NHPC Ltd Management Discussions.

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

The global power sector is going through the phase of major transformation with new energy sources and new players entering the arena of power generation. The world is witnessing the cause of climate change and is inclining towards greener sources of energy which has outgrowth the share of renewable energy sector. The year 2020 witnessed one of the biggest health challenges faced by the world. COVID-19 pandemic has impacted all segments of economy and power sector was no exception. The electricity generation in the country fell by 9.12% to 598.93 Billion Units (BUs) in the first half of FY 2020-21 as compared to previous year as industrial and commercial activities remained muted amid lockdowns imposed across the nation, but picked up pace in the second half of the fiscal, with the easing of lockdown measures1. India’s growing urban population, start of economic activities in the coming quarters after a sizable population gets vaccinated and its quest for affordable, clean and reliable power provide a huge scope for continued growth in power demand.

The power sector provide the stimulus for growth of Indian economy. The sector mainly comprises generation, transmission and distribution utilities which is a crucial component of India’s infrastructure base. India is the third largest consumer of energy in the world after USA and China as reported by international agencies like IEA, Statista, but the per capita energy consumption of India is still very low as compared to developed countries. With the growth in economy, 100% electrification, housing for all and introduction of electrical vehicles, the energy demand in the country is likely to increase tremendously creating opportunities for the power sector companies. India’s strategy is to encourage development of renewable sources of energy through incentives provided by the Government to promote hydro, wind and solar energy. The future of the energy industry has changed with the emergence of new technologies, greater environmental challenges etc.

Above industry scenario indicates that there is ample opportunity for consistent growth of business in hydro and renewable energy sector in the times to come with growth in demand. Water is one of the nature’s invaluable renewable gifts which can be harnessed for least cost power generation. Hydro-electric power is one of the most widely used sources of energy. Our country has an enormous hydro power potential and ranks amongst the topmost nations in the world for possessing feasible hydro-power capacity, most of which is yet to be tapped. Your Company has prominent role to play in tapping the hydro-power potential of the Country and has already developed twenty hydro-electric projects across the country.

As on March 31, 2021, the total installed capacity of India’s power stations stood at 3,82,151.23 MW with contribution of 2,34,728.22 MW, 46,209.22 MW, 6,780 MW and 94,433.79 MW from Thermal, Hydro, Nuclear and Renewable power respectively 2. Country’s total electricity generation from conventional sources was 1234.44 BUs during the financial year 2020-21 as compared to 1250.78 BUs during last year, registering a subsidence of 1.29%3. Power supply position (demand/availability) in the country shown energy demand of 12,75,534 MUs during 2020-21 whereras energy supplied was 12,70,663 MUs i.e. deficit of 0.4%4.

2. HyDROPOWER POTENTIAL IN INDIA

The re-assessment study of the hydro-electric potential of the country was done by the Central Electricity Authority (CEA) in 1987. According to it, the hydro power potential in terms of installed capacity is estimated at 1,48,701 MW, comprising 1,45,320 MW potential capacity from hydro-electric schemes having capacity of above 25 MW. Therefore, the outlook of India’s hydropower generation looks promising with expected pace of industrialization in the country and Government of India’s mission to provide 24x7 electricity to all.

3. MEASURES TAKEN BY GOVERNMENT OF

INDIA TO PROMOTE HyDROPOWER SECTOR

Government of India has taken various initiatives to achieve inclusive growth in Power Sector for providing cleaner and affordable power for all. One of such initiative is the new hydro policy, wherein the Government of India has approved a slew of measures which inter-alia include declaration of Large Hydropower Projects (LHPs) i.e. projects with capacity of more than 25 MW as renewable energy source. Provisions of Hydro Purchase Obligations notified (HPO) have been as a separate entity within Non–solar Renewable Purchase Obligation (RPO), which require Distribution Companies (DISCOMs) to buy a fixed amount of hydro energy to cut reliance on fossil fuels etc. Ministry of Power, Government of India in January, 2021

RPO trajectory with HPO as a separate entity within Non-Solar RPO. As per above notification:

RPO shall be calculated in energy terms as a percentage of total consumption of electricity excluding consumption met from hydro sources (LHPs).

Solar RPO may be met by power produced from solar power plants-solar photo voltaic or solar thermal.

Other Non-Solar RPO (excluding HPO), may be met from any renewable source other than solar and LHPs.

HPO benefits may be met from the power procured from eligible LHPs commissioned on or after March 08, 2019 and upto March 31, 2030 in respect of 70% of the total generated capacity for a period of 12 years from the date of commissioning. Free power is to be provided as per agreement with the State Government and that provided for Local Area Development Fund (LADF), shall not be included within this limit of 70% of the total generated capacity.

HPO liability of the State/Discom could be met out of the free power being provided to the State from LHPs commissioned on or after March 08, 2019 as per agreement at that point of time excluding the contribution towards LADF if consumed within the State/Discom. Free power (not contributed towards Local Area Development) only to extent of HPO liability of the State/Discom, shall be eligible for HPO benefits.

In case the free power, as above, is insufficient to meet the HPO obligations, then the State would have to buy the additional hydro power to meet its HPO obligations or may have to buy the corresponding amount of Hydro Energy Certificate to meet the non-solar hydro renewable obligations.

The Hydro Energy Certificate mechanism under Regulation to be developed by CERC to facilitate compliance of HPO Obligation, would have a capping of 5.50/Unit of electrical energy w.e.f. March 08, 2019 to March 31, 2021 and with annual escalation @ 5% thereafter for purposes of ensuring HPO compliance.

HPO Trajectory shall be trued up on annual basis depending on the revised commissioning schedule of Hydro Projects. The HPO Trajectory for the period between 2030-31 and 2039-40 shall be notified subsequently.

Hydro Power imported from outside India shall not be considered for meeting HPO.

On achievements of Solar RPO compliance to the extent of 85% and above, balance shortfall, if any, can be met by excess non-solar energy consumed beyond specified Non-Solar RPO for that particular year. Similarly, on achievement of other Non-Solar RPO compliance to the extent of 85% and above, balance shortfall if any, can be met by excess solar or eligible hydro energy consumed beyond specified Solar RPO or HPO for that particular year. Further, on achievement of HPO compliance to the extent of 85% and above, balance shortfall, if any, can be met by excess solar or other non-solar energy consumed beyond specified Solar RPO or Other Non-Solar RPO for that particular year.

POSOCO will maintain data related to compliance of RPOs.

SERCs may consider to notify RPO trajectory including HPO for their respective States in line with aforesaid RPO trajectory. Moreover, CERC may consider to devise suitable mechanism similar to Renewable Energy Certificate (REC) mechanism to facilitate fulfillment of HPO.

Lately, Ministry of Power, Government of india has invited suggestions on Draft National Electricity Policy, 2021. Your Company along with all other CPSEs has manifested modifications in the Policy, which will expedite development of Hydro Power Sector in India.

Tariff rationalization measures for bringing down hydropower tariff have also been notified which allows hydro power developers to determine tariff by back loading of tariff after increasing project life to 40 years, increasing debt repayment period to 18 years and introducing escalating tariff of 2%. The levellized tariff over the useful life of the hydro-electric project may be calculated on the basis of the norms specified in CERC Regulations. The determination of year wise tariff is left to the Developers and DISCOMs as per their feasibility for a long term PPA for procurement of Hydro Power for a period of not less than specified years depending upon specified conditions.

Further, to reduce time and cost overruns of Hydro Power Projects, Ministry of Power has issued guidelines for compliance, which include provision of sunset date, scheduling, dispute resolution, enhanced delegation, adoption of international best practices, timely claim settlement and incentive to labour for achieving project milestones in time.

4. MEASURES TAKEN BY MINISTRY OF POWER, GOVERNMENT OF INDIA TO ENSURE PAYMENT SECURITY MECHANISM TO INTER-STATE GENERATORS SUPPLYING POWER TO DISCOMS

As a payment security mechanism, a provision has been made in PPAs to provide Letter of Credit (LC) by DISCOMs to generating companies. However, LCs are not being provided by DISCOMs having large outstanding dues. Ministry of Power (MoP) vide its order dated June 28, 2019 has re-emphasized the need for maintenance of adequate LC as a payment security mechanism. National Load Dispatch Center (NLDC)/ Regional Load Dispatch Center (RLDC) were directed to schedule power to DISCOMs only after intimation by Generating Companies (GENCOs) that LCs for desired quantum of power has been opened by DISCOMs. LC for shorter duration i.e. one week / fortnight was also permitted. In case of difficulty, even payment of advance through electronic mode for one day purchase of electricity was also granted. The above measures have ensured that DISCOMs release the payments to generating companies timely for electricity drawn from August 01, 2019 onwards. Ministry of Power (MoP), Government of India in March, 2021 has issued further directions for strict compliance. As per MoP directions, DISCOMs have to liquidate current dues after February 01, 2021 in time and LC has to be encashed invariably by GENCOs, if DISCOMs are unable to pay their current dues within specified period. Also, in case of accumulated dues of period before February 01, 2021, the DISCOMs and GENCOs have to work out an installment plan to liquidate the dues and any failure on part of DISCOMs will result in regulation of power supply and/or invocation of Tripartite Agreement.

The above measures have ensured that DISCOMs timely release the payments for electricity drawn from February, 2021 onwards. In view of prevalent low interest regime and raising of the issue of high late payment surcharge rate by DISCOMs, MoP vide notification dated February 22, 2021 has the Electricity (Late Payment Surcharge (LPS)) Rules, 2021 according to which the rate of late payment surcharge has been reduced from 18% per annum to SBI MCLR (1 year) as on 1st April of the financial year plus 5 percent which results into surcharge of 12.75% per annum for balance period of financial year 2020-21 from the date of issue of notification. Further, the rate of Late Payment Surcharge for the successive months of default shall increase by 0.5 percent for every month of delay provided that the LPS shall not be more than 3 percent higher than the base rate at any time. Simultaneously, it has been directed that all payments from DISCOMs shall be first adjusted towards LPS and thereafter, towards monthly charges, starting from the longest overdue bills.

