasons etc. in bid process handling. 

We hope that these results further aid planning and improved design of DF process, possibly the coming RFP revision for MP bids. With this broad objective to support scale-up of DF model, we request DF bidders community to participate actively in this survey and share their non-confidential learnings. (Please click here to take online survey)

Post by Rahul Bagdia @ pManifold

pManifold's services in Distribution Franchisee space: 

• Customer Side information & Analytics: as we believes that customers opinions, preferences and satisfaction play an important role in establishing good governance of the emerging model, provides actionable insights to bidders and DF operators to plan their customer-end and new capex roll outs etc.
• Industry Reports & Knowledge Platforms for all DF associated stakeholders (see our blogs, Linkedin group and organized conference)

Cheat sheet for Distribution Franchisee

This is a consolidation of our previous blogs, focussed more to help the current bidders for Madhya Pradesh DF bids.

Bidders Perspective

·         Baseline:  Key comparison of revised RFPs for MP Distribution Franchisee

·         Selection: Distribution Franchisee Attractiveness - Comparison for Madhya Pradesh's 9 districts

·         Customer mix: Customer segmentation and analytics of revised MP Distribution Franchisee bids

·         Input price: Bid analytics for MP Distribution Franchisee

·         Viability: Urban & Rural customer segmentation in revised Distribution Franchisee bids at MP

Utility and Regulators perspective

·         Baseline accuracy & trust: Third Pre-bid Conference take-away from Madhya Pradesh Distribution Franchisee Bids

·         Customer Satisfaction is key: Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids

·         Utility gains?:  Real gains for Utility and End-Consumers from Distribution Franchisee business

·         Large theft: Local Insights on Gwalior City - Field interview with utility ground staff

·         Capacity Building: R-APDRP: Missing understanding on usability of technology by utility people

Local business intelligence on utilities performance - take informed bidding on MP Distribution Franchised towns

The revised MP Distribution Franchisee RFPs has brought down on average coverage area by 100%, number of consumers and electricity sales by 60% and number of DTCs by 77%. Also with mandated capex of Rs. 170 cr for Gwalior, Rs. 70 cr. for Ujjain and Rs. 30 cr. for Sagar and target ATC reductions to 15% in 2 years, the bids will become more competitive and likely also volatile. It has become more important now to integrate various perspectives and data sets of information to validate assumptions and prepare informed bidding numbers. 

pManifold is an Information and Advisory company and is working broadly with relevant stakeholders to help scale-up of the emerging Distribution Franchisee model in India. In this role, we conducted a first type of study to measure Customer Opinions, Preferences and Satisfaction for Electric Utilities of Ujjain, Sagar and Gwalior, which brings a fair customer perspective that could be integrated with technical perspective to arrive at tighter estimates of Capex and Opex. We have compiled a Consolidated report on the 3 towns (priced at Rs. 25K), which could provide winning edge in the MP bids. 

Also available are comprehensive regional packages (priced at Rs. 25K) each consisting of 4 separate reports with GIS visualization and together they could help find answers to the following viability questions:

1. Customer Satisfaction – Top Results (30+ slides) includes top level findings with attribute and factor level comparisons and recommendations
   
• What are the key customer segmentation trends in terms of geographical localization, avg. monthly consumption, economic loss due to power outages, types of meters, backup equipments, education/profession, access to internet, electricity bill payment preferences, opinion on DF privatization etc? (across 4 consumer categories of Residential, Industrial, Commercial & Agri)
• What are the key issues on Power reliability, Metering/Billing, Customer services, utility communications, utility IT and records handling, Tariff and utility Management as perceived by customers across 28+ attributes? (across for 4 consumer categories and also overall)
• What areas required capital expenditures to improve overall utility's performance? How to prioritize capital expenditure for highest return on customer satisfaction, which is found to be correlated with ROI?
  

Customer segmentation and analytics of revised MP Distribution Franchisee bids

Our earlier blog Urban & Rural customer segmentation in revised Distribution Franchisee bids at MP compares the category wise distribution of number of consumers across the 3 locations of Gwalior, Sagar & Ujjain. This blog summarizes the comparison of other key parameters - Electricity Sales, Revenue Billed and Collection Efficiencies between new & old RFP regions.

Electricity Sales (in LUs)

Key observations from the above table are:

• Electricity Sales has decreased most in Sagar (>77%), followed by Ujjain (>72%) and Gwalior (>30%).
• Electricity Sales to 'Irrigation' customers has decreased more than 90% across all the 3 locations indicating that the majority of Agri customers falls outside city limits.
• Across 'Industrial' customers for all 3 locations, Sagar city has highest drop in Electricity Sales which is more than 70%.