torrent power ltd share price Management discussions


Indias power sector remained resilient and continued to grow during FY23, even amid global uncertainties. Power demand witnessed a growth rate of ~9.5%, highest in the past decade. The surge in power demand was mainly due to normalcy in economic activities after COVID-19 induced contraction last year. However, due to global uncertainties which led to higher fuel cost the generation failed to meet the growing demand, resulting in power shortages and peak power deficit rising to 4% in FY23 against 1.2% last year. Electricity prices soared in tandem with rising power demand and inflated fuel prices. Average electricity prices in Day Ahead Market (DAM) increased significantly to I 7.8/ unit in Q1 FY23 compared to I 3.2/unit during the same period last year and later cooled as the global conditions eased. As a result of steady growth in energy demand and restrained capacity addition in the thermal segment, average thermal Plant Load Factor (PLF) in FY23 improved to 64% from 59% last year.

Peak power demand reached an all-time high on May 17, 2023 at 220 GW and is expected to go up to 225-230 GW in FY24. With power demand expected to further rise this year, some key measures taken by the government to ensure power availability include: (i) Direction to all thermal plants using imported coal to operate at their full capacity by invoking Section 11 of the Electricity Act, 2003; (ii) Launch of High Price Day Ahead Market (HP-DAM) and Surplus Power Portal (PUShP) to make use of gas-based generating stations, imported coal-based generating stations and battery-energy storage systems; (iii) Utilization of ~9 GW of gas-based power generation capacities for peak load; and (iv) Commissioning of ~2,920 MW new thermal power plants. Further, to protect buyers from paying exorbitantly high prices during high demand situations, even when the cost of generation is marginal, Central Electricity Regulatory Commission (CERC) reduced the price cap in power exchange to I 10/unit.

Thrust on renewable segment continued in view of Indias “Net Zero Pledge” to achieve net-zero emissions by 2070. While India had originally targeted to achieve 40% of installed capacity from non-fossil fuels by 2030, such level has already been achieved which is commendable. Government now targets to take this capacity to 50% by 2030. We are the only country among the G20 nations which is on track to achieve targets under the Paris Agreement.

On the other hand, India missed its ambitious target of installing 175 GW of Renewable Energy (RE) capacity by the year 2022 by 31%. In FY23, 15.3 GW of RE capacity [13 GW Solar & 2 GW Wind] was installed against 15.5 GW [14 GW Solar & 1 GW Wind] last year. The pace of capacity addition remained slow due to uncertainties on account of higher input costs, availability of land, increase in interest rates, etc. Further, delays in signing of Power Purchase Agreements

(PPAs) by the state distribution companies (discoms) remain a concern for the sector. Solar segment contributed 53% of the capacity and has been the mainstay of RE growth, while contribution of wind segment has been relatively limited since FY17. The method of reverse auction led to continuous fall in tariffs, at times to an unsustainable level, with some of the projects not taking-off and some under-construction projects coming to a halt. In January23 the government eliminated the reverse auction method for wind power projects and instead decided to offer capacity through a single-stage closed-envelope bidding process. This step is expected to lead to higher wind capacity additions in the coming years. The renewable sector continued to attract foreign investments even amid inflationary pressures and restrictive monetary policies across the globe. In FY23, Indian RE sector attracted Foreign Direct Investment (FDI) of I 206.7 billion against I 121.05 billion last year. The commitment towards climate change goals and favourable policy support from government further strengthened the investment prospects in this sector. With the increasing push on Environmental, Social and Governance (ESG) concerns from investors coupled with reduction in cost of projects and thrust given to the sector by the government, Commercial & Industrial (C&I) customers are emerging as potential opportunity for the RE developers. C&I segment could drive growth of RE projects as ~49% of the electricity generated in India is consumed by C&I users while their present share of RE consumption is less than 5%.

Reliance on thermal power generation, especially coal, is expected to continue in India due to its ability to operate round-the-clock and to provide base load. To provide equal importance to renewables and to meet growing demand while focusing on reducing Green House Gas (GHG) emissions, Government of India (GoI) has mandated all upcoming coal/lignite-based power plants to source/ establish a minimum of 40% of their capacity from RE as Renewable Generation Obligation (RGO). In FY23, GoI approved the National Green Hydrogen Mission with an initial outlay of I 19,744 Cr with an aim to facilitate demand creation, production, utilization and export of Green Hydrogen. Further, the focus of the Government could also be seen on new energy areas such as Battery Storage, Biofuels and Compressed Gas. The aggressive policies of Indian Government towards rapid deployment of renewables and robust framework for energy efficiency programs have made India highest-ranked G20 country on Climate Change Performance Index-2023.

