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Management Discussion  
Power Grid Corporation Of India Ltd.
 
BSE Code 532898
ISIN Demat INE752E01010
Book Value(Rs.) 108.15
NSE Code POWERGRID
Dividend Yield % 2.88
Market Cap(Rs. in millions) 952672.47
P/E 11.52
EPS 15.81
Face Value(Rs.) 10  
Year End: March 2015
 

Management Discussion and Analysis

Economic outlook

In fiscal 2015, India has emerged amongst the few economies with favorable economic outlook. Better prospects in the Country are mainly due to economy being relieved from the vulnerabilities associated with an economic slowdown, continuous inflation, increased fiscal deficit, slowdown in domestic demand. Indian economy is strengthening through higher infrastructure spending and continued reform in financial and monetary policy. The Indian economy grew by 7.3 per cent during 2014-15 as against 6.9 per cent in 2013-14. Electricity is one of the most critical components of infrastructure, affecting economic growth and well-being of people at large. For the first time in the country, the annual electricity generation in 2014-15 crossed one thousand Billion Units. Power generation during the 2014-15 is 1,048.403 BU showing a growth rate of 8.4% over the brvious year, which is the highest growth rate in the last two decades.

Sectoral outlook

The Twelfth Five Year Plan lays special emphasis on development of the infrastructure sector including energy as an imperative for sustaining high growth. According to the Twelfth Plan projections, during the Plan period, i.e. 2012- 17, an investment of US$ 1 trillion is required in the infrastructure sector in India. During the Twelfth Plan period, the capacity addition is estimated at 88,537 MW comprising 26,182 MW in the Central Sector, 15,530MW in the State Sector, and 46,825 MW in the Private Sector respectively. Summary of Capacity Addition Programme during Twelfth Plan is as under:

Against aforesaid target of 88,537 MW, 61,014.12 MW capacity has been added till March, 2015, which constitutes 68.91 per cent of the target envisaged in the Twelfth Plan. The individual targets achieved by the centre, states, and private sector during this period are 47.23 per cent, 78.69 per cent, and 77.79 per cent, respectively. Achievement up to March, 2015 during the Twelfth Plan is as under:

Capacity addition target and achievement during April, 2014 to March, 2015 are as under:

The generation capacity addition during 2014-15 was 22,566 MW against a target of 17,830 MW, which is the highest ever achievement in a single year. Out of 22,566 MW added during the year 2014-15, contribution of thermal sector was significant i.e. 20,830 MW (92% of the total); Hydro sector was 736 MW and nuclear sector was 1,000 MW.

Electricity Generation during 2014-15

With a target of 1,023.00 billion units (BU) and achievement of 1048.403 BU, electricity generation by power utilities has exceeded the target set during 2014-15 showing growth of 102.48 per cent. In 2014-15, growth in generation in thermal category was 102.30 per cent, Hydro was 103.87 per cent Nuclear was 101.91 per cent and Bhutan Import was 104.11 per cent.

Transmission Sector:

Government of India is now increasing its focus more on transmission sector. Government of India has taken number of steps - such as expediting forest clearances and intensive monitoring of critical transmission lines, 22,101 circuit kilometers (ckm) of transmission lines have been commissioned during the year 2014-15 against 16,748ckm commissioned during the same period last year, thus having a growth of 31.96% which is the highest ever achievement in a single year. This is 106% of the annual target of 20,882 ckm fixed for 2014-15. Similarly, the overall increase in the transformation capacity has been 65,554 MVA during 2014-15 which is record achievement in a single year and constitutes 137% of the target of 47,871 MVA fixed for 2014-15.

The huge capacity addition coupled with higher generation and improved transmission capacity has resulted in considerably reducing the electricity energy shortage from a level of 7 to 11% during the last two decades to a record low of only 3.6% during the year 2014-15.

POWERGRID - A 'Navaratna' Public Sector Enterprise and 'Central Transmission Utility' of the Country

Power Grid Corporation of India Ltd. (POWERGRID), the "Central Transmission Utility" of the Country since 1998, has been engaged in planning/ construction, operation & maintenance of inter-state transmission system (ISTS) as its core business. Your Company has expanded its business into (a) Telecom: utilizing its extra high voltage power transmission network infrastructure in the country; (b) Consultancy service : for engineering procurement and construction within and outside India, in the fields of electrical power transmission & distribution, to government and other utilities in India & abroad.

POWERGRID Transmission Network as on 31st March, 2015:

• Owns & operate transmission network of about 115,637 ckm of Extra High Voltage (EHV) transmission lines, 192 Nos. EHVAC & High Voltage Direct Current (HVDC) Sub-stations and 231,709 MVA transformation capacity.

• Maintained the transmission availability at 99.87% (during F.Y.2014-15) at par with International Utilities.

• Wheels about 46% of the total power generated across Country.

POWERGRID'S commitment towards strong & secured of National Grid:

During the year, the Company has added 8,830 ckm. of transmission network and 8 Sub-stations with transformation capacity of 25,786 MVA. National Grid of about 46450 MW inter-regional power transmission capacity has been established.

Addressing the concerns in construction & maintenance of Inter-state transmission system (ISTS) and also shouldering its responsibility towards society and Nation

With rapid urbanization, growth in population density, habitation & infrastructure over the period resulting in reduced availability of usable land for development of infrastructure projects, availing Right-of-Way for construction & operation of transmission lines, acquisition & optimal use of land for substations; obtaining forest clearances and addressing environmental concerns have become major challenges for the expansion of transmission network. Further, construction and maintenance of vast transmission network also calls for skilled manpower and improved operational & maintenance efficiency. In view of above, major areas of concern in construction and operation & maintenance of ISTS are as under:

(i) Right of Way (RoW) Issues

(ii) Acquisition and optimal use of land for Substations

(iii) Obtaining forest clearance

(iv) Availability of skilled manpower

(v) Increasing efficiency in operational & maintenance

Your Company, apart from its endeavor to mitigate the aforesaid concerns is making vigours efforts in achieving energy efficiency and sustainable development.

The Company has also, by leveraging its managerial & technological capabilities, been successful in acquiring a number of Project SPV's and establish the project on Build, Own, Operate and Maintain ("BOOM") basis under Tariff Based Competitive Bidding (TBCB) route which has been implemented with effect from 6th January,2011 pursuant to the Tariff Policy and guidelines related thereto issued by the Government of India for all the Inter-State Transmission System (ISTS) Projects except for some specifically identified projects as may be determined by the Government of India.

The aforesaid major concerns, as stated under Serial No. (i) to (v) above, in construction and operation & maintenance of ISTS, are being addressed through innovation and adoption of new technologies. Towards this, your company has taken various initiatives such as deploying various technologies like + 800 kV HVDC transmission, 765 kV DC line, development of 1200kV Ultra High Voltage (UHV) AC technology, High Temperature Low Sag (HTLS) conductors, multi circuits, compact & tall towers, High Surge Impedance Loading Lines, Fixed & Thyristor controlled Series Compensation, etc. Further, towards achieving continuous improvements, your Company is also coming up with state-of-the-art laboratories for power system analysis, advanced equipment diagnostics, smart grid technology for transmission & distribution, energy efficiency, control and automation, which will help in adoption of innovative technologies in transmission system. Some of these issues and technological initiatives taken-up are:

(i) Addressing Right of Way (RoW) issues:

In order to address the RoW issues and to cater to the need of bulk Power Transfer to distantly located Load Centres, your Company has been adopting higher voltages levels specially designed towers and technologies to gradually and increase the power carrying capacity of transmission lines to optimize the RoW requirement. Some of the technological initiatives taken by the Company are as under:

• Adoption of high voltage bulk power transmission lines

Your company has taken initiative and developed indigenously 1200kV Ultra High Voltage (UHC) AC technology, the highest transmission voltage level in the world, in collaborative efforts with domestic manufacturers. In this direction, POWERGRID has successfully established the 1200 kV UHVC test station at Bina including test-charge of 1200 kV single and double circuit transmission lines as pilot project. Construction of 1200 kV upgradable transmission line from Wardha to Aurangabad (approx. 350 km length, to be initially charges at 400kV level) is also underway and shall be charged at rated voltage after field trials.

With introduction of higher voltage transmission systems like 765 kV Double Circuit transmission lines, + 800 kV UHVDC and 1200 kV UHVAC transmission lines in the Country, which are brsently under construction, huge reduction in RoW requirement per MW of power transferred is envisaged. Construction of UHVDC line viz. + 800 kV, 6000MW HVDC line from Biswanath Chariyali (Assam) to Agra (Uttar Pradesh) via Alipurduar (West Bengal) (about 1750 km long), facilitating transfer of bulk power from North Eastern Region to Northern Region through the constricted chicken neck area is in advance stage of construction and will be one of the longest HVDC lines in the world. Construction work for another + 800 kV HVDC line between Champa (Western Region) and Kurukshetra (Northern Region) having length of approx. 1400 km is under implementation.

