Western Region Transmission (Maharashtra) Private Limited

active

In May 2009, the 1035km 400kv double-circuit transmission project developed by Reliance Power Transmission Limited in the state of Maharashtra under a BOO agreement reached financial closure. The project was a part of the 1500km Western Region System Strengthening Scheme - II (WRSSS - II) being implemented in the states of Maharashtra (1035km) and Gujarat (483km). This would be the first such kind of transmission line project being implemented by the private sector. Reliance Power Transmission Limited, a subsidiary of Reliance Infrastructure, established Western Region Transmission (Maharashtra) Private Limited, a special purpose vehicle, to implement this Maharashtra phase of the project. The company was awarded the project through a competitive bidding process held on Apr 2006 by the Power Grid Corp of India Ltd (PGCIL). In Nov 2006, Reliance Power Transmission Ltd (RPTL) emerged as the lowest bidder by virtue of lowest tariff quoted and was selected as the preferred bidder. The company received transmission license from Central Electricity Regulatory Commission (CERC) for a period of 25 years and was entrusted to establish the transmission lines under the scheme. Corporates like Tata Power, Lanco, Reliance, Essar Power, Larsen & Toubro, GMR Group, Kalptaru Power, Gammon India and Jyothi Structures, China Light & Power, Mitsubishi Corp of Japan and AES Corp of USA, and four Spanish companies including Isolex Wat and Abengoa had shown interest in this international competitive bid. 28 bid documents had been purchased in total. While RPTL was issued letter of award in November 2006 by PGCIL, implementation agreement was signed one year later i.e. in Nov. 2007 with PGCIL because of subsequent modification in the project structure from BOOT (‘Build Own Operate & Transfer) to BOO (Build Own & Operate). As per the recommendations of Public Private Partnership Appraisal Committee (PPPAC) of Govt. of India, the new BOO structure included deletion of Transfer clause as well as Buyout clause and also revised the payment security mechanism (as recommended by the Khurana Committee in June 2007). In March 2009, Power Transmission Agreement (PTA) for the license period has been signed with the eight beneficiaries namely Maharashtra State Electricity Distribution Company Ltd, Gujarat Urja Vikas Nigam Ltd, Madhya Pradesh Power Trading Company Ltd, Chhattisgarh State Electricity Board, Electricity Department, Administration of Dadra and Nagar Haveli, Electricity Department, Government of Goa, Electricity Department, Administration of Daman and Diu and MP Audyogik Kendra Vikas Nigam Limited. 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 WRTGPL 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 97.3 million (INR 4710 million at 48.41 INR/USD). The project achieved financial closure in May 2009 and was being funded through debt to equity ratio of 2.33 times. Financing comprised a USD 68.1 mn (INR 3297mn) 12.75-year term loan and USD 29.2mn (INR 1413mn) equity. While debt was repayable over the period of 13 years post CoD, and the bullet repayment (28% of the part of the loan amount of USD 68.1mn) was due at the end of 13th year from project CoD. However, sufficient comfort was available for the refinanced portion by way of a long tail period i.e. of about 9 years available for revenues as Transmission Service Charges were payable by beneficiaries for 22 years post CoD. The debt repayment was expected to start from June 2011, leaving six month gap between the CoD and start of debt repayment. The company could start civil works at the sites from July 2009 onwards only after obtaining the approval under Sec-164 of Electricity Act 2003 (which enables the company to obtain the Right of Ways). As a result of significant time spent in signing of power transmission agreement as mentioned above, scheduled CoD was extended by nine months to December 2010 along with grant of transmission license, as directed by CERC in its order dated Dec. 2008. In case of any delays in meeting the scheduled CoD, company was required to pay liquidated damages to PGCIL as per the terms of Implementation agreement. The project became operational in June 2011.