KED Khurdha

8/9/2019 KED Khurdha

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DISTRIBUTION FRANCHISE AGREEMENT FOR KHURDA ELECTRICAL DIVISION, KHURDA

This Agreement is made on this 5 th day of January 2013 at Bhubaneswar between Central Electricity Supply

Utility of Odisha, a Utility created pursuant to the Central Electricity Supply Utility of Odisha (Operation &

Management) Scheme 2006 framed by OERC under Section 22 of the Electricity Act 2003 having itsprincipal office at 2 nd Floor, IDCO Towers, Janpath, Bhubaneswar - 751022, hereinafter referred to as

“CESU” (which expression unless repugnant to the context or meaning thereof shall include its successors

and assigns) of the ONE PART

And

Feedback Energy Distribution Company Pvt. Ltd. “FEDCO”, a wholly owned subsidiary of Feedback

Infrastructure Services Pvt. Ltd. a company registered under the Companies Act, 1956 having its registered

office at 311,3 rd Floor, Vardhaman Plaza, Pocket 7, Plot No. 6, Sector 12, Dwaraka, New Delhi-110075 ,

hereinafter referred to as “the Distribution Franchisee” (which expression unless repugnant to the context

or meaning thereof shall include its successors and permitted assigns) of the OTHER PART.

Each referred to as a Party and together as Parties.

WHEREAS:

A) CESU is a Deemed Distribution Licensee under the provisions of the Electricity Act, 2003 (the “Act”)having license to supply electricity in certain areas of the State of Odisha.

B) Under the provisions of the Act, CESU is entitled to distribute electricity to a specified area withinits area of supply through another person referred to as Franchisee.

C) Commission desired that since huge losses to the extent of 70% prevalent in the LT Side of majoritydivisions under DISCOMs, a way should be found out to arrest the huge losses by engaging CAPEX

based franchisees urgently.


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D) M/s CRISIL Risk & Infrastructure Solutions Ltd.(CRIS) has been engaged by CESU as TransactionAdvisor (Consultant) for identification and selection of project developers (Franchisees) for the

implementation of Smart Grid Solution for Energy Management & Energy Efficiency (SGS-EMEE) on

additional revenue sharing BOT model for the reduction of AT&C loss to about 15% in the

franchisee area.

E) CESU had floated an Expression of Interest (EOI) for twelve divisions to receive the proposal fromthe prospective project developers (franchisees) for implementation of (SGS-EMEE) deploying the

BOT model on incremental revenue sharing basis. .

F) Five firms participated and submitted both technical and financial proposal as per RFP (Request forProposal) document for the selection as Input Based Franchisee.

G) On the evaluation of the tender documents (RFP documents), M/s Feedback Infrastructure ServicesPvt. Ltd. has became successful and accordingly duly selected as Input Based Franchisee with

Incremental Revenue Share (IBF—IRS) model for Khurda Electrical Division (KED Khurda), a part of

Electrical Circle-II, Bhubaneswar as more particularly described hereinafter and referred to as the

Franchise Area ,.

H) Accordingly, CESU issued a Letter of Intent No. 33422 dated 19.10.2012 to the M/s FeedbackInfrastructure Services Pvt. Ltd. and the same had been accepted by M/s Feedback Infrastructure

Services Pvt. Ltd.

I) M/s Feedback Infrastructure Services Pvt. Ltd. has incorporated a Special Purpose vehicle by thename M/s Feedback Energy Distribution Company Pvt. Ltd. “FEDCO” and has requested CESU to

enter into this Distribution Franchise Agreement (DFA), vide its letter no. nil dt.30.10.2012.

J) M/s Feedback Energy Distribution Company Pvt. Ltd. “FEDCO” will sign the Distribution FranchiseeAgreement (DFA) with CESU and take up the responsibility of executing & delivering the obligations

as Input Based Franchisee with Incremental Revenue Share (IBF—IRS) model committed by M/s

Feedback Infrastructure Services Pvt. Ltd. under the Smart Grid Solution for Energy management &

Energy Efficiency (SGS-EMEE) project.

K) The parties have agreed to record the terms and conditions for distribution of the electricity withinthe Franchise Area by executing this indivisible Distribution Franchise Agreement, as detailed in

subsequent paras.

L) The parties are fully aware that this Agreement is for distribution of electricity in franchise area

through the Distribution Franchisee as contemplated under the Electricity Act, 2003. (Section 14proviso 7).

NOW, THEREFORE, IN VIEW OF THE FOREGOING PREMISES AND IN CONSIDERATION OF THE MUTUAL

COVENANTS, PREMISES AND AGREEMENTS CONTAINED HEREIN, THE PARTIES AGREE AS FOLLOWS:


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1. DEFINITION OF TERMSFor the purpose of this Distribution Franchise Agreement (including all its annexures), the following

terms, phrases and their derivations shall have the meanings given below unless the context clearly

mandates a different interpretation. Where the context so indicates, the present tense shall imply

the future tense, words in plural include the singular, and words in the singular include the plural.

The word ‘shall’ is always mandatory and not merely directory. The definitions are applicableregardless of whether the term is written in capital letters.

1.1 AB Cables

Shall mean Aerial Bunched Cables

1.2 Act

Means the Electricity Act, 2003, as amended from time to time

1.3 Agreement Representative

Shall mean the persons, nominated by the Parties as set forth in Article-19.41.4 AMR

Means Automatic Meter Reading System

1.5 AT&C loss

Expressed in percentage and shall be computed as follows:

AT & C Loss = (1- (Billing Efficiency*Collection Efficiency))*100

1.6 Base Year

Shall mean the financial year 2011-12 (refers to April 1 to March 31)

1.7 Billing Efficiency

Shall mean the ratio of energy actually billed to consumers in units and total energy input in thatarea, in percentage terms for a particular period and shall be calculated as below:

Billing Efficiency = (Billed Energy (Sale) to Consumers / Total Input Energy)*100

1.8 Collection Efficiency

Shall mean the ratio of revenue actually realized from consumers and energy billed to Consumers,

in percentage terms for a particular period and shall be calculated as below:Collection Efficiency= (Revenue realized from Consumers/ Energy Billed to Consumers) * 100

1.9 Consumer

Shall mean as defined under the Act and the Supply Code. For the purpose of this agreement

“Consumer” shall include all HT & LT Consumers and exclude “EHT Consumer”.

1.10 Contract Year

Shall mean each successive period of one year beginning from the Effective Date of this Agreement.

1.11

ComplaintShall mean any written or electronic correspondence by a Consumer expressing dissatisfaction with

products or services of the Distribution Franchisee.


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1.12 Distribution System

Means the system of wires and associated facilities between the delivery points on the

transmission lines or the generating station connection and the point of connection to the

installation of the Consumers in the Licensee Area. It means the supply and conveyance of

electricity by means of distribution system. Distribution System shall comprise CESU Distribution

System and Franchisee Distribution System.

1.13 CESU Distribution System

Shall mean the HT and EHT network component of Distribution System

1.14 Franchisee Distribution System

Shall mean (i) LT network component commencing from the secondary side of the distribution

transformers and (ii) service line connections of HT Consumers forming part of the Distribution

System.

1.15 Distribution Assets

Shall mean the distribution assets employed by the Distribution Licensee/ Distribution Franchisee

in the Franchise Area for distribution of electricity.

1.16 CESU Distribution Assets

Shall mean the assets created and employed by CESU in the Franchise Area for distribution of

electricity.

1.17 Franchisee Distribution Assets

Shall mean the distribution assets created and employed by Distribution Franchisee in the

Franchise Area for distribution of electricity.

1.18 DF

Shall mean Distribution Franchisee

1.19 Distribution Losses

Distribution Loss = (1- Billing Efficiency)*100

1.20 Effective Date

Shall mean the date of handing over of the business operations of Franchise Area by CESU to the

Distribution Franchisee pursuant to this Agreement after the conditions precedents are satisfied.Such date shall be indicated by the Distribution Franchisee and accepted by CESU which shall not

be later than 60 days from the date of signing of this agreement unless mutually agreed otherwise.

Such date shall be the 1 st day of the English calendar month, unless mutually agreed otherwise.

1.21 Engineer-in-Charge

Each of the Parties shall designate an Engineer-in-charge who is duly authorized to act on behalf of

the respective Parties, to liaise for purposes of and carry out Agreement Management pertaining to

the management of all matters related to the compliance with the requirements of this Agreement.

The Engineer-in-charge shall be of the rank of Superintending Engineer or equivalent and abovefrom CESU and a rank of General Manager and above from Distribution Franchisee.


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1.22 Expert(s)

Shall mean the person(s) identified as the members of the working team at the time of signing the

agreement or any other person(s) of similar experience and expertise.

1.23 Expiry Date

Shall mean sixty months from the Effective Date.1.24 Expiry Payment

Shall mean the payment to be made on expiry of the Agreement by either Party to the other Party

as per Article - 16.8.

