MANAGEMENT DISCUSSION & ANALYSIS
1. Industry Structure and Developments
1.1. Market Structure
India has different models for sale and purchase of bulk power - integrated utility [State Electricity Board (SEB)], single buyer (MoU based/regulated generation), competitive bidding, captive power generation and sale to captive users. At the consumer end, India has models such as monopoly where the incumbent state distribution company is the sole provider of electricity, franchisee model, retail competition, etc. Migration to a more mature market structure is expected to occur gradually. With the proposed amendment to the Electricity Act, 2003 (EA, 2003) on the anvil, the market structure may alter significantly in the long-term.
The installed generating capacity in the country as on 31st March 2015, was 272 GW (and an additional 43 GW of captive power). Grid capacity addition during the financial year for the country was 25 GW as compared to capacity addition of 20 GW during the brvious financial year.
Coal production by Coal India Limited (CIL) and its subsidiaries was 494 MT in FY15 against 462 MT in FY14, reflecting a 7% growth y-o-y as against CAGR of 2.3% experienced in the last three years. The process of captive coal block auctions is aimed at facilitating the growth of domestic coal production. Thermal coal imports this year stood at over 150 MT. Domestic natural gas production was 33,656 MCM against 35,407 MCM in FY14. (Source: www.coalindia.in, www.petroleum.nic.in)
The backbone transmission of system in India is mainly through 400 kV AC and 220 kV AC networks with the highest transmission voltage level being 765 kV. Transmission lines capacity has increased to over 3 lakh Ckm in FY15, reflecting an increase of 7.5% over the brvious year.
The recently issued 'Performance Report of State Power Utilities' by Power Finance Corporation (PFC) for FY13 indicates that Aggregate
Technical & Commercial (AT&C) losses of state owned distribution utilities are still at very high levels. Financial health of state electricity utilities in retail distribution continues to remain the most critical issue for the sector's viability.
As part of the proposed amendments to the EA, 2003, separation of the wires and supply businesses is envisaged. This is expected to increase competition in the supply sector, though reliability of wires & network remaining with the incumbent would continue to pose challenges.
1.6. Power Trading
Around 115 BUs of electricity were traded in the short-term power market during FY15 (as compared to 105 BUs in FY14), accounting for around 9% of the total generation.
With increased opportunities, the challenges in the power trading sector have also grown. The competition has grown fierce due to an increase in the number of CERC licensed traders from 13 in FY05 to 71 in FY15. Due to this, trading margins are also under immense brssure.
Power trading is also adversely affected by continued corridor constraints for power flow from brdominant generating regions in East & West to consumption centres in the South leading to brvalence of high prices for the customers in the southern states.
1.7. Power Services Business
With the opening up of the Electricity Sector, several private players started establishing power plants in India to meet the demand supply gap. With this development, the market for outsourcing of O&M of Power Plants also opened up in India. Today, it is estimated that over 15,000 MW capacities have been outsourced for O&M. In the next 2-3 years, additional 12,000 MW of capacity is expected to deploy outsourced power services.
Further, in the transmission sector, with the entry of private players in last few years, there is an opportunity for O&M services and project management consultancy services.
1.8. Changes to Regulatory Environment
Regulatory reforms in the power sector are critical given the current challenges across the value chain. The following are some of the important regulatory changes that took place in FY15:
• Electricity (Amendment) Bill, 2014
The Electricity (Amendment) Bill, 2014 was introduced in Lok Sabha on 19th December 2014. The Bill seeks to segregate the distribution network from the electricity supply business and to introduce multiple supply licensees in the market amongst other changes. The Bill has been referred to Parliamentary Standing Committee on Energy which has submitted its report. Your Company is actively participating in the public consultation process directly and through industry associations.
• The Coal Mines (Special Provisions) Bill, 2015 and Coal Auctions
Hon’ble Subrme Court, vide its judgment dated 25th August 2014, read with its order dated 24th September 2014 cancelled the allocation of 204 captive coal blocks. To reallocate the cancelled captive coal blocks, the Parliament, passed the Coal Mines (Special Provisions) Act, 2015. This provides for allocation of coal mines, through auction and allotment, and vesting of the right, title and interest in and over the land and mine infrastructure, to successful bidders and allottees, with a view to ensure continuity in coal mining operations and production of coal.
Ministry of Coal put on auction Schedule II (42 producing and ready to produce blocks) and Schedule III (32 substantially developed coal blocks) in the months of January and February 2015. As per indications available from Government of India, the process of auction of coal blocks is likely to continue in the months and years ahead.
