BEFORE THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION LUCKNOW

BEFORE THE UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION LUCKNOW Present Shri Rajesh Awasthi, Chairman Petition No. 690/2010 IN THE MATTER OF : Review of the Commission s order dated 02-07-10 passed in petition no 632/2009 for approval of Request for Proposal (RFP) & RFP Project documents - Transmission Service Agreement (TSA), Share Purchase Agreement (SPA) & Connection Agreement (CA) for selection of developer to establish 765KV Mainpuri - Bara line with 765KV/400KV AIS at Mainpuri and associated schemes/works (Package-1) through tariff based competitive bidding process. AND IN THE MATTER OF : AND Uttar Pradesh Power Transmission Corporation Ltd., 11th Floor, Shakti Bhawan Extension, 14-Ashok Marg, Lucknow 226 001 :Petitioner Petition No. 691/2010 IN THE MATTER OF : Review of the Commission s order dated 02-07-10 passed in petition no 633/2009 for approval of Request for Proposal (RFP) & RFP Project documents - Transmission Service Agreement (TSA), Share Purchase Agreement (SPA) & Connection Agreement (CA) for selection of developer to establish 765KV S/C Mainpuri - Hapur & Mainpuri Greater Noida lines with 765KV/400KV AIS at Hapur & Greater Noida and associated schemes/works (Package-2) through tariff based competitive bidding process. AND IN THE MATTER OF : Uttar Pradesh Power Transmission Corporation Ltd., 11 th Floor, Shakti Bhawan Extension, 14-Ashok Marg, Lucknow 226 001 :Petitioner Page 1 of 10

The following were present: 1. Shri R.S. Pandey, Director (Projects), UPPTCL 2. Shri P.K. Gupta, Superintendent Engineer, UPPTCL 3. Shri Vineet Kumar, Executive Engineer, UPPTCL 4. Shri A.N. Gupta, Assistant Engineer, UPPTCL 5. Shri Alfonso, M/s Isolux Corsan 6. Shri R.R. Aiyer, M/s Isolux Corsan 7. Shri Lalchand, M/s Isolux Corsan 8. Shri Alok Kumar Gupta, M/s Cobra, S.A. 9. Shri Vinay Ahuja, M/s Cobra, S.A ORDER (Date of hearing 25 th August, 2010) (1) U.P. Power Transmission Corporation Ltd., (UPPTCL) has been authorized to act as Bid Process Coordinator (BPC) by the Energy Task Force (ETF) of GOUP. Therefore as BPC they have filed the said petitions and sought a review on certain issues related to the Commission s order dated 02.07.10 in the matter pertaining to Petition Nos. 632/2009 & 633/2009 which are in regard to approval of the RFP & RFP Project documents for selection of Transmission Service Provider (TSP) to develop the following on Build, Own, Operate and Transfer (BOOT) basis : (a) 765KV Mainpuri - Bara line with 765KV/400KV AIS at Mainpuri and associated schemes/works, called Package-1, which consists of 765/400 KV lines/lilo and 765/400 or 400/220 or 132 KV substations and (b) 765KV Mainpuri - Hapur & Mainpuri Greater Noida lines with 765KV/400KV AIS at Hapur & Greater Noida and associated schemes/works, called Package-2, which consists of 765/400 KV lines/lilo and 765/400 or 400/220 or 132 KV substations. The Petitioner, UP Power Transmission Corporation Ltd., had submitted for approval the RFQ, RFP & RFP Project documents of package-1 & 2 vide Petition Nos. 632/2009 & 633/2009. The RFQ documents have already been approved by the Commission vide orders dated 15.10.09 & 20.10.09. The Commission vide its order dated 02.07.10 disposed the petitions and Page 2 of 10