1.25 Extra High Voltage or EHV

Shall mean any voltage above 33,000 Volts subject to permissible variations

1.26 EHT Consumer

Shall mean any Consumer catered to at EHV.1.27 Franchise

Means the rights granted by CESU to the Distribution Franchisee or DF to act as a franchisee of

CESU to distribute electricity in the Franchise Area and all the rights, powers and authorities

available to CESU as a distribution licensee necessary to fulfill the obligations and responsibilities as

contemplated under this Agreement and which can be conferred upon the Distribution Franchisee

under the Act.

1.28 Franchise Area

Shall mean the area as mentioned in the Article - 4.3 in respect of which the Distribution Franchiseeshall act as a franchisee of CESU.

1.29 Force Majeure

Without limiting the general limitations of liability in any way arising under this Agreement neither

party is responsible for failure or delay in performance of services or obligations hereby undertaken

due to occurrence of any event of force Majeure including acts of God, acts of any Government (de

jure or de facto) or regulatory body or public enemy, war, riots, embargoes, industry-wide strikes,

or contingencies, whether of a similar or dissimilar nature to the foregoing, beyond the parties

control, which cannot be reasonably forecast or prevented, thereby, hindering the performance by

the parties of any of their obligations hereunder.

1.30 GoO

Shall mean the Government of Odisha and any Ministry, Department, or any other Authority of the

Government of Odisha.

1.31 GRIDCO

Shall mean GRIDCO Limited or its successors.

1.32 HT Consumer

Shall mean the Consumers being served through High Tension Supply lines as defined in Supply

Code.


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1.33 Input Energy

As recorded in Apex Meters installed in OPTCL Grid on the 33 KV side of Power transformers less

consumption of station transformers ± of imports / export from interdivision / inter-discoms and /

or any other sources like CGP/CPP/IPP or renewable sources connected at 11kV or 33 kV line

(please refer to Annexure 20.1)

1.34 Input Point

Shall mean the supply point at OPTCL apex meter installed in 33 KV side of 132/33 KV and 220/33

KV transformers and import points which feed energy to the Franchise Area at 11 KV /33 KV (please

refer to Annexure 20.1). Any change in export or import point shall be updated after joint

verification by the Distribution Franchisee and CESU.

1.35 Major Incident

Means an incident associated with the Distribution and retail supply of electricity in the Franchise

Area, which results in a significant interruption of service, substantial damage to equipment, or loss

of life or significant injury to human beings and shall include any other incident, which CESUexpressly declares to be a major incident. Significant interruption of service for this purpose shall

mean interruption impacting more than 10% Consumers continuously for a period of more than 24

hours and substantial damage to equipment shall mean damage to Distribution Assets exceeding

10% or more of average monthly revenue.

1.36 OERC

Shall mean the Odisha Electricity Regulatory Commission, or its successors.

1.37 OPTCL

OPTCL shall mean the Odisha Power Transmission Company Limited and its successors and assigns.

1.38 Law

Means, in relation to this agreement, all laws in force in India and would include any statute,

ordinance, regulation, notice, circular, code, rule or direction, or any interpretation of any of them

by a Governmental instrumentality and also includes all applicable Rules, Regulations, Orders,

Directions, Notifications by a Governmental instrumentality pursuant to or under any of them and

shall include all Rules, Regulations, Decisions, Directions and Orders of OERC.

1.39 Low Tension (LT) Consumer

Shall mean the Consumers being served through Low Tension Supply lines as defined in Supply

Code.

1.40 Person

Shall include any company or body corporate or association or body of individuals, whether

incorporated or not, or artificial juridical person.

1.41 Prudent Utility Practices

Shall mean the practices, methods and standards that are generally accepted nationally from time

to time by electric utilities for the purpose of ensuring the safe and efficient distribution ofelectricity, operation and maintenance of Distribution Assets, billing and collection of distributed

power etc.


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1.42 Public Right of Way

Shall mean the surface, the air space above the surface, and the area below the surface of any

public street, highway, lane, path, alley, sidewalk, bridge, tunnel, parkway, waterway, easement, or

similar property within the Franchise Area, which, consistent with the purposes for which it was

dedicated, may be used for the purpose of installing and maintaining the system. No reference

herein to a “Public Right-of-Way” shall be deemed to be a representation or guarantee by CESUthat its interest or other right to control the use of such property is sufficient to permit its use for

such purposes, and the Distribution Franchisee shall be deemed to gain only those rights to use as

are vested in CESU and as the CESU may have the right and power to give.

1.43 Revenue Per Unit (RPU)

Shall mean the total Energy Charges (EC) for a specified period divided by Input Energy (IE, as per

Article 1.33) during the same period. The same shall be computed as per Article 8.1.2.

1.44 SLDC

Shall mean the State Load Dispatch Centre of Odisha.

1.45 Smart Meter

Shall mean AMR / AMI enabled energy meters having facilities of remote reconnection /

disconnection, enhance / reduce the load and the remote meter reading

1.46 Special Arrear

As per the order of Hon’ble High Court dated 30 March 2012 arrears of single phase domestic

consumers for FY 2011-12 are being billed to such consumers in eight installments commencing

from August 2012 to March 2013. Special Arrear shall mean such arrears billed to these consumers

in installments as stated above.

1.47 Special Purpose Vehicle (“SPV”)

“SPV” shall mean the company incorporated or to be incorporated under the Companies Act,1956by the Selected Bidder solely for the purpose of carrying out the obligations under the Distribution

Franchisee Agreement and to undertake the Distribution of electricity as per terms of the

Distribution Franchisee Agreement.

1.48 Supply Code

Shall mean OERC Distribution (condition of Supply) Code 2004, as amended from time to time.1.49 Termination Payment

Shall mean the payment to be made on Termination of the Agreement by either Party to the other

Party as per Article - 16.9 and Article - 16.10.

2. CONDITIONS PRECEDENT & SUBSEQUENT TO THE AGREEMENT

2.1 Conditions Precedent To Be Satisfied By The DF & CESU

2.1.1

Submission of Performance GuaranteeThe Distribution Franchisee (DF) shall secure the guarantee to perform by providing Performance

Guarantee to the satisfaction of CESU from any nationalized bank or Scheduled Bank for an amount


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equivalent to INR 1 crore per division in the form of Bank Guarantee (BG) payable at Bhubaneswar

Branch. This Performance Guarantee shall be governed as per conditions stipulated in Article – 9.2

2.1.2 Submission of Payment Security Deposit

The DF shall secure the Payment Security Deposit by providing a Bank Guarantee to the satisfaction

of CESU from any nationalized bank or Scheduled Bank payable at Bhubaneswar Branch, for an

amount equivalent to 7 days of average revenue collected in the base year. This Bank Guarantee

shall be governed as per conditions stipulated in Article- 9.1

2.1.3 Completion of Audit of Various Parameters

DF shall complete its due diligence of the franchise area & validate the following base line data as

provided at the time of issuing Letter of Intent:

2.1.3.1 Base Year AT&C Losses;

2.1.3.2 Base Year level of Input Energy;

2.1.3.3 Base line RPU

2.1.3.4 Ongoing Contracts in the Franchise Area pertaining to billing and collection as on Effective Date;

2.1.4 Meter Reading

CESU and the DF shall conduct a joint metering reading of the interface meters at the Input Points.

The DF may request for a calibration of the meter if so required. [This reading is to be taken at the00:00 hrs of the day of taking over.]

2.1.5 Business Plan – Distribution Franchisee

The DF shall submit its Business Plan (as Annexure 20.11) in the DFA to CESU and the same shallform a part of the agreement. The Business Plan shall be as per Article 5.1.3. The Works Plans are a

subset of the Business Plan shall be attached at Annexure 20.6, Annexure 20.7 and Annexure 20.8.

2.1.6 DF shall submit a commitment bond for all the Experts. In case of any change in the Expert, the DFshall replace person of similar or better experience, expertise and qualification.

2.1.7 Capital Expenditure Plan – CESU

CESU shall share with the Distribution Franchisee the proposed Capital Expenditure Plan in the

Franchise Area proposed to be implemented in a period of four years. Please refer to Annexure

20.5 for the approved Capital Expenditure plan of CESU.

2.1.8 If, the Distribution Franchisee fails to satisfy Article 2.1.1 to Article 2.1.5, within the stipulatedduration, CESU shall be entitled to terminate this Agreement and forfeit the earnest money deposit

of the Distribution Franchisee at its discretion.

2.2 Conditions Subsequent To Be Satisfied By the DF & CESU

2.2.1 CESU shall identify the Consumers for which Service Connection Charges (SCC) have been receivedby it, but connections have not been provided. The Distribution Franchisee shall be responsible for

providing connection to these Consumers. The installation material for such connections shall beissued by CESU to the Distribution Franchisee and further supervision charges received from the

Consumers, if any, towards such connections shall be remitted to the Distribution Franchisee.


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2.2.2 The authorized officers of Distribution Franchisee shall be authorized, under Section 126, Section135,Section 151 and Section 152 of Electricity Act 2003 for taking necessary action to prevent the

unauthorized use, theft & pilferage of electricity in Franchisee Area, subject to approval from GoO

& OERC.

2.2.3 The Distribution Franchisee may suggest the required network improvement in CESU’s governmentfunded capital expenditure plan. CESU shall consider the same while preparing the subsequent

phase of Capital Expenditure Plan.

