Business Plan for Grid Company Limited

Bihar Grid Company Limited

Business Plan for Bihar Grid Company Limited for control period from FY 2017-18 to FY 2020-21

BUSINESS PLAN PREPARED AS A PART OF REGULATORY FILING UNDER MYT FRAMEWORK OF BERC March 2017

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CONTENTS

DEFINITION ...... 3

1. INTRODUCTION ...... 4

2 PROFILE OF BIHAR GRID COMPANY LIMITED ...... 5

3 ENERGY SCENARIO ...... 7

4 TWELFTH PLAN OBJECTIVES FOR GROWTH TRENDS ...... 9

5 TRANSMISSION BUSINESS-ISSUES AND CHALLENGES ...... 9

6 BUSINESS PLAN FOR BIHAR GRID COMPANY LIMITED ...... 11

7 CONSTRUCTION ACTIVITIES OF BIHAR GRID COMPANY LIMITED ...... 12

8 STATUTORY & REGULATION FRAMEWORK ...... 13

9 RETURN ON EQUITY(ROE)...... 15

10 TRANSMISSION CHARGES FOR FY 2013-14 AND MYT CONTROL PERIOD ...... 15

11 PHASED FUND REQUIRMENT FOR CAPEX FROM EQUITY AND LOAN ...... 15

12 MODE OF FINANCING ...... 16

13 INTEREST DURING CONSTRUCTION ( IDC ) @ 12 % ...... 16

14 PROPOSED CAPEX( Capital Expenditure )PLAN ...... 16

16 CAPITALISATION SCHEDULE ...... 19

17 MANPOWER FOR O&M ...... 19

18 DIVIDEND PAYMENT ...... 19

19 REVENUE PROJECTION ...... 19

20 REVENUE COLLECTIONS FROM TRANSMISSION COMPANY ...... 20

21 BENEFICIARY ...... 20

22 CONCLUSION ...... 20

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DEFINITION i) BERC means Bihar Electricity Regulatory Commission. ii) BIHARGRID means Bihar Grid Company Limited. iii) BSPHCL means Bihar State Power Holding Company Limited. iv) BSPTCL means Bihar State Power Transmission Company Limited v) CAPEX means Capital Expenditure. vi) CPSU means Central Public Sector Undertaking. vii) DPR means Detailed Project Report. viii) GIS means Gas Insulated Switchgear. ix) IDC means Interest During Construction. x) IEDC means Incidental Expenditure During Construction. xi) ITSA means Implementation and Transmission Service Agreement. xii) MYT means Multi Year Tariff. xiii) O&M means Operations and Maintenance. xiv) POWERGRID means Power Grid Corporation Limited. xv) R&M means Repairs and Maintenance. xvi) RoE means Return on Equity. xvii) SHA means Shareholder`s Agreement. xviii) STU means State Transmission Utility.

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1. INTRODUCTION

IN ORDER TO DEVELOP THE INTRA-STATE TRANSMISSION SYSTEM IN THE STATE OF BIHAR, IT WAS AGREED BETWEEN BIHAR STATEPOWER HOLDING COMPANY LIMITED (BSPHCL) AND POWER GRID CORPORATION OF LIMITED (POWERGRID) TO FORM A 50:50 JOINT VENTURE COMPANY IN THE NAME OF BIHAR GRID COMPANY LIMITED UNDER THE PROVISION OF COMPANIES ACT 1956. THE PROPOSED COMPANY WILL BUILD, OWN AND OPERATE (BOO) THE TRANSMISSION SYSTEM AND IT WILL BE A TRANSMISSION LICENSEE DULY APPROVED BY BERC.

1.1 Bihar Grid Company Limited was registered on 04.01.2013 under the Companies Act 1956 with the objective of providing transmission facilities to the state distribution companies and any other transmission system users. BGCL also fulfils the responsibility of planning, developing and coordinating with state transmission utility (STU) of the State of Bihar.

1.2 BGCL has prepared a strategic & operational business plan taking cognisance of existing internal factors and external business environment affecting the business.

1.3 The Business of Bihar Grid Company Ltd shall, at all times, be conducted on commercial line and it shall be done independently and distinct from the share holders.

1.4 The Bihar Grid Company Ltd (BGCL) shall have an authorised equity share capital and unless otherwise mutually agreed, there shall be only one class of share. The paid up capital of BGCL shall be as follows;

i) 50% of the issued and paid up equity share capital shall be held by POWERGRID and the balance 50% shall be held by BSP(H)CL. ii) BGCL shall be managed by its Board of Directors, and shall follow the rates and guidelines of CPSU. It shall be responsible for formulating the policy of the company in all matters as per CPSU guidelines.

1.5 The BERC in exercise of power vested in it under section 62(1) (b) read with section 62(3) and section 64(3) (a) of the Electricity Act 2003 and the BERC Terms and Conditions for Determination of Tariff Regulations, 2007 and other enabling provision on this behalf has asked to prepare and submit Business Plans for Transmission scheme Part-II of Phase-IV to avail the tariff in line with Multi Year Tariff as per BERC notification dated 24th April 2007 and its amendment order dated 10.03.2014.

