rattanindia power ltd share price Management discussions

1. SECTOR AND POLICY OVERVIEW

The Central Government has approved a Revamped Distribution Sector Scheme- a Reforms-based and Results-linked Scheme with an outlay of Rs. 3,03,758 Crores over a period of five years from FY 2021-22 to FY 2025-26 with the objective to improve the quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector. The Scheme aims to reduce the AT& C losses to pan-India levels of 12-15% and ACS-ARR gap to zero by 2024-25 by improving the operational efficiencies and financial sustainability of all DISCOMs/ Power Departments. Accordingly, the Indian Governments major policy initiatives have been focussing on its transition from a predominantly fossil-fuel based energy economy to a cleaner and greener economy; improvement in the operational and financial health of the Discoms and augmenting distribution infrastructure; integration of large scale renewable capacity to and continuous strengthening of the countrys transmission network; addressing stress in the thermal power sector especially Independent Power Products (IPPs) deepening of the power markets through incorporation of Indias third power exchange and through newer products like RTM, GTAM, GDAM, etc. and ensuring timely recovery of costs across the entire value chain on account of Change in Law and other regulatory recovery.

Driven by a fast-expanding economy, growing population, fast urbanization and industrialization, India is expected to see the largest increase in demand across any country globally over the next 20 years as per the International Energy Agency (IEA). India has already put in place a robust policy and institutional framework required for meeting its energy requirements and for attracting investments from across the globe in its energy sector. With over 80% of the eligible population having been vaccinated against Covid-19, India has recovered strongly after the third wave of the pandemic. With economic activity having rebounded and opening up of all business activities, peak power demand for FY 2023 increased by 6.3 percent to 216 GW while in energy terms, it increased by 9.6 percent to 1,512 billion units. Indias demand for electricity too reached new heights, with the country registering a record maximum power demand of 223.24 GW on 9^th June 2023.

The welcome steps taken towards opening of the retail oil & gas markets and allowing private investments in commercial coal mining in the previous years has been met with muted response. In addition, the nation continues to face challenges in ensuring improvements in the financial health of the power sector due to the ailing financial health of its power distribution companies, which are still largely under the control of the Government. In spite of the Governments best intent to increase competition by de-licensing and opening up Indias distribution sector to wide-scale private participation, the overall sector continues to be highly regulated. In the Power Sector, Independent Power Producers (IPPs) like your Company procure coal from Coal India Limited (a government owned company). Coal transportation is primarily through the Indian Railways (another government owned organization) and electricity generated by the generators is supplied to Discoms (most of which are government owned). Here, supplier of raw material (coal), services (transportation) and the procurers of electricity are directly under Central or State Governments and in effect, act as monopolies in the respective areas.

In order to improve the business atmosphere in the power sector, a lot of work still needs to be done to improve efficiency. - viz., quality and quantity of coal supplied to IPPs, allotment of rakes by Indian Railways, timely payment of bills by Discoms, etc.

However, notwithstanding the above, the Government continued to focus on reforming the power sector even during the difficult times under Covid-19 and took some landmark initiatives to help overcome the challenges that the Discoms continue to face. Some of these steps include the push for privatization of the distribution sector in States and all Union Territories, a special one-time liquidity infusion of Rs. 90,000 Crores (that was subsequently further scaled up to Rs. 1.35 lakh Crores), focus on consumer rights through the Draft Electricity (Rights of Consumers) Rules, 2020, impetus to domestic solar manufacturing through Basic Custom Duty (BCD) imposition and Performance Linked Incentives (PLI) scheme, opening up commercial mining for private players, and announcement of Rs. 3.06 trillion reforms-based and results-linked Revamped Distribution Sector Scheme.

2. INDIAS FUTURE ELECTRICITY OUTLOOK

Energy demand in India is growing rapidly with major implications for the global energy market. The Government of India has made remarkable progress in providing access to electricity and clean cooking while implementing a range of energy market reforms and integrating a high share of renewable energy sources into the grid. India, with a population of 1.36 billion and a fast growing economy, has seen its energy demand increasing rapidly as the country continues to urbanize and the manufacturing sector develops. This growing demand is met through various energy sources, with coal set to remain the largest source of energy supply. India also continues to develop the institutional framework needed to attract the investment required to satisfy this growing energy need.