• Use of High Performance Conductors in Existing & New Lines

High performance conductors are conductors of different configurations, which have the capacity to carry more power with lesser transmission losses. The key benefits are:

> transfer more power using the same towers and line corridor

> lower sag as against conventional conductor at higher operating temperatures.

Keeping in view the advantages of re-conductoring of exisiting lines with high performance conductors that facilitates faster implementation vis-a-vis creating new parallel corridors and conservation of scarce land, RoW and forest resources, etc. initiatives have been taken by your company for re-conductoring of some of the existing lines such as Siliguri—Purnea, Neyveli TPS-I to

Neyveli TPS-II, and Farakka-Malda 400 kV D/C lines with High Temperature Low Sag (HTLS) conductors to enhance their power carrying capacity.

Considering superconductor technology as a promising future technology, your company is on implementation of a demonstration project on High Temperature Superconductor (HTS) cable system, for assessing the feasibility and operational issues.

• Network expansion has caused increased fault levels across India and in certain pockets due to interconnection & generation concentration. To control these fault levels, POWERGRID is employing series Reactors both in lines and in buses.

• In order to address the Right of Way constraints and to conserve forest areas, POWERGRID has been designing and using various types of towers depending upon land topography and conditions- Compact, Pole Type, Multi-Circuit Towers.

(ii) Acquisition of Land for substations:

With rapid urbanization and reduced availability of land, particularly in cities & metros, hilly regions, etc., acquisition of land for establishment of Substations has become a major challenge now a days, and calls for reduction/ optimization of land use for setting up of transmission systems.

There is no land acquisition involved in the transmission line however piece of land is normally required for setting of substations. Since land has now become a scare resource and many issues are raised during its acquisition, POWERGRID follows the land management practices to optimize the requirement of land even for such a piece of land.

Your Company constantly upgrades and improvises by investing in new technology like Gas Insulated Switchyard (GIS) which require very less land area (1/4th approximately) in comparison to traditional Air Insulated Switchyard (AIS). Following the principle of minimization to conserve land resources, POWERGRID has also taken a policy decision to establish only GIS substations in vicinity of city / habitated area.

In order to make land acquisition process in the Country more transparent and participative as well as to ensure Rehabilitation and Resettlement of affected families GOI has enacted a new Act viz. "The Right to Fair compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act,2013" and was made effective since 1st January, 2014. Time requirement for acquisition of small piece of land under the new Act is between 3 to 4 years which is well beyond the stipulated time line (18 to 36 months max. depending upon voltage & terrain) provided to POWERGRID by Central Electricity Regulatory Commission (CERC) for completion of transmission projects. As such it is seen as a very significant impediment for completing the project on schedule as per stipulated Regulation of CERC. Therefore, to secure required land on time to facilitate timely commissioning of projects, POWERGRID has devised a combrhensive policy to secure private land on willing seller willing buyer basis on negotiated and agreed rate.

(iii) Forest Clearances

Obtaining forest clearance on time for transmission projects, owing to lengthy and cumbersome process was a very big challenge for your Company. However, our concerted efforts and the positive and continuous assistance of Govt. of India/Ministry of Power has resulted in Ministry of Environment & Forests (MoEF) taking many pro-active decision for expediting the forest clearance particularly for linear projects including transmission lines. The most important of such policy change is in respect of enhancement of powers of RMoEFs through notification dt. 10th October, 2014. This will result in early and expeditious forest clearance as now all proposals of forest clearance for transmission line shall be cleared by the respective RMoEFs without any reference to MoEF, Delhi irrespective of area involved. The number of RMoEF offices has also been increased from 6 to 10 for faster processing of such clearance.

The Company had been able to obtain in-principle (Stage-I) forest clearances for 1688.43 ha. of forest land covering 32 lines such as 800 kV HVDC Champa-Kureshetra, 765 kV Vindhyachal-Satna, Ranchi-Dharamjaygargh-Jabalpur and 400 kV Chandwa-Gaya etc. and final (Stage-II) clearance for 1760.63 ha. covering 34 lines such as 765 kV Angul-Jharsuguda, Raipur-Wardha, 132 kV Tezu-Namsai etc. in FY 2014-15.

(iv) Developing skilled manpower:

With the change in technology, strategy and growing competitive business environment, our human resources are continuously keeping themselves updated and upgraded in terms of their knowledge, skill and attitude. Human Resource Development Interventions are directed towards learning new competencies and to reinforce good work practices & change workplace behaviour as per the Organizational needs.

The HRD Action Plan for the year 2014-15 was based on the brmise of the outcome of two pronged strategy viz. Organisational Need Analysis (ONA) and Training Needs Assessment (TNA). The Company has been able to link the Individual Development Plans (IDP) of employees as per the business requirement which helps the organization to keep updating the competencies of employees to meet current and future requirement. In order to align with growing competitive business environment, POWERGRID imparted training on RoW & new Land acquisition Act certified Project Management programmes, Networking Skills, Hands on training on Transformer & Reactor, etc..

Skill development programmes in the areas of transmission line, tower erection and stringing, for unemployed / under-employed youths which are being conducted at various locations in the Country and more than 600 such young men were trained during 2014-15. Company has set up the necessary infrastructure for conducting such training in POWERGRID sub-stations and training in other areas are being conducted in all these centres concurrently. Cumulatively, about 1600 persons have been trained up to 31st March, 2015 under this initiative for enhancing the availability of skilled manpower for construction jobs in the field of transmission.

During the Year, 83 executives have been certified for Project Management.

Three National Standards for technician, line-man and electrician have been brpared and published by Power Sector Skill Council (PSSC).

As the part of Training Consultancy during the FY 2014-15, training has been imparted to employees of Haryana Vidyut Prasaran Nigam Ltd. (HVPNL), Bhakra Beas Management Board(BBMB),Powergrid Company of Bangladesh Ltd. (PGCB), Kenya Electricity Transmission Company Limited (KETRACO), Ceylon Electricity Board, Nepal Electricity Authority, Tanzania Electric Supply Co Ltd and US Energy Association, World Bank- CASA countries and Bhutan Power Corporation.

(v) Increasing operational & maintenance efficiency:

Company's assets have grown exponentially with increased number of 765 kV transmission lines in the system. Geographical sbrad of assets all over the Country, open electricity market, wide variation in power flow in terms of quantum and direction, increased penetration of renewable generation, need for effective utilization of existing assets etc. have made it a challenging task to maintain the system with high reliability, safety & security of such large power system in real time basis. Recognizing the need for effective control on real time basis and to improve planning and operations of power system as a whole, your company is adopting various measures such as:

• Your company has introduced process bus architecture by implementing pilot project at 400kV substation, Bhiwadi. Under this primary equipment switchgear (CB & Isolators) and CT/PTs were connected through with Optical fibres Ethernet using IEC 61850 protocol thereby avoiding complex protection, control & measurement cables. This will pave way towards digital substations in POWERGRID.

• Your company is exploring introduction of State-of-the-Art Fault Current Limiter (FCL), which does not affect the steady State power transfer capability of the transmissions lines. These advanced FCL helps in reduction of fault current by offering higher impedance under fault condition only.

• Remote operations of Substations and creation of Maintenance Service Hub facilities where group of experts of all areas like control & protection, switchyard equipment, transformer & reactor shall be available to do major maintenance of equipment as & when required. At the ended of FY 2014-15, 75 substations are being operated though remote operation including 44 substations without operating staff.

• Your Company has adopted state-of-the-art condition monitoring techniques for transmission equipments for detection of defects at their incipient stage. These include Frequency Response Analysis (FRA), Frequency domain spectroscopy, Dissolved Gas Analysis (DGA), DGA of bushing, vibro-acoustics of OLTC etc. for Transformers and Reactors, Dynamic Contact Resistance Measurement for Circuit Breakers, Third Harmonic Resistive Current measurement for Surge Arrestors, Thermo-vision scanning etc. for smooth operation with high reliability and availability during their useful service life. POWERGRID has introduced online Capacitance & Tan delta monitoring of the bushings, dynamic temperature record through FO sensors in Transformer and Reactor and multi gas monitoring system for getting advance alarm prior to failure.

• Hotline maintenance, a highly specialized maintenance activity wherein highly skilled manpower carry out maintenance activities such as replacement of insulator, vibration dampers, hardware etc. on live lines and thus avoiding outages of transmission lines.

Hotline maintenance on 765 kV transmission lines has also been introduced to minimize outage duration and hence enhancement of system availability.

Your Company is in the process of adoption of Hotline maintenance technique using Helicopter. It will help in reduction of outage duration and enhancement of transmission system reliability.

