Kanpur and Agra Power Distribution Fanchise

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On 18th May 2009, Torrent Power Limited (TPL) signed a Distribution Franchisee Agreement with Uttar Pradesh Power Corporation Limited (UPPCL, the state utility) for Kanpur urban area and Agra urban area, in the state of Uttar Pradesh (UP). TPL would distribute power in Agra & Kanpur for the next 20 years. In both these areas, the Company would distribute power as an agent of the present distribution licensees: The franchise of Agra Urban Area under Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL), had about 272,000 consumers in this area of 188 sq. kms with an estimated demand of 420MW. The franchise of Kanpur Urban area encompassed 500 sq. kms supplied by Kanpur Electricity Supply Company Limited (KESCO). The estimated demand in the area was about 510 MW with approximately 470,000 consumers. The scope of franchise included the distribution of electricity, realisation of bills, maintenance and development of the infrastructure and other related works. Torrent Power was selected through a competitive bidding process undertaken by UPPCL in February 2009. The bid variable was the highest price at which power was purchased from UPPCL for subsequent distribution in the franchise area. In Agra, 4 companies - Torent Power (TPL), Reliance Power, PNC Infratech and Jamshedpur Utilities & Services Company (JUSCO), had submitted bids for power distribution in Agra. TPL won the bid by quoting the highest purchase price of INR 1.96/kWh(levelized rate for a period of 20 years). At present, the revenue collection in Agra was at the rate of Rs 1.43/kWh while AT&C losses, (which included line loses, theft as well as non-billing) were to the tune of 42%. TPL needed to bring down power losses to 15 % in the next five years as per the franchise agreement. For Kanpur franchise, TPL had won the bid by quoting the highest purchase price of INR 2.17/kWh (levelized rate for a period of 20 years), followed by Tata Power which bid INR 2.16/kWh. For Kanpur circle, T&D losses were at 47% and TPL needed to bring it down to 20% in next five years as per the franchise agreement. TPL would purchase power from the UPPCL (at INR2.17/kWh and INR1.96/kWh for Kanpur and Agra respectively) and would distribute it to consumers on the rates approved by the UP Electricity Regulatory Commission. Franchisee would remit a pre-determined share of the revenue collection at regular intervals to the Licensee, as per the Franchisee Agreement. TPL was expected to invest USD 31-41 million (INR 1500-2000 mn at 48.41 INR/USD) in Agra and USD 103 million (INR 5000 mn at 48.41 INR/USD) in Kanpur in the first six months to reduce T&D losses and improve collections. TPL commenced distribution franchisee operations in Agra on 1st April, 2010. TPL was expected to kick start its operations in Kanpur by October 2010. 2010 project since the the sponsor commenced distribution franchisee operations in Agra on 1st April, 2010.