Essel Vidyut Viataran (Ujjain) Private Limited

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On 10th May 2012, Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited (MPPKVVCL) and Essel Group consortium (Smart Wireless Private Limited as Lead member, and Pan India Network Limited, Pan India Infrastructures Private Limited - all Essel Group Companies)signed a Distribution Franchisee Agreement for Ujjain city in the state of Madhya Pradesh(MP). Essel Group would distribute power in Ujjain city for the next 15 years. In this area, the Company would distribute power as an agent of the present distribution licensee - Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited (MPPKVVCL). There were about 515,000 people (101,000 registered power consumers among these) in the city spread over 92.68 sq. kms. with an estimated demand of about 104MW with annual power consumption of about 388.69 MUs. Essel group consortium established Essel Vidyut Viataran (Ujjain) Private Limited (EVVUPL), a special purpose vehicle, to execute this distribution franchise. The primary obligation of the Distribution Franchise (EVVUPL) included - (a) undertaking the distribution and supply of power to the consumers of MPPKVVCL in the designated Distribution Franchise Area, (b) undertaking reading of meters, generating of bills, payment collection, as per the retail tariff structure deterined by MPERC (State Power Regulator), (c) maintaining the existing distribution network and replacing failed distribution transformers and defective meters and other network infrastructure assets, (d) making payments to MPPKVVCL, (e) collection of MPPKVVCL's outstandinf arreats as their agent and remittance of the same. The Essel Group consortium was selected through a competitive bidding process undertaken by MPPKVVCL on 7th March 2012. The bid variable was the highest price at which power was purchased from MPPKVVCL (Discom) for subsequent distribution in the franchise area. 10 companies including - Spanco, Monte Carlo, Dainik Bhaskar Power, A2Z, ACME, PNC Infratech,CESC, GTL, and Shyam Indus, had submitted bids out of which only 9 qualified. Essel won the bid by quoting the highest purchase price - Levelized Input Rate (LIP) of INR 3.781 per unit. Minimum LIP was Rs. 2.390/unit among all quoted LIPs. The 2nd ranker in the bid was GTL at INR 3.558. Four out of Nine 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. At the end of FY 2010-11, AT&C losses, (which included line loses, theft as well as non-billing) were to the tune of 38.71%. As per the DF agreement, EVVUPL needed to bring down power losses to 15 % by the end of FY2013-14. EVVUPL would purchase power from the MPPVVCL and would distribute it to consumers on the rates approved by the MP Electricity Regulatory Commission. Franchisee would remit a pre-determined share of the revenue collection at regular intervals to the Licensee, as per the Distribution Franchisee Agreement. EVVUPL was mandated to invest USD 11.9mn (INR 700 mn @58.6 INR/USD) in Ujjain for infrastructure upgrade to reduce T&D losses and improve collections. The project achieved financial closure on 25th November 2013 at a debt/equity ratio of 64/36.The estimated project cost at the time of financial closure was USD 18.8mn (INR 1100mn @58.6 USD/INR). Financing comprised a 13-year term loan of USD 12.1mn (INR 710mn), and sponsor equity of USD 6.6mn (INR 390mn). State Bank of India was the sole arranger for the term loan. Financing also comprised a INR 190mn 1-year fund based working capital facility, a INR530m 1-year non-fund based working capital facility. EVVUPL commenced distribution franchisee operations in Ujjain in Decemeber 2012.