directed UPPTCL to modify the RFP & RFP Project Documents according to the decisions & directions of the Commission and issue the modified documents to the bidders, M/s Cobra Instalaciones and M/s Isolux Corsan with a copy to the Commission for information and records. In compliance to the above directions, the petitioner issued the RFP & RFP Project Documents to both the bidders with a copy to the Commission and thereafter filed the review petitions requesting the Commission to review the following issues:- i. Submission of the benchmark prices along with the detailed calculation to the Commission after receipt of bids but prior to opening of the bids for adoption of Swiss Challenge Method (SCM) of bidding, as directed by the Commission vide para-11(c) of its order dated 02-07-10. In its review petition, the petitioner submitted that it is not possible for them to compute the benchmark price as it was inadvertently mentioned during the hearing on 08-06-10 and that the Energy Task Force at no stage had decided to go for such computation of benchmark price. The petitioner also submitted that ETF in its meeting on 13-07-10 has directed that the competitiveness of prices shall be decided by the GOUP S Bid Evaluation Committee after opening of price part of the said bid. In view of above, the petitioner requested the Commission that the condition for submitting the benchmark prices to the Commission after receipt of bid but prior to opening of bids may be waived. ii. Alignment of clause 2.14.4 of RFPs and accordingly modify clause 19.2 of TSAs regarding minimum equity holding / equity lock - in with the provisions of SBD, as directed by the Commission vide para-11(g)(ii) of its order dated 02-07-10. The petitioner through the review petitions has submitted that ETF in its meeting dated 13-07-10 has approved clause 2.14.4 of RFPs and 19.2 Page 3 of 10

of TSAs as per the directions of the Commission with some changes. They have incorporated in the relevant clauses that in case of any change in the ownership of South East UP Power Transmission Company Ltd. or Western UP Power Transmission Company Ltd. the new owner / consortium must fulfill the technical criteria as given in clause 2.1.2 of the RFQs. In view of above, the petitioner requested the Commission to approve the provision of technical criteria for the new owner / consortium also as per clause 2.1.2 of the RFQs. iii. Alignment of clauses-13.1(e) & 13.6 of TSAs for revocation of transmission license in TSPs Events of Defaults with Sec-20 of Electricity Act, 2003, as directed by the Commission vide para-11(g)(v) of its order dated 02-07-10. In the review petitions, the petitioner submitted that as per the provisions of Electricity Act 2003, the grant and revocation of transmission license comes under the scope of the Commission and therefore there is no need of specifying all the relevant provisions of EA 03 in the TSA. (2) The Commission issued notice to UPPTCL and the two bidders M/s Cobra Instalaciones and M/s Isolux Corsan vide UPERC/Secy/JD(T)/2010/141 dated 18-08-10 for hearing in the matters to be held on 25-08-10. (3) Accordingly during the hearing on 25.08.10, the issues of both the review petitions were considered for discussion. Since all the issues are similar in nature for both the petitions as such the same have been decided by this common order. (4) The oral submissions made in the hearing are summarized as below :- (i) The Petitioner made the following submissions :- a) In reference to para-11(c) of the Commission s order dated 02-07-10 vide which UPPTCL was directed to submit the benchmark prices along with the detailed calculation to the Commission after receipt of bids but Page 4 of 10

prior to opening of the bids for adoption of Swiss Challenge Method (SCM) of bidding, the Petitioner submitted that the computation of benchmark prices is not possible at this stage and competitiveness of prices shall be decided by the Bid Evaluation Committee after opening of price part of the said bid and therefore requested that condition of submitting benchmark prices may be waived. Director (Projects) also submitted that UPPTCL will put up the details of RFP bids before the Bid Evaluation Committee to decide the competitiveness of the bids and their decision in this regard will be conveyed to the Commission. b) In reference to para-11(g)(ii) of the Commission s order dated 02-07-10 for minimum equity holding / equity lock - in, vide which UPPTCL was directed to align the clause 2.14.4 of RFPs and accordingly modify clause 19.2 of TSAs with the provisions of SBD, the Petitioner submitted that the modification has been done in RFPs and TSAs as per the directions of the Commission. They also submitted that the main objective of framing the RFP and TSA documents was to ensure that the lead member, who runs the project, be technically capable throughout the term of TSA. Therefore they have incorporated this condition in these documents stating that if the lead member changes after five years, the person who joins the consortium should have the same technical strength on the basis of which the project had been awarded to the original bidder. With the above intention the petitioner has added one paragraph in RFPs and TSAs that in case of any change in the ownership of South East / Western UP Power Transmission Company Ltd, the new owner/consortium must fulfill the technical criteria as per clause 2.1.2 of the RFQs. c) In reference to para-11(g)(v) of the Commission s order dated 02-07-10 vide which UPPTCL was directed to align the article-13.1(e) & 13.6 of TSAs with Sec-20 of Electricity Act, 2003 for revocation of transmission license in TSPs Events of Defaults, UPPTCL submitted that the Page 5 of 10