5. CERC (TERMS AND CONDITIONS OF TARIFF) REGULATIONS, 2019

CERC has issued CERC (Terms and Conditions of Tariff) Regulations, 2019 in March, 2019 which are applicable for the period 2019-24. Some of the benefits for Hydro-electric Projects as per above regulations are as under: l Cut-off date now to be considered as 36 months from the end of calendar month of Commercial Date of Operation (COD). l Delay in obtaining statutory approval for the project (except where the delay is attributable to the project developer) included under ‘Force Majeure’ event. l Variation in additional capitalization increased from 5% to 10% for levy of penal interest (i.e. 1.2 times bank rate for reimbursement of additional AFC to beneficiaries & 1 times the bank rate for recovery of AFC from beneficiaries). l Land acquisition (except where the delay is attributable to the generating company) to be considered as ‘un-controllable factor’ for analysis of time & cost overrun.

l O&M expenses for older plants - the normative O&M expenses allowed for older power stations does not include the impact of wage revision, minimum wages and GST, which will be allowed separately.

CERC has also notified Second Amendment to CERC Tariff Regulations, 2019 in February, 2021 which states that the charges payable by a beneficiary DISCOMs shall be first adjusted towards late payment surcharge on the outstanding charges and thereafter, towards monthly charges billed by the generating company starting from the longest overdue bill.

6. SWOT ANALySIS

(i) STRENGTHS l Established track record in developing hydroelectric projects & experienced manpower

Your Company possesses rich experience and expertise in development of hydro-electric projects across the country. NHPC has a competent and committed workforce which has extensive experience in the industry with capabilities and expertise in conceptualization, construction, commissioning and operation of hydro-electric projects. Their skills, industry knowledge and experience provide significant competitive advantage to the Company.

l Capabilities from concept to commissioning including in-house design & engineering and geo-technical studies

NHPC has over 45 years of experience in hydro power sector and is endowed with in-house capabilities from conceptualization to commissioning of hydroelectric projects. NHPC has a full-fledged design division dedicated to cater the design and engineering requirements of its projects. The in-house design team with extensive experience in hydro power sector gives NHPC an edge over other hydro power companies. NHPC has specialized group consisting of experienced geologists, geophysicists and research personnel who are capable of providing engineering geological and geotechnical solutions for hydropower projects right from inception to commissioning. NHPC is using the latest geo-physical exploration techniques on site for data interpretation and preparation of in-house reports. NHPC is the only hydro utility in India having expertise in techniques like tunnel seismic prediction, seismic tomography and high resolution resistivity imaging which provide sub-surface information in an effective and economic way. NHPC has also acquired advanced 12-Channel Resistivity Imaging system and latest generation hydrophone chains. Your Company has also developed in-house National Accreditation Board for Testing and Calibration Laboratories (NABL) accredited rock mechanics, construction material testing laboratory with high end testing instruments and a sophisticated remote sensing lab. In last one year, NHPC has also developed Geographic Information System (GIS) capabilities in the field of geological investigations. A few R&D projects are also taken up in collaboration with IITs towards effective utilization of these techniques under varied geological conditions. NHPC has in-house capability to carry out detailed topographical survey and other survey works by using latest state-of-art equipments like Electronic total stations, Differential GPS (DGPS) and 3D laser scanner etc. by using latest compatible software in an efficient manner with utmost accuracy in order to develop topographical maps in all required scale. The in-house survey team (having surveyed around 40 projects with more than 40,000 Ha area) has made great contribution in reducing the dependency on Survey of India (SOI) and in saving lot of time and cost.

l Extensive experience in construction and operation of hydro-electric projects

NHPC has extensive experience & expertise in developing hydro-electric projects in complex geological regions by overcoming number of geo-technical challenges using in-house state-of-art technology. It has successfully completed construction of some of the challenging hydro-electric projects in India situated in remote hilly areas with various challenges like inaccessibility, poor logistic, adverse climate and technological hindrances. With its strong team of competent, efficient and experienced professionals, it is capable of executing all types and sizes of hydro-electric projects. Your Company has proven experience in efficient operation of power stations particularly in silt prone Himalayan region. At present, NHPC is successfully operating twenty hydro power stations of different installed capacities, ranging from 44 MW to 690 MW.

l Strong financial position

Your Company has paid-up share capital of 10,045.03 Crore and an investment base of over 66,302 Crore as on March 31, 2021. The average Net Profit earned by your company during the last five financial years stands at 2887.14 Crore with Net Profit Margin of 31.71%. The average EBITDA margin of your company during the last five financial years works out to 61.41%. Your company has Net worth of 31,647.31 Crore and long-term borrowings of 21,241.22 Crore as on March 31, 2021. NHPC has highest credit rating i.e., ‘AAA’ with stable outlook assigned by domestic credit rating agencies i.e., ICRA, CARE and India Rating for its listed bonds. Your company has Debt Equity Ratio of 0.78, Interest Service Coverage Ratio of 8.03 and Debt Service Coverage Ratio of 3.62. The strong financial position of the Company and highest credit credentials empower your company to execute capital intensive large Hydro-electric Projects with borrowings at competitive rates.

l Strong operating performance

Your Company has successfully managed to develop and implement twenty-two hydroelectric projects (including two through its subsidiary company i.e. NHDC Limited), one solar power project and one wind power project with an aggregate installed capacity of 7,071 MW. NHPC with its fleet of power stations is a flagship company in hydro power sector in India.

l Seismic safety assessment

NHPC is totally committed to seismic safety of its power stations. It has developed one of its kind state-of-art centralized real time seismic data center at its Corporate Office for online seismic monitoring of its all power stations. The data center records and provides quick assessment of any earthquake event within the vicinity of respective power stations. An R&D project on Attenuation Relationship has also been initiated in association with IIT Roorkee for development of attenuation relationship for Himalayan region. This is a big step towards risk assessment measures and enables dam safety reviews for each of its power stations. Beside this, in order to collect pre-impounding sample of seismicity data of the project area, specialised seismicity studies like Micro Earthquake (MEQ), are also being carried out for requisite projects to record & monitor the seismic activity.

(ii) OPPORTUNITIES l Untapped hydro potential

India is endowed with significant hydroelectric potential. The deteriorating hydro-thermal mix, peaking shortages and frequency variations have forced policy makers to turn their attention towards the development of hydro power. India’s huge untapped hydro potential, especially in the north-eastern region, provides opportunity for the development of hydro power. NHPC with its presence in north-eastern region and its capabilities has an opportunity for capacity addition by tapping hydro potential in coming years.

l NHPC’s continued ability to complete the hydro projects

The strength shown by NHPC over the years about its ability to complete the hydro-electric projects, where most of the other companies particularly in private sector are generally failing, is a sign of hope for the hydro sector. As a result, NHPC’s forte in the construction of hydro-electric projects is creating new space for its growth. NHPC has opportunity to resume stalled hydroelectric projects of the country by taking over debt-burdened hydro power companies through CIRP process thereby supporting economic growth of the Country. NHPC has already taken over Lanco Teesta Hydro Power Limited (developing Teesta-VI HE Project in Sikkim) and Jalpower Corporation Limited (developing Rangit-IV HE Project in Sikkim) through CIRP process.

l Renewable Energy

Government of India has been emphasizing on speedy development of solar power in potentially solar rich states across the Country. Government of India has targeted to achieve 175 GW capacity of renewable energy by 2022, comprising of 100 GW solar, 60 GW wind, 5 GW of small hydro and 10 GW of biomass and others1. This target has been further upscaled to 450 GW capacity by 2030, as announced by Hon’ble Prime Minister of India at U.N. Climate Action Summit. Several measures in the solar power sector such as solar park policy, CPSU Scheme, grid-connected rooftop solar plants in conjunction with sharp decline in solar panel costs has made the investment in solar power business highly attractive. NHPC is making its efforts to explore new opportunities for the generation of power through renewable energy projects. MNRE has recently introduced Ultra Mega Renewable Energy Power Parks (UMREPPs) mode under the existing solar park scheme for development of large scale renewable energy projects with the support of Central Financial Assistance (CFA). NHPC is exploring all possible opportunities to develop solar parks/floating solar projects (>50 MW) and to develop solar power projects under CPSU Scheme in various potential rich states such as Odisha, Telangana, Rajasthan etc. to avail the benefit of the schemes of Govt. of India. In the present scenario, NHPC has opportunities for the development/ exploitation of untapped Renewable Energy potential of the Country.

l Grid Balancing Requirement

Hydropower projects are ideal to meet peak load, compared to thermal power plants as they can be swiftly turned on and off. This helps the grid in withstanding fluctuations caused by intermittent supplies from solar and wind. As India plan to add extensive renewable energy capacity in the coming years, hydropower projects will be crucial to stabilize the grid. NHPC generates clean, green and sustainable hydro power which is useful in meeting peak power demand. The present scenario would create opportunities for NHPC to develop hydro power.

