Forward looking statements
Statements in this Management Discussion and Analysis of Financial Condition and
Results of Operations of the Company describing the Companys objectives, expectations or
predictions may be forward looking within the meaning of applicable securities laws and
regulations. Forward looking statements are based on certain assumptions and expectations
of future events. The Company cannot guarantee that these assumptions and expectations are
accurate or will be realised. The Company assumes no responsibility to publicly amend,
modify or revise forward looking statements, on the basis of 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
availability and 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.
The financial statements of the Company have been prepared in accordance with the
provisions of the Companies Act, 2013 (the Act) and comply with the Companies (Indian
Accounting Standards) (Ind AS) Rules, 2015, which have been notified by the Central
Government on February 16, 2015. The Management of Reliance Power Limited ("Reliance
Power" or "the Company") has used estimates and judgments relating to the
financial statements on a prudent and reasonable basis, in order that the financial
statements reflect in a true and fair manner, the state of affairs and profit/(loss) for
the year.
The following discussions on our financial condition and results of operations should
be read together with our audited consolidated financial statements and the notes to these
statements included in the Annual Report.
Unless otherwise specified or the context otherwise requires, all references herein to
"we", "us", "our", "the Company",
"Reliance" or "Reliance Power" are to Reliance Power Limited and/or
its subsidiary companies.
Indian Power Sector, Opportunities and Threats
Universal access for consumers to affordable & reliable power in a sustainable
manner is the guiding principle for Indias Power Sector. Accordingly, Governments major
initiatives focus on:
transition from fossil fuel based energy to cleaner & greener sources of energy;
addressing stress in the thermal power sector, especially private generating companies;
strengthening distribution sector by improving operational & financial efficiency
of DISCOMs and augmenting distribution infrastructure;
continuous strengthening of transmission system for seamless transfer of power from
surplus to deficit regions ensuring timely recovery of costs due to change in law, for
entities across power supply chain; and deepening of power markets through introduction of
RTM,
GTAM, GDAM markets.
During the Financial Year 2022-23, the Indian power sector witnessed:
Less than targeted addition to installed generation capacity;
Rapid pickup of demand owing to economic rebound post relaxation of pandemic
restrictions;
Increase in Thermal PLFs to 64.15% in financial year ended 2023, an increase of 5% over
financial year ended 2022;
Narrowing of energy deficit and peaking deficits;
Increased volume of trading in power exchanges;
Continued efforts towards resolution of stressed generation assets in the private
sector;
Continued challenges facing Discoms:
O high level of Aggregate Technical and Commercial losses (AT & C Losses);
O Cost and Tariff rate gap (ACS – ARR); and O continued financial
stress and liquidity challenges.
Demand and supply outlook
On the demand side, Indias per capita power consumption is at ~1255 kWh/year (as on
March 31, 2022), which is about one-third of the worlds average ~3500 kWh/year
consumption. Growing population; increasing electrification & universal access to
power; rising per-capita usage and expansion in economic activities including penetration
of Electric Vehicles (EV) in both consumer and industrial segments, are expected to drive
growth in power consumption.
In the financial year 2023, peak power demand increased by 6.3 percent to ~216 GW,
whereas in energy terms it increased by 9.6 percent to ~1,511 BU. With the industrial and
commercial sector together accounting for nearly 50% of the countrys electricity
consumption, resumption of economic activity post relaxation of pandemic restrictions has
made a positive impact on the overall demand. Gradual and calibrated resumption of
economic activity will further support the growth of electricity demand.
Power Generation Capacity
In terms of capacity, there has been a year-on-year increase of nearly 17 GW in
installed power generation capacity (416 GW in FY23 vis-a-vis 399 GW in FY22).
There has been a progressive shift towards renewable sources (mainly solar & wind).
In the last 5 years, the share of renewable energy in the installed capacity has increased
from ~33% (~114 GW in March 2018) to ~43% (~179 GW in March 2023).
Key risks and concerns
Power sector is a highly capital intensive business with long gestation periods before
commencement of revenue streams, especially for projects using conventional technology.
Coal-based power projects have average development and construction period of 7 to 8 years
and an even longer operating period (over 25 years). Since most of the projects have such
a long time frame, there are certain inherent risks in both, internal and external
environment. The Company monitors the external environment and manages its internal
environment to mitigate the risks / concerns on a continuous basis. Some of the key areas
that need continuous monitoring within the sector are:
a) Enhanced focus on ESG norms
There has been enhanced focus on ESG norms primarily driven by environmental dimension
of ESG and climate change awareness. Indian authorities are also giving increased
attention to these norms. SEBI has come out with a circular for a detailed disclosure on
these parameters and the required data is disclosed under the Business Responsibility and
Sustainability Report as attached with the annual report. The Company is complying with
the required operating norms of power generation including following best operating
practices on the social and governance
b) Weak financial condition of electricity distribution Companies
The financial health of electricity DISCOMs is an area of key concern threatening the
very viability of the power sector. DISCOMs are the weakest link in the electricity supply
chain and have been suffering on account of operational inefficiencies; inadequate
investments in distribution network as well as lack of timely and adequate tariff
revisions to help recover costs.