Commission has already made regulations for granting and revocation of transmission license and therefore there is no need to mention them again. (ii) The representatives of M/s Cobra and M/s Isolux objected to the plea of the petitioner regarding minimum equity holding / equity lock - in and addition of a new paragraph in clause 2.14.4 of RFPs and clause 19.2 of TSAs. M/s Cobra submitted that if the required technical expertise is maintained for five years after COD of the project then thereafter the main task that remains to be performed is related to operation & maintenance of the project for which there are many equally experienced parties who can operate and maintain the project in an efficient manner. With this view the technical requirement of the lead member up to five years after COD is adequate. They also submitted that whatever has been pleaded by UPPTCL is not as per SBD and therefore the directions of the Commission issued vide order dated 02-07-10 have not been complied with. M/s Isolux also emphasized that the technical capability of the lead member comes into play at the time of development of the project and once the project is on track for five years after COD the managerial skills rather than technical expertise become more important. (5) The Commission expressed its displeasure on the manner the RFP & RFP Project Documents have been issued by the petitioner after incorporating certain modifications on their own whereas they have not incorporated some of the modifications directed by the Commission. The Commission observed that the modifications in the documents have been carried out by the petitioner which are not as per the directions of the Commission issued vide its order dated 02.07.10. The Commission also observed that the modifications now sought by the petitioner through the said review petitions have already been incorporated in the said documents without approval of the Commission and issued to the bidders. This demonstrates the Petitioner s total disregard to the established Regulatory process. Page 6 of 10

(6) The directions of the Commission, issued vide its order dated 02.07.10, which have not been incorporated in the modified documents are summarized as below:- a) The Commission vide para-12(ix) allowed scheduled COD for the overall project as thirty months from the date of award of work and the petitioner was directed to amend clause 2.15.1 of RFPs accordingly. However the petitioner while making the said amendment mentioned thirty months from the effective date / date of award of work. The petitioner clarified that it has been done since the date of award of work is neither defined in SBD nor in RFP & RFP Project Documents. The petitioner further submitted that effective date, as defined in clause 2.1 of TSAs, is later of the dates of the three events i.e. (i) the agreement is executed and delivered by the Parties, (ii) the selected bidder acquires for the Acquisition Price, one hundred percent of the equity shareholding of SPVs with all its assets & liabilities as per the provisions of SPA and (iii) the selected bidder provides the Contract Performance Guarantee. In view of the fact that all the three events are to be completed within a period of fifteen days from the date of issue of Letter of Intent, the petitioner requested the Commission to allow scheduled COD for the overall project as thirty months from the date of award of work plus fifteen days and this is to be read as effective date. The Commission, rejecting the contention of the Petitioner, observed that it is common knowledge that the date of award of work in respect to any work is the date of issue of Letter of Intent for that work and is therefore not required to be defined separately. Further, the Commission is of the view that the countdown of the scheduled COD for the overall project must start from a fixed date otherwise the scheduled date of commissioning of the project is likely to get shifted in the event of delay in complying with any of the three events mentioned under effective date. The Commission has viewed with concern the manner in which the petitioner has on its own accord made Page 7 of 10