Expansion of transmission grid is a prerequisite to meet growing power demand and to optimally use the generation resources. While the transmission capacity addition during FY23 remained muted, Government launched I 2.44 trillion scheme, with an objective of evacuating power from large-scale renewable projects and to seamlessly

transfer electricity from power-surplus regions to power- deficit regions. Ministry of Power (MoP) is working to make the transmission sector smarter and future-ready with modern technological and digital solutions. This will not only reduce transmission losses but also improve grid stability by providing backup power during emergencies and thereby ensuring the availability of power even during natural disasters and preventing blackouts.

Timely tariff rise to discoms is extremely essential to manage cashflow mismatch and to ensure timely payments to generators. This aids the power sector in performing efficiently. The latest announcement in June22 by MoP to reschedule outstanding discom dues in several EMIs under Electricity (Late Payment Surcharge and Related Matters) Rules to reduce the outstanding dues of discoms, seems to be a relief for the generation segment. This scheme which is aimed to bring payment discipline among the discoms, given the risk of losing short and eventually medium/long term access to power supply, has worked well as the total discom dues have come down to 1 0.9 trillion in March23 from 11.4 trillion in May22. The government expects discoms to clear all dues by FY26. Such dues have been above 1 1 trillion


The Company is an integrated power utility engaged in the businesses of electricity generation, transmission and distribution with operations spread across the states of Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Uttar Pradesh, Telangana and Union Territory (UT) of Dadra & Nagar Haveli and Daman & Diu.


The Company has total generation capacity of 4,896 MW comprising of Thermal and Renewable generating assets (including 736 MW of renewable capacity in pipeline).

A. 3,092 MW Thermal Generation

i. 362 MW Coal-fired Thermal Generation

The 362 MW AMGEN Power Plant at Ahmedabad in Gujarat is an embedded generation unit for the licensed distribution area of Ahmedabad. It is regulated by Gujarat Electricity Regulatory Commission (GERC) which allows cost plus post-tax Return on Equity (RoE) of 14% as part of the regulated tariff.

ii. 2,730 MW Gas-fired Thermal Generation

The Company has three gas-based plants namely 1,147.5 MW SUGEN Mega Power Plant, 382.5 MW UNOSUGEN Power Plant and 1,200 MW DGEN Mega Power Plant which are

since September20. Additionally, the efficiency of the state discoms have also improved after Ministry of Power revised the norms of lending agencies and restricted finance to loss making discoms without any action plan to improve within specific timeframe. This led to significant improvement in Aggregate Technical & Commercial losses (AT&C) numbers which in turn led to reducing the gap between Average Cost of Supply (ACS) and Average Realizable Revenue (ARR), which are considered as key indicators of performance for discoms. Governments thrust on use of automation and smart metering including prepaid metering is expected to play a pivotal role in distribution segment.

In the coming years a sustained growth in electricity demand will continue dependency on thermal capacities with a sizeable share, despite the strong policy focus and growing capacity addition in the RE segment. With aggressive climate change targets, the RE segment is poised for continuing growth. To encourage RE segment, cutting-edge storage technologies need to be adopted and implemented at a faster pace to make power network more resilient.

built with highly efficient power generation technologies. SUGEN and UNOSUGEN are regulated by CERC which allows cost plus post-tax RoE of 15.5% as part of the regulated tariff structure. 76% of SUGEN and UNOSUGEN capacities are tied up under long-term PPAs. 1,200 MW DGEN Power Plant operates sparingly, balancing intermittent demand and high gas cost.