• CERC Tariff Regulation 2014
CERC notified tariff regulations under 'Term and Conditions of Tariff, 2014', which will form the basis for regulations for a period of five years with effect from 1st April, 2014 to 31st March, 2019 and shall be applicable to all Central Generating Stations, Inter-State Generating Stations and the Inter-State Transmission Systems for whom the tariff is determined under Section 62 of EA, 2003.
The key changes are with regards to tax and calculation of incentives for thermal power plants. As per the new regulations, the base rate of Return on Equity (RoE) would be grossed up with the effective tax rate of the respective financial year. The effective tax rate would be considered on the basis of actual tax paid for the financial year by the generating company. The incentive for thermal power plants would be calculated based on the Plant Load Factor (PLF) instead of Plant Availability Factor (PAF) and would be paid at the rate of 50 paise/kWh for every unit generated above 85% PLF. Apart from these, the regulations have tightened the operating parameters such as Station Heat Rate, Auxiliary Consumption and Secondary Fuel Oil Consumption for thermal power plants.
Your Company is an integrated player across the power value chain which gives it a competitive edge in the marketplace. The key focus areas for the Company will be scaling up of Generation capacity and Value Added Businesses viz. services, trading etc. Considering the evolution in the global energy environment, the Company will maintain a portfolio of options for its generation mix. The Company plans to have 20-25% of its generation capacity from clean and green sources over the next 8-10 years.
While Indian market continues to remain the primary focus of business, your Company has started making investments in projects in select international geographies to diversify its portfolio. In line with the international strategy, the Company continues to evaluate investment opportunities in Africa, Turkey & Middle East, South East Asia and the SAARC region. In addition, the Company continues to evaluate various opportunities for providing management and technical advisory services in Generation and Distribution businesses.
The Company is focusing on the consumer end of the value chain through distribution network development and power supply business. The Company is also looking at scaling up its Value Added Businesses i.e. businesses with no or low capital investment (Power trading, O&M services, Strategic engineering, Solar EPC) substantially over the next few years. The Company would continue to evaluate investments in non-core businesses such as telecom - Tata Teleservices Limited, Tata Teleservices (Maharashtra) Limited,
Tata Communications Limited and depending on market situation and opportunity, divest them at an appropriate juncture.
3. Opportunities and Outlook
The growth in domestic market has in the last few years been constrained given the uncertainties around fuel supply, financial condition of discoms, challenges of land acquisition, water linkages and various statutory clearances. As the power sector is seen as a key driver supporting the growth of the nation at large, the new Government at the Centre has been pursuing reforms which is expected to ease some of the known constraints.
The opportunities that exist for your Company is as follows:
o Greenfield projects in India and international geographies of focus
o Expansion at existing sites where the Company is operating
o Due to the current financial stress in the power sector in India, there are assets which may be available for acquisition. The Company is evaluating and will continue to evaluate opportunities to acquire projects in various stages of development across the country. These acquisitions, if they materialize, will leverage our existing businesses in the power value chain.
o Renewables: The Company is exploring multiple options, both greenfield and through possible acquisitions. This will help enhance the market share for both solar and wind based generation. Given the increasing difficulty of acquiring land for future capacity addition in India, the Company is actively evaluating and pursuing opportunities to acquire land in strategic markets in the country to help build a strong pipeline.
o Decentralised Distributed Generation: The Company is actively advocating, evaluating and pursuing projects for solar, wind, biomass-based power plants and other formats of generation to make them commercially viable specifically for small (kW sized) power plants.
With growing focus on improving the state of distribution business, several business models have been evaluated in the past.
While the PPP route has been successfully demonstrated in Delhi, the distribution franchisee model has been accepted by a few states as the route to bring in private investments, expertise and management skills in the distribution business.
Your Company will pursue opportunities in the distribution sector– partnering with States/Union Territories that have the institutional will and conviction to reform and drive operational improvement.
The Company is actively tracking developments with respect to amendments to EA, 2003, which might create opportunities in electricity supply business.
Over the next few years, the demand for transmission capacity is expected to increase significantly, driven primarily by increase in generation capacity and also due to requirements of open access, inter-regional transfers and integration of infirm renewable power in the system.
Your Company is continuously pursuing the expansion of its transmission network in the Mumbai and Delhi License Areas. The Company also keenly tracks any growth opportunities in the transmission sector and reviews each opportunity as it brsents itself.
Subsequent to the judgement of the Hon’ble Subrme Court of India pertaining to the matter of coal block allocation, the Company’s share of coal allocated in two mines viz. Tubed and Mandakini also got cancelled.
The Company did not participate in the first two rounds of the coal block auction process as it concluded after a detailed evaluation that the offered coal blocks were uneconomical for the Company’s qualified end use plants. However, the Company will continue to evaluate coal blocks available in future rounds of auction.
