1. The present application has been made by Coastal Andhra Power Limited under Section 63 of Electricity Act, 2003 for adoption of tariff determined through international competitive bidding process for supply of electricity from Krishnapatnam Ultra Mega Power Project (hereinafter referred as 'Krishnapatnam UMPP').
2. Section 63 of the Electricity Act, 2003 (hereinafter referred to as 'the Act') envisages that the Appropriate Commission shall adopt the tariff if such tariff has been determined through the transparent process of bidding in accordance with the guidelines issued by the Central Government. The Central Government in Ministry of Power has issued the guidelines contemplated under Section 63 of the Act, titled "Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees" (hereinafter referred to as 'the guidelines') vide Resolution No. 23/11/2004-R&R(Vol.II) dated 19.1.2005 which have been further modified vide amendments dated 30.3.2006,18.8.2006 and 27.9.2007. The salient features of the bidding process as laid down in the guidelines are discussed hereunder for convenience of reference: (a) The guidelines are applicable for procurement of base-load, peak-load and seasonal power requirements of distribution licensees through process of competitive bidding by following one of the two mechanisms. Case I mechanism covers the cases where the location, technology or fuel is not specified by the procurer. Case 2 mechanism pertains to hydro-power projects, load center projects and other location specific projects with specific fuel allocation such as captive mines available which the procurer intends to set up under the tariff based bidding process. The distribution licensees (referred to as procurers for the purpose of competitive bidding) may adopt the guidelines for long-term procurement for a period of 7 years and above and medium term procurement for a period exceeding 1 year up to a period of seven years.
(b) Procurement by more than one distribution licensee through a combined bid process is permitted and in such a case, the procurer has the option of conducting the bid process through an authorized representative. The authorized representative may be one of the procurers or for Case 2 mechanism, a special purpose vehicle (SPV) may be incorporated for the purpose.
(c) The bid documentation is required to be prepared in accordance with the Guidelines and the Standard Bid Documents (SBD) issued by the Central Government. In such cases, intimation shall be sent by the procurer to the appropriate Regulatory Commission about initiation of the bidding process. In the event of deviation from the bidding conditions contained in the guidelines, approval of the Appropriate Commission shall be sought by the procurers or their authorized representative.
(d) For long-term procurement from the projects with pre-identified sites, the procurers or their authorized representative are required to complete such activities as site identification, land acquisition, environmental clearance, water linkage etc required for the project.
(e) A two-stage bidding process comprising separate Request for Qualification (RFQ) and Request for Approval (RFP) shall be adopted for long-term procurement under the guidelines and the procurer or authorized representative shall prepare bid documents including RFQ and RFP in line with these guidelines and standard bid documents.
(f) The procurer shall publish a RFQ notice in at least two national newspapers, company website and preferably in trade magazines to accord it wide publicity. The bidding process shall necessarily be by way of international competitive bidding. RFP shall be issued to all bidders, who are qualified at RFQ stage. In case, the bidders seek any deviation and procurer finds that deviation is reasonable, the procurer shall obtain approval of the appropriate Commission before agreeing to such deviation.
(g) Formation of consortium shall be permitted. In such cases the consortium shall identify a lead member and all correspondence for the bid process shall be done through the lead member. The procurer may specify technical and financial criteria, and lock in requirements for the lead member of the consortium, if required.
(h) The minimum number of qualified bidders should be at least two other than any affiliate company or companies of the procurer to ensure competitiveness. If the number of qualified bidders responding to the RFQ/RFP is less than two and the procurer still wants to continue with the bidding process, the same may be done with the consent of the Appropriate Commission.
(i) The procurer shall constitute a committee for evaluation of the bids with at least one Member external to the procurer organization and affiliates. The external Member shall have expertise in financial matters/bid evaluation. The procurer shall reveal past association with the external Members directly or through its affiliates that could create potential conflict of interest.
(j) Eligible bidders shall be required to submit separate technical and price bids along with necessary bid-guarantee. The bid shall be opened in public and representatives of bidders desiring to participate shall be allowed to remain present. The bidder, who has quoted lowest levellised tariff as per evaluation procedure, shall be considered for award of the contract.
