DIRECTOR'S REPORT

Tata Power Company LtdIndustry : Power Generation And Supply
BSE Code:500400
ISIN Demat:INE245A01021
Book Value(Rs):59.5395781
NSE Symbol:TATAPOWER
Div & Yield %:1.42
Market Cap (Rs Cr.):24816.3
P/E(TTM):44.76
EPS(TTM):2.05
Face Value(Rs):1
  Change Company 

To the Members,

The Directors are pleased to present to you the Ninety-Eighth Annual Report on the business and operations of your Company and the Statements of Account for the year ended 31st March 2017.

1. FINANCIAL RESULTS

Figures in Rs crore (Table 1)

Consolidated Standalone
FY17 FY16 FY17 FY16
(a) Net Sales / Income from Other Operations* 27,288 28,526 7,282 8,316
(b) (Less) Operating Expenditure (22,051) (22,354) (5,109) (5,737)
(c) Operating Profit 5,237 6,172 2,173 2,579
(d) (Less) Add: Forex (Loss) Gain (383) (663) (78) (57)
(e) Add: Other Income 586 754 992 962
(f) (Less): Finance Cost (3,114) (3,236) (1,296) (1,146)
(g) Profit before Depreciation and Tax 2,326 3,027 1,791 2,338
(h) (Less): Depreciation / Amortisation / Impairment (1,989) (1,649) (634) (604)
(i) Profit Before Exceptional Item 337 1,378 1,157 1,734
(j) (Less): Exceptional Item (651) (98) (651) Nil
(k) Profit (Loss) before Tax (314) 1,281 506 1,734
(l) (Less) Add: Tax Expenses or Credit 46 (681) (223) (379)
(m) Net Profit (Loss) after Tax (268) 600 283 1,355
(n) Add: Share of Profit of Associates and Joint Ventures 1,217 186 - -
(o) Net Profit for the year 949 786 283 1,355
Attributable to -
- Owners of the Company 746 662 283 1,355
- Non-controlling interests 203 124 - -
(p) Other Comprehensive income (Net of Tax) (133) (23) (121) (258)
(q) Total Comprehensive Income 816 762 162 1,097
Attributable to -
- Owners of the Company 613 639 162 1,097
- Non-controlling interests 203 123 - -

*Including rate regulatory income (expense)

Details regarding the changes due to the transition to IndAS are listed in Section 13 of this Board's Report.

2. FINANCIAL PERFORMANCE AND THE STATE OF THE COMPANY'S AFFAIRS

2.1. CONSOLIDATED

On a Consolidated basis, the Operating Revenue was at _ 27,288 crore in FY17, compared to _ 28,526 crore in FY16. The decrease was mainly due to lower fuel cost and power purchase cost being passed through for the regulated business. The Consolidated Profit after Tax in FY17 was at _ 746 crore compared to _ 662 crore in the previous year mainly due to higher contribution by the coal mines, renewables business and associates and lower foreign exchange losses, o_set by loss towards contractual obligation on account of purchase of shares in Tata Teleservices Limited (TTSL) from NTT DoCoMo Inc., Japan (Docomo). (Refer Section 11 - Management Discussion and Analysis (MD&A) of this report for details)

2.2. STANDALONE

On a Standalone basis, the Operating Revenue stood at _ 7,282 crore in FY17 compared to _ 8,316 crore in FY16. The decrease was mainly due to lower fuel cost and power purchase cost being passed through for the regulated business.

The Profit after Tax in FY17 was at _ 283 crore as compared to _ 1,355 crore last year. This was mainly due to loss toward contractual obligation on account of purchase of shares in TTSL form Docomo along with the increase in finance cost softened by the impact of favourable regulatory orders in the previous year. The Earnings per Share (Basic and Diluted) in FY17 stood at _ 0.63.

(Refer Section 10 - MD&A of this report for details)

2.3. EXCEPTIONAL ITEM

In 2008-09, Docomo acquired shares of TTSL from Tata Sons Limited (TSL) and other group companies including your Company. In terms of the Agreements with Docomo, TSL, inter alia, agreed to provide various indemnities and a sale option entitling Docomo to sell its entire shareholding at a minimum predetermined price per share if certain performance parameters were not met by TTSL. Under the provisions of these agreements, your Company was obligated to purchase from Docomo, its holding in TTSL in the proportion of shares sold by the Company to the total secondary sale by the group companies, as a part of the process. The minimum pre-determined price represented 50% of the acquisition price of 2008-09.

