Tata Power Company Ltd.
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ISIN No INE245A01021 52Wk High (Rs.) 90 BV (Rs.) 56.42 FV (Rs.) 1.00
Bookclosure 27/07/2018 52Wk Low (Rs.) 60 EPS (Rs.) 9.16 P/E (X) 7.37
Mkt Cap. (Rs. Cr.) 18,243.70 P/BV (X) 1.20 Div Yield (%) 1.93 Mkt Lot 1
2018-03

To the Members,

The Directors are pleased to present to you the Ninety-Ninth Annual Report on the business and operations of your Company along with the audited Financial Statements of Account for the year ended 31st March 2018.

1. FINANCIAL RESULTS

Figures in Rs. crore (Table 1)

Standalone

Consolidated

FY18

FY17#

FY18

FY17#

(a)

Net Sales/Income from Other Operations1

7,301

6,769

28,921

27,286

(b)

(Less): Operating Expenditure

(4,924)

(4,651)

(22,860)

(21,585)

(c)

operating profit

2,377

2,118

6,061

5,701

(d)

(Less)/: Forex Loss/(Gain) (excluding Forex Loss/(Gain) on Borrowings)

(20)

(23)

(114)

(94)

(e)

Add: Other Income

929

995

433

586

(f)

(Less): Finance Cost (including Forex Loss/(Gain) on Borrowings)

(1,431)

(1,319)

(3,723)

(3,365)

(g)

profit before Depreciation and Tax

1,855

1,771

2,657

2,828

(h)

(Less): Depreciation/Amortisation/Impairment

(663)

(605)

(2,398)

(1,956)

(i)

profit before Share of profit of Associates and Joint Ventures

1,192

1,166

259

872

(j)

Add: Share of Profit of Associates and Joint Ventures

-

-

1,554

1,226

(k)

profit before Exceptional Items

1,192

1,166

1,813

2,098

(l)

(Less)/Add: Exceptional Items

(4,437)

(651)

1,102

(651)

(m)

profit/(Loss) before Tax

(3,245)

515

2,915

1,447

(n)

(Less)/Add: Tax Expenses or Credit

166

(120)

(164)

(350)

(o)

Net profit/(Loss) after Tax from Continuing operations

(3,079)

395

2,751

1,097

(p)

Profit/(Loss) before Tax from Discontinued Operations

(86)

16

(86)

16

(q)

(Less)/Add: Tax Expenses or Credit from Discontinued Operations

14

(13)

14

(13)

(r)

Net profit/(Loss) after Tax from Discontinued operations

(72)

3

(72)

3

(s)

Net profit/(Loss) for the year

(3,151)

398

2,679

1,100

(t)

Net profit/(Loss) for the year Attributable to -

- owners of the Company

(3,151)

398

2,477

897

- Non-controlling interests

-

-

202

203

(u)

other Comprehensive income (Net of Tax)

45

(122)

94

(133)

(v)

Total Comprehensive Income

(3,106)

276

2,773

967

Attributable to -

- owners of the Company

(3,106)

276

2,571

764

- Non-controlling interests

-

-

202

203

*Including rate regulatory income/(expense)

#Restated - Refer notes to standalone/consolidated financial statements

2. Financial Performance and The State of The Company’s Affairs

2.1. Consolidated

On a Consolidated basis, the Operating Revenue was at Rs. 28,921 crore in FY18, compared to Rs. 27,286 crore in FY17. The increase was mainly due to higher revenue from the renewables portfolio and higher fuel cost being passed through for the regulated business.

The Consolidated Profit after Tax in FY18 was at Rs. 2,679 crore compared to Rs. 1,100 crore in the previous year mainly due to higher contribution by the coal mines, renewables business and associates, lower foreign exchange losses, recognition of deferred tax assets of certain investments treated as held for sale and reversal of impairment provisions of Coal Companies made in earlier years. This was partly offset by loss towards contractual obligation on account of purchase of shares in Tata Teleservices Limited (TTSL) from NTT DoCoMo Inc., Japan (Docomo). [Refer Section 10 - Management Discussion and Analysis (MD&A) of this report for details]

2.2. STANDALONE

On a Standalone basis, the Operating Revenue stood at Rs. 7,301 crore in FY18 compared to Rs. 6,769 crore in FY17. The increase was mainly due to higher fuel cost and power purchase cost being passed through for the regulated business.

The loss in FY18 was at Rs. 3,151 crore as compared to profit of Rs. 398 crore last year. This was mainly due to impairment provisions made for investments in Coastal Gujarat Power Limited (CGPL), hydro projects in overseas locations and impairment of a unit of Trombay Generating Station. This was partly offset by deferred tax assets recognised on certain investments treated as held for sale.

The Earnings per Share (Basic and Diluted) in FY18 stood at Rs. 4.34 before exceptional items and at Rs. (12.05) after exceptional items.

(Refer Section 9 - MD&A of this report for details)

2.3. EXCEPTIONAL ITEM

CGPL-Coal Mines SBU: The Board after considering the fact that the Indonesian coal mines were acquired to supply coal to CGPL as also to act as a hedge for the coal price risk that the CGPL PPA exposes it to, and considering that the hedge has consistently performed well on an overall basis, has approved treating both as a single cash generating unit. This has a significant impact on how the impairment of the combined CGU is assessed. The past year has shown a consistent increase in the price of coal and this is expected to persist for the foreseeable future. Having regard to this, an impairment of the investment in CGPL has had to be recognized. In addition, a reassessment of electricity prices predicted for the post Power Purchase Agreement (PPA) period also has had a negative impact on the value of CGPL.

The combined effect of these two has resulted in an impairment of Rs.3,555 crore of the investment in CGPL in the standalone accounts. This is because, unlike in the consolidated accounts, in the standalone accounts each investment must be impaired on its own, without setting off the appreciation in other investments and also because in those accounts the investments are carried at cost or lower.

However, in the consolidated accounts the impact is not the same because the losses incurred by CGPL in past years have already been recognized in those accounts over the years. On the other hand, the increase in coal prices has resulted in a positive impact on the value of the coal mines investment, making it possible to reverse an impairment of Rs.1,887 crore accounted for in earlier years when the long-term prediction for coal prices was well below the revised, current prediction.

It may be noted that several assumptions are involved in arriving at the above provisions.