(k) The Power Purchase Agreements (PPAs) shall be signed by the procurers with the selected bidder/SPV (after its acquisition by the selected bidder) consequent to the selection process in accordance with the terms and conditions as finalized in the RFP bid documents.
However, in case of projects under Case 2 from which more than one distribution licensee located in different States intend to procure power by carrying out bidding process through a SPV, the PPA and other required project agreements may be entered into between the SPV and the procurers prior to the last day of submission of RFP bids with the proviso that these agreements shall be effective from the date of acquisition of the SPV by the selected bidder.
(l) After conclusion of the bid process, the Evaluation Committee shall provide appropriate certification on conformity to the bid process evaluation according to the provisions of the RFP document.
The procurer shall provide a certificate on the conformity of the bid process to the guidelines.
(m) For the purpose of transparency, the procurer shall make the bids public by indicating all the components of tariff quoted by all bidders, after signing of the PPA or PPA becoming effective whichever is later. While doing so, only the name of the successful bidder shall be made public and details of tariffs quoted by other bidders shall be made public anonymously. The procurer shall also make public the PPA signed with the successful bidder/SPV. (n) The applicant shall submit the signed PPA along with the certification certificates by the Evaluation Committee to the Appropriate Commission for adoption of tariff in terms of Section 63 of the Act.
3. The applicant, Coastal Andhra Power Limited, was incorporated under the Companies Act, 1956, as a wholly owned subsidiary of Power Finance Corporation (a Government company) with a total authorized and paid up share capital of Rs. 5 lakh. The applicant has been authorized by all the procurers (Distribution licensees of the State of Andhra Pradesh, Karnataka, Tamilnadu and Maharashtra) as the authorized representative for discharging all the rights and obligations of the procurers to undertake the bidding process for selection of bidder who shall acquire the applicant company, the Coastal Andhra Power Limited (CAPL) and after acquisition, shall cause CAPL to build, own and operate (BOO) the Krishnapatnam UMPP located at Krishnapatnam, District Nellore, in the State of Andhra Pradesh.
4. The applicant has stated that allocation of power from Krishnapatnam UMPP along with other UMPPs was discussed and finalized in a meeting taken by Secretary (Power), Government of India on 10.7.2006 with the Principal Secretaries/Energy Secretaries of the beneficiary states and the representatives of Power Finance Corporation and Central Electricity Authority. The allocation of power from Krishnapatnam UMPP is as under: 5. The procurer-wise allocations of power from Krishnapatnam UMPP and the name of authorized entity are as under: State Power Procurement Coordination Centre, Government of Karnataka on behalf of: 6. The applicant has submitted that competitive bidding process was initiated on 12.7.2006 with the publication of global invitation for pre-qualification for selection of developer to build, own, operate and maintain the 4000 MW Krishnapatnam UMPP with imported coal for supply of contracted power to the procurers for 25 years. The Commission was duly informed about the initiation of the bidding process vide the applicant's letter dated 25.8.2006. The process was completed on 30.11.2007 with issue of Letter of Intent (LOI) to the successful bidder, M/s. Reliance Power Limited. The key milestones in the bid process were as under: Issuance of amendments of RFP on the basis of amendment of Standard Bid Documents 7. The applicant has stated that in all, 13 bidders as listed below submitted their bids at the RFQ stage: M/s Reliance Power Limited (previously Reliance Energy Generation Limited) 8. The applicant has submitted that the RFP documents were finalized by an Empowered Committee comprising the officials from Central Electricity Authority, Ministry of Power, Power Finance Corporation, Central Commission, and distribution licensees from the States of Andhra Pradesh, Karnataka and Maharashtra in line with the Standard Bidding Documents for procurement of power under Case 2 issued by Ministry of Power, Government of India. The applicant has further submitted that in line with the revised Standard Bidding Documents issued on 31.1.2007 and 21.9.2007, the RFP documents were revised vide amendments dated 9.2.2007 and 4.10.2007.