2.2.4 The Joint Audit Team of CESU and the DF shall complete an audit of Asset Register as on Effective

Date

All the conditions subsequent stated above shall be satisfied within 2 (two) months’ time from the

Effective Date.

3. DURATION OF AGREEMENT

3.1 Duration of Agreement

The duration of this Agreement shall be for a period of sixty months from the Effective Date.

3.2 Provision for New Agreement beyond 5 years

Depending on the performance of the DF, CESU may consider to negotiate a new contract on

mutually agreed terms and conditions. The DF will have to apply formally in writing for new

contract at least 18 (eighteen) months prior to the expiry of the Franchise Agreement.

While entering into the new contract with the DF, CESU may consider inter-alia:-

3.2.1 Unrecovered meter rent installed by the DF

3.2.2 Extra expenditure made by the DF beyond the Capital Expenditure Plan as per this agreement.

3.3 Early Termination

This agreement can be terminated before the expiration of the Franchise Period as per the

provisions of Article-16 and Article-3.4of this Agreement.

3.4 Event Of Abandonment

If the DF ceases to operate all and/or any substantial part of the Franchisee Distribution System for

a period of forty eight (48) consecutive hours without the prior written consent of CESU, then this

would be treated as an event of abandonment and CESU or its designates shall be entitled to

immediately enter any and/or all of the site(s) and operate the Franchisee Distribution System,provided however that:


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An event of abandonment shall not have been set to occur, if the cessation of operation has

resulted from -

(i) an event of Force Majeure; or

(ii) a scheduled outage

(iii) non-supply of power by CESU during the said periodIt is however expressly agreed that if the DF is proceeding with diligence and good faith to

overcome or remedy such event and such event is overcome or remedied within a further period of

forty eight (48) hours, then such an event shall not be treated as an event of abandonment.

It is hereby expressly agreed that all third party liabilities arising out of the event of abandonment

shall be borne by the DF alone. The DF shall indemnify and hold CESU harmless against the same as

provided in Article - 13.1.1 .The DF shall compensate CESU for the losses suffered by CESU, if any,

as provided in Article - 13.2.1.

3.5 Training & Workshop

In case Article 3.2 is not exercised, the Distribution Franchisee shall provide for Training and

Knowledge Transfer to CESU employees six (6) months prior to expiry date. The Distribution

Franchisee shall provide a minimum of 4 workshops and 3 weeks of On-the-job Training to CESU

Employees. The dates of the trainings and workshops shall be finalized in consultation with CESU to

ensure smooth transitioning.

3.6 SurvivalThe expiry or termination of this Agreement shall not affect accrued rights and obligations of the

parties under this Agreement, nor shall it affect any continuing obligations for which this

Agreement provides, either expressly or by necessary implication, the survival of, post its expiry or

termination.

4. GRANT OF DISTRIBUTION FRANCHISE

4.1 Grant of FranchiseSubject to the terms and conditions of this Agreement, and Section 14 Proviso 7 and Section 2(49)

of the Act, CESU agrees to supply electricity to the DF for further distribution to Consumers in the

Franchise Area and the DF hereby agrees that it shall perform all the obligations and accept all the

liabilities of CESU as the Distribution Licensee for the Franchise Area in respect of Franchisee

Distribution System and Distribution Assets as stipulated in the Law, Regulations and Directives of

OERC issued from time to time, as if they were to apply to the Distribution Licensee and any other

activities as stipulated in this Agreement. In consideration of the above, the DF shall have “Right to

Use” the CESU Distribution Assets and all other rights, powers and authorities available to CESU as

a Distribution Licensee to perform its obligation under this Agreement. Distribution Franchiseehowever shall not be the owner of CESU Distribution Assets.


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4.2 Exclusivity

The DF will be the exclusive franchisee of CESU in the Franchise Area in respect of the Franchisee

Distribution System and the Distribution Assets. The DF shall not be entitled to assign or transfer in

any manner its rights and obligations under this Agreement to its affiliate or any other third party

without prior consent of CESU. However the DF may appoint sub-contractor (s) for outsourcing

some of its activities with a prior written intimation to CESU.

It is however clarified that the DF alone shall be liable and responsible to CESU for the due

performance of this Agreement and any default / breach of any of the terms and conditions of this

Agreement by any such sub-contractor shall be deemed to be a default / breach by the DF.

4.3 Franchise Area

The Franchise Area shall mean the area referred to Khurda Electrical Division, Khurda as described

in the Annexure -20.1. The Franchise Area shall be one Electrical Division containing at present the

Input Points and output points as detailed in Annexure –20.1. In case the details provided in theAnnexure – 20.1 are different from the Joint Audit report, the conclusions of the Joint Audit report

shall be final and Annexure – 20.1 shall stand amended accordingly. Any changes/modifications

done in the Input and output points during the duration of the agreement shall be incorporated in

the same day in the Annexure 20.1 when the change is effected.

4.4 Effect of Acceptance

By accepting the Franchise and executing this Distribution Franchise Agreement (DFA), the DF

accepts and agrees to comply with the provisions of this Distribution Franchise Agreement and theAct.

4.5 Directions

The DF shall comply with CESU directives issued for compliance of the Laws, Regulations, Orders

(includes CESU’s order from time to time) and Directives of OERC and all other prevailing law of the

land.

4.6 Intent

It is the intent of both the parties that each party shall enjoy all rights and be subject to all

obligations of this Distribution Franchise Agreement for the entire term of the Agreement and to

the extent any provisions have continuing effect, after its expiry.

4.7 This Distribution Franchisee Agreement is ‘Input Based Franchisee with Incremental Revenue Share

(IBF-IRS)’

4.7.1 CESU shall make payment to the DF for DF’s revenue share which shall be calculated as per Article8.1 of this Agreement. DF shall submit a claim for the portion of DF’s Revenue Share and other

collection if any remitted to CESU as per Article 8.2.1.


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5. DUTIES AND RESPONSIBILITIES OF THE DISTRIBUTION FRANCHISEE

Duties and Responsibilities of the DF shall be as follows:

5.1.1 Undertaking the obligations and discharging all duties and responsibilities of the DistributionLicensee in the Franchisee Area as stipulated in Electricity Act, 2003 and corresponding regulations

as if they were to apply to the Distribution Licensee and as per the contract agreement;

5.1.2 Distribution Franchisee shall prepare a loss reduction trajectory taking into account (i) achievementof Revenue per Unit (RPU) equal to or more than Bulk Supply Tariff (BST) latest within 25th month

assuming the growth in current BST and retail tariff at an annual rate of 10% and (ii) achieving

AT&C loss level of about 15% by 60th month;

5.1.3 Based on the above AT&C loss reduction trajectory, the DF shall work out a Business Planincorporating (i) capital works like laying of AB Cable and installation of LT Capacitor banks, (ii)

repair and maintenance jobs in the LT network, (iii) operational plan for the LT network, (iv)

consumer services, (v) Installing Smart Meters etc. This Business Plan shall be a rolling plan updatedat the beginning of every Contract Year. The Business Plan shall be deemed to form part of the

Agreement and Distribution Franchisee shall adhere to the above Business Plan. The Business Plan

must include capital expenditure and operational expenditure plan along with a yearly cash flow

statement justifying the viability of operations. AT&C loss reduction trajectory as per Business Plan

during performance of its obligations shall be critical as per Article 20.9. The Business Plan shall

cover the following –

a) Installing check meters at Input Points and cross over points to the extent check meters are notinstalled there. Responsibility of installing main meters lies with CESU and check meters shall

be installed by the DF in their respective Franchise Area

b) Installing 100% Smart Meters at 11 KV feeders for energy audit purpose and installing SmartMeters to DTRs.

c) Installing Smart Meters in respect of Consumers having loads (i) up to 10 kW in the first twelve

months of operation and (ii) up to 5 kW, 3 phase LT connection within twenty four months

d) Installing Smart Meters in respect of all other Consumers (except BPL consumers) and otherthan those at (c) above within the shortest possible time. For BPL consumers conventional

meters shall be provided and the DTR feeding to such consumers shall have Smart Meter

e) Providing all the last mile infrastructure requirements from distribution transformers (DTR)onwards up to consumer premises and include DTR meters (Smart Meters), consumer meters,

AMR, AB Cables, automation, as well as related technology induction

f) Laying of AB Cables in theft prone areas not less than 20% of total LT line in Franchisee Area

g) Installing LT Capacitor banks on the secondary side of the distribution transformer whereverpower factor is 0.80 or below

h) Undertaking operation, repair & maintenance, safety and security of the distribution assetsfrom secondary side of the DTR onwards as per Prudent Utility Practices and the standards that

may be prescribed by OERC. Distribution Franchisee shall plan such repair and maintenance jobs to improve efficiencies, upgrade infrastructure including replacement of Distribution

Assets


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The above activities shall include replacement of LT Poles and conductors. However,

replacement of Poles shall be minimum 3% per annum and for conductors 5% per annum. Any

unutilized limit from previous contract years can be utilized in the current contract year e.g. if

in year 1 the replacement of poles was done to the extent of 1% then in the second year the

minimum will be 5%. In case any replacement is done in excess of the above limit in any year

then the minimum stipulated percentage for the subsequent years can be adjusted accordingly.

e.g. if in year 1 the replacement of poles was done to the extent of 5% then in the second year

the minimum will be 1%.

i) Maintaining the existing distribution network and meters including repair of the same fromthe secondary side of the DTR. Subject to the provisions of sub clause (j) DF shall also be

responsible for replacing failed distribution transformers from CESU’s imprest stock

j) Maintaining and/or replacing failed distribution transformers within the prescribed timeframe including repair of the same if so required by CESU against specific and separate

work order at CESU’s approved schedule of rates

k) Restoration of 11 kV/33 kV line or DTR Oil filtering, though not in the scope of Franchisee,can be taken up by franchisee with the consent of CESU on cost reimbursement basis

The Business Plan so furnished shall be approved by the CESU.