(iii) THREATS/ CHALLENGES /CONCERNS

l Time and cost overruns

Time and cost overruns is a major concern in the construction of hydro-electric projects. Most hydro-electric projects are generally located in hilly terrain, which are at the receiving end of devastating natural calamities like landslides, hill slope collapses & roadblocks, flood, cloud burst etc. These calamities cause severe setbacks in construction schedule. Further, in-spite of extensive survey and investigation, geological uncertainties may have to be tackled especially in long tunnels such as Head Race Tunnel. NHPC with its rich experience and expertise coupled with state-of-the art technology has overcome such surprises many a times in the past. However, these uncommon and unpredictable geological uncertainties may result in time and cost over-run.

l Time consuming clearance process:

Development of a hydro-electric project requires numnerous statutory as well as non-statutory clearances from various agencies before implementation. Multiple organization and states are generally involved in the clearance process. Therefore, obtaining requisite clearances has been a complex, tedious and time-consuming process and sometimes leads to abnormal delay in the project implementation. Many of the projects get bogged down because of the lengthy clearance procedures.

l Difficulties in entering into Power Purchase

Agreements (PPAs)

Sale of energy from projects having higher tariff is getting difficult in present day’s power trading scenario. Beneficiaries prefer to purchase their additional power requirement on short term basis through power exchange or e-procurement rather than opting for long term/medium term specific PPAs. As hydro-electric projects are site and its tariff depends on location/design parameters and high initial investment, the tariff for new hydro-electric projects is relatively higher. Due to above reasons, hydro projects face difficulties in dispatch of power from new projects through long term PPA’s. It is expected that this issue shall be settled in upcoming projects once measures to promote hydropower notified sector by Govt. of India in March, 2019 are fully implemented.

l High initial cost/ tariff

The development of hydro-electric projects involves long gestation period and require large initial investment which results into high initial tariff. Cash flow and results of operations of hydro-electric projects are also subject to variations as per tariff regulations notified by CERC from time to time. It is expected that this issue shall be settled in upcoming projects once measures to promote hydropower sector notified by Govt. of India in March, 2019 are fully implemented.

l Opposition to hydro-electric projects

Hydro-electric projects in India are also facing opposition by certain pressure groups. This has created an apprehension amongst the hydroelectric project developers as some of their projects are getting stalled.

l State hydro policies restricting entry of PSUs

Several State Governments have their own hydro policies, which favour payment of upfront premium, free power over & above the requisite free power etc. for allocation of hydro-electric projects to the developers. CPSEs are facing difficulties in getting these hydro-electric projects as they require to follow the norms of Government of India.

l Dependence on few contractors

Construction of hydro-electric projects requires manpower, machinery and substantial investment of money. There are very few resourceful contractors in India who have experience in this and are willing to work in remote and difficult locations where accessibility is a major issue. The limited range of contractors, who are able to perform in the sector, increases our dependency on few contractors.

7. RISKS AND CONCERNS

Your Company has a well-defined risk management policy to provide overall framework for the risk management in the company. Key risks which may have detrimental effect on the business of the company, have been identified along-with their mitigation measures and recorded in the risk register. Risk coordinators for each of the risks who are responsible for timely action to manage such risks, are identified. A Board level Risk Management Committee has been constituted to assist the Board in management of key risks, as well as aligning the strategic objectives, within the organization’s operations to achieve the intended outcomes. Risk Management Committee further ensures that appropriate systems are in place to manage the identified risks, so that organization’s assets are suitably protected. The Risk Management Committee is assisted by Risk Assessment Committee comprising of Chief Risk Officer and other heads of key departments/regions. Risk Assessment Committee identifies the key risks, suggest mitigation measures and monitor/supervise the implementation of risk management policy. The heads of departments/ regions/ projects/ power stations implement and review the directions issued by Risk Assessment Committee on the identified risks and their mitigation measures.

8. OUTLOOK

Your company is one of India’s leading hydro power generating companies and is committed to provide affordable and reliable power to support country’s rapidly developing economy. Your company is presently engaged in the construction of seven hydroelectric projects with an aggregate installed capacity of 5,894 MW which includes projects being implemented through subsidiary / joint venture companies. Out of above, two hydro-electric projects with an aggregate installed capacity of 2,800 MW are being implemented by NHPC on standalone basis. Further, projects having aggregate installed capacity of 10,787.1 MW are under clearance/approval stage on consolidated basis. NHPC is diversifying its portfolio by taking different renewable energy projects besides venturing into power trading business. NHPC has already commissioned one project each of wind and solar energy. Details of under construction projects, projects under clearance/approval stage and renewable energy projects are given in the Directors’ Report. Your company has taken initiatives to streamline the processes by adopting new technologies in the areas of engineering for its sustainable growth. NHPC has also applied the contemporary practices to reduce construction time delays as well as cost overrun. Presently, operations of all power stations of the company are either semi or fully automated. Construction supervision, post-commissioning monitoring and hurdle free operations are ensured by use of information technology. Many power stations are equipped with advanced distributed control systems along with SCADA systems. NHPC is also looking forward for remote operation of some of its power stations.

9. SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

Generation of electricity is the principal business activity of the Company. Other operations viz. power trading, contracts, project management and consultancy works do not form a reportable segment as per the Ind AS – 108 on "operating segment". The company has a single geographical segment, as all its power stations are located within the Country.

10. INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

Your Company has sound Internal Control Systems in place. NHPC has a clearly defined organizational structure, manuals and standard operating procedures to ensure orderly, ethical and efficient conduct of its business. A comprehensive delegation of power from Chairman and Managing Director to down below is in place to assist in smooth decision making, which is periodically reviewed to align it with changing business environment and for speedier decision making. Your Company has in-house internal audit department headed by a senior officer. In compliance to Section 138 of the Companies Act, 2013, the Board has appointed Shri K.L. Acharyulu, General Manager (Finance) as Chief Internal Auditor of the Company.

The internal audit department has qualified and experienced workforce to carry out periodical as well as special audits The Internal Audit department submits their audit observations and action taken thereon to the Audit Committee. The recommendations of the committee are duly complied. In compliance to Section 134 of the Companies Act, 2013, M/s Arun K. Agarwal & Associates, Chartered Accountants, New Delhi was appointed to provide independent assurance on implementation of Internal Financial Controls in the Company during the financial year 2020-21. The firm, in its report, acknowledged the effectiveness of prevailing internal control systems in the Company

11. FINANCIAL DISCUSSION AND ANALYSIS PROFIT & LOSS ITEMS

A detailed analysis of the Audited Financial Results of the Company for the Fiscal 2021 vis--vis Fiscal 2020 is as under: -

Income

Table: 1 ( in Crore)

Fiscal 2021 Fiscal 2020
Units of electricity generated (in million units) Income 24,235 26,113
(i) Sales of Energy 7,010.44 7,430.81
(ii) Income from Finance Lease 371.62 203.65
(iii) Income from Operating Lease 712.00 666.57
(iv) Revenue from Contracts, Project Management and Consultancy Works 38.52 27.88
(v) Revenue from Power - Trading 216.48 239.47
(vi) Other Operating Income 157.52 166.77
Revenue from operations 8,506.58 8,735.15
[sum of (i) to (vi)]
Add: Other Income 1,150.81 1,036.44
Total Income 9,657.39 9,771.59

Total income in Fiscal 2021 decreased by 1.17% to 9,657.39 Crore from 9,771.59 Crore in Fiscal 2020, primarily due to decrease in generation in Fiscal 2021, decrease in Revenue from Power – Trading partially offset by increase in Revenue from Project Management and Consultancy works, increase in Lease Income and increase in Other Income.

Sale of Energy

The principal source of income of the company is from sale of power to bulk customers comprising, mainly of electricity utilities owned by State Governments/ Private Distribution Companies pursuant to long-term Power Purchase Agreements. The rate of electricity are determined Power Station wise by the Central Electricity Regulatory Commission (CERC). The CERC vide its notification no. L-1/236/2018/CERC dated March 07, 2019 has issued Tariff Regulations for the tariff period 2019-24 and subsequent amendments from time to time. Pending approval of tariff for the period 2019-24 by Central Electricity Regulatory Commission (CERC), sales in respect of the Power Stations have been recognized provisionally as per ibid tariff notification and taking into account provision towards truing up of capital cost of the Power Stations in line with CERC Tariff Regulations 2019-24. In case of Teesta Low Dam-III Power Station, the Company has entered into a supplementary PPA with M/s WBSEDCL for off take of the entire power generated by TLDP-III Power Station for its balance useful life of 35 years on mutually agreed tariff during the year w.e.f. April 01, 2019. Pending approval by CERC, sale has been recognised at the rates agreed upon in the supplementary PPA.

The said regulations inter-alia provides that, for the purpose of filing of tariff petitions, the Return on Equity (ROE), a component of tariff, is to be grossed-up using effective tax rate of the respective Financial Year. For the purpose of recognizing Sales, ROE has been grossed up using effective tax rate for FY 2020-21. The Tariff Regulations also provide for incentives which comprise of incentives on achieving plant availability factor greater than Normative Annual Plant Availability Factor (NAPAF), incentive for generation of energy in excess of the design energy of the plant (Secondary Energy) as well as incentive by way of deviation charges where the Power Station of the Company contribute towards maintaining grid stability. Sale includes reimbursement on account of Water Cess in respect of power stations situated in UT of Jammu & Kashmir.

In Fiscal 2021, 24235 MUs of electricity (excluding infirm power of 236 MUs generated by Parbati-II HE Project during FY 2020-21) was generated from installed capacity of 5551 MW as against 26113 MUs (excluding infirm power of 190 MUs generated by Parbati-II HE Project during FY 2019-20) from installed capacity of 5551 MW in Fiscal 2020. Accordingly, there was a decrease of 7.19% in the number of units generated. The average selling price (after adjustment of components of earlier year sales and free power to home state) was 3.67 per unit for 21,274 million units sold in Fiscal 2021 as against 3.53 per unit for 22,916 million units sold in Fiscal 2020. During Fiscal 2021, the Company has earned 762.90 Crore towards incentives against 810.00 crore in Fiscal 2020.

Sale of energy decreased by 5.66% to 7,010.44 Crore in Fiscal 2021 from 7,430.81 Crore in Fiscal 2020 primarily due to less generation in Power Stations. Company’s Plant Availability Factor (PAF) in Fiscal 2021 was 84.87% as compared to 84.04% in Fiscal 2020.

