THE TATA POWER COMPANY LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
TO
THE MEMBERS,
The Directors are pleased to present their Ninety - First Annual Report on
the business and operations of the Company and the statements of account
for the year ended 31st March, 2010.
1. FINANCIAL RESULTS Figures in Rs. crores
Standalone Consolidated
FY 2010 FY 2009 FY 2010 FY 2009
(a) Net Sales/Income from 7,098.27 7,236.23 18,985.84 18,061.32
Other Operations
(b) Operating Expenditure 5,219.66 6,095.29 15,132.64 14,411.69
(c) Operating Profit 1,878.61 1,140.94 3,853.20 3,649.63
(d) Add: Other Income (incl. 281.58 632.35 588.88 563.94
net gain on exchange)
(e) Less: Interest and 422.99 327.76 781.82 812.88
Finance charges
(f) Profit before Depreciation 1,737.20 1,445.53 3,660.26 3,400.69
and Tax
(g) Less: Depreciation/ 477.94 328.85 892.96 936.86
Amortisation/Impairment
(h) Profit before Tax 1,259.26 1,116.68 2,767.30 2,463.83
(i) Less: Provision for Taxes 320.50 194.48 628.66 1,165.10
(including provision for
Deferred Tax and Fringe
Benefit Tax)
(j) Net Profit after Tax 938.76 922.20 2,138.64 1,298.73
(k) Less: Minority Interest - - 233.46 107.56
(l) Add: Share of Profit of - - 61.66 27.57
Associates
(m) Net Profit after Tax, 938.76 922.20 1,966.84 1,218.74
Minority Interest and Share
of Profit of Associates
(n) Less: Statutory (8.89) (45.30) (8.89) (45.30)
Appropriations
(o) Distributable Profi ts 947.65 967.50 1,975.73 1,264.04
(p) Add: Balance brought forward 2,253.21 2,105.22 2,476.54 2,067.17
from the previous year
(q) Add: Reserves acquired - - (1.90) -
during the year
(r) Balance 3,200.86 3,072.72 4,450.37 3,331.21
which the Directors have
appropriated as under to:
(i) Proposed Dividend 285.05 255.26 285.05 255.26
(ii) Dividend 0.31 0.72 0.31 0.72
(iii) Additional Income - 37.98 31.75 49.05 44.86
tax on Dividend
(iv) Debenture Redemption 59.77 31.78 59.77 31.78
Reserve
(v) General Reserve 400.00 500.00 410.61 519.28
(vi) Special Reserve Fund - - 3.02 0.77
(vii) Self Insurance Reserve - - 2.00 2.00
TOTAL 783.11 819.51 809.81 854.67
(s) Leaving a balance of 2,417.75 2,253.21 3,640.56 2,476.54
to be carried forward
2. FINANCIAL HIGHLIGHTS
2.1 Standalone results:
During the year, the Company reported its highest ever Profi t after Tax
(PAT) of Rs. 938.76 crores, as against Rs. 922.20 crores for the previous
year, a growth of 2%. The Operating Revenue was lower at Rs. 7,098.27
crores, as against Rs. 7,236.23 crores, a decline of 2%. Operating Revenue
was lower mainly due to lower fuel cost in the Mumbai regulated business.
The Operating Profi t was higher by 65% due to operational effi ciencies
and higher volume of business. Other Income was lower at Rs. 281.58 crores,
as against Rs. 632.35 crores, a decline of 55%. This was mainly due to
lower gain on exchange of Rs. 51.98 crores as against Rs. 144.33 crores for
the previous year. The previous year included profi t of Rs. 255.78 crores
from the sale of long term investments as against Rs. 0.03 crore during the
year under review.
Earnings per share (basic) decreased by about 7% to Rs. 40.77 as against
Rs. 43.69 in the previous year. This is mainly due to the increase in the
equity capital (from 22,14,24,443 shares to 23,73,07,236 shares) due to the
conversion of Foreign Currency Convertible Bonds (FCCBs) and issue of
shares underlying Global Depository Receipts (GDRs).
2.2 Consolidated results:
The Consolidated Operating Revenue at Rs. 18,985.84 crores grew by 5% and
PAT at Rs. 1,966.84 crores grew by 61% as against Rs. 18,061.32 crores and
Rs. 1,218.74 crores respectively, for the previous year. The increase in
the Consolidated Operating Revenue was primarily on account of the higher
coal sales in Indonesian Coal Companies and higher revenue in North Delhi
Power Limited (NDPL). The Consolidated PAT is higher mainly on account of
higher revenue, forex gain in Coastal Gujarat Power Limited (CGPL) and
lower impairment of investment compared to the previous year.
3. DIVIDEND:
The Directors of your Company are pleased to recommend a higher dividend of
120% (Rs. 12 per share) for the approval of the shareholders (FY09 dividend
of Rs. 11.5 per share).
4. EXISTING BUSINESSES:
As of 31st March, 2010, the Company had an installed capacity of 2,977 MW
based on various fuel sources: thermal (coal, gas, oil), hydroelectric
power, renewable energy (wind) and waste gases. The details of the
installed capacity are given in Table 1.
Table 1 : Details of installed capacity
Fuel Source Location State Installed Category
Capacity Total
(MW) (MW)
Thermal - Trombay Maharashtra 1,580 }
coal/oil/gas Jojobera Jharkhand 428 } 2,089
Belgaum Karnataka 81 }
Thermal-waste Haldia West Bengal 120 120
gases
Thermal-production Jamshedpur Jharkhand 120 120
gases
Hydro Bhira Maharashtra 300 }
Bhivpuri Maharashtra 75 } 447
Khopoli Maharashtra 72 }
Renewables Wind farms Maharashtra, 201 201
Gujarat,
Karnataka
Total 2,977 2,977
4.1 Operational Highlights:
The Company generated 15,946 Million Units (MUs) of power from all its
power plants during the year as compared to 14,807 MUs in the previous
year, an increase of 8%.
4.2 Tata Power - Mumbai Operations
4.2.1 Generation:
The generation Units are at Trombay (1,580 MW thermal), and Bhira, Bhivpuri
and Khopoli (447 MW hydroelectric).
* Trombay Thermal Power Station
The Trombay Thermal Power Station has an installed capacity of 1,580 MW, of
which primarily 750 MW is coal fi red, 650 MW uses oil and the balance 180
MW uses gas as a source. However, Unit 5 also has multi - fuel fi ring
capability.
During the year, the station recorded its highest ever generation of 10,168
MUs (previous best of 10,002 MUs in FY08) with an all time high coal fi
ring of 23.56 lakhs MT, due to commissioning of Unit 8. The operational
performance of the current Units is given in Table 2.
Table 2 : Details of thermal power generation for FY10 - Trombay
Generation (MUs) Generation Plant Load
Availability Factor (PLF)
FY10 FY09 FY10 FY09 FY10 FY09
Trombay 10,168 9,845 87% 91% 73% 84%
During the year, the Company successfully completed the overhaul of Unit 5
during which the Unit underwent major renovation and modernization. The
station was bestowed a number of awards. Chief among them are 'Best
Operation and Maintenance Project in Asia' by Asian Power Awards 2009,
'Award for Trombay Thermal Power Station Unit 8 - Commissioning of the Unit
before the stipulated target time' by the Council of Power Utilities and
Silver Shield for Unit 8 for speedy completion and commissioning of project
by the Ministry of Power, Government of India under its Comprehensive Award
Scheme 2008 - 09.
* Hydro Stations - Bhira, Bhivpuri and Khopoli
The Company has three hydroelectric power generating stations, totaling 447
MW, located in the Raigad district of Maharashtra.
During the year, the three hydro power plants collectively generated 1,455
MUs as against 1,151 MUs generated in the previous year, an increase of
26%. The Company completed the overhaul of 24 MW Unit 8 at Khopoli in 15
days (earlier cycle time of 17 days).
Table 3 : Details of hydroelectric power generation for FY10
Generation (MUs) Generation Plant Load
Availability Factor (PLF)
FY10 FY09 FY10 FY09 FY10 FY09
Khopoli 259 274 98% 96% 41% 43%
Bhira (Old) 349 221 99% 98% 27% 17%
Bhira 542 356 99% 90% 41% 27%
Pumped
Storage
Unit
Bhivpuri 305 300 97% 96% 46% 46%
Total 1,455 1,151 99% 95% 37% 29%
4.2.2 Transmission:
The Company has about 1,100 Circuit Kms. of transmission network in Mumbai
Operations area, comprising 973 Circuit Kms. of 220 kV / 110 kV overhead
lines and 124 Circuit Kms. of 220 kV / 110 kV underground cables, which
connects Trombay and the hydro generating stations to 17 receiving stations
(RSs) spread across the Mumbai Operations area. The transmission lines are
used by the Company's own distribution business, Brihanmumbai Electric
Supply and Transport Undertaking (BEST) and Reliance Infrastructure Limited
(RInfra). The major highlights for the year:
* Capacity expansion was completed for meeting projected growth in
Distribution Companies (discoms) and Railway load requirement.
* Under Jan Jagruti Abhiyaan 2010 initiative, an awareness campaign for
community safety and overhead line fault reduction, awareness programs for
school children were held in Borivali and Kalyan section, covering 1,115
students from 6 schools.
During the year, transmission grid availability was 98.86% as against the
Maharashtra Electricity Regulatory Commission (MERC) norm of 98%.
4.2.3 Distribution:
The Company's distribution business in Mumbai has attained tremendous
growth during the year with the addition of 4,225 consumers on the
Company's wires and 28,270 changeover consumers. MERC, in its order dated
15th October, 2009, allowed changeover of consumers from RInfra to the
Company and vice versa (Refer Section 12.4.4). The major highlights for the
year:
* All reliability indices have improved compared to the previous year due
to faster restoration of power supply to consumers using distribution
automation system and reduction in interruptions due to network
improvement.
* To meet the increased demand with changeover of consumers, the Company
has undertaken various actions including commissioning 2 distribution
substations (DSS), 50 consumer substations (CSS) and 105 Circuit Kms. of
cable network (the highest since FY01) to take the total network length to
more than 1,350 Circuit Kms., development of 'Customer Connect' portal for
consumers, 'Fleet on Street' team with laptop computers and web access,
etc.
* Tata Power Distribution was bestowed the Gold Shield by the Ministry of
Power, Government of India under its Comprehensive Award Scheme for
meritorious Operations and Maintenance (O & M) performance in the power
sector for FY09.
4.3 Tata Power Captive Power Plant (CPP) / Independent Power Producer (IPP)
business
Table 4 : Details of thermal power generation for FY10 - CPP/IPP
Generation (MUs) Generation Plant Load
Availability Factor (PLF)
FY10 FY09 FY10 FY09 FY10 FY09
Jojobera 3,002 3,009 93% 94% 80% 80%
Belgaum 394 447 79% 91% 55% 63%
Haldia 608 179 89% 85% 70% 17%
4.3.1 Jojobera Thermal Power Station:
The Jojobera Thermal Power Station in Jharkhand has an installed capacity
of 428 MW. During the year, the station recorded a generation of 3,002 MUs
as compared to 3,009 MUs in the previous year. Unit 1 and Unit 3 underwent
complete turbine overhaul for the fi rst time since their commissioning,
resulting in signifi cant improvement in the heat rate of these Units.