Industrial and commercial activity account for more than half of Indias annual power use. Homes account for a fourth, while agriculture has accounted for over a sixth in the recent years. Power consumption grew 9.5 per cent to 1,503.65 billion units year-on-year in 2022-23, mainly due to higher demand amid a rise in economic activities. Similarly, the peak power demand or highest supply in a day also rose crossing the 210 GW mark on 9th June 2022 and touching an all-time high of 211.86 GW on 10th June 2022. The Ministry of Power opined that power consumption and demand will see substantial improvement in 2023-24. As per the projections of the International Energy Agency (IEA), India, in order to meet the anticipated growth in electricity demand over the next twenty years, would need to add a power system the size of the European Union to what it has now. Indias ambition to move to a 100% electric mobility ecosystem by 2030 itself is expected to add an additional requirement of 70 terawatt hours of electricity.

As per Central Electricity Authority (CEA) estimates, the electricity generation target (Including RE) for the year 2023-24 has been fixed as 1750 billion Unit (BU). i.e., growth of around 7.2% over actual generation of 1624.158 BU for the previous year (2022-23). The generation during 2022-23 was 1624.158 BU as compared to 1491.859 BU generated during 2021-22, representing a growth of about 8.87%.

3. RISKS AND CONCERNS

The Power Sector, directly or indirectly, impacts almost all the sectors contributing to the growth of the nation. Setting up of a power project requires huge capital investments and takes years of concentrated efforts for successful completion and commissioning. Hence, any slowdown in the power sector has a domino effect on overall economic growth of the country.

Some of the critical issues impacting the performance of the sector are mentioned below:

3.1. Fuel

Indias clean energy transition is advancing; however, coal will stay to boost energy security. Announcements for coal sector for some brownfield expansion projects, delays in retirements or even lifetime extension plans for old thermal plants, and liquidation or revival of part of stalled private sector projects is on the cards. Securing fuel is the top priority to respond to short-term challenges, while implementing reforms is on the long-term transition agenda. Indias coal production to increase, however, import dependence may also continue in the power sector to fulfil the rising demand in 2023.

Indias coal consumption has witnessed a massive growth of around 753% surge from 130.73 MT in 1983-84 to 1115.02 MT in the year 2022-23. In order to ensure a continuous supply of coal to the power plants and meet any contingent situations relating to Power Sector including alleviating critical coal stock position in power plants, an inter-ministerial sub-group comprising of representatives from the power ministry, coal ministry, railway ministry, Central Electricity Authority (CEA), Coal India Limited (CIL) and its subsidiaries meet regularly. Besides, an Inter-Ministerial Committee (IMC) has also been constituted comprising of railway board chairman; the secretary ministry of coal, the secretary, ministry of environment, forest and climate change and the secretary, ministry of power; to monitor augmentation of coal supply and power generation capacity.

As per the draft report of Niti Aayog, the coal demand is expected to remain in the range of 1,192-1,325 million tonnes by 2030. A plan to increase all India coal production to the level of 1 BT by 2023-24 and coal production by Coal India Limited to 1 BT by 2024-25 has been prepared. The resultant increase in coal availability will be able to meet the demand of coal to the extent available.

Indias overall coal Production has seen a quantum jump to 893.08 MT in FY 2022-23 as compared to 728.72 MT in FY 2018-2019 with a growth of about 22.6%. The priority of the Ministry is to enhance the domestic coal production to reduce the dependence on substitutable coal imports. In the last 5 years, the production of Coal India Limited (CIL) has increased by 703.21 MT (Million tonnes) as compared to 606.89 MT in FY 2018-2019 with a growth of 15.9%.

While currently, CIL is expected to supply only 75% of the coal quantity committed under the Fuel Supply Agreements to generators, forcing power generators to source balance coal from costly alternate sources, your plant currently has been able to source the balance 25% from SECL through road mode. Furthermore, your company has been able to get 20% additional coal, over and above the monthly scheduled quantity, from SECL through RCR mode since February 2023 and continues to get this on monthly basis. This will further enhance the availability of the Plant for the next fiscal 2024.

