Forum of Regulators

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Department of Industrial and Management
Engineering
Indian Institute of Technology Kanpur
2nd Capacity Building Programme for Officers of
Electricity Regulatory Commissions 3 8 August,
2009
Power Procurement under Competitive Bidding
GuidelinesCase Study - GUJARAT P.S. Shah, IAS
Secretary, GERC
Forum of Regulators
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Power Procurement under Competitive Bidding
GuidelinesCase Study - GUJARAT
P.S. Shah, IAS Secretary, GERC Date 07.08.09
at IIT- Kanpur
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OVERVIEW OF PRESENTATION

• Background of the Bids and Types of Bids
• Response to Bids at RFQ stage and Process of
  Approval
• Pre Bid Conference and Finalization of Bids
• Submission of documents and Issues for approval
• Major deviations from SBD
• Commissions approval to bids 1,2 and 3
• Brief technical/financial overview of all the
  three Bids
• Conclusion
• Lessons Learnt

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BACKGROUND

• Gujarat Urja Vikas Nigam Ltd (GUVNL) is the
  procurer for four unbundled distribution
  licensees
• For Long Term Power Procurement, Request for
  Qualification Document issued on 1st February
  2006
• Competitive Bidding first (of its kind after
  issue of guidelines u/s 63) in the country
• Location
• Fuel unspecified
• Power to be supplied by end of 11th five year
  plan
• Three (3) different types of Bids

Case I of SBD
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Bid Types

• Three Bid Types

01/LTPP/06
02/LTPP/06
03/LTPP/06
Max/Min Cap
2000/100 MW
2000/500 MW
Not specified
Fuel
Imp Coal
Coal/Lignite
Escalable transportation And fuel
handling Energy charge
PPA term
25 yrs
25 yrs
15/25/35 yrs
Not Specified (NS)
Location
Fixed Capacity and Energy Charges
Escalable and non escalable capacity charge
Indexed Variable Charge and forex variation for
Bid 3
Tariff
Const Period
Max 60 mths
Max 36 mths
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Response to Bids (RfQ)

• Positive response received for all the bids

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Request for Approval of Bids

• GUVNL brings Bids to notice of Commission vide
  letter dated 13.03.2006
• Commission asks GUVNL vide letter dated
  20.03.2006 to get approval of deviations in
  Bidding Documents from SBD

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Pre Bid Conference and Finalization of Bids

• Pre Bid Conference held on May 6, 2006.
• Revised documents issued on 26th June 2006
• Final deadline for submission of Bid
• Bid 01/LTPP/2006 September 11, 2006
• Bid 02/LTPP/2006 January 03, 2007
• Bid 03/LTPP/2006 January 03, 2007

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Submission of Documents for Approval

• GUVNL submits deviations from SBD for approval of
  Bid 01/LTPP/2006 on 27.06.2006
• GUVNL submits deviations from SBD for approval of
  Bid 02 03/LTPP/2006 on 27.11.2006

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Issues for Approval

• Quantum of Power to be Procured
• According to 16th EPS, for comfortable power
  situation, addition of around 10,000 MW in 11th
  plan period required
• Procurement of maximum 6000 MW justified
• Deviations from SBD
• Presentation given by GUVNL on 28.06.2006
• Deviations approved (Bid 1 approved on 29.08.06,
  Bid 2 3 approved on 30.12.06)

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Major Deviations from SBD

• Although all the Bids were of Case I type, the
  SBD of Case II was followed for drafting the bid
  documents.
• The bidders were allowed (at their option) in all
  the bids to supply power from more than one power
  plant.
• 
  Continued

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Major Deviations from SBD

• Deviations in 01/LTPP/2006
• Although coming under Case I, the fuel was
  specified as coal/lignite.
• The CoD for the plant was kept 36 months, whereas
  the SBD talk of at least 48 months.
• Deviations in 02/LTPP/2006
• The tariff provided for escalable energy charges
  (escalation rate for Gas and Coal/Lignite
  specified)
• The tariff also provide for the escalation rate
  for fuel transportation through Indian Railways.
  
• 
  Continued ..
  

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Major Deviations from SBD

• Deviations in 03/LTPP/2006
• Although coming under Case I, the fuel was
  specified as imported coal.

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Commissions approval to Bid 01/LTPP/2006

• 01/LTPP/2006 approved on 29.08.2006 with the
  following addition to RFP and PPA document
• GUVNL to have the first right of refusal to
  additional capacity of power station
• Power may be contracted by GUVNL if it is lower
  than or at par with quoted levelised tariff
• In case of refusal, power plant may sell this to
  third party
• First right of refusal of GUVNL will not hold if
  power is used for captive use or contracted for
  sale on long term basis to a licensee in the
  state where the plant is located.

