GE Power India Ltd Management Discussions.

Global international trade as well as manufacturing activities have softened and trade tensions remain elevated. Although advanced economies are likely to see a slowdown & clock @1.5-2% growth, the Emerging Market & Developing Economies (EMDEs) are likely to fill up and contribute to the lift up of the global growth for next 3 years with growth ~4.2-4.6%. Muted external demands, with higher borrowing cost coupled with consistent policy uncertainties are expected to hold back the growth of EMDEs from its potential.


India has retained the tag as the worlds fastest growing economies of the world in 2018. As per World Bank report, India is likely to remain at the top of the growth charts with ~7.5% estimated growth in next 3 years. There is improvement in the domestic demand and credit growth is expected to revive due to implementation of structural reforms. Harmonization of GST, better tax compliance /collection and rebound of credit growth is likely to strengthen the investments, with consumption remaining as the main contributor of growth. Investment cycles has already started picking up and would gather more strength with more and more private investments expected to join the force.

Monsoons are expected to be normal this year, as per latest forecasts which would be good for the Indias agrarian economy. Further with ambitious public infrastructure development plans such as Smart Cities, housing for all, network of expressways, ports, airports, Bullet Trains, defense etc. are likely to help Indian economy to maintain the growth momentum. With faster resolution of stressed assets and boost in private investments, the growth is expected to get a stimulus.

However, the growth trend faces threats from the possibilities of rising crude oil price hitting, fiscal slippage, higher inflation and possible delays in structural reforms to address NPAs & weak balance sheets of banks & financial institutions. External risks of unexpectedly faster tightening of global financial conditions could possibly drag down the economic growth.


Indian Power sector added ~5.8 GW of thermal capacities to the grid in FY18-19, which was ~33% lower than the previous year, basically due to delayed implementations, financial stress & lower than expected demand growth. Although there was a lot of activity in Renewable energy space, orders for various new renewable power projects continued to be getting placed. However, only few new power generation projects based on conventional sources were proposed during FY2019. While power supply situation has improved significantly, and India reduced the energy & peak deficit to <0.4% in FY2019, electricity generation grew by 3.56% in FY2019. On one hand Electricity connections are being provided to many households, electric vehicles are being promoted that are likely improve demand, whereas on the other hand efforts are being made to reduce wasteful electricity consumption through implementation of efficiency improvement schemes like distribution of large no. of LED bulbs and PAT scheme for conservation of electricity / resources. Poor health of DISCOMs, slowdown in signing new PPAs, high NPAs in power sector (especially IPPs) etc. remain a concern to the power sector. With energy and peak deficit approaching zero, the focus now seems to be shifting towards making the electricity generated more affordable and cleaner. Hence, it has been noticed that ordering of FGDs for coal based power plants to comply with new emission norms picked up in FY2019. Central utilities such has NTPC, NLC , DVC & certain Private utilities also placed orders for installation of FGDs in their power plants. Apart from FGD implementation, it is expected that utilities would also take up implementation/modifications for achieving NOx and SPM norms. IN FY19, NTPC ordered 10GW of capacities for NOx reduction and many other central, state and private utilities are floating tenders for implementation of FGDs & NOx reduction solutions in their units to meet new norms which are likely to finalize in FY2020 or beyond. It is expected that ordering of FGDs/NOx upgrade would increase from FY2020 onwards as users approach the dead line of 2022 for implementation & meeting the norms.

On the affordability front & with a view of optimizing the transportation cost, GOI came up coal rationalization scheme, where in, coal linkage of a TPP of an IPP may be voluntarily be transferred from one Coal Company to another based on the availability during the fiscal and future coal production plan of the coal company. This has already resulted in substantial savings in coal costs. Further pilot scheme of effecting the dispatches based on central national merit order instead of individual state wise merit order has been approved and shall be implemented in FY2020. This scheme is likely to promote higher generation from more efficient and low cost sources leading to substantial savings in costs and resources while meeting the end demand. Therefore, apart from the need of meeting new emission norms, there is going to be a healthy competition between utilities for schedule that is expected to drive need for efficient generation & low generation cost operation.


