02 July VIPL Response to balancedata gaps 1 / Queries Set Case 36 of 2015 Data Gaps/Deficiencies on the Petition submitted by VIPL

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1 Exhibit A VIPL Response to balancedata gaps 1 / Queries Set Case 36 of 2015 Data Gaps/Deficiencies on the Petition submitted by VIPL VIPL- Transmission: Determination of Capital Cost and Approval of ARR for FY and Replies to Balance Data Gaps - Set 1 (Query No. is same as was provided in Response to data gaps submitted by VIPL (Ref: VIPL/MUM/ /MERC/VIPL-T/1dated 17 th July 2015)) 14. VIPL has submitted IDC and Financing cost of Rs Crores in the Petition as compared to an in-principle approved IDC of Rs Crore. VIPL should submit the detailed working of IDC and Financing cost including monthly loan drawl and corresponding documentary evidences justifying the significant increase in IDC & Financing expenses for the Project. VIPL should submit the detailed calculation of IDC for the in-principle approved capital cost and the IDC calculation for revised capital cost submitted in the Petition, in excel format with all linked formulas and assumptions considered for calculation. VIPL-T Response: VIPL would like to submit that the financing of the project was done on combined basis for Transmission &Generation assets.there was no separate financing for Transmission assets. In view of above, thefollowing methodology was adopted for calculations of IDC for Transmission schemes 1 & 2: 1) Firstly, IDC of entire project including Generation &Transmission was calculated as on commissioning dates of Transmission schemes 1& 2. 2) Further, total IDC as calculated above is apportioned betweengeneration &Transmission assets in the ratio ofvalue assets of Generation &Transmission respectively, as on the date of Capitalisation of Transmission schemes. Detailed workings for original and actual IDC based on the above methodology is enclosed in Annexure Query 14. The explanationrelated toincrease in IDC is providedunder query No-2 (Sr. No 4 in table) indata Gaps Set 1 (Exhibit A submitted vide letter Ref: VIPL/MUM/ /MERC/VIPL-T/1 dated 17th July 2015). 15. VIPL should submit the loan-wise details regarding opening and closing loan and actual interest paid for FY Further, VIPL should also submit loan-wise applicable rate of interest at the beginning of the year for FY and FY along with documentary evidence. 1

2 VIPL-T Response:VIPL wants to submit that, there has been certain revisions since the time the petition dated 18 th Feb 2015 (Ref: VIPL/MUM/FEB15/MERC/01) till the time clarifications were sought on data-gaps by the Hon ble Commission. The said revisions will affect Interest on Long-term loan capital and Interest on working capital leading to change in the Annual Revenue Requirement. The following are the revisionsrequired to be made 1) Rate of Interest on Long-term Capital for FY is to be revised as 14%. VIPL. VIPL submits that there was an inadvertent mistake in the interest rate used for computation of interest on long-term capital for FY The same is to be revised as 14% in place of 13.75% which was mentioned earlier. VIPL request Hon ble Commission to condone the same. 2) Rate of Interest on Long-term Capital for FY is to be revised as 12.5%. The Hon ble Commission may appreciate the fact that VIPL has managed to reduce the interest rate of long term debt significantly by refinancing the Rupee Term Debt. The refinancing transaction of the loan got completed post submission of the petition dated 18 th Feb 2015 (Ref: VIPL/MUM/FEB15/MERC/01). As per the Reserve Bank of India circular ref no DBOD.BP.BC.No.31/ / dated August 07, 2014 the long term debt of existing infrastructure projects may be refinanced with longer repayment period for reducing the interest liability of the projects. In order to take advantage of improved credit profile, VIPL re-financed majority of its domestic rupee loan taken for the project to avail the following benefits: Reduce the interest rate on domestic rupee loan from earlier 14.00% pa to 12.50% pa Reduction in the number of lenders in the consortium for better coordination w.r.t. compliance of financial and non-financial covenants and ease of obtaining of financing related approvals in future from lenders The abovechanges will result into changes in the following sections of the petition submitted on 18th Feb Interest on Loan Capital 5.8. The Petitioner submits that since the project was funded as part of total power station, there is no segregated source wise funding identified towards creation of the transmission asset. However, for the purpose of the Interest rate for the project, the Petitioner submits that interest rate as per Rupee loan availed for the VIPL project has been considered for transmission assets. The ECB loan and Buyer s credit availed for the VIPL project (Generation and Transmission project as a whole) has been fully allocated to VIPL Butibori Generation project 2