3.2. Growth of transmission network and evolving framework for transmission access to support future growth and integration of renewable energy

The Indian power transmission segment has grown significantly over the years, making the countrys electricity grid one of the largest synchronous grids in the world, facilitated seamless transfer of electricity from power-surplus regions to power deficit regions, thereby meeting the growing needs of consumers. With India targeting to meet its COP-26 goal of meeting 50% of its energy needs from renewables and achieve 500GW of installed capacity of renewables by 2030, significant expansion and strengthening of the interstate transmission system (ISTS) will be required.

One of the most significant policy and reform initiatives taken by the Central Government to enhance non-discriminatory access to the countrys transmission network is the introduction of the General Network Access (GNA) through the Electricity (Transmission System Planning, Development and Recovery of Inter-State Transmission Charges) Rules, 2021, notified on 01 October 2021. GNA allows non-discriminatory access to the Inter-State Transmission System (ISTS), as requested by a designated interstate customer and granted by the central transmission utility (CTU) for a maximum injection or drawl in mega-watts and for a specific period. A transition to GNA would provide the much-needed flexibility to entities in purchasing electricity under contracts of varying durations without the limitations of ISTS network availability. For generators too, there will be enhanced flexibility in sales since target beneficiaries will not have to be specified.

In addition, with an aim to enhance the transparency of the CTU in its role as an independent body as envisaged under the Act, it has been separated from POWERGRID in order to provide greater transparency and a level-playing field between PGCIL and other private transmission players under the TBCB framework.

In addition, the Govt. is now pushing for several interconnections between India and its neighbouring states of Nepal, Bangladesh and Sri Lanka.

Going forward, the Govt. plans to add an additional 17,500 ckm of transmission network and 80,000 MVA of transformation capacity annually over the next three years, with an estimated capital investment of Rs. 3,040 billion between 2020 and 2025, under the National Infrastructure Pipeline, with state utilities expected to contribute to capex additions of about Rs. 1,900 billion. The next few years is expected to see growth in leveraging of technology (shift to extra high voltage network with advanced technology like voltage source convertors and deployment of FACTS and project developers moving to deployment of LiDAR technology, drones and air cranes for construction and thermos- vision cameras and android-based applications for operations & maintenance. In the next few years, in addition to expanding the physical grid, utilities will increasingly need to invest in advanced and grid-enhancing technologies to improve capacity, grid resilience and stability.

3.3. Financial health of state Discoms and Government support

Poor financial health and financial viability of the Discoms continue to be the major faced by power producers. Most Discoms continue to make major losses as a result of poor and archaic network infrastructure, inefficient operations and expensive long term power purchase agreements. This has resulted in Discoms growing inability to pay power generators on time, thereby in turn endangering the financial health of the generators and their lenders, keeping them tottering on the brink of slipping back into stress.

Aggregate Technical and Commercial Loss (AT&C Loss) and ACS-ARR Gap are key indicators of DISCOM performance. In the last 2 years, the AT&C loss of the DISCOMs of the country was hovering at 21-22%. Ministry of Power instituted a number of measures to improve the performance of utilities. The aggregate technical and commercial (AT&C) losses of distribution companies (discoms) have further declined to about 13.5 percent in FY23 from 16.4 percent in FY22, according to provisional data prepared by the Ministry of Power.

The decline of 13.5% in AT&C losses in one year is the result of a number of initiatives taken by the Ministry of Power. The Central Government has approved a Revamped Distribution Sector Scheme- a Reforms-based and Results-linked Scheme with an outlay of Rs.3,03,758 crore over a period of five years from FY 2021-22 to FY 2025-26 with the objective to improve the quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector. The Scheme aims to reduce the AT& C losses to pan-India levels of 12-15% and ACS-ARR gap to zero by 2024-25 by improving the operational efficiencies and financial sustainability of all DISCOMs/

Power Departments excluding Private Sector DISCOMs. Apart from RDSS, other decisive measures such as late payment surcharge rules, prudential lending norms by Power Finance Corporation (PFC) and REC etc also have helped in loss reduction

Further, on 03 June 2022, Ministry of Power, Govt. of India notified the Electricity (Late Payment Surcharge and Related Matters) Rules 2022, on the basis of which all outstanding dues (including LPS) up to the date of the notification frozen and rescheduled into monthly instalments ranging from 12 to 48 months, failing which, the supply obligation of the generating company will stand reduced to 75%, with the generator being free to sell the balance 25% in the exchanges. In addition, a LPS would be applicable on the outstanding amount after the due date equivalent to the base rate in the first month of default. This will increase by 0.5% for each subsequent month, provided that the LPS rate shall not be more than 3% of the base rate at a time.