• Your Company has also introduced Aerial Patrolling of lines using Helicopters for the first time in India in selected areas such as deep forests, hilly terrain &snow bound areas where ground patrolling is difficult and very time consuming. Helicopter equipped with Gimbal mounted LIDAR (Light Ranging and Detection), Thermo-vision Camera, High resolution Video and Digital camera has been deployed to identify the defects within short period in comparison with patrolling of lines on foot by human being and taking corrective actions.

• Your Company is in the process of mapping pollution intensity of various Regions of the Country on a geographical map in association with State Power Transmission Utilities. This shall help in deciding suitable insulators for efficient and effective performance of transmission lines particularly in high pollution and foggy areas. For Northern Region, the measurement activity has been completed and pollution mapping already been undertaken in Southern Region and Eastern Region.

• Your Company has undertaken full scale implementation of WAMS (Wide Area Measurement Technology) technology on pan India basis under "Unified Real Time Dynamic State Measurement System (URTDSM)" Project integrating State and Central Grids with aim to enhance efficiency in overall grid management in open electricity market regime. The Project shall enable synchronous measurement of real time grid parameters across the widely sbrad grid with low latency in data transfer to control centers.

Under this project, Phasor Measurement Units (PMUs) would be placed at all HVDC, 400kV and above substations and generating stations including at 220 kV level. The experience gained during implementation of WAMS Pilot Project, which now has 56 PMUs in field is being utilized for implementation of URTDSM Project. URTDSM shall involve installation of around 1200 PMUs and computer hardware & software at 34 control centers. This is largest project of its kind ever implemented world over.

Synchronized phasor measurements will facilitate improved monitoring, visualization and enhanced situational awareness of the grid events on real time. POWERGRID is also developing various analytics using PMU measurements for diagnosis, validation and control purpose. The analytics will enable for implementation of Wide Area Protection & Control Systems, which will improve grid reliability, security and reduce probability of blackouts and minimize their sbrad.

Your Company has also undertaken Power System study through Real Time Digital Simulator (RTDS) for HVDC. RTDS has a specialized computer hardware and software designed specifically to achieve real time simulation of power systems with HVDC, FACTS and protective relays, etc. specifically for study of dynamic performance which is likely to enhance efficiency in operation.

To meet the communication requirement of URTDSM and SCADA upgradation, all the substations of POWERGRID, Central Generating stations and important station of States are being connected on Fiber Optic network. During 2014-15 around 10000 kms. of OPGW network has been established to connect additional sub-stations, power plants and provide redundant path also. This shall ensure availability of required bandwidth for various applications being provided at SLDCs, RLDCs and NLDC for grid operations. Laying of fibers shall also facilitate reliable operation of National Transmission & Asset Management Centre (NTAMC) and help in expansion of telecom business.

• Efforts in improving power quality & stability:

> SVC & STATCOM: To improve power quality and stability, POWERGRID is deploying STATIC VAR COMPENSATOR (SVC) & STATCOM at various locations. Presently 3 numbers of SVC & 3 numbers of STATCOM are under construction and others are at different stages of procurement.

> Network expansion has caused increased fault levels across India and in certain pockets due to interconnections & generation concentration. To control these fault levels, POWERGRID is employing series Reactors both in lines and in buses. The various studies are underway and necessary steps are being taken up for implementation of series reactors in Delhi NCR.

Thrust on Sustainable Development

Your Company is fully conscious to conserve natural resources and avoid environmental sensitive areas as far as possible through implementation of ESPP. Key initiatives taken by POWERGRID towards sustainable development are technological initiatives for conservation of brcious RoW, rain water harvesting system which is now an integral part of every new substation design, installation of LED bulbs, solar lights, fuel catalysts devices for DG sets, Waste Paper Recycling Plant etc.

POWERGRID's efforts to reduce Carbon footprint through reusing the waste paper are successful and we are producing enough in house recycled paper for use of office stationery like letterheads, writing pads, visiting cards, envelopes etc. This has resulted in reduction in use/ procurement of fresh paper and will save tree cutting.

Recognising the need for high penetration of renewable resource sustainability, as well as to address the challenges, your company has developed combrhensive solution through formulation of "Green Energy Corridors" Reports. Your Company has started implementation of Green Energy Corridors to facilitate grid integration of renewable generation capacity addition in Twelfth Five Year Plan across India. The implementation covers construction of inter-state transmission systems and mitigating measures for grid interconnection of variable & intermittent renewable energy sources by using control infrastructure like forecasting tool for renewable generation, establishment of renewable energy management centers, provisions for flexible generation, energy storage, smart grid applications like demand side management & demand response etc.

Your Company has also started planning & implementation of combrhensive plans to evacuate power from various solar parks being developed aggregating about 20,000 MW.

Tariff-based Competitive Bidding Regime

Till date POWERGRID emerged as successful Bidder and acquired eight transmission projects viz. POWERGRID NM Transmission Limited, POWERGRID Vemagiri Transmission Limited, POWERGRID Vizag Transmission Limited, POWERGRID Unchahar Transmission Limited, POWERGRID KALA AMB Transmission Limited, POWERGRID Jabalpur Transmission Limited, POWERGRID Warora Transmission Limited and POWERGRID Parli Transmission Limited. All projects are under various stages of implementation except for Transmission System associated with IPPs of Vemagiri area which has not been taken up pursuant to the CERC order dated 27.09.2013.

Risk Management Procedure

For the purpose of evaluating and managing the uncertainties the enterprise faces, Enterprise Risk Management framework has been implemented in POWERGRID. The framework is a structured, consistent and continuous process for identification, assessment, monitoring and management of risks. As per this framework, the significant business processes / risks are monitored and controlled through various Key Performance Indicators (KPIs). A Board level Risk Management Committee reviews these KPIs on regular basis and provides updates to the Audit Committee / Board.

As on 31st March, 2015, the Risk Management Committee comprised oftwo Directors and two Non-official Part-time Directors.

In addition to risk & challenges mentioned above, the following risks involved in execution of our projects and their mitigation are:

• Synchronization Riskwith Generation Projects

There could always be a gap in the commissioning of generation units vis-a-vis the associated transmission system and there might be delays in the materialisation of some of the generation projects.

To mitigate the same, the Agreements are being signed with the Generators by your Company to share and bear the applicable Interest during Construction (IDC). Further, Tariff Regulations 2014 provides payment of transmission charges or IDC as decided by CERC from the date of actual commissioning of transmission system irrespective of commissioning of Generating Units. Subsequently, on commissioning of generating units Armed up Beneficiaries pay transmission charges in accordance with relevant Regulation.

• Revenue Risk

The Central Electricity Regulatory Commission (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2010 which came into effect from 01.07.2011, provides for computation of Point of Connection (PoC) charges and losses by introducing new methodology for sharing of transmission charges. However, States viz. Bihar, Odisha, West Bengal, Maharashtra and Jharkhand had challenged the aforesaid sharing methodology in the court of law and final decision is awaited. In terms of interim order of the Delhi High Court, all the above States are however making payment as per said Regulation, but under protest.

CERC Tariff Regulations allow payment against monthly bills towards transmission charges within a period of 60 days from the date of bills and levying of Surcharge @ 18% per annum on delayed payment beyond 60 days. Further, graded rebate is also provided in case of payment is made within 60 days. Most of the utilities are availing 60 days allowable period for clearing their dues. During the FY 2014­15, collection efficiency has been very good and appropriate actions for realization of dues were taken by the company against defaulting utilities.

The Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulation, 2014 notified on 21.02.2014 came into effect for a control period offive years starting from 01.04.2014.

The following aspects of this Regulation may have impacted revenue of the Company as under:

¦ The increase in Benchmark availability from earlier level of 98% to 98.5% for AC system and from earlier level of 92% for HVDC bi-pole links & 95% for HVDC back-to-back station to 96% for HVDC system alongwith the cap of incentive at 99.75% have lead to minor reduction in transmission incentive during the period;

¦ The variations in capital expenditure on account of time and/or cost overruns on account of land acquisition have now been termed as controllable factors which may impact allowance of incidental expenditure and interest during construction; and

¦ The benchmark Operation and Maintenance norms for FY 2014-15 (with escalation for subsequent years under the control period) have been reduced as compared to FY 2013-14. These normative charges are formulated based on the last five years actual O&M expenditure of POWERGRID.

Notwithstanding the above, POWERGRID is taking up the aforesaid issues appropriately with CERC.

Following are the Regulations which may have positive impact:

¦ Increase in specified timelines for project completion will provide more opportunities to the company to avail additional 0.5% RoE for timely completion of the project/ elements of the project.

¦ A transmission element can now be declared under commercial operation from the next day of charging the same as against to be declared from the first day of the following month as per the brvious regulations.