4.3.2 Belgaum Thermal Power Station:
The Belgaum Thermal Power Station, an IPP in Karnataka, has a heavy fuel
oil based generation capacity of 81 MW. During the year, the plant
generated 394 MUs as compared to 447 MUs in the previous year, a decrease
of 12% due to lower demand by Karnataka Power Transmission Corporation
Limited during the rainy season. Major overhaul was carried out for Units
1, 3 and 4.
4.3.3 Haldia Power Plant:
During the year, the Company commissioned Unit 3 of 30 MW, resulting in
increase in the installed capacity of the plant to 120 MW. These Units use
hot coke oven gas from Hooghly Metcoke and Power Company Limited to produce
steam for power generation. One sixth of the power generated is contracted
to West Bengal State Electricity Distribution Company Limited and the
balance is traded through Tata Power Trading Company Limited (Tata Power
Trading). During the year, the collective generation of all Units was 608
MUs. The Company completed major repairs on Unit 1, annual overhauling of 6
boilers of Unit 2 for license renewal and renovation job of both circuits
of 132 kV transmission line.
4.4 Wind Generation:
During the year, the Company commissioned an additional 42 MW of wind power
capacity, taking the total capacity to 201 MW. The installed capacity for
wind power generation at various locations is given in Table 5.
Table 5 : Details of installed capacity - wind
Location State Installed
Capacity (MW)
Supa Maharashtra 17
Bramanvel Maharashtra 11
Khandke Maharashtra 50
Samana Gujarat 50
Gadag Karnataka 50
Sadawaghapur Maharashtra 18
Visapur Maharashtra 4
Total 201*
* Total does not add up due to rounding off.
The collective generation by the wind farms was 320 MUs during the year as
against 177 MUs in the previous year.
4.5 Power Services Business:
The Power Services business is a new division created within the Company
with a view to leverage the Company's capability and experience in power
plant operations and maintenance, project management, EPC management,
specialized testing services and all related activities. It offers
customized solutions to new as well as existing power plants and
distribution networks. The Company has signed an MoU with Korea East West
Power Company Limited, one of the largest generation utilities of the
Republic of Korea (South Korea), initiating technical cooperation in the fi
eld of O&M of generation assets. During the year, the Power Services
division has bagged contracts as below:
* O&M Service for upcoming 80 MW coal fi red thermal power plant at
Gummidipoondi, Chennai of OPG Power Generation Private Limited.
* Project Management Services for 300 MW coal fi red thermal plant at
Bhadreshwar in Gujarat of OPG Power Gujarat Private Limited.
* Specialised Services - GIS Testing Services were delivered to Utility
EnergyTech for HV testing of 245 kV GIS at 3 substations in Mumbai.
* EPC Management Services - EPC job of 11 kV package substation along with
cables for National Stock Exchange of India Limited, Mumbai.
4.6 Other business - Tata Power Strategic Electronics Division (SED):
SED has been a leading domestic player in the defence systems and
engineering space for over four decades and has now emerged as a prime
contractor to Ministry of Defence (MoD) for indigenous defence products and
systems. SED is closely working with MoD and defence laboratories to
provide products and solutions for the defence requirements of the country,
and is now recognised as one of the premier suppliers of weapon systems in
India. During FY10, SED had a turnover of Rs. 122.84 crores as against Rs.
101.01 crores in FY09, a growth of 22%. SED ended the year with an order
backlog in excess of Rs.198 crores. During the year, SED scored a number of
achievements. Notable among them are:
* SED successfully cleared the Joint Receipt Inspection (JRI) for the fi
rst two lots of Pinaka launchers and command posts. The third and fourth
lots have successfully undergone Factory Acceptance Tests.
* SED has recorded signifi cant success in the offsets opportunity by
clinching fi ve orders worth about Rs. 13 crores from IAI, Israel. Phased
deliveries have already started.
* Phase II of Bengaluru factory upgrade is underway. With increased private
sector participation in defence, SED has the necessary credibility and
capability to be a long term reliable partner for India's defence forces.
5. NEW GENERATION PROJECTS
5.1 Coastal Gujarat Power Limited:
CGPL, the Company's wholly owned subsidiary, is implementing the 4,000 MW
Ultra Mega Power Project (UMPP) at Mundra in Gujarat. The project,
estimated to cost Rs. 17,000 crores, is progressing as per schedule, with
engineering, procurement and construction activities in full swing. The
cumulative progress till the end of March 2010 was approximately 53% with
total capital commitments of over 81% of total equipment ordering and a
total actual expenditure of Rs. 7,270 crores. Civil, structural,
mechanical, electrical and control and instrumentation work is underway
with over 11,500 direct and indirect workmen deployed at the site.
The boiler hydro - test for Unit 1 was successfully completed on 31st
March, 2010. 220 kV substation has been charged and construction power is
being drawn from this. The fi rst Unit is expected to be commissioned
during the fi rst half of FY12, as per accelerated commitments given by the
Company to the power procurers. Rapid progress is being made on the other
Units as well. The progress of construction activities for the critical
linkages viz. port and transmission being undertaken by Mundra Port and
Special Economic Zone Limited and Power Grid Corporation of India Limited
(PGCIL) respectively are also progressing as per schedule. Adequate safety
measures have been put in place including training and systems developed
with the help of leading safety experts like DuPont. Safety events are
organized regularly to sensitize workers.
The Company is receiving loan disbursements as per the funding plan. CRISIL
has assigned CGPL 'A+' rating refl ecting the good progress made by the
project.
CGPL has taken several initiatives for the local community in the area of
livelihood and income generation, education and health as part of its
community relationship programme involving local communities. A green belt
development plan is being prepared to enhance environment improvement in
the project area.
The Company and CGPL each have a subsidiary in Singapore - Trust Energy
Resources Pte. Limited and Energy Eastern Pte. Limited respectively - for
meeting the coal and shipping requirements of the project.
5.2 Maithon Joint Venture Project:
Maithon Power Limited (MPL), a joint venture (JV) between the Company (74%)
and Damodar Valley Corporation (26%), is constructing a 1,050 MW (2 x 525
MW) power plant at Maithon in Jharkhand. The Company is rendering project
management services to MPL and will provide O&M services to MPL post
commissioning.
The project has received all the statutory clearances including
environmental clearance from the Ministry of Environment and Forests
(MoEF). All the Power Purchase Agreements (PPAs) have been signed and power
evacuation arrangement is in place.
Ordering for all packages has been completed within the budget. Major
equipments like boiler drum, boiler pressure parts, cooling towers, turbine
equipments, etc. have already been erected and balance work is progressing
as per schedule. Unit 1 is expected to be commissioned in the second half
of FY11, the major challenge being the railway linkage from the main line.
However, coal transportation by road is being worked out for Unit 1 to
ensure timely commissioning. MPL is fi rming up fuel supplies from Coal
India Limited and its subsidiaries and certain identifi ed sources. Fuel
Supply Agreement (FSA) has been signed with Bharat Coking Coal Limited for
supply of 1.6954 million tonnes per annum (MTPA) on 26th March, 2010.
5.3 Diesel Generation (DG) Capacity:
The Company has sold 6 DG sets (60 MW capacity) in view of high fuel costs.
The remaining 4 DG sets are being refurbished and will be progressively
commissioned in the coming year.
5.4 International Projects:
5.4.1 Dagachhu Hydro Power Project, Bhutan:-
The 114 MW (2 x 57MW) Dagachhu project is being implemented by the Company
jointly with Druk Green Power Corporation Limited of Bhutan. Ordering for
the project has been completed and contractors have mobilized at site. All
statutory clearances, land, water and environment clearances have been
received and PPA for the entire quantum of power has been signed. The
project is expected to be commissioned in FY14.
5.5 Renewable Projects:
5.5.1 Wind Power:-
The Company is developing wind power projects of over 200 MW, of which 150
MW is proposed to be commissioned during FY11 in Maharashtra and Tamil
Nadu.
5.5.2 Solar Power:-
The Company is implementing a 3 MW grid connected solar photovoltaic (PV)
plant, one of the largest of its kind in India. Work has commenced at the
site. The National Solar Mission mandates that sub - 5 MW grid connected
solar power projects sell power to the State discom. Project commissioning
is expected in Q2 FY11.
5.6 Projects Under Planning:
5.6.1 Coastal Maharashtra Project:-
During the year, the Company has made substantial progress in the project.
Rehabilitation and Resettlement (R&R) authority of Government of
Maharashtra (GoM) has approved R&R proposal of the Company. GoM has issued
the gazette notifi cation in October 2009 under Section 32 (1) of the
Maharashtra Industrial Development Act, 1961. Environmental clearance for
the project (initial phase - 1,600 MW) has been granted by MoEF expert
committee. Lease agreement for water front usage and construction of coal
berth has been signed with Maharashtra Maritime Board. The plant is
expected to be commissioned within 3 years of completion of the land
acquisition, which is expected to be completed during the year.
5.6.2 Naraj Marthapur Project, Orissa:-
The major clearances for the 1,320 MW Naraj Marthapur project have been
obtained. Process is on for obtaining environmental clearance from MoEF.
The plant is expected to be commissioned within 3 years of completion of
the land acquisition, which is expected to be completed during the year.
The Company has been allotted the Mandakini coal block located in the Angul
district of Orissa, estimated to have reserves of 291 million tonnes, along
with Monnet Ispat and Energy Limited and Jindal Photo Limited. The mining
plan is already approved and the detailed project report has been prepared.
Land acquisition process has started. Coal production is scheduled to start
by Q4 FY11. The Company will get a coal supply of 2.5 MTPA for about 660 MW
generation at the Naraj Marthapur thermal power plant in Orissa. The
balance coal requirement for the project is proposed to be secured through
linkage coal.
5.6.3 Tiruldih Power Project, Jharkhand:-
The Company has initiated steps to acquire 900 - 1,200 acres of land at
Tiruldih in Seraikela Kharsawan district of Jharkhand to set up 1,980 MW (3
x 660 MW) power plant in 2 phases, as part IPP and part CPP for Tata Steel
Limited (Tata Steel) through Industrial Energy Limited (IEL), a JV of the
Company (74%) with Tata Steel (26%). The process of land acquisition has
commenced and is expected to be completed by the end of FY12. The
commissioning of the plant is expected to take about 3 years thereafter.
The Company was allotted the Tubed coal block jointly with Hindalco
Industries Limited (Hindalco). This block is estimated to have about 120
million tonnes of reserves and is located in the Latehar district of
Jharkhand. Hindalco and the Company have formed a JV company, Tubed Coal
Mines Limited, to develop the coal block. Mining Plan has been approved for
6 MTPA of which the Company's share of 2.4 MTPA is expected to suffi ce for
about 660 MW of thermal generation. The balance coal requirement for the
plant is proposed to be secured through Tata Steel and linkage coal. The
coal block is expected to be operational by FY13.