Docomo exercised its sale option in July 2014 to sell its entire shareholding at the predetermined price. As the sum payable amounted to a capital account transaction, under the Foreign Exchange Management Act (FEMA), permission of the Reserve Bank of India (RBI) was required. RBI did not permit the acquisition of the shares at the predetermined price as the price was higher than fair market value of the shares. The matter was taken up for arbitration at U.K. by Docomo and it received a favourable award. The arbitration award had to be petitioned by TSL with Delhi High Court for implementation, due to RBI's objection. On 28th April 2017, the Delhi High Court, while deciding on the matter, allowed TSL to pay the amounts to Docomo as per arbitration award for acquisition of the shares. This obligated your Company to purchase 11,82,22,767 shares. Consequently, during the year your Company has deposited Rs 790 crore with Delhi High Court through TSL towards its share of the award. Based on the latest available valuation of TTSL shares, the Company has accounted for the loss of Rs 651 crore towards contractual obligation on account of purchase of shares in TTSL in the standalone and consolidated financial statements as an Exceptional Item. Further, since your Company holds 17% stake in Tata Communications Limited, proportionate impact of its share in the loss towards the said contractual obligation has been accounted in the share of Profit/(loss) of associates and joint ventures amounting to Rs 146 crore.

2.4 ANNUAL PERFORMANCE

Details of the Company's annual financial performance as published on the Company's website and presented during the Analyst Meet, after declaration of annual results can be accessed using the following link: https://www.tatapower.com/pdf/investor-relations/analyst-presentation-may-17.pdf (scan the adjacent QR code on any mobile device smart phone/ tablet to read the policy on the Company website. QR code scanner app can be downloaded free of cost for Android/iOS/Windows devices from respective app stores)

3. DIVIDEND

The Directors of your Company recommend a dividend of 130% (` 1.30 per share of Rs 1 each), subject to the approval of the Members. According to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the top 500 listed entities based on market capitalization (calculated as on 31st March of every financial year) are required to formulate a dividend distribution policy which shall be disclosed in their annual reports and on their websites. Accordingly, the Dividend Policy of the Company is provided in Annexure-I. The Dividend Policy of the Company has been provided in the following link: https://www.tatapower.com/ aboutus/dividend-policy.pdf (alternately, scan the adjacent QR code using a mobile device to read the policy on the Company website).

4. CURRENT BUSINESS

Your Company is present across the value chain of power business viz. Generation, Transmission, Distribution, Power Trading, Power Services, Coal Mines and Logistics, Solar Photovoltaic (PV) manufacturing and associated Engineering, Procurement, Construction (EPC) services. Apart from the above, your Company is present in defence electronics and applications.

As on date of the report, the Tata Power group of companies had an operational generation capacity of 10,463 MW based on various fuel sources - thermal (coal, gas and oil), hydroelectric power, renewable energy (wind and solar PV) and waste heat recovery.

The Company (including its subsidiaries) has nearly 30% of its capacity (in MW terms) in clean and green generation sources (hydro, wind, solar and waste heat recovery), while the target is to maintain 30-40% of its total generation capacity to be from non-fossil fuel based generation sources by 2025.

Details of generation businesses in operations (Table 2)

Fuel Source Location State Normative capacity under management Returns/ Earnings Model Category Total
(MW) (MW)
Mundra Gujarat 4,150 Long term PPA based on UMPP Bid
Trombay Maharashtra 1,430 Long term PPA - regulated Return on Equity
Maithon Jharkhand 1,050 Long term PPA - regulated Return on Equity
Jojobera Jharkhand 428 Long term PPA - regulated Return on Equity and negotiated PPA
Thermal – Coal / Oil / Gas Industrial Energy 7,322
Limited (IEL) – Jharkhand 120 Bilaterally negotiated long term PPA
Jojobera
PT Citra Kusuma
Indonesia 36 Captive Arrangement
Perdana
TPDDL Rithala (Gas Based) New Delhi 108 PPA is being pursued
IEL – Jamshedpur Jharkhand 120 Bilaterally negotiated long term PPA
Thermal – IEL – Kalinganagar Odisha 135 Bilaterally negotiated long term PPA
Waste Heat 375
Recovery Haldia West Bengal 120 Merchant sale (100 MW) and bilateral sale to West Bengal (20 MW)
Bhira Maharashtra 300
Khopoli Maharashtra 72 Long term PPA - regulated Return on Equity
Bhivpuri Maharashtra 75 693
Hydro Dagachhu Bhutan 126 PPA with Tata Power Trading Company Limited (TPTCL)
Itezhi Tezhi Zambia Maharashtra, Gujarat, Madhya Pradesh, 120 Long term regulated return
Renewables Wind farms Karnataka, Tamil Nadu, Rajasthan and South Africa Maharashtra, Gujarat, 1140 Long term PPA based on Feed-in-tariff + REC Mechanism (includes 30 MW assets of Indo Rama Renewables Jath Limited) 2073
Solar Photovoltaic (PV) Tamil Nadu and Delhi 933 Long term PPA based on Feed-in tariff
Total 10,463

NOTE: Trombay Unit 4 - 150 MW has been scrapped during the year and the same has been removed from the total installed capacity.