• Integrated Management Policy: POWERGRID is committed to:

¦ establish and maintain an efficient and effective "National Grid" with due regard to time, cost, technology and value addition,

¦ sustainable development through conservation of natural resources and adopting environment friendly technology on principles of Avoidance, Minimization and Mitigation,

¦ ensure safe, occupational hazard free and healthy work environment,

¦ to the satisfaction of stakeholders in all areas of its activities and shall endeavor to improve continually its management systems and practices in conformity to legal and regulatory provisions.

• Internal Control

POWERGRID has a combrhensive Internal control mechanism in place to verify the Accounting and Financial Management System, adequacy of controls, material checks, financial propriety aspects and compliance implementation mechanism. The elaborate guidelines for brparation of Accounts are followed consistently for uniform compliance. In line with the provisions of Section 179 read with Rule 8 of the Companies (Meetings of Board and its Powers) Rules,2014 the Internal Auditors were appointed by the Board of Directors. The regular and exhaustive Internal Audit on half yearly basis is carried out by the experienced Cost / Chartered Accountant Firms in close co-ordination with Company's own Internal Audit department to ensure that all checks and balances are in place and all internal controls/systems are in order. The Corporate Internal Audit Department also carryout System Audit and Management Audit to reassure the effectiveness of internal control mechanism. The scope and authority of the Internal Auditor is derived from the Internal Audit Plan approved by the Audit Committee.

As on 31st March, 2015, the Company had an Audit Committee in place as per clause 49 of the Listing Agreement, which had three Independent Directors and one Non-offlcial Part-time Director. The Audit Committee meets at regular intervals and is informed of compliance with internal control mechanism. The significant / material audit findings are placed before the Audit Committee for review, discussion and subsequent action.

Financial Discussion and Analysis

Comparison of Fiscal 2015 to Fiscal 2014

Your company's total income in Fiscal 2015 was Rs.17,780.04 crore, which rebrsented an increase of 13.09% over the total income of Rs.15,721.41crore in Fiscal 2014. In Fiscal 2015, transmission and transmission-related activities constituted 92.92% of our total income, with the balance coming from our consultancy, telecommunication business and other incomes

Income on account of Transmission Charges for the year has been provisionally recognized based on "CERC (Terms and conditions of tariff) Regulations 2014" pending issuance of final tariff orders (whereever tariff petitions have been filed) and filing of tariff petitions in certain cases for the block period 2014-19. However beneficiaries are being billed as follows:

i) In respect of the assets commissioned prior to 31.03.2014, in accordance with the tariff approved and applicable as on 31.03.2014 as provided in CERC (Terms and Conditions of Tariff) Regulations, 2014.

ii) In respect of assets commissioned after 31.03.2014 up to 90% of the tariff claimed wherever provisional orders have been issued by the CERC.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Tariff norms

Our charges for transmission customers are governed by tariff norms determined by the Central Electricity Regulatory Commission ("CERC") pursuant to central government tariff policy and legislation. As per the Tariff Policy issued by GoI on 6th January, 2006, Central Electricity Regulatory Commission (CERC) shall be guided by the Tariff Policy while specifying the terms and conditions for the determination of tariff. The CERC has vide its notification dated 21st February, 2014 notified the tariff regulations applicable for transmission system including communication system used for inter-state transmission of electricity for the tariff Block 2014-19 which shall remain in force from 01.04.2014 to 31.03.2019. Under the tariff regulations applicable for the tariff Block 2014-19, we are permitted to charge our customers transmission charges for recovery of annual fixed cost ("AFC") consisting of components - return on equity, interest on outstanding debt, debrciation, operation & maintenance expenditure and interest on working capital.

The Return on equity is computed on br-tax basis by grossing up the base rate of return on equity of 15.5% at the effective tax rate of the respective financial year. In case of projects commissioned on or after 1st April, 2014, an additional Return on Equity (ROE) of 0.5% will be allowed if such projects are completed within the timeline specified under the CERC tariff regulations for the Block 2014-19. However, additional ROE of 0.5% will not be admissible for transmission line having length of less than 50 kilometers. The rate of ROE may be reduced by 1% for such period as may be decided by CERC if any transmission system is declared under commercial operation without commissioning of data telemetry, communication system up to load dispatch centre or protection system.

The repayment of loan capital for the year of the tariff period 2014-19 is deemed to be equal to the debrciation allowed for that year. Despite any moratorium period availed by your company, the repayment of loan is considered for tariff from the first year of commercial operation of the project and shall be equal to the annual debrciation allowed.

For interest on working capital, the working capital amount is calculated as - (i) consisting of receivables equivalent to two months of fixed cost; (ii) maintenance spares @ 15% of operation and maintenance expenses; and (iii) operation and maintenance expenses for one month. Rate of interest on working capital for the year is on normative basis and is equal to the Base Rate plus 350 basis points of State Bank of India (Bank Rate) as on 1.4.2014 or as on 1st April of the year in which the transmission system, is declared under commercial operation, during the tariff period 2014-15 to 2018-19 whichever is later.

Under the tariff norms brscribed by CERC for the tariff Block 2014-2019, recovery of transmission charge is permitted to your company on the achievement of the operational norms of 98% for AC system and 95% for HVDC system. An incentive is also allowed if the availability of our transmission network is above 98.5% and upto 99.75% in respect of AC systems, and above 96% and upto 99.75% in respect of HVDC systems and penalized if the availability of our network is below 98% or 95% respectively. The Availability Incentives are linked with monthly transmission charges.

The sharing of transmission charges by Beneficiaries are governed by Central Electricity Regulatory Commission (Sharing of Transmission Charges and Losses in inter-state Transmission System) Regulations, 2010 issued by CERC.

The tariff regulations applicable for the Tariff Block 2014-19 provides that :

- the specified timeline for completion of projects have been increased by 06 months for various categories by CERC;

- the rate of escalation in O&M charges on year to year basis for the Tariff Block 2009-14 was 5.72% and the same has been considered as 3.32% introducing Compound Annual Growth Rate (CAGR) concept for the first time.

Foreign Exchange Rate Variation

Your company under the tariff regulations for the block 2014-19 has an option to hedge foreign exchange exposure in respect of the interest on foreign currency loan and repayment of foreign loan acquired for the transmission system, in part or full and recover the cost of hedging of foreign exchange rate variation corresponding to the normative foreign debt, in the relevant year.

If hedging of the foreign exchange exposure is not undertaken, the extra rupee liability towards interest payment and loan repayment corresponding to the normative foreign currency loan in the relevant year is permissible provided it is not attributable to the generating company or the transmission licensee or its suppliers or contractors. During the financial year 2014-15, no hedging for foreign exchange exposure has been undertaken by your company.

As per Regulations on Sharing of Inter-State Transmission Charges & Losses, 2010 which came into force from 01.07.2011, POWERGRID, as CTU, is performing the activity of Billing, Collection and Disbursement (BCD) on behalf of all the ISTS licensees and also certain non-ISTS licensees whose lines have been certified by RPCs to be used as ISTS.

Revenue from Other Services

Your company also earns revenue from consultancy (including project management and supervision services) and telecommunication business. Our consultancy income mainly consists of fee from the RGGVY works, the execution of transmission- and communication system-related projects on a turnkey basis and technical consulting assignments for Indian state utilities, joint venture companies and utilities in other countries. The income from Consultancy business against sale of services in the Fiscal 2015 was Rs.380.60crore as against Rs.332.48 crore in the Fiscal 2014, a increase of 14.47%. The income from consultancy business against sale of products in the Fiscal 2015 was nil as against Rs.294.07 crore in Fiscal 2014. This is due to completion of Myanmar Project during Fiscal 2014.

The revenue from our telecommunication business is mainly on account of leasing bandwidth of our fibre-optic lines. There was a marginal decrease in Telecom revenue by 0.45% in Fiscal 2015 from Rs.276.14 Crore to Rs.274.89Crore.

Other Income

Your company's other income was X602.81 crore in Fiscal 2015, an increase of 22.74% over the other income of X491.13 crore in Fiscal 2014.

Expenses have been categorized as- (i) Employees' benefits expense, (ii) Finance Costs, (iii) Debrciation and amortization expense, (iv) Transmission, Administration and Other Expenses and (v) Purchase of Stock in trade.

Your company's total expenditure were Rs.11,490.66 crore in Fiscal 2015, an increase of 21.50% over the total expenditures of Rs.9,457.66 crore in Fiscal 2014. The total expenditures as a percentage of total income were 64.63 % in Fiscal 2015 compared to 60.16 % in Fiscal 2014.

Employees' benefits expense

Employees' remuneration and benefits expenses include salaries and wages, incentives, allowances, benefits, contributions to provident and other funds and welfare expenses.