Georgia Hydro Power Project: The standalone accounts contain an impairment provision for the investment in, and commitment to, Tata Power International Pte. Ltd. (TPIPL), a wholly owned subsidiary which had invested in a joint venture company setting up a Hydro power plant in Georgia, aggregating to Rs.675 crore due to depressed power prices in the open market in Turkey coupled with the devaluation of Turkish Lira as also because of a tunnel collapse that has led to a delay in the commercial operation of the plant apart from higher project cost.

The corresponding provision in the consolidated accounts is Rs.528 crore because operating losses have been recognized in the profit and loss account for the difference.

Tata Teleservices Ltd.: A provision has been made for damages of Rs.107 crore towards contractual obligation representing mark to market loss on change in the value of put option on the equity shares of TTSL in both, the standalone as also the consolidated accounts.

Trombay: Your Company has recognized an impairment loss of Rs.100 crore (in both, the standalone as also the consolidated accounts) for one of its units of the Trombay Thermal Power Station consequent on the expiry of its PPA at the end of FY19 with no scope currently existing for finding a buyer for its power.

others (only in the consolidated accounts): Impairment of Rs.38 crore for the carrying amount of Rithala power plant in Tata Power Delhi Distribution Limited due to no likelihood of its operation with gas not being available at administered prices and the partial disallowance of tariff by DERC (appealed against).

Goodwill of Rs.12 crore has been written down in solar power plant acquired by the company consequent on the value for which it was incurred having been realized.

2.4. ANNUAL PERFORMANCE

Details of the Company’s annual financial performance as published on the Company’s website and presented during the Analyst Meet, after declaration of annual results can be accessed using the following link:

https://www.tatapower.com/pdf/investor-relations/analyst-presentation-may-18.pdf (alternately, scan the adjacent QR code using a mobile device to read the file on the Company website).

3. DIVIDEND

Based on the Company’s performance, the Directors of your Company recommend a dividend of 130% (Rs. 1.30 per share of Rs. 1 each), subject to the approval of the Members.

According to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the top 500 listed entities based on market capitalization, calculated as on 31st March of every financial year are required to formulate a dividend distribution policy which shall be disclosed in their annual reports and on their websites. Accordingly, the Dividend Policy of the Company is provided in Annexure-I.

The Dividend Policy of the Company can be accessed using the following link: https://www.tatapower.com/aboutus/dividend-policy.pdf (alternately, scan the adjacent QR code using a mobile device to read the policy on the Company website).

4. CURRENT BUSINESS

Your Company is present across the value chain of power business viz. Generation, Transmission, Distribution, Power Trading, Power Services, Coal Mines and Logistics, Solar Photovoltaic (PV) manufacturing and associated Engineering, Procurement & Construction (EPC) services.

As on 31st March 2018, the Tata Power group of companies had an operational generation capacity of 10,757 MW from various fuel sources - thermal (coal, gas and oil), hydroelectric, renewable energy (wind and solar PV) and waste heat recovery, details of which are given below in Table 2.

Currently, the Company (including its subsidiaries) has nearly 32% of its capacity (in MW terms) in clean and green generation sources (hydro, wind, solar and waste heat recovery). The Company is targeting 40-50% of its total generation capacity from non-fossil fuel based generation sources by 2025.

Details of generation businesses in operation (Table 2)

Fuel Source

State

Location

Normative Capacity (MW)

returns / earnings model

Category total (MW)

Thermal - Coal / Oil / Gas

Gujarat

Mundra

4,150

Long term PPA based on UMPP Bid

7,340

Maharashtra

Trombay

1,430

Extension of Long term PPA - regulated Return on Equity

Jharkhand

Maithon

1,050

Long term PPA - regulated Return on Equity

Jharkhand

Jojobera

428

Long term PPA - regulated Return on Equity and negotiated PPA for Captive Arrangement

Jharkhand

IEL - Jojobera

120

Bilaterally negotiated long term PPA

Indonesia

PT Citra Kusuma Perdana

54

Captive arrangement

New Delhi

TPDDL - Rithala (Gas based)

108

PPA is being pursued

Thermal -Waste Heat Recovery

Jharkhand

IEL - Jamshedpur

120

Bilaterally negotiated long term PPA

375

Odisha

IEL - Kalinganagar

135

Bilaterally negotiated long term PPA

West Bengal

Haldia

120

Merchant sale (100 MW) and bilateral sale to West Bengal (20 MW)

Hydro

Maharashtra

Bhira

300

Long term PPA - regulated Return on Equity

693

Maharashtra

Khopoli

72

Maharashtra

Bhivpuri

75

Bhutan

Dagachhu

126

Merchant

Zambia

ItezhiTezhi

120

Long term regulated return

Renewables

Maharashtra, Gujarat, Madhya Pradesh, Karnataka, Tamil Nadu, Rajasthan, Andhra Pradesh, and South Africa

Wind farms

1161

Long Term PPA based on Feed-in-tariff REC Mechanism

2,349

Renewables

Andhra Pradesh, Bihar, Delhi, Gujarat, Haryana, Jharkhand, Karnataka, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh

Solar Photovoltaic (PV)

1188

Long Term PPA based on Feed-in-tariff

2,349

Total

10,757

Details of other businesses (Table 3)

Business

Company/Entity/Parent Company

Returns/Earnings Model

Key details

Transmission

Tata Power (TPC - T), Mumbai

25 year license w.e.f August 2015 - regulated Return on Equity

Over 1188 Ckms. of transmission lines, connecting generating stations to 21 receiving stations.

Powerlinks Transmission Limited (PTL)

Regulated Return on Equity

2328 Ckms. of 400 kV transmission lines to evacuate power from Eastern/North Eastern region to Northern Region.

Distribution

Tata Power (TPC - D), Mumbai

25 year license w.e.f August 2015- Regulated Return on Equity

Over 4500 Ckms. of distribution network. Around 6.80 lakh consumers.

Tata Power Delhi Distribution Limited (TPDDL)

Regulated Return on Equity

Approximately 15,081 Ckms. of distribution lines. Over 16.5 lakh consumers.

Tata Power Ajmer Distribution Limited (TPADL)

Distribution Franchise model

Over 2,130 Ckms. of network length. Around 1.34 lakh consumers.

Coal Investments

Coal and Infrastructure, Indonesia

Returns based on dynamics in International thermal coal market

Stake in Indonesian mines.

Solar PV

manufacturing, EPC

Tata Power Solar Systems Limited (TPSSL)

Returns based on sector dynamics and market competition

Manufacturing and sale of solar PV cells and modules and EPC services.

Power Trading

Tata Power Trading Company Limited (TPTCL)

Returns based on market dynamics in short term and bilateral power market subject to cap prescribed by CERC

Category I power trading license, which permits the company to trade any quantum of power.