5.6.4 Project Trust (Corus), The Netherlands:-
The Company and Tata Steel are in discussions to develop the 525 MW (3 x
175 MW) production gases based project at Ijmuiden in The Netherlands.
5.6.5 Tamakoshi - 3 Hydro Electric Project, Nepal:-
Discussions are on with SN power for jointly setting up this project
(expected to be 880 MW) and providing surplus power for sale in Indian
markets on merchant basis. SN Power is in discussions with the Government
of Nepal for the clearances required.
6. KEY SUBSIDIARIES:
6.1 Industrial Energy Limited:-
IEL has commissioned its fi rst 120 MW Power House 6 (PH6) inside Tata
Steel Works at Jamshedpur. This Unit utilizes the waste blast furnace gas
from Tata Steel. During the year, PH6 generated 563 MUs.
Table 6 : Details of thermal power generation for FY10 - IEL
Generation (MUs) Generation Plant Load
Availability Factor (PLF)
FY10 FY09 FY10 FY09 FY10 FY09
IEL - PH6 563 - 89% - 54% -
Jamshedpur*
* Commissioned in FY10.
IEL is also implementing the following project:
6.1.1 Unit 5 at Jojobera:
A 120 MW coal based power plant is being constructed at the Company's
existing site at Jojobera. All the major construction works at the site
have been completed and the Unit has been synchronized on 13th April, 2010.
Balance work related to mills, bunkers, coal handling and ash handling
system is in progress. Commercial Operation Declaration for the Unit is
expected in the first half of FY11.
6.2 Maithon Power Limited:
MPL is constructing a 1,050 MW (2 x 525 MW) power plant at Maithon in
Jharkhand (Refer Section 5.2).
6.3 Powerlinks Transmission Limited (PTL):
PTL is a JV between the Company (51%) and PGCIL (49%). PTL transmits power
from the 1,020 MW Tala Hydro Electric Power Project in Bhutan and surplus
power from the Eastern / North - Eastern region of India through its
transmission lines between Siliguri (West Bengal) and Mandaula (Uttar
Pradesh), spanning a distance of 1,166 Kms. The availability of
transmission line was maintained at 99.94% for Eastern Region and 99.79%
for Northern Region in FY10 as against the minimum stipulated availability
of 98%. During FY10, PTL has earned revenues of Rs. 300.98 crores, a growth
of 18% over previous year revenues of Rs. 254.49 crores and a PAT of Rs.
108.09 crores, a growth of 65% over the previous year PAT of Rs. 65.34
crores. PTL has recommended a dividend of Rs. 1.8 per share for FY10.
6.4 North Delhi Power Limited:
NDPL, a discom supplying power to North Delhi, is a subsidiary of the
Company (51% share), the balance being held by Delhi Power Company Limited
(a Government of Delhi undertaking). NDPL services over one million
consumers spread over 510 sq. kms. in the North Delhi area. The peak load
in this area is about 1,259 MW, with energy consumption of over 6,900 MUs.
NDPL has earned revenues of Rs. 3,393.81 crores during FY10, a growth of
about 38% over the previous year (Rs. 2,463.70 crores). The Company earned
PAT of Rs. 350.73 crores in FY10 compared to Rs. 171.47 crores in FY09. PAT
for FY10 includes reversal of deferred tax liability of earlier years
amounting to Rs. 139 crores. The Aggregate Technical and Commercial (AT&C)
losses have been reduced at the end of FY10 to around 14.7% against the
regulatory target of 18.7%.
During FY10, NDPL was bestowed the National Award (Silver Shield) for
Meritorious Performance for 2008-09 by the Ministry of Power, Government of
India, the Asian Power Utility of the year Award for 2009 by Asian Power
Awards, Singapore, and the IMM Eminent Organization Award for Excellence by
the Institute of Marketing and Management.
6.5 Tata Power Trading Company Limited:
Tata Power Trading, incorporated in December 2003 with an equity capital of
Rs. 2 crores, was the fi rst company in India to receive a power trading
license from the Central Electricity Regulatory Commission (CERC) in June
2004. Tata Power Trading transacted 4,075 MUs during the year as compared
to 2,996 MUs in the previous year and has shown a CAGR of 43% over the past
5 years. It was ranked the third largest trader with a market share of
9.83% in 2009. This has resulted in about 9% increase in revenues to Rs.
2,357.72 crores from Rs. 2,171.93 crores in the previous year. The PAT
increased by 8% to Rs. 8.24 crores as against Rs. 7.63 crores in the
previous year.
6.6 NELCO Limited (NELCO):
NELCO, established in 1940, is listed on Bombay Stock Exchange Limited
(BSE) and National Stock Exchange of India Limited (NSE). The Company,
along with its subsidiary, holds 50.1% stake in NELCO. NELCO's current
businesses cater to defence, railways, steel plants and energy sector
through various products and solutions of integrated security solutions
(intrusion detection, border security and surveillance, homeland security
solutions, etc.), power electronics (converters and control electronics)
for railways, energy saving drives solutions for industries and Supervisory
Control and Data Acquisition (SCADA) systems for power utilities. Tatanet
Services Limited (Tatanet), a subsidiary of NELCO, provides satellite
connectivity solutions to more than 400 corporates and enterprises in India
through VSAT and sets up turnkey communication networks in India and
abroad. NELCO proposes to transfer the undertakings which comprise traction
electronics, SCADA and industrial drives businesses as a 'going concern' on
a slump sale basis to Crompton Greaves Limited for a total consideration
not exceeding Rs. 92 crores, subject to the receipt of all consents,
approvals and permissions as may be required, including the consent of the
shareholders of NELCO.
During the 18 months period ended 30th September, 2009, NELCO has posted a
turnover of Rs. 354 crores and net profi t of Rs. 3.28 crores. NELCO had
extended its fi nancial year by 6 months upto 30th September, 2009.
6.7 Af-Taab Investment Company Limited (Af-Taab):
Af-Taab is a wholly owned investment subsidiary of the Company. During
FY10, Af-Taab earned an operating income of Rs. 39.55 crores and PAT of Rs.
15.07 crores, as against Rs. 11.79 crores and Rs. 3.86 crores respectively
in FY09.
6.8 Chemical Terminal Trombay Limited (CTTL):
CTTL is a wholly owned subsidiary of the Company offering warehousing
facility for organic and inorganic chemicals including petrochemicals.
During FY10, CTTL earned an operating income of Rs. 11.15 crores and PAT of
Rs. 3.41 crores, as against Rs. 10.64 crores and Rs. 2.88 crores
respectively in FY09.
7. INVESTMENTS IN INDONESIAN COAL COMPANIES:
The outstanding debt taken for the acquisition of a 30% stake in two major
Indonesian coal companies, PT Kaltim Prima Coal and PT Arutmin Indonesia
and related companies (Coal Companies) stood at USD 695 million as on 31st
March, 2010 compared to USD 764 million as on 31st March, 2009.
The performance of the two Indonesian thermal coal companies, viz. PT
Kaltim Prima Coal and PT Arutmin Indonesia continued to be robust. The
production during calendar year 2009 was 63 million tonnes as against 53
million tonnes in 2008. The coal companies have continued to enjoy robust
operational performance. Coal prices have shown good recovery in FY10 and
it is expected that the strong trend will continue.
The equity interest in the two Indonesian coal companies provides a natural
hedge for the power business which uses imported coal against rising coal
prices, besides providing security of fuel supply through the offtake
agreements.
8. SUSTAINABILITY AT TATA POWER:
Sustainability forms the core of the Company's vision 'To be the most
admired Integrated Power and Energy Company delivering sustainable value to
all stakeholders'. In fact, the Company owes its very existence to its
founder Mr. Jamsetji Tata's vision that 'Clean, cheap and abundant power is
one of the basic ingredients for the economic progress of a city, state or
country'. The vision of our founder is the guiding principle for our
sustainability initiatives. At Tata Power, Sustainability integrates
economic progress, social responsibility and environmental concerns with an
objective of improving the quality of life for all stakeholders, now and
for generations to come. The Company views it as an opportunity to make a
difference and remain committed to the issues of resource conservation,
energy effi ciency, environment protection and enrichment and development
of local communities in and around our areas of operations. It is an
integral part of the Company's objective of 'Leadership with Care'.
In its drive towards a clean environment, the Company is trying to set
standards in the development and implementation of cutting edge eco -
friendly technologies and processes for energy management. The Company is
working with policymakers and regulators to advance technology, strengthen
the renewable energy portfolio, accelerate the development of cost
effective energy effi ciency programs and manage consumers' demand for
electricity. The Company has also tied up with various organizations
engaged in cutting - edge research in the renewables space and is piloting
projects based on geothermal energy, solar concentrators, biomass gasifi
cation, etc. - all with a view to bring these to commercial operation and
scale in the medium term. During the year, the Company has notched up a
number of achievements in relation to Sustainability, chief of which are as
below:
* The Company has been bestowed two awards - the Golden Peacock CSR Award
and the TERI Corporate Awards 2008 - 2nd prize - for Business response to
HIV / AIDS.
* A BPO unit at Khopoli, a JV of the Company, Mannat Foundation (an NGO
formed by the Company) and Tata Business Support Services Limited has
provided jobs to 167 local people in the catchment areas of the Company's
hydro power stations.
* 84 Self - Help Groups were formed by 1,350 members in Hydros and Mundra.
* Improvement of comprehensive education programme has benefi ted over
8,000 students of 100 schools in Maithon, Jharkhand.
* Employee volunteers have contributed a total of 2,311 hours for various
social and environmental causes.
* In order to conserve and protect the existing biodiversity in the
vicinity of the Mundra UMPP, a comprehensive survey has been carried out
for one year for baseline data collection. Such studies will be carried out
for all new project sites and repeated periodically.
* The establishment of the green belt and other green zones at Mundra has
helped in generating livelihood opportunities for local populations
especially womenfolk in plant and nursery maintenance, making of clay
pitchers, etc.
* Rain water harvesting has commenced at Maithon, Corporate Center - Carnac
and Salsette RS.
* Program on cost sharing basis for investment grade energy audit has been
launched to commercial customers having load demand > 100 kVA and
industrial customers having load demand > 500 kVA.
* MERC has given its approval for energy effi cient T5 fluorescent tube
light (FTL) pilot program for the Company's consumers. Under this program,
the Company will offer 50,000 FTLs with electronic ballast at a discounted
price to its end consumers.
* Energy audit of the Company's installations has been completed at
Khopoli, Corporate Center - Carnac, Dharavi RS, SED and Trombay residential
colony to explore various opportunities in energy effi ciency and energy
conservation.
* 2.82 KW Solar / hybrid wind turbine demonstration project has been
commissioned at Mankhurd substation for meeting the lighting requirements
of control room.
* The Company has formed an Advisory Group for its 'Architecture of Care'
initiative, as well as an Architecture Cell. The administrative buildings
of Maithon and Mundra are being designed as green buildings for
environmental effi ciency, use of local materials and conservation of
natural resources to achieve gold certifi cation as per India Green
Building Code.