Your company had 8,902 employees on our payroll as of March 31, 2015, compared to 9,154 employees as of March 31, 2014, a decrease by 2.75% mainly due to separation (completion of tenure/resignation) of employees. Employees' remuneration and other benefits increased by 8.70% to Rs.1023.65 Crore in Fiscal 2015 from Rs.941.68 Crore in Fiscal 2014. The increase is due to an increase in Dearness allowance, superannuation benefits and normal increments as well as higher commissioning of assets.

Finance Cost

Finance cost increased by 25.63% to Rs.3,979.32 crore in Fiscal 2015 from Rs.3,167.52 crore in Fiscal 2014. The increase was mainly due to commissioning of new Transmission Assets worth Rs.21,761 crore, interest on which were earlier capitalized but now treated as operating expenditure.

These charges include guarantee fee of Rs.167.43 crore (brvious year Rs.148.03 crore) (net of IEDC) payable to the GoI for giving guarantees to the lenders of our foreign currency loans.

Debrciation and Amortisation Expenses

Your company's debrciation increased by about 27.27% to Rs.5,085.41 crore in Fiscal 2015 from Rs.3,995.68 crore in Fiscal 2014. The increase was mainly because of the commissioning of new transmission assets worth Rs. 21,761 crore and full-year impact in Fiscal 2015 of transmission assets Rs.15,904 crore which were commissioned during Fiscal 2014.

The debrciation has been applied considering the technical life of each debrciable asset class as brscribed by CERC viz. transmission lines — 35 years and substations — 25 years on straight line method.

Debrciation on assets of telecom and consulting business is provided for on straight line method as per useful life specified in schedule-II of the Companies Act, 2013. ULDC assets commissioned prior to 1st April, 2014 are debrciated on straight line method© 6.67% per annum.

Transmission, Administration and Other Expenses

Transmission, administration and other expenses consist primarily of costs of the repair and maintenance of buildings, plant and machinery and power charges. Other items in this category include expenditures for travel, security, vehicle hire charges, insurance and rent rates & taxes on our properties.

Transmission, administration and other expenses increased by 21.77% to Rs.1,355.16 crore in Fiscal 2015 from Rs.1,112.86 crore in Fiscal 2014. The increase is on account of the increase in Gross Block (tangible and intangible assets) by Rs.21,761 crore added at various points of time during Fiscal 2015 and full year impact of assets added in Gross Block during Fiscal 2014 as certain expenses that were earlier being capitalized during the construction of the project are now treated as an operating expense subsequent to the commissioning of the project.

Profit before Tax

Your company's profit before tax in Fiscal 2015 was Rs.6,289.38 crore, an increase of 0.41% over our profit before tax of Rs.6,263.75 crore in Fiscal

2014.

Provision for Tax

In Fiscal 2015, we provided for Rs.1,280.99 crore of Minimum Alternate Tax, compared to Rs.1,274.13 crore in Fiscal 2014. The increase was primarily due to increase in Profit before tax in Fiscal 2014.

Provision for deferred tax is made in respect of timing difference mainly on account of higher debrciation charge available under income tax provisions.

The tariff norms for the block period 2014-19 notified by the CERC provide for grossing up of the return on equity based on effective tax rate for the financial year based on the actual tax paid during the year on the transmission income. Accordingly, deferred tax provided during the year ended 31st March, 2015 on the transmission income is accounted as 'Deferred Tax Assets against Deferred Tax liability'. Deferred Tax Assets against Deferred Tax liability for the year will be reversed in future years when the related deferred tax liability forms a part of current tax.

Profit after Tax

Your company's Profit after Tax in Fiscal 2015 was Rs.4,979.17 crore, an increase of 10.71 % over our Profit after Tax of Rs.4,497.42 crore in Fiscal 2014.

LIQUIDITY AND CAPITAL RESOURCES

Your company depends on both internal and external sources of liquidity to provide working capital and to fund capital requirements. Historically, the capital expenditures have been funded with internally generated funds, grants and equity contributions by the Government and debt financing. As at March 31, 2015, your company had cash and cash equivalents of Rs.2,062.98 crore. As at March 31, 2015, we also had unutilized Bank Guarantees limits of approximately Rs.313.60 crore for capital requirements and committed and undrawn cash credit facilities of approximately Rs.300 crore ("cash credit") towards our working capital facilities.

Net Cash from Operating Activities

Your company's net cash flows from operating activities are principally used to service long-term debt, for capital expenditures, for investments and for payment of dividend.

The net cash from operating activities was Rs.15,041.77 crore in Fiscal 2015 as against Rs.15,399.44 crore in Fiscal 2014.

 Net Cash (used in) Investment Activities

Your company's net cash used in investing activities was Rs.23,843.45 crore in Fiscal 2015 as against Rs.26,517.74 crore in Fiscal 2014. This primarily reflected expenditures on fixed assets and capital work-in-progress as well as construction stores of Rs.24,242.48 crore, receipt of interest and dividend income of Rs.435.40 crore & loan given to subsidiaries of Rs.229.70 crore.

Net Cash from Financing Activities

In Fiscal 2015, your company's net cash flow from financing activities was Rs.6,447.14 crore as against Rs.13,873.85 crore in Fiscal 2014. Your company raised Rs.17,756.54 crore of new borrowings. These borrowings included principally Rupee denominated bonds and foreign currency borrowings. The company repaid Rs.6,398.68 crore of borrowings and paid interest and finance charges of Rs.3,678.70crore. In the Fiscal 2015, we paid dividends of Rs.l,046.32 crore comprising final dividend for Fiscal 2014 and an interim dividend for Fiscal 2015. The dividend for the financial year 2014-15 (including proposed final dividend @13.10%) is Rs.1046.32 crore. The dividend payout works to 21.01% of PAT.

Capital Expenditures

Your company's capital expenditure are primarily for the installation of new transmission capacity and the expansion of existing capacity. Our capital expenditure in Fiscal 2015 and Fiscal 2014, were Rs.22,456 crore and Rs.23,158 crore, respectively.

Return on Equity

The return on equity that we were generally permitted in Fiscal 2015 on transmission assets under our tariffs has been 15.5%. Our actual Return on Equity from period to period across our entire business in Fiscal 2015 is 13.09% as against 13.07% in Fiscal 2014.

Selected Balance Sheet Items

Fixed Assets

Your company's total fixed assets (Net Block) were Rs.1,29,568.40 crore and Rs.1,05,005.48 crore as at March 31, 2015 and March 31, 2014, respectively. Fixed assets have been categorized as— (i) Tangible Assets; (ii) Intangible assets; (iii) Capital work in progress; and (iv) Intangible assets under development.

(i) Tangible assets

Our Tangible Assets consist of plant and machinery such as transmission lines, substations, HVDC and ULDC equipment and other transmission equipment; buildings; land; office equipment; fixtures; and motor vehicles. Tangible Assets value (Net Block) increased from Rs.72,501.95 crore in Fiscal 2014 to Rs.88,902.51 crore in Fiscal 2015, an increase by 22.62%. These increases are mainly due to the commissioning of new transmission assets.

(ii) Intangible assets

Our Intangible Assets consist of Electronic Data Processing Software and Right of Way-Afforestation Expenses. The value of unamortized Intangible assets increased from X652.12 crore in Fiscal 2014 to X783.70 crore in Fiscal 2015, an increase by 20.18%.

(iii) Capital work in progress

Your company's capital work-in-progress was Rs.39,670.90 crore and Rs.31,502.41 crore, as at March 31, 2015 and 2014, respectively, an increase of 25.93%. The cost of materials consumed, erection charges and other expenses incurred for the implementation of projects are shown on the balance sheet as capital work-in-progress, pending capitalization of the completed project. The change in this amount is due to capitalization of a number of transmission projects on commissioning of these projects and due to undertaking of new transmission projects.

During the Year, material for construction of Substations (including HVDC) is being transferred to Capital Work in Progress (CWIP) during the progress of erection work as against earlier practice of transferring the same on the completion of erection work. The change of practice has resulted in increase in CWIP amount by Rs.234.43 Crore with corresponding reduction in Construction Stores.

(iv) Intangible assets under development

Afforestation Expenses incurred in relation to the implementation of projects (pending capitalization) are shown on the balance sheet as Intangible assets under development. The value of Intangible assets under development was Rs.211.29 crore and Rs.349.00 crore, as at March 31, 2015 and 2014, respectively.

Construction stores

Construction stores were Rs.13,041.96 crore and Rs.17,625.30 crore as at March 31, 2015 and 2014, respectively. These amounts rebrsent capital expenditure on the new as well as ongoing transmission projects. The decrease is mainly due to the capitalisation of no. of new transmission projects.