B. 1,804 MW Renewable Generation

i. 1,068 MW Operational Projects

With addition of 50 MW solar capacity acquired during the year, the total operational renewable generation capacity of the Company reached 1,068 MW (263 MW Solar and 805 MW Wind) which is tied up under long-term PPAs. 491 MW or 46% of operational capacities have attractive preferential feed-in-tariff based PPAs with the Company operated distribution utilities.

ii. 736 MW Upcoming Projects

• 300 MW Solar Power Project

The Company had won 150 MW in reverse auction and further 150 MW of capacity was awarded under green-shoe option in competitive bidding conducted by distribution arm of the Company in FY21 to

commercial operation of these projects is expected in FY24. C&I segment is fast growing and has good returns potential.


The Company is the licensed operator for electricity distribution in major cities of Gujarat i.e. Ahmedabad, Gandhinagar, Surat and Dahej SEZ and in the UT of Dadra & Nagar Haveli and Daman & Diu (DNH & DD), aggregating to ~1,028 sq kms of area. It is also developing a state-of-the-art distribution network as a licensee in Dholera Special Investment Region (DSIR) spanning 920 sq kms area. DSIR is part of the prestigious Delhi-Mumbai Industrial Corridor (DMIC) Project and is being developed in phases as a manufacturing hub on the concept of plug-and- play model. DSIR will have infrastructure facilities comparable to any smart industrial city in the world. DSIR represents a long-term growth opportunity for the Company. The licensed distribution businesses of the Company in Gujarat are regulated by GERC, which allows cost plus post-tax RoE of 14% as part of a regulated tariff structure. The licensed distribution business in the Union Territory of DNH & DD is regulated by Joint Electricity Regulatory Commission (J ERC) which allows cost plus post-tax RoE of 15.5% for distribution wires business and 16% for retail supply business as part of the regulated tariff structure.

service Renewable Purchase Obligations (RPO) at a tariff of I 2.22 per kWh for a period of 25 years. The scheduled commissioning date has been extended till March24 in view of force majeure situation arising on account of COVID and resultant supply chain disruption.

The Company has progressed well on the project with 75% land acquired and connectivity approval received. Orders for supply of modules as well as inverters have been placed. Laying of 220kV high tension (HT) lines is in progress. The project is being implemented in Gujarat by Torrent Saurya Urja 2 Private Limited, a wholly owned subsidiary of the Company.

• 115 MW Wind Power Project

The Company had won 115 MW Wind Power Project under the SECI V auction held in FY19 at a tariff of I 2.76 per kWh for a period of 25 years. 27 MW of the capacity has been commissioned on May 27, 2023 and the balance capacity is expected to be commissioned progressively.

The Project has scheduled commissioning date of October 28, 2022. There is delay due to uncontrollable factors, for which, the Company has requested SECI/MNRE for grant of extension in Scheduled Commercial Operation Date (SCOD). The project is being implemented in Gujarat by Torrent Solargen Limited, a wholly owned subsidiary of the Company.

• 300 MW SECI XII Wind Power Project

The Company, during the reporting year, won 300 MW Wind Power Project under SECI XII auction at a tariff of I 2.94 per kWh for a period of 25 years with schedule commissioning by March25. The project is being implemented in Karnataka by Torrent Saurya Urja 2 Private Limited, a wholly owned subsidiary of the Company.

• ~21 MW C&I Solar Projects

The Company through its various Special Purpose Vehicles (SPVs) has tied-up with C&I consumers across the country for cumulative capacity of ~21 MW under Behind the Meter and Captive Arrangement with PPAs tenure ranging from 15 years to 25 years. The commencement of

During FY23, the Company has been granted parallel distribution license for distribution and supply of electricity in the area of Mandal Becharaji Special Investment Region (MBSIR), spread over total area of ~102 sq kms for a period of 25 years. MBSIR is also a part of DMIC project and is being developed as an automobile hub. Uttar Gujarat Vij Company Limited (UGVCL) is the incumbent licensee and will continue to remain a licensee; the consumers, however, will have an option to choose one of the licensee for power supply. The estimated load in the region is 1,150 MW. Capex of ~1 460 Crore is expected to be incurred in the next 5 years. Currently the matter is sub-judice as Gujarat Urja Vikas Nigam Limited (GUVNL) & UGVCL have filed two appeals challenging GERCs order for grant of license to the Company.