Details of other businesses

Business Company/Entity Location Returns/ Earnings Model Key details
25 year license w.e.f Over 1,200 CKms. of transmission
Tata Power
Mumbai August 2015 - regulated lines, connecting generating stations
(TPC - T)
Return on Equity to 21 receiving stations.
Transmission 1166 Kms. of 400 kV transmission
Powerlinks Eastern/
Regulated Return on lines to evacuate power from
Transmission Northern
Equity Eastern/North Eastern region to
Limited (PTL) regions
Northern Region.
25 year license w.e.f Over 4,300 Ckm of distribution
Tata Power
Mumbai August 2015 - regulated network. Around 6.75 lakh
(TPC - D)
Return on Equity consumers.
Distribution
Tata Power Delhi Approximately 15,000 Ckm of
Regulated Return on
Distribution New Delhi distribution lines. Over 1.58 million
Equity
Limited (TPDDL) consumers.
Returns based on
Coal and
Coal Investments Indonesia dynamics in international Stake in Indonesian mines
Infrastructure
thermal coal market
Solar PV Tata Power Solar Returns based on sector
Manufacturing and sale of solar PV
manufacturing, Systems Limited Bengaluru dynamics and market
cells and modules and EPC services.
EPC (TPSSL) competition
Returns based on market
Tata Power dynamics in short term Category I power trading license,
Power Trading Trading Company Across India and bilateral power market which permits the company to trade
Limited subject to cap prescribed any amount of power.
by CERC
Trust Energy Operates long term charters to meet
Returns based on long
Shipping Resources Pte. Singapore captive shipping requirements.
term charters
Limited Vessels operated are cape size.
Tata Power Amongst the Indian private sector,
Returns based on sector
Strategic Strategic SED is one of the leading suppliers
Mumbai dynamics and market
Engineering Engineering of systems integration for defence
competition
Division (SED) equipment.
One of the leading service providers
Returns based on sector
of project management, O&M and
Power Services Tata Power Mumbai dynamics and market
specialized services in the power
competition
sector.

Percentage contribution of different business models (Table 4)

Model Capacity (MW) % of overall capacity Returns Tata Power projects
Regulated returns 3275 31.3% Fixed return on equity Mumbai Operations (Trombay & Hydro), Maithon, Jojobera
Unit #2 and #3, TPDDL Rithala
Regulated tariff mechanism (Renewables) 2073 19.8% Fixed tariff + PLF driven Wind, Solar
PPA driven IEL (Unit 5, PH6, KPO), CKP
Captive power plant 411 3.9%
(14-19%) (Indonesia)
Merchant 226 2.2% Market driven Haldia (100MW) Dagachhu (126MW)
MoU/ Bilateral 20 0.2% PPA driven Haldia (20MW)
PPA or Bid driven/ Fixed Tariff / Case II 4458 42.6% Bid driven Jojobera Unit#1 and #4, CGPL, ITPC (Zambia)

5. SUBSIDIARIES/JOINT VENTURES/ASSOCIATES

As on 31st March 2017, the Company had 49 subsidiaries (38 are wholly-owned subsidiaries), 37 Joint Ventures (JVs) and 8 Associates. Of the erstwhile subsidiaries, 3 companies have been classified as Joint Ventures under Indian Accounting Standards (Ind AS) and 1 of the investments has been classified as Associate.

During the year, the following changes occurred in your Company's holding structure:

Subsidiaries: The Company, through its subsidiaries, incorporated Nelco Network Products Limited, Vagarai Windfarm Limited and Chirasthayee Saurya Limited. Further, through its subsidiary Tata Power Renewable Energy Limited, it acquired Welspun Renewables Energy Private Limited and its 19 operating subsidiaries. It also acquired the wind assets of Indo Rama Renewables Jath Limited. Post acquisition of WREPL by TPREL, WREPL acquired one company (Welspun Urja India Limited) and merged one of the19 subsidiaries (Solarsys Energy Private Limited).

Joint Ventures: The Company formed Resurgent Power Ventures Pte. Ltd. and LTH Milcom Private Limited as joint ventures and divested OTP Geothermal Pte. Ltd., PT Sorik Marapi Geothermal Power and PT OTP Geothermal Services Indonesia, during the year.

Associates: The Group also divested its holding in ASL Advanced Systems Private Limited.

Report on the performance and financial position of each of the subsidiaries, JVs and Associates has been provided in Form AOC-1.

The policy for determining material subsidiaries of the Company has been provided in the following link: https://www.tatapower.com/aboutus/pdf/dms-policy-15.pdf (alternately, scan the adjacent QR code using a mobile device to read the policy on the Company website).