Investments

Investments have been classified into current and non-current categories. As at March 31, 2015, the Non- current Investments and Current Investments were Rs.740.99 crore and Rs.185.43 crore as against Rs.814.33 crore and X184.35 crore, respectively as at March 31, 2014. Investments under 'Current' category are those which are realizable or intended to be realizable within 12 months after the reporting date. Your company's Investments mainly consist of bonds issued by the SEBs as part of the One Time Settlement. We have also invested Rs.12 crore in equity shares of PTC India Limited; Rs.229.32 crore in Powerlinks Transmission Limited, the joint venture between us and The Tata Power Company Limited through which the Tala Transmission Project was constructed; Rs.23.40 crore in Torrent Power Grid Limited; Rs.78.00 crore in Jaypee Powergrid Limited; Rs.70.94 crore in Parbati Koldam Transmission Company Limited; Rs.41.01 crore in Teestavalley Power Transmission Limited; Rs.106.96 crore in North East Transmission Company Ltd.; Rs.22.50 crore in Energy Efficiency Services Ltd.; Rs.23.90 crore in National High Power Test Laboratory Private Ltd; Rs.4.94Crore in Cross Border Power Transmission Company Limited; Rs.1 lac in Kalinga Bidyut Prasaran Nigam Private Limited; Rs.10.02 crore in Bihar Grid Company Limited; Rs.0.98 Crore in Power Transmission Company Nepal Limited; Rs. 109.52 crore in subsidiaries of our Company viz. Rs.30.64 crore in Power System Operation Corporation Ltd; Rs.24.00 crore in POWERGRID NM Transmission Ltd; Rs.54.73 crore in POWERGRID Vizag Transmission Limited; & Rs.0.05 crore in POWERGRID Unchahar Transmission Limited, Rs.0.05 crore in POWERGRID Kala Amb Transmission Limited and Rs.0.05 crore in POWERGRID Jabalpur Transmission Limited (formerly known as Vindhyachal Jabalpur Transmission Limited) .

Loans and Advances

The loans and advances have been classified into long-term & short-term categories. As at March 31, 2015, the long-term loans & advances and short-term loans & advances were Rs.4,177.89 crore and Rs.566.42 crore as against Rs.4,584.39 crore and Rs.440.64 crore, respectively as at March 31, 2014. Long-term loans and advances include advances for capital expenditure, loans to employees, lease receivables (rebrsenting certain capital expenditures made by the company in respect of the state sector ULDCs of all five regions, for which the constituents of those regions are reimbursing the company on a finance lease basis), loans and advances to contractors, advance income tax & TDS and other deposits with tax authorities( Net of Tax provided), advances to related parties and all other loans and include advances which are not expected to be realized within next 12 months from the reporting date or within normal operating cycle whichever is longer. The decrease in loans and advances from Fiscal 2014 to Fiscal 2015 was mainly due to decrease in advances for capital expenditure.

Inventories

Inventories are valued at lower of the cost, determined on weighted average basis, and net realizable value. The costs of inventories were Rs.717.75 crore, as at March 31,2015 as against Rs.712.40 crore in Fiscal 2014.Our inventories consists of transmission line items such as tower parts, conductors, insulators and other items, and substation items such as transformers, circuit breakers, ICTs and other items. The cost of our inventories increased in Fiscal 2015 as compared with Fiscal 2014, on account of your company continuing to expand the transmission network and capitalization of new projects.

Trade Receivables

Trade Receivables consist mainly of receivables relating to transmission services, and also receivables from consultancy services and telecom services. Our Trade Receivables as on March 31, 2015 and 2014 were Rs.2,118.65 crore and Rs.1,578.46 crore, respectively. Trade receivables increased by 34.22% in Fiscal 2015 as compared to Fiscal 2014. The reason for increase in Trade receivables was mainly due to increase in sales and increase in dues of J & K.

Substantially, all of our receivables are covered by letters of credit, following which we have no material debt collection problems.

Other Current Assets

Our other current assets as at March 31, 2015 and 2014 respectively, were Rs.2,278.87 crore and Rs.1,735.63 crore. Other current assets increased by 31.30% in Fiscal 2015 as compared to Fiscal 2014, mainly due to increase in monthly bill and non availability of CERC Tariff Orders for some of the assets commissioned during Fiscal, 2015.

Indebtedness

We rely on both Rupee and foreign currency denominated borrowings. A significant part of our external funding has been through long-term foreign currency loans from multilateral agencies such as the World Bank and the Asian Development Bank, with our performance under such loans guaranteed by the GoI.

The following table sets forth, by currency, our outstanding debt and the periods during which debt amounts mature or payment is otherwise due. Currency conversions are as of 31st March, 2015:

Long-term borrowings

Your company's Long-term borrowings (excluding current maturities) as at March 31, 2015 and 2014 were Rs.89,375.84 crore and Rs.76,790.22 crore, respectively. Long-term borrowings include amounts raised from our private placement of bonds, term loans from banks, loans from the International Bank for Reconstruction and Development, Asian Development Bank and Bank of India, Cayman Islands and other Foreign Financial Institutions. Due to the increased investment in new projects during the last year, our borrowings have increased substantially.

Secured Loans

Our secured loans (excluding current maturities of long term loans) as at March 31, 2015 and 2014 were Rs.84,554.04 crore and Rs.72,429.45 crore, respectively. Most of these loans have been secured by floating charges on the moveable and immoveable properties of the Company. Unsecured Loans

Our unsecured loans (excluding current maturities as at March 31, 2015 and 2014 were Rs.4,821.80 crore and Rs.4,360.77crore respectively, which consist of (ten year) foreign currency bonds, loans from foreign financial institutions such as the Natixis (Formerly Credit National) in France, Japan International Cooperation Agency (Formerly Japan Bank for International Co-operation) in Japan, Skandinaviska Enskilda Banken AB(publ) in Sweden and AB Svensk Exportkredit,Sweden.

Advance Against Debrciation (AAD)

Advance against debrciation (AAD) is a component of tariff that we were permitted to charge under CERC regulations for the Block 2004-09, to cover shortfall in respect of debrciation in a year on assets, for repayment of debts. AAD was done away with in the tariff block 2009-2014 and debrciation rate were reworked. Due to change in these tariff norms and the debrciation rates w.e.f. 01.04.2009, the outstanding AAD has been taken to transmission income after 12 years from the date of commercial operation to the extent the debrciation charged in respect of transmission system is more than the debrciation recovery under tariff. As on 31st March,2015, our AAD has decreased by 3.94% from Rs.2,018.07 crore in Fiscal 2014 to Rs. 1938.57 crore in Fiscal 2015.

Current liabilities

Your company's current liabilities as at 31st March, 2015 were Rs.21,845.28 crore (brvious year Rs.19,517.13crore). The current liabilities include short-term borrowings, Trade payables, short term provisions and other current liabilities. Current liabilities at March 31, 2015 were 11.93% higher as compared to March 31, 2014. The increase is mainly due to increase in other current liabilities from Rs.15,520.04 crore in Fiscal 2014 to Rs.19,040.36 crore Fiscal 2015 consists of current maturities of long term borrowings and Deposit/Retention money for contractors and others and advances for customers.

Contingent liabilities decreased by 15.55% in Fiscal 2015 compared to Fiscal 2014. This decrease was mainly on account of- (i) disputed Tax matters (Income tax / Sales tax/ Excise / Municipal tax) pending & being contested before various Appellate Authorities. Many of these matters have been disposed off in favour of the Company but are disputed before higher authorities by concerned departments; (ii) Land compensation cases and (iii) other contingent liabilities.

BUSINESS AND FINANCIAL REVIEW OF JOINT VENTURE COMPANIES and SUBSIDIARIES: JOINT VENTURE COMPANIES:

A) Powerlinks Transmission Limited (POWERLINKS): Main Objective and Capital Structure

POWERGRID and TATA POWER are the Joint Venture Partners in this Joint Venture Company and hold 49% and 51% equity, respectively. The Company was incorporated to undertake the implementation of Transmission Lines associated with Tala HEP, East-North interconnector and Northern Region Transmission System from Siliguri in West Bengal via Bihar to Uttar Pradesh and was the first public - private partnership in Power Transmission. POWERLINKS had progressively commissioned the project in August, 2006 and it is under commercial operation since 1st September, 2006. The Project has been implemented on Debt: Equity ratio of 70:30. As on 31.03.2015, POWERLINKS has Authorized share capital of Rs.4,83,60,00,000/- and paid-up capital of Rs.4,68,00,00,000/- out of which POWERGRID holds Shares of Rs.229.32crore and TATA POWER hold shares of Rs.238.68crore. POWERLINKS has paid interim dividend of 17% amounting to Rs.38.98 crore for Fiscal 2015.