Shipping

Trust Energy Resources Pte Limited, Singapore (TERPL)

Returns based on long term charters

Vessels operated are of cape size.

Power Services

Tata Power

Returns based on sector dynamics and market competition

A leading service providers of project management, O&M and specialized services in the power sector.

Percentage contribution of different business models (excludes under construction) (Table 4)

Model

Capacity (MW)

% of overall capacity

Returns

Bussiness/Division

Fixed Return on Equity

3724

34.7

1) Regulated Return on Equity

2) Bilateral captive agreement

3) PPA Driven

1) Mumbai Operations (Trombay & Hydro), Maithon, Jojobera Unit #2 and #3, TPDDL Rithala

2) IEL (Unit 5, PH6, KPO), CKP (Indonesia)

3) Haldia (20 MW)

Fixed Tariff (Renewables)

2349

21.8

Feed-in-tariff Bid Driven

Wind and Solar projects

Fixed Tariff

(Conventional Generation)

4458

41.4

Bilateral agreement Bid Driven

Jojobera Unit#1 and #4, CGPL, ITPC (Zambia)

Merchant

226

2.1

Market driven

Haldia (100 MW) Dagachhu (126 MW)

4.1. SALE OF STRATEGIC ENGINEERING DIVISION (SED)

The Board has decided to sell its Defence business, Strategic Engineering Division (SED), to Tata Advanced Systems Limited, a wholly owned subsidiary of Tata Sons Limited at an enterprise value of Rs. 2,230 crore. SED engaged in the business of indigenous design, development, production, integration, supply and life cycle support of mission critical defence systems. This will be subject to National Company Law Tribunal (NCLT), Ministry of Defence, Competition Commission of India and shareholders approval. This business is not a core activity for your Company and it needs a different type of risk appetite and support to grow to its potential.

The transaction is proposed to be executed on a slump sale basis. The valuation of the business has been carried out by independent valuers appointed by the Company. Further, a fairness opinion on valuation has been taken from a Category-1 Merchant Banker. The business value is mainly derived from future projections and orders, hence, the valuation has been structured into upfront payment and earn outs. The upfront payment has been agreed at an enterprise value of Rs. 1,040 crore, whereas the earnout payment of Rs. 1,190 crore is subject to receipt of six identified orders spread over the next 6 years. The upfront value will be adjusted for working capital changes and any profits or losses accrued till the time of closing.

5. subsidiaries/joint ventures/associates

As on 31st March 2018, the Company had 50 subsidiaries (40 are wholly-owned subsidiaries), 37 Joint Ventures (JVs) and 8 Associates. Of the erstwhile subsidiaries, 3 companies have been classified as Joint Ventures under Indian Accounting Standards (Ind AS) and 1 of the investments has been classified as Associate.

During the year, the following changes occurred in your Company’s holding structure:

- Subsidiaries: Chemical Terminal Trombay Limited, an erstwhile subsidiary of the Company merged with the Company during the year. The Company incorporated Tata Power Ajmer Distribution Limited and Far Eastern Natural Resources LLC.

- There was no change in the holding structure of Joint Ventures and Associates during the year.

A report on the performance and financial position of each of the subsidiaries, JVs and Associates has been provided in Form AOC-1.

The policy for determining material subsidiaries of the Company can be accessed using the following link: https://www.tatapower.com/pdf/ aboutus/policy-for-determining-material-subsidiaries.pdf (alternately, scan the adjacent QR code using a mobile device to read the policy on the Company website).

6. RESERVES

The balance in the various reserves of the Company for FY18 and the previous year are as follows:

Figures in Rs. crore (Table 5)

Particulars - standalone

As at 31st March, 2018

As at 31st March, 2017

Capital Redemption Reserve

1.85

1.85

Capital Reserve

61.66

61.66

Securities Premium Account

5,634.98

5,634.98

Debenture Redemption Reserve

1,000.61

1,000.90

General Reserve

3,853.98

3,853.98

Retained Earnings

1,878.99

5,361.42

Investment Revaluation Reserve

(374.12)

(2 53.40)

Statutory Reserve

660.08

660.08

7. FOREIGN EXCHANGE - EARNINGS AND OUTGO

8. REGULATORY AND LEGAL MATTERS

The businesses of the Company are governed primarily by the Electricity Act, 2003 (EA, 2003) and associated regulations. Mentioned below are the critical regulatory orders pertaining to the Company that were issued during FY18, none of which impact the ‘going concern’ status of your Company.

8.1. MUNDRA UMPP

8.1.1. COMPENSATORY TARIFF/FORCE MAJEURE RELIEF

CGPL - Mundra UMPP approached the Central Electricity Regulatory Commission (CERC) for evolving a mechanism for compensating CGPL for the adverse impact of the uncontrollable and unprecedented escalation in the imported coal prices and the change in law in Indonesia (Indonesian Government’s decision to benchmark export coal prices against international prices. The CERC, after considering the recommendations of a committee appointed for the aforesaid purpose vide its order dated 21st February 2014, decided that CGPL was entitled to compensatory tariff from 1st April 2012 over and above the tariff agreed under the PPA with the Procurers, till the hardship on account of Indonesian regulations persisted.

The Procurers challenged the order and filed an appeal with the Appellate Tribunal for Electricity (APTEL) which passed an interim order dated 21st July 2014, directing the Procurers to pay a compensatory tariff from March 2014 onwards, although it stayed the compensation for the prior period, till disposal of the appeal filed before it. On appeal by the Procurers, the interim order of APTEL was set aside by the Supreme Court and APTEL was directed to hear and dispose of the appeals expeditiously.

On 7th April 2016, APTEL, while rejecting the grounds of change in law and use of regulatory powers, remanded the matter to CERC to assess the compensation on grounds of Force Majeure (FM) as permissible under the PPA.

The Procurers, including a consumer group, filed a Civil Appeal before the Supreme Court challenging the FM relief provided as per APTEL’s judgement. The Supreme Court directed that CERC may pass the order on FM relief, but it was to be given effect only with the prior permission of the Supreme Court. Based on the remand by APTEL, the matter was heard by CERC and order passed on 6th December 2016, prescribing the FM relief mechanism.