1.6 Accordingly, the Bihar Grid Company Limited in compliance with the BERC Terms and Conditions of Tariff Regulations, 2007 has prepared Business plan for the three years control period (from FY 2017-18, 2018-19 & 2019-20).The objective of the Business Plan is to project the Capital Investments, Financing costs, various expenses and performance of the Transmission function of BIHAR GRID during the MYT control period.

Approach to Development of Business Plan

1.7 The Business Plan for the Bihar Grid is prepared based on the review of erstwhile Transmission profile, challenges faced in intra-state transmission and operational performance. While preparing the Business Plan, past trends of various parameters

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have been considered so as to project the same appropriately for the years covered under the control period.

1.8 Normally, the capital investment is based on projected demand growth in distribution sector commensurate with the economic growth and generation capacity addition necessitating increased evacuation requirement. Based on these projections, addition of transmission lines and substations or augmentation of existing transmission& transformation capacity are planned.

1.9 Accordingly, the Transmission Business Plan for the control period would include following:

 Capital Investment Plan: Capital investments in the transmission function are required for both, addition of new lines and substations necessary for allowing flow of increased power onwards to the distribution utilities as well as system strengthening and improvement schemes for increased reliability and grid stability. The planning of Capital Investment is to essentially commensurate with the anticipated load growth and quality improvement measures. The Capital Investment Plan broadly includes the proposed year wise Capital Investment towards new assets to be added.

 Capitalisation Schedule and Funding of Capex: The Business Plan also includes the schedule of capitalisation for the proposed investments for the new schemes. Considering the year wise amount envisaged, the funding of Capital Investment has been proposed.

 Major Transmission Assets: The major Transmission Lines and Substations proposed to be added, along with capacity additions have also been summarised in this Business Plan.

1.10 Each of the above mentioned components of the Business Plan has been detailed out in subsequent chapters. The Business Plan has been prepared according to the BERC Terms and Conditions of Tariff Regulations, 2007, the Electricity Act, 2003 and applicable rules/ regulations/ provision of the law, Standard Accounting Practices and generally accepted O&M norms etc.

2 PROFILE OF BIHAR GRID COMPANY LIMITED

2.1 The share holder agreement between Power Grid Corporation of India Ltd and Bihar State Power (Holding) Company Ltd was made on 29th Dec,2012 and accordingly implementation and transmission service agreement between Bihar State Power (Holding) Company Ltd and Bihar Grid Company Ltd for intra-state transmission projects in the state of Bihar was signed on 5th Jan’2013.

Considering the rapid load growth and the upcoming generation in the State of Bihar in the next 5-6 years, a comprehensive study was carried out by POWERGRID in 2011-12 in association with BSEB and CEA. As per the study, the following mentioned future transmission schemes including strengthening of existing system in Bihar were planned, which were to be covered under 12th plan. Some of the works were assigned to M/s Bihar Grid Company Limited (BGCL). The scheme was divided in three parts as indicated below:

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- Part-1: Bihar Sub-Transmission Phase-II extension scheme (Annexure-1) - Part-2(a): Strengthening scheme: Phase-1: Schemes identified for year 2012- 13, 2013-14 & 2014-15 (Annexure-2a)- under Phase-III - Part-2(b): Strengthening Scheme: Phase-2: Schemes identified for year 2015- 16 & additional strengthening for year 2016-17 (Annexure-2b) - under Phase- IV - Part-3: Generation Linked Scheme: Transmission System for evacuation of power from Lakhisarai, Pirpainti & Buxer generation projects (identified for year 2016-17) – under Phase-V (Annexure- 3)

Note 1: The broad indicative cost of the transmission system is about 6300 Cr. (Part- 1-Rs. 300 Cr., Part-2(a) : Rs.1400 Cr, Part-2(b): Rs.3000 Cr., Part-3-Rs.1600 Cr.) Note 2: Additional scope of work shall be assigned by BSP(H)CL/its Subsidiaries, from time to time, on mutually agreeable basis. Note 3: The list in annexures is an indicative list. BSP(H)CL/its Subsidiaries on its own or on direction of the State Government can change the scope of work/the schemes listed by addition or omission as per requirement.

Accordingly, the scheme under Part-1 was undertaken by BSPTCL as the works under this scheme was to be taken up on priority.

Further, the scheme under Part-2(a) was also undertaken by BSPTCL as the works under this scheme is primarily for removal of system constraints, existing as well as anticipated in the near future.

2.2 Subsequently, a substantial portion of the scope of works under Part 2(b) of the scheme viz. “Strengthening of Transmission System in Bihar – Phase-IV (Part 1 of 2) at a cost of Rs.1699.36 Crores(as per April 2013 price index) is presently undertaken by BGCL, MYT for which has already been approved by BERC. The detailed list of works under this scheme is enclosed herewith as Annexure-I.

2.3 Now, the revised DPR for the BGCL portion of work under Part 2(b) of the scheme viz. “Strengthening of Transmission System in Bihar – Phase-IV (Part 2 of 2, BGCL Scope) at a cost of Rs.1688.36 Crores (as per April 2016 price level) has been prepared. The same is proposed to be implemented by BGCL on Build, Own & Operate (BOO) basis. The agenda for Board resolution shall be put up shortly and after resolution intimation shall be furnished to BERC.