5.1.4 Improving quality of service and enhancing Consumer satisfaction with provision of Consumercall centers, mobile fuse call and maintenance centers, as required;

5.1.5 Undertaking reading of meters, generation of bills, distribution of the same on monthly basis

and bill collection from the consumers in the Franchisee Area, as per the retail tariff structuredetermined by OERC and abiding by the Conditions of Supply laid down under the license

conditions thereof;

5.1.6 Collecting the revenue through electronic means like spot collection machines should beencouraged. Use of manual money receipts as far as practicable should be reduced to zero.

On-line arrangement shall be made for collection so that when any amount is collected and

money receipt is issued by the DF, the data shall be transferred on line on real time basis to

CESU;

5.1.7 Establishing easy payment option facilities for the consumers to pay their electricity bill. Door

to door collection should be discouraged. Wherever door – to - door cash collection if required,the amount so collected shall be promptly deposited in the CESU’s account as per the

conditions mentioned in this Agreement;

5.1.8 Making payment to CESU as per the terms and conditions of this Agreement;

5.1.9 Collection of arrears as an agent of CESU, and remittance of the same as per the terms and

conditions of this Agreement;

5.1.10 Generating Management Information System (MIS) periodically and monitoring reports inprescribed formats and online communication of the same to CESU. Furthermore, all data

regarding billing, collection and other related works shall be provided to CESU on regular basisin agreed electronic format as provided by CESU;


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5.1.11 Franchisee shall use its own IT infrastructure including hardware, software and network andshall not use existing IT Infrastructure and resources of CESU after the hand-holding period;

5.1.12 Interface method, CESU’s server credentials and data format shall be provided by CESU withinone month from the effective date;

5.1.13 On the event of taking over the DF area by CESU from the DF during the contract period orafter the expiry date of contract, to ensure the smooth transition of takeover, the DF shall hand

over, network infrastructure, the data, the software licenses including smart meter

communication software (Graphic User Interface, Character User Interface, Application

Programming Interface, Libraries Configurations, user manuals, operations and troubleshooting

manuals) duly imparting training to CESU staffs;

5.1.14 Constructing LT lines against deposit works / Remunerative Scheme conforming regulations ofOERC, while providing new connection to consumers in its franchisee area;

5.1.15 DF may install the test benches for testing single phase meter at division level and for testing 3

phase /Smart Meters at Circle level as per their requirement;5.1.16 Carrying out monthly energy audit on distribution transformer wise and 11 kV feeder-wise

5.2 Use of CESU Distribution Assets

5.2.1 The DF shall be entitled to use the CESU Distribution Assets to perform its obligation under thisAgreement. CESU shall however, continue to be the owner of such assets.

5.2.2 The DF shall restore all assets which are damaged beyond repair and shall provide necessaryinformation to CESU to identify the scrap against its Asset register.

5.2.3 On termination/ expiry of this agreement, the DF shall without demur hand over physicalpossession/ custody of CESU Distribution Assets in same condition, subject to normal wear and

tear.

5.2.4 If Distribution Franchise requires to use any assets owned by CESU that have not beentransferred as envisaged in this agreement, CESU will on its discretion allow usage subject to

separate charges for the use of the same.

5.2.5 The Distribution Franchisee shall not use any assets owned by CESU for any other use except

for distribution of electricity and activities concerned with the subject of this Franchisee

Agreement.

5.3 New Distribution Assets attracting Capital Expenditure

5.3.1 Distribution Franchisee may apply to CESU to undertake the unallocated and/or delayed capitalworks, those are being executed or to be executed by CESU in the Franchise Area at the

predetermined contract order cost or CESU’s approved schedule of rates. After approval from

CESU, the DF can execute such work as per CESU’s satisfaction. Further, all such assets shall

form a part of the CESU Distribution Asset.


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5.3.2 The Distribution Franchisee shall also maintain a separate record of the Distribution Assetscommissioned / installed by it with all details and particulars. It shall also make entries of these

assets in the asset register.

5.3.3 Such assets in normal working condition shall be transferred to CESU at no cost in case ofExpiry or Termination in the case of Distribution Franchisee Event of Default as per Article 16.8

and Article 16.10. However, in case of Termination on account of CESU Event of Default, CESUshall take the same on the books of account at the depreciated value, computed as per the

costs and depreciation rates as approved by OERC.

5.3.4 If any new asset added by the Distribution Franchisee is not featuring in the list provided toCESU, the cost of the same shall be ascertained quarterly by an independent agency appointed

by CESU for the purpose. The depreciation rate for such asset, if not appearing in the list

provided to CESU, shall be taken as per the prevailing OERC Regulations at that time.

5.3.5 The Distribution Franchisee shall submit details of the assets added by it on a quarterly basis,and the value of such assets shall be certified by CESU as acceptable in terms of Article 5.3.3

and Article 5.3.4. Such certification shall be done within a period of 30 (Thirty) days.

5.4 Inventory of O&M Spares for DTR downwards Assets on LT lines

5.4.1 The DF shall maintain reasonable stock of inventory of LT line materials like poles, conductorsetc. for meeting the routine requirement of operation & maintenance and contingencies.

5.5 Adhering to Supply Schedule

5.5.1 The DF shall strictly adhere to the planned load shedding schedule of CESU when circumstanceswarrant based on schedules fixed by SLDC from time to time.

5.6 Duties and Responsibilities

The duties and responsibilities shall include, in addition to discharge of duties as mentioned in

the Article 5.1, but not limited to, the following activities:

5.6.1 Load Forecast

The Distribution Franchisee shall carry out demand estimation/ load forecast periodically andsubmits the same to CESU in prescribed format.

5.6.2 Operation, Repair & Maintenance and Up gradation

Distribution Franchisee shall be responsible for undertaking operations and maintenance

related activities after the secondary side of the distribution transformers till the metering

point of the LT Consumers in the Franchise Area. The Distribution Franchisee shall also ensure

proper metering of HT Consumers.


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5.7 Compliance with standards / Laws

The Distribution Franchisee shall be responsible for complying with all Indian Electricity Rules,

OERC Standards, Regulations and other Directives as issued and modified from time to time

and as applicable to any distribution licensee. Any penalty imposed by OERC or any other

Government Authority on account of failure of the Distribution Franchisee in compliance shall

be borne by the Distribution Franchisee. The Distribution Franchisee shall abide by and followthe directives and/ or regulations provided in Electricity Act 2003, Supply Code and CEA

Regulations, amended from time to time on the matter.

5.7.1 Distribution Franchisee shall strictly abide by all norms and safety measures as prescribed inthe Electricity Laws.

5.8 Consumer Service

The Distribution Franchisee shall abide by and follow the directives and/ or regulations

provided in Electricity Act 2003, Supply Code, CEA regulations and OERC regulations amendedfrom time to time .

6. DUTIES AND RESPONSIBILITY OF CESU

The broad duties and responsibilities of CESU shall include the following activities:

6.1.1 CESU shall supply the power at Input Points so long it is available from GRIDCO / OPTCL systemto the Franchise Area.

6.1.2 CESU shall carry out capital expenditure in line with the Capex plan specified under Article2.1.7 and Capex plan finalized as per Article 2.2.3 based on GoO’s / State Steering or

Monitoring Committee ’s guidelines issued from time to time .

6.1.3 CESU shall make timely payments to the DF as per the terms and conditions of this Agreement.

6.1.4 CESU shall be responsible for undertaking the operation and maintenance activities startingfrom DTRs towards the upstream which includes all 11KV, 33KV lines, network elements, and

33/11 KV substations. Further, CESU shall also be responsible for replacement of defective

/burnt Distribution Transformers and installation of new DTRs if required.

6.1.5 CESU at the request of the DF shall pursue with the relevant agencies for the augmentation ofEHV line and transformer capacity for Franchise Area wherever needed.

6.1.6 CESU shall mark or send a copy of the Directives received by it under applicable laws,Regulations and Directives of OERC, which are not in the public domain to the DF.

6.1.7 CESU shall maintain at the Division level stock of material for DTR (4% of available DTR) andabove including material pertaining to HT Lines, Distribution Transformers of various capacities,

to facilitate quick restoration of power supply in any eventuality.