Subsequently, the civil appeals filed by Procurers and consumer groups were heard before the Supreme Court. The Supreme Court, vide judgement dated 11th April 2017, disposed of the appeal with regard to compensatory tariff, inter alia holding that:

a) CGPL’s case does not fall under the Force Majeure clause in the PPA

b) The Change in Law as defined under PPA contemplates only change in domestic (Indian) laws

The Supreme Court has, however, upheld that the CERC has powers under Section 79(1)(b) of EA, 2003 to regulate, which includes power to determine or adopt tariff even for tariff that is determined under competitive bidding route (Section 63 of EA, 2003). While the Supreme Court held that the Regulatory Commission has the powers under Section 79 of EA, 2003, the judgement did not specifically validate the applicability of said principle to the relief that had been granted by CERC to CGPL earlier.

The Company has been operating and maintaining the 4,150 MW Mundra Ultra Mega Power Station which is operating at benchmark operational parameters and making a significant contribution in ensuring the energy security of the country. While the Company continues to make efforts to seek additional tariff and is engaged with various stakeholders including the Central Government, Procurers and the Lenders, it is pursuing all alternative options at CGPL including sourcing of competitive coal from other relevant geographies as also use low grade and blended coal options to contain the underrecovery at Mundra UMPP. However, with ever-increasing international coal prices, the project is becoming increasingly unviable. A large part of the investment made in the project is also being considered for provisioning in the accounts.

Your Company is exploring all options for the long term sustainability of the power station and to structure the investment in a manner that it earns a reasonable return.

8.1.2. CHANGE IN LAW

CGPL has filed petitions under Change in Law -Operations and Change in Law - Construction before the APTEL against certain disallowances given by the CERC.

Additionally, the CERC passed an order on 14th March 2018 allowing Compensation Cess on actual coal consumed based on Auditors Certificates. Any refund arising due to subsuming of other taxes in GST would need to be settled mutually between the Generators and its Procurers.

8.1.3. PETITION SEEKING IN-PRINCIPLE APPROVAL FOR CAPEX AND OPEX TO COMPLY WITH NEW ENVIRONMENT NORMS

The Ministry of Environment, Forest and Climate Change (MoEF&CC), vide its notification, has revised the environment emissions norms mandating all thermal power plants to comply with the same. Your Company had filed a petition with CERC seeking in-principle approval for the capital expenditure in order to secure finance from the financial institutions so as to comply with the new norms. The matter was heard before CERC to decide whether the above MOEF&CC notification falls under the Change in Law as per the PPA. However, final directions from CERC are awaited.

8.2. MUMBAI OPERATIONS

8.2.1. MULTI YEAR TARIFF (MYT) ORDERS OF MERC

MERC passed its MYT order for the generation business on 8th August 2016, for the transmission business on 30th June 2016 and for the distribution business on 21st October 2016. In FY18, review petitions, as relevant, against these orders, have been filed at the appropriate forums.

8.2.2. NETWORK ROLL-OUT PLAN

The Petition has been disposed of by MERC on 12th June 2017 providing inter alia, criteria and various possible scenarios for providing consumer connections, establishing an institutional mechanism for evaluating and deciding on applications for new connections forwarded by the Distribution Licensees, as also prescribing the protocol for releasing connections to new consumers etc. The said order has been challenged before APTEL by your Company as well as by other Mumbai Discoms and a consumer body. The final hearing on these appeals has been completed and orders are reserved.

8.2.3. TPC-D’S RIGHT TO LAY NETWORK AND ACQUIRE CUSTOMERS

MERC in its order, in the case filed by BEST, ruled in favour of Tata Power Company-Distribution (TPC-D), that it can lay its distribution network in line with the APTEL Judgement in Appeal No. 246 of 2012 and also in line with MERC’s interim order dated 9th November 2015 in case no. 182 of 2014.

MERC in its order dated 24th January 2018, rejected the claim of RInfra-D against TPC-D contravening the decision and the directions of the Commission issued in the interim order dated 9th November 2015, in Case No. 182 of 2014 relating to TPC-D’s right to acquire new or switchover consumers by laying its own network in terms of the APTEL judgement and MERC’s interim order .

8.2.4. DISTRIBUTION LICENSES - APPEAL FILED BY R-INFRA AND BEST

The appeal filed by R-Infra challenging the distribution license granted to TPC-D in August 2014 is pending before APTEL. Further, appeals filed by R-Infra and BEST against the interim order dated 9th November 2016, passed by MERC, are also pending before APTEL. Proceedings in the matter are completed and the order is reserved.

8.2.5. STANDBY CHARGES

On an appeal filed by your Company, the Supreme Court had stayed the operation of the APTEL order in 2007, subject to the condition that your Company deposits an amount of Rs. 227 crore and submits a bank guarantee for an equal amount. Your Company has complied with both the conditions. R-Infra has also subsequently filed an appeal before the Supreme Court challenging the APTEL order. Both the appeals were admitted in 2007. The matter was part heard during this year and the hearings are yet to be completed.

8.2.6. ENERGY CHARGES AND ‘TAKE OR PAY’ OBLIGATION

In a case relating to Take or Pay obligation payable to the Company, the Supreme Court, vide its order dated 14th December 2009, has granted a stay against the APTEL order and has directed R-Infra to deposit with the Supreme Court a sum of Rs. 25 crore and furnish a bank guarantee for the balance amount. No hearings were held during the year on this matter.

8.2.7. ENTRY TAX

Your Company had filed a writ in the Bombay High Court (HC) challenging the constitutional validity of the Maharashtra Entry Tax Act, 2002. HC dismissed the writ petition. Aggrieved, your Company filed Special Leave Petitions (SLP) in the Supreme Court. Vide its order dated 21st October 2016, the Supreme Court passed the order staying the demand of entry tax, by extending the interim stay earlier granted by the High Court. Your Company has filed a writ petition in the Supreme Court, on which the Supreme Court issued a notice and tagged it along with the Company’s SLP. The matter is now awaited for listing for final hearing and disposal.

8.2.8. EXTENSION OF PPA BETWEEN TPC-G AND BEST

BEST and Tata Power Company-Generation (TPC-G) had entered into a PPA dated 21st December 2006 for bulk supply of power. The said agreement was extended from time to time by the parties with due approval of MERC. The term of the existing PPA expired on 31st March 2018.

BEST undertook a competitive bidding process for procurement of 750 MW power for 5 years starting 1st April 2018. However, after completion of the bidding process, BEST filed a petition before MERC seeking cancellation of the bidding process undertaken, approval of timelines for undertaking a fresh competitive bidding process for 5 years starting from 1st April 2019 and the extension of the existing PPA between BEST and TPC-G in terms of Clause 3.3 of the existing PPA.