amendments to the directions given in this regard in the Commission s order dated 02.07.10. The Commission therefore directs the petitioner to maintain the scheduled COD for the overall project as thirty months from date of award of work and make necessary amendments as and where required in the documents and issue the same to both the bidders. b) In view of amendment made by Ministry of Power, GOI in Standard Bid Documents of Request For Proposal (RFP) & Transmission Service Agreement (TSA) for procurement of Transmission Services through tariff based competitive bidding vide letter no 15/01/2010/Trans dated 07.05.10 regarding enhancement of the term of the transmission service agreement from twenty five years to thirty five years and the subsequent request made by the UPPTCL for the same, the Commission vide para-12(i) of its order dated 02-07-10 directed the petitioner to align the clauses and annexure of RFP & RFP Project documents accordingly. In compliance to the Commission s order, the petitioner has changed the period given in the definition of Expiry Date from twenty five years to thirty five years. However, while doing so they have also modified the reference date from when the Expiry Date shall be considered. They have now considered it from the scheduled COD instead of from the date of issue of Transmission License. Previously the RFP & RFP Project Documents had mentioned the Expiry Date as per the SBD i.e. from the date of issue of Transmission License or such extended period as granted by Commission. In view of this the Commission directs the Petitioner to maintain the Expiry Date as the date which is 35 (thirty five) years from the date of issue of Transmission License or such extended period as granted by Commission. c) The Commission directed vide para-11(f) of its order dated 02-07-10 that the details of other technical specifications and parameters may be decided by the successful bidder provided it does it under the supervision of UPPTCL. The petitioner did not incorporate the above direction of the Commission while making the modified documents. The Petitioner explained that they could not understand the meaning of the word Page 8 of 10

supervision and whether the petitioner needs to give its approval for the other technical specifications. The Commission clarified that the work shall be carried out by the successful bidder under the overall supervision of UPPTCL and therefore directed the petitioner to suitably amend the clauses of RFPs & RFP Project Documents. (7) The main objection of M/s Cobra and M/s Isolux was on the plea of the petitioner regarding minimum equity holding / equity lock - in and the addition of a new paragraph in clause 2.14.4 of RFPs and clause 19.2 of TSAs. Having heard the deliberations of the petitioner and both the bidders the Commission opined that the technical expertise of the lead member as provided in the RFQs is essential only up to 5 (five) years from COD. Thereafter the requirement of technical expertise will get drastically reduced in comparison to what it was in the initial stages of the project. In view of above, the Commission directed the petitioner to make necessary amendment in RFPs and RFP Project Documents to the extent that in case of any change in the ownership the new owner / consortium must fulfill the minimum technical requirement which shall be decided mutually by UPPTCL and the successful bidder during pre award discussions. So far as the submission of the benchmark prices is concerned, the Commission clarified that the submission of details of computation of benchmark prices may not be required, but submission of benchmark prices is imperative for adoption of Swiss Challenge Method (SCM) of bidding. The Commission did not accept the explanation of the petitioner that competitiveness of prices shall be decided by the Bid Evaluation Committee after opening of the price bids as the Petitioner failed to explain how the Bid Evaluation Committee would decide upon the competitiveness of the prices in the absence of any benchmark price. Therefore the Commission directed the petitioner to confirm that the benchmark prices shall be submitted to the Commission after receipt of the bids but prior to opening of the bids. The petitioner has confirmed the same vide their letter dated 13.09.10. Regarding alignment of the clauses-13.1(e) & 13.6 of TSAs with Sec-20 of Page 9 of 10

Electricity Act, 2003 for revocation of transmission license in TSPs Events of Defaults, the Commission agreed with the argument of the petitioner that grant & revocation of transmission license come under the purview of the Commission and clarified that all the relevant provisions of Sec-20 of EA 03 need not be specified by the petitioner. Reference to the relevant clauses would suffice. (8) The Commission noted that the RFP & RFP Project Documents have already been issued by the petitioner with certain modifications made on their own. In view of this the Commission directs the petitioner to issue necessary amendment to the RFP & RFP Project Documents incorporating all the decisions and directions of the Commission. A copy of this amendment shall be submitted to the Commission for information and records. (9) The petitions are disposed of. (Rajesh Awasthi) Chairman Lucknow ; Dated 15 th September 2010 Page 10 of 10