The Company continues to evaluate investments in international thermal coal mines to meet the current and future generation growth needs.
4. Risks and Concerns
Tata Power is faced with risks of different varieties, all of which need different approaches for mitigation:
• Risks common to several players in the sector and country of operation
• Risks very specific to the Company due to the way its businesses/operations are structured
• Disaster Management and Business Continuity risks which are by nature rare, but are events with dramatic impact
The key risks and concerns facing the Power sector in India are as follows:
• India’s domestic capacity is heavily skewed towards fossil fuels which has a negative impact from an environmental perspective.
Regulatory orders to address climate change can adversely affect valuations of coal based power stations.
• Pace of economic growth can slow down leading to lower growth in demand for power in India.
• Slowdown in pace of regulatory reforms in the country can affect aspects such as renewables scale-up, Case I and Case II bidding, opportunities for private player in distribution sector, amendment of EA, 2003, etc.
• Domestic coal supply may continue to remain inadequate or inaccessible to meet the growth in generation capacity.
• Infrastructure constraints such as railways and port capacity that may affect the transportation of domestic coal and logistics of imported coal.
• The imposition of export restrictions or levy of taxes by energy exporting countries could make the cost of imported energy into India more expensive and unattractive for discoms.
• The poor financial health of SEBs continues to be a factor that impedes the growth of the sector.
• Shortage of domestic gas and expensive LNG imports affects the financial viability of gas-based power plants.
• 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.
• The availability of cost-effective capital for funding of new projects could be a cause of concern given current exposure of banks to power sector and stranded assets which can result in NPAs.
The key risks and concerns specific to your Company are as follows:
• Timely resolution and implementation of CGPL PPA Compensatory Tariff
• Risks in Mumbai business due to brssure on tariff in distribution business
• Volatility in exchange rates and coal prices
• Steep fall in international coal prices adversely impacting the profitability of coal mines, thereby affecting their valuations For the Company’s forays in the domestic and international markets, adequate assessment of the risks and returns associated with each investment is carried out and appropriate mitigation measures are put in place.
Your Company has brpared Disaster Management Plans as per National Disaster Management Authority guidelines and Business Continuity Plans as per ISO 22301:2012. British Standards Institution (BSI) has assessed the same and has recommended your Company for certification.
5. Operational Performance
Consolidated operations of Tata Power are categorised into three segments: Power, Coal and Others. Report on the performance and financial position of each of the subsidiaries, joint ventures and associate companies has been provided in Form AOC-1. Highlights of operational performance of key entities are listed below.
• Trombay: Generation was lower than last year on account of low system demand planned, low PLF in Unit-6 to reduce oil usage, low availability of APM gas impacting Unit-7, and forced outages of Unit-7 and Unit-8. The plant has undertaken several operational improvement measures such as Cooling Water Tunnel interconnection between units for vacuum improvement in condenser that helps improve efficiency of units, installation of Variable Frequency Drive for hot well make up pump that results in reduction of auxiliary power consumption.
• Jojobera: Generation was marginally higher than brvious year on account of higher demand. The plant has undertaken measures for improvement in boiler performance optimising primary air flow in mills.
• Haldia: Generation from Haldia was lower in FY15 mainly because of forced outages and lower supply of flue gas. The plant has undertaken several measures for operational improvement including restoration of deareator extraction temperature to design value to increase power generation, rectification of stalling problem of turbine and implementation of auto changeover scheme to improve restoration time.
• Hydro: The decrease in generation was on account of lesser margin in KWTA quota and the need to keep the peaking capacity available during low lake level period i.e. May and June of the calendar year 2015.
• Renewables (Wind and Solar): Lower generation from wind was primarily due to backing down by utilities and lower wind trend. Generation at solar plant at Mulshi was as per expectation.
The Transmission assets, which are part of the Mumbai License Area, had a grid availability of 99.65% (highest ever) as against the MERC norm of 98%. This improved availability is due to proactive actions taken based on brventive maintenance practices, good condition monitoring and judicious planning and execution of planned outages.
• During the year, the Company added 430 MVA of Transformation Capacity, laid 47.35 Ckm of network and commissioned a new 145 kV GIS Receiving Station.
• 220 kV Transmission line between MSETCL Kalwa Receiving Station and Tata Power Salsette Receiving Station has been uprated and will enhance Transmission capacity for bringing power to Mumbai city from outside.
• The Company organised special safety awareness programs in the vicinity of High Tension lines in Mumbai, under its Jan Jagruti Abhiyaan initiative. The objective is to reduce electrical accidents that can be caused while living in areas which are close to high voltage Transmission lines.
The highlights of the Distribution business are as follows:
• Total consumer base increased to over 6 lakh with addition of 19,284 direct and 1,18,851 changeover consumers during FY15.