MERC, vide its order dated 27th February 2018, has approved extension of the validity of the PPA between BEST and TPC-G for 676 MW of power (excluding Unit 6) along with certain other directions to be incorporated in the existing PPA as extended up to 31st March 2019.

8.2.9. EXTENSION OF PPA BETWEEN TPC-G AND TPC-D

TPC-D and TPC-G had entered into PPA dated 23rd December 2006 for bulk supply of power. The said agreement was extended from time to time by the parties with due approval of MERC. The term of the existing PPA was to expire on 31st March 2018.

MERC vide its order dated 27th March 2018, approved the extension of Power Purchase Arrangement between TPC-G and TPC-D for one year from 1st April 2018 to 31st March 2019 for a total capacity of 672 MW.

8.3. JOJOBERA OPERATIONS

8.3.1. MYT Order For jojobera uNIT 2 And uNIT 3 INcluDING TRuE-uP FOR FY 2015-16

On 19th February 2018, JSERC has passed the MYT Order for Jojobera Unit 2 and Unit 3 for the control period FY17-21 together with true-up for FY16.

With respect to the tariff order for the control period FY17-21, a review has been sought from JSERC on a deviation taken on an operating norm. With respect to truing-up for FY16, your Company has taken up review of some claims which have been disallowed before JSERC and appealed at APTEL.

8.4. MAITHON POWER limited (MPL)

8.4.1. REVIEW/APPEAL FILED AGAINST DISALLOWANOES BY CERC FOR TRUING-UP OF TARIFF FOR FY12-14 AND DETERMINATION OF TARIFF FOR FY15-19

MPL had filed a petition for determination of tariff for the period FY15-19 along with the truing-up for FY12-14 on 1st June 2015, before CERC. The proceedings in the above matter had been completed in December 2016 and the order was issued on 26th December 2017. MPL filed a review petition before CERC and appeal before APTEL against the disallowances in the tariff order dated 26th December 2017.

8.4.2. PETITION SEEKING IN-PRINCIPLE APPROVAL FOR CAPEX SCHEMES FOR MEETING NEW ENVIRONMENT NORMS

MPL has approached CEA and MoEF&CC as per directions of CERC, to decide the optimum technology and associated costs, for phasing of implementation of different environment measures in compliance with new environmental norms. It will then approach CERC based on the approval of CEA and direction of MoEF&CC.

8.5. POWERLINKS TRANSMISSION LIMITED (PTL)

8.5.1. TRUING-UPFOR FY10-FY14 AND MULTI YEAR TARIFF FOR FY14-19

Subsequent to the true-up order for FY10-14, CERC directed its staff to examine the impact of Transmission Majoration Factor (TMF) to review the continuation of TMF for subsequent years.

CERC, thereafter, notified a draft amendment to CERC Tariff Regulations, 2014 abolishing the continuation of TMF for PTL. Powerlinks, objecting to such amendment, has filed detailed comments and presented the same before CERC during the public hearing held for the issue. CERC has not issued the final regulations in this regard yet.

9. RISKS AND CONCERNS

Your Company is faced with risks of different types, all of which need different approaches for mitigation. Details of various risks faced by the Company are provided in section 4 of MD&A of this Annual Report.

10. RISK MANAGEMENT FRAMEWORK AND INTERNAL FINANCIAL CONTROLS

Risk Management Framework:

Based on the Risk Management Policy (https://www.tatapower. com/pdf/aboutus/risk-management-policy.pdf) (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website), a standardized Risk Management Process and System has been implemented across the Tata Power group. Risk plans have been framed for all identified risks and uploaded in the system with mitigation action, target dates and responsibility. The Risk Register contains the mitigation plans. Functional Risk Management Committees (FRMCs) closely monitor and review the risk plans.

The Apex Risk Management Committee (ARMC) meets every quarter to review key strategic and tactical risks, identify new risks and assess the status of mitigation measures. As per the Listing Regulations, a Risk Management Committee (RMC) was constituted which currently comprises of three Independent Directors, one Non-Executive Director and one Executive Director. The RMC meets regularly to review critical strategic risks.

In FY16 and FY17, the British Standards Institution (BSI) did an assessment of Tata Power and its eight major subsidiaries and conferred the ‘Statement of Compliance’ for Tata Power Group for ISO 31000:2009. Tata Power was the first power company in India to get this recognition in FY15. This year, Tata Power Group’s external ISO assessment is scheduled for July 2018.

Tata Power bagged two prestigious awards at the CRO Leadership Summit and awards conducted by UBS Transformance in November 2017. The Company won the ‘Risk Management Team of the Year, 2017’, and Tata Power’s Chief Risk Officer, Mr. Parshuram Date, was awarded ‘CRO of the Year, 2017’ in the power sector. In January 2018, Tata Power was pronounced as the joint winner in the category - ‘Best Risk Management Framework & Systems - Power’, at the 4th Edition of CNBC-TV18 The India Risk Management Awards. Also, this year, Tata Power has obtained a copyright for its web-based Risk Management System.

Internal Financial Controls and Systems:

The Company has its internal audit function reviews and ensures sustained effectiveness of Internal Financial Controls (IFC) by adopting a systematic approach to its work.

To fulfil the requirements of the Companies Act, 2013 the in-house internal audit team integrated IFC controls into risk control matrix (RCMs) of enterprise processes in FY17. 100% testing of IFC controls was ensured during process audit or creating separate audit areas of IFC testing where process audits were not due.

On review of the internal audit observations and action taken on audit observations, we can state that there are no adverse observations having material impact on financials, commercial implications or material noncompliances which have not been acted upon.

The Company continued the Control Self-Assessment (CSA) process, which included seven Tata Power group companies this year, whereby responses of all process owners are used to assess internal controls in each process. This helps the Company to identify focus audit areas, design the audit plan and support CEO/CFO certifications for internal controls.

11. SAFETY

Safety is a core value of the Company. The Company has adopted a structured approach towards implementation of Safety Policies and Programs to integrate safety with critical business processes with a goal to continuously improve safety performance. Safety organisation has been established for developing and implementing Safety Management Systems and to facilitate a change in culture through leadership interventions to mitigate risks.

Safety Statistics FY18: (Table 7)

Sl. No.

Safety Parameters in your Company’s work jurisdiction (Tata power, CGPL, MPL, LEI, CTTL, PTL, TPDDL and TPSSL)

FY18

FY17

1

Fatality (Number)

1

2

2

LTIFR (Lost Time Injuries Frequency Rate per million man hours)

0.17

0.23

3

Total Injury Frequency Rate (No of injuries per million man hours)

2.26

4.32

4

First Aid Cases (Number)

105

232

Your Company is deeply aggrieved by the fatality and accidents. It treats any fatality in any of its premises, of any of its employees, contractor/associate employees or any third party, with equal gravitas and is committed to taking the entire working environment and behaviour to the highest safety standards.