* Tata Power Energy Club - In FY10, the Club became a national movement on
energy conservation, covering more than 250 schools across Mumbai, Delhi,
Pune, Ahmedabad, Bengaluru, Kolkata, Belgaum, Jamshedpur and Lonavla on the
subject of energy conservation. The Club has sensitised over 1 million
citizens and has helped save over 1 million units so far.
* Sustainability awareness sessions have been conducted at various
locations of the Company. A total of 899 employees have been covered till
March 2010.
9. GLOBAL COMPACT COMPLIANCE:
The Company has been reporting data since 2006 as per the Global Compact
Initiative taken up by the Secretary General of the United Nations in 2002.
The Compact requires businesses to adhere to Ten Principles in the areas of
human rights, labour standards, environment and anti - bribery. The Company
submitted to the Global Compact website its 'Communication on Progress' as
required in respect of implementation of the Ten Principles in its business
processes. Additionally, the Company published its Annual Corporate
Responsibility Report, as per the new GRI 'G3' guidelines released in 2005.
10. SAFETY:
The Company has given safety a high priority, appointing DuPont as a
consultant to guide it on its journey to Safety Excellence. A number of
initiatives have been taken to embed a culture of safety and safe working
practices in the organisation. A detailed corporate safety action plan has
been prepared, including the activities that will be guided and supervised
by DuPont staff and by the Company staff on a monthly basis. An Apex Safety
Committee - chaired by the Managing Director - reviews the Company's safety
performance every month and guides the implementation of detailed action
plans through Central Safety Committees and Site Implementation teams at
all sites. Five Corporate Committees for Safety Observations, Incident
Investigation, Rules and Procedures, Capability Building and Contractors
Safety Management act as 'Keepers of Standards', introducing new and
improved procedures, systems and processes for implementation through the
Apex Safety Committee and the local counterparts of the fi ve corporate
committees. New safety work procedures in line with DuPont methodologies
have been developed and are being implemented. Intensive training modules
have been organised by DuPont as well as DuPont trained trainers. Safety
requirements have been drilled down to the level of contractors' employees
and made a part of all contracts. The Company has also deployed software
for recording, analyzing and reporting the results of Safety Training
Observation Program (STOP) audits, a proprietary DuPont methodology for
safety observations. Additionally, software for safety audits and incident
reporting including near - misses with tracking of implementation of
recommendations has been deployed. A cross functional audit team trained by
DuPont has been conducting audits against safety standards at our project
sites at regular intervals.
11. RENEWABLES AND NEW TECHNOLOGY:
The Company is a member of the Cleantech Forum and various web sites, which
helps it to keep abreast of the Research and Development (R&D) updates on
clean technologies. Periodic visits with vendors and participation in
conferences also assist in identifying and selecting companies for
reviewing. Interactions are on with faculty members from the Indian
Institute of Technology (IIT) - Bombay, Mumbai University Institute of
Chemical Technology (ICT), Massachusetts Institute of Technology (MIT),
University of California at Berkeley, Purdue and Washington Universities to
stay updated on technology. Various technologies in a variety of areas like
algae for CO2 absorption, carbon capture reuse and storage, fuel cell
(telecom tower application), gasifi cation (biomass, coal), solar
(photovoltaic, thin - fi lm and concentrated thermal), micro - turbine wind
energy generation, etc. are being evaluated. During the year, the Company
has continued to expand its presence in the fi eld of renewable energy.
Some key highlights are:
* Geothermal - The Company has invested in Geodynamics, a leading
Australian company in enhanced geothermal systems with a view to bring the
learnings from the investment to India.The Company has invested AUD 50
Million in the project so far.
* Solar Concentrated Thermal - The Company is working on two different
technologies - a 1 MW unit in association with IIT Bombay and a 500 KW unit
with ICT and Tata Steel.
* Floating Solar PV - During FY11, the Company is planning to test a 13.5
KW pilot unit at Walwhan dam.
* Micro - Wind - During FY11, the Company proposes to test a 2 KW micro
horizontal axis wind turbine and a vertical axis wind energy generator.
12. CORPORATE SERVICES:
12.1 Financing:-
The Company successfully completed a GDR offering of USD 335 million
(originally USD 250 million but upsized on demand), issuing 14,838,110 GDRs
(each GDR representing one share of the Company) at USD 22.577 per GDR (Rs.
48.27 is the reference exchange rate), at a tight discount of 3.23% to the
closing market price of the Company's share prevailing on the day of the
issue, in July 2009. The proceeds of the issue will be utilised mainly to
meet equity requirements of the Mundra and Maithon projects. The Company
has since repaid all its outstanding short term loans - Rs.100 crores from
HDFC Bank Limited in July 2009 and commercial paper of Rs. 168 crores in
September 2009. The Company has also prepaid a long term corporate loan
from IDBI Bank Limited of Rs. 290 crores in August 2009, carrying an
interest rate of 13.50%, to reduce interest costs. In November 2009, the
Company successfully completed a 1.75% FCCB issue of USD 300 million. The
bonds are convertible at Rs. 1,456.125 per share (at a 10% premium over the
closing price of the Company's shares on NSE on 5th November, 2009) and
bear a yield to maturity of 3.5% p.a. Of the USD 200 million FCCB issue
made in 2005, out of 200,000 bonds issued, all the bonds were converted
except for 90 bonds which were redeemed through a payment of USD 104,610 by
the Company in February 2010. In Q4 FY10, the Company raised two loans, one
from IDFC Limited of Rs.150 crores and the other from HDFC Bank Limited of
Rs. 600 crores. These loans are to fi nance the debt requirements (70% of
the capital expenditure) of the Mumbai Operations. During the year,
Standard and Poor's affi rmed the Company's 'BB-' rating and revised the
outlook to 'Positive' from 'Stable', refl ecting the Company's progress on
its projects under execution. Moody's re - affi rmed its rating outlook on
the Company's long term borrowing program at 'Stable' with 'Ba3' rating in
January 2010. CRISIL has revised its rating outlook on the Company's long
term borrowing programme and bank facilities to 'Positive' from 'Stable',
and re - affi rmed the rating at 'AA' in October 2009. Similarly, ICRA has
revised the outlook to 'Positive' from 'Stable' and retained the rating at
LAA in December 2009.
12.2 Business Excellence:-
* Tata Business Excellence Model (TBEM)
During the year, the Company's efforts on its journey of Business
Excellence received a signifi cant boost with the Company being bestowed
with the prestigious JRD QV Award. The assessment report received after the
assessment has been reviewed and action plans have been drawn up to take
the Company to the next higher level of excellence.
* Organisation Transformation (OT)
The OT exercise rolled out during FY09 made signifi cant progress. As per
the original plan, a group of 120 offi cers were to undergo a total of 5
modules in 6 batches, spread over 18 months. The programme is moving ahead
as per plan. Another OT initiative, LASER (Learn, Apply, Share, Enjoy, Refl
ect), aimed at achieving high standards of shop - fl oor excellence and
strengthening the relationships between front - line offi cers and workmen
achieved high levels of success, in terms of relationship building,
improving operational effi ciencies, and improving the workplace through
programmes like autonomous maintenance, 5-S and focused improvement
projects, etc. A total of around 150 projects were undertaken, covering
around 900 employees.
* Enterprise Process Model
The Enterprise Process Model introduced two years ago to streamline the
processes in the Company was further strengthened during the year through a
review and improvement process.
* Benchmarking and Innovation
A separate benchmarking cell has been created to focus entirely on
benchmarking. The team is pursuing best practices to achieve improvements
on operating parameters based on benchmarks from a study by Solomon
Associates (USA), a similar study undertaken for hydros in collaboration
with SN Power (Norway) and benchmarking exercise between NDPL and Tata
Power (Distribution), resulting in improvements across both entities. The
Company also launched an improved knowledge management initiative called
SKY (Seeking Knowledge from You; Sharing Knowledge with You). SKY is a
people-to-people connect to help each other with the tacit knowledge
available with each individual.
12.3 Human Resources Development:-
During FY10, net addition to manpower was 268 people, taking the total to
3,809. During the year under review, a number of HR initiatives were taken
to supplement the Company's effort towards business sustainability and
growth.
* Employee Engagement
Based on the employee engagement (Q12) and satisfaction survey by Gallup in
FY09, VOICES communication and action planning workshops were conducted to
communicate the survey fi ndings and facilitate formulation of action plans
at different divisions to address areas of concern. Q12 action planning
workshops were conducted for improving engagement.
* Training
A number of training programmes were conducted to ensure development of the
required competencies. The Company signed a long term MoU with the National
Institute of Construction Management and Research (NICMAR) to enhance
project management competency of its employees.
* Talent Management and Succession Planning
To identify the right talent and develop a pipeline of key resources, the
Company has a structured Talent Management process whereby high potential
offi cers were identifi ed and Individual Development Plans prepared to
hone their potential. To provide fast track career growth opportunities and
leadership exposure to bright young offi cers, Accelerated Career
Enhancement (ACE) scheme was implemented in FY09. In the second year of
this initiative, six offi cers have been selected for ACE 2010. Three ACErs
selected in 2009 have been placed in key departments. Another initiative,
Forum of Rising Talent (FORT), consisting of a team of young offi cers was
formed based on the concept of shadow board to build leadership pipeline.
As a leadership development initiative, Multirater System was initiated
where the entire top management team went through the Multirater workshop
and feedback obtained by the leaders has been shared with their direct
reports. The Company undertook a detailed succession planning exercise
taking into account the normal attrition rate and the criticality of the
function.
* Performance Management System (PMS)
The PMS is a well evolved system with appraisal letters being issued within
a month of closure of the fi nancial year, for the fourth year in a row.
* Industrial Relations
On the industrial relations front, the Company enjoyed a cordial year.
12.4 Regulatory matters:
12.4.1 Tariff Petition with MERC:-
The Company fi led its Annual Performance Review (APR) for FY10 and Annual
Revenue Requirement (ARR) petition for FY11 with MERC. The public hearing
for the same has been completed and the orders are awaited.
12.4.2 MERC tariff order for Unit 8:-
The Company had commissioned its Trombay Unit 8 on 29th March, 2009.
Thereafter, the Company fi led a petition for approval of the fi xed costs
and tariff for Unit 8 for the portion of the capacity contracted with BEST
and the Company's distribution business. MERC has issued the tariff order
for the same vide its order dated 19th January, 2010.
12.4.3 Appeals against MERC tariff orders:-
Regulatory inputs in the APR petition in view of the Appellate Tribunal for
Electricity (ATE) judgement has enabled recovery of the past disallowances
by MERC in its earlier tariff orders. MERC has also clarifi ed the
Company's right to claim under recoveries from BEST and RInfra on account
of erroneous computations in MERC's previous tariff order. The Company had
fi led appeals in the ATE in regards to certain disallowances in the tariff
orders for FY10 as well as certain disallowances and directives in the
tariff order for Unit 8.