The summarized performance is as under:

Year ended 31 March 2019 Year ended 31 March 2018
Orders received 37,199 27,491
Sales 19,027 13,433


Year ended 31 March 2019 Year ended 31 March 2018
Orders in hand 76,570 59,197

In terms of orders, this has been one of the best years in the recent past for Power. The year witnessed the opening of a large opportunity related to new environmental norms for SOx and NOx. Your Company was awarded four contracts by NTPC for installation of air quality control systems (using Wet Flue Gas Desulphurization technology) for a combined value of H 17,815 million. The four power plant projects are Solapur (2x660 MW), Tanda (2x660 MW), Unchahar (1x500 MW) and Meja (2x660 MW). Your Company has also been awarded a H 1,420 million order by NTPC for supply and installation of low NOx combustion system.

BHEL has awarded your Company, three orders for the supply of pressure parts equipment for Patratu and Udangudi and Panki for a value of H 5,620 million. The Hydro division of your Company will be responsible for the design and supply of the main electro-mechanical equipment involving five 257 MW Francis turbines for the Baleh Hydroelectric Project in Sarawak, Malaysia for H 6,890 million (the value of the order for your Company as the leader of the consortium).

In terms of Sales, execution of the following projects, Ramagundam (supplies for retrofit project of 3x200 MW Ansaldo Steam Turbines for NTPC), Sihanoukville, Cambodia (first CFB Boiler fully designed and manufactured from India), Neyveli, Rampal Barh and Telengana (pressure parts), Ghatampur (Electrostatic Precipitator), Hassyan and Jimah (Integrated Projects) and Lower Solu, Bajoli and Tehri (Hydro electro-mechanical equipment) constituted bulk of the revenue.

The order backlog now is well over the three and a half (3 %) years of sales.


India, is home to ~18% of the worlds population, but consumed only ~6% of the worlds primary energy. However, Indias energy consumption has almost doubled since 2000 and there is even more potential for further rapid growth. Indias economy, already the worlds third-largest by purchasing power parity (PPP), is growing rapidly and has become the worlds fastest growing economy. Riding on this rapid economic growth, coupled with population growth, which will make India the most populous country in the world in next 8 years, India is set to become the top country contributing to 25% of world energy demand rise till 2040. Indias power system is expected to almost quadruple in size by 2040 to catch up and keep pace with electricity demand & increases at almost 5% per year.

Power generation projects, like all other infrastructure projects, depend heavily on governments policies and plans. At present, power availability situation is quite comfortable in India, mainly due to large capacity addition in last few years. However, long-term potential of the Indian power sector remains intact given the future energy growth needs of India. Although significant renewable capacity is planned to be added to the grid, coal shall remain on the forefront and emerge as one of the best options for meeting demand of electricity in India.

With new environmental norms, FGDs/ NOx & PM upgrades are a must for almost all operating power generation units. However, not all units are likely to be installed with FGDs/ NOx/ OM upgrades due to commercial reasons, especially older ones and small-sized units, which are likely to retire or be replaced. In fact, it is estimated that replacement could be the driving factor for new-built market for next few years. This market need is expected to be intensify as the utilities near the target year of implementation i.e. 2022.

With increasing share of renewables comes the big challenge of integration of such variable energy sources into the grid while maintaining grid stability & reliability. There would be increasing requirement for power for meeting peaking and load balancing requirement. In absence of gas availability, limited hydro - normal as well as PSP, coal based power would remain the mainstay of Indian economy for decades to come. With many mid range capacity units being available to support flexibility needs effectively, utilities are likely to adopt such units to work in flexible mode while utilizing large size supercritical units to run in the base load thereby optimizing the flexibility costs & emissions.


In the next few decades, coal will continue to play an important role in the countrys energy mix with 50% share, considering factors such as energy security, grid stability Coal being the most cost-effective source of electricity is likely to remain main source of electricity for meeting additional demand from the growing Indian economy. Apart from demand of additional electricity, replacement of currently operating older and inefficient units would present opportunities for new power generation units.

Large opportunities from the power sector would be emanating from new environmental norms for thermal power generation units - public utilities as well as captive units - in India. Of all proposed norms, FGDs/ NOx & PM present a large market for OEMs. Central Pollution Control Board has revised the implementation timeline for FGDs to 2022 providing sufficient time for installation. Though some critical issues are yet to be addressed completely, ordering for FGDs has begun with NTPC leading the way. It is expected that significant ordering for FGDs would continue for next few years. De-NOx solutions too would present opportunities for power sector OEMs. Increasing share of power from renewables is expected to lead new retrofit and flexibility upgrade opportunities. With schedule dispatches that are likely to be governed by one national level merit order in the future, its expected that utilities would adopt efficiency improvement solutions to reduce generation cost and undertake such retrofits on merits to stay in the race. This provides opportunity for offering cost effective, relatively quick implementable efficiency retrofit solutions. As the industry expands scale, opportunities for deploying digital solutions for better asset utilization/ reliability/ efficient operation etc.