Recognizing the difficulties faced by the DISCOMs, the Government has implemented a set
of comprehensive measures under UDAY (Ujwal DISCOM Assurance Yojana) to help distribution
utilities achieve operational and financial turnaround. UDAY scheme was targeted to lower
AT&C losses, reduce gap between ACS and ARR (Cost and Tariff rate) and improve
operational efficiency of DISCOMs. Additionally, efforts from Energy Efficiency Services
(EESL) to replace conventional meters with smart meters are targeted at improving billing
efficiency, leading to higher revenue realisation by DISCOMs. With experience gained from
implementation of UDAY scheme, Government is now working on rolling out a revamped
reforms-based result-linked power distribution sector scheme to support DISCOMs. The
Scheme envisages an outlay of about Rs 3 lakh crores over a duration of financial year
2022 to 2026. Key objective of the Scheme is to reduce AT&C losses to pan-India levels
of 12-15% and ACS-ARR gap to zero by financial year 2025. While these measures are
expected to benefit the sector in the long term, their effective implementation holds the
key.
Additional measures, such as privatisation of DISCOMs in union territories; and
amendment to Electricity Act to give consumer a choice of supplier, when implemented
effectively, are likely to positively impact the sector in the long run.
The turnaround of DISCOMs will help generating companies in mitigating counterparty
risks both in terms of payment security and increased demand for power.
c) Power Demand and Plant Load Factor (PLF) of Thermal Power Plants
Power demand in India has grown at a CAGR of about 5.66 percent in last 5 years. Growth
in electricity demand has been met by rapid capacity addition of thermal projects in the
earlier years. However, quick addition of renewable in the last few years and lower than
envisaged growth in demand for electricity, has led to lower PLF of thermal power plants.
However, resumption of economic activities post COVID-19 restrictions has seen a positive
impact in terms of PLF of coal fired thermal power plants which stood at 64.15% for
financial year 2023. Notwithstanding growth in renewable capacity, thermal power plants
would continue to remain the mainstay for meeting base load requirements considering the
intermittent nature of supply from renewable sources.
d) Gas - Continuing supply deficit
Viability of existing as well as newly developed gas-based power plants, aggregating to
nearly 25 GW capacity, is adversely impacted due to lack of adequate domestic gas supply
in the country. This industry-wide issue, which has led to practically entire gas-based
capacity in the country getting stranded, continues to await a long-term resolution.
e) Implementation of New Environment (Protection) Norms
With notification of the Environment (Protection) Amendment Rules, 2015, all coal-based
power plants are required to meet the revised emission norms.
For complying with the new environment norms, the developers would need to undertake
additional capital expenditure (CAPEX). In order to facilitate the smooth implementation
of the same, the Ministry of Power (MOP), vide its letter dated May 30, 2018, has issued
directions to the CERC and other State regulators (SERCs) to consider the revised emission
standards as Change in Law (CIL) and devise an appropriate regulatory mechanism to address
the impact on tariff. During financial year 2022, CERC issued framework for computing
tariff recovery to mitigate impact of Change in Law due to implementation of new
environment norms.
In the present sector context, banks and financial institutions are not forthcoming to
finance the additional capital expenditure arising from implementation of CAPEX to meet
new environment norms. Certainty in cost recovery on account of additional capital and
operational costs, under concluded long-term and medium-term PPAs, is critical to securing
financing for timely completion of additional capital expenditure.
Further, Ministry of Environment, Forest and Climate Change (MoEFCC) vide its Gazette
Notification dated Mar 31, 2021 categorized all TPPs with reference to its location and
revised the timelines for compliance of new emission norms. The same has been further
extended by 2 years vide a Gazette Notification dated Sep 05, 2022 from MoEFCC.
f) Governments thrust for future growth of Power Sector in India
In the budget, announced in February 2023, Green Growth was identified as a major
priority area for giving a direction for growth for the economy. The budget provided for
schemes like Green Hydrogen Mission, Energy Transition towards net zero objectives, thrust
on Energy Storage projects, etc. Reliance Powers operating project portfolio is well
diversified in terms of location, fuel source and off-takers. Projects key
differentiators help mitigate sectoral challenges highlighted above.