12.4.4 Mumbai Distribution Business:-
On an appeal fi led by the Company, the Supreme Court, by its landmark
judgement of 8th July, 2008, set aside the orders of MERC and ATE and has
upheld the Company's right to supply electricity in retail directly to all
consumers. This has paved the way for the Company to grow its distribution
business. Subsequently, MERC issued a clarifi catory order dated 22nd July,
2009 defi ning the wheeling charges payable by consumers seeking power
supply from the Company using RInfra's distribution network. In order to
cater to the large number of requests received from potential consumers
seeking to switch over from RInfra, the Company fi led a petition in MERC
seeking clear guidelines for an 'Operational Protocol' for supplying power
to consumers using RInfra's network. Interim order defi ning the 'Interim
Operational Protocol' has been issued on 15th October, 2009. The order is
pathbreaking, in that it allows the consumers to choose their supplier
between RInfra and Tata Power, thus establishing a viable alternative for
reform in the distribution sector in the country. It also, for the fi rst
time, separates the wires from the supply business in distribution. So far,
more than 28,000 consumers have changed over from RInfra to the Company,
thereby resulting in increased sales. Further, the Company has been
receiving almost 500 new applications everyday from consumers seeking
changeover to the Company.
12.4.5 Power Purchase Agreements:-
The Supreme Court, by its landmark judgement of 6th May, 2009, approved the
PPAs signed by the Company with BEST for 800 MW and with Tata Power
(Distribution) for 477 MW, which were earlier approved by MERC. On an
appeal fi led by RInfra, the ATE had set aside the PPAs approved by MERC
and directed MERC to consider the question of approval of PPAs afresh along
with the contentions raised by RInfra. The Supreme Court has also held that
Section 23 of the Electricity Act, 2003 (EA 2003) does not give any
jurisdiction to MERC to allocate any power to a non - contracting discom.
Immediately after the judgement of the Supreme Court, the Company notifi ed
RInfra of its intention to stop supplying 460 MW power to it from 1st
April, 2010, giving RInfra a notice of over 9 months to arrange power on
long term basis for its consumers in line with its obligations as a
distribution licensee under the EA 2003. The Company subsequently signed a
PPA for 160 MW for meeting the expected requirement of its own consumers
for FY11 from this 460 MW capacity. Further, the Company signed an
agreement with BEST to supply 100 MW of the remaining capacity. Rather than
arrange power for its consumers, RInfra has instead approached the GoM for
relief. The GoM formed a 5 member committee to study the situation and to
submit a report on the same. On 7th May, 2010, the GoM issued a memorandum
in which it suggested to continue to supply 100 MW to BEST from 1st May,
2010, 360 MW to RInfra till 30th June, 2010 and 200 MW to RInfra thereafter
till 31st March, 2011. The Company's consumers were thus deprived of their
lawful capacity of 160 MW from 1st April, 2010, putting an additional
burden of power purchase on them (Refer Section 12.6.3 and 12.6.4 for
subsequent developments).
12.4.6 Jojobera Operations:
* Tariff petition for FY09 and FY10 to Jharkhand State Electricity
Regulatory Commission (JSERC) Tariff order for Jojobera Units 2 and 3 was
issued by JSERC on 20th January, 2010. JSERC has considered the terms
enshrined in the PPA with Tata Steel upto FY11. Further, ARR petition of
Jojobera Units 2 and 3 for FY11 (including truing - up for FY09 and APR for
FY10) has been submitted to JSERC on 20th March, 2010. For FY12, JSERC has
directed the Company to renegotiate the PPA terms in line with the JSERC
Tariff Regulations and submit the ARR for FY12 within 6 months. The Company
has filed an appeal in the ATE against the JSERC directive.
12.5 Risk Management:-
As part of the Risk Management Process, during the year the Company
reviewed the various risks and fi nalized mitigation plans which were
reviewed periodically by the Risk Management Committee. Futher, six Risk
Management Sub - Committees (RMSCs) closely monitored and reviewed the risk
plans periodically. Employees contribute to the risk identifi cation
process through the web based Risk Perception System. The risk areas
identifi ed by the Risk Management Process were covered by the Internal
Audit Plan and major risks were discussed every quarter at meetings of the
Audit Committee of Directors.
12.6 Legal Matters:
12.6.1 Standby Charges:-
On an appeal fi led by the Company, the Supreme Court has stayed the
operation of the ATE order, subject to the condition that the Company
deposits an amount of Rs. 227 crores and submits a bank guarantee for an
equal amount. The Company has complied with both the conditions. RInfra has
also subsequently fi led an appeal before the Supreme Court challenging the
ATE order. Both the appeals have been admitted and are listed for hearing
and fi nal disposal.
12.6.2 Energy Charges and Take or Pay Obligation:-
MERC directed RInfra to pay Rs. 323.87 crores to the Company towards the
difference between the rate of Rs. 1.77 per kWh paid and Rs. 2.09 per kWh
payable for the energy drawn at 220 kV interconnection and towards its
'Take or Pay' obligation for the years 1998-1999 and 1999-2000. On an
appeal fi led by RInfra, the ATE upheld the Company's contention with
regard to payment for energy charges but reduced the rate of interest. As
per the ATE order, the amount payable works out to Rs. 56.12 crores
(including interest), as on 31st May, 2008. As regards the 'Take or Pay'
obligation, the ATE has ordered that the issue should be examined afresh by
MERC after the decision of the Supreme Court in the appeals relating to the
distribution licence and rebates given by RInfra. The Company and RInfra fi
led appeals in the Supreme Court. Both the appeals have been admitted and
are listed for hearing and fi nal disposal. The Supreme Court, vide its
order dated 14th December, 2009, has granted stay against the ATE order and
has directed RInfra to deposit with the Supreme Court a sum of Rs. 25
crores and furnish a bank guarantee for the balance amount. Pursuant to the
liberty granted by the Supreme Court, the Company has withdrawn the above
mentioned sum subject to an undertaking to refund the amount with interest,
in the event the appeal is decided against the Company.
12.6.3 Writ Petition in the Bombay High Court:-
The Company has filed a Writ Petition in the Bombay High Court challenging
the Memorandum and Report of the GoM dated 7th May, 2010 inter alia
directing the Company to supply 360 MW power to RInfra upto 30th June, 2010
and thereafter 200 MW upto 31st March, 2011.
12.6.4 Petition in MERC:-
The Company has fi led a petition in MERC challenging the refusal of the
Maharashtra State Load Despatch Centre to schedule 160 MW power from Tata
Power (Generation) to Tata Power (Distribution) pursuant to directions
issued to it by the GoM, for giving effect to the directions in the
memorandum dated 7th May, 2010. This 160 MW is required by Tata Power
(Distribution) to meet the load requirement of its consumers in the Mumbai
Operations area.
13. FOREIGN EXCHANGE EARNINGS/OUTGO:
The foreign exchange earnings of the Company during the year under review
amounted to Rs. 55.78 crores (previous year Rs. 327.60 crores), mainly on
account of forex interest, etc. The foreign exchange outflow during the
year was Rs. 1,592.13 crores (previous year Rs. 2,684.99 crores), mainly on
account of fuel purchase of Rs. 1,254.97 crores (previous year Rs. 2,220.30
crores), repayment of foreign currency loans with interest thereon, NRI
dividends and FCCB interest of Rs. 69.41 crores (previous year Rs. 272.21
crores) and purchase of capital equipment, components and spares and other
miscellaneous expenses of Rs. 267.75 crores (previous year Rs. 192.48
crores).
14. DISCLOSURE OF PARTICULARS:
Particulars required by the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988 are given in the prescribed
format as Annexure I to the Directors' Report.
Particulars of Employees: In terms of the provisions of Section 217 (2A) of
the Companies Act, 1956 (the Act), read with the Companies (Particulars of
Employees) Rules, 1975, the names and other particulars of employees are
set out in the Annexure to the Directors' Report. However, having regard to
the provisions of Section 219 (1)(b)(iv) of the Act, the Annual Report is
being sent to all Members of the Company excluding the aforesaid
information. Any Member interested in obtaining such particulars may write
to the Company Secretary at the Registered Offi ce of the Company.
15. SUBSIDIARIES:
On applications made by the Company under Section 212 (8) of the Act, the
Central Government, vide letters dated 9th April, 2010 and 13th May, 2010,
exempted the Company from attaching a copy of the Balance Sheet, Profi t
and Loss Account, Directors' Report and Auditors' Report of the subsidiary
companies and other documents required to be attached under Section 212 (1)
of the Act to the Balance Sheet of the Company. Accordingly, the said
documents are not being attached with the Balance Sheet of the Company. A
gist of the fi nancial performance of the subsidiary companies is contained
in the report. The Annual Accounts of the subsidiary companies are open for
inspection by any Member / Investor and the Company will make available
these documents / details upon request by any Member of the Company or to
any investor of its subsidiary companies who may be interested in obtaining
the same. Further, the Annual Accounts of the subsidiary companies will be
kept open for inspection by any investor at the Company's Head Offi ce and
that of the subsidiary company concerned and would be posted on the website
of the Company.
16. DIRECTORS:
Mr R K Misra, Nominee Director of Life Insurance Corporation of India (LIC)
on the Board of the Company, resigned with effect from 31st July, 2009. The
Board placed on record its appreciation of the valuable contribution made
to the Company by Mr Misra. Mr Thomas Mathew T was appointed as an
Additional Director with effect from 7th August, 2009, in accordance with
Article 132 of the Articles of Association of the Company and Section 260
of the Act. Mr Mathew holds offi ce only upto the date of the forthcoming
Annual General Meeting and a Notice under Section 257 of the Act has been
received from a Member signifying his intention to propose Mr Mathew's
appointment as a Director. Mr. Mathew is the Nominee Director of LIC on the
Board of the Company.
Mr S Ramakrishnan was re - appointed as Executive Director of the Company
with effect from 1st October, 2009 to 28th February, 2014.
In accordance with the requirements of the Act and the Articles of
Association of the Company, Mr A J Engineer, Mr N H Mirza and Mr R
Gopalakrishnan retire by rotation and are eligible for re - appointment.
17. AUDITORS:
Messrs Deloitte Haskins & Sells (DHS), who are the Statutory Auditors of
the Company, hold offi ce until the conclusion of the ensuing Annual
General Meeting. It is proposed to re - appoint DHS to examine and audit
the accounts of the Company for FY11. DHS has, under Section 224 (1) of the
Act, furnished a certifi cate of its eligibility for re - appointment. The
Members will be requested, as usual, to appoint Auditors and to authorize
the Board of Directors to fi x their remuneration. In this connection, the
attention of the Members is invited to Item No. 6 of the Notice. Members
will also be requested to pass a resolution (vide Item No. 9 of the Notice)
authorizing the Board of Directors to appoint Auditors / Branch Auditors /
Accountants for the purpose of auditing the accounts maintained at the
Branch Offi ces of the Company, in India and abroad.
In accordance with the requirement of the Central Government and pursuant
to Section 233 B of the Act, the Company carries out an audit of cost
accounts relating to electricity every year. Subject to the approval of the
Central Government, the Company has appointed M/s N I Mehta & Co. to audit
the cost accounts relating to electricity for FY11.