Your Company has increased its efforts on safety during the year and has adopted the following safety interventions in FY18 to improve safety in the organisation:

- Collaborative Leadership Coaching Program was conducted for identified leaders.

- Safety Code of Conduct (SCoC) was framed and signed off by all employees.

- Integrated safety Key Responsibility Area (KRA) was included in Performance Management System (PMS).

- Enhanced capability building through competency-based training programs at Tata Power Skill Development Institute (TPSDI).

- Implemented the contractors’ safety code of conduct to improve capability and capacity of contractors and evaluated their safety performance for all the stages of contract (registration, bidding and execution).

- Stakeholder ‘Suraksha’ application developed for empowering the business associates to report incidents/observations.

12. SUSTAINABILITY

Your Company successfully completed over 100 years of operations and remains committed to the legacy of being a responsible corporate citizen. It has practised sustainability over these 100 years and thus, reinforced the core value of Leadership with Care. For your Company, sustainability is care for the environment, care for the customers and shareholders, care for the community and care for our people.

The Company’s efforts on sustainability were recognized at various platforms and a testimony to this was the various awards bestowed upon your Company. The Company has received the domain excellence award in biodiversity conservation at the CII ITC Sustainability Awards 2017. Your Company was also ranked 3rd in the Responsible Business Ranking for Sustainability and CSR released in September 2017.

12.1. CARE FOR OUR COMMUNITY/COMMUNITY RELATIONS

Your Company has actively worked on the key focus areas in Corporate Social Responsibility (CSR) covering education, health & sanitation, water, livelihood and employability, social capital and financial inclusivity, as well as rural energy while focusing on Affirmative Action (AA) initiatives of the Tata Group.

Your Company has a unique governance system for Sustainability as a strategic theme. This is guided by the Sustainability Advisory Council (SAC) comprising eminent experts from various fields impacting sustainability.

Tata Power’s CSR initiatives were extended to the geographies where the new solar and wind plants are located.

Your Company’s standalone CSR spend for FY18 stood at Rs. 14.71 crore against the Companies Act, 2013 requirement of Rs. 13.71 crore. Additionally, as a part of disaster relief operations, the Company contributed towards relief efforts in Gujarat.

Independent monitoring, effectiveness of implementation and impact assessment were undertaken to provide feedback and to refine, realign the programs so that the extent and effectiveness of the initiatives could be improved in pursuance of the Company’s objective to improve the quality of life of the community and to get the community’s tacit or implied acceptance of the Company’s co-existence with them.

Details of the CSR activities of your Company and its key subsidiaries are listed in the MD&A section of this annual report.

The annual report on CSR activities is provided in Annexure-II.

12.2. AFFIRMATIVE ACTION

Under its Affirmative Action (AA) program, your Company has implemented several initiatives for Employment, Entrepreneurship, Employability, Education and Essential Amenities for the communities around its operating sites.

The major programs carried out in the neighbourhood of the operating plants and projects are Skill Development Programs (through TPSDI, Industrial Training Institutes and Vocational Trainings), entrepreneurships programs like Maval dairy, sustainable agriculture and supporting Self Help Groups (SHG), and support for educational initiatives like e learning, educational aid and learning camps.

The Company continued its work in areas beyond its areas of operations, such as in Jawahar taluka, Palghar district of Maharashtra, which has a tribal population which constitutes over 90% of the total population with a vast majority being below the poverty line. The activities here include initiatives like generating livelihood opportunities to improve sub-economic status, integrated watershed management program, capacity building through a participatory approach, women’s empowerment through SHGs and a Village Development Council (VDC) for sustainable development. The VDC has elected members from the village, as well as a Tata Power representative and is responsible for the sustainable development of the village.

12.3. CARE FOR OUR ENVIRONMENT

The Company, during the year under review, addressed various aspects of resource conservation, energy efficiency, carbon footprint, renewable power generation, biodiversity and green buildings. Details of initiatives undertaken are given in MD&A Section 8.1.3.

12.4. CLUB ENERJI

Tata Power’s Club Enerji is focused on school students to champion the noble cause of conservation of resources and enhance moral and civic values. The Club has been ceaselessly working towards creating responsible citizens of tomorrow who focus not only on conserving energy and natural resources (like fossil fuel - coal, oil, gas, water; managing waste; afforestation), but also conserve civic, ethical and moral values in society at large.

Recognizing the immense value that schools and school children can bring to the initiative and taking due consideration of the social need, Tata Power started ‘Tata Power Club Enerji’ in 2007 to propagate efficient usage of energy and to educate the society on climate change issues. The program is now in its 10th year and has covered more than 500 schools across Mumbai, Delhi, Pune, Ahmedabad, Bengaluru, Kolkata, Belgaum, Jamshedpur, Lonavala and five more cities. It has reached out to more than 1.93 crore citizens, collectively saved 25 million units of electricity - equivalent to saving 25,000 tons of CO2. All over India, 2,00 Mini Clubs have also been formed under the Club Enerji initiative.

Tata Power Club Enerji also launched its comprehensive online module in November 2015 with an aim to reach out to a larger audience with a vision of transformation and adoption of a holistic and robust approach towards conservation. The module, since its launch, has also reached out to audiences in new international geographies like Philippines, UAE, USA, UK and South Africa and newer national geographies like Chandigarh, Hyderabad and Chennai.

12.5. DEMAND SIDE MANAGEMENT

The Company has been a pioneer in propagating energy conservation and efficiency. Demand-side management (DSM) refers to cooperative activities between the utility and its customers to implement options for increasing the efficiency of energy utilization, with resulting benefits to the customer, utility and the society.

12.6. SUSTAINABLILITY REPORTING

Your Company has adopted the latest Global Reporting Initiative (GRI) Standards for its combined Sustainability Report for FY16-18, which is currently under preparation, to report on its sustainability performance specific to the Indian operations of your Company viz. generation, transmission and distribution. The Company’s Sustainability Reports can be accessed using the following link: https://www.tatapower. com/sustainability/communication.aspx (alternately, scan the adjacent QR code using a mobile device to read the policy on the Company website)

12.7. business responsibility report (BRR)

The Business Responsibility Reporting is in line with the SEBI requirement based on the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’ notified by Ministry of Corporate Affairs (MCA), Government of India, in July 2011. Your Company reported its performance for FY18 as per the BRR framework, describing initiatives taken from an environmental, social and governance perspective.