Adjusted Sales of Energy

The revenue from sales of energy includes sales pertaining to earlier years but recognised in current year and excludes the sales of energy through five number of Power Stations whose sale is now considered as Operating/Finance Lease in terms of Ind-AS Provisions.

As per CERC Tariff Regulations, Exchange Rate Variation on interest payments and Loan repayments corresponding to the normative loans considered for tariff of stations/units is payable/recoverable to/ from the beneficiaries on repayment of the loans and interest thereon. Pursuant to the opinion of Expert Advisory Committee of the ICAI, Foreign Exchange Rate Variation on restatement of foreign currency loans as at the Balance Sheet date, payable/ recoverable to/from customers later-on on actual settlement, is accounted for by creating a deferred liability/asset in the accounts instead of adjusting the same in the statement of Profit & Loss.

For the purpose of year to year comparison, the impact of earlier year sales has been excluded from sales of energy in order to arrive at the adjusted sales of energy.

The revenue from sales of energy after such adjustments is as under: Table: 2 ( in Crore)

Fiscal 2021 Fiscal 2020
Net Sales (including lease income) 8,094.06 8,301.03
Less: Earlier year sales 290.99 220.50
Adjusted Sales of Energy 7,803.07 8,080.53

Revenue from Contracts, Project Management and Consultancy Works

The revenue under this head includes revenue from assignments pertaining to Construction Contracts, Project Management & Consultancy Contracts. These assignments primarily include consultancy assignments in respect of Chenab Valley Power Projects Private Limited and Lanco Teesta Hydro Power Limited. The income from contracts, project management and consultancy works increased by 38.16% from 27.88 Crore in Fiscal 2020 to 38.52 Crore in Fiscal 2021 due to increase in assignments in Fiscal 2021.

Revenue from Power Trading

The revenue under this head includes revenue from Power Trading activity which the Company ventured into during Fiscal 2019. The revenue from Power - Trading decreased from 239.47 Crore in Fiscal 2020 to 216.48 Crore in Fiscal 2021 due to decreased Power Trading activities in Fiscal 2021.

Other Operating Income

Other operating income in Fiscal 2021 was 157.52 Crore i.e. a decrease of 5.55% as against 166.77 Crore in Fiscal 2020. Components of Other operating income are placed hereunder: Table: 3 ( in Crore)

Other Operating Income Fiscal 2021 Fiscal 2020
Income From Sale of Self- Generated VERs/REC 1.92 1.76
Income on account of generation based incentive (GBI) 2.96 2.53
Interest from beneficiary states 152.64 162.48
Total 157.52 166.77

Other Income

Other income in Fiscal 2021 was 1150.81 Crore i.e. an increase of 11.03% as against 1036.44 Crore in Fiscal 2020. Major components of Other Income are placed and discussed hereunder: Table: 4 ( in crore)

Other Income Fiscal 2021 Fiscal 2020
Interest on Loan to Govt. of Arunachal Pradesh 60.82 55.80
Interest on Term Deposits/ Investments 53.36 59.66
Dividend (mainly from NHDC-a Subsidiary Co.) 292.68 489.97
Late Payment Surcharge 532.81 259.34
Liability/ Provisions not required written back 21.82 5.22
Income from Insurance Claim 65.05 29.33
Other miscellaneous income 124.27 137.12
Total 1150.81 1036.44

During Fiscal 2021, 532.81 Crore was earned as Late Payment Surcharge from beneficiaries, as against 259.34 Crore during Fiscal 2020.

During Fiscal 2021, 292.68 Crore was earned as Dividend from investments, mainly from subsidiary company (NHDC Ltd), as against 489.97 Crore during Fiscal 2020.

Expenditure

Table: 5 ( in Crore)

Expenditure Fiscal 2021 Fiscal 2020
Purchase of Power - Trading 212.37 234.13
Generation Expenses 854.37 901.67
Employee Benefits Expense 1,409.26 1,515.52
Finance Costs 649.59 795.42
Depreciation & Amortization Expense 1,234.50 1,545.34
Other Expenses 1,425.89 1,514.95
Total Expenditure 5,785.98 6,507.03

Total expenditure decreased by 11.08% to 5,785.98 Crore in Fiscal 2021 from 6,507.03 Crore in Fiscal 2020 mainly due to decrease in Purchase of Power- Trading by 21.76 Crore, decrease in Generation Expenses by 47.30 Crore, decrease in Other Expenses by 89.06 Crore, decrease in Finance Cost by 145.83 Crore, decrease in Employee Benefits Expense by 106.26 Crore and decrease in Depreciation & Amortization Expense by 310.84 Crore. Our total expenditure as a percentage of total income was 59.91% in Fiscal 2021 as compared to 66.59% in Fiscal 2020.

Purchase of Power Trading

Purchase of Power – Trading consists of expenses on purchase of power for Trading. These expenses represent approximately 3.67% of the total expenditure in Fiscal 2021.

Generation Expenses

Generation expenses consist of Water Cess and Consumption of stores and spare parts. These expenses represent approximately 14.77% of the total expenditure in Fiscal 2021 compared to 13.86% of the total expenditure in Fiscal 2020. In absolute terms, these expenses were 854.37 Crore in Fiscal 2021 as against 901.67 Crore in Fiscal 2020. The decrease of 47.30 Crore in generation expenses is primarily on account of decreased water cess due to lower power generation at some of the J&K based Power Stations.

Employee Benefits Expense

Employee benefits expense include Salaries and Wages, Allowances, Incentives, Contribution to Provident Fund, Contribution to Employees Defined Contribution Superannuation Scheme, Impact of wage revision and expenses related to other employee welfare funds. These expenses represent 24.36% of our total expenditure in Fiscal 2021 as against 23.29% in Fiscal 2020. Employee costs has decreased from 1,515.52 Crore in Fiscal 2020 to 1,409.26 Crore in Fiscal 2021 i.e. a decrease of 106.26 Crore in Fiscal 2021. The reduction is mainly due to retirement of 562 employees during Fiscal 2021.

There were 5569 employees on the payroll as of March 31, 2021 compared to 6131 employees as of March 31, 2020. Out of this 3108 and 3501 employees were engaged in Operation & Maintenance areas of our business during Fiscal 2021 & 2020 respectively.

Finance Costs

‘Finance costs’ consist of interest expense on bonds and term loans. In books of accounts, borrowings are denominated in Indian Rupees, including amount raised in foreign currencies (Japanese Yen). Finance Cost also includes expenses on account of Guarantee Fees in connection with loans raised from Foreign Market.

Finance Cost represent 11.23% of the total expenditure in Fiscal 2021 compared to 12.22% of the total expenditure in Fiscal 2020. Finance Cost decreased by 18.33% to 649.59 Crore in Fiscal 2021 from 795.42 Crore in Fiscal 2020. The decrease in Finance Cost is mainly due to full year capitalization (except for lockdown period i.e. 23.03.2020 to 23.04.2020) of finance cost of Subansiri Lower Project in Fiscal 2021 whereas in Fiscal 2020 first two quarter charged to Profit & Loss and thereafter capitalized, Repayment of loans and change in weighted average rate of interest in Fiscal 2021.

Depreciation & Amortization Expense

As per accounting policy of the Company, Depreciation is charged to the extent of 90% of the cost of assets following the rates and methodology notified by CERC vide notification dated 07.03.2019 on straight line method, except for some items on which depreciation is charged to the extent of 95% of the costs of the assets at the rates prescribed in the Companies Act, 2013 or as per rates assessed by Management.

Depreciation cost decreased by 20.11% to 1,234.50 Crore in Fiscal 2021 from 1,545.34 Crore in Fiscal 2020. The decrease in depreciation expenses is primarily due to completion of 12 years of life of Dulhasti Power Station and adjustment of depreciation at TLD-III PS which has been accounted as Finance lease in Fiscal 2021.

As a percentage of total expenditure, depreciation & amortization expense decreased to 21.34% in Fiscal 2021 from 23.75% in Fiscal 2020.

Other Expenses

Other expenses consist primarily of Repair & Maintenance of Buildings and Plant & Machinery, Security Expenses, Insurance Expenses, Electricity Charges, CSR, Other Administrative Overheads, Provisions etc. These expenses represent approximately 24.64% of the total expenditure in Fiscal 2021 as against 23.28% in Fiscal 2020. In absolute terms, these expenses decreased approximately by 5.88% to 1425.89 Crore in Fiscal 2021 from 1514.95 Crore in Fiscal 2020. The decrease of 89.06 Crore in other expenses is primarily due to decrease in CSR Expenses, Interest to Beneficiary states, Exchange Rate Variation, Travelling & Conveyance Expenses, Security Expenses, R&M Expenses partially offset by increase in Insurance Expenses, losses out of insurance claims and provision made at Parbati-III PS against amount deposited under protest with one of the contractors, etc. which are higher in Fiscal 2021.

Exceptional Item

In line with the directions of the Ministry of Power dated May 15 & 16, 2020, the Company has given a one-time rebate of 185 Crore to DISCOMs and Power Departments of States/ Union territories for passing on to ultimate consumers on account of COVID-19 pandemic. The said rebate has been presented as an "Exceptional item" in the Financial Statements.