18. AUDITORS' REPORT:
The Notes forming part of the Accounts referred to in Auditors' Report of
the Company are self - explanatory and, therefore, do not call for any
further explanation under Section 217 (3) of the Act. The consolidated fi
nancial statements of the Company have been prepared in accordance with
Accounting Standard 21 on Consolidated Financial Statements, Accounting
Standard 23 on Accounting of Investments in Associates and Accounting
Standard 27 on Financial Reporting of Interest in Joint Ventures, issued by
the Council of the Institute of Chartered Accountants of India.
19. CORPORATE GOVERNANCE:
To comply with conditions of Corporate Governance, pursuant to Clause 49 of
the Listing Agreements with the Stock Exchanges, a Management Discussion
and Analysis Statement, Report on Corporate Governance and Auditors'
Certifi cate, are included in the Annual Report.
20. DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 217 (2AA) of the Act, the Directors, based on the
representations received from the Operating Management, confirm that:
i) in the preparation of the annual accounts, the applicable accounting
standards have been followed and that there are no material departures
therefrom;
ii) they have, in the selection of the accounting policies, consulted the
Statutory Auditors and have applied them consistently and made judgements
and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the fi nancial
year and of the profi t of the Company for that period;
iii) they have taken proper and suffi cient care to the best of their
knowledge and ability for the maintenance of adequate accounting records in
accordance with the provisions of the Act, for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities;
iv) they have prepared the annual accounts on a going concern basis.
21. ACKNOWLEDGEMENTS:
On behalf of the Directors of the Company, I would like to place on record
our deep appreciation to our Shareholders, Customers, Business Partners,
Vendors, both international and domestic, Bankers, Financial Institutions
and Academic Institutions. The Directors are thankful to the Government of
India and the various Ministries, the State Governments and the various
Ministries, the Central and State Electricity Regulatory authorities,
Corporation and Municipal authorities of Mumbai and other cities where we
are operational.
Finally, we appreciate and value the contributions made by all our
employees and their families for making Tata Power what it is.
On behalf of the Board of Directors,
R N Tata
Mumbai, 24th May, 2010 Chairman
FORM B
FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION
Research and Development (R & D):
1. Specifi c area in which R & D carried out by the Company Development of
advanced algorithms for ballistic applications.
2. Benefi ts derived as a result of the above R & D Import substitution
product for applications in ballistic and fire control computers.
3. Future Plan of Action Upgradation of existing fire control systems in
artillery and armoured combat systems.
4. Expenditure on R & D (in Rs. lakhs)
a) Capital 99.57
b) Recurring 52.69
c) Total 152.26
Technology absorption, adaptation and innovation:
1. Efforts, in brief, made towards Technology Absorption, adaptation and
innovation
IP based voice and data communication system.
2. Benefi ts derived as a result of the above efforts State-of-the-art
indigenous solutions for communication systems in noisy environments.
3. In case of imported technology (Imported during the last five years
reckoned from the beginning of the financial year), following information
may be furnished:
a) Technology Imported None
b) Year of Import NA
c) Has technology been fully NA
absorbed
d) If not fully absorbed, areas NA
where this has not taken place,
reasons thereof and future plans
of action
New Technology Absorption
1. Trombay
* LED Based Lighting:
The Company has commissioned LED based lighting system at its Trombay
housing colony. This has resulted in sizable energy savings and has a
potential of reducing 175 tons of CO2 emissions on an annual basis.
* Fault Tolerant Distributed Control System:
During the year, the Company has adopted the latest fault tolerant
Distributed Control System to replace obsolete control systems at Trombay
Unit 5. The older systems replaced were Furnace Safeguard Supervisory
System, Boiler Controls and Turbine Governing System and were based on
analog devices. The new systems based on state-of-the-art digital
technology and with built in redundancies have enhanced the capability of
maintenance and operations personnel to review plant disturbances and
faults online and take immediate corrective action to avoid any generation
loss.
* Infrared thermography for online monitoring of 220 kV equipments:
Trombay Thermal Power Station has introduced use of Infrared thermography
for online monitoring of all electrical equipment in 220 kV switchyard.
This technique using infrared camera helps early detection of developing
hot spots on joints and other switchyard equipment. This technique is also
used to monitor the health of transformers, radiators and bushings.
Introduction of the technology has enabled the Company to avoid costly
unplanned outages / maintenance and increased reliability at reduced cost
by taking proactive steps to avoid any failure.
* Upgrade of Unit 6 ID fan LCI drives:
The Company has upgraded the LCI drives of all ID fans of Trombay 500 MW
Unit 6 with the latest VME design of TMEIC-GE. The VME design provides
improved reliability and less than half the number of circuit boards with
300 MHz Celeron. processor along with improved fl exibility and diagnostics
with state-of-the-art HMI. This has eliminated the tripping of ID fans due
to the malfunctioning of LCI control hardware. In addition to extending the
product life, this modernization program provided signifi cant functional
enhancements plus system condition and capability assessment of the drive
system. This is the fi rst upgrade of 20 year old LCI system anywhere in
India.
* Variable Frequency Drives (VFD) for coal feeder motor:
Variable Frequency Drives have been introduced at Trombay Unit 5 on the
coal feeders in place of eddy current coupled motors. Installation of the
VFD system is expected to improve availability of coal feeders by reducing
the non - availability of the feeders and minimizing the breakdown time.
The VFD system of speed control also serves the purpose of energy
conservation and enhances the life of the motor.
* Cryogenic cleaning of motor windings:
Cryogenic cleaning using dry ice has been introduced for cleaning of
accumulated dust and oil traces in motor windings at Trombay. This method
does not demand complete dismantling of motor, thus reducing the time
required for the job from 5 days to 1-2 days with an equally effective
cleaning.
* Electrical Signature Analysis of HT Motors:
Electrical Signature Analysis is the procedure of acquiring the motor
current and voltage signals, performing signal conditioning and analyzing
the derived signals to identify the various faults. It helps maintenance
personnel to monitor the health of running equipment and proactively plan
the predictive maintenance practices. This technique has been used for
condition monitoring of all high voltage motors at Trombay 500 MW Unit 5.
2. Jojobera
* High Pressure Milling System (HPMS):
HPMS designed inserted sinter cast rolls are made up of inserts having very
high hardness and embedded in soft ductile iron core. These inserts are
arranged in such a fashion that a layer of ductile iron is always present
between two hard inserts. While in operation, this layer wears out faster
than the inserts resulting in groove formation. These grooves help the roll
in biting the material, positively avoiding slippage of material and
thereby preventing additional wear. This action creates improved retention
of coal thereby vastly improving grinding action. The core made of tough
ductile iron is also capable of withstanding severe shock without any
danger of failure due to breakage.
* Anhydrous Ammonia dosing system:
Anhydrous Ammonia dosing system is being used at Jojobera Power Station for
improving the ESP performance. This has given an optimum flow rate of
Ammonia for a range of inlet dust burden. The system creates better
distribution of Ammonia in flue gas resulting into better ESP performance
and reduced stack emissions.
3. Transmission and Distribution
* Cold shrink joint:
The Company has introduced 3M make cold shrink joint and Euromould make
termination was made on 22 kV XLPE cable.
This is a touch proof type termination.
* BCPU (Bay Control and Protection Unit):
The Company has introduced BCPU at DSS level for the first time. These
units were implemented on 33 kV substations.
* The new Europack make cable spiking tool:
This has been introduced in place of cable spiking gun for which bullets
have to be imported from UK. It punctures the cable hydraulically and has
adequate safety measures.
4. Electrical Testing and Automation (ETA)
* Online Circuit Breaker monitors:
Online Circuit Breaker Monitors are installed on critical breakers at all
Hydro divisions. These monitor the performance of the various breaker
parameters whenever the circuit breaker operates. Offl ine testing requires
equipment outage and resources in terms of manpower, material and time and
is usually done once in two to three years. Because of these online
monitors, the condition of the breakers can be assessed regularly, thereby
optimizing the resources and increasing the availability.
MANAGEMENT DISCUSSION AND ANALYSIS
1. SECTOR OVERVIEW:
1.1 Global Energy Demand:-
The global average per capita consumption of energy is currently at about
2,500 kWh. It is said that the basic minimum need of energy for a decent
quality of life is about 4,500 to 5,000 kWh per capita(1). Further, global
population is expected to rise from about 6.8 billion currently to about 9
billion by 2050 and then stabilize(2). Therefore, no matter which way one
looks at energy demand viz. either to just provide a basic quality of life
to the existing population or to take care of the needs of another 2.2
billion people, the world will need more energy. While the rate of growth
in energy consumption is expected to be very high in growing economies like
China, India, Africa, South America, etc., the growth in energy consumption
in absolute terms is projected to be the highest in China followed by North
America, India, Middle East, etc. For the power sector, growth in absolute
energy consumption is perhaps more relevant than just percentage change in
energy consumption. Further, it is also seen that the ability to pay in
markets that have high energy growth rates is weaker as compared to the
developed markets.
(1) Internal Analysis
(2) EIA (U. S. Energy Information Administration)
In absolute terms, the United States of America (USA) is by far the largest
consumer of energy followed by China and Western Europe. Japan, South
Korea, Middle East and Russia are the other big consumers. In comparison,
India's energy consumption today is much lower but is expected to be around
the current levels of Japan, South Korea, etc. by 2030(3).
(3) EIA
With evolving consumer needs and technology, energy and electricity are
getting more fungible. Electricity, however, is the most convenient form of
energy and hence, it is expected that from its current share of 17% of
delivered energy, it will rise to 20% by 2030(4).
(4) EIA
The key factors that will shape the energy / electricity markets will be
climate change and energy security. The key drivers for the power sector
will be based on:
* World moving towards the optimal energy mix based on either low carbon or
low cost.
* Focus on increasing the overall system effi ciency through technology
breakthroughs.
* New delivery models like decentralized generation.
1.2 Global Energy Supply:-
The World has fossil fuel reserves that are projected to last for 80 years
based on current consumption levels and around 45 years based on increasing
consumption trends (See Chart 1). Russia has sizeable energy consumption
and also one of the biggest reserves. Saudi Arabia, South Africa and
Australia are other regions of large reserves with a far lower domestic
consumption and hence can play a major role in the global trade of energy.
Chart 1: Fossil fuel reserves of key consumers (2008)(5)
Regions A B C D E F
World 9,958 80 44 58 22 21
USA 2,050 70 55 93 4 1
China 1,855 37 18 95 3 3
Japan & Korea 640 4 4 0 0 0
Western Europe 616 8 4 75 13 13
Russia 610 226 200 64 29 7
India 404 87 31 95 2 2
Brazil & Argentina 207 22 15 59 13 28
Saudi Arabia 174 229 49 0 17 83
South Africa 129 133 55 100 0 0
Australia 115 395 108 98 2 1
Egypt 70 35 19 0 78 22
A = Consumption (Million tonnes of oil equivalent [MTOE])
B = Years of reserves if domestic consumption remains constant
C = Years of reserves if domestic consumption grows business-asusual
D = Coal Reserves* (% of total energy reserves)
E = Gas Reserves* (% of total energy reserves)
F = Oil Reserves* (% of total energy reserves)
(5) BP Statistical Review
* The totals do not add up due to rounding off.