13. directors and key managerial personnel

Change in Board composition

Pursuant to the Guidelines adopted by the Company for retirement of Non-Executive Directors, Dr. Homiar S. Vachha, Independent Director on your Company’s Board, ceased to be Director of the Company effective 23rd April 2017, consequent upon his completing 75 years of age. The Board of Directors place on record their deep appreciation for the contribution made by Dr. Vachha during his tenure.

On the recommendation of the Nomination and Remuneration Committee (NRC), Mr. K. M. Chandrasekhar was appointed as an Additional Director of the Company with effect from 4th May 2017 by the Board of Directors, in accordance with Section 161(1) of the Act and Article 132 of the Company’s Articles of Association. Mr. Chandrasekhar was also appointed as an Independent Director for a period of 5 years with effect from 4th May 2017 upto 3rd May 2022. His appointment as Independent Director was approved at the previous Annual General Meeting (AGM) by the Members.

Mr. Pravin H. Kutumbe, nominee of Life Insurance Corporation of India (LIC) on the Company’s Board, resigned as a Director of your Company effective 20th May 2017. The Board has placed on record its appreciation of the valuable contribution made to the Company by Mr. Kutumbe during his tenure. Mr. Hemant Bhargava, Managing Director of LIC, was then nominated by LIC as Director on the Board. Mr. Bhargava was appointed as an Additional Director of the Company with effect from 24th August 2017, by the Board of Directors, on the recommendation of the NRC, in accordance with Section 161(1) of the Act and Article 132 of the Company’s Articles of Association. Mr. Bhargava holds office only upto the date of the forthcoming AGM and a notice under Section 160(1) of the Act has been received from a Member signifying its intention to propose his appointment as a Director.

Mr. S. Padmanabhan and Ms. Sandhya S. Kudtarkar, NonExecutive Directors on your Company’s Board, resigned from the Board on 16th November 2017. The Board has placed on record its appreciation of the valuable contribution made to the Company by Mr. Padmanabhan and Ms. Kudtarkar during their respective tenures.

Mr. Saurabh Agrawal and Mr. Banmali Agrawala were appointed as Additional Directors of the Company with effect from 17th November 2017, by the Board of Directors, on the recommendation of the NRC, in accordance with Section 161(1) of the Act and Article 132 of the Company’s Articles of Association. Mr. Agrawal and Mr. Agrawala hold office only upto the date of the forthcoming AGM and a notice under Section 160(1) of the Act has been received from a Member signifying its intention to propose their appointment as Directors.

Mr. Anil Sardana resigned as CEO & Managing Director of the Company effective close of business hours on 30th April 2018. The Board has placed on record its deep sense of appreciation of the valuable contribution made by Mr. Sardana to the operations and growth of the Company during his tenure.

On the recommendation of the NRC, Mr. Praveer Sinha was appointed as Additional Director of the Company with effect from 1st May 2018, by the Board of Directors, in accordance with Section 161(1) of the Act and Article 132 of the Company’s Articles of Association. Mr. Sinha holds office only upto the date of the forthcoming AGM and a notice under Section 160(1) of the Act has been received from a Member signifying his intention to propose Mr. Sinha’s appointment as Director. Mr. Sinha was also appointed as CEO & Managing Director of the Company for the period of 5 years commencing from 1st May 2018 to 30th April 2023. His appointment and the terms and conditions of his appointment including remuneration payable to him, require approval of the Members at the ensuing AGM.

In accordance with the requirements of the Act and the Company’s Articles of Association, Mr. N. Chandrasekaran retires by rotation and is eligible for re-appointment. Members’ approval is being sought at the ensuing AGM for his re-appointment.

Number of Board Meetings

Nine Board Meetings were held during the year. For further details, please refer to Report on Corporate Governance, which forms a part of this Annual Report.

Independent Directors

In terms of Section 149 of the Act, Mr. N. H. Mirza, Mr. D. M. Satwalekar, Ms. Anjali Bansal, Ms. Vibha Padalkar, Mr. S. V. Bhandarkar and Mr. K. M. Chandrasekhar are the Independent Directors of the Company. The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the Act.

Key Managerial Personnel

In terms of Section 203 of the Act, the following are the Key Managerial Personnel (KMP) of the Company:

- Mr. Praveer Sinha, CEO and Managing Director

- Mr. Ashok S. Sethi, COO and Executive Director

- Mr. Ramesh N. Subramanyam, Chief Financial Officer

- Mr. Hanoz M. Mistry, Company Secretary

14. ANNUAL EVALUATION OF BOARD PERFORMANCE AND PERFORMANCE OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS

The Board of Directors has carried out an annual evaluation of its own performance, performance of the Directors individually as well as the evaluation of the working of its Committees, pursuant to the provisions of the Act, Regulation 25 of the Listing Regulations and the Guidance Note on Board Evaluation issued by SEBI on 5th January 2017.

The following process was adopted for Board evaluation:

i) Feedback was sought from each Director about their views on the performance of the Board, covering various criteria such as degree of fulfilment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning, Board culture and dynamics, quality of relationship between the Board and the Management and efficacy of communication with external stakeholders. Feedback was also taken from every Director on his assessment of the performance of each of the other Directors.

ii) The Nomination and Remuneration Committee (NRC) then discussed the above feedback received from all the Directors.

iii) Based on the inputs received, the Chairman of the NRC also apprised the Independent Directors at their meeting, summarising the inputs received from the Directors as regards Board performance as a whole and of the Chairman. The performance of the Non-Independent Non-Executive Directors and Board Chairman was also reviewed by them.

iv) Post the meeting of the Independent Directors, their collective feedback on the performance of the Board (as a whole) was discussed by the Chairman of the NRC with the Chairman of the Board. It was also presented to the Board and a plan for improvement was agreed upon and is being pursued.

v) Every statutorily mandated Committee of the Board conducted a self-assessment of its performance and these assessments were presented to the Board for consideration. Areas on which the Committees of the Board were assessed included degree of fulfilment of key responsibilities, adequacy of Committee composition and effectiveness of meetings.

vi) Feedback was provided to the Directors, as appropriate. Significant highlights, learning and action points arising out of the evaluation were presented to the Board and action plans drawn up. During the year under report, the recommendations made in the previous year were satisfactorily implemented.