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Response to Bid 01/LTPP/2006 (RfP)

• 3 bids received. All Technically qualified. Fuel
  Type Coal/Lignite.
• BIDDER QTY LEVELISED
• TARIFF (Rs/Kwh)
• Adani Enterprise 500 MW
  3.7038
• PTC India
• Main Bid 190 MW 3.2502
• Additional Bid 250 MW 3.4947
• Jindal Power Ltd 150 MW
  3.4801
• Continued

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Bid 01/LTPP/2006

• Evaluation Committee Recommends rework of
  levelised tariff
• Evaluation Committee Recommends Financial
  Re-Bidding for Bid No 1
• Results of re-bidding were as follows
• BIDDER TARIFF
• Adani Enterprise 3.2939 Rs/Unit
• Jindal Power Ltd 3.2483 Rs/Unit
• PTC Main Bid 3.2499 Rs/Unit
• PTC Additional Bid 3.3595 Rs/Unit
• Levelised tariff was reduced by all the bidders.
  
  Continued

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Bid 01/LTPP/2006

• Evaluation Committee recommends lowest tariff of
  3.2483 Rs/Unit of Jindal Power Ltd to be
  accepted and other bidders to match the same.
• Levelised tariff was reduced by all the bidders
  at Rs. 3.2483 per Unit
• Letter of Intent (LoI) issued.
• Only Adani Enterprise Ltd submitted enhanced bank
  guarantee on issuance of LoI.
• Adani Enterpriser Ltd successful winner of Bid
  1/LTPP/2006 with 1000 MW power
• Later tariff was finalized to Rs. 2.8900/Kwh
  (levelised).
• No escalation in quoted tariff over the 25
  years-Life of the project.
  

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Bid 02 03/LTPP/2006

• For Bid 02/LTPP/2006, 6 bids received. Total 2704
  MW offered
• For Bid 03/LTPP/2006, 4 bids received. Total 3150
  MW offered.
• All bidders technically qualified

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Commissions approval to Bid 02 03/LTPP/2006

• Commission approved deviations of RFP and PPA
  documents on 30.12.2006 from SBD with following
  condition
• GUVNL shall follow process of procurement based
  on appropriate benchmarked prices.
• It should inform the Commission about the details
  of bids received before issuing LoI.

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02/LTPP/2006

• Technical/Financial details
• Subject to escalation rates as per CERC
  notification.

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Selection 02/LTPP/2006

• Selection Committee selects the following lowest
  bids
• Aryan Consortium 200 MW 2.2498 Rs./Unit
• Adani Consortium 1000 MW 2.3495 Rs./Unit

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03/LTPP/2006

• Technical/Financial details
• Subject to escalation rates as per CERC
  notification.

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03/LTPP/2006

• Evaluation Committee recommends Essar Power Ltd
  as winner of third bid.
• To supply 1000 MW of Power, using imported coal
  at lowest levelised tariff of Rs. 2.4006/Unit

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CONCLUSION

• The Process of finalization of all three bids
  took approximately 1 year
• The Final Results were

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PROCESS/STATUS

• Process followed
• Approval of quantum of power to be procured
• Presentation by GUVNL on competitive bidding and
  review of RFP/PPA
• Approval of deviation from SBD
• Power Purchase Agreements received for approval.

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Adoption of Tariff

• On signing of PPAs, the GUVNL approached GERC for
  adoption of tariff
• The Commission directed GUVNL to make the terms
  and conditions of the winning bids and anonymous
  comparison of other bids together with details of
  PPAs public through website and newspaper notice
  in accordance with the MoP Guidelines.
• GUVNL complied with that direction and also
  submitted the certificate of bid evaluation
  committee that provisions of guidelines and bid
  process followed by the applicant
• Commission has approved the tariff rate
  discovered through competitive bidding and
  approved the PPAs in December, 2007

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Lessons Learnt

• States facing power shortage, need active
  initiatives in competitive bidding process.
• Deviations from SBD depends upon the specific
  circumstances/issues affecting the state and need
  regulatory clearance with minimum delay
• Interaction between Regulator and Procurer
  facilitate quicker disposal of process
• Reasonable flexibility has helped in successful
  completion.
• Case I can also be competitive if internal
  benchmarking is done by the procurer after
  receiving the bids and before opening of the
  financial bids.

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Second Round of Bidding

• June, 2007 Request from GUVNL to initiate
  bidding under case-1 for 2000 MW of power
• Asked GUVNL to follow documents as approved
  earlier and follow the process based on
  appropriate benchmarked prices
• GUVNL has received four bids (1900 MW) ranging
  from Rs. 3.24 per kWh to Rs. 3.79 per kWh
• Decided not to purchase long term power in view
  of the high tariff rates

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Third round of bidding

• June, 2009 GUVNL requested commission to
  approve deviations in the bidding documents for
  long term procurement of power of 3000 MW as Case
  1
• Proposed Deviations are intended to relax the
  qualification criteria (related to forest
  /environment clearance, water use permission,
  land possession, fuel agreement etc.) in order to
  make it more competitive.
• RFP issued total 28 interested parties
  registered

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Thank You
Gujarat Electricity Regulatory Commission