2.4 Main functions and duties of Bihar Grid Company Limited:

2.4.1 To undertake planning and coordination activities in regard to Intra-State Transmission, works connected with the inter-State Transmission System in the State of Bihar, to introduce open access in transmission on payment of transmission charges. To ensure development of an efficient, coordinated and economical system of Intra-State Transmission lines for smooth flow of electricity from a generating station to load centres and to provide non-discriminatory open

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access as per requirement. Other functions as may be assigned to the company by law or otherwise by Government or Government Authority concerning the operation of the Power System.

2.4.2 To plan, acquire, develop, establish, built, take over, erect, lay, operate, run, manage, renovate, modernize, electrical transmission lines and / or net works through various voltage lines and associated sub-stations, including cables, wires, meters, computers and materials connected with transmission, ancillary services, telecommunication and tele-metering equipment etc.

2.4.3 BGCL shall make available the entire transmission capacity of the Project to BSP(H)CL on a commercial basis subject to the conditions laid down in the ITSA.

2.4.4 BGCL will derive its revenue by recovery of transmission charges from transmission system users. The Company shall be primarily in the business of transmission of electricity and it shall be vested with the transmission assets, interest in property, rights and liabilities. The company shall act as Transmission Licensee under the Provisions of Section 14 of the Electricity Act, 2003

2.4.5 BGCL will also define its own `Safety policy ` keeping in view the motto of `ZERO ACCIDENT GOAL `.

2.4.6 BGCL will also adopt the Environmental Social Policy and Procedure(ESPP) and also the Corporate Social Responsibility (CSR) in line with POWERGRID’s established Policy and Procedure and will make a sincere contribution towards the under privileged community by supporting a wide range of educational initiatives so as to make a positive difference in their lives.

2.4.7 BGCL as a part of its energy conservation programme will contribute towards energy conservation by spreading awareness amongst the people and adopt energy efficient state of the art technology.

3 ENERGY SCENARIO

3.1 Primarily, the transmission of power in the State of Bihar takes place at 400kV, 220kV and 132kV voltage levels. The transmission network of the State Transmission Utility (STU) i.e. BSPTCL consists of 103 substations and approximately 1951.46 Circuit Kilometres (CKM) (220KV level) and 7375.32 Circuit Kilometres (CKM) (132KV level) long transmission lines with 5590 MVA (220/132KV) and 8570 MVA (132/33KV) MVA transformation capacity as on date.

3.2 The power supply position in the State of Bihar remained very poor and consequently the peak deficit in the State has comparatively remained worst than the national average for the country. The deficits in terms of energy availability and peak demand for Bihar in 2013-14 were 4.1% and 6.2% and the same at national level were 4.2% and 4.5% respectively as per Load Generation Balance Report (LGBR) 2014-15 of CEA. Further, as per the said report, the deficits in terms of energy availability and peak demand anticipated for State of Bihar in 2014-15 are 15.3% and 25.9% whereas the same at national level are anticipated at 5.1% and 2.0% (Copy of the relevant annexures of CEA report enclosed). The details are represented in the charts below:

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16000 25.0% 15000 21.3% 14000 20.2% 20.0% 13000 15.0% 12000 14.4% 13.0% 11000 10.0% 10000 9000 5.0% 4.1% 8000 7000 0.0% 2009-10 2010-11 2011-12 2012-13 2013-14

Requirement (MU) Availability (MU) Deficit

3000 35.0% 32.9% 31.0% 2500 30.0% 25.0% 2000 22.5% 20.0% 1500 14.4% 15.0% 1000 10.0%

500 6.2% 5.0%

0 0.0% 2009-10 2010-11 2011-12 2012-13 2013-14

Peak Demand (MW) Peak Met (MW) Peak Deficit 3.3

3.4 Bihar has witnessed sharp increase in the economic growth during 11th&12th plan period mainly on account of the developments in the secondary sector which has led to a sharp rise in the per-capita income. However, the same is yet to reflect in the energy/ power sector growth, as evident from the per capita energy consumption of state, which is very low at 258kwh (source:BSP(H)CL) in comparison to the national average of 1010kwh (for FY 2014-15). Therefore, to cater to the need and growth, schemes like R-APDRP and RGGVY are being implemented in the State which will definitely improve the distribution sector.

3.5 The Electricity Distribution Companies in the State of Bihar relies for its energy requirement mainly on Central Sector Generating Stations as state owned capacity is not at-all adequate to cater to the need. Further, the T&D loss of the Distribution Companies are around 41%. Therefore, the State EHV transmission system needs to be strengthened suitably for proper interface with the Inter State Network for meeting the requirement by wheeling the power through the length and breadth of the state.

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3.6 The State of Bihar has experienced tremendous economic growth since the last few years. The developmental activities in the various sectors in the state have resulted in impressive growth rate of the state. During the 11thplan period, against the all India growth rate of 7.94%, Bihar achieved a growth rate of 12.08% .The per capita income of Bihar grew at 10.47% during the 11th plan, which is 4% higher than the same for the country. The primary sector of the state is experiencing a decline in the share of state’s domestic product – from 37.49% in 2000-01 to 18.12% in 2011-12 (Adv.). This is due to the increased pace of developments in the secondary sector.