Your Company is well placed to reap these upcoming opportunities in the Indian power sector.

Risks and Threats

Even as we make optimal use of this abundant domestic coal resource, the country needs to effectively address issues of Green House Gas (GHG) emissions and other pollutants from burning coal. As per estimates of various agencies, India was the 3rd largest CO2 emitter, the 2nd largest SOx emitter and the 3rd largest NOx and PM emitter in the world. The power sector is one of the biggest contributors to these emissions.

GoI has taken several initiatives for cleaner and cheaper ‘Power for All, such as scaling up the renewable energy capacity addition target to 175GW by 2022. There is an over supply situation in power generation. In such a scenario, the most important concern is lack of orders for new power projects. Financial health of private developers as well as govt. utilities and DISCOMs is another major concern. Many private developers are already in poor shape and have added to the strained Indian banking sector.

GOI is also deploying the Perform, Achieve and Trade (PAT) scheme for energy efficiency improvements across key energy intensive sectors and adopting new stricter pollution standard norms for SOx, NOx, PM, Hg & water consumption for thermal power plants in India. However, implementation of many of these measures has been slow and there is risk of shifting of such implementation plans beyond targets. There are achievements in some pockets but a lot still needs to be done on the ground with stricter timelines and stricter efficiency norms.

The Indian grid performance has vastly improved in the recent past, however its likely to be tested by substantial increase in thrust on renewable capacity. With increasing share of renewable in electricity generation-mix, Indias daily ramp up requirement is likely to exceed 80 GW by 2022. Some Coal-based units would be required to operate in flexible mode. Although discussions and pilot studies are being carried out in this regard, much faster adoption needs to be done along with regulatory clarity on compensation mechanism for such flexible operation. Lack of clarity in compensation coupled with wait and watch attitude of utilities is likely to delay implementation of flexibility upgrade projects in the country effectively making the grid unstable/ delay the renewable capacity addition plans.


One of the key requirements of the Companies Act, 2013 is that companies should have adequate Internal Financial Controls (IFC) and that such controls should operate effectively.

Internal Financial Controls means the policies and procedures adopted by the company for ensuring orderly and efficient conduct of its business, including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.

Your Company process of assessment ensures that not only does adequate control exist, but it can be evidenced by unambiguous documentation. The process involves scoping and planning to identify and map significant accounts and processes based on materiality. Thereafter risk is identified and their associated controls are mapped, else remediation is implemented. These controls are tested to assess operating effectiveness.

The auditor performs independent testing of controls. The Auditors Report is required to comment on whether the Company has adequate IFC system in place and such controls are operating effectively.

Your Companys Internal Control System is robust and well established. It includes documented rules and guidelines for conducting business. The environment and controls are periodically monitored through procedures/ processes set by the management, covering critical and important areas. These controls are periodically reviewed and updated to reflect the changes in the business and environment.

Management reviews actual performance of the business on a regular basis. In all about 60 key controls across the organisations units were identified to be tested in a systematic basis. Design gaps and weaknesses were identified to particular business and to specific process owners and followed through methodically for closure.

In line with the internal audit program, internal audit of two units and four processes/areas was done. The implementation of audit recommendations was followed through on a monitored and timebound plan.

The audit committee met 4 (four) times during the year. The committee reviewed the adequacy and results of the testing of Internal Financial Controls and Internal Audit actions.


S.No. Particulars 2018-19 2017-18 Variance Reason for variance
(i) Debtors Turnover 2.0 1.5 32% Collection as per contract terms
(ii) Inventory Turnover (Raw Material) 11.8 11.2 5% -
(iii) Interest Coverage Ratio Not applicable
(iv) Current Ratio 1.2 1.1 6% -
(v) Debt Equity Ratio Not applicable
(vi) Operating Profit Margin (%) 10% 5% 101% Due to exceptional items
(vii) Net Profit Margin (%) (before tax) 7.7% 3.1% 145% Due to exceptional items
(viii) Return on net worth(%) 7.9% 3.0% 168% Due to exceptional items


The total number of permanent employees on the rolls of the Company stood at 1,697 as on 31 March 2019.

Employees are the most important of all resources. Your Company in FY 2018-19 saw minimum external hiring. Focus was on interbusiness transfer of talents.