The Company also operates as a franchisee (of the license holder) for electricity distribution in the cities of Bhiwandi, Agra and Shil-Mumbra-Kalwa (SMK) aggregating to 1,007 sq kms of area. The term of the franchise agreement for Bhiwandi is up to 2027, for Agra is up to 2030 and for SMK is up to 2040, which may be renewed on expiry. The franchised distribution businesses of the Company are governed

by the respective Distribution Franchise Agreements executed between the Company and State discoms as the license holders. The main thrust of the Company is to reduce AT&C losses, improve electricity supply and customer services in the franchised areas.

The Company distributes nearly 28 billion units of power to over 4 million customers and caters to a peak demand of over 5,280 MW.


The Company currently operates 354 km of 400 kV double circuit transmission lines and 128 km of 220 kV double circuit transmission lines for transmission of power generated at our gas-based power plants to various off-take centres. The operations are


conducted through Torrent Power Grid Limited (TPGL), a subsidiary of the Company.

During the year, TPGL received communication from Central Transmission Utility of India (CTU) that it has been awarded a transmission scheme for evacuation of 4.5 GW RE power under Regulated Tariff Mechanism (RTM) model. Approval u/s 68 of Electricity Act, 2003 has also been obtained. Project consists of laying 400 kV D/C line of 60 km and bay upgradation from 2,000 Amp to 3,150 Amp with expected implementation timeline of 24 months. The project will be regulated by CERC which allows cost plus post-tax RoE of 15.5% as part of the regulated tariff structure.

In addition to above, the Company has non-material electrical cables manufacturing business.


The following tables set forth the key operational parameters:

A. Thermal Generation




FY23 FY22 FY23 FY22 FY23 FY22

PAF (%)

93.40 92.05 98.04 92.74 99.09 91.22

PLF (%)

88.23 76.88 15.01 44.31 1.74 41.09

Generation (MUs)

2,565 2,222 1,467 4,332 57 1,339

Note: DGEN gas-based power plant did not operate during the year.



During the year, AMGENs PLF improved to 88% from 77% last year due to rise in demand leading to higher off-take by long-term beneficiaries. Despite acute coal shortages throughout India, AMGEN managed to get allocated domestic coal as per Fuel Supply Agreement (FSA) which aided in keeping variable cost under control.

Despite frequent starts/stops due to infrequent and inconsistent demand, gas-based generation

plants were able to maintain a healthy Plant Availability Factor (PAF). However, with continued Russia-Ukraine conflict and other factors, gas prices in international markets remained high for major part of the year leading to lower overall utilisation of plant capacities - both SUGEN and UNOSUGEN. The resultant surplus tied-up LNG was sold at attractive rates.

B. Renewables

Operational Projects



FY23 FY22* FY23 FY22*

Capacity (MW)

263 138 804.5 648.5

PLF (%)

18.69 16.82 24.33 27.12

Net Generation (MUs)

414 203 1,715 1,541

*New renewable acquisitions have not been considered as the plants were acquired towards the end of the financial year.

Wind PLF in FY23 was lower as compared to FY22 due to drop in wind speed as well as non-operation of 50 MW of capacity on account of EHV tower failure and Right of Way (ROW) issues. Solar PLF was higher mainly due to higher irradiation in FY23.

C. Licensed Distribution


Ahmedabad & Gandhinagar


Dadra & Nagar Haveli and Daman & Diu (DNH & DD)


FY23 FY22 FY23 FY22 FY23 FY22" FY23 FY22

Area (sq kms)

~356 ~52 ~603 - ~17

Sales (MUs)

8,274 7,684 3,692 3,337 9,635 - 711 659

Growth (%) over PY

7.68 10.64 NA 7.84

Distribution Loss (%) - Actual

3.74 4.17 3.17 3.38 1.59 - 0.48 0.45

Distribution Loss (%) - Normative

6.03 6.24 3.54 3.54 3.35 - 0.43 0.43

Consumer Base (Lakh, except Dahej)

20.71 20.39 6.32 6.27 1.57 - 120* 117*

Peak Demand (MW)

1,900 1,646 742 689 1,281 - 106 93

*Represents number of industrial consumers; Dahej licensed area comprises the Dahej SEZ area, which is made up of export-oriented manufacturing units.

"Operations of DNH & DD were taken over w.e.f. April 1, 2022

Demand at licensed distribution areas witnessed high growth, mainly driven by industrial and commercial category consumers as the trend of economic activities came back to normal post COVID-19, coupled with increase in number of consumers and decrease in open access on back of rising power prices. Demand from residential consumers also observed surge because of stretched summer and fresh demand from new consumers.