B) JAYPEE POWERGRID Limited (JPL):

Main Objective and Capital Structure

The main objective of the Company was to implement a transmission system to evacuate power generated by 1000 MW Karcham Wangtoo Hydro Electric Power Project in Kinnaur District in Himachal Pradesh, from Wangtoo to Abdullapur. The Project has been implemented on Debt :Equity ratio of 70:30. As on 31.03.2015, JPL has Authorized share capital of Rs.300 crore and paid-up capital of Rs.300 crore divided into 30,00,00,000 equity shares of Rs.10 each, POWERGRID equity being Rs.78 crore. Jaiprakash Power Ventures Limited and POWERGRID individually hold 74% and 26%, respectively as on 31.03.2015. The project was progressively commissioned in April,2012. JPL has paid a total dividend of 13% amounting to Rs.10.14 crore for Fiscal 2015.

C) Torrent Powergrid Limited (TPL): Main Objective and Capital Structure

The main objective of the Company was to establish transmission system associated with 1100MW Gas Based project (Sugen) Generation Station of Torrent Power Ltd. (TPL) at Akhakhol in Surat District of Gujarat. POWERGRID and Torrent Power Ltd. are the Joint Venture Partners in this Company and hold 26% and 74% equity, respectively, POWERGRID equity being Rs.23.40 crore. The Project has been implemented on Debt: Equity ratio of 70:30. As on 31.03.2015, TPL has Authorized share capital of Rs.125.00 crore and paid-up capital of Rs.90.00 crore. The project was progressively commissioned in March, 2011 and it is in operation. TPL has paid interim dividend of 7% amounting to Rs.1.64 crore for Fiscal 2015 and the Board has recommended a further final dividend of 5.5% for Fiscal 2015.

D) North East Transmission Company Ltd.(NETC):

POWERGRID entered into a Joint Venture Agreement in February, 2009 with ONGC Tripura Power Project Company Ltd. (OPTC), Government of Tripura, Manipur, Mizoram, Assam Electricity Grid Corporation Ltd, Meghalaya and Nagaland for establishment of Transmission Line of 400kV D/C Palatana- Silchar Bongaigoan Transmission Project associated with 726.6 MW Palatana Gas base Power Project in the state of Tripura. The Joint Venture Company is named 'North East Transmission Company Limited'. OTPC, the generating Company is a joint venture of ONGC Ltd., Government of Tripura and Infrastructure Leasing & Finance Services Ltd., (IL&FS Ltd.). The Project has been implemented on Debt: Equity ratio of 80:20. As on 31.03.2015, NETCL has Authorized capital of Rs.600.00 crore and paid-up share capital of Rs.411.4 crore, POWERGRID equity being Rs.106.96 crore. The project was progressively commissioned in Feb'2015. NETCL has paid maiden dividend (Interim) of 20% amounting to Rs.21.39 crore for Fiscal 2015 and the Board has recommended a further final dividend of 10% for Fiscal 2015.

E) Parbati Koldam Transmission Company Limited (PKTCL):

POWERGRID entered into a Joint Venture Agreement on 23rd November, 2007 with Reliance Energy Limited (REL) now Reliance Infrastructure Ltd, for implementation of transmission lines associated with Parbati-II (800 MW) HEP and Koldam (800 MW) HEP. The Company named 'Parbati Koldam Transmission Company Limited' took up implementation of Parbati and Koldam Transmission systems through Joint venture route and got the Transmission License in September,2008. The Project is being implemented on Debt :Equity ratio of 70:30. As on 31.03.2015, PKTCL has Authorized share capital of Rs.331.00 crore and paid-up capital of Rs.272.82 crore, POWERGRID equity being Rs.70.94 crore. Major portion of the Project was commissioned progressively in Oct'2014.

Financial Highlights of the Company:

F) Teestavalley Power Transmission Limited (TPTL):

POWERGRID entered into a Joint Venture Agreement with Teesta Urja Limited on 23rd November, 2007 on 26% equity -POWERGRID and 74% equity Teesta Urja Limited (TUL) for implementation of transmission lines of Teesta-III viz. 400k/V D/C line associated with 1200 MW Teesta-III Hydro Electric Power Project to Kishanganj sub-station (Karandighi) and got the Transmission Licence in Fiscal 2009. The Project is being implemented on Debt :Equity ratio of 75:25. As on 31.03.2015, TPTL has Authorized share capital of Rs.275.00 crore and paid-up capital of Rs.157.73 crore, POWERGRID equity being Rs.41.01crore. Since the project is under implementation, there is no operating profit.

G) National High Power Test Laboratory Private Limited (NHPTL):

POWERGRID entered into a Joint Venture Agreement in April, 2009 with equal participation with NTPC Ltd., NHPC Ltd., Central Power Research Institute (CPRI) and Damodar Valley Corporation (DVC) for setting up an On-line High Power Test Laboratory for short circuit test facility in the country. The Joint Venture Company is named 'National High Power Test Laboratory Private Limited'. Central Power Research Institute, Bangalore (CPRI) has been inducted as the Fifth equal equity partner of the Company on 24.02.2012. Thereby the equity participation of 20% each for all the JV Partners. The Project is being implemented on Debt :Equity ratio of 60:40. As on 31.03.2015, NHPTL has Authorized share capital of Rs.120 crore and paid-up capital of Rs.110.48 crore, POWERGRID equity being 23.90 crore. A fully independent, stand alone, state-of-the-art, professionally managed, international class, "On Line High Power Short Circuit Test Facility" is being established by the Company at Bina (M.P.) to provide a full range of short circuit testing for the electrical equipment manufacturing industry and power utilities in conformance to Indian and International Standards. The project is under progress. Since the project is under implementation, there is no operating profit.

H) Energy Efficiency Services Limited (EESL):

POWERGRID entered into a Joint Venture Agreement in November, 2009 with equal participation (25% equity each) with NTPC Ltd., Power Finance Corporation Ltd. and Rural Electrification Corporation Ltd. The JV Company viz. Energy Efficiency Services Limited will promote measures of Energy efficiency, Energy Conservation and Climate Change and is carrying out business related to energy audit of Govt, buildings, consultancy assignments etc. The Project is being implemented on Debt :Equity ratio of 70:30. As on 31.03.2015, the Company has Authorized share capital of Rs.190.00 crore and paid up capital of Rs.90.00 crore, POWERGRID equity being Rs.22.50 crore.

I) Cross Border Power Transmission Company Limited (CPTCL):

POWERGRID had entered into a Joint Venture Agreement in July, 2012 with IL&FS Energy Development Company Limited (IEDCL), Satluj Jal Vidyut Nigam Limited (SJVNL) & Nepal Electricity Authority (NEA) for implementation of Indian portion of the transmission line, i.e.Muzaffarpur-Sursand section on Indian side of 400kV D/C Muzaffarpur - Dhalkebar Indo-Nepal Cross Border transmission line. Equity contribution by POWERGRID, SJVNL, IEDCL and NEA are 26%, 26%, 38% and 10% respectively in JVC. The estimated completed cost

of the project is Rs.210.70 Crore the project is being implemented on debt:equity ratio of 80:20. As on 31.03.2015, CPTC has Authorized share capital of Rs.75 crore and paid-up capital of Rs.19 crore, At brsent POWERGRID equity being Rs. 4.94 crore. The project is under implementation.

J) Power Transmission Company Nepal Limited (PTCN):

POWERGRID had entered into a Joint Venture Agreement in April, 2014 with NEA, Hydroelectricity Investment and Development Company Ltd (HIDCL) and IEDCL for implementation of Nepalese portion of the transmission line, i.e. Dhalkebar-Bhittamod section on Nepal side of 400 k/V D/C Muzaffarpur-Dhalkebar Indo-Nepal Cross Border transmission line. Equity contribution by POWERGRID, NEA, HIDCL and IEDCL are 26%, 50%, 14% and 10% respectively in JVC. The estimated cost of the project is X93.9 Crore and the project has been envisaged to be implemented on Debt: Equity ratio of 70:30. As on 31.03.2015, PTCN has Authorized share capital of NPR 300million and paid-up share capital NPR 60 Million. At brsent POWERGRID equity being NPR 15.6 million. The Nepalese and Indian portion of the line shall facilitate exchange of power between two countries.

K) Bihar Grid Company Limited (BGCL):

POWERGRID had entered into a Shareholders' Agreement on 29.12.2012 with Bihar State Power (holding) Company Limited {BSP(H)CL} for implementation of Intra State Transmission System in the State of Bihar on 50:50 equity participation basis. The Company is implementing Bihar Transmission System Strengthening Schemes in Phase IV, Part I worth Rs.1699 Crore. The company has been granted transmission license by BERC in June, 2013. The project is being implemented on Debt :Equity ratio of 80:20. As on 31.03.2015, the Company paid up capital of Rs.20.05 crore, POWERGRID equity being Rs.10.025 crore. Since the project is under implementation, there is no operating profit.