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7. METERING AND MEASUREMENT

CESU and the DF shall follow CEA Regulations for meters including Smart Meters, check meters,

metering system, inspection and testing of meters, and maintenance of meters.

Directives/order/ clarification issued by OERC from time to time in this regard will also be

followed by both the parties.

8. INVOICE, PAYMENT AND REMITTANCES

8.1 Invoice, Payment and Collection

8.1.1 Information regarding the consumer billing and collection shall be maintained by the DFthrough a software program in such a manner that all the details (mentioned below under

Article 8.1.2) are captured on a daily basis and passed on to CESU along with the collection

details on real time basis.

These daily information shall be submitted to the following CESU officials:

Sub-Divisional Officer, Executive Engineer, Superintending Engineer of the Franchisee Area,

Head of Finance, HR, Operations, MIS, IT & Commerce branch of CESU Head Quarter.

8.1.2 DF shall maintain all the billing & collection of all the consumers in the franchise area.

The DF shall maintain separate details for each month for

EC = TC - MRDF – MR CE – SCC – Misc Income DF – Misc Income CESU - SD - ED – Tax+ SD adjusted

against EC + Interest on SD of live consumers adjusted against EC + CESU’s own consumption

Where

EC = Energy Charge in rupees

TC = Total Collection inclusive of all Arrears in rupees Less unrealized cheques & demand draft

Less collection against Special Arrear as per Article 8.1.10

MRDF = Meter Rent Collected for meters installed / replaced by the DF in rupees.

MRCE= Meter Rent Collected for meters installed by CESU in rupees

SCC = Service Connection Charges collected for installations done by the DF in rupees.

Misc Income DF = (as the case may be and as per the work undertaken by DF) ReconnectionCharges + Meter testing fee + Processing Fee + Super vision Charge + Labour Charges

Misc Income CESU = (as the case may be and as per the work undertaken by CESU)

Reconnection Charges + Meter testing fee + Processing Fee + Super vision Charge + Labour

Charges

SD = Security Deposit /Additional Security Deposit (ASD) in rupees

ED = Electricity Duty in rupees

Tax = Other Statutory Taxes collected from the Consumers in rupees

SD adjusted against EC = Security Deposit adjusted against arrear EC for consumers as perRegulation 22 of Supply Code, shall be treated as deemed collection


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CESU’s own consumption = EC portion of the revenue billed against energy consumed by

CESU’s own offices shall be treated as deemed collection

The DF shall also maintain the Billing details of all of the above individually along with the

following:

IE = Input Energy in Units

EB = Energy Billed in Units

RPU = EC / IE

8.1.3 Monthly Bill or Monthly Invoice raised by the DF

The Monthly Bill amount that shall be payable by CESU to the DF shall be computed based on

the details as below:

MI (Monthly Invoice / Monthly Bill) = [(RPU Current Month - RPU Base Year ) *IE Current Month * (1-X %)] +

MRDF Current Month + SCCCurrent Month + Misc Income DF Current Month

Where

RPU Current Month = ECCurrent Month / IE Current Month

RPU Base Year = EC Base Year (Duly adjusted in case of each revision of retail supply tariff in every

FY)/ IE Base Year

EC Base Year shall be calculated by taking into account change in tariff for the various categories of

consumers in current Financial Year and Consumption for Base Year multiplying the same with

the Collection Efficiency in the Base Year.

RPU Base Year will be calculated based on the tariff change as approved by OERC on the 1st day of

the current Financial Year or any day specified by OERC. The base line RPU for the division is as

per Annexure 20.2

Current Month = Month for which the payment has to be made by CESU to Distribution

Franchisee

X% = Percentage Revenue share for the Contract Year as offered to CESU and given in Annexure

20.10.

Please refer to the Annexure 20.3 illustrating the calculation of RPU.

8.1.4 First Month Claim - The First claim submitted by the DF on CESU shall be at the end of the firstmonth of operation and shall be computed as per Article 8.1.3. 100% of the first claim shall be

paid to DF on the 4th day of the succeeding month.

8.1.5 From the second month onwards, on 4th day of the month CESU shall make total payment dueafter reconciliation to the DF for the preceding month’s due, calculated on cumulative basis in

each FY.

8.1.6 Provisional weekly installment payment will be made on 7th, 14th, 21st, 28th day of the monthfor the dues to the DF in that month; which will be reconciled on 4th of the following month.

E.g.: If the total amount due to the DF in the month of July presuming it to be the first month ofthe contract is Rs 1,00,000/- then CESU will make the full payment of Rs.1,00,000/- on 4th day

of the succeeding month i.e. in the month of August. During month of August on 7th, 14th,


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21st, and 28th day CESU shall pay 20% of the dues of the previous month amounting to

Rs.20,000/-. Full payment of the balance dues, if any, will be paid after reconciliation on 4th of

September – the succeeding month. This procedure will form the basis of payments for the

succeeding months during the subsistence of the Agreement.

8.1.7 Regarding adhoc payment to DF, CESU will issue necessary instruction to the concerned Bank

on 5th day of the succeeding month for release of weekly installment on 7th, 14th, 21st & 28thday of the month as per the stipulations mentioned in para 8.1.6 above.

8.1.8 The DF shall submit its monthly claim on 1st day of succeeding month to CESU for reconciliationof payments provisionally made.

8.1.9 The Interest on security deposits of Consumers that is adjusted towards dues of the Consumers

in their bills shall be credited by CESU in full towards collection done by the DF in the same

calendar month.

8.1.10 Collection from October 2012 to March 2013, against Special Arrear billed to single phase

domestic consumers for FY 2011-12 as per the order of Hon’ble High Court dated 30 March2012 shall be considered as collection against Special Arrear and it shall be remitted in full to

CESU. Any default on the part of the consumer in any month but realized subsequently shall be

considered as normal arrear. From April 1, 2013 Collection against Special Arrear in any month

shall be treated as part of normal arrear and shall be considered for RPU calculation for that

month.

8.1.11 The amount paid by the consumer shall be first adjusted towards Electricity Duty provided thatin case of part payment by the consumer, the proportionate share of the Duty from the total

collection shall be adjusted first. Out of the balance, adjustments shall be made in the following

order of priority:

a) Current Electricity Charges

b) Current Miscellaneous Charges

c) (i) Arrear as per Article 8.1.10 (applicable till March 2013)

(ii) Arrear Electricity charges excluding above

d) Arrear Miscellaneous Charges

e) Delayed Payment Surcharge

8.2 Payment to CESU

The DF shall make payment to CESU in the following manner:

8.2.1 The DF shall deposit all the collections on daily basis in the designated account of CESU within 48hours of such collection from urban area and within 72 hours of such collection from rural area. In

case of a public holidays or banking holidays the money should be deposited on the next working

day. The Franchisee shall open a collection account which shall be non-drawl and no-lien account; in

its own name in the same bank and branch in which the escrow account of CESU is operated. The

Franchisee shall first deposit all the collection to this account and provide an irrevocable instruction


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to the bank to transfer all amount deposited in the said account till the previous day to the CESU

account .

8.2.2 Bank transfers, NEFT, RTGS & other such electronic transfers shall be in the CESU’s account. Allthe cheques and demand draft shall be drawn in favour of CESU.

8.2.3 In case of a shortfall or default in the remittance by the DF against the obligation as per Article8.2.1, CESU may recover such amount by invocation of BG given for Payment Security Deposit bythe DF after issuing a 2 days’ notice to the DF. The DF has to restore the BG with its original amount

within 2 working days after invocation of BG by CESU .

8.2.4 If the DF is unable to pay the Input Based Revenue portion (calculated as per Article 8.2.6) amountin any given month, the DF shall remit the amount equal to such shortfall and also payback the

advance payment made by CESU for the month within 7 working days.

8.2.5 The DF shall be responsible for payment of all taxes, duties, and statutory /local levies arising as

a result of commercial transaction under this contract, such as service tax, sales tax etc if

applicable. CESU shall not be responsible for any tax related liabilities.

8.2.6 On a monthly basis CESU shall raise an invoice onto the DF for its Input based Revenue in thefollowing manner:

Input Based Revenue shall be calculated as: (RPU Base Year * IE Current Month )

8.2.7 The deposits made by the DF as per Article 8.2.1 in CESU’s account shall be considered asadvanced payment towards the invoice raised / to be raised by CESU as per Article 8.2.6

9. SECURITY DEPOSIT AND PERFORMANCE GUARANTEE

9.1 Security Deposit

As provisioned in the Article-2.1.2 of this Agreement, the Distribution Franchisee shall submit

and maintain valid for the duration of this Agreement, a payment Security Deposit to the

satisfaction of CESU in the form of an irrevocable and unconditional Bank Guarantee (BG) as

per Exhibit 21.1 (b) from any nationalized bank or Scheduled bank payable at Bhubaneswar for

an amount equivalent to Seven (7) Days of average revenue collected in the base year.

The Bank Guarantee shall be governed as below:

9.1.1 The Payment Security Deposit Bank Guarantee shall be initially valid for a period of 90 daysover and above from one year from the Effective Date.