Movements in Regulatory Deferral Account Balances (Regulatory Income)

In line with the Guidance Note on "Accounting for Rate Regulated Activities" issued by the Institute of Chartered Accountants of India (ICAI) as well as keeping in view the provision of Ind AS 114 – Regulatory Deferral Accounts, ‘Regulatory Assets’ has been created and corresponding ‘Regulatory Income’ has been recognized for 227.09 Crore. This includes Depreciation due to moderation of Tariff in respect of Kishanganga Power Station 195.51 Crore, Exchange Differences against monetary Items 1.70 Crore, Adjustment against Deferred Tax Recoverable for tariff period up to 2009 (-)75.46 Crore and Adjustment against Deferred Tax Liabilities for tariff period 2014-19 6.28 Crore, Regulatory Assets recognised against the borrowing cost and other cost incurred during Covid-19 Lock Down Period amounting to 99.06 Crore which have been charged to the Statement of Profit & Loss as per the relevant Accounting Standard. Rate regulated income is recognised in the books of accounts for Fiscal 2021 on account of below mentioned four factors:

(i) Regulatory Deferral Account balances due to moderation of tariff of Kishanganga Power

Station

The Company has carried out moderation of depreciation as a component of tariff of Kishanganga Power Station to make the tariff saleable which has been allowed by the CERC. This entitles the Company to recover the lower depreciation considered in tariff during the first ten years of operation over the balance useful life of the Power Station. Accordingly, the right to recover the difference between the depreciation charged in the books as per CERC Tariff Regulations, 2019-24 and that recoverable through tariff amounting to 195.51 Crore during Fiscal 2021 (Fiscal 2020 195.62 Crore) has been recognised as Regulatory Income.

(ii) Regulatory Deferral Account balances in respect of exchange differences on Foreign Currency Monetary items

Exchange differences arising on translation/ settlement of foreign currency monetary items to the extent charged to the Statement of Profit & Loss and further recoverable from or payable to the beneficiaries in subsequent periods as per CERC Tariff Regulations are being recognized as ‘Regulatory Deferral Account balances’ w.e.f. April 01, 2016. These balances are adjusted from the year in which the same become recoverable from or payable to the beneficiaries after Date of Commercial Operation (COD) of the Project. Accordingly, the Company has created Regulatory Assets and recognised corresponding Regulatory Income of 1.70 Crore during Fiscal 2021 (Fiscal 2020 0.99 Crore), which is recoverable from beneficiaries in future periods.

(iii) Regulatory Deferral Account balances due to reclassificationof deferred tax recoverable/ deferred tax adjustment against deferred tax liabilities

As per CERC Tariff Regulations, deferred tax arising out of generating income for the tariff period 2004-09 is recoverable from beneficiaries in the year the same materializes as current tax. For the tariff periods 2014-19 and 2019-24, deferred tax is recoverable by way of grossing up the Return on Equity by the effective tax rate based on actual tax paid. Till March 31, 2018 the deferred tax recoverable from beneficiaries in future years was presented as an adjustment to deferred tax liability. The practice was reviewed in FY 2018-19 based on an opinion of the Expert Advisory Committee of the Institute of Chartered Accountants of India (EAC of the ICAI) obtained during that year. As per opinion of the EAC of ICAI, adjustment against Deferred Tax Liability is not a deductible temporary difference resulting into deferred tax asset under Ind AS 12- Income Taxes, but rather fulfils the definition of regulatory deferral account balance in terms of Ind AS 114 - Regulatory Deferral Accounts. The regulated assets (+)/liability (-) recognized in the books during Fiscal 2021 are as follows: In respect of deferred tax recoverable for tariff period upto 2009, 75.46 Crore has been utilized during Fiscal 2021 (Fiscal 2020 125.71 Crore) and in respect of deferred tax adjustment against deferred tax liabilities (pertaining to tariff period 2014-19), 6.28 Crore has been recognised as Regulatory Income during Fiscal 2021 (Fiscal 2020 69.46 Crore).

(iv) Regulatory Deferral Account balances due to Borrowings and Other Costs incurred during Covid-19 Lock Down Period

Due to outbreak of Covid-19 pandemic, Ministry of Home Affairs vide order dated March 24, 2020 imposed a nationwide lockdown to prevent the spread of Covid-19 in the country which was extended from time to time.

During the initial period of lockdown, there was a temporary suspension of major construction activities from March 23, 2020 to April 22, 2020 at Parbati-II Project and from March 23, 2020 to April 23, 2020 at Subansiri Lower Project.

Tariff Regulations for the period 2019-2024 notified by the CERC allows capitalisation of borrowing and other attributable costs incurred due to uncontrollable factors including force majeure events. Accordingly, borrowing and other administrative costs incurred at these projects during the period of temporary suspension of work due to lockdown on account of Covid-19 have been charged to the statement of Profit & Loss and further the same have been recognised as regulatory deferral account balances as under: Table: 6 ( in Crore)

Particulars Amount
Parbati-II HE Project 47.59
Subansiri Lower HE Project 51.47
Total 99.06

Profit before Tax (including Rate Regulated Income)

Due to the reasons outlined above, our profit before tax increased by 8.46% to 3,913.50 Crore in Fiscal 2021 from 3,608.17 Crore in Fiscal 2020.

Tax Expenses

In Fiscal 2021, we provided 680.13 Crore for tax expenses as compared to 601.00 Crore in Fiscal 2020. The increase in tax expenses in Fiscal 2021 is on account of increase in current year taxes by 132.90 Crore which is partially offset by decrease in earlier year tax adjustments by 21.13 Crore and decrease in deferred tax expenses by 32.64 Crore.

Other Comprehensive Income (OCI)

Other Comprehensive Income (OCI) which comprises Re-measurements of defined benefit plan and Fair value gain/loss in Equity & Debt Instruments in Fiscal 2021 was 7.20 Crore against (-) 0.62 Crore in Fiscal 2020.

Total Comprehensive Income (TCI)

Total Comprehensive Income (TCI) i.e. total profit inclusive of OCI in Fiscal 2021 was 3,240.57 Crore i.e. an increase of 7.78% as against 3,006.55 Crore in Fiscal 2020.

LIQUIDITY AND CAPITAL RESOURCES

Both internal and external sources of liquidity are utilized for Working Capital requirement and funding of capital expenditure requirements. Generally long term borrowings are raised through term loans from banks/ financial institutions or issue of bonds either in Indian Rupees or foreign currencies. Cash and cash equivalents were 145.57 Crore and 8.87 Crore as of March 31, 2021 and 2020 respectively.

Cash Flows

Table: 7 ( in Crore)

Fiscal 2021 Fiscal 2020
Net cash inflow/(outflow) from operating activities 4,509.80 2,214.11
Net cash inflow/(outflow) from investing activities (1,507.34) (2,896.98)
Net cash inflow/(outflow) from financing activities (2,865.76) 679.70

Net Cash from operating activities

In Fiscal 2021, the net cash from operating activities was 4,509.80 Crore and Profit before Tax and Regulated Income but after exceptional items was 3,686.41 Crore. Net cash from operating activities has been arrived at after adjusting non-cash items mainly depreciation of 1,234.50 Crore, interest expenses of 649.59 Crore, 220.40 Crore towards provisions, 50.03 Crore towards sales adjustment on a/c of FERV, 8.69 Crore loss on sale of assets/claims written off, 48.38 Crore for deferred revenue on account of advance against depreciation, 21.82 Crore on account of provisions/liabilities not required written back, 292.68 Crore on account of dividend income, 680.14 Crore towards interest earned on Deposits/ Investments & Late Payment Surcharge and other non-operating items. Changes in Operating Assets & Liabilities had impact of cash inflow by 350.37 Crore, which was due to the net effect of change in Inventories, Trade Receivables, Other Financial Assets, Loans & Advances and Other Financial Liabilities and Provisions.

The net cash from operating activities was 2,214.11 Crore in Fiscal 2020. We had net Profit before Tax and Regulated Income but after exceptional items of 3,264.56 Crore in Fiscal 2020. Our net cash from operating activities had been arrived at after adjusting non-cash items mainly depreciation of 1,545.34 Crore, interest expenses of 795.42 Crore, 155.17 Crore towards provisions, 42.94 Crore towards sales adjustment on a/c of FERV, 2.51 Crore loss on sale of assets/claims written off, 44.72 Crore for deferred revenue on account of advance against depreciation, 5.22 Crore on account of provisions/ liabilities not required written back, 489.97 Crore on account of dividend income, 421.50 Crore towards interest earned on Deposits/Investments & Late Payment Surcharge and other non-operating items. Changes in Operating Assets & Liabilities had impact of cash outflow by 2016.96 Crore, which was due to the net effect of change in Inventories, Trade Receivables, Other Financial Assets, Loans & Advances and Other Financial Liabilities and Provisions.

Net Cash from Investing Activities

Our net cash used in investing activities was 1,507.34 Crore in Fiscal 2021. This mainly reflected expenditure on Fixed Assets i.e. Property, Plant & Equipment, Other Intangible Assets & Expenditure on construction projects of 1,763.89 Crore, 500.00 Crore towards Investment in Joint Venture and 280.41 Crore towards Investment in Subsidiaries partly offset by interest income on Deposits/Investments & Late Payment Surcharge by 743.63 Crore and an amount of 292.68 Crore towards dividend income.

Our net cash used in investing activities was 2,896.98 Crore in Fiscal 2020. This mainly reflected expenditure on Fixed Assets i.e. Property, Plant & Equipment, Other Intangible Assets & Expenditure on construction projects of 2,708.71 Crore and 140.45 Crore towards Investment in Joint Venture partly offset by interest income on Deposits/ Investments & Late Payment Surcharge by 386.39 Crore and an amount of 489.97 Crore towards dividend income.

Net Cash from Financing Activities

In Fiscal 2021, our net cash outflow from financing activities was 2865.76 Crore. We raised 2,327.03 Crore from issue of bonds and sub-ordinate debts received from the Government of India. Borrowings to the tune of 2,116.14 Crore were repaid.

Our cash outflow on account of repayment of lease liability was to the tune of 3.86 Crore. The amount related to interest servicing was 1,495.72 Crore. In Fiscal 2021, Total dividend (including dividend tax) amounting to 1,577.07 Crore was paid.