3.4. Distribution Reforms

The Distribution Sector continues to be the sticky pain point for the entire power sector value chain. The Government has done remarkably well in ensuring one hundred percent electrification of households under its flagship SAUBHAGYA program in the past few years - the impact of which is now being felt in terms of increased domestic demand for electricity.

The Govt. of India, with an intent to improve the performance of distribution, had released the plan to privatize the distribution business in 8 Union Territories in 2020 as part of the fourth tranche of Rs. 20 trillion stimulus package announced to address the economic fallout of the pandemic. Of these, 3 Union Territories have already been awarded to the selected private bidders.

However, the impending changes to the Electricity Act 2003, proposed to be brought in through the Electricity (Amendment) Bill, 2021, still remains to see the light of day. This draft Bill proposes bringing in de-licensing of the distribution business which is expected to improve performance through competition and offer customers choices in choosing their preferred electricity supplier.

This, along with the Revamped Distribution Sector Scheme announced by the Cabinet in June 2021 (which aims to bring down Aggregate Techno-Commercial Losses to 12-15% and reduce the gap between Average Cost of Supply and Average Revenue Realization to 0% by 2024-25), is expected to largely address the current inefficiencies and problems being faced by the distribution sector.

3.5. Delays in resolution of disputed receivables from Discoms by generators

The Company too has been continuously striving and leaving no stone unturned to secure its admitted dues locked up under disputes to the tune of more than Rs. 1,770.12 Crores. The last few years has seen the issue of disputed receivables, especially on account of recovery of costs related to mandatory charges incurred towards washing of coal (mandated by changes notified by the Ministry of Environment, Forests and Climate Change) and towards compensation for procurement of alternate coal on account of Coal Indias failure to meet committed delivery quantity under Fuel Supply Agreements (FSA) through Change in Law for projects supplying power under tariff based competitively bid PPAs like that of your Company, has been a major cause for financial stress and delayed recoveries of just receivables from Discoms. However, on account of certain favourable orders from Honble Supreme Court and APTEL, the company has witnessed a traction towards recovery of disputed receivables.

In this regard, the Company has been successful in securing favourable orders in two issues that it has been pursuing to resolve - one, in case of recovery and pass-thru of past costs incurred in recovery of cost of procurement of alternate coal due to failure of the coal companies to meet their commitment under the FSA to the tune of Rs. 1,420 Crores as on 30^th June 2023, in which the Honble Supreme Court has decided the matter in favour of the Company and secondly, in an order from the APTEL on 22 March 2022, towards reimbursement of Evacuation Facility Charges levied on coal, along with carrying cost. In this regard, MSEDCL had filed an appeal before the Honble Supreme Court challenging the order from the APTEL which was dismissed by the Supreme Court on 20^th April 2023 and the APTEL order was upheld.

The Company continues to constantly pursue and follow up in case of the other outstanding disputed receivables and is hopeful, that with the proposed strengthening of the regulatory mechanism and the institutional framework under the proposed Electricity (Amendment) Bill, 2021, hopefully, a large part of this issue of delay would now be addressed.

4. BUSINESS REVIEW

Your Company has a well-formulated strategy to tackle the challenges that the sector is facing currently. With a total of 2,700 MW commissioned capacity at Amravati and Nasik, the Company is amongst the top 10 private power producers in the country. Amravati thermal power plant has a long-term arrangement for supply of 1,200 MW to the Maharashtra State Electricity Distribution Company Ltd (MSEDCL) and all the five units of Amravati TPP are available for supplying power.

Your Amravati Plant continued to be available to supply at above 80% plant availability in line with the provisions of the PPA. Your Company also managed to secure a favourable order from the Maharashtra Electricity Regulatory Commission (MERC) on 31 December 2020, which has made the plant significantly competitive in the State Merit Order Schedule, and as a result, ended the financial year with a plant load factor (PLF) of 88% in the fourth quarter for FY 2023. Amravati plant would continue to be extremely competitive, resulting in higher PLF going forward and contributing to the Nations development by providing reliable, cost-effective and efficient base load supply.