3 for which the Hon ble Commission has approved provisional tariff vide its order dated February 17, 2014 in case 91 of With regard to interest rate on debt considered as explained above, VIPL-T has considered the interest rate on Indian Loan for FY 14-15, based on norms specified in the MYT Regulations As per the Reserve Bank of India circular ref no DBOD.BP.BC.No.31/ / dated August 07, 2014 the long term debt of existing infrastructure projects may be refinanced with longer repayment period for reducing the interest liability of the projects. In order to take advantage of improved credit profile, VIPL re-financed majority of its domestic rupee loan taken for the project to avail the following benefits: Reduce the interest rate on domestic rupee loan from earlier 14.00% pa to 12.50% pa Reduction in the number of lenders in the consortium for better coordination w.r.t. compliance of financial and non-financial covenants and ease of obtaining of financing related approvals in future from lenders The working of the same is provided in the financial model submitted along herewith as Appendix As has been stated earlier, the assets under Scheme 1 have been charged, tested and ready to use/put to use on 29 th June However, the supply of power started from April 1, 2014, as per PPA, hence, the loan corresponding to 70% of project cost as provided in Clause 4.12 above has been considered as the loan admitted from 1 st April 2014 onwards In accordance of the above, the interest on loan capital is computed as in the table below: Table 1: Interest on Loan Capital UoM FY Estimated FY Estimated Opening Loan Balance* Rs. Crs Loan Drawl Rs. Crs - - Normative Loan Repayment Rs. Crs Closing Loan Balance Rs. Crs Interest Rate % 14% 12.50% Interest on Loan Capital Rs. Crs *Opening loan for FY specified above is the loan as on date of supply of power as per PPA calculated based on 70% of Capex as on date of commissioning less actual accumulated depreciation for FY & FY

4 Interest on Working Capital Interest on working capital has been calculated according to Clause 36.2(c) of MYT Regulations 2011 reproduced as under: (c) Rate of Interest on working capital shall be on normative basis and shall be equal to the State Bank Advance Rate (SBAR) of State Bank of India as on the date on which the application for determination of tariff is made Considering the above regulation, interest on working capital has been computed at the rate of % per annum for FY & FY 15-16, which is equivalent to SBAR as on date of submission of this petition. The SBAR over the years is provided in the table below: Table 2: SBAR over the years Date From Date To Number of Days Interest Rate 7-Nov Mar % 1-Apr Mar % Since VIPL-T is a new transmission licensee, it does not have any historical records to analyse and determine the nature of requirement of working capital in relation to stores, materials and supplies. Therefore, for the purpose of this petition 1% of opening GFA has been considered as annual requirement for stores for the relevant financial year Accordingly VIPL-T has considered the following assumptions while computing the working capital: Table 3: Working Capital Assumptions In Months O&M Expenses 1 Stores, Materials and Supplies 1 Revenue 1.5 Assumption for Stores 1% of GFA Interest on Working Capital FY 15 & FY % The table below provides the IoWC in accordance with MYT Regulations 2011: 4

5 Table 4: Interest on Working Capital UoM FY FY Normative Normative O&M Expenses Rs. Crs Stores Rs. Crs Expected Revenue from Transmission Rs. Crs Total Working Capital Requirement Rs. Crs Interest on Working Capital Rs. Crs Since the Petitioner is not envisaging any security deposit to be taken from the users of its transmission system, no interest on security deposit has been considered for the purpose of computation of Transmission ARR. Clause 5.29 of the petition is also revised as under: Based on the above parameters, the Projected Aggregate Revenue Requirement for VIPL-T for FY to is summarized in the table below: Table 5: Aggregate Revenue Requirement MYT Period FY FY Operation & Maintenance Expenses Depreciation Expenses Interest on Long-term Loan Capital Interest on Working Capital and on consumer security deposits Other Expenses - - Income Tax (FY 15, FY 16) Contribution to contingency reserves Total Revenue Expenditure Return on Equity Capital Aggregate Revenue Requirement Less: Non Tariff Income Less: Income from Other Business - - Aggregate Revenue Requirement from Transmission Tariff The financial model at Appendix 5 of the Petition submitted dated 18th Feb 2015 is revised and attached along with this response to data gaps as Annexure to Query 15 (A).Due to the above changes, the similar figures are required to be revised in F1. (c), F1. (d), F1. (i)of the petition submitted on 18th Feb

6 The details of the combined rupee term loan for the Project (Generation & Transmission combined) is as FY under. Rs Cr Opening Rupee Term Loan for Closing Rupee Term Loan Interest on Rupee Term Loan paid Interest Rate at the beginning of the year 14.00% The interest rate at the beginning of the year for FY is 12.5%. Loan document for the project are executed outside Maharashtra State and as per The Maharashtra Stamp Act (Bom.Act LX 1958) Section 18 and 19, pages 117 and 118,any document executed out of the state and subsequently such instrument or a copy of theinstrument has been received in the state, then the stamp duty is chargeable. VIPL thereforereiterates that the relevant pages of unsigned copy of loan agreement are being submittedfor interest rate applicable at the beginning of the year FY as Annexure 15 (B). The authenticity of the submissions vis-à-vis the original loan agreement has been verified bythe representatives of the Hon ble Commission during previous tariff proceedings. In this regard, minutes of meeting for the same is being attached herewith as Annexure to Query 15 (C). Similarly, as the loan documents for refinanced Rupee term loan are also executed outside Maharashtra, relevant pages of unsigned loan document is being attached herewith as Annexure to Query 15 (D) for determining the interest rate applicable at the beginning of FY If required, authenticity of the loan document can be verified by Representatives of Hon ble Commission as done in earlier proceedings. Base PLR applicable at the beginning of FY and FY for Axis Bank is attached herewith as Annexure Query 15 (E).. 6