TERMS OF REFERENCE

INDIA: BECOM – Modernisation of Distribution Network

I. Objective

As part of ADB’s due diligence process, it requires a technical diligence to be performed on

BESCOM’s project before making a financing decision. This document sets out the Terms of
Reference for the due diligence consultant (the “Consultant”).
The technical due diligence will be aiming at:
• Reviewing the current situation in terms of condition of major equipment and facilities
(including high tension / low tension network), recent years’ performance, operation and
maintenance (O&M) practices as well as network losses;
• Reviewing and analysing the recent years’ power loads as well as the forecasts for the medium
to long term future, based on which the proposed investments will be justified;
• Assessing BESCOM’s present technical performance, review of system conditions reports
(based on sectors identified by the ADB team);
• Reviewing the project costs and implementation arrangements to confirm that they are
appropriate;
o Performing a detailed estimation of the expected benefits from implementation of
the investment projects, including achievable operation capacity and availability
improvements, reliability, losses reductions, reduction in operating costs and
energy efficiency etc.;
o Performing a qualitative and if possible quantitative analysis of the network
improvements after the implementation of the investment programme in terms of
integration with existing grid;
• Performing a detailed cost-benefit analysis of the ADB investment packages (linked to key
performance indicators) of the Project;
• Review all relevant documents which BESCOM has submitted to the regulatory body for the
approval of tariff and capex assumptions in the financial model;
• Analyse key risks and uncertainties of implementation of the project.
• Review and provide recommendations/corrective measures on designs and planning activities
related to the project being implemented by BECOM against national legislation, and ADB’s
requirements and good international practice;

II. Scope of Work

The Consultant will perform the following tasks.

1. Assessment of BESCOM’s general condition and investment needs. Through site visits to
representative locations and discussions with BESCOM’s technical management, the Consultant
will determine the present condition of the BESCOM system (which is falling under the project).
Having also reviewed and discussed with BESCOM management the company overall technical
and financial performance (i.e. losses and collection), the Consultant will list the main issues and

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 challenges (including future regulatory requirements) facing the Company as well as the
consequences if they remain unaddressed.
2. Review the project scope. The Consultant will review in detail BESCOM investment and operation
& maintenance plans as related to the HT/LV and related ADB Project (including the installation
of the optic fibre cables) - as prepared and presented by BESCOM. The Consultant will confirm
to ADB whether the priorities are properly allocated among the proposed measures and will
propose, if necessary, some amendments to the scope. The Consultant will also review and
confirm the prices for proposed items (taking into consideration any recent increases in prices /
costs for electrical equipment) as well as the implementation arrangements for both investment
and operation & maintenance. The Consultant will confirm if they are suitable and identify any
potential implementation risks (e.g. delays, cost overruns etc.). For the optic fibre cables, the
consultant will:
2.1. Opine on BESCOM’s business plan and capacity to bring optic fibre to market.
2.2. Review O&M cost implications of the project broken down between the underground
transmission lines and optic fibre cable business. This will include routine and unscheduled
maintenance costs.
2.3. Opine on the reasonableness of project construction schedule, critical paths, and potential
implications of delays on project risks and costs.
2.4. Opine on the base case cost (broken down between optic fibre business and transmission lines)
with regard to industry standards and adequacy of contingencies.
2.5. Validate that technical specifications of the optic fibre cables (and related equipment) are: (i)
appropriate given local market demand and competition and (ii) suitable to connect to
customer sites.

3. Implementation capabilities. The Consultant will review the organisational structure and
implementation capability of BESCOM (related to the Project only, but for the avoidance of doubt,
including the installation, operation and maintenance of optic fibre cables), including major
Project subcontractors, confirming whether they are appropriate and whether BESCOM and its
subcontractors will have adequate resources successfully to deliver the investment programme as
approved by the regulatory body.
3.1. The Consultant will evaluate the contractor’s technical expertise w.r.t optic fibre cables,
together with the track record of the supplier and contractor of the optic fibre cables.
3.2. Opine on the technical capacity of BESCOM to operate optic fibre cables.
3.3. Review staffing strategy and key staff experience and qualifications for the optic fibre
business.
3.4. Validate the capacity of BESCOM’s MIS, internal systems, and processes to facilitate billing,
collecting, and customer monitoring for the optic fibre business.
3.5. Highlight key risks and mitigants relating to construction permits, regulatory approvals, land
usage permits, rights of way (if any), etc.