9.1.2 Distribution Franchisee shall renew the Payment Security Deposit Bank Guarantee 30 days prior

to its expiry date for a further period of one year and furnish the same to CESU, failing which

CESU shall have the right to invoke the Payment Security Deposit BG after giving a notice of

seven days. A similar renewal shall be done every year during the duration of the DFA.

9.1.3 Within one week of beginning of each quarter, the amount of the BG shall be upgraded, basedon the collection from the Franchise Area with a fresh BG of additional amount. However,

under no circumstances shall the amount of BG revised downwards. The validity of such fresh

BG shall be such as to co-terminate with the validity of the BG submitted under Article 9.1.2.


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These BGs shall also be renewed every year for a further period of one year during the duration

of the DFA.

9.1.4 The Payment Security Deposit can also be invoked as per the Article 16.7.2.4 and Article 8.2.3of this Agreement.

9.2 Performance Guarantee

As provisioned in the Article-2.1.1 of this Agreement, the Distribution Franchisee shall submit

and maintain valid for the duration of this Agreement, a performance guarantee to the

satisfaction of CESU in the form of an irrevocable and unconditional Bank Guarantee as per

Exhibit 21.1 (a) from any nationalized bank or Scheduled bank payable at Bhubaneswar for an

amount equivalent to INR 1 crore per division for first year of Franchise term.

The Bank Guarantee shall be governed as below:

9.2.1 The Performance Guarantee shall be in the format prescribed by CESU initially valid for a period

of 90 days over and above from the one year from the Effective Date.

9.2.2 Distribution Franchisee shall renew the Performance Guarantee within 15 days of completionof one year and furnish the same to CESU, failing which CESU shall have the right to invoke the

Performance Guarantee. The said renewal shall continue till the duration of the DFA.

9.2.3 CESU has the right to invoke the Performance Guarantee in case of failure to bring down theAT&C losses as per loss reduction trajectory upto variation of 5% as per the Annexure 20.9 of

the DFA and as per the Article 16;submitted by Distribution Franchisee and approved by CESU.

9.2.4 Distribution Franchisee shall, within two weeks of invocation of the Performance Guarantee byCESU, submit the fresh performance guarantee to the level prior to invocation as per the terms

and conditions of the DFA.

9.2.5 The Performance Guarantee can also be invoked as per the Article 16 of this Agreement.

10. HAND HOLDING & DEPUTATION OF CESU EMPLOYEES

10.1 Handholding

CESU’s employees shall provide handholding support to the franchisee for the first 3 monthsfor which CESU shall continue to bear the cost of salary & allowances payable to the CESU’s

employees involved therein. On specific request by the DF, Handholding period may be

extended upto six months from the Effective Date.

10.2 Deputation of CESU Employees

The existing employees of CESU in the Franchise Area will be given an option to join the DF on

deputation if requested by the DF, as per Deputation Rules of CESU. Please refer to the Exhibit

21.2 for Deputation Rules of CESU.After the hand-holding period, CESU will redeploy its employees elsewhere. However, if the DF

requests the services of some of the employees, the option of the same can be extended by


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CESU to its employees at its discretion on lien basis or permanent absorption by DF depending

on the decision taken by the DF and the particular employee.

11. EMPLOYEE(S) ENGAGED BY THE DF

11.1 DF’s responsibilities towards employees and indemnifying CESU

11.1.1 The DF shall be responsible for recruitment of employees at its own choice. Under nocircumstances the employee(s) of the DF shall be considered as CESU employee and claim of

remuneration at par with CESU employee(s). The DF shall make it clear to the employee(s)

engaged by him that they are its employee(s) and CESU has nothing to do with employment or

any other claim. Only the persons expressly agreeing to these conditions shall be employed by

the DF. CESU will not be responsible or liable for the claims raised by the employee(s) of the DF

and the DF shall indemnify CESU in respect thereof.

11.1.2 The DF shall indemnify CESU against all claims which may be made under the Minimum WagesAct, 1948.The Contract Labour (R&A) Act, 1970, Abolition of Child Labour Act, 1986, Provident

Fund Act, 1952, ESI Act, 1948, Payment of Wages Act, 1936 or any statutory modification

thereof or Rules there under or otherwise for in respect of any damage or compensation

arising in consequence of any dispute under these Act.

11.1.3 The DF shall indemnify CESU against all claims under the Workmen Compensation Act, 1923 orany statutory modification thereof or rules there under or otherwise for in respect of any

damage or compensation payable in consequence of any accident or injury sustained by any

workman engaged in the performance of the business relating to this Distribution Franchisee

Agreement. In case of personal injury to workmen employed by the DF on the works for whichthe DF is liable to pay the compensation under the Workmen Compensation Act.

11.1.4 The DF should follow all statutory Rules, Acts and Regulations that are relevant and necessaryfor carrying out the work.

12. REPORTING AND AUDIT

12.1 Reporting

The DF shall furnish to CESU the following information as per schedule stated therein:

12.1.1 The DF shall be required to update the asset register and submit the same to CESU on aquarterly basis.

12.1.2 The DF shall generate periodic Management Information System (MIS) and Monitoring Reports

as required by CESU and OERC in the prescribed format and communicate them to CESU

through email.

12.1.3 The DF shall facilitate CESU for filing of ARR petition by providing data with respect to theFranchise Area as per format provided by OERC. The requisite data shall be made available

latest by 1 st week of October having updated data till end of September for that year.

12.1.4 The DF shall provide online access to its system to the designated CESU officials.


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12.1.5 All correspondence, records, reports, presentations and other forms of information developedby the DF whether electronic or physical, and required by the Licensee to continue operations,

shall become the property of CESU upon Expiry/ termination of the Agreement subject to

applicable permissions. CESU reserves, without limitation, the right to adopt procedures, forms

and productivity enhancement methods developed under this Agreement, elsewhere.

Notwithstanding the above, the DF shall have the right to retain copies of information, reports,

correspondence, presentations mentioned above.

12.1.6 The DF shall notify CESU, at the earliest possible time, of any Major Incident that has occurredwith details affecting any part of the Distribution System.

12.2 Audit

12.2.1 The DF within the Franchisee Area shall submit detailed audited reports for inventory andassets on an annual basis subject to verification by CESU.

12.2.2 The DF shall carry out annual audit of the billing data including the system and database andconsumer service centres operated within the scope of the Franchise Area subject to

verification by CESU.

12.2.3 All the aforesaid audits/verifications shall be conducted by a third party auditor mutually

agreed to by CESU and DF. Both, CESU and the DF shall equally bear the cost of such audits.

12.2.4 CESU may, at any time during the subsistence of this agreement, inspect, verify and audit therequired data and records for the purpose of verifying information received under this

contract, and the DF shall be obliged to extend all cooperation, assistance and facilities, as may

be required.12.2.5 The DF shall comply with all reporting formats and data requirements prescribed.

13. INDEMNIFICATION

13.1 Indemnity

13.1.1 The DF during the term of this Agreement shall indemnify, defend and hold CESU harmlessagainst:

13.1.1.1 Any acts of omissions/commission of the DF with regard to the electricity distribution services.In such event the DF shall have no claim for compensation, incentive or any other claim against

CESU.

13.1.1.2 Claims against CESU made by any third party for any act of commission or omission by the DF,the DF shall indemnify and hold CESU harmless and compensate all the losses so caused to

CESU. CESU shall also be entitled to defend any action with third parties at the cost and

expenses of the DF.

13.1.1.3 All monetary obligations or losses or implications arising out of such action / inaction of

Distribution Franchisee in the nature of costs, expenses or damages. CESU shall have no liabilityin respect of loss of profit, loss of income, loss of agreement or any other losses or damages

suffered or arising out of or in connection with existence of any defects whether latent or


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apparent in electricity network and the obligation of Distribution Franchisee to provide support

services shall remain unaffected thereby.

13.1.1.4 Non-payment of all taxes, duties, and statutory /local levies arising as a result of thiscommercial transaction as required under Article 8.2.4

13.1.1.5 Non-compliance of the Laws, Regulations, Orders and Directives of OERC by the DistributionFranchisee.

13.1.1.6 Any penalty imposed on account of non-compliance as stated hereinabove.

13.1.1.7 This Indemnification shall survive the term of this Agreement.

13.1.2 CESU shall indemnify, defend and hold the Distribution Franchisee harmless against:

13.1.2.1 Acts of commission or omission in the Franchise Area by CESU till the end of 3 months after theEffective Date of this agreement. However, such indemnity shall be limited only to legally

established claims.

13.2 Procedure for claiming indemnity

13.2.1 Third party claims

13.2.1.1 Where either party is entitled to indemnification from the other party pursuant to Article13.1,it shall promptly notify the other party of such claim, proceeding, action or suit referred to in

Article 13.1 in respect of which it is entitled to be indemnified. Such notice shall be given as

soon as reasonably practicable after the Indemnified party becomes aware of such claim,

proceeding, action or suit. The indemnifying party shall be liable to settle the indemnificationclaim within thirty [30] days] of receipt of the above notice. Provided however that, if:

(i) The Parties choose to contest, defend or litigate such claim, action, suit or

proceedings in accordance with Article 13.1 below; and

(ii) the claim amount is not required to be paid/deposited to such third party pending

the resolution of the dispute,

The indemnifying party shall become liable to pay the claim amount to indemnified party or to

the third party, as the case may be, promptly following the resolution of the dispute, if such

dispute is not settled in favour of the indemnifying party.