Distribution losses at Ahmedabad and Surat licensed distribution operations has decreased considerably in FY23 as compared to FY22 through activities like network improvement, slum electrification, mass raids in theft prone areas, etc. As a result of continuous efforts, Company was able to limit the distribution losses way below normative levels.

Major capex activities were carried out during the year for reliability improvement of the distribution network and distribution loss reduction at the newly acquired distribution licensed area of Dadra & Nagar Haveli and Daman & Diu. Various reliability parameters like SAIFI (i.e. Average No. of Interruption per Customer), SAIDI (i.e. Customer Hours Lost), etc. have improved and actual distribution loss remained below the normative level.

Tariff for FY24 (including true-up for FY22) was determined by GERC vide order dated March 31, 2023 for Ahmedabad, Surat and Dahej SEZ

licensed areas. No tariff hike has been allowed for these licensed areas. However, the Honble Commission has approved rise in base Fuel and Power Purchase Price Adjustment (FPPPA) for Ahmedabad from I 2.02/unit to I 2.71/unit; for Surat from I 1.48/unit to I 2.17/unit and for Dahej SEZ from I 0.54/unit to I 1.17/unit. The hike in base FPPPA is in line with rise in approved base power purchase cost. The Companys profits are not directly impacted by the tariff order, as its returns in licensed distribution businesses are determined by 14% post-tax RoE as per the tariff regulations. The tariff order results in creation of cashflow surplus/deficit based on annual costs incurred, which is settled through quarterly FPPPA and true-up mechanism in the subsequent years.

The aggregate amount of regulatory gap of past periods approved and expected to be approved by GERC and JERC as on March 31, 2023 is I 1,978 Crore and I 29 Crore respectively and the same is appropriately accrued in the financial statements. In addition, aggregate amount of regulatory gap of I 701 Crore is under dispute at various forums (primarily comprising of claims on account of carrying costs) and is not accrued in the financial statements; the same will be accrued in the financial statements of the period in which such disputes are determined by the appropriate statutory authorities.

Operations are yet to commence at Dholera licensed area and currently the focus is primarily

on graded planning and development of an efficient distribution network involving setting up of basic infrastructure and provision of temporary construction power to new industries to be set up. Based on development plans of the

DSIR Authority, an investment of about I 1,200 Crore is envisaged over 10 years to cater to demand of about 425 MVA out of which approx. I 205 Crore has been incurred till FY23.

D. Franchised Distribution

Bhiwandi Agra


FY23 FY22 FY23 FY22 FY23 FY22

Area (sq kms)

~721 ~221 ~65

Sales (MUs)

3,552 3,094 2,015 1,784 519 440

Growth (%) over PY

14.81 12.92 17.96

Distribution Loss (%)

10.00 11.64 9.49 12.10 33.48 40.48

Consumer Base (Lakh)

3.79 3.62 4.99 4.87 2.95 2.75

Peak Demand (MVA)

595 566 510 472 146 132

The Franchised Distribution sales for FY23 were higher as compared to FY22 which was partly due to pent up demand which was affected by COVID-19 restrictions. In addition, the sales increased during the current year on account of higher demand driven mainly by residential, power loom and industrial consumers.

Significant reduction in distribution losses was observed at all the franchised distribution areas through loss reduction activities like surveillance & vigilance, theft deterrent systems, law enforcement against illegal connections, along with network improvement activities like distribution transformer cleaning, HT/LT network

revamping, meter replacement and service revamping. Agra franchised distribution area achieved a remarkable milestone of sub 10% distribution loss with a reduction of 2.61% as compared to FY22.

The collection efficiency is showing continuous improvement due to vigilance activities, disconnection drives and pickup in economic activities. Bhiwandi has achieved collection efficiency of 100.41% and Agra has achieved collection efficiency of 100.06%. Despite challenges, SMK achieved collection efficiency of 101.07% and led to a downward trend in AT&C loss.

(I in Crore)


FY23* FY22 Change in %

Revenue from Operations

25,694 14,258 80%

Fuel/Power Purchase/Material Cost

19,134 9,077 111%


6,560 5,181 27%

Other Income

382 235 63%

Other Expenses

1,802 1,590 13%


5,141 3,826 34%

Finance Cost

818 628 30%

Depreciation and Amortization Exp.