4 TWELFTH PLAN OBJECTIVES FOR GROWTH TRENDS

4.1 The State has set following objectives to meet 12-13% growth rate during the Twelfth plan period:

 To attempt for a high growth rate (7%) in Agriculture and allied sectors by adopting the strategy of the Rainbow Revolution;  To develop infrastructure at a much higher pace;  To focus on industrialization;  To emphasize the development of the social sector further, particularly education and health;  To make a sustained effort for reduction in poverty;  To make a substantial increase in the income level of the lowest strata of society; and  To make an attempt at equitable regional development.

4.2 Due to rapid growth in Bihar, the current level of demand is anticipated to increase drastically from current level of 3717 MW to 5660MW by 2017-18.To facilitate the growth of the State and in order to meet the increasing demand for power, the state Government of Bihar has planned various power generation capacity addition programmes and allocation of fresh/ increased power from upcoming Central and Private sector projects. With the progress of materialisation of these capacities, the Transmission system needs to be adequately enhanced and strengthened so that power from various new/ additional generating sources is evacuated efficiently for further transmission and supply to the consumers at distribution ends in the State.

5 TRANSMISSION BUSINESS-ISSUES AND CHALLENGES 5.1 Transmission network serves as an important link between the Generation and Distribution segments of electricity supply business. The issues and challenges pertaining to the Transmission business are mostly in terms of keeping up with the growth needs of the other two segments. The growth in the demand along with increasing electrification at distribution end drive the need to meet the peak demand and energy requirement by arranging supply from internal and external generation sources. For which the transmission system has to be strengthened adequately and timely for maintaining grid stability and supply quality.

5.2 Considering the very limited power generating capacity, the State Government of Bihar has taken several initiatives in order to fulfil the supply needs of the state by

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setting up a few Independent Power Projects (IPPs), State Sector Projects and arranging shares from Central Projects. Thus, by FY 2016-17 the power available from these sources is going to touch around 5018MW.

5.3 As projected by CEA in its 18th Electric Power Survey (EPS), the peak demand(MW) and Energy requirement (MU) for the coming year are as follows:-

2015-16 2016-17 2017-18 Peak Demand (MW) : 4352 5018 5660 Energy Requirement (MU) : 26330 29539 33050

5.4 The Commercial losses on account of theft and pilferage are major components of the losses. With the increasing electrification initiatives at distribution end, certain portion of energy is pilfered through unauthorised means. Though, it’s a challenge for Distribution Function to reduce the losses, the Transmission system has to accommodate the loss component as well along with legitimate retail sales so far as the transmission infrastructure requirement is concerned.

OTHER KEY CHALLENGES

5.5 The growth of Transmission Lines and Transformation capacity/Substationsadditions over the past few years is represented in the following chart.

Line Length (CKM) Transformation Capacity 6000 (MVA) 4000 6000 2000 4000 0 2000 0 2009-10 2010-11 2011-12 2012-13 2013-14

400KV 220KV 132KV 220KV 132KV

5.6 Observing the past trend shows that the circuit km of 400kV Transmission line remained at 75 Ckm level, whereas it has grown at minimal 0.4% CAGR for 220kV and 4.4% CAGR for 132kV level during five years.

5.7 Similarly, the number of 220kV substations grew at 3% and 132kV substations increased at 5.65% CAGR during this period. The 220kV transformation capacity increased at 8.8% CAGR and that for 132kV increased at 13% CAGR.

5.8 Taking into account the tremendous growth that is expected to take place during the ensuing MYT control period in terms of power availability and retail sales, the Transmission segment has to cope up by suitably enhancing the growth rate of infrastructure additions and undertaking appropriate R&M schemes. Thus, keeping

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pace with the ever increasing power requirements would be a major business challenge for the Transmission Company during the ensuing MYT control period.

5.9 The Open Access regulations were issued by BERC in 2006 according to which the eligible person (Licensee, Generating Company, Consumer etc.) is allowed for non- discriminatory open access to the intra-state transmission system subject to availability of adequate transmission capacity. With the growth of the power market, the open access consumers may put a challenge before the Transmission Company in terms of providing access to transmission facilities. Transmission Company has to take care of additional capacity that might be required to accommodate such needs as such open access consumers may not necessarily be existing customers.

5.10 At execution level, the key challenge for Transmission Company shall be to manage the multiple clearances related to projects, lands and right of way issues efficiently to ensure that all the schemes are approved and implemented without any time and cost overrun.

5.11 Replacement of ageing assets is necessary to maintain reliability of supply. Further, to maintain safety and reliability in operation of transmission system, it’s important to improve the condition monitoring and augment or refurbish the network and control/ switchgear equipment.