13.2.1.2 The indemnified Party may in consultation with the Indemnifying Party, contest, defend andlitigate a claim, action, suit or proceeding for which it is entitled to be indemnified under Article

13.1 and the indemnifying Party shall reimburse to the indemnified Party all reasonable costs

and expenses incurred in this respect.. However, the indemnified Party shall not settle or

compromise such claim, action, suit or proceedings without first getting the consent of the

indemnifying Party, which consent shall not be unreasonably withheld or delayed.

The indemnifying Party may, at its own expense, assume control of the defence of any

proceedings brought against the indemnified Party, if it acknowledges its obligation to

indemnify, gives prompt notice of its intention to assume control of the defence, and employs

an independent legal counsel at its own cost.


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13.3 Indemnifiable Losses

Where either party is entitled to Indemnifiable Losses from the indemnifying party pursuant to

Article 13.1, it shall promptly notify the indemnifying party of the Indemnifiable Losses. The

indemnifying party shall pay the Indemnifiable Losses within [30] thirty days of receipt of the

notice seeking Indemnifiable Losses by indemnified party. It is expressly agreed herein that the

Indemnifiable losses of either party shall be restricted to costs and expenses for all claims

except for the Indemnifiable losses for third party claims, wherein consequential damages shall

also be included, if applicable.

14. INSURANCE

The DF at its own discretion shall insure, obtain and keep in effect all Insurances required under

laws of India for the assets installed / commissioned during the term of this Agreement.

15. NON-DISPOSAL OF SHARES AND CHANGE IN MANAGEMENT

15.1 Non Disposal of Ownership

The parent companies and / or Promoters of the Distribution Franchisee shall give an

Undertaking to CESU for Non-disposal of shares / stake equal to or greater than 49%. During

the operation of this Agreement there shall be no change in management / ownership except

as above.

15.2 Change in Management

The Distribution Franchisee shall not effect any change in the management responsible for its

operations under this Agreement without prior approval of CESU.

In case any Expert / Management Personnel is to be replaced, prior intimation is to be given to

CESU. The Expert / Management Personnel shall be substituted with a similar or better

qualified Expert failing which CESU will have the right to impose a penalty / declare event of

default. In case of difference of opinion on the suitability of the substituted expert, CESU shalldiscuss with the DF on why it considers such substituted persons as not suitable and provide

reasonable opportunity to the DF to recruit an alternate person before resorting to its right

under this Article.

16. EVENT OF DEFAULT AND TERMINATION

16.1 Monitoring and reviewing the performance of DF

16.1.1 CESU will monitor the performance of DF on various operational parameters on Billing,

Collection and Remittance as per Article 8, AT&C Loss trajectory in view of Annexure 20.9,


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Work Plans in view of Annexure 20.6, Annexure 20.7 and Annexure 20.8 and Consumer Service

as per OERC guideline as well as the terms of this agreement once in a quarter.

16.1.2 DF will be communicated on the deficiency in service, if any from time to time. They arerequired to comply the same immediately.

16.2 Distribution Franchisee Event of Default

The occurrence and continuation of any of the following events, unless any such event occurs

as a result of a Force Majeure event or a breach by CESU of its substantial obligations under

this Agreement, shall constitute a Distribution Franchisee event of default.

16.2.1 Payment / Collection Transfer Default

Payment Default or Collection Transfer Default by the DF shall mean failure or refusal by the DF

to perform its following obligations under the Agreement:

16.2.1.1 Failure on account of the DF to make payment / transfer the collection as per Article - 8.2.1 ofthis Agreement;

16.2.1.2 Failure on account of the DF to make payment as per Article - 8.2.4 of this Agreement;

16.2.1.3 The DF shall eliminate such Event of Default and mitigate consequences of such Event ofDefault within a period of 2 working days;

16.2.2 Critical Events of Default are:

16.2.2.1 Failure to maintain Performance Guarantee and Security Deposit as per Article -9 of thisagreement;

16.2.2.2 Failure to carry out meter reading activities and bill consumers for a period of more than 1month;

16.2.2.3 Failure to maintain a RPU greater than RPU Base Year for two consecutive quarters;

16.2.2.4 Failure to submit in time the Information Report as provided by CESU;

16.2.2.5 The DF shall eliminate such Event of Default and mitigate consequences of such Event ofDefault within a period 15 days for Event of Default cited at 16.2.2;

16.2.3 Other Critical Events of defaults are:

16.2.3.1 Failure to achieve 10% AT&C loss reduction in the first year of operation;

16.2.3.2 Failure to achieve 5% less than committed cumulative AT&C loss reduction trajectoryconsecutively for two (2) years as defined in Annexure 20.9;

16.2.3.3 Failure to invest up to 90% of cumulative expenditure for two (2) years as defined in WorkPlans given at Annexure 20.6 and Annexure 20.7;

16.2.3.4 The DF has engaged in a corrupt practice or/and fraudulent practice in competing for executingthe contract.

16.2.3.5 A resolution for winding up has been passed by the majority shareholders of the DF.

16.2.3.6 The DF is declared insolvent or bankrupt.


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16.2.3.7 The DF has unlawfully repudiated this Agreement or has otherwise expressed an intention notto be bound by this agreement.

16.2.3.8 Any representation or warranty made by the DF during the term of the agreement is found tobe false and misleading.

16.2.3.9 Sale of Input energy in the Franchise Area to any party outside the Franchise Area.

16.2.3.10 Failure to comply with Article 15;

16.2.3.11 Failure to comply with non-critical events of default within the specified period as per Article16.2.4.

16.2.3.12 The DF shall eliminate such Event of Default and mitigate consequences of such Event ofDefault within a period 30 days for Event of Default cited at 16.2.3.

16.2.4 Non-critical Event of Default

Non-critical Event of Default by the DF shall mean failure or refusal by the DF to perform the

following obligations under the Agreement:

16.2.4.1 Failure to submit periodic performance report (comprising Billing and Collection report,) toCESU after Effective Date;

16.2.4.2 Reporting inconsistencies in energy/ revenue accounting, if observed during periodic/unscheduled inspection;

16.2.4.3 Failure to comply with any terms and conditions, as applicable under this Agreement for aconsecutive period of thirty (30) days;

16.2.4.4 Persistent non-compliance of Standards of Performance laid-down by OERC after the first

Contract Year. Persistent would mean non-compliance of any of terms of Standards ofPerformance in all similar cases for a continuous period of three months;

16.2.4.5 Persistent non-compliance of OERC’s “Electricity Supply Code and Other Conditions of Supply”as approved and modified from time to time after the first Contract Year. Persistent would

mean repeated non-compliance of any of terms of Supply Code and Other Conditions of Supply

for a continuous period of three months;

16.2.4.6 The DF shall eliminate such Event of Default and mitigate consequences of such Event ofDefault within a period of 60 days at 16.2.4.

If any of the above is in default for a period of more than 60 days, it shall become a CriticalEvent of Default as per Article 16.2.3.11.

16.3 CESU Event of Default

The occurrence and continuation of any of the following events, unless any such event occurs

as a result of a Force Majeure Event or a breach by Distribution Franchisee of its substantial

obligations under this Agreement, shall constitute a CESU Event of Default:

16.3.1 Critical Event of Default

16.3.1.1 Failure on account of CESU to make payments as per Article 8.1.4, 8.1.5 and 8.1.6 of thisAgreement;


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16.3.1.2 The CESU shall eliminate such Event of Default and mitigate consequences of such Event ofDefault within a period of 15 days.

16.3.2 Non-Critical Event of Default

16.3.2.1 Breach of any other material terms and conditions, as applicable under this Agreement for aconsecutive period of thirty (30) days. If the default continues for a period of more than 60

days, it shall become a Critical Event of Default;

16.3.2.2 The CESU shall eliminate such Event of Default and mitigate consequences of such Event ofDefault within 60 days.

16.4 Termination Procedure for Event of Default by the DF

16.4.1 On the occurrence of Event of Default by the DF, CESU shall issue an Event of Default notice tothe DF.

16.4.2 In case the DF is unable to eliminate/ mitigate the consequences of Event of Default within theperiod stipulated at 16.2.2.5 and 16.2.3.12 a preliminary notice of termination may be served

by CESU to the DF, elaborating the event of default by the DF. For Article 16.2.1 a final

termination notice may be served directly.

16.4.3 If the default is not cured within a period of thirty days from the date of issue of the

preliminary notice of termination as provided in Article 16.4.2, this Agreement may be

terminated after serving the final termination notice to the DF.

16.4.4 It is expressly agreed that both the parties shall continue to perform their respectiveobligations until the serving of final termination notice, whereupon this Agreement shall

terminate on date of such notice served to the DF.

