East North Interconnection Company Limited

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In January 2010, Power Finance Corporation (PFC) awarded a concession of 25 years (including construction period starting from the date of grant of Transmission License) to M/s Sterlite Technolgies Limited, for the development of the 454km 400kv double-circuit transmission project,in the states of Assam, West Bengal, and Bihar. The East-North interconnection mega transmission project was aimed to evacuate power from the North-East and Eastern states to the Northern region of India through two sections - Bongaigaon-Siliguri Line, and Purnia-Biharsharif line.Given the huge potential of hydro power in North East, commitments were made to have 4 nos of transmission corridors in the chicken area, which would take care of about 24000 MW of power transfer to meet the long term power transfer requirement i.e. next 10-15 years from NE. East North Interconnection Company Limited (ENICL) was incorporated on 1st February, 2008 for enabling import of NER/NR surplus power by NR. PFC Consulting Limited (subsidiary of PFC) conducted the bid process for the SPV, East North Interconnection Company Limited (ENICL). The SPV had been formed to undertake preliminary survey work, identification of route, preparation of Survey Report, initiation of the process of land acquisition (if required), initiation of process of seeking forest clearance(if required) and to conduct the bidding process. Long Term Transmission Customers (LTTCs) - discoms across Rajasthan, Delhi, Uttarakhand, Haryana, Punjab, Himachal Pradesh, Jammu & Kashmir, and Union Teritory of Chandigarh, were to enter into Transmission Service Agreement (TSA) with the successful bidder. 16 bidders had evinced interest in the proejct, out of which only 8 had qualified. Out of the 7 qualified bidders, only 3 participated in the final price bid. Sterlite Technologies Limited (subsidiary of Vedanta Resources Plc) won the bid by quoting the lowest levelized transmission charges of USD 26.4mn (INR 1187.95mn @45 USD/INR)per annum. The other 2 bidders Lanco Deepak consortium and Reliance Power Transmission Limited had quoted INR 1676.92mn/year and INR 2400mn/year respectively. The SPV East North Interconnections Company Limited was subsequently transferred to Sterlite on March 31st 2010. Adoption of Transmission Charges and grant of Transmission License by CERC was done on October 28, 2010.The tariff adopted for the transmission system was valid for a period of25 years. The tariff of the transmission assets beyond the period of 25 years were to be governed in accordance with the provisions of CERC Regulations. The tariffs or the Transmission Service Charges (TSC) comprised of a non escalable component and an escalable component linked to inflation index as notified by CERC (Central Regulator). Full TSC as per the quoted tariff structure were payable to ENICL by the counterparty state-utilities subject to availability of the transmission lines at normative level of 98%. As mentioned in PTA, a payment security mechanism was in place which comprised of - (a) revolving Letter of Credit (for 105% of monthly TSC), and (b)right for request to RLDC (Regional Load Dispatch Centre) for diversion of low cost power available to defaulting state utility in the peak time (7 to 10 pm) so that dues could be adjusted from the revenues arising out of sale of those diverted units at Unscheduled Interchange (UI) rate. Counter party credit risks post CoD were thus expected to remain largely mitigated by way of adequate payment security mechanism as put in place in PTA. The estimated project cost was USD 222.2 million (INR 10000 million @45 USD/INR). The project achieved financial closure in January 2011 and was being funded through debt to equity ratio of 70/30. Financing comprised a USD 155.5mn (INR 7000mn) term loan and USD 66.7mn (INR 3000mn) equity. SBI Capital was the sole arranger for the term loan. During implementation of the project, there has been an increase in scope with line length increasing to ~4 Sterlite Group has been incorporated in the London Stock Exchange as Vedanta Resources Plc. In India, it is often refered to as Sterlite Group.