15. REMUNERATION POLICY FOR THE DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read with Part D of Schedule II to the Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board, a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity and Director Attributes, which is provided in Annexure-III to this Report and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company, which is reproduced in Annexure-IV to this Report.

16. COMMITTEES OF THE BOARD

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority.

The following statutory Committees constituted by the Board function according to their respective roles and defined scope:

- Audit Committee of Directors

- Nomination and Remuneration Committee

- Corporate Social Responsibility Committee

- Stakeholders Relationship Committee

- Risk Management Committee

Details of composition, terms of reference and number of meetings held for respective committees are given in the Report on Corporate Governance, which forms a part of this Report.

The Board has laid down separate Codes of Conduct for Non Executive Directors and Senior Management personnel of the Company and the same can be accessed using the following link: h ttps://www. tatapower.com/pdf/ aboutus/Code-of-Conduct-NEDs. pdf. (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website). All Senior Management personnel have affirmed compliance with the Tata Code of Conduct (TCOC). The CEO & Managing Director has also confirmed and certified the same. The certification is enclosed at the end of the Report on Corporate Governance.

17. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

The information on conservation of energy and technology absorption stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is attached as Annexure - V to this Report.

18. particulars of employees and remuneration

The information required under Section 197(12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is attached as Annexure - VI.

The information required under Rule 5(2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in the Annexure forming part of this Report. In terms of the first provision to Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. Any member interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. None of the employees listed in the said Annexure are related to any Director of the Company.

Officers of the organisation are classified into five management work levels i.e. MA, MB, MC, MD and ME. The work levels are further divided into grades. Nonmanagement employees are across different grades and also have been classified as unskilled, semi-skilled, skilled and highly skilled.

For the officers, Uniform Compensation Structuring (UCS) exercise was undertaken in FY18 to promote talent mobility in the organisation. This will help in ensuring seamless mobility of talent with minimal or no change in CTC across the Tata Power Group. UCS provided an integrated, aligned and uniform view of talent across entities leading to more avenues for growth to available talent across entities. The entire implementation process was done in-house by the HR team in the defined time span.

19. RELATED PARTY TRANSACTIONS

In line with the requirements of the Act and the Listing Regulations, the Company has formulated a Policy on Related Party Transactions and the same can be accessed using the following link: https://www.tatapower.com/pdf/ aboutus/rpt-policy-framework- guidelines.pdf (alternately, scan the adjacent QR code using a mobile device to read the policy on the Company website). Details of Related Party Transactions as per AOC-2 are provided in Annexure-VII to this Report.

20. DEPOSITS (Table 8)

Sl. No.

particulars

Amount in Rs.

1.

Accepted during the year

Nil

2.

Remained unpaid or unclaimed at the end of the year2

2,58,105

3.

Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

NA

- At the beginning of the year

- Maximum during the year

- At the end of the year

4.

Details of deposits which are not in compliance with the requirements of Chapter V of the Act

NA

*This relates to deposits accepted under the Companies Act, 1956.

21. LOANS, GUARANTEES, SECURITIES AND INVESTMENTS

The Company, being an infrastructure company, is exempt from the provisions as applicable to loans,

guarantees and securities under Section 186 of the Act. The details of investments are provided in the notes to the financial statements.

22. EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 of the Act and Rule 12 of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 is provided in Annexure-VIII to this Report.

23. AUDITORS

M/s S R B C & CO. LLP (SRBC), who is the statutory auditor of your Company, holds office until the conclusion of the hundred and third AGM to be held in the year 2022, subject to ratification of its appointment at every AGM, if required under law.

Members will also be requested to pass a resolution (vide Item No.12 of the Notice) authorizing the Board of Directors to appoint Branch Auditors for the purpose of auditing the accounts maintained at the Branch Offices of the Company abroad.

24. AUDITORS’ REPORT

The standalone and the consolidated financial statements of the Company have been prepared in accordance with Indian Accounting Standards (IndAS) notified under section 133 of the Companies Act, 2013.

25. COST AUDITOR AND COST AUDIT REPORT

M/s Sanjay Gupta and Associates, Cost Accountants, were appointed Cost Auditors of your Company for FY18.

In accordance with the requirement of the Central Government and pursuant to Section 148 of the Act, your Company carries out an annual audit of cost accounts relating to electricity. The Cost Audit Report and the Compliance Report of your Company for FY17, was filed on 8th September 2017 with the Ministry of Corporate Affairs through Extensive Business Reporting Language (XBRL) by M/s Sanjay Gupta and Associates, Cost Accountants, before the due date of 30th September 2017.

26. secretarial audit report

M/s. Parikh & Associates, Company Secretaries, were appointed as Secretarial Auditors of your Company to conduct a Secretarial Audit of records and documents of the Company for FY18. The Secretarial Audit Report confirms that the Company has complied with the provisions of the Act, Rules, Regulations, and Guidelines and that there were no deviations or non-compliances.

The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks or disclaimers. The Secretarial Audit Report is provided in Annexure-IX.

The Company confirms compliance with the requirements of Secretarial Standards 1 and 2.

27. CORPORATE GOVERNANCE

Pursuant to Regulation 34 of the Listing Regulations and relevant sections of the Act, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors’ Certificate thereon are included in the Annual Report.

28. VIGIL MECHANISM

Your Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act, a vigil mechanism was established for directors and employees to report to the management instances of unethical behaviour, actual or suspected, fraud or violation of the Company’s code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counsellor (CEC)/Chairman of the Audit Committee of the Company for redressal.

29. DIRECTORS’ RESPONSIBILITY STATEMENT

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants including audit of IFC for financial reporting by the statutory auditors and the reviews performed by management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company’s IFC were adequate and effective during FY18.

Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed and there are no material departures;

b) the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors had prepared the annual accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively (refer section 10);

f) the Directors had devised proper systems to ensure compliance with the provision of all applicable laws and that such systems were adequate and operating effectively.

30. ACKNOWLEDGEMENTS

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our shareholders, customers, business partners, vendors - both international and domestic, bankers, financial institutions and academic institutions for all the support rendered during the year.

The Directors are thankful to the Government of India, the various ministries of the state governments, the central and state electricity regulatory authorities, communities in the neighbourhood of our operations, municipal authorities of Mumbai, and local authorities in areas where we are operational in India; as also partners, governments and stakeholders in international geographies where the Company operates, for all the support rendered during the year.

Finally, we appreciate and value the contributions made by all our employees and their families for making the Company what it is.

On behalf of the Board of Directors,

N. Chandrasekaran

Chairman

(DIN: 00121863)

Mumbai, 2nd May 2018