• Annual distribution sales were 5,969 MUs in FY15 as against 6,541 MUs in FY14.
• In FY15, 704 km of network was developed of which 286 km was of HT and 418 km was of LT. 101 Consumer Substation (Capacity addition-98MVA) and 10 Distribution Substations (Capacity addition-240 MVA) were commissioned in FY15. Five new Bill Collection Centres were commissioned in FY15.
• In FY15, the Services division provided Project Management Services for about 1,300 MW and O&M services for about 1,000 MW.
• In addition, the division provided services such as GIS testing, Design & Quality Audit etc. for various clients.
5.1.5 Strategic Engineering Division (SED)
Despite the continuing sluggish growth in Defence industry in FY15, SED delivered significant growth in revenues compared to FY14 through operational excellence and execution against existing order backlog. Some of the noteworthy achievements of SED during FY15 are:
• Tata Power SED (along with br-selected associate L&T) was selected as one of the two Development Agencies for Prototype Development phase of BMS Program. Tata Power SED is the leader of the Consortium.
• The Republic Day 2015 Parade, which had the theme of 'Make in India', had on display two indigenous systems and both had contributions from Tata Power SED.
Due to unforeseen changes in Indonesian law along with the tariff structure of the Power Purchase Agreement (PPA), CGPL is not able to recover the full cost of fuel through its tariff. Details of petition submitted by CGPL and an update on the same have been provided in the Board's Report Section 9.5.
Power Purchase Agreement
Out of the total capacity of 1,050 MW,
• 900 MW power had been tied up through long term PPAs. DVC, WBSEDCL and Tata Power Delhi Distribution Limited (TPDDL) have each tied up 300 MW.
• 150 MW has been tied up under long term PPA with Kerala State Electricity Board (KSEB) on 30th December 2013. Recently,
Medium Term Open Access (MTOA) has been granted for evacuation of entire contracted capacity (150 MW) from Maithon Power to KSEB. The MTOA is valid from 1st January 2016 till 31st May 2018, by when it is expected that the Long-Term Open Access (LTOA) on transmission would be granted.
5.8. Tata Power Delhi Distribution Limited (TPDDL)
The marginally higher PAT is mainly due to increase in compensation for carrying cost of regulatory assets, lower debrciation rate in line with new Companies Act, improved operational performance which were partially offset by one time Rithala Plant provision for contingency against the recognized revenue coupled with a tariff order which was not fully cost reflective.
TPDDL has a registered consumer base of 14.4 lakh and spans across an area of 510 sq. km. in Northern and North Western part of Delhi. TPDDL sales stood at 8,426 MUs in FY15 as compared to 8,038 MUs in FY14 and for the first time achieved single digit AT&C loss of 9.87%. TPDDL has also met all time peak demand of 1,704 MW in FY15 as against 1,508 MW in FY14. Tariffs in the past have been insufficient to ensure recovery of the power purchase costs of the Company, which has resulted in accumulation of Regulatory Assets to the tune of Rs. 5,358 crore as in FY15 compared to Rs. 5,146 crore in FY14.
In FY15, TPDDL successfully braved the devastating storm of 30th May 2014 in Delhi where wind speeds of over 110 kmph were observed. Teams were immediately deployed at various affected locations and TPDDL was able to restore 50% of power in less than 5 hours and 100% restoration of sub-transmission lines and 80% of distribution network within 12 hours of the disaster.
TPDDL is currently supporting Tata Power in providing consultancy services in the country of Benin/Nigeria and has developed expertise in lending such services of change management and distribution, anywhere around the globe.
5.9. Tata Power Trading Company Limited (TPTCL)
Revenue for FY15 is nearly flat as compared to the brvious year. However PAT was down by 26% as compared to the brvious year primarily on account of higher competition leading to lower trading margin, which is in line with margins of competitors.
Cross-Border Trade of power from Dagachhu Hydro Power Corporation Limited, started from 20th February 2015. TPTCL is the first Indian trader to start merchant power trade from Bhutan. TPTCL also invested in a 1.25 MW rooftop solar power project in Tamil Nadu to ensure green power in its portfolio and also to avail accelerated debrciation norms.
5.10. Trust Energy Resources Pte. Limited (Trust Energy)
The lower PAT is mainly due to reduction in coal marketing commission and lower coal shipments as compared to brvious year. The assets under Trust Energy maintained an overall availability of close to 99.9% with 0.7 days down time on one of the vessels in FY15.
A new vessel (208,000 DWT) has been contracted to securitize the freight of CGPL for twenty years and is scheduled to be delivered in 2016. The Company has also undertaken several measures to reduce operating expenditure viz. condition monitoring system for lubricants, reduction in hull and machinery insurance brmium and ensuring lean structure to manage overhead costs.