4. Review the contract. The Consultant will review and opine on the technical aspects of the
engineering, procurement and construction contract as related to the HT/LV and related Project
including the installation of the optic fibre cables, identify potential risks emerging from these
contracts and suggest ways to mitigate them including: (i) Review the scope of work, terms and
conditions of the contract and the completeness of component coverage, and recommendations on
any modification or clarifications; (ii) comment on the appropriateness of performance tests (if
any) and final acceptance tests specified in the contract to indicate solid long-term performance;

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 and (iii) determine contractors' liabilities including performance security, post completion and
warranty.
5. Cost / benefit analysis. The Consultant will prepare a cost / benefit analysis for each of the project
components in terms of (i) reduction of commercial losses, (ii) reduction of technical losses, (iii)
reduction of CO2 emissions as a result of reduced technical and commercial losses, (iv)
improvement in network reliability with reference to the system average interruption frequency
index (SAIFI) and system average interruption duration index (SAIDI) metrics, (v) integration
into the energy system, (vi) impact on BESCOM’s profit and loss and any other benefits by the
installation and operation of the optic fibre cables based on the analysis on the market demand
with respect to the optic fibre cables, and (vii) impact on the overall company’s profit and loss and
cash flow statements together with any other benefits that the Consultant may anticipate, including
reduction / increase in O&M costs.
6. Financial model. The Consultant will verify BESCOM’s investment, maintenance and other cost
and project phasing assumptions in the financial model. In particular, the consultant will provide:
(a) support and advice on technical input assumptions and appropriate sensitivities; (b) validation
that projected revenues are consistent with technical assumptions and cost-plus tariff principles,
which incorporate RoE, depreciation, permitted O&M costs, permitted borrowings, power
purchase costs, interest and opex costs.

III. Implementation Arrangements, Reporting and Deliverables

At least one week before the site visit, the Consultant will provide ADB and BESCOM with a list of
particular locations and people to meet during the visit together with a tentative agenda.
The Consultant will submit the following deliverables in English:
Technical Assessment:
1. Summary of Key Findings – within 1 - 2 weeks of the site visit;
2. Draft Final Report within 2 weeks of the site visit and no later than [insert date];
3. Final Report within 1 weeks of receiving the ADB’s comments on the draft version.
The reports shall include a key issues matrix which will provide a summary list of the key risks
identified during due diligence and discussed in the report. The key issues matrix shall assign a risk
rating, state any risk mitigant(s) and give the status of each risk item.
All reports will be provided both in electronic formats (Word and Excel as well as pdf-format).

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ANNEX 1

Outline Format for the Report

The Consultant is expected to use its professional judgement to determine what aspects (either listed
below or additional) are relevant to the Assignment.

Executive Summary

1 | Nature of the Project to be Supported

• Description and context of the proposed Project
2 | The Existing Company
2.1 | Operations, Facilities and Assets
• Physical description (including both past and current activities)
• Location
• Site history
• Current operations
• Organisation of environmental and social management
2.2 | Approach and Methodology

• Summary of national, local, and any other applicable laws, regulations, and standards
• Audit and site investigation procedure

3 | Conclusions and Recommendations

3.1 | Summary of Regulatory Compliance
3.2 | Summary of Key Impacts, Risks and Liabilities
3.3 | Corrective and Mitigation Measures

Appendices to include
• Details of Persons Consulted
• Maps/Photo/video/CD log/List of key documents reviewed
• Copies of Permits and other documentation

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