Brief Summary

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Last 5 years has seen multiple IBDF models getting adopted by various States – Maharashtra (Nagpur, Aurangabad, Jalgaon), Madhya Pradesh (Sagar, Ujjain), Bihar (Muzaffarpur, Bhagalpur, Gaya). There are some states like Orissa which have adopted a low Capex variant of IBDF model and some newer states like Assam, Himachal Pradesh, Rajasthan, etc. who are exploring a higher variant of IBDF, namely the PPP Concessionaire model.

IBDF model has seen fairly operational maturity, with early adopters like Nagpur IBDF being able to reduce AT&C losses from 32% to current 15% and further targeting to reach in single digit in another 1-2 years. There are couple more IBDF projects now, which has been able to also close debt syndication with banks. Amidst this good, there are some hard examples as well like termination of Aurangabad IBDF; some operational, political and skilled resource struggle by few operating IBDFs, etc. With above context, we tend to strongly believe that IBDF model is rightly positioned to become the best model for scaling right PPP structure in Power Distribution in India.

We are glad to bring to you our latest report on Input-based Power Distribution Franchisee (IBDF) model in India. The key highlights of the report are:

• Updates on current status of IBDF model (Operational / On-going / Suspended / New Opportunities)
• IBDF Model – Projected Trend and Actual Uptake
• Analysis of bids – Jharkhand, Bihar and SAIL’s 4 townships
• Performance Review of operational DFs
• Brief comparison between IBDF and PPP Concessionaire model
• Suggested next level evolution of Input based Distribution Franchisee model

Detailed Table of Contents (Q2 Report)

1. Terminology / Acronyms
2. Executive Summary of Power Distribution Franchisee
3. Power Distribution Scenario in India
   • Energy Value Chain & its Leakages
   • Distribution Scenario in India
   • Key Issues faced by Utilities?
   • Different Operating Models in use
   • Attractive of DF model over other Privatization Models
4. Distribution Franchisee as a Business Model
   • Introduction to Power Distribution Franchisee
   • Types of Business Models
   • Suitability to ‘Urban’ and ‘Rural’ circles
5. Input based Distribution Franchisee (IBDF) Market
   • Key Market Drivers
   • Projects Update – Operational / Ongoing / Suspended
   • Players – Operators and Bidders
   • Model Uptake – Trends and Future Projections
   • Industry Analysis – Porters 5 Forces Model
6. IBDF Operating Model
   • Key Stakeholders
   • Stakeholders Analysis
   • Major Activities and Operations
   • Model Risks
7. IBDF Bid Process and RFP Analysis
   • Bid Process
   • RFP Key Contract Parameters
   • Comparative Review of RFPs, Bidders Preferences & Outlook
8. Analysis of Bids in Maharashtra
   • Connections and Assets Information from RFPs
   • Customer Segmentation
   • Winning Bid Comparison
   • Projected Contribution of Winning Bid to Utility
9. Analysis of Bids in Madhya Pradesh
   • Bids Quick Characterization
   • Attractiveness Matrix
   • Connections and Assets Information from RFPs
   • Customer Segmentation
   • Winning Bid Comparison
10. Analysis of Bids in Jharkhand & SAIL
    • Connections And Asset Information From RFPs
    • Customer Segmentation
11. SAIL Distribution Franchisee bids – 4 Townships
12. IBDF Investment Model
    • Base Case (Input) – Key Assumptions
    • Base Case (Input) – Bid Price and Loss Reduction Trajectories
    • Base Case (Input) – Capex Assumption
    • Base Case (Input) – Estimated Returns
    • Case 1: Sensitivity of Equity IRR to Levelized Input Price
    • Case 2: Sensitivity of Equity IRR to Capex
    • Case 3: Sensitivity of Equity IRR to Opex
    • Case 4: Sensitivity of Equity IRR to Tariff Growth Rate
    • Case 5: Sensitivity of Equity IRR to Load Growth Rate
    • Case 6: Sensitivity of Equity IRR to Input Price Shape/Curve
13. Case Studies
    • IBDF Case Study 1: Torrent Power Ltd (TPL) @ Bhiwandi
      • Comparison of Torrent Power at Agra and Bhiwandi by Reuters
    • IBDF Case Study 2: SPANCO @ Nagpur
14. Conclusions
15. References
16. Appendix
    • 255 towns suggested by Shunglu Report for IBDF Implementation
    • List of Unbundled States in India (in Chronological Order)
    • List of Pilot Smart Grid Projects
    • Lists & Links of Distribution Companies, SEB’s in India?

Key Highlights of the Report are

1. Current Market Scenario, its uptake and Upcoming Opportunities of Distribution Franchisee
2. Key Functional Roles and Responsibility of Distribution Franchisee Operator
3. Key Roll Out Challenges for Distribution Franchisee Operator across various stakeholders
4. Case Studies of already existing Operators
5. Bid Process description for distribution franchisees
6. Evolution of RFP terms and conditions across various past DFs, with highlighting of critical risks
7. Past bid analytics of DFs at Nagpur, Aurangabad, Jalgaon, Gwalior, Ujjain and Sagar
8. Detailed Financial numbers derived using a base financial model for UJJAIN city (recent MP bid analysis)
   • Sensitivity to different parameters like CAPEX, OPEX, Tariff Rate, Load Growth Rate, Price bid curve, etc.

Key Questions Answered

1. What is the potential of Distribution Franchisee model?
2. Which states are looking to adopt the model?
3. What are the key risks and challenges of the distribution franchisee model?
4. How is the bid process and how to analyze critical contract terms and conditions in the RFP?
5. What is a typical Capex Distribution for new Distribution Franchisee?
6. What Returns to expect from a DF model, and what key sensitivity parameters to analyse?
7. How has been the bidding scenario and trend in previous DF bids?
8. How is the experience of current distribution franchisee operators?
9. How is the current competitive landscape in the distribution franchisee space?

Information Sources

1. Excerpts from industry experts
2. Opinions and Reviews of various reports in Distribution Franchisee sector
3. Inputs from Conferences and Workshops
4. Secondary Research

A Must Buy for

1. Potential New Entrants in Distribution Franchisee space to get up-to speed on the market
2. Existing Distribution Franchisee operators to train / update new hires and stay up to date on market trends
3. Research and Educational Institutes to learn about various aspects of the Distribution Franchisee market
4. Banks and Financial Institutions to learn about the sector and understand the financial implications of investing in distribution franchisee businesses
5. Consultants to upgrade their know-how in the distribution franchisee market space

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