In Fiscal 2020, our net cash inflow on financing activities was 679.70 Crore. We raised 5,967.71 Crore from fresh domestic term loans, foreign loans & bonds. Borrowings to the tune of 1,715.05 Crore were repaid. The amount related to interest servicing was 1,332.22 Crore. In Fiscal 2020, Total dividend (including dividend tax) amounting to 2,237.47 Crore was paid.

BALANCE SHEET ITEMS Balance Sheet Highlights Assets

Table: 8 ( in Crore)

Particulars As of March 31
2021 2020
Non-Current Assets
Property, Plant and Equipment, Capital Work in Progress, Right of Use Assets, Investment Property, Intangible Assets 38,679.02 39,393.17
Non-Current Investments 3,921.68 3,400.74
Long Term Loans 943.27 798.65
Other Financial Assets 4,917.27 3,435.91
Non-Current Tax Assets (Net) 0.00 138.90
Other Non-Current Assets 3,560.71 3,035.41
Total Non-Current Assets 52,021.95 50,202.78
Current Assets
Inventories 124.42 118.24
Trade Receivables 3,206.02 3,585.12
Cash & Bank Balances 913.96 389.12
Short Term Loans 48.44 46.03
Other Financial Assets 2,386.12 2,932.96
Current Tax Assets (Net) 165.73 127.14
Other Current Assets 372.08 375.91
Total Current Assets 7,216.77 7,574.52
Regulatory Deferral Account Debit Balances 7,063.31 6,836.22
Total Assets and Regulatory Deferral Account Debit Balances 66,302.03 64,613.52

Equity and Liabilities

Table: 9 ( in Crore)

As of March 31,
Equity 2021 2020
Equity Share Capital 10,045.03 10,045.03
Other Equity 21,602.28 19,938.78
Non-Current Liabilities
Long Term Borrowings 21,241.22 20,889.74
Other Financial Liabilities 2,054.34 2,059.23
Long Term Provisions 28.38 27.66
Deferred Tax Liabilities (Net) 3,589.36 3,641.19
Other Non-Current Liabilities 2,034.60 2,082.65
Current Liabilities
Short Term Borrowings 726.03 714.31
Trade Payables 201.34 304.26
Other Financial Liabilities 2,925.62 2,880.07
Other Current Liabilities 565.85 802.44
Short Term Provisions 1,252.98 1,228.16
Current Tax Liabilities (Net) 35.00 0.00
Total Equity and Liabilities 66,302.03 64,613.52

Financial Condition

Property, Plant and Equipment (PPE), Capital Work in Progress (CWIP), Right of Use Assets (ROU), Investment Property, Intangible Assets

Our PPE consisting of Land, Dams, Tunnels, Buildings including Power House Buildings, Construction Equipment, Plant & Machinery, Office Equipment, Computers after Depreciation, were 19,163.61 Crore and 21,463.33 Crore as of March 31, 2021 and March 31, 2020 respectively.

Capital Work in Progress which includes Hydraulic Works, Buildings including Power House Buildings, Construction Equipment, Plant & Machinery and S&I works at our power projects were 17,754.48 Crore and 16,097.65 Crore as of March 31, 2021 and March 31, 2020 respectively.

Right of Use Assets (ROU) including forest land under right of use and other leased assets were 1,752.92 Crore and 1,826.98 Crore as of March 31, 2021 and March 31, 2020 respectively.

Investment Property consists of one piece of land at Bangalore amounting to 4.49 Crore.

Intangible Assets comprising of computer software were 3.52 Crore and 0.72 Crore as of March 31, 2021 and March 31, 2020 respectively.

Investments

Investments are intended for long term and carried at cost which consist of Equity investments in Subsidiaries/Joint Venture Companies, Govt. Securities & Bonds. Our total investment was 3,921.68 Crore and 3,400.74 Crore as of March 31, 2021 and March 31, 2020 respectively.

The increase in Investment is the net effect of increase in investment in subsidiary companies and investment in one of our Joint Venture Company & increase in fair value of investment in equity instruments.

Loans (Current & Non-Current)

Loans include loans to our employees and loan including interest to Govt. of Arunachal Pradesh & National High Power Test Laboratory Limited (NHPTL). Loans as of March 31, 2021 and of March 31, 2020 were 991.71 Crore and 844.68 Crore respectively i.e. there is an increase of 17.41 % over figures of previous Fiscal mainly due to increase in loan including interest to Govt. of Arunachal Pradesh & NHPTL and increase in employee loans during Fiscal 2021.

Other Financial Assets (Current & Non-Current)

The other financial assets as at March 31, 2021 stood at 7303.39 Crore against 6,368.87 Crore for the previous fiscal. i.e. there is an increase of 14.67% over figures of previous Fiscal. Other Financial Assets include Amount recoverable on account of Bonds fully serviced by Govt. of India, Lease rent receivable, Interest income accrued on Bank Deposits, claim recoverable from different agencies, Share Application Money pending allotment, Receivable from Subsidiaries/JVs and Receivable on account of unbilled revenue etc.

The increase of 14.67% in Fiscal 2021 as compared to the figures in Fiscal 2020 is mainly due to increase in Lease rent receivable, Share Application Money pending allotment, claim recoverable from different agencies partially offset by decrease in Receivable on account of unbilled revenue and late payment surcharge.

Tax Assets (Current & Non-Current)

Tax assets as of March 31, 2021 and 2020 were 165.73 Crore and 266.04 Crore respectively i.e. there is a decrease of 37.70% over figures of previous Fiscal. Tax Assets include Advance Income Tax & Tax Deducted at Source over and above provision for current tax upto FY 2019-20.

Other Non-Current Assets

Other non-current assets mainly comprise deferred foreign currency fluctuation assets, advances (Capital as well as Other than Capital) and advance to contractor against arbitration awards. Our other non-current assets as of March 31, 2021 and 2020 were 3,560.71 Crore and 3,035.41 Crore respectively. The increase of 17.31% in Fiscal 2021 as compared to the figures in Fiscal 2020 is mainly due to increase in advance to contractor against arbitration awards, increase in advances other than capital advances partially offset by decrease in deferred foreign currency fluctuation assets.

Inventories

Inventories are valued at cost or Net Realisable Value whichever is lower. Our inventories were valued at 124.42 Crore and 118.24 Crore as of March 31, 2021 and 2020 respectively.

Trade Receivables

These consist primarily of receivables against the sale of electricity excluding unbilled revenue. The Trade receivables (net of provision for doubtful debts) as of March 31, 2021 and 2020 were 3,206.02 Crore and 3,585.12 Crore respectively. Decrease of 10.57% in trade receivables in Fiscal 2021 as compared to Fiscal 2020 is due to increase in realisation of outstanding dues from beneficiaries.

Cash and Bank Balances

Cash and Bank balances as of the Balance Sheet date consist of cash surplus in our current account and Short Term deposits and the unspent advances received from Government entities in respect of costs associated with the Pradhan Mantri Grameen Sadak Yojna Scheme in connection with the development of rural roads and the Rajiv Gandhi Grameen Vidyutikaran Yojana scheme relating to the establishment of Rural Electrification Infrastructure.

Cash and Cash equivalents as of March 31, 2021 and 2020, respectively, were 145.57 Crore and 8.87 Crore. The increase of 136.70 Crore during Fiscal 2021 is net result of cash inflow from operating activities of 4,509.80 Crore offset by cash outflow on investing activities by 1,507.34 Crore & 2,865.76 Crore on account of financing activities respectively.

Bank balances other than Cash and Cash Equivalents as of March 31, 2021 and 2020, respectively, were 768.39 Crore and 380.25 Crore.

Our bank balances other than Cash and Cash Equivalents included 155.81 Crore (Previous Year 268.78 Crore) held for Rural Road and Rural Electrification works being executed by Company on behalf of other agencies and also included unpaid dividend, unpaid interest & other earmarked balances of 112.58 Crore (Previous Year 111.43 Crore) which were not freely available for the business of the Company.

Other Current Assets

Other Current Assets mainly comprises Deposit and Advances other than Capital Advances, Prepaid Expenditure and Deferred Foreign Currency Fluctuation Assets. Our other Current Assets, as of March 31, 2021 and 2020 respectively were 372.08 Crore and 375.91 Crore, a decrease of 1.02% in Fiscal 2021 as compared to the figures in Fiscal 2020.

Regulatory Deferral Account Debit Balances

In line with the Guidance Note on "Accounting for Rate Regulated Activities" issued by the Institute of Chartered Accountants of India as well as keeping in view the provisions of Ind-AS 114-Regulatory Deferral Accounts, ‘Regulatory Assets’ has been created and corresponding ‘Regulatory Income’ has been recognized.

Regulatory Deferral Account Debit balances as on March 31, 2021 and March 31, 2020 were as under: Table: 10 ( in Crore)

Particulars March 31, 2021 March 31, 2020
Regulatory Deferral Account balances in respect of Subansiri Lower Project 3,470.59 3,470.59
Wage Revision as per 3rd Pay Revision committee 631.90 631.90
Differential depreciation due to Moderation of Tariff in respect of Kishanganga Power Station 563.11 367.60
Exchange differences on Foreign Currency Monetary items 1.72 0.02
Adjustment against Deferred Tax Recoverable for tariff period upto 2009 1,453.56 1,529.02
Adjustment against Deferred Tax Liabilities for tariff period 2014-2019 843.37 837.09
Borrowings and Other Costs incurred during Covid- 19 Lock Down Period at Parbati-II and Subansiri Lower Project 99.06 0.00
Total 7,063.31 6,836.22

Net worth

The net worth of the Company at the end of Fiscal 2021 increased to 31,647.31 Crore from 29,983.81 Crore in the previous Fiscal registering an increase of 5.55% mainly due to increase in Profit after tax and increase in retained earnings.