16.4.5 CESU shall exercise its Step-in rights after serving the final termination notice. The DF shall beobliged to extend transition assistance for a period of 30 days from the serving of such final

termination notice, failing which the costs and expenses incurred by CESU on the account of

non-provision of such assistance by the DF shall be recovered from the Termination payment of

the DF.

16.5 Termination Procedure for Event of Default by CESU

16.5.1 On the occurrence of Event of Default by CESU, the DF shall issue an Event of Default notice toCESU.

16.5.2 In case CESU is unable to eliminate/ mitigate the consequences of Event of Default within theperiod stipulated in Article 16.3.1.2 and Article 16.3.2.2, a preliminary notice of termination

may be served by the DF to CESU, elaborating the Event of Default by CESU.

16.5.3 If the default is not cured within a period of thirty days from the date of serving of preliminary

termination notice as provided in Article 16.5.2, or if suitable explanation for the inability to

cure the default in question within the stipulated time is not submitted, this Agreement may be

terminated after serving the final termination notice to CESU.


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16.5.4 It is expressly agreed that both the parties shall continue to perform their respectiveobligations until the serving of final termination notice, whereupon this Agreement shall

terminate on date of serving such notice to CESU.

16.5.5 CESU shall exercise its Step-in rights after receiving the final termination notice. The DF shall beobliged to extend transition assistance for a period of 30 days from the serving of such Final

termination notice, failing which the costs and expenses incurred by CESU on the account ofnon-provision of such assistance by the DF shall be recovered from the Termination payment of

the DF.

16.6 Consequences of Termination

16.6.1 Consequences of Termination for the DF’s Event of Default

16.6.1.1 Without prejudice to the other rights of CESU in case of termination, the DF shall pay all thedues payable to CESU on the date of termination. The DF shall pay dues to third parties only

after the payment of all CESU dues. However statutory obligations such as Provident Fundpayment, Tax related payments will have first priority.

16.6.1.2 CESU has right to make good any shortfall from the performance guarantee by invoking the BG.

16.6.1.3 CESU unconditionally reserves the right to claim from the DF any costs, expenses or loss that itmay have incurred by reason of breach of failure on the part of the DF to observe and perform

any of the terms and conditions of the agreement

16.6.1.4 On termination of this Agreement however occasioned, the DF shall forth with deliver to CESUall relevant papers including the forms used, partially used and unused receipts books, all

promotional materials and documents which may have come into its possession or custodyunder the terms of this Agreement or otherwise.

16.6.2 Consequences of Termination for CESU’s Event of Default

16.6.2.1 Without prejudice to the other rights of the DF in case of termination, CESU shall pay all thedues payable to the DF which is due on the date of termination as per Article 16.9.

16.7 Step in Rights of CESU

16.7.1

Step In Rights in case of Event of Default after serving of Final Termination Notice16.7.1.1 CESU or its Designate(s) shall be entitled to immediately enter any and/ or all of the Site(s) and

operate the Distribution System and collect revenues due from Consumers.

16.7.1.2 CESU shall have the right to invoke the Performance Guarantee furnished by DistributionFranchisee as well as Bank Guarantee against the Payment Security Deposit and to recover all

its dues and outstanding amounts.

16.7.1.3 All Distribution Assets of the DF in the Franchise Area shall stand transferred to CESU

16.7.2 Step In Rights in the Event of Abandonment by Distribution Franchisee

16.7.2.1 CESU or its Designate(s) shall be entitled to immediately enter any and/or all of the Site(s) andoperate the Distribution System.


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16.7.2.2 CESU shall have a right to terminate the Agreement.

16.7.2.3 CESU shall issue a take-over notice to the Agreement Representative and serving of such noticeshall be treated as a deemed takeover of operations by CESU.

16.7.2.4 CESU shall have the right to invoke the Performance Guarantee furnished by DistributionFranchisee as well as Bank Guarantee against the Payment Security Deposit and to recover all

its dues and outstanding amounts.

16.7.2.5 All Distribution Assets of the DF in the Franchise Area shall stand transferred to CESU.

16.7.2.6 However, the liability of meeting the repayment obligations on account of financingarrangements for such assets shall lie with the DF.

16.8 Mode of Payment on Expiry

The payment on expiry of the DF agreement shall consist of the following:

16.8.1 Additional Revenue collected against billing of last month of Franchisee Operation Period

worked out as per Article 8.

16.8.2 All the payments including un-utilized BG shall be released after deductions on account of anyoutstanding amount towards CESU, if any.

16.8.3 Unrecovered meter rent if any in the Franchise Area

16.9 Mode of Termination Payment in case of CESU Event of Default

The Termination payment to the DF shall consist of the following:

16.9.1 Un-recovered meter rent if any in the Franchise Area.

16.9.2 Due Payments for Franchisee Operation Period worked out as per Article 8.

16.9.3 Depreciated value of all Distribution Franchisee Assets in the Franchise Area calculated inaccordance to the depreciation rates published by OERC.

16.9.4 An amount equal to 70% of dues worked out described as above shall be released to the DF notlater than 30 days from the Termination Date.

16.9.5 The balance 30% of dues shall be released on completion of physical verification and auditingbut not later than 60 days from Termination Date.

16.9.6 All the above payments including un-utilized BG shall be released after deductions on accountof any outstanding amount towards CESU, if any.

16.10 Mode of Termination Payment in case of Event of Default of Distribution Franchisee

The Termination payment to the DF shall consist of the following:

16.10.1 Un-recovered meter rent if any in the Franchise Area.

16.10.2 An amount equal to 70% of dues worked out described as above shall be released to the DF not

later than 7 days from the Termination Date.


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16.10.3 The balance 30% of dues shall be released on completion of physical verification and auditingbut not later than 30 days from Termination Date.

16.10.4 All the above payments including un-utilized BG shall be released after deductions on accountof any outstanding amount towards CESU, if any.

17. GOVERNING LAW AND DISPUTE RESOLUTION

17.1 Governing Law

17.1.1 This Agreement has been executed and delivered in India and its interpretations, validity and

performance shall be construed and enforced in accordance with the laws of India and also the

laws applicable to the State of Odisha.

17.1.2 Any dispute arising out of compliance/ non-compliance of this Agreement shall be exclusivelyunder the jurisdiction of court at Bhubaneswar and the High Court of Orissa at Cuttack.

17.1.3 Disputes between the consumers in the Franchise Area and CESU shall be referred to theexisting relevant Consumer Grievance Redressal Forums.

17.2 Amicable Settlement

17.2.1 Either Party shall be entitled to raise any dispute or differences of whatever nature arisingunder, out of or in connection with this Agreement including its existence or validity by giving a

written notice to the other Party, which shall contain:

(i) The details of the Dispute;

(ii) The grounds for such Dispute; and

(iii) All documentary evidence in support of its claim.

The other Party shall, within thirty (30) days of receipt of dispute notice issued under Article

17.2.1, furnish:

(i) Counter-claim and defences if any regarding the Dispute; and

(ii) All documentary evidence in support of its defences and counter-claim.

17.2.2 Both the parties shall constitute a Permanent Dispute Resolution Body having equalrepresentation from each of the parties. The disputes or differences arising under this

Agreement shall be referred for resolution to this body, which shall communicate its decision

within Thirty (30) days. Engineer-in-Charge of the Electrical Circle and Project Head (or

Engineer-in-Charge by whatever name called) of the Distribution Franchisee shall be part of this

Permanent Dispute Resolution Body.

17.2.3 In case of non-settlement of dispute by the Engineer – in - Charge and Project Head of theDistribution Franchisee, such dispute or differences shall be referred for decision to a body

constituted of CEO, CESU and Head, Distribution Franchisee (by whatever name called) which

shall communicate its decision within a period of 15(fifteen) days.

17.2.4 Dispute remains still unresolved either party may approach the OERC. The Parties agree that

the award of OERC shall be final and binding upon the Parties.


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17.2.5 The language of the submission to OERC shall be English.

17.2.6 Both the parties shall continue to perform their respective obligations during the conduct of

the Dispute Settlement Procedure.

17.3

Disputed Payments17.3.1 A claim submitted by the DF in terms of Article-8 can be disputed by CESU; however, CESU shall

remit the payment against the same to the DF within the stipulated time which CESU deems fit.

17.3.2 In case the dispute is resolved in the favour of the DF, CESU shall within 7 days of settlement ofsuch dispute pay the additional amount.

17.3.3 The information submitted by the DF and forming a basis for the claim can also be disputed by

CESU.

17.3.4 In case the dispute is resolved in the favour of CESU, the DF shall within 7 days of settlement of

such dispute refund the excess amount.

17.4 Severability

If any section, provision or Article of this Agreement is held by a court of competent jurisdiction

to be invalid or unenforceable, or is pre-empted by central or state laws, regulations or

regulatory agencies, the remainder of this Agreement shall not be affected, except as is

otherwise provided in this Agreement. However if the implication of such a situation is

significant, both the parties may mutually decide the future course of action.

18. FORCE MAJEURE

18.1.1 No Party shall be liable to the other Parties if, and to the extent, that the performance or delay

in performance of any of its obligations under this Agreement is prevented, restricted, delayed

or interfered with due to occurrence of any event of force Majeure including acts of God, acts

of any Government (d

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