6 BUSINESS PLAN FOR BIHAR GRID COMPANY LIMITED

6.1 Accordingly, the BIHAR GRID in compliance with the BERC Terms and Conditions of Tariff Regulations, 2007has prepared Business plan for the three year control period (from FY 2017-18 to 2019-20).The objective of the Business Plan is to project the Capital Investments, Financing costs, various expenses and performance of the Transmission function of BIHARGRID during the MYT control period.

This Business Plan is hence submitted for approval by the Hon’ble Commission.

6.2 Key Objectives

Broadly, the following key objectives were kept in mind while preparing the Business Plan.

 Strategic Planning: The primary objective of the Business Plan is to analyse and anticipate the future requirements in advance and strategically plan for the capital investments, related means of financing and various associated costs and document them which would serve as an effective tool for monitoring and execution of future works. With the level of economic growth the State of Bihar is experiencing, it becomes utmost important to project the growth in transmission network infrastructure commensurate with the energy demand required for fuelling the economic growth targets of the State.

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 Regulatory Compliance: As highlighted in aforesaid Para 6.1, the direction issued by the Hon`ble Commission entails submission of function wise separate Business Plan. Thus, it is an essential part of the regulatory compliance for the Company.

 Better Operational Efficiency: The Business Plan is prepared so as to be useful for the Managing Board, associated stakeholders, the Hon’ble Commission and various government bodies. The future projections in the Plan would help the BGCL in decision making and taking proactive actions, and thus improving the overall operational efficiency of the transmission network infrastructure.

7 CONSTRUCTION ACTIVITIES OF BIHAR GRID COMPANY LIMITED

7.1 PROPOSED LINES/SUBSTATIONS UNDER PHASE IV PART-2 (BGCL Scope)

1 2X500 MVA + 2X160MVA + 2X80MVA ,400/220132/33 KV NEW GIS STATION AT 2 LILO of 400 KV D/C (Quad),ckt 3&4, of - Balia line, at Naubatpur (New) 3 LILO of 220 KVD/C Ara (PG) - (BSPTCL) line at Naubatpur (New) 4 220 KV D/C Naubatpur(New)-(BSPTCL) Transmission line. 5 132KV D/C Naubatpur (New) – (BSPTCL) 6 132KV D/C Naubatpur (New) – Palliganj (BSPTCL) 7 2X500MVA + 3X160 MVA + 4X80MVA, 400/220/132/33 KV GIS STATION AT JAKKANPUR 8 LILO of 400 kV D/C Nabinagar-II - Patna(PG) Transmission Line at Jakkanpur (New) 9 LILO of 220 KV D/C Sipara(BSPTCL)-Bihta (BSPTCL) line at Jakkanpur (new). 10 LILO of 220 kV S/C Khagaul(BSPTCL) - Sipara (BSPTCL) at Jakkanpur (New) 11 LILO of 132 KV D/C Jakkanpur-Sipara line at Jakkanpur new (being re- conductored with HTLS by BSPTCL) 12 LILO of 132 KV S/C Jakkanpur/Mithapur- line at Jakkanpur new (being re-conductored with HTLS by BSPTCL) 13 2X100MVA, 220/33 KV NEW GIS AT BHUSAULA 14 220 KV D/C Naubatpur (New)-Bhusaula (New) Transmission line 15 2X160MVA + 2X80MVA ,220/132/33 KV GIS at 16 LILO of 220 KV D/C Ara (PG) - Pusauli(PG) line at Dumraon (New) 17 132 kV D/C Dumraon (New) - Dumraon (BSPTCL) Transmission line. (ACSR Zebra Conductor) 18 132 kV D/C Dumraon (new)- (BSPTCL) 19 132KV D/C Dumraon(New)- Jagdishpur (BSPTCL) 20 LILO of one Ckt of 132KV D/C Purnea–Naugachia/ Khagaria line at Katihar

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(BSPTCL)

7.2 PROJECTS COMMISSIONING TARGET:

1 2X500 MVA + 2X160MVA + 2X80MVA ,400/220/132/33 KV NEW GIS 30.11.2019 STATION AT NAUBATPUR 2 LILO of 400 KV D/C (Quad),ckt 3&4, of Patna - Balia line, at Naubatpur 30.11.2019 (New) 3 LILO of 220 KVD/C Ara (PG) - Khagaul(BSPTCL) line at Naubatpur (New) 30.11.2019 4 220 KV D/C Naubatpur(New)-Bihta(BSPTCL) Transmission line. 30.11.2019 5 132KV D/C Naubatpur (New) – Masaurhi (BSPTCL) 30.11.2019 6 132KV D/C Naubatpur (New) – Palliganj (BSPTCL) 30.11.2019 7 2X500MVA + 3X160 MVA + 4X80MVA, 400/220/132/33 KV GIS STATION 30.11.2019 AT JAKKANPUR 8 LILO of 400 kV D/C Nabinagar-II - Patna(PG) Transmission Line at 30.11.2019 Jakkanpur (New) 9 LILO of 220 KV D/C Sipara(BSPTCL)-Bihta (BSPTCL) line at Jakkanpur 30.11.2019 (new). 10 LILO of 220 kV S/C Khagaul(BSPTCL) - Sipara (BSPTCL) at Jakkanpur 30.11.2019 (New) 11 LILO of 132 KV D/C Jakkanpur-Sipara line at Jakkanpur new (being re- 30.11.2019 conductored with HTLS by BSPTCL) 12 LILO of 132 KV S/C Jakkanpur/Mithapur-Fatuha line at Jakkanpur new 30.11.2019 (being re-conductored with HTLS by BSPTCL) 13 2X100MVA, 220/33 KV NEW GIS AT BHUSAULA 30.11.2019 14 220 KV D/C Naubatpur (New)-Bhusaula (New) Transmission line 30.11.2019 15 2X160MVA + 2X80MVA ,220/132/33 KV GIS at DUMRAON 31.03.2019 16 LILO of 220 KV D/C Ara (PG) - Pusauli(PG) line at Dumraon (New) 31.03.2019 17 132 kV D/C Dumraon (New) - Dumraon (BSPTCL) Transmission line. 31.03.2019 (ACSR Zebra Conductor) 18 132 kV D/C Dumraon (new)-Buxar (BSPTCL) 31.03.2019 19 132KV D/C Dumraon(New)- Jagdishpur (BSPTCL) 31.03.2019 20 LILO of one Ckt of 132 KV D/C Purnea – Naugachia/ Khagaria line at 31.03.2019 Katihar (BSPTCL)

