1. CPCS Transcom Limited Solutions for growing economies Industry and Transaction Review Conference The Reductions in Aggregate Technical and Non- Technical Loss Approach to Bidding Arif Mohiuddin November 28, 2011

2. Solutions for growing economies 2 Purpose for the Disco Transactions ATC&C Defined Method of ATC&C Bid Evaluation Post-Privatisation Conclusion Outline

3. Solutions for growing economies 3 The PHCN Successor Distribution Companies are characterized by high levels of Technical, Commercial and Collection Losses The key objectives are to – reduce losses – increase connectivity and access to power through enhanced investments – provide reliable power supply – provide clear parameter for assessing operators Purpose for the Disco Transactions

4. Solutions for growing economies 4 ATC&C is defined as the Aggregate Technical, Commercial and Collections Loss of a Distribution Company This is the difference between the amount of electricity received by the Distribution Company and the amount received from customers ATC&C Defined

5. Solutions for growing economies 5 Example:  Disco Receives 100 MWh of electricity from Transco in a particular month  Disco Bills consumers $90 for 90MWh  Disco Collects $80 from consumers for that month ATC&C Defined

6. Solutions for growing economies 6 The Aggregate Technical and Commercial Loss is therefore: 1 – (90 MWh/100 MWh) = 0.1 or 10% The Collections Loss is therefore: 1- (80/90) = 0.11 or 11% ATC&C Defined

7. Solutions for growing economies 7 The collection loss only occurs on the 90% of the electricity that was billed for To get the ATC&C we will multiply the collection loss by 0.9 and add it to the Aggregate technical and commercial loss ATC&C loss = 0.1 + 0.9x0.11 = 0.2 =20% ATC&C Defined

8. Solutions for growing economies 8 Bidders will Bid on the relative reduction in losses For Example If a bidder bids to reduce the loss by 10% in year one that means – If the present loss is 50%, the bidder would be expect to reduce the loss to 45% (i.e. 1- (50 x.1) = 45) Method of Bid Evaluation

9. Solutions for growing economies 9 Each bid will contain a proposed 5 year loss reduction trajectory Bids will be evaluated based on the lowest end level in losses for a particular distribution company Method of Bid Evaluation

10. Solutions for growing economies 10 Assume a Disco currently has an ATC& loss level of 35% Bidder ABCYear 1 Year 2 Year 3 Year 4 Year 5 Results (sum) % Loss Reduction Committed by Bidder by year 5%8%10% 12% Projected ATC&C Loss Level (%) 33.25%30.59%27.53%24.50%21.56% Reduction from previous year's ATC&C level 1.75%2.66%3.06%3.03%2.94% Discounted ATC&C loss Reduction (10% discount rate used) 1.59%2.20%2.30%2.07%1.83%9.98% Method of Bid Evaluation

11. Solutions for growing economies 11 Method of Bid Evaluation- Experimental Case We expect the loss reductions during control period to be on accelerated Basis

12. Solutions for growing economies 12 Post-Privatisation The present numbers used to calculate the ATC&C loss are based on the market operators’ data A baseline accurate loss level will be established within a reasonable timeframe The loss numbers that are proposed by the winning bidder will then be incorporated into MYTO model

13. Solutions for growing economies 13 Any increased level of required investments would need to be agreed with NERC As tariff is based on targeted loss, – failure to reach the loss target level will trigger loss of profit – Exceeding loss target will trigger higher profit If bidders consistently do not meet their loss reduction targets, NERC may further decide to revise the capex amounts allowed for a bidder under their tariff Post-Privatisation

14. Solutions for growing economies 14 FGN is determined to have successful Disco transactions Further measures are being considered – to attract credible and serious operators only – to avoid unrealistic and unachievable loss targets Conclusion

15. CPCS Transcom Limited Solutions for growing economies Thank you Questions: phcnprivatisation@cpcstrans.com November 28, 2011