5.11. Coal & Infrastructure Companies
Your Company, through its subsidiaries, holds 30% stake in PT Kaltim Prima Coal (KPC) and 26% stake in PT Baramulti Suksessarana Tbk (BSSR), which are strategic assets to hedge imported coal price exposure at CGPL and an important part of the supply chain for its coal off-take requirements.
In FY14, your Company signed an agreement to sell its 30% stake in PT Arutmin Indonesia and associated companies in coal trading and infrastructure. The aggregate consideration for Tata Power’s 30% stake is USD 510 million, subject to certain closing adjustments and restructuring actions. However, the Conditions Precedent to closing the transaction could not be completed in FY15. Your Company is pursuing steps to complete this transaction.
The production at the two Indonesian thermal coal companies, viz. PT Kaltim Prima Coal and PT Arutmin Indonesia, during CY14 was 84.49 MT as against 80.32 MT in CY13. The coal price realization for the year was USD 52.64/tonne as compared to USD 63.87/tonne in the brvious year due to continuing downtrend in global coal prices. The lower price of coal impacted the profitability of the coal companies substantially as compared to the earlier years. However, as is the strategy of the Company, the overall impact on profitability of Tata Power Consolidated was partially offset by lower fuel cost in CGPL.
BSSR along with its wholly owned subsidiary, PT Antang Gunung Meratus produced a total of 4.85 MT during CY14. The coal companies have taken steps to reduce the cost of production by focussing on productivity and operating efficiencies.
5.12. Tata Power Solar Systems Limited
During the year, there was a marginal improvement in bottomline due to improved operational performance. However, the Company continued to incur a loss as it faced challenges in fully utilizing its manufacturing capacity. The market was extremely competitive especially due to imports.
• Solar Photovoltaic (PV) Cells and Modules: During the year, the company supplied 65 MW of modules to customers in the Domestic Content Requirement (DCR) market under Phase 2, Batch 1 of JNNSM program.
• Projects: The Company executed 10 MWp for Bhoruka Power Corporation Limited in the state of Karnataka and has also won open access projects that supply power to corporate customers through the grid.
• Products: The Company has won an order in J&K to supply and install solar home lighting solutions to over 43,000 homes in the state. The Company also exported cells and modules, and got repeat orders from the international customers. The products business faced unexpected adverse brssures owing to withdrawal of subsidies by the Government of India.
8. Enablers to business
The Company pursues a combrhensive model in its quest towards Sustainability (described in Board's Report Section 12). This includes the following key elements: Care for our People, Care for Community, Care for our Environment and Care for our Shareholders and Customers. The Company’s latest Sustainability Report is hosted on its website: http://www.tatapower.com/sustainability/sustainabilitycommunications.
8.1.1 Care for our People
• Safety - Safety has been adopted as a core value at Tata Power and is hence the first priority for the Company. Safety performance of the Company has been reported in Board's Report Section 12.1. Keeping in mind the safety performance in FY15, it was decided to reduce the overall performance pay of all employees including the Managing Director and the Executive Director by a quantum of 5%. The Members of the Board of Directors of the Company have voluntarily offered to reduce their remuneration payable for FY15 by 5%.
• Employee Engagement - On a standalone basis, the manpower (officers and staff ) at the end of FY15 stood at 4,310 as compared to 4,244 at the end of the last financial year. Women employees account for approximately 9% of the manpower.
The overall employee engagement of your Company determined through Aon Hewitt survey in FY15 was 69% as against the 66% in FY14 and is above the industry average of 60% and is a sector benchmark in India.
• Industrial Relations - Your Company has, since its inception, supported working collaboratively with all stakeholders to maintain cordial industrial relationship at all locations. The activities at all location progressed peacefully and cordially during the year.
• Sexual Harassment – The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on brvention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for brvention and redressal of complaints of sexual harassment at workplace. An Internal Complaints Committee (ICC) is set up for all administrative units
or offices of Tata Power to redress complaints received regarding sexual harassment. The policy has set guidelines on the redressal and enquiry process that is to be followed by complainants and the ICC, whilst dealing with issues related to sexual harassment at the work place towards any woman associates. All women associates (permanent, temporary, contractual and trainees) as well as any woman visiting the Company’s office brmises or women service providers are covered under this policy.