Oil is the most widely traded commodity primarily because of its ease of
handling and usage. However, oil exports are largely controlled by the
Middle East countries, Russia and Nigeria. The major oil importers are the
USA, Western Europe, China, India and Japan. Increasing cost of oil
production, falling reserves and increasing demand are likely to push oil
prices north(6).
(6) EIA, FACTS, Internal Analysis
Gas as a traded commodity is fast increasing, facilitated by improving
Liquefi ed Natural Gas (LNG) infrastructure. The major gas consumers are
USA, Western Europe and Japan whereas the main suppliers are Russia and
countries in the Middle East. The discovery of shale gas in North America
could, however, dramatically change the gas supply scenario leading to drop
in demand and stranded LNG capacity, resulting in lower gas prices in the
near term(7).
(7) EIA, FACTS, McKinsey Gas Report, Internal Analysis
Sea - borne coal trade especially thermal coal is only about 15% of the
total coal consumption. The main importers of coal are USA, China, India,
Western Europe, Korea and Japan. The main suppliers are Russia, Indonesia,
Australia, South Africa and Colombia. The USA has the largest reserves of
coal but is currently not exploiting them. Growing demand for energy in
China and bottlenecks in internal supply in India are expected to drive
global demand for coal in the near term.
At a macro level, this implies limited fossil fuel supply and that many
people might in their lifetime see fossil fuel availability taper off.
Hence, prices of fossil fuels are expected to rise. This would also lead to
an increase in electricity prices. Since major consuming economies like
Western Europe, Japan, South Korea and China do not have suffi cient
domestic resources, nuclear power and renewable sources would be more
important to fulfill their energy requirements.
1.3 Market Structure:
While primary energy like coal, gas and oil are global commodities,
electricity has traditionally been a more local/regional commodity. This
picture however might see some change with international grids getting
connected.
(8) Internal Analysis, various websites
Globally, a structure seems to be evolving where electricity generation and
retail is open to competition and the wires will be a natural monopoly and
available to all. The power generated is sold to a common pool on the basis
of 'Least marginal cost of supply' from where all retailers buy their
supply needs. The markets permit direct hedging contracts between the
retailers and generators to manage price volatility of the common pool.
India has different models of power sale ranging from an integrated utility
(the old State Electricity Board [SEB] structure), to a 'single buyer' (MoU
based / regulated generation), to 'wholesale competition' (Ultra Mega Power
Projects [UMPPs], Case 1) and retail competition (Mumbai). It is expected
to migrate to developed market structure as soon as the gap between demand
and supply is narrowed.
While the electricity market structure is subject to a high degree of
regulation, the basic input to electricity i.e. fuel, remains free of all
control and can provide opportunities for a deregulated play over a longer
term (in India fuel is not yet free of all control - coal mines are still
'allocated' and oil and gas prices are still administered).
An analysis of the value chain from fuel to electricity generation to
transmission to distribution and fi nally to retail suggests that the
maximum value lies on the fuel side followed by generation. The volatility
of returns in fuel, however, is higher as compared to that in generation.
1.4 India Scenario:
Current per capita consumption of electricity in India is about 700 kWh(9)
which would have to grow 7-8 fold to provide a decent quality of life. At a
GDP growth rate of 5-9%, the demand is expected to grow to about 3 times by
2017(10). It is expected that with the 12th five year plan (2017), India
might have suffi cient base load capacity. However, with economic growth
there will still be a need to add 115 GW to 190 GW of base load capacity
between 2020 and 2030 i.e. about 12,000 MW to 19,000 MW every year. Hence,
there would be a need to continue adding base load capacity in the 13th and
14th five year plans as well(11).
(9) Central Electricity Authority (CEA) Monthly Review of Power Sector,
March 2010
(10) McKinsey and Co. 'Powering India - the Road to 2017', Internal
Projections
(11) EIA, Internal Analysis
The major fuel source for base load capacity addition is expected to be
coal. However, availability of domestic coal is a challenge on account of
various bottlenecks such as capacity expansion of Coal India Limited, coal
block allocation, tribal land acquisition, environmental and forest
clearances, etc. This is further compounded by issues around land
acquisition for the power plant, water availability and ash disposal for
domestic coal based plants.
The expected growth would mean that about 40,000 MW will be under
construction every year. About 75,000 to 80,000 new skilled workers would
be required only for construction and operations in the power sector(12).
However, the power sector faces competition from both infrastructure
sectors and other industries such as IT for skilled manpower. Further, at
an average cost of Rs. 6 crores per MW covering all forms of generation,
India will need Rs. 240,000 to 300,000 crores as capital, with an
additional requirement of about Rs. 60,000 crores to Rs. 80,000 crores per
year. Hence, people development and funding are critical to cater to the
growing demand.
(12) Internal Analysis
In view of the inherent risks and challenges in developing and executing
new projects and increasing fuel costs, the cost of generation is likely to
increase. However, the political will to pass on these costs to consumers
has been rather weak, thereby forcing Governments to increase subsidy
bills. It is ironic that while the consumers are willing to pay for diesel
generation sets and invertors from which the cost of power is very high,
they are unwilling to pay for power from the utilities. People need to be
educated and prepared for price increases and the Governments need to
address this communication challenge. Unless the challenge of an increasing
subsidy bill is addressed urgently, it could become another serious
bottleneck in capacity addition.
Currently, the power sector relies excessively on coal based generation.
When the climate change movement gathers momentum,India will need to move
away from coal to other power generation sources such as hydro and nuclear.
Even without the challenge of climate change, just the sheer need for more
energy and the need for self - reliance will drive the Indian power sector
towards energy effi ciency, conservation and cleaner power.
Towards this end, the Company has enunciated an 8 fold path for
sustainability to address the fallouts and opportunities. It has undertaken
various initiatives in each of the eight areas of Environment,
Architecture, Community, Business Practices, Advocacy, Renewables, New
Technology and New Models of Development. It has started the Tata Power
Energy Club for creating consumer awareness and established renewable
energy generation as part of the approach.
Nuclear power is a good alternative for India. However, the current
technologies which are based on 'once through' nuclear reactors may not
suffice as the world is also short of Uranium. The three stage process
adopted by India that uses reprocessed spent fuel in fast breeder reactors,
eventually moving to a Thorium based cycle would, therefore, provide the
long term solution.
1.5 Performance of the Indian Power Sector during the year 2009-10:
1.5.1 Generation:-
The total power generation in the country during FY10 was 771 Billion Units
(BUs) which comprised primarily 640.52 BUs thermal followed by 106.66 BUs
hydro, 18.65 BUs nuclear and 5.34 BUs import from Bhutan. The average
thermal plant load factor was 77.5%. The installed generating capacity in
the country (as shown in Chart 3) as on 31st March, 2010 was 159.398
GW(13).
(13) CEA, Infraline reports (14) CEA, CIL reports
Chart 3: Installed Capacity by Fuel (Capacity in GW and %)
Coal 84.1 53%
Gas 17.1 11%
Hydro 36.9 23%
Nuclear 4.6 3%
RE 15.5 10%
1.5.2 Capacity Addition:
The capacity addition in the 8th, 9th and 10th five year plans put together
was 56.722 GW. The 11th plan (2007-2012) target is 78.700 GW. Capacity
commissioned during 11th plan (up to 31st March, 2010) is 22.302 GW with
about 40.072 GW under construction. The country is, therefore, expected to
add substantially more capacity in the 11th plan as compared to the
previous plans. This expected capacity addition, however, is still short of
the target.
1.5.3 Fuel Availability - Coal:
Domestic availability of coal has been inadequate for meeting the growing
requirement for electricity generation. Import of coal is, therefore, being
resorted to during the last few years and utility-wise allocation is being
made by the Ministry of Power in consultation with CEA. The import of coal
is set to rise from about 50 million tonnes per annum (MTPA) currently to
over 150 MTPA by 2013(14).
(14) CEA, CIL reports
1.5.4 Fuel Availability - Gas:
The installed generation capacity of gas based power stations as on 31st
March, 2010 was about 17.055 GW. Since the commencement of gas production
by Reliance Industries Limited (RIL) from their KG D-6 gas fi elds in the
month of April 2009 and the allocation of gas to the power sector on
priority, the supply situation has improved considerably. Gas requirement
in the 12th plan would be 90 million metric standard cubic meters per day
(MMSCMD).
1.5.5 Transmission:
The rate of growth of the transmission network (at voltages of 220 kV and
above) during the past decade has been at about 6 - 7% per annum. The inter
- regional transmission capacity has increased from 5.050 GW (end of 9th
plan) to 20.750 GW by March 2009. However, this still falls short of the
14% per annum growth in transmission capacity targeted in the 11th plan.
The Government policy plans to increase inter - regional transmission
capacity to 58.700 GW by 2015. It is expected that thereafter, inter -
regional transmission will not be a constraint(15).
(15) CEA, Infraline reports
1.5.6 Distribution:
Power Distribution still remains a segment that needs signifi cant reform,
as this would have a direct impact on the sector's commercial viability and
ultimately on the consumers. The sector has been plagued by high
distribution losses and low billing recovery, resulting in poor fi nancial
health of the utilities. After the mediocre results of the Accelerated
Power Development and Reforms Programme (APDRP), the Government has
introduced the Revised Accelerated Power Development and Reforms Programme
(R-APDRP). The program is to be implemented in 2 phases. The focus of the
fi rst phase is on implementation of Information Technology (IT) systems
for distribution. This is to be followed by large scale distribution
franchising in the second phase in order to remove ineffi ciencies. The
reform of the distribution sector is also crucial for the success of the
generation sector as the generation companies cannot sell power to fi
nancially unviable entities(16).
(16) CEA, Infraline reports
1.5.7 Power Trading:
Of the total electricity generation in India in FY10, the short term power
market comprised only 8 per cent. Organized power trading started in India
after the enactment of the Electricity Act, 2003 (EA 2003). EA 2003
recognized trading as a distinct licensed activity and provided for non -
discriminatory open access to generators, consumers and licensees. Tata
Power Trading Company Limited (Tata Power Trading) was the fi rst company
to be granted a license by the Central Electricity Regulatory Commission
(CERC) in June 2004. Presently, there are 45 licensed traders, of which the
active players are Tata Power Trading, PTC India Limited, NTPC Vidyut
Vyapar Nigam Limited, Adani Enterprises Limited, Reliance Energy Trading
Limited, Lanco Electric Utility Limited and JSW Power Trading Company
Limited.
2. OPPORTUNITIES AND OUTLOOK
2.1 Domestic:
2.1.1 Generation:-
* The country still needs to add substantial generation capacity. The
opportunities in power generation will, therefore, be available across all
forms of generation from coal to renewables.