Your Company is also undertaking a holistic and organization wide transformation exercise to achieve excellence in performance under key areas related to operational, financial and business, in order to have a meaningful impact on the profitability of the Company.

Your Company also managed to secure favourable judgement from the Honble Supreme Court of India on 27^th March 2023 in the long-standing dispute with MSEDCL, regarding recovery of additional costs of procurement of alternative coal and changes in taxes & duties, under which the appeal of MSEDCL against the APTEL order was dismissed. Payments under this have already started materializing, with MSEDCL having already paid Rs. 613.01 Crores as on 30^th June 2023. Your Company continues to pursue for early release of the balance amount.

Your company also managed to secure order from APTEL on 22 March 2022 directing MERC to determine the amount payable to the Company towards the reimbursement of Evacuation Facility Charges levied on coal along with Carrying Cost to be calculated at LPS rate and MERC to pass fresh Order considering APTEL direction within 2 months. In this regard, MSEDCL had filed an appeal before the Honble Supreme Court challenging the order from the APTEL which was dismissed by the Supreme Court on 20 April 2023 and the APTEL order was upheld.

Apart from the above, your Company is also working on to make the existing processes more robust and resilient to deal with the new normal. The Company ended the year 2022-23 with an EBITDA of Rs. 1,108.46 Crores and Profit After Tax (PAT) of Rs. 332.65 Crores, with PAT higher when compared to FY 2021-22 with an EBIDTA of Rs. 1160.73 Crores and PAT of Rs. 348.14 Crores.

In addition to this, your Company continues to strive to improve its margins on a regular basis. The management of your Company continues to leave no stone unturned towards resolving the current stress in Sinnar Thermal Power Limited and is in active discussion with lenders and other stakeholders.

5. COMPETITIVE STRENGTHS

Your company has following competitive strengths which will enable it to achieve a strong position in the Power Sector:

5.1. Statutory and Non-statutory Clearances

Your Company has secured all major required clearances necessary for successful operations of the Amravati Thermal Power Project and Nasik Thermal Power Project.

For the Amravati Thermal Power Project, the Company has taken 1,350 acres of land on lease from Maharashtra Industrial Development Corporation (MIDC), signed a Fuel Supply Agreement (FSA) for 6.10 MTPA coal with South Eastern Coalfields Limited (SECL), obtained 87.6 million cubic meter water allocation from upper Wardha dam from Vidarbha Irrigation Development Corporation and has secured the consent to operate from Maharashtra State Pollution Control Board.

For Nasik Thermal Power Project, Sinnar Thermal Power Limited has taken 1,069.35 acres of land on lease in Nasik SEZ, secured coal allocation for total 5.226 MTPA coal from South Eastern Coalfields Limited & Mahanadi Coalfields Limited and had secured 36.5 million cubic meter water allocation from Water Resources Department, Nasik. The Nasik project continues to be preserved in line with the recommendations of the independent Lenders Engineers.

The two projects are among the few which have all major clearances in place, while as much as 11GW of coal-based projects continue to be stressed due to non-availability of coal linkages, as per the Government of Indias report.

5.2. Financial Closure

Both Amravati and Nasik power projects have achieved financial closure.

5.3. Power Purchase Agreement

Amravati thermal power project has a 1,200 MW PPA with MSEDCL for period of 25 years from the date of commercial operation and has been successfully supplying power to MSEDCL for over 9 years now. This PPA has a provision for further extension of term based on mutual agreement between the parties. The Power plant is supplying power generated from this power plant to MSEDCL at pre-determined tariffs, as part of a Case-1 bidding framework initiated by MSEDCL.

Further, in the case of the Sinnar Thermal Power Limited (SPV for development of the Sinnar Thermal Power Project), your Company is leaving no stone unturned to secure a long term PPA from MSEDCL.

5.4. Fuel Security

Your Company has Fuel Supply Agreements (FSA) with Coal Companies, supplying coal at prices notified by the Ministry of Coal, covering the entire requirement for operating the plant at normative PLF. This puts your Company in a very strong competitive position as compared to the present mechanism wherein coal linkages are granted through e- auction process where bidders either offer premium over notified prices of coal or offer discount on the tariff for supply of power under PPA. In fact, your Company has been successful in enhancing its fuel linkage from the coal company by 20% beyond monthly scheduled quantity thereby enhancing long term fuel security for the Project and reducing dependence on competitively auctioned / imported coal.