The following is a summary of sexual harassment issues raised, attended and dispensed during FY15:
• No. of complaints received: 1
• No. of complaints disposed off: 1
• No. of cases pending for more than 90 days: Nil
• No. of workshops on awareness program against sexual harassment carried out: 8
8.1.2 Care for Community
The five thrust areas for Corporate Social Responsibility (CSR) wherein the Company engages with its Community are:
• Primary Education with focus on girl child
• Health and Drinking Water
• Livelihood and Employability
• Social Capital and Infrastructure
• Inclusive Growth
Details of CSR spend by the Company is given in and Annexure-I of the Board's Report. CSR activities undertaken by the Subsidiaries and Joint Ventures with significant spend (CGPL, MPL, TPDDL) are as follows:
Gujarat Power Limited (CGPL)
The Company abides by all stipulated norms including mitigation action for environmental, social, community and ecological aspects. Following are some of the salient features and programs undertaken on social and community aspects.
At brsent, CGPL is focussing on 21 villages for implementation of various CSR activities. A systematic approach has been followed for identification of stakeholders and designing programs to promote co-creation. The active role played by the Gram Panchayat has led to the formation of the village level committees which are the first contact point for the company for all developmental work.
Swachh Jal is a program which aims at providing clean water by establishing RO plants and hence brventing water borne diseases in the coastal community. During the year, six RO plants have been installed and now a total of 18 RO plants are operational in the villages, which are effectively managed by the Panchayat. These 18 RO plants (12 nos. each with 1,000 litres/hour capacity, 6 nos. each with 500 litres/hour capacity) cater to the water needs of 18,630 people of the region.
Project Arogya hosts school and community health camps and programs for creating awareness on sanitation and health. During the year, seven specialized health camps were organised in 31 villages which covered 1,177 beneficiaries. Initiatives such as School Health Camps, Community Health Camps, Special Camps (viz. Eye and cataract, Gynaecology) were also conducted.
CGPL is implementing the Shiksha Sarathi and Project Sujaan initiatives to drive upliftment of the education standards. This has benefited 14,469 children across the region. This is being implemented in 83 schools of 50 villages.
Shiksha Sarathi is a Combrhensive Education Upliftment Programme for children in primary school and also aims at capacity building of the teachers. Activities pursued through this are teachers training, learning camps for Std. 3rd-5th, science camps, setting up libraries, etc. These activities have contributed to improved 'learning achievement' of the students evident in their proficiency in reading, mathematics, etc.
Sujaan involves empowering the future generation through value-added computer aided literacy. Under this program, 41 learning stations have been installed, which includes 14 learning stations in schools where number of SC/ST students is high.
Project Sagar Bandhu is an ambitious program designed for development of the fishermen community through strengthening of village institutions like the Village Development Advisory Council (VDAC) and implementation of various activities such as initiatives in micro-financing support, formation of Self Help Groups, establishment of group enterprises, Roof rain water harvesting structure, pipe line connectivity for provision of drinking water, health camps, support to the informal school by providing teachers, provision of mid day meal in school, distribution of fishing gears for livelihood enhancement, etc.
Project Akshaya Urja Deep is a green solution for lighting fishing boats using solar energy, improving livelihood profitability and working towards a sustainable future of fishermen. 113 units of solar boat lights were given to the fishermen which are used for illumination in their hutments and in the boat during fishing at night. This has resulted in increase in productivity because of increased daily fishing hours and saving in costs such as purchase of kerosene.
Kanthi Area Livelihood Program is a project for enhancing livelihood of the community under Gaushala initiatives. During the year, CGPL supplied fodder for 3,600 cattle which benefited 450 cattle owners. Responding to the request of district administration, CGPL provided fodder during the drought in 7 villages. The company has been apbrciated officially by the government for the same.
Community Asset Creation
Project Annapurna is an initiative for household bio-gas installations through cost sharing between CGPL and the user community.
During FY15, 30 household bio-gas units have been installed. It is having positive impact on the health of families.
Mangrove Afforestation Program has been undertaken by the company in collaboration with Gujarat Ecological Commission (GEC) and Kantiyajal Tavar Vikas Samiti (KTVS) from October 2010 and has been effectively implemented in 1,000 hectares of land in the coastal village of Kantiyajal, Bharuch district.
Approach to observations made by Compliance Audit Ombudsman (IFC) and Compliance Review Panel (ADB) The Company and its lenders have received complaints from a few NGOs, who have alleged that CGPL has not done enough to protect the livelihood of fishermen in the neighbourhood. Following the allegations made to IFC and ADB, the Compliance Audit Ombudsman (CAO with reference to IFC) and Compliance Review Panel (CRP with reference to ADB) reviewed the social and environmental safeguard scenario in CGPL. After the report published by the Compliance Audit Ombudsman, CGPL has, in collaboration with IFC, developed an M&M (Monitoring and Management) Plan which is currently being executed. This includes actions and interventions to address the CAO observations.