1,281 1,334 (4%)

Other Comprehensive Income / (Expense)

10 3 233%

Profit Before Tax and Exceptional Items

3,051 1,867 63%

Exceptional Items

- 1,300 (100%)

Profit Before Tax

3,051 567 438%

Tax Expense

880 106 730%

Total Comprehensive Income

2,171 461 371%

including DNH & DD which was taken over w.e.f. April 01, 2022


The key financial data from the Statement of Profit and Loss is set out below:

The Profit Before Tax for the year was higher by 63% as compared to previous year. Profitability improved mainly due to recent acquisitions:

a) Licensed distribution business of DNH & DD; and

b) 281 MW of renewable capacities

Moreover, the key operating drivers of existing distribution business namely higher volumes, lower distribution losses and increased RoE on account of new capex were also positive and contributed to the increase in contribution. On the other hand, reduced demand from long-term beneficiaries as well as merchant power mainly due to high gas cost, led to a drag on the contribution levels. Such loss was partially offset by sale of RLNG.

Finance cost of the Company increased mainly on account of new borrowings.

Further, last year the bottom line of the Company was affected due to non-cash charge on account of impairment loss on carrying amount of DGEN power plant by I 928 Crore (net of deferred tax reversal).

Liquidity, Capex and Debt Positions

The Companys liquidity, including mutual fund investments and deposits with banks/financial institutions, was I 883 Crore at the beginning of the year. Liquidity as at the end of the year was I 1,143 Crore, an increase of I 260 Crore. For the year:

• net cash generated from operating activities was I 2,724 Crore

• borrowings including short term debt net of repayment was I 1,394 Crore and

• net cash utilised for (a) capital expenditure I 2,555 Crore; (b) dividend distribution I 1,062 Crore; and (c) payment for acquisition of subsidiaries I 241 Crore; leaving a closing liquidity balance of I 1,143 Crore.

During the year, the Company incurred capital expenditure (i.e. capitalisation, capital work- in-progress and capital advances) of I 2,938 Crore majorly towards improvement of existing network at our distribution areas and expansion of renewable businesses.

The long term debt of the Company at the year-end was I 10,521 Crore, net increase of I 2,107 Crore over the previous year (new debt raised I 3,812 Crore less repayment of debt I 1,705 Crore). The weighted average rate of interest at the year-end was 8.11% with repayment profile as under:

(I in Crore)

Financial Year





2024-25 to 2027-28


2028-29 to 2031-32


2032-33 to 2035-36


2036-37 to 2039-40




The Company is rated by leading Credit rating agencies - CRISIL and India Ratings and the long term rating and short term ratings are as under:

• Long term rating : CRISIL AA+ / Stable and IND AA+/ Stable

• Short term rating : CRISIL A1+ and IND A1+

The following table sets forth key financial ratios based on consolidated financials:




Explanation in case of deviation of > 25%

Debtors Turnover Ratio

13.35 (~27 days)

9.43 (~39 days)

Debtors Turnover Ratio has improved by 42% as compared to previous year on a reported basis mainly due to RLNG sales and the addition of new distribution area of DNH & DD this year.

Interest Coverage Ratio



Current Ratio



Current Ratio has improved by 32% as compared to the previous year mainly due to repayment of current borrowings and higher regulatory assets during the year on account of higher fuel price.

Long Term Debt to Equity Ratio



Net Debt to EBITDA






Explanation in case of deviation of > 25%




EBITDA Margin decreased by 26% as compared to previous year mainly due to acquisition of new licensed area of DNH & DD.

Net Profit Margin



Return on Net Worth



Return on Net Worth improved by 44% as compared to previous year mainly due to increase in Profit After Tax (PAT) on account of reasons explained in preceding para.

*Excluding exceptional item pertaining to DGEN plant impairment in FY22


Key risks and concerns in the businesses of the Company

are briefly explained below:

• The Company has operational gas-based power generation capacity of 2,730 MW, out of which 1,163 MW is tied up as on March 31, 2023 under long-term PPAs and balance 1,567 MW untied capacity is dependent on shortterm power contracts. During the year, certain portion of such capacity remained unutilised for want of short-term power contracts particularly in view of high gas prices.