5.5. Execution Team

One of key strengths of your company is the team of experts who have vast experience of constructing, commissioning and operating large power projects. Senior management people of the Company comprise of an excellent balance of leaders and experts with experience in both the private and public sectors, including senior and experienced people from Navratna Companies of the country - like NTPC, BHEL, to name a few and who have vast experience in the implementation and operation of thermal power projects. This team is capable of addressing the challenges currently being faced by thermal power projects in the country.

6. STRATEGY

The key elements of the Companys strategy include:

6.1. Capitalizing on the opportunities in Indian power generation sector

Your Company has planned significant long-term initiatives to capitalize on the huge potential presented by the Indian power sector. With a growing economy, there will be increase in electricity demand and therefore, significant investment will be required in generation, transmission and distribution to fulfil this demand and fulfil Government of Indias ambitious target of providing "Power for All". The Company already has the expertise and ability to raise capital and execute large scale power projects to reap the benefits of growth in the sector. With its partnership with marque special situations funds, the Company continues to evaluate options for strategic acquisitions being offered in the market on an on-going basis to enhance value to its shareholders.

6.2. Leveraging of project execution and operating skills

Your Company has a young and dynamic leadership team with diversified experience across operations, finance and business-related areas and constantly strive to achieve excellence in their core areas of operations. We have hired leaders and project managers with the ability and skill sets to drive business to new heights.

6.3. Ensuring fuel security

Your Company has adequate coal linkages/FSA with Coal India Limited to ensure a steady supply of coal to fire the power plants. In this regard, the Company was successful in enhancing its long-term fuel supply arrangement with the coal company, increasing its monthly allocation by 20% beyond monthly scheduled quantity for February and March 2023, minimizing the requirement to secure additional coal supplies to meet demand.

The Company also continues to actively evaluate opportunities available for securing coal blocks for mining of coal for captive use under the auction process for commercial mining, which will ensure long-term self-sufficiency in fuel for the Project and minimize associated costs.

6.4. Operating power plant at high availability:

It is vital that a power station has a high plant availability factor (PAF), which in turn translates to higher Plant Load Factor (PLF). Unplanned outages can result in loss of revenue. Your Company has in place a team of very experienced and skilled O&M experts to run its power plants smoothly with the highest possible availability. As a result, even due to the shortage of coal supply from Coal India Limited and rakes availability from railways, Amravati Plant put in place a comprehensive risk mitigation framework to address the same, ensuring 81% plant availability during FY 2023.

6.5. Climate Change:

The Company is sensitive about the climate change initiates implemented worldwide as well as in our country and to contribute to the novel cause, company has adopted the best-available technologies at our power plant to ensure efficient operations.

7. HUMAN RESOURCES

Your Companys human resource policy provides an environment that motivates its employees to realize their full potential.

Your Company respects each employee and motivates them by offering opportunities based on their skill-sets, and in the process, builds mutually benefiting relations between the Company and its employees. Your Company has put in place a policy that not only increases productivity but also increases job satisfaction of its employees.

Your Company has put in place a recruitment system in the organization wherein right candidates with the right skills are recruited. Your company has established systems which aim to provide training to employees at every level of the organization that leads to quality work output in their assigned work, in turn helping in improving the bottom-line of your Company.

In addition to this, proper remuneration, regular appraisal, and development opportunities provided to the employees have enabled your Company to achieve its goal in a highly competitive market. Your Company believes that its employees are most productive when they have a good work-life balance to enable them to meet their responsibilities outside work and minimizes employee turnover. The total number of permanent employees as on March 31, 2023 was 544.

8. CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility Policy (CSR Policy) was framed in the year 2014 and a Corporate Social Responsibility Committee, comprising members from the Board of Directors of the company was constituted. The Committee is entrusted with the responsibility of effectuating and operationalizing the CSR Policy of the Company.

As part of these efforts, the Company continues to engage with the local community at its Plant site and undertake initiatives from time to time in this regard.

9. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a system of internal controls commensurate with the nature and size of its operations, which effectively and adequately encompasses every facet of its operations and functional areas.