9. The evaluation of the RFP bids was undertaken by an Apex Evaluation Committee, which was assisted by an Expert Committee and Bid Process Management Consultant, M/s Ernst & Young and the Review Consultant, M/s Pricewaterhousecoopers. The composition of the Apex Evaluation Committee constituted with the approval of the Board of Directors of the applicant company was as under: Shri A K Goyal, Special Chief Secretary, Energy, Government of Andhra Pradesh Shri Dilip Rau, Additional Chief Secretary and Principal Secretary (Energy), Government of Karnataka Shri Rahul Asthana, Principal Secretary (Energy), Government of Maharashtra 10. The applicant has submitted that out of the 13 bidders who qualified at the RFQ stage, two bidders such as M/s AES India Pvt Limited and M/s Torrent Power AEC limited did not purchase the RFP documents and another two bidders namely, M/s Lanco Infratech Ltd-Globeleq (Singapore) and M/s YTL Power International Berhad (Malasia) withdrew from the process at the RFP stage. In response to the RFP issued by the Company, 3 bidders as listed below submitted their bids: The bid process consultant, M/s Ernst & Young carried out a responsiveness check of the non-financial bids submitted by the bidders as per the conditions of the RFP which was reviewed and endorsed by the review consultant, M/s Pricewaterhousecoopers. The consultants found all the three bids as responsive for opening of financial bids as per para 3 of the RPF Compliance Report dated 6.11.2006. Accordingly, financial bids submitted by these three bids were opened on 7.11.2007 in the presence of the bidders' representatives, the Expert Committee and three members of the Apex Evaluation Committee. The details of financial bids prepared by the consultants are reproduced in the summary table below: 11. The levellised tariffs as per the bid evaluation report prepared by the Expert Committee are indicated as under: 12. The Apex Evaluation Committee in its meeting held on 26.11.2006 accepted the recommendations of the Expert Committee and declared M/s Reliance Power Limited as the successful bidder with an equivalent levellised tariff of Rs. 2.33296 /kWh. The Apex Evaluation Committee, as per the minutes placed on record, has confirmed that there was no deviation in the financial bids submitted by the responsive bidders.
The Board of Directors of the Company in its 16th meeting held on 26.11.2006 accepted the recommendations of the Apex Evaluation Committee declaring M/s. Reliance Power Limited as the successful bidder. Accordingly, Letter of Intent (LoI) was issued to M/s Reliance Power Limited on 30.11.2007 which has been accepted by Reliance Power Limited vide its letter dated 5.12.2007.
13. The applicant has also submitted that the provisions of Paras 5.9, 6.1, 6.2, 6.3 and 6.4 of the Guidelines have been complied with and has placed on record necessary documents in support of the same.
14. The applicant has prayed that the tariff quoted by M/s Reliance Power Limited in respect of Krishnapatnam UMPP be adopted by the Commission under Section 63 of the Electricity Act, 2003.
15. It is pertinent to mention here that in contrast to the elaborate role of the Commission in tariff determination under Section 62 of the Act, its role in case of tariff discovery through the competitive bidding process undertaken under Section 63 is essentially confined to adoption of tariff, on being satisfied that transparent process of bidding in accordance with the guidelines have been followed in determination of such tariff. While adopting the tariff discovered through the competitive bidding process, the Commission is not required to go into the merits or analysis of the tariff so discovered.
16. We have perused the application and other relevant documents placed on record by the applicant. Our observations are given as under: (a) Para 3.1(i) provides that the bid documentation shall be prepared in accordance with the guidelines and the approval of the Appropriate Commission shall be obtained unless the bid documents are as per the standard bid documents issued by the Central Government. As per para 3.1(ii) of the Guidelines, approval of the Commission shall be sought in the event of deviations from the bidding conditions following the process laid down in para 5.16 of the Guidelines. We have perused the bid documents such as RFQ, RFP and PPA etc. and find that the documents have been prepared in accordance with the standard bid documents issued by the Central Government and as amended from time to time.
(b) As per para 5.9 of the guidelines, the procurer is required to reveal past association with the external members-directly or through its affiliates-which could create potential conflict of interest. The applicant has placed on record necessary certificates from the procurers in which the procurers have confirmed that "but for our association in connection with the transactions, arrangements, dealings and interactions in the ordinary course of our business or in our official capacity, directly or through our affiliates, we did not have any past association with the external members of the Apex Evaluation Committee constituted by the Board of Directors of Coastal Andhra Power Limited, that could create potential conflict of interest". We are satisfied that the certificates meet the requirements of Para 5.9 of the guidelines.