L) Kalinga Bidyut Prasaran Nigam Private Limited (KBPNL):

POWERGRID had entered into a Shareholders' Agreement on 04.01.2013 with OPTCL for implementation of Intra State Transmission System in the State of Odisha on the basis of 50:50 equity participation. The company has been granted transmission license for Phase-I Project (worth Rs.599.50 Crore) by OERC. Pending Notification of Multi Year Tariff for Phase-I Project and grant of Transmission License for Phase-II Project by OERC, implementation of Phase-I Project has not been taken up.

SUBSIDIARIES

A) Power System Operation Corporation Limited (POSOCO):

Power System Operation Corporation Ltd (POSOCO) was incorporated as a wholly owned subsidiary of POWERGRID on 20.03.2009. POSOCO, is responsible for Independent System Operation. As on 31.03.2015, POSOCO has Authorized share capital of Rs.200 crore and paid-up capital of Rs.30.64 crore. The company paid an interim dividend of Rs.4.60 crore during the year and Board has recommended a further final dividend of Rs.15.32crore for FY 2014-15.

B) POWERGRID NM Transmission Limited:

POWERGRID NM Transmission Company Limited (PNMTL), formerly known as Nagapattinam-Madhugiri Transmission Company Limited was acquired/taken over by POWERGRID on March 29, 2012 under Tariff Based Competitive Bidding for establishing Transmission System associated with IPPs of Nagapattinam / Cuddalore Area(Package A) from PFC Consulting Ltd (the Bid Process Co-ordinator). Consequent to such acquisition, PNMTL became the wholly owned subsidiary of POWERGRID. The transmission system comprising 765kV D/C and 765kV S/C is to traverse the states of Tamil Nadu and Karnataka. As on 31.03.2015, PNMTL has an Authorized share capital of Rs.65.00 Crore and paid-up capital of Rs.24 Crore. The company has been granted transmission license by CERC in June, 2013. The Project is under implementation.

C) POWERGRID Vemagiri Transmission Limited:

POWERGRID Vemagiri Transmission Limited, formerly known as Vemagiri Transmission System Limited was acquired /taken over by POWERGRID on April 18, 2012 under Tariff Based Competitive bidding for establishing Transmission system associated with IPPs of Vemagiri Area (Package A) from REC Transmission Projects Company Limited (the Bid Process Co-ordinator). Consequent to such acquisition, POWERGRID Vemagiri Transmission Ltd. became wholly owned subsidiary of POWERGRID. The transmission system comprising 765kV D/C is to traverse the state of Andhra Pradesh and Telangana. As on 31.03.2015, POWERGRID Vemagiri Transmission Ltd. has Authorized and Paid-up share capital of Rs.5 Lac. CERC vide Order dated 06.04.2015 stated that Vemagiri-Khammam-Hyderabad 765 kV D/C lines under the project is neither required as an evacuation line nor as a system strengthening line, no useful purpose will be served by adopting the transmission charges and granting license to the petitioner for the said transmission line and has withdrawn the regulatory approval for the Transmission project.

D) POWERGRID Vizag Transmission Limited:

POWERGRID VIZAG Transmission Limited (PVTL) formerly known as Vizag Transmission Limited was acquired /taken over by POWERGRID on August 30, 2013 under Tariff Based Competitive bidding for establishing Transmission system for 'System Strengthening in Southern Region for import of power from Eastern Region' from REC Transmission Projects Company Limited (the Bid Process Co-ordinator). Consequent to such acquisition, PVTL became wholly owned subsidiary of POWERGRID. The transmission system comprising 765kV D/C & 400kV D/C is to traverse the state of Andhra Pradesh and Telangana. As on 31.03.2015, POWERGRID VTL has Authorized share capital of X90 Crore and paid-up capital of Rs.54.73 Crore. The company has been granted transmission license by CERC in January, 2014. POWERGRID Vizag Transmission Limited has successfully raised an amount of Rs.290 crore from domestic sources through Bond Issue at 8.90% p.a. interest repayable after 5 years. The Project is under implementation.

E) POWERGRID Unchahar Transmission Limited:

POWERGRID Unchahar Transmission System Limited (PUTL) was acquired /taken over by POWERGRID on March 24, 2014 under Tariff Based Competitive bidding from REC Transmission Projects Company Limited (the Bid Process Co-ordinator) for establishment of Transmission System for ATS of Unchahar TPS on build, own, operate and maintain (BOOM) basis. Consequent to such acquisition, PUTL became wholly owned subsidiary of POWERGRID. The transmission system comprising 400 kV D/C is to traverse the state of Uttar Pradesh. As on 31.03.2015, PUTL has Authorized Share Capital of Rs.5 Crore and Paid-up share capital of Rs.5 Lac. The company has been granted transmission license by CERC in July, 2014.

F) POWERGRID Kala Amb Transmission Limited:

POWERGRID Kala Amb Transmission Limited (PKATL) formerly known as NRSS XXXI (A) Transmission Limited was acquired /taken over by POWERGRID on May, 12, 2014 under Tariff Based Competitive bidding from REC Transmission Projects Company Limited (the Bid Process Co-ordinator) for establishment of Transmission System for Northern Region system Strengthening Scheme, NRSS-XXXI (Part-A) on build, own, operate and maintain (BOOM) basis. Consequent to such acquisition, PKATL became wholly owned subsidiary of POWERGRID. The transmission system comprising 400/220 kV GIS substation, 400 kV D/C LILO and Series Compensation is contemplated in the state of Himachal Pradesh. As on 31.03.2015, PKATL has Authorized Share Capital of Rs.5 Crore and Paid-up share capital of Rs.5 Lac. The company has been granted transmission license by CERC in July, 2014.

G) POWERGRID Jabalpur Transmission Limited:

POWERGRID Jabalpur Transmission Limited (PJTL) formerly known as Vindhyachal Jabalpur Transmission Limited was acquired /taken over by POWERGRID on February 26, 2015 under Tariff Based Competitive bidding from REC Transmission Projects Company Limited (the Bid Process Co-ordinator) for establishment of Transmission System Strengthening associated with Vindhyachal-V on build, own, operate and maintain (BOOM) basis. Consequent to such acquisition, PJTL became wholly owned subsidiary of POWERGRID. The transmission system comprising 765kV D/C transmission line is to traverse the state of Madhya Pradesh. As on 31.03.2015, PJTL has Authorized and Paid-up share capital of Rs.5 Lac. Application for grant of Transmission license has been filed before CERC.

H) POWERGRID Warora Transmission Limited (Formerly Gadarwara (A) Transco Limited):

Gadarwara (A) Transco Limited (GATL) was acquired /taken over by POWERGRID on April 24, 2015 under Tariff Based Competitive bidding from REC Transmission Projects Company Limited (the Bid Process Co-ordinator) for establishment of Transmission System Associated with Gadarwara STPS (2 x 800 MW) of NTPC (Part-A) on build, own, operate and maintain (BOOM) basis. Consequent to such acquisition, GATL became wholly owned subsidiary of POWERGRID. The transmission system is contemplated in the states of Maharashtra and Madhya Pradesh and comprises 765kV D/C, 400kV D/C transmission lines and establishment of 2X1500 MVA 765/400 kV new substation in Warora. As on 31.03.2015, GATL has Authorized and Paid-up share capital of Rs.5 Lac. Application for grant of Transmission license has been filed before CERC.

I) POWERGRID Parli Transmission Limited (Formerly Gadarwara (B) Transmission Limited):

Gadarwara (B) Transmission Limited (GBTL) was acquired /taken over by POWERGRID on April 24, 2015 under Tariff Based Competitive bidding from REC Transmission Projects Company Limited (the Bid Process Co-ordinator) for establishment of Transmission System Associated with Gadarwara STPS (2 x 800 MW) of NTPC (Part-B) on build, own, operate and maintain (BOOM) basis. Consequent to such acquisition, GBTL became wholly owned subsidiary of POWERGRID. The transmission system is contemplated in the state of Maharashtra and comprises 765kV D/C, 400kV D/C transmission lines and establishment of 2X1500 MVA 765/400 kV new substation in Parli. As on 31.03.2015, GBTL has Authorized and Paid-up share capital of Rs.5 Lac. Application for grant of Transmission license has been filed before CERC.

Consolidated financial statement of POWERGRID

The consolidated financial statements have been brpared in accordance with Accounting Standards (AS-21) "Consolidated Financial Statements' and Accounting Standards (AS-27) 'Financial reporting of Interests in Joint Ventures' and are included in this Annual Report.

Cautionary Statement

Statement in the Management Discussion and Analysis and Directors' Report describing the Company's objectives, projections and estimates, are forward-looking statements and progressive within the meaning of applicable laws and regulations. Actual results may vary from those exbrssed or implied, depending upon economic conditions, Government Policies and other incidental factors. Readers are cautioned not to place undue reliance on the forward looking statements.

For and on behalf of the Board of Directors

(R. N. Nayak)

Chairman & Managing Director

Place: New Delhi

Date : 10.08.2015

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