8 STATUTORY & REGULATION FRAMEWORK

8.1 Norms for Working Capital Requirement

S. No. Particulars Norm 1 Operation and maintenance O&M Expenses for one month expenses 2 Maintenance spares 1% of Project cost.

3 Receivables Equivalent to two months of transmission charges.

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4 Rate of interest on working Short –term Prime Lending Rate of State capital Bank of India on 1st April of the year.

8.2 The rate of interest applied on the proposed working capital is as per the SBI PLR as on 1 April 2016, which is 14.00%.

8.3 The Company prays to Hon’ble commission for approval of the proposed charges towards interest on working capital.

Employee Expenses 8.4 The employee expenses primarily include costs towards salaries, dearness allowances, perks, performance related pay, bonus, staff welfare and medical benefits, leave travel and earned leave encashment, and the terminal benefits in the form of pension, gratuity etc.

8.5 The Company has considered function wise actual employee cost provided in the Statement of the Annual Account for FY 2015-16 for projecting the same for MYT control period. While determining the employee cost, the Company has reduced the same by employee cost capitalised to arrive at the net employee cost for the year. For this purpose, the actual employee cost capitalised for the FY 2015-16 has been apportioned across respective functions in the ratio of their employee costs.

8.6 The Consumer price index has increased from 125.4 in FY 2014-15 to 131.1 in FY 2015-16 which is an increase of 5.7%. Considering the same, the estimates that the Employees expenses will increase by 5.7% in FY 2016-17 and during the MYT period from FY 2017-18 to FY 2020-21.

8.7 The Company has applied escalation on employee cost capitalisation values for FY 2017-18, 2018-19, 2019-20 & 2020-21.

8.8 Based on the above, the net employee cost for tariff determination is projected in following manner.

8.9 The Company would like to submit to the Hon`ble Commission that, though the O&M costs are “controllable” as per the BERC (Terms and Conditions of Tariff) regulations, 2007, it shall consider the employee expenses as “uncontrollable” owing to the following facts. (a) Increase in the salaries of employees including dearness allowance, (b) Increase in salaries due to recruitment of new employees and contractual appointments; and (c) Provision of retirement dues on the basis of actuarial valuation from current financial year.

8.10 The Company prays to the Hon`ble commission to adopt a practicable approach while determining the Transmission charges with due consideration of the above factors appropriately since any disallowance in employee costs leads to cash losses for the Company.

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Administration & General Expenses (A&G) 8.11 Administration and General expenses mainly comprise costs towards rent charges, telephone and other communication expenses, professional charges, conveyance and travelling allowances and other debits.

Repair & Maintenance (R&M) Expenses 8.12 The Repair & Maintenance Expenses primarily include the costs towards regular upkeep of the system and network as well as the office establishments, office equipment, building and civil works, furniture and fixtures etc. The R&M activities form an integral part of the Company’s efforts to maintain reliable and quality power supply as also in the reduction of losses in the system.

9 RETURN ON EQUITY(ROE)

9.1 The company has got the ROE at 16% as base rate of return as per the BERC Tariff Regulations, 2007, amended in 2014.

10 TRANSMISSION CHARGES FOR FY 2013-14 AND MYT CONTROL PERIOD

10.1 The Annual Fixed Charges or Transmission charges are arrived at by aggregating all the expenses detailed in pervious sections viz., Depreciation, Interest on Loan, Interest on Working Capital, O&M expenses and ROE. The total expenses less Non- Tariff Income are the net Annual Fixed Charges or Transmission charges.

10.2 Accordingly, following is the summary of projections for approval by Hon`ble Commission for BGCL.

10.3 The Company would like to submit that the Transmission charges for the MYT control period are estimated based on the applicable rules and regulations of CPSU and the methods adopted by Hon’ble Commission in its tariff order for FY 2014-15. The various costs are estimated in accordance with the regulatory norms, assumptions and detailed justifications.