The M&M Plan focuses on monitoring of selected Environmental and Biodiversity parameters over different time durations, to establish that UMPP Mundra is functioning within the stipulated norms of the IFC/World Bank. Some of these monitoring and verification exercises for example, “Verify brsence of radioactive materials in coal & fly ash” have been conducted and concluded that radioactive materials are below detection levels in coal and fly ash. Monitoring of some parameters are designed for longer time period and hence continuing. As part of the M&M Plan, a socio-economic survey is being conducted to identify areas of interventions required in the villages in the UMPP’s vicinity. While the study report is being finalized, the recommended actions of the report will be mainstreamed in the regular CSR work of CGPL. The update and details of the progress of the M&M plan is available on the following website http://www.tatapower.com/cgpl-mundra/csr.aspx
The CRP (Compliance Review Panel) in reference to the ADB report, has recently been published and the action plan is being developed. The Company wishes to reinforce that the core issues raised are not specific to Mundra UMPP alone, but relate to issues generally concerning the coastline of Gujarat. CGPL shares a very healthy relationship with the local communities and continues to work with them on multiple platforms and community development initiatives. The Company is engaging with all NGOs who work closely with the local community as well as fishermen in and around Mundra UMPP area. The Company would always welcome enhanced engagement with all those who have commitment to genuinely pursue the cause of local communities and ensure enhancement in their quality of life.
Maithon Power Limited (MPL)
During the year under review, the following activities were undertaken:
• Employability trainings were organized with the help of Tata Consultancy Services Limited and Aegis Global Limited on skill development for working in BPO/KPOs in which 495 local youth were trained. About 30% of those trained have already got placement in locations such as Kolkata and Jamshedpur. In continuation of the above, local youth were also imparted training on various soft skills such as brsentation skills, group discussion, public speaking, interpersonal skills, computer operation, verbal and non-verbal communication, email writing, etc.
• 80 tribal women were trained in jute & straw handicraft. Forward linkage with Jharcraft (GoJ) has been established.
• 60 tribal youth were involved in establishing fly ash brick manufacturing unit.
• Two Mobile Medical Units with a team of doctors, pharmacists and nurses were deployed to provide medical advice for treatment of non-chronic diseases, along with distribution of required medicines in 24 locations covering 60 villages near the plant and railway infrastructure.
• Health awareness trainings were imparted to women. Special medical camps on anaemia were also conducted in the nearby villages.
• During the year, MPL started three remedial education support centres and provided education support to 650 students and 50 women around the plant area to bridge their learning gaps.
• MPL has also started a computer training centre in one school facilitating training to 280 candidates including 50 adults.
• 100 non-functional tube wells were repaired in nearby villages.
• Supply of drinking water in nearby 33 villages during summer season was also undertaken by MPL.
Tata Power Delhi Distribution Limited (TPDDL)
TPDDL has developed a unique socio-economic business case for addressing needs and aspirations of key communities which are lso its consumers, thereby building a symbiotic relationship for the benefit of both, viz. members of such economically weaker sections especially for those residing in Jhuggi Jhopri (JJ) clusters, resettlement colonies and the company. There are 200+ listed JJ clusters and resettlement colonies which fall in the company’s area of operation.
TPDDL’s innovative processes of integrating CSR with its business goal of AT&C loss reduction is one of its kind in the industry and has won CII Industrial Innovation Award 2014. In FY15, CSR umbrella program “Haath Badhana, Haath Batana” was launched.
In FY15, the major CSR initiatives undertaken with the objective of reaching out to the communities in which the company operates were:
• Women Literacy programs (290 centres) which helped create 741 brand ambassadors
• 5 RO plants were installed in government schools
• 2 night shelters started
• Education support program for SC/ST students and wards of Adult Literacy Centre and Vocational Training beneficiaries
• More than 30,000 women benefitted by the initiative of imparting education and vocational training
• Mobile dispensaries and drug de-addiction camps 8.1.3 Care for our Environment
Following key initiatives were taken up in FY15:
• Ash Utilisation
• Sewage Treatment Plants at Hydro station of Bhivpuri and Jojobera
• E-Waste Management across your Company
• Promoting E-Bill subscription by consumers in Distribution business
• Demand Side Management
• Carbon abatement
8.1.4 Care for our Customers.
Strengthening customer focus is one of the key areas of attention for Tata Power. The Company aims at achieving customer affection, a level of excellence in customer focus that goes beyond customer satisfaction and delight.
In this direction, the Company in FY15, initiated 'Tata Power Customer Affection Program (TP-CAP)' and instituted a dedicated team to pursue this in a systematic manner, both in Business-to-Business (B2B) and Business-to-Consumer (B2C) businesses. The
Company plans to undertake a detailed study of customer segmentation and realign its focus based on needs of each segment.