Long Term Borrowings

Long Term Borrowings mainly comprised of Bonds, Secured Term Loans & Unsecured Loans including Foreign Currency Loans amounting to 15,679.99 Crore, 316.00 Crore and 5,235.00 Crore in Fiscal 2021 as against 14,532.79 Crore, 974.00 Crore and 5,371.87 Crore respectively in Fiscal 2020. The Secured loans include borrowings from domestic banks and financial institutions along with corporate bonds raised in the capital markets that are secured against assets of the company.

The increase in Long Term Borrowing to the extent of 1.68% over previous fiscal is mainly on account of issue of ‘AB’ & ‘AC’ Series Bonds partly offset by redemption of bonds and repayment of borrowings.

Other Financial Liabilities (Current & Non-Current)

Other Financial Liabilities include Amount payable towards Bonds fully serviced by Govt. of India, current maturities of long term debt, interest accrued but not due on borrowings, EMD/ Retention Money, etc. The other financial liabilities as at March 31, 2021 stood at 4,979.96 Crore against 4,939.30 Crore for the previous fiscal i.e. there is an increase of 0.82% over figures of previous fiscal.

Provisions (Current & Non-Current)

Provisions include provision for Performance Related Pay, Superannuation/Pension fund, Provision towards employee benefits (actuarial valuation), Provision for Tariff Adjustment, Provision for Wage Revision – 3rd Pay Revision Committee, Provision for Committed Capital Expenditure and Other Provisions etc. Total provisions stood at 1,281.36 Crore as at March 31, 2021 as against 1,255.82 Crore for previous fiscal i.e. there is an increase of 2.03 % over figures of previous fiscal.

Deferred Tax Liabilities

The Deferred Tax Liabilities as at March 31, 2021 stood at 3,589.36 Crore against 3,641.19 Crore for the previous fiscal.

Other Non-Current Liabilities

The Other Non-Current Liabilities as at March 31, 2021 stood at 2,034.60 Crore against 2,082.65 Crore for the previous fiscal. Other Non-Current Liabilities include Income received in advance (Advance against Depreciation) and Grants in aid-from Government.

Short Term Borrowings

The Short term borrowings as at March 31, 2021 stood at 726.03 Crore against 714.31 Crore for the previous fiscal. Short term borrowings consist of amount payable to the banks by the beneficiaries on account of bills discounted against trade receivables.

Trade Payables

The Trade payables as at March 31, 2021 stood at 201.34 Crore against 304.26 Crore for the previous fiscal i.e. there is a decrease of 33.83% over figures of previous fiscal.

Other Current Liabilities

The other current liabilities as at March 31, 2021 stood at 565.85 Crore against 802.44 Crore for the previous fiscal i.e. there is a decrease of 29.48% over figures of previous fiscal.

Current Tax Liabilities

The current tax liabilities as at March 31, 2021 stood at 35.00 Crore against Nil for the previous fiscal. This represents excess provision of current tax over and above Advance Income Tax & TDS for FY 2020-21.

OFF-BALANCE SHEET ITEMS Contingent Liabilities

The following table sets forth the components of our contingent liabilities as of Fiscal 2021 and 2020. Table: 11 ( in Crore)

Particulars Fiscal 2021 Fiscal 2020
Claims against the Company not acknowledged as debts in respect of:
Capital Works 9,480.36 10,069.32*
Land Compensation Cases 235.04 137.04
Disputed Tax matters and Other Items 1,325.22 1,308.75*
Total 11,040.62 11,515.11

* Contingent liability amounting to 74.78 Crore has been reclassified from "Capital Works" to "Others" during Fiscal 2020.

Contingent liabilities decreased by 4.12% from 11,515.11 Crore as of March 31, 2020 to 11,040.62 Crore as of March 31, 2021.

BUSINESS AND FINANCIAL REVIEW OF SUBSIDIARIES/JOINT VENTURE COMPANIES

Highlights of the subsidiaries and joint venture companies of NHPC are as under:-

NHDC Limited

NHDC Ltd. was incorporated on 01.08.2000 as a Joint Venture of NHPC Ltd. (51.08%) and Government of Madhya Pradesh (48.92%) having authorised share capital of 3,000 Crore. NHDC has commissioned Indira Sagar Power Project (1,000 MW) and Omkareshwar Power Project (520 MW). The Total Income of NHDC Ltd. for the financial year ended March 31, 2021 and 2020, respectively was 1,348.42 Crore and 1,494.57 Crore. The Profit After Tax of NHDC Ltd. for the financial year ended March 31, 2021 and 2020, respectively was 664.63 Crore and 940.16 Crore. Paid up share capital of the company is 1,962.58 Crore of which NHPC’s contribution is 1,002.42 Crore.

Loktak Downstream Hydroelectric Corporation Limited

Loktak Downstream Hydroelectric Corporation Limited was incorporated on 23.10.2009 as a Joint Venture of NHPC Ltd. (74%) and Government of Manipur (26%) having authorized share capital of 230 Crore. Paid up share capital of the company is 132.00 Crore of which NHPC’s contribution is 98.90 Crore. The Company is yet to start operations.

Bundelkhand Saur Urja Limited

Bundelkhand Saur Urja Limited was incorporated on 02.02.2015, as a Joint Venture of NHPC Ltd. and Government of Uttar Pradesh (UPNEDA), with NHPC’s share not less than 74%. The authorized share capital of the company is 100.00 Crore. Paid up share capital of the company is 21.98 Crore of which NHPC’s contribution is 16.26 Crore (74.00%). The Company is yet to start operations.

Lanco Teesta Hydro Power Limited

During the FY 2019-20, NHPC has acquired Lanco Teesta Hydro Power Limited as its wholly owned subsidiary under insolvency resolution process. The acquisition was made as per the resolution plan submitted by NHPC and approved by the National Company Law Tribunal (NCLT). The authorized share capital of the company is 1500.00 Crore. Paid up share capital of the company is 970.50 Crore in which 100% contribution has been made by NHPC. The Company is involved in construction of Teesta-VI hydro power project and is yet to start operations.

Jalpower Corporation Limited (JPCL)

On 31.03.2021, NHPC has acquired Jalpower Corporation Limited under insolvency resolution process for a consideration of 165.00 Crore and the Company has become a wholly owned subsidiary of NHPC from that date. The acquisition was made as per the resolution plan submitted by NHPC and approved by the National Company Law Tribunal (NCLT). The authorized share capital of the company is 200.00 Crore. Total equity of the company as on 31.03.2021 is 188.15 Crore (including share application money of 165.00 Crore).The Company is involved in construction of 120 MW Rangit-IV Hydroelectric Project and is yet to start operations.

Chenab Valley Power Projects Private Limited

Chenab Valley Power Projects Private Limited was incorporated on 13.06.2011 as a Joint Venture of NHPC Ltd. (49%), Jammu & Kashmir State Power Development Corporation (JKSPDC) (49%) & PTC India Ltd. (2%) having authorized share capital of 3,500 Crore for execution of Pakal Dul, Kiru & Kwar H.E. Projects with installed capacity of 2164 MW in Chenab River Basin. Paid up share capital of the company is 2479.78 Crore of which NHPC’s contribution is 1287.85 Crore. The Company is yet to start operations.

National High Power Test Laboratory Private Limited (NHPTL)

NHPTL was incorporated on 22.05.2009 as a Joint Venture Company of NHPC Ltd., NTPC Ltd., Power Grid Corporation of India Limited (Power Grid) and Damodar Valley Corporation (DVC) each having 25% of equity participation. During the Fiscal 2013, Central Power Research Institute also entered into the Joint Venture thereby revising the equity participation to 20% of each Joint Venture partner. The Company has been incorporated to set up an Online High Power Test Laboratory for short-circuit test facility in the Country having Authorised Share Capital of 153 Crore. As on March 31, 2021 paid up share capital of the company is 152 Crore of which NHPC’s contribution is 30.40 Crore. The company has started commercial operation during Fiscal 2018. For the financial year ended March 31, 2021, the Company incurred a loss of 19.23 Crore while loss for the financial year ended March 31, 2020 was 21.37 Crore.

Consolidated Financial Statements of NHPC Ltd, its Subsidiaries and Joint Venture Companies

The Consolidated Financial Statements have been prepared in accordance with Ind-AS 110-‘Consolidated Financial Statements’ and Ind-AS 28-‘Investment in Associates & Joint Ventures’ which are included in this Annual Report.

A brief summary of the results on a consolidated basis is given below: Table: 12 ( in Crore)

Particulars Fiscal 2021 Fiscal 2020
Total Income 10,705.04 10,776.64
Profit before Tax 4,483.11 3,265.51
Profit after Tax (after adjustment of Non- Controlling Interest) 3,257.00 2,884.92

HIGHLIGHTS OF CONSOLIDATED BALANCE SHEET Table: 13 ( in Crore)

Particulars Fiscal 2021 Fiscal 2020
Non-Current Assets 56,423.41 54,570.49
Current Assets 9,369.71 9,561.41
Regulatory Deferral Account Debit Balances 7,363.93 7,136.85
Total 73,157.05 71,268.75
Total Equity 35,918.69 34,154.68
Non-Current Liabilities 30,277.49 30,066.34
Current Liabilities 6,203.21 6,299.81
Regulatory Deferral Account Credit Balances 757.66 747.92
Total 73,157.05 71,268.75

Table: 14 Key Financial Ratios (Standalone basis)

S. No. Ratios Fiscal 2021 Fiscal 2020 % Change
1. Debtors Turnover Ratio (Net Sales/ Average Debtors) 1.65 1.83 (-) 9.84%
2. Inventory Turnover Ratio Not Applicable Not Applicable -
3. Interest Service Coverage Ratio (ISCR) # (Profit before Interest, Depreciation and Tax/ Interest) 8.03 7.53 6.64%
4. Debt Service Coverage Ratio (DSCR) # (Profit before Interest, Depreciation and Tax/ Principal repayment and Interest) 3.62 3.41 6.16%
5. Current Ratio (Current Assets/Current Liabilities) 1.26 1.28 (-) 1.56%
6. Debt Equity Ratio (Debt/ Net worth) 0.78 0.82 (-) 4.88%
7. Operating Profit Margin (Operating Profit/ Net Sales) 42.19% 37.49% 12.54%
8. Net Profit Margin (Net Profit/ Total Income) 33.48% 30.77% 8.81%
9. PE Ratio (Market Price Per Share*/ Earning Per Share) 7.59 6.67 13.79%
10. EBITDA ( in crore) 5,718.02 5,787.73 (-) 1.20%
11. EBITDA Margin (EBITDA/ Total Income) 59.21% 59.23% (-) 0.03%

# For the calculation of ISCR and DSCR, amount of interest and Principal repayments against the borrowings of the operational projects have been considered.