The system involves a compliance management team with established policies, norms and practices as also the applicable statutes and rules and regulations, with an inbuilt system of checks and balances, so that appropriate and immediate corrective actions are initiated in right earnest in the event of any deviations from the stipulated standards and parameters.

The effectiveness and deliverability of the internal control systems are reviewed periodically so that measures, if any, needed for strengthening the same can be taken, with the changing business needs of the Company. The Company continues to regularly review its systems, processes and controls on an on-going basis, comparing and aligning them with the industrys best practices.

10. PERFORMANCE HIGHLIGHTS

10.1 Operational Performance:

During FY 2022-23, in spite of the difficulties faced by the economy and businesses due to shortage in coal supply from CIL and rake availability from railways, Amravati Thermal Power Project achieved an annual plant availability of 81.35% and Plant Load Factor (PLF) of 77.18% as against the previous years availability of 85.85% and PLF of 75.10% respectively. As a result, the Company could realize its entire fixed charges through tariff as per the provisions of the PPA. Availability of the Plant for the Q2 and Q3 was affected due to the significant fall in the availability of coal from coal companies and resulting lower dispatch by Coal India Limited, which saw 16 of the countrys 135 coal-fired power plants with zero coal stock at the end of Q2 FY 2022.

However, despite these issues impacting thermal power plants across the country, your Plant achieved a PLF of 87.77% in the last quarter of FY 2023 and an annual PLF of 77.18% for the whole of FY 2023. Going forward, we are confident that the Amravati Plant would continue to be competitive in the MOD and demonstrate comparatively higher PLFs.

The Company sold 8,422.16 million units (MU) of electricity to MSEDCL during the financial year under its long term PPA, compared to 8,156.86 million units in the previous fiscal.

10.2 Financial Performance:

Particulars	FY 2022-23	FY 2021-22	FY 2020-21
Generation Sales (MU)	8422.16	8156.864	2,597.62
Net Sales (Rs. Crore)	3231.16	3,259.52	1,559.86
PBT (Rs. Crore)	353.02	348.14	96.71

11. SIGNIFICANT CHANGES DURING THE YEAR

During the Year under review, there were following changes in the Key Financial Ratios:

S. No. Ratio	Formula			Remarks
		FY 2022-23	FY 2021-22
1 Debtors Turnover	Revenue/ Average trade receivables	1.29	1.37	Due to decrease in revenue and average trade receivable
2 Inventory Turnover	Cost of material consumed/ Average value of inventory	17.57	11.38	Due to higher Plant Load Factor (PLF) as compared to previous year (PLF)
3 Interest Coverage Ratio	Earnings before interest and tax/ Interest Expense	1.66	1.59	Due to decrease in EBITDA and reduced interest cost
4 Current Ratio	Current assets/ Current liabilities	1.53	1.66	Current portion of long-term borrowings has resulted in decline in ratio
5 Debt Equity Ratio equity	Total debt*/ Shareholders	0.69	0.83	Due decrease in debt
6 Operating Profit Margin (%)	Earnings before interest and tax/ Revenue	27.43%	28.66%	Due to increase in consumption on account of higher Plant Load Factor (PLF) as compared to previous year (PLF)
7 Net Profit Margin (%)	Net profit/ Revenue	10.30%	10.68%	Due to decrease in profit and revenue
8 Return on Networth (%)	Net profits after taxes/ Average shareholders equity	6.11%	6.82%	Due to decrease in profit

*Total debts excluding lease liability.

Further please refer to note 46 of financial statements also.

12. FORWARD LOOKING STATEMENTS

Statements in this Management Discussion and Analysis Report, describing the Companys objectives, projections, estimates and expectations, may be forward looking statements within the meaning of applicable securities, laws, and regulations.

Forward-looking statements are based on certain assumptions and expectations of future events and the actual results might differ from those expressed or implied herein. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility nor is under any obligation to publicly amend, modify or revise any such forward-looking statements based on any subsequent developments, information, or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include cost of fuel, determination of tariff and such other charges and levies by the regulatory authority, changes in Government regulations, tax laws, economic developments, and such other factors.

13. DETAILS OF CHANGE IN RETURN OR NETWORTH AS ON MARCH 31, 2023

Return on net worth has decreased to 6.11% from 6.82% due to decrease in total revenue and increase in average share- holders equity during FY 22-23.