Sasan Ultra Mega Power Project, developed by Sasan Power Limited (SPL), is the most
competitive thermal power supplier for all its procurers; has a long-term Power Purchase
Agreement (PPA) in place and a strong payment security mechanism mitigating risks relating
to demand and weak financial condition of distribution companies. Further, it has a
captive coal mine, which provides complete fuel security. During the year under review,
Sasan recorded a Plant Load Factor (PLF) of 85.80%. Rosa Power Project, developed by Rosa
Power Supply Company Limited (RPSCL), operates under a cost-plus business model wherein
tariffs are determined by the State Regulator under Section 62 of Electricity Act. Rosa
Power too has a long-term PPA in place and has a three-tier payment security mechanism
mitigating demand & payment related risks. Rosa has always consistently maintained its
high plant availability, with financial year 2023 witnessing a plant availability of
85.23%.
SPL and RPSCL have been working in right earnest towards implementation of projects to
comply with new environmental norms.
Your Companys renewable portfolio is fully contracted in terms of power offtake, thus
mitigating demand risk and has suitable payment security mechanisms in place.
As brought out above, your Companys operating project portfolio is significantly
insulated from sector specific risks.
Internal Financial Control and Systems
The Company has put in place internal control systems and processes which are
commensurate with its size and scale of its operations. The system has control processes
designed to take care of various control and audit requirements. The Company has a robust
Internal Audit function which oversees the implementation and adherence to various systems
and processes. The internal audit function reviews and ensures the sustained effectiveness
of Internal Financial Controls designed by the Company. The internal audit team is
supported by the reputed audit firms to undertake the exercise of Internal Audit at
various project locations. The report of the Internal Auditors is placed at the Audit
Committee of the Board and the improvements in systems and processes are carried out where
necessary.
Risk Management Framework
The Company has also put in place a Risk Management Framework, both at the corporate as
well as at the project level, which provides a process of identifying, assessing,
monitoring, reporting and mitigating various risks at all levels, at periodic intervals.
The Risk Management process is supervised by the Risk Management Committee of the Board.
The said Committee has been continued having regard to its usefulness although it is not a
mandatory requirement pursuant to the Listing Regulations. The Committee undertakes a
review of the risks as well as the status of the mitigation plans.
Discussion on Operations of the Company
The Company is in the business of setting up and operating power projects and
development of coal mines associated with such projects. The Company has built a portfolio
of power projects and coal mines. Of the power projects in its portfolio, the projects
aggregating to ~ 5945 MW are operational while the other power projects are under various
stages of development.
a) Sasan Ultra Mega Power Project, 3,960 MW pithead coal-based Project in Madhya
Pradesh
The 3,960 MW Sasan Ultra Mega Power Project (the Sasan UMPP), the worlds largest
integrated power plant cum coal mine continued to deliver one of the best operating
performance among the peers, with a generation of ~29,764 million units at a high PLF of
85.80% Coal production from its captive coal mines was 16.31 Million Metric Tons during
the year. Including the overburden handled at 68.2 Million BCM, total volume handled at
Sasan Coal Mine during the year is 79.1 Million BCM, making it one of the largest coal
mine in the country in terms of volume handled. The power generated from the Sasan UMPP is
sold to 14 DISCOMs across 7 States under a 25 year long-term PPA.
b) Rosa, 1,200 MW coal-based power project in Uttar Pradesh
Rosa power plant completed another year with excellent operational and financial
performance. In its 11th year of full operations, the plant generated 7,511 MUs
of electricity. The entire electricity generated from the project is sold to the State of
Uttar Pradesh under a cost-plus regulated PPA.
c) Butibori, 600 MW coal-based power project in Maharashtra
The 600 MW Butibori power plant in Nagpur, Maharashtra was not operational during the
year due to protracted delays in issuance of legal/regulatory orders; lack of fuel supply
for one of the units and commercial dispute with the power procurer.
d) Vashpet, 45 MW wind farm in Maharashtra
The Company has set up a 45 MW Wind Farm in Sangli District of Maharashtra. During the
year under review, the project generated 47.24 MUs of electricity.
e) Dhursar, 40 MW Solar Photovoltaic (PV) power project in Rajasthan
Dhursar Solar Power Private Limited (DSPPL) has set up a 40 MW Solar PV Plant in
Jaisalmer district of Rajasthan. Electricity from this project is sold under a PPA for a
period of 25 years. During the year under review, the project generated 56.64 MUs of
electricity.
f) 100 MW Solar CSP in Rajasthan
Rajasthan Sun Technique Energy Private Limited (RSTEPL), a wholly-owned subsidiary, has
commissioned the 100 MW Concentrated Solar Power Project (CSP) in Jaisalmer, Rajasthan.