* Closing Price as on 31st March of respective Fiscal has been consider for Market Price Per Share.

Return on Net worth (PAT/ Net Worth)

Return on Net worth of the company at the end of Fiscal 2021 increased to 10.22% from 10.03% in the previous Fiscal 2020 registering an increase of 1.89% mainly due to increase in Profit after tax partially compensated by increase in retained earnings.

12. MATERIAL DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS FRONT

Your Company has a highly talented team of committed professionals and has been able to induct, develop and retain the best talent. NHPC endeavors to acquire the best talent in the Country from leading educational institutions and universities. It has been working towards nurturing and retaining talent by providing opportunities to improve their knowledge and skills. Job rotation and inter-location transfer through-out the organization facilitate planned development of careers and broaden the outlook of employees. Employees’ participation has been ensured through information sharing with employees, seeking their support, suggestions and co-operation.

(i) TRAINING OF EMPLOYEES

Your company organizes various developmental programmes for its employees in the areas of behavioural, managerial skills and core competencies. These progammes organized by the Company are either in-house or through premier management & engineering institutions which helps employees to keep them abreast with the latest developments and changes taking place in the area of their operation. In addition to above, NHPC also sponsors its executives on regular basis to acquire higher qualification and specialization to enhance their productivity and effectiveness.

(ii) EMPLOYEE STRENGTH

The employee strength of the company as on March 31, 2021 was 5,569 (3,281 executives, 196 supervisors & 2,092 workmen).

(iii) WELFARE MEASURES FOR WOMEN EMPLOYEES

The number and percentage of women employees as on March 31, 2021 is given at

Table 15.

Table 15: Particulars of women employees

Total no. of employees as on 31.03.2021 No. of women employees % of overall employee strength
5,569 590 10.6

Steps taken for the welfare of women employees: l Women employees are regularly nominated to various programmes/seminars on women empowerment and other issues related to women.

l Women employees are eligible for child care leave with pay up to 730 days for taking care of two children up to the age of 18 years (no age limit in respect of child with minimum disability of 40%).

l Women employees have option to declare parents/parents-in-law as their dependents under medical rules.

l Internal Complaints Committees (ICCs) have been constituted at various locations of the Company to examine the grievances/complaints relating to sexual harassment of women employees.

l Women representatives are nominated on selection board/committee constituted for promotion/recruitment of employees.

l Women employees may avail maternity leave as per service rules.

l NHPC Corporate Office, Faridabad has Creche facility for infants of the employees.

l Relaxations in attendance timings are given to women employees posted at Corporate Office.

l WIPS (Women in Public Sector Forum) Cell has been constituted in Corporate Office.

(iv) WELFARE MEASURES AND RESERVATION FOR SCHEDULED CASTE (SC), SCHEDULED TRIBE (ST) AND OTHER BACKWARD CLASSES (OBC)

Your Company is providing reservation and relaxation to SC/ST and OBC candidates in direct recruitment as per guidelines issued by DoPT from time to time. The relaxed standard and reservation is also applicable to SC/ST employees, while considering them for promotion. The management holds periodical meetings with SC/ST/OBC employees for discussing various issues related to them. A SC/ST/OBC Cell has been set up for the welfare of SC/ST and OBC employees headed by separate Liaison Officers.

Representation of SC/ST/OBC employees is given at Table 16.

Table 16: Particulars of SC/ST/OBC employees

Total

Representation

no. of employees as on 31.03.2021 SC % age ST % age OBC % age
5,569 816 14.65 359 6.45 853 15.32

(v) WELFARE MEASURES FOR DIFFERENTLy ABLED EMPLOYEES:

Representation of differently abled employees is given at Table 17.

Table 17: Particulars of differently abled employees

Total no. of employees as on 31.03.2021 Differently abled employees % of differently abled employees
VH HH OH Total %age
5,569 12 3 101 116 2.08

VH=Visual Handicap, HH=Hearing Handicap, OH=Orthopedic Handicap

Steps taken for the welfare of differently abled employees:

The reservation and relaxation is provided to differently abled candidates/employees in direct recruitment and promotion as per guidelines issued by DoPT/Ministry of Social Justice & Empowerment from time to time. In addition to above, following welfare schemes have also been extended to differently abled employees:-

l Differently abled employees as well as employees who are care giver to dependent child are exempted from rotational transfer. These employees are given option about their preference in place of posting at the time of transfer/promotion.

l Financial assistance is provided to employees (who get physically handicapped while in service) for vocational training.

l Reimbursement of expenses for purchase of hearing aid is given to hearing impaired employees/their dependents.

l Reimbursement of the cost of artificial limbs and interest free loan for it is being given to employees/their dependents.

l Restriction of age is not applicable in respect of physically/mentally retarded children for considering them as dependents.

l Lifetime medical facility to the mentally or physically dependent children having 40% or more of one or more disabilities in respect of retired/deceased employees is being provided under NHPC retired Employees’ Health Scheme.

13. ENVIRONMENTAL PROTECTION AND CONSERVATION, TECHNOLOGICAL ABSORPTION, RENEWABLE ENERGy DEVELOPMENTS & FOREIGN EXCHANGE CONSERVATION

(i) Environment Protection and Conservation:

Your Company has a "Corporate Environment Policy" (CEP) which aims to address the environmental and social concerns for the sustainable development of conventional & non-conventional sources of energy. Major highlights of CEP are to integrate environmental considerations into planning, execution and operation of projects, to undertake the post-construction impact assessment studies and to undertake unique voluntary initiatives beyond statutory obligations. NHPC also makes efforts to create conditions so that economic growth and environmental preservation become compatible in the long run. Environmental Impact Assessment (EIA) for NHPC projects is undertaken during investigation stage to identify probable impacts on environment. Based on the findings of EIA studies, Environmental Management Plans (EMPs) are proposed and implemented to compensate the adverse impacts of the project by taking necessary measures like, compensatory afforestation, catchment area treatment, bio-diversity conservation, green belt development, fishery management, rejuvenation of dumping and quarry sites including resettlement & rehabilitation, etc. Environment and Diversity Management Division has been established at the Corporate Office to monitor and facilitate implementation aspects of environmental safeguard measures at all the projects.

Compliance under Corporate Environmental Policy:

Environment Management Cells have been constituted at all projects / power stations of your company, for effective implementation of EMPs and voluntary initiatives. Various voluntary initiatives have been taken up at many NHPC Projects / Power Stations for Waste Management, Water Conservation and Energy Conservation. Six monthly progress reports for various Projects/ Power Stations for period ended March, 2020 and September, 2020 were submitted to Ministry of Environment, Forest and Climate Change (MoEF & CC) and its concerned Regional offices.

These reports were also uploaded on the website of the Company i.e. www.nhpcindia.com. The company also conducts post-construction Environment Impact Assessment (EIA) Studies to evaluate the effectiveness of the management plans implemented during the course of construction of the project.

Your Company has conducted Post construction EIA studies in respect of various Power Stations viz. Uri (UT of J&K), Rangit (Sikkim), Dhauliganga (Uttarakhand) and Teesta-V (Sikkim) both through in-house and external agencies. Post construction EIA Study of Loktak Power Station (Manipur) and Uri-II Power Station (UT of J&K) through external agency are under process. NHPC also conducted Sustainability Assessment of Teesta-V Power Station, Sikkim through Sustainability Assessment Protocol of International Hydropower Association (IHA) for operational projects. As per the findings of the assessment, out of 20 parameters on which the Teesta-V Power Station was assessed, it meets basic good practice on all parameters, meets proven best practice on 6 parameters and exceeds basic Good Practice on 9 parameters.

(ii) Renewable Energy Developments:

Your company is diversifying its activities to explore renewable energy projects such as solar and wind power projects. The details of renewable energy projects are given in the Directors’ Report.

(iii) Foreign Exchange Conservation:

In accordance to "Make in India" policy of Government of India, your company is making efforts to encourage the participation of local firms in the bidding process. The participation of local firms as well as Micro & Small Enterprises helps in conservation of foreign exchange and growth of Indian industry at large.

(iv) Technology Absorption:

Information regarding technology absorption has been included in Annexure-IV to the Directors’ Report.

14. CORPORATE SOCIAL RESPONSIBILITy

Information regarding Corporate Social Responsibility has been included in the Directors’ Report.

15. CAUTIONARy STATEMENT

The views and forward-looking statements contained in this report are based on reasonable assumptions and subject to certain risks and uncertainties that could cause actual results to differ from those reflected in such statements.

Readers are requested to review and confirm with other information in this report and in the company’s periodic reports. The company undertakes no obligation to publicly update or revise any of these forward-looking statements whether as a result of new information, future events or otherwise. The financial figures shown above are based on the audited results of the Company.

For and on behalf of the Board of Directors

(Abhay Kumar Singh)

Chairman and Managing Director

DIN 08646003

Date: August 27, 2021

Place: Faridabad