10.4 The company also proposed that Letter of Credit (LC) may be opened by the beneficiary @ 105 % of the average monthly billing calculated every six months as payment security mechanism. A rebate of 2% will be allowed if the payment is made by the beneficiary on presentation of transmission charges bill and a rebate of 1 % shall be allowed if the payment is made within one month of presentation of bill.

11 PHASED FUND REQUIRMENT FOR CAPEX FROM EQUITY AND LOAN

The anticipated year wise fund requirement (equity and loan) for the projects including interest during construction is given below.

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(Rs in Crores) Equity (20%) Loan (80%) Total Year 2017-18 48.07 192.27 240.34

2018-19 100.70 402.78 503.48

2019-20 158.31 633.26 791.57

2020-21 30.59 122.38 152.97

Total 337.67 1350.69 1688.36

The above phased fund requirement is provisional and the final phased fund requirement shall be submitted to the commission after investment approval by the BGCL Board.

12 MODE OF FINANCING

Transmission lines and substations covered under this scheme are envisaged to be implemented by BGCL through Domestic funding. The equity component (20% ) is proposed to be met by promoters i.e. POWERGRID & BSPHCL and the loan component (80%) proposed through Domestic Lender.

 THE ESTIMATED COST OF THE PROJECTS IS BASED ON APRIL 2016 PRICE LEVEL.

 THE INCIDENTAL EXPENDITURE DURING CONSTRUCTION ( IEDC ) : 12%

 CONTIGENCIES: 3%

13 INTEREST DURING CONSTRUCTION ( IDC ) @ 12 %

13.1 The interest during construction is the interest charged on the actual loan drawl during the year. The interest rate considered for the IDC is the applicable interest rate for the proposed loans. The following table shows the computation of IDC for FY 2017-18 as well as the MYT Control period.

Interest During Construction (Rs. Crore) Year 2017-18 2018-19 2019-20 2020-21 Total Total Fund Required excluding IDC 229.46 458.91 688.36 152.97 1529.7 Loan Amount (80%) 192.27 402.78 633.26 122.38 1350.69 Interest During Construction 10.88 44.57 103.21 0 158.66

14 PROPOSED CAPEX( Capital Expenditure )PLAN

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14.1 Construction Activities Of 400kv Gas Insulated Switchgear (GIS) Substations By BIHARGRID

( All figures in Crores) New Projects 2017-18 2018-19 2019-20 2020-21 Total i) Naubatpur 440KV GIS 42.74 91.59 143.50 27.48 305.31 ii) Jakkanpur 400KV GIS 48.87 104.73 164.08 31.42 349.11 iii) Bhusaula 220KV GIS 11.98 25.66 40.21 7.70 85.55 iv) Dumraon 220KV GIS 20.71 44.38 69.52 13.31 147.92 TOTAL 124.30 266.37 417.31 79.91 887.89

14.2 Extension Of BGCL GIS substation / BSPTCL (OLD) Substations By BIHARGRID ( All figures in Crores)

Extension Projects 2017-18 2018-19 2019-20 2020-21 Total i) 220kV Bihta GIS (BSPTCL) 3.89 8.33 13.05 2.50 27.77 ii) 132kV Dumraon (BSPTCL) 0.60 1.29 2.02 0.39 4.30 iii) 132kV Buxar (BSPTCL) 0.55 1.19 1.86 0.36 3.96 iv) 132kV Katihar (BSPTCL) 0.64 1.37 2.14 0.41 4.56 v) 132kV Jagdishpur GIS (BSPTCL) 4.01 8.60 13.48 2.58 28.67 vi) 132kV Palliganj (BSPTCL) 1.55 3.33 5.22 1.00 11.10 vii) 132kV Masuahri (BSPTCL) 1.56 3.33 5.22 1.00 11.11 TOTAL 12.80 27.44 42.99 8.23 91.46

14.3 Construction Activities Of Transmission Lines By BIHARGRID

Yearwise Fund Requirment (Rs.in Crores)

NAME OF LINES 2017-18 2018-19 2019-20 2020-21 TOTAL 1 LILO of 400kV D/C Nabinagar-II – 6.58 14.10 22.08 4.23 46.99 Patna(PG) transmission line at Jakkanpur (New) (14 Kms) 2 LILO of 220kV D/C Sipara 1.85 3.97 6.21 1.19 13.22 (BSPTCL) – Bihta (BSPTCL) line at Jakkanpur (New) (14 Kms) 3 LILO of 220kV S/C 1.50 3.21 5.03 0.96 10.70 Khagaul(BSPTCL)-Sipara (BSPTCL) at Jakkanpur (New) (10 Kms) 4 LILO of 132kV D/C Jakkanpur- 4.34 9.31 14.58 2.79 31.02 Sipara line at Jakkanpur new (being re-conductored with HTLS by BSPTCL) (20 Kms) 5 LILO of 132kV S/C 3.07 6.57 10.29 1.97 21.90 Jakkanpur/Mithapur-Fatuha line at Jakkanpur New( being re- conductored with HTLS by BSPTCL)(12 Kms) 6 LILO of 400kV D/C (Quad) ckt. 5.21 11.15 17.48 3.35 37.18 3&4 of Patna-Balia line at Naubatpur (New)(12Kms)