During the year under review, project generated 47.24 MUs of electricity.
g) Krishnapatnam Ultra Mega Power Project (the Krishnapatnam UMPP), 3,960 MW imported
coal-based Project in Andhra Pradesh
Coastal Andhra Power Limited (CAPL), a wholly owned subsidiary of the Company is
responsible for development of imported coal-based Krishnapatnam UMPP. The Project has
been facing viability challenges consequent upon changes in the regulations in Indonesia
from where coal was intended to be imported for the Project. As the issue could not be
resolved through mutual discussions with Procurers and Procurers issued a notice of PPA
termination & demanded liquidated damages, the Company sought to initiate arbitration
and approached Honble Delhi High Court (March 2012). Following the order by Division
Bench of Honble Delhi High Court (January 2019), the Procurers encashed the bank
guarantees available with them and recovered Rs 300 Crore as the liquidated damages. In
accordance with the direction of the Honble Delhi High Court, CAPL filed a petition in
CERC. Pursuant to provisions of Share Purchase Agreement for acquisition of CAPL, the
Company has approached Power Finance Corporation, the nodal agency which facilitated
international competitive bidding for Krishnapatnam UMPP, for buyback of CAPL. Currently,
key legal matters pertaining to CAPL, which are pending before the courts are: (i) Buyback
of CAPL - Honble Delhi High Court; and (ii) Resumption of CAPL land - Honble High Court
of Andhra Pradesh at Amaravati.
h) 3,960 MW coal-based power project in Madhya Pradesh
Chitrangi Power Private Limited (CPPL), a wholly owned subsidiary of the Company, had
taken up development of a 3960 MW coal-based power project in Madhya Pradesh. In view of
the current outlook on thermal power capacity addition, implementation of this project has
been kept in abeyance.
i) Samalkot Power Project (SMPL)
In the absence of availability of domestic natural gas, entire gas-based generation
capacity in the country including SMPL is stranded. Company has relentlessly pursued
opportunities to monetize SMPL equipment and towards this end, it had entered into a
Memorandum of Understanding (MOU) with the Government of Bangladesh (GoB) for developing a
gas-based project of 3000 MW capacity in a phased manner. Pursuant to the above, Reliance
Bangladesh LNG and Power Limited (RBLPL), subsidiary of the Parent Company had taken steps
to conclude a long-term PPA for supply of 718 MW (net) power from a combined cycle gas
based power plant to be set up at Meghnaghat near Dhaka in Bangladesh (Phase-1). The
project agreements (comprising Power Purchase Agreement, Land Lease Agreement, Gas Supply
Agreement and Implementation Agreement) were signed in September 2019.
Parent Company also concluded agreements with JERA Power International (Netherlands) -
a subsidiary of JERA Co. Inc. (Japan) to invest 49% equity in RBLPL in September
2019. JERA owns/ has domestic investments in 27 power projects with ~80 GW of generating
capacity in Japan and nearly 10 GW of generating capacity overseas (including projects
under development). JERA also has a large portfolio of 11 LNG terminals and 20 LNG
carriers. SMPL had signed an Equipment Supply Contract in March 2020 to sell one
module for development of the Phase-1 project in Bangladesh. The export of the module has
been completed and proceeds from equipment supply have been used to pare the debt from
EXIM Bank of United States.
Your Company continues to pursue opportunities for monetization of remaining two
modules of SMPL.
j) Hydroelectric Power Projects
The Company undertook the development of various hydroelectric power projects,
aggregating to 3438 MW capacity, located in Arunachal Pradesh, Himachal Pradesh and
Uttarakhand. These projects are in different stages of development. Hydroelectric power
projects by nature have long gestation periods and require clearances from various
authorities before commencement of construction activities. Some of these projects have
achieved significant development milestones. However, given the current hydro power sector
scenario, expected tariffs of hydro projects and consequent reluctance of DISCOMs to enter
into long-term PPAs for hydro power, the development efforts on these projects have been
kept in abeyance. The Company is exploring opportunities for monetization of the
hydroelectric power projects.
k) Coal Mines
The Company has been allocated coal mines in India along with the UMPP. The Moher and
Moher Amlohri Extension coal block, a captive coal block allocated to Sasan Power Limited
(SPL), is fully operational.