The Company has built capabilities to import LNG from international markets at efficient prices to operate its power plants. However, such prices are subject to fluctuations and associated foreign exchange risks, geopolitical and supply-demand mismatch risks, consequent to which, there would be periods during which power from these plants would be uncompetitive.

The fuel contracts of the Company contain Take or Pay/ Use or Pay/ Ship or Pay obligations. Given the volatility in the LNG market, going forward there could be a potential liability on the Company to pay the obligation charges as defined in the contracts, considering the current tie-up. Mitigation efforts are being made to reduce the impact of these adverse implications.

The Company is making efforts to get PPAs for its unutilised gas power capacity. With the need of power during summer peak, Government has come out with a scheme to supply gas-based power during summer crunch period, and we have been awarded a contract to supply power based on competitive bidding. However, large available coal-based capacities and Governments thrust to increase renewable generation capacity in the country coupled with falling tariffs of renewable power pose a risk to the Companys uncontracted gas-based generation capacity.

• The Companys 362 MW coal-based power plant (AMGEN) was required to comply with stricter emission norms by

December22. AMGEN is compliant with all environmental norms except SOx (Sulphur Oxide). On June 5, 2022, Union Ministry of Environment, Forest and Climate Change (MoEFCC) revised the emission norms, which allows AMGEN to operate till December 31, 2027 without SOx compliance with an undertaking to retire the plant on or before December 31, 2027. If the plant continues to operate beyond December 31, 2027, environment compensation charge of I 0.40/kWh will be imposed with effect from January 1, 2025. Later, on January 20, 2023, CEA in a letter to Ministry of Power suggested to allow all old thermal power plants to run up to the year 2030 by doing necessary Renovation and Modernization considering the expected demand scenario.

To meet with the cyclic variations in generation and demand gaps due to increase in renewable energy generation, CEA has mandated flexible operation for all coal-based power plants, under which all coal-based power plants have to become capable of minimum load operation with defined ramp rate. AMGEN has initiated for feasibility study in this regard.

• The Companys licensed distribution business faces the risk of delay in recovery of some part of cost of supply due to regulatory stipulations. The unrecovered and undisputed regulatory claim as at year end was I 2,007 Crore, recognised in the financial statements for the year. While such recoveries are permitted with carrying costs for delayed recovery, the same may affect the cash flows of the Company.

I n addition, regulatory disputes also cause delay in recovery of some part of the cost of supply. Such disputed regulatory claim as at the year-end was I 701 Crore, which is not recognised in the financial statements for the year.

Competition in the distribution sector is expected to increase due to Governments emphasis on multiple

distribution licensees in the same area. The Electricity (Amendment) Bill, 2022 introduced in Lok Sabha provides for the same.

• In terms of upcoming projects, the Companys renewable business faces the risk of high commodity price including module prices leading to increased project cost. As indigenous module manufacturing capacity is insignificant, solar projects are mainly dependent on imported modules resulting in import and currency risk. Land acquisition is another major challenge in renewable energy business faced by all developers causing delay in many projects.

In terms of operational projects, stringent renewable scheduling and forecasting guidelines considering unpredictable weather forecast results into penalties



SUGEN and UNOSUGEN plants are backed with long term PPAs for 76% capacity. DGEN plant is operated intermittently for supply of power through merchant power market during period of power supply deficit, provided affordable natural gas and/or RLNG is available.

LNG prices have seen extreme volatility and remained high in calendar year 2021 (around $17/mmbtu) as well as in calendar year 2022 (around $32/mmbtu) as against historical prices in the range of $5-$10/ mmbtu. Since Q4 FY23, the prices have witnessed a reducing trend and are currently below $10/mmbtu. Demand is anticipated to remain lower mainly due to a warmer peak winter in the US, Europe and China and sufficient inventory levels. On the other hand, supply improved towards the end of FY23 due to restart of one of the largest LNG export terminals of USA, which was non-operational since June22. Going forward, prices for natural gas are likely to ease given the decline in demand and increase in supply. However, the uncertainty of gas flow from Russia to Europe due to geopolitical tension, economic recovery in China and intensity of summer may play a crucial role.