* Gas based power generation opportunities are likely to emerge in the
Indian market from both domestic gas and LNG.
* The Government is expected to float bids for 2 domestic coal based UMPPs
of 4,000 MW each during the year. More such opportunities are expected in
the near term.
* Many central and state agencies are looking for Public Private
Partnership (PPP) model for fuel sourcing and generation. The Company is
exploring these opportunities.
* The UMPP model is also likely to be followed for hydro projects.
2.1.2 Distributed Generation:
* Large rural population (about 400 million) with no access to electricity
also presents an opportunity in decentralized distributed generation.
Combining renewable power with distributed generation is one way to meet
rural demand.
2.1.3 Renewables:
* The National Solar Mission has presented an opportunity to grow the solar
generation portfolio of the Company and the Company is looking forward to a
300 MW market for installed capacity by 2013.
* The introduction of the Renewable Energy Certifi cate (REC) mechanism
would help manage the liquidity in the renewable energy market by allowing
States that lack renewable energy sources to meet their Renewable Purchase
Obligation (RPO). This would stimulate growth in the renewable energy
space.
2.1.4 Distribution:
* Many States - notably Haryana and Rajasthan - have appointed advisors to
help them in rolling out distribution franchisees last year. The Government
of Uttar Pradesh is also looking for privatization of distribution circles.
More distribution opportunities are anticipated in the near term. The
Company will review each opportunity and participate in these
opportunities.
2.1.5 Transmission:
* Power Finance Corporation Limited (PFC) has initiated bids for the Ultra
Mega Transmission Projects (UMTP). These are likely to come up for bidding
during the year.
2.2 International:
* Nuclear power is the next big opportunity in India subject to Government
approvals and breakthroughs in fast breeder technologies. While private
sector has not been allowed to participate in India, international
opportunities could present themselves.
* For derisking coal availability in India, the Company is actively
pursuing coal opportunities in Indonesia and Southern Africa.
* The economic crisis last year has brought overleveraged and distressed
operating assets to the market. The Company is evaluating these
opportunities for diversifying construction and country risk.
* The Company continues to scout for energy sources around the world. The
Company is also looking for opportunities in renewables and particularly
geothermal energy in suitable global markets.
3. RISKS, THREATS AND CONCERNS:
The large opportunity for additional generation capacity created by high
economic growth will be subject to a lot of risks which the government and
utilities will need to address:
* While domestic coal supply is inadequate to meet current demand, there is
not enough infrastructure in both the exporting countries and India to
handle large quantities of coal for import into India. This is likely to
lead to higher fuel costs which will need to be passed on to the consumers.
* Delays in land acquisition, environmental clearances and other approvals
remain an area of concern.
* Lack of water is another threat to the capacity addition plans, since
about 79% of the upcoming capacity will be in areas of water scarcity.
There is a need to address this through de-salination plants or building
more coastal power plants.
* The rising subsidy bill of distribution companies (discoms) needs to be
addressed for the long term viability of the sector in India and remains a
concern.
* Another cause of concern faced by the infrastructure sector and the power
sector in particular is the lack of manpower. India requires about 75,000
to 80,000 new skilled workers per year only for the power sector.
* The availability and cost of capital for funding of new projects could
also be a cause of concern, given that power projects are capital
intensive. The economy and the monetary policy will need to play a key role
in ensuring that these projects receive timely funds.
* The imposition of export restrictions or levy of taxes by energy
exporting countries could make the cost of imported energy into India even
more expensive and unaffordable for the common man.
4. INFORMATION TECHNOLOGY:
With signifi cant movements in distribution / retail segment and upcoming
generation projects, the focus of IT operations during the year was
primarily towards IT enablement of business processes to help business to
ensure sustainability and competitiveness. This was achieved through the
use of SAP as the base platform. The major business processes that were IT
enabled include generation and transmission billing, power purchase and
sale and application handling for changeover and new consumers. Another
area of thrust in non-SAP systems was to introduce state-of-the-art
software systems / technologies for project collaboration, compliance
monitoring and document management systems across the enterprise.
Assessment studies on SAP utilization and server hardware were conducted
using services of renowned consultants for future IT roadmap.
5. FINANCIAL PERFORMANCE OF THE COMPANY
5.1 Standalone results:
During the year, the Total Income at Rs. 7,379.85 crores was lower by 6% as
compared to Rs. 7,868.58 crores in the previous year. Operating Income at
Rs. 7,098.27 crores for the year was lower by 2% as compared to Rs.
7,236.23 crores in the previous year. The decline was mainly due to lower
fuel costs in the Mumbai regulated business. The decrease in the fuel cost
from Rs. 4,807.65 crores to Rs. 4,045.56 crores was mainly due to a decline
in prices both domestically and internationally.
Further, the Company also reduced the fuel cost by replacing oil with
cheaper RLNG gas, thereby reducing the tariff for the end consumers.
The cost of power purchased was lower at Rs. 251.69 crores compared to Rs.
493.50 crores during the previous year, mainly due to lower power cost and
lower purchases. Other operating expenses were higher at Rs. 922.41 crores
in the current year (Rs. 794.14 crores in the previous year). This increase
is attributable to higher employee costs and higher operations and
maintenance costs for the existing and new units that were commissioned
during the year.
Depreciation was higher at Rs. 477.94 crores in the current year (Rs.
328.85 crores in the previous year) mainly on account of the first full
year of operation of Trombay 250 MW Unit 8 Power Plant, Units 1 and 2 of
Haldia Power Plant, commissioning of Unit 3 of Haldia Power Plant and new
wind farms. Interest and fi nance charges were higher at Rs. 422.99 crores
in the current year (Rs. 327.76 crores in the previous year) mainly on
account of higher capitalization and increased borrowings.
Tax was higher at Rs. 320.50 crores in the current year (Rs. 194.48 crores
in the previous year) mainly on account of higher profi t before tax during
the year.
Thus, the Profit after Tax (PAT) accordingly increased to Rs. 938.76 crores
as against Rs. 922.20 crores in the previous year. Basic earnings per share
(EPS) on distributable profi ts of Rs. 947.65 crores (previous year
Rs.967.50 crores) stood at Rs. 40.77 as against Rs. 43.69, a decline of
about 7%. This is mainly due to the increase in the equity capital (from
22,14,24,443 shares to 23,73,07,236 shares) due to the conversion of
Foreign Currency Convertible Bonds (FCCBs) and issue of shares underlying
Global Depository Receipts (GDRs).
During the year, the net addition of Rs. 1,024.94 crores to the Gross Block
was mainly on account of Unit 3 of Haldia Power Plant, new wind farms
commissioned during the year and other capitalization in Mumbai Operations.
The Net Current Assets as on 31st March, 2010 were higher at Rs. 3,785.99
crores as compared to Rs. 2,609.82 crores in the previous year. Borrowings
at Rs. 5,872.01 crores as on 31st March, 2010 were higher by Rs. 673.81
crores as compared to the previous year. Net Worth of the Company of Rs.
9,131.97 crores as on 31st March, 2010 was higher by Rs. 1,946.81 crores as
compared to previous year primarily on account of retained profits,
increase in share capital and securities premium due to the issue of GDRs.
Debt/Equity Ratio decreased from 0.60 in the previous year to 0.55 as on
31st March, 2010.
The increase in share capital resulted in a decrease in the Return on Net
Worth from 14% in the previous year to 10% as on 31st March, 2010.
5.2 Consolidated Results:
The Consolidated Operating Revenue at Rs. 18,985.84 crores grew by 5% as
against Rs. 18,061.32 crores in the previous year. The increase in the
Consolidated Operating Revenue was primarily on account of the higher coal
sales in Indonesian Coal Companies and higher revenue in North Delhi Power
Limited (NDPL).
Profi t before Tax, share of Associates, Minority Interest and Statutory
Appropriations stood at Rs. 2,767.30 crores as against Rs. 2,463.83 crores,
a growth of 12%.
Interest charged on a consolidated basis at Rs. 763.87 crores was higher by
8% as against Rs. 708.74 crores in the previous year, primarily on account
of additional loans taken by the Company and its subsidiaries. Depreciation
was also higher by 34% at Rs. 877.68 crores as against Rs. 656.49 crores in
the previous year. Provision for Tax stood at Rs. 628.66 crores as against
Rs. 1,165.10 crores in the previous year. The decrease is mainly due to
lower profi t from coal companies and reversal of deferred tax by NDPL.
Further, the previous year also included a provision made by the coal
companies in respect of pre - acquisition tax liability.
The PAT after adjusting for share of Associates and Minority Interest at
Rs. 1,966.84 crores was higher by 61% as compared to Rs. 1,218.74 crores of
the previous year. The Consolidated PAT is higher mainly on account of
higher revenue, forex gain in Coastal Gujarat Power Limited (CGPL) and
lower impairment of investment compared to the previous year.
6. RISK MANAGEMENT PROCEDURE AND STRUCTURE:
Risk Management as a formal exercise began in the Company in 2004 - well
before the Clause 49 mandate. Risks are evaluated based on the probability
and impact of each risk. The Risk Register contains the mitigation plans
for eleven categories of risks. Risk Owners prepare their risk plans which
include responsibilities and timelines. These are periodically updated for
the actions taken. Six Risk Management Sub-Committees (RMSCs) closely
monitor and review the risk plans. The Company's Risk Management Committee
(RMC) comprises the Executive Directors, Chief Risk Offi cer and other
senior managers. The RMC meets every quarter to review the risk plans and
to suggest further mitigation action points. During the year, review at
business unit level was initiated to cover the major risks of each division
by Divisional RMSC and subsequent review by RMC. A consultant has been
engaged to benchmark the Risk Management Process.
An update on the major risks is presented every quarter to the Audit
Committee of Directors (Audit Committee). The major risks include
volatility in prices of fuel and availability of fuel, country risk
regarding coal investments, cost competitiveness of generation, project
execution related risks, stricter emission norms impacting generation and
projects, volume risk due to open access, impact of global fi nancial
turmoil, major threats from terrorism / sabotage, etc. The Risk Management
Policy is reviewed and revised annually. The risk areas are covered in the
risk based Internal Audit Plan.
* Internal controls and systems:
The Internal Audit function has been outsourced to a firm of Chartered
Accountants who conduct the audit on the basis of an Annual Audit Plan. The
Internal Audit process includes review and evaluation of effectiveness of
the existing processes, controls and compliance. It also ensures adherence
to policies and systems and mitigation of the operational risks perceived
for each area under audit. The departmental performance is rated through
the Control Effectiveness Index given by the Internal Auditors. Signifi
cant observations including recommendations for improvement of the business
processes are reviewed by the management before reporting to the Audit
Committee.
The Audit Committee then reviews the Internal Audit reports and the status
of implementation of the agreed action plan.
7. CAUTIONARY STATEMENT:
Statements in the Management Discussion and Analysis, describing the
Company's objectives, projections and estimates may be forward
- looking statements within the meaning of applicable securities laws and
regulations. Actual results may vary from those expressed or implied,
depending upon economic conditions, Government policies and other
incidental / related factors. |