Industrial Relations

Durgapur Manufacturing Plant signed Triparte Long Term Wage settlement signed with Recognized Unions and Labor Office on 17 December 2018. The settlement was signed for 5 years starting 1 July 2019 post negotiations which was concluded in record time of 5 months in an environment of trust & positivity. No single day of unrest was observed during the financial year at Durgapur manufacturing plant.

VRS Scheme was launched in Maneja (Vadodara) factory in August 2018. Around 95% of the workmen opted for the scheme. Subsequent to it, the manufacturing operations at the factory was closed.

Notice of closure of the Shahabad factory was submitted to the Government on the 11 October 2018 and subsequently the factory was closed on 14 December 2018.

75 employees were transferred from the Kolkata Office to Noida Head office in the FY 2018-19 towards consolidation of Business operations to enhance execution capabilities.

2018 was a year where your Company focused on strengthening the Talent Management process. A strong people review process was conducted to identify areas where the employees could grow and be developed. Coaching for performance workshops were conducted across the country to create a strong performance culture along with Speed Coaching sessions for hi-potential employees who got personalized attention on their developmental needs. Back to Basics was an initiative launched which required managers/ people leaders to have clear feedback conversations with each employee and ~1500 developmental actions were identified through the process. A concentrated effort was put in undertaking a training need analysis to address these developmental actions. Not only did your Company focus on technical skill enhancement but also on behavioral skill development through classroom trainings on Influencing skills, business communication skills, presentations skills, people leader expectations. A total of 250 employees were covered through these trainings. Over and above classroom sessions opportunities were given to employees to develop on the job through stretch assignments, bubble assignments and job enlargements with clear deliverables and regular reviews. A clear focus for your Company was to also imbibe the culture of Diversity and Inclusion and awareness with respect to prevention of sexual harassment in the organization where ~15 sessions across the country were conducted to enable managers in endeavor to create a safe working environment for diverse talent. Upskilling and multiskilling of talent has also been a priority for the Company. Your Company has created a platform called "Leaders in Residence" to strengthen cross functional connect which gives the leaders visibility to talent across various verticals and employees an understanding of the products and opportunities across various organization vertical. To build a strong talent pipeline your Company has invested in leadership programs like Financial Management Program, Project Management Leadership program and Operations Management Leadership program where employees are trained on various aspects of the function. Your Company continues to evolve and looks forward to leaner and smarter ways of functioning and redesigned organizations wherever necessary along with integrating services team as planned. At the manufacturing site in Durgapur, your Company continues the apprentices program to induct fresh talent and diversity. Family day was conducted to bring the sense of belongingness and togetherness which was very well received by the employees. Leadership visits, HR visits were done at the construction sites and many employees were brought in to the Corporate office for various sessions to drive a strong site connect.

With a more stable organization structure in 2018, your Company had a strong engagement agenda with a focus on health and fitness where Zumba, yoga and dance sessions were conducted for employees. Round Table sessions, coffee conversations, mango day, sports and festival events took place throughout the year. Your Company also recognised and rewarded success with the teams.


Long term demand for electricity in Indian market remains intact. However, need for additional coal based electricity is under severe stress. Given the need to balance the growing environment concerns with the objective of providing affordable power to its citizens, it is important for India to manage coal plants with a holistic approach. There are cases where plants are strong candidates for an efficiency improvement or for flexible operations and for these cases, an integrated approach to address emissions with flexibility/efficiency retrofit is an operationally and financially optimal solution. These solutions along with latest digital technologies will ensure coal- based power plants will continue to be the mainstay of Indias power system supplying affordable and reliable power to all Indian citizens and meeting the growth aspirations of Indian economy. Resolution of complex state of affairs in the industry is of utmost significance. Concentrated effort from Govt. to increase demand of electricity from industry as well as from other sectors is required for revival of the sector.


This report contains forward-looking statements, which may be identified by their use of words like ‘plans, ‘anticipate, ‘believe, ‘estimate, ‘expect, ‘intend, ‘will, ‘projects or other words of similar expressions as they relate to the Company or its business are intended to identity such forward-looking statements. All statements that address expectations or projections about the future, including, but not limited to statements about the Companys strategy for growth, development, market position, expenditures, and financial results are forward looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Company undertakes no obligations to publicly update or revise forward looking statements, whether as a result of new information, future event or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such statements. Therefore, as a matter of caution, undue reliance on the forward looking statements should not be made as they speak only of their dates. The above discussion and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto.

For and on behalf of the Board of Directors
Vishal Keerti Wanchoo
Place : Noida Chairman & Non-Executive Director
Date : 27 May 2019 (DIN 02776467)