During the year 2015-16, the Government of India cancelled the allocation of Chhatrasal
Coal Block to SPL and restricted annual coal production from Moher and Moher Amlohri
Extension coal mine to 16 Million Metric Tonnes per annum. The Company has challenged the
above directions of the Ministry of Coal (MoC) in Honble High Court of Delhi by way of a
Writ Petition, which is pending. Based on representations of SPL and recommendations made
by the Inter Ministerial Committee (IMC), MoC has been relaxing the restriction on an
annual basis, which ensures complete fuel security for Sasan UMPP.
The Company also has coal mine concessions in Indonesia.
l) Coal Bed Methane (CBM) Blocks
The Company had stakes in four Coal Bed Methane (CBM) blocks. All four blocks have
since been relinquished.
Health, Safety and Environment (HSE) and Corporate Social Responsibility (CSR)
The Company attaches utmost importance to the operational safety standards at all its
installations. Necessary proactive and preventive measures are regularly undertaken to
ensure that the standards are followed for the safety of employees and equipment. Both
external and internal safety audits, as well as mock drills are conducted time to time to
gauge emergency and crisis management preparedness.
Corporate Social Responsibility has always been an integral part of Reliance Groups
vision. The Company firmly believes in the commitment to all its stakeholders. Special
emphasis is laid on empowering local communities around all the business units. The
Company undertakes social interventions in the field of Healthcare, Education, Rural
Transformation, Swachh Bharat Abhiyan and Environment. The programmes are designed after
identifying the needs of the community and are integrated into the annual operating
business plans with measurable goals. Our CSR programmes have received numerous awards and
accolades over the years from renowned organisations like FICCI, World CSR Congress,
Bombay Chambers of Commerce & Industry (BCCI), India CSR and The CSR Journal.
Human Resources
The Company strongly believes that its employees are the most valuable asset and the
strategic differentiator. With this focus in mind, Reliance Power has taken various
initiatives towards aligning its HR processes with its business strategy. Our endeavour is
to provide a work environment where continuous learning and development takes place to
meet the changing demands and priorities of the business.
The Company has a rich blend of millennial and experienced employees. We have 1,305
highly trained and experienced professionals pan India. We take immense pride in the
technical and functional excellence of our employees. We attach much importance to
learning and development of our employees. Our well laid down career progression plans
help in seamless transfer of knowledge to the younger generation and shape them as future
leaders.
Discussion on Financial Condition and Financial Performance
An extract of the Consolidated Profit and Loss is provided below:
Rs in lakhs
Particulars |
Year Ended March 31, 2023 |
Year Ended March 31, 2022 |
|
|
Restated |
| Revenue from operations |
7,54,269 |
7,50,311 |
| Other Income |
34,005 |
18,362 |
Total Income |
7,88,274 |
7,68,673 |
| Cost of Fuel consumed |
3,65,476 |
3,02,580 |
| Employee Benefit Expenses |
17,881 |
17,374 |
| Finance Cost |
2,52,661 |
2,72,082 |
| Depreciation / Amortisation |
1,03,273 |
1,07,728 |
| General, Administration & Other Expenses |
1,82,414 |
1,56,858 |
Total Expenses |
9,21,705 |
8,56,622 |
Profit before exceptional items and tax |
(1,33,431) |
(87,949) |
| Exceptional items |
1,03,686 |
- |
Profit/(Loss) after exceptional items and before tax (continuing
operations) |
(29,745) |
(87,949) |
| Tax Expenses |
6,391 |
4,373 |
Profit/(Loss) after Taxes (continuing operations) |
(36,136) |
(92,322) |
| Profit/(Loss) after Tax (discontinuing operations) |
(4,153) |
860 |
Profit/(Loss) after Tax (continuing & discontinuing operations) |
(40,289) |
(91,462) |
| – Profit attributable to non-controlling interest |
6,788 |
4,938 |
| – Profit attributable to owners of the Parent |
(47,077) |
(96,400) |
| EPS (Rs) (basic and diluted) |
(1.352) |
(2.984) |
Key financial ratios based on Consolidated Financials are presented below:
Particulars |
Year Ended March 31, 2023 |
Year Ended March 31, 2022 |
|
|
Restated |
| Debtors Turnover (Days) |
130 |
156 |
| Inventory Turnover (Days) |
60 |
63 |
| Interest Coverage Ratio* |
0.5 |
0.7 |
| Current Ratio |
0.3 |
0.3 |
| Debt Equity Ratio |
1.8 |
1.9 |
| Operating Profit Margin (%)* |
25.0 |
36.5 |
| Net Profit Margin (%)* |
(18.3) |
(11.9) |
| Return on Networth (%)* |
(12.9) |
(8.0) |
* Lower due to increase in operating cost and provision for impairment
+91-9892691696