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7 LILO of 220kV D/C Ara(PG) – 2.63 5.64 8.84 1.69 18.81 Khagaul(BSPTCL) line at Naubatpur (New) (22 Kms) 8 220kV D/C Naubatpur(New) – 3.34 7.15 11.20 2.14 23.83 Bihta(BSPTCL) transmission line (25 Kms) 9 220kV D/C Naubatpur (New) – 2.45 5.24 8.21 1.57 17.47 Bhusaula (New) Transmission line (18 Kms) 10 LILO of 220kV D/C Ara (PG) – 5.49 11.76 18.42 3.53 39.20 Pusauli (PG) line at Dumraon (New) (50 Kms) 11 132kV D/C Dumraon (New) – 0.86 1.83 2.87 0.55 6.11 Dumraon (BSPTCL) transmission line (8 Kms) 12 132kV D/C Dumraon (new) – 1.76 3.77 5.90 1.13 12.56 Buxar (BSPTCL) (20 Kms) 13 LILO of one Ckt of 132kV D/C 2.52 5.40 8.46 1.62 18.00 Purnea-Naugachia/Khagaria line at Katihar (BSPTCL) (30 Kms) 14 132kV D/C Dumaron(New)- 2.82 6.04 9.46 1.81 20.12 Jagdishpur(BSPTCL)(32 Kms) 15 132kV D/C Naubatpur – Masauhri 1.50 3.22 5.04 0.97 10.73 transmission line (11.5 Kms) 16 132kV D/C Naubatpur – Palliganj 3.22 6.89 10.80 2.07 22.97 transmission line (25.5 Kms) Total 75.21 161.16 252.48 48.35 350.82 GRAND TOTAL (SS+Bay+line) 212.32 454.96 712.78 136.49 1330.17

15 ABSTRACT COST ESTIMATE

Description Amount (Rs. in Crores) Preliminary survey etc 1.51 Land Acquisition etc. 52.71 Cost of compensation for Transmission lines 127.32 Civil works 24.06 Equipment cost a) Transmission lines 271.35 b) Sub-Stations 901.88 Total: 1330.17 IEDC ( 12%) 159.62 CONTIGENCIES (3%) 39.91 Total Projects Cost: 1529.70

INTEREST DURING CONSTRUCTION 158.66 Grand Total: 1688.36

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16 CAPITALISATION SCHEDULE

16.1 While preparing the Business Plan, BGCL has considered Capitalisation Schedule in following manner for new schemes and for Extension of BSPTCL (OLD) Substations.

(Rs. in crores)

Capitalisation Schedule 2017-18 2018-19 2019-20 For new schemes and Extension of Nil Nil 1688.36 BSPTCL (OLD) Substations

THE ENTIRE WORK TO BE COMMISSIONED WITHIN 36MONTHS FROM DATE OF INVESTMENT APPROVAL BY BGCL BOARD.

17 MANPOWER FOR O&M

a)For one No. 400KV Sub-Station:1 no.In-Charge,2 no.Executive,1no.Supervisor ,1no.Workmenand 8no.Shift persons b)For one no. 220kv Sub-Station:- 1 no. In- Charge,1no.Executive,1no. Supervisor,1no.Workmen and 4no. Shift persons c)For Every 300km T/L:1no.Executive,1no.Supervisor and1no.Workmen.

18 DIVIDEND PAYMENT

Dividend payment out of profit of the Company to be decided later on.

19 REVENUE PROJECTION

Transmission Charges: 19.1 The Annual Fixed Charges or Transmission charges are arrived at by aggregating all the expenses detailed in pervious sections viz., Depreciation, Interest on Loan, Interest on Working Capital, O&M expenses and Return on equity. The total expenses less Non-Tariff Income are the net Annual Fixed Charges or Transmission charges.

19.2 Accordingly, following is the summary of projections as per Tariff petition and estimates of Aggregate Revenue Requirement for Transmission Company are tabulated below. Revenue Projection (Rs. Crores)

Particulars Amount Rate (%) FY2019-20 Depreciation 1688.36 5.28 89.15 Interest & Finance Charges 1350.69 12 162.08 Interest on Working Capital 78.13 14 10.94 O&M Cost 1688.36 2 33.77 Return on Equity 337.67 16 54.03 Total per Year Revenue(in Cr) 349.96

Revenue from Tariff to be 20.72 percent of the total cost of the Project.

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20 REVENUE COLLECTIONS FROM TRANSMISSION COMPANY

Revenue to be collected from Bihar State Power (Holding) Company Limited/its Subsidiaries through a confirmed irrevocable, unconditional and revolving Letter of Credit.

21 BENEFICIARY

The beneficiary of the project is Bihar State Power (Holding) Company Limited/its Subsidiaries.

22 CONCLUSION

THE BUSINESS PLAN IS BEING SUBMITTED TO HON`BLE COMMISSION. HOWEVER, IF ANY OTHER INFORMATION OR DOCUMENTS ARE REQUIRED, IT WILL BE SUBMITTED ACCORDINGLY.

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