(c) We are satisfied that there was sufficient competition at the RFQ and RFP stages. The evaluation of the responsive bids has been done by the experts considering the appropriate escalation indices and discount factors notified by the Commission.
(d) As per the Para 6.1 of the guidelines, PPA is required to be signed with selected bidder/SPV (after its acquisition by the selected bidder) consequent to the selection process in accordance with the terms and conditions as finalized in the RFP bid documents.
It has been further provided that for cases referred to in Para 3.4 of the Guidelines, the PPA and other project documents may be executed by the SPV and the concerned parties prior to the last date of submission of the RPF bids. Para 3.4 mandates that the PPA and other project documents shall contain a proviso that these documents shall be effective from the date of acquisition of the SPV by the successful bidder. We have also perused the signed PPA and note that Para 2.1 of the PPA provides that the agreement shall come into effect from the effective date. The term 'effective date' has been defined as the 'date of the acquisition of hundred percent (100%) equity share holding of the seller by the Selected Bidder in accordance with the provisions of the Share Purchase Agreement'.
Accordingly, the applicant has signed all the project documents including the PPA (except Share Purchase Agreement) on 23.3.2007 with the procurers. We are satisfied that the PPA has been signed with the procurers in accordance with Para 6.1 of the Guidelines.
(e) We note that the PPA has been signed by the SPV with the procurers on 23.3.2007 before the finalisation of the selected bidder. To take care of this eventuality, the PPA defines 'Selected Bid' as 'the Bid of the Selected Bidder as accepted by the Procurers or their Authorised Representative, copy of which shall be attached herewith as Schedule 16 on or prior to the Effective Date'. In accordance with the said provisions, the applicant has attached with the PPA copy of the selected bid on the basis of which LoI has been issued to Reliance Power Limited.
(f) Throughout the bidding process, wide publicity had been given in the Indian and foreign media for the development of Krishnapatnam UMPP. At every stage of the bidding process both procurers and bidders had been duly involved with the process.
(g) The applicant has placed on record appropriate certification from the Apex Evaluation Committee that the evaluation is in accordance with the provisions of the bid documents. As regards the certificate from the procurer on the conformity of the bid process to the guidelines, the Chief Executive of the applicant company as the authorized representative of the procurer in para 4 of his affidavit dated 20.12.2007 has certified that " the above bid process has been undertaken in accordance with the guidelines issued by Ministry of Power, Government of India for the Determination of tariff by Bidding Process for Procurement of Power by Distribution Licensees under Electricity Act, 2003 (Competitive Bidding Guidelines) as amended and the Standard Bid Documents(SBDs) issued by Ministry of Power under such Guidelines". We are satisfied that the requirements of Para 6.2 of the guidelines have been complied with.
(h) It hasbeen stated by the applicant that the bids will be made public on PPA becoming effective which will take place after acquisition of the company by successful bidder as per the provisions of the RFP and PPA. Since Para 6.3 of the guidelines requires the procurer to make the bids public by indicating all the components of tariff quoted by all the bidders after signing of the PPA or PPA becoming effective, whichever is later, we are satisfied that the provisions Para 6.3 has been complied with. We direct the procurer to place on record of the Commission the details of acquisition of the applicant company by M/s Reliance Power Limited and also the documents regarding the steps taken by the applicant to make the bids public as per the requirements of Para 6.3 of the guidelines.
17. Based on the submission in the application and the documents placed on record, we find that tariff discovery for the Krishnapatnam UMPP has been carried out through a transparent process of bidding in conformity with the "Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licensees". Accordingly, in terms of Section 63 of the Act, we adopt the tariff as quoted by the selected bidder, M/s Reliance Power Limited for Krishnapatnam Ultra Mega Power Project for supply power to the procurers as per their respective shares as indicated in para 5 above. The year-wise tariff for 25 years quoted by M/s Reliance Power Limited and adopted by the Commission is enclosed as Annexure to this order. The adopted tariff shall be charged in accordance with the provisions of the PPA signed on 23.3.2007 and the bid of the selected bidders as accepted by the procurers which has been subsequently made a part of the PPA.