With the growing demand for power and above cited limitations faced by gas-based generation facilities, coal-based generation looks unavoidable for 24x7 reliable power. Coal-based power plants ability to supply power during peak power demand either as base power or as off-peak power is greatly valued.

for no fault of developers. Further, long receivable cycle of revenue from various state discoms adds pressure on cashflows.

• The constantly evolving threat of cybercrime remains as one of the bigger concern for the businesses. As a measure to counter/reduce cybercrime incidents, the Company has taken up simulation-based awareness program for all users to ensure effectiveness of IT awareness. The Company has availed cyber insurance to combat any financial loss arising due to a cyber-attack. The Company is following NIST framework published by the US National Institute of Standards and Technology for associated risks. Further, Zero Trust Architecture Network is being implemented with focus on three pillars - End Points/Devices, Access/Authorizations and Data.


The Company firmly believes that renewable energy growth is poised to accelerate in FY24 due to impetus of the Government coupled with increasing concerns for climate change and ESG considerations leading to a greater demand for clean energy sources.

The Company expects its renewable power assets to operate efficiently in the coming years subject to favourable climatic conditions. With Companys experience of executing and operating renewable projects, it intends to have presence across the renewable energy chain by participating in utility scale Solar, Wind, Hybrid and Pump Storage Hydro projects and also supplying RE power to C&I customers. The Company is conscious of its impact on the environment and is actively exploring both organic and inorganic opportunities in the RE sector in order to reduce its carbon footprint. Further, the Company is working to create pipeline of ~5GW in the form of land identification and connectivity applications for development of RE projects.


In Licensed Distribution business, the Company will focus on developing the licensed area of Dholera SIR, newly acquired area of UT of Dadra & Nagar Haveli and Daman & Diu and Mandal Becharaji Special Investment Region (subject to outcome of pending appeals). The Company will also focus on adopting state-of-the-art technology and automation in operations in addition to expansion and upgradation of existing networks in distribution areas of Ahmedabad, Gandhinagar, Surat

and Dahej SEZ to cater to the growth in demand and further reduce distribution losses.

In Franchised Distribution business, the Company will focus on developing the operations at franchised area of SMK and expanding and upgrading its network in existing areas of Bhiwandi and Agra to cater to the growth in demand and further reduce AT&C losses.

The Company will continue to look for new opportunities in the distribution sector in the form of privatisation or franchise of existing areas. Having recognised that the only way forward to reduce the AT&C losses is privatisation; the Ministry of Power is pushing for privatisation in the distribution sector; thereby creating growth opportunities for the Company. With the Companys long experience in supplying reliable & quality power and reducing distribution losses to amongst the lowest in the country, the Company expects to benefit from the GoIs plans of delicensing the electricity distribution business and allowing discoms to have non-discriminatory access to the distribution system of any area. The stringent operational norms proposed for discoms will also lead


The Companys Internal Control Systems are commensurate with the size and nature of its operations, aimed at achieving efficiency in operations, optimum utilisation of resources, reliable financial reporting and compliances with all applicable laws and regulations. Ernst & Young (EY) LLP is the Internal Auditor of the Company. It carries


Certain statements in the Management Discussion and Analysis may be forward-looking. Actual outcomes may vary from those expressed or implied. The Company assumes no responsibility to publicly amend, modify, update or

to greater franchise opportunities for the Company in the near to medium term. It is expected that the UT of Jammu & Kashmir, and the states of Goa and Uttar Pradesh may soon announce privatisation for their discoms.

Business opportunities are also being explored in other distribution areas in form of parallel licensee in the near future.


Currently, the Company has limited investments in the transmission segment. However, transmission projects of more than H30,000 Crore are likely to come-up for bidding in the segment with robust regulatory mechanism and limited counter-party risks. The Company intends to selectively participate in tariff based competitive bidding for transmission projects (inter-state and intra-state). Considering the Companys strengths in financing and executing large projects, this is an area for future growth. Further, the Company is also evaluating brownfield opportunities.

out extensive internal audit throughout the year across all functional areas and submits reports to the Audit Committee. The recommendations from such internal audit and follow-up actions for improvements of the business processes and controls are also periodically reviewed and monitored by the Audit Committee.

revise any such statements on the basis of subsequent developments, information or events.