• Fund Raising
On 25th April 2014, the Company allotted 33,15,52,894 Equity Shares of Rs. 1/- each at a price of Rs. 60/- per Equity Share aggregating to Rs. 1,989.32 crore pursuant to shares issued under Rights Issue.
During the year, your Company successfully completed an offering of 3-year Debentures aggregating Rs. 1,000 crore and 5-year Debentures aggregating Rs. 500 crore. The proceeds of the debentures were utilised for the redemption of FCCBs of USD 300 million. The Coupon on the 3-year and 5-year debentures is set below 9.5% for both offerings. Despite a difficult environment, your Company managed to optimise the financing cost through a balanced mix of borrowings from banks/ NBFCs, commercial papers and Debentures.
Despite the brssure on your Company’s balance sheet due to under-recovery of fuel costs at CGPL, Mundra, your Company managed to control the borrowing costs by constantly sourcing cheaper sources of funds. CGPL is also actively pursuing its lenders for getting a lower lending rate and also plans to utilize RBI’s 5:25 scheme to avail favourable refinancing and repayment options.
• Debt repayment
During the year, an amount of Rs. 8,140.82 crore was repaid on existing loans and debentures. This includes the redemption of Rs. 1796.70 crore of FCCBs which was partially financed by raising debentures of Rs. 1500 crore.
• Credit Rating
As on 19th May 2015, your Company had the following five credit ratings, stated below. The ratings have been assigned on the basis of consolidated credit profile of Tata Power and its subsidiaries:
• Standard & Poor’s Rating Services: B+ with Stable outlook
• Moody’s Investor Services: Ba3 with Stable outlook
• CRISIL: AA- with Stable Outlook
• CARE: AA
• ICRA: AA with Negative Outlook
Your Company is exposed to risks from market fluctuations of foreign exchange. Your Company’s policy is to actively manage its long term foreign exchange risks within the framework laid down by the Company’s forex policy and it includes:
i. Hedging buyers credit exposure with a combination of Forwards and Options
ii. Hedging inflows in the form of Dividend/Interest immediately
iii. Hedging principal and interest payments of foreign currency loans of domestic projects at least 3 years before the due date
• Cash flows from operating activities
Cash generated from operations of your Company, post adjustments to profit before tax, has decreased from Rs. 2,699.50 crore in FY14 to Rs. 1,687.90 crore in FY15. This is primarily on account of higher power purchase cost, higher cost of components consumed, higher employee benefits expenses and lower reduction in Regulatory Assets during FY15 compared to the reduction during
FY14. On a consolidated level, net cash flow from operating activities decreased from Rs. 6,483.07 crore to Rs. 5,980.91 crore.
8.3. Business Excellence
• Tata Business Excellence Model - In line with the Tata Group guidelines for high performing companies, your Company undergoes Tata Business Excellence Model (TBEM) assessment once in two years. In FY15, your Company underwent the assessment and achieved an improved score. The Board, Management and entire staff of the Company reviewed the findings of the assessment with the objective of consolidating its strengths and addressing various opportunities for improvement as an outcome of the assessment process and Company's commitment to Business Excellence.
• Business Process Reengineering (BPR) – This year the focus was on Enterprise Resource Planning reimplementation. Also, some of the critical processes in the areas of Procurement, Customers and Employee Service & Administration were reengineered to bring in best practices and improve effectiveness of these processes.
• Culture Building – Realising the importance of building the desired culture in the organisation, your Company has strengthened several behavioural initiatives in FY15. These included Leher (an organisational transformation program for officers), LASER (an organisational transformation program for shop floor employees), We Care (umbrella program for strengthening organisational values embedment are run), Spandan (organisational transformation and safety programs for shop floor employees), Workers Development Program (organisational transformation for contract employees), Gender Diversity & Inclusivity programs.
8.4. Information and Communication Technology
During the year, SAP reimplementation has been completed and has brought in new functionalities for core operational processes as well as a new paradigm in terms of Social, Mobility, Analytics and Cloud Technology. ICT Systems have been recommended by BSI for ISO 22301:2012 BCMS certification. Infrastructure systems have been upgraded using latest blade technology and operating systems. Command & Control Centres for physical access have been established. Information Security is another focus area wherein initiatives related to access control for servers and applications have been undertaken.
9. Financial Performance – Standalone
Your Company recorded a PAT of Rs.1,010 crore during the financial year ended 31st March 2015 (FY14: Rs.954 crore). Both the basic and the diluted earnings per share were at Rs. 3.30 for FY15.
11. 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 exbrssed or implied, depending upon economic conditions, Government policies and other incidental/related factors.