6. RESERVES

The net movement in the various reserves (Standalone Accounts) of the Company for FY17 and the previous year are as follows: Figures in Rs crore (Table 5)

Particulars FY17 FY16
Capital Redemption Reserve 1.60 1.60
Capital Reserve 61.66 61.66
Securities Premium Account 5,634.98 5,634.13
Debenture Redemption Reserve 1,000.90 545.24
General Reserve 3,866.24 3,866.24
Retained Earnings 4,466.08 5,110.80
Investment Revaluation Reserve (253.40) (139.69)

7. FOREIGN EXCHANGE - EARNINGS AND OUTGO

Figures in Rs crore (Table 6)

Particulars – Standalone FY17 FY16
Foreign Exchange Earnings 340 200
Foreign Exchange Outflow mainly on account of: 1,263 1,283
Fuel purchase 971 935
Interest on foreign currency borrowings, NRI dividends 42 41
Purchase of capital equipment, components and spares and other miscellaneous expenses 250 307

8. REGULATORY AND LEGAL MATTERS

The businesses of the Company are governed primarily by the Electricity Act, 2003 (EA, 2003) and associated regulations. Mentioned below are the critical regulatory orders pertaining to the Company that were issued during FY17, none of which impact the "going concern" status of your Company.

8.1. MUNDRA UMPP

8.1.1. COMPENSATORY TARIFF/ FORCE MAJEURE RELIEF

Coastal Gujarat Power Limited (CGPL) - Mundra UMPP had approached Central Electricity Regulatory Commission (CERC) for evolving a mechanism for compensating CGPL for the adverse impact of the uncontrollable and unprecedented escalation in the imported coal prices and the change in law in Indonesia. CERC had, after considering the recommendations of a Committee appointed for the aforesaid purpose, vide its order dated 21st February 2014, decided that CGPL was entitled to compensatory tariff from 1st April 2012 over and above the tariff agreed under the PPA with the Procurers, till the hardship on account of Indonesian regulations persisted.

The Procurers challenged the order and filed an appeal with Appellate Tribunal for Electricity (APTEL). APTEL passed an interim order dated 21st July 2014, directing the Procurers to pay a compensatory tariff from March 2014 onwards, although it stayed the compensation for the prior period, till disposal of the appeal filed before it. On appeal by the Procurers, the interim order of APTEL was set aside by the Supreme Court and APTEL was directed to hear and dispose o_ the appeals expeditiously. On 7th April 2016, APTEL, while rejecting the grounds of change in law and use of regulatory powers, remanded the matter to CERC to assess the compensation on grounds of Force Majeure (FM) as permissible under the PPA.

The Procurers, including a consumer group, filed a Civil Appeal before the Supreme Court challenging the FM relief provided as per APTEL's judgment. The Supreme Court directed that CERC may pass the Order on FM relief, but it was to be given effect only with the prior permission of the Supreme Court. Based on the remand by APTEL, matter was heard by CERC and order passed on 6th December 2016, prescribing the FM relief mechanism.

Subsequently, the civil appeals filed by Procurers and consumer groups were heard before the Supreme Court. The Supreme Court vide judgement dated 11th April 2017, disposed o_ the appeal with regard to compensatory tariff, inter alia holding that:

a) CGPL's case does not fall under the FM clause in the PPA

b) The Change in Law as defined under PPA contemplates only change in domestic (Indian) laws The Supreme Court has, however, upheld that the CERC has powers under Section 79(1) (b) of EA, 2003 to regulate, which includes power to determine or adopt tariff even for tariff that is determined under competitive bidding route (Section 63). While the Supreme Court held that the Regulatory Commission has the powers under Section 79 of EA, 2003, the judgement did not specifically validate the applicability of said principle to the relief that had been granted by CERC to CGPL, earlier. Your Company, therefore, is in consultation with its legal counsels for advice on the possible legal options and way forward. The Company remains committed to operating and maintaining the 4,000 MW Mundra Ultra Mega Power Station which is operating at benchmark operational parameters and is making a significant contribution in ensuring the energy security of the country. While the Company continues to make Efforts to seek additional tariff, it is pursuing all alternative options at CGPL including sourcing of competitive coal from other relevant geographies as also use low grade and blended coal options to contain the under-recovery at Mundra UMPP. Efforts are also in progress to optimally refinance debt and minimize the total cost incurred on debt servicing. It may also be noted that the combined investments in the Indonesian coal mines along with investment in coal logistics and CGPL, when considered together, provide a natural hedge towards future fluctuations in coal prices. It may be noted that CGPL project cost does not include the investment made in the coal mines . For the long-term sustainability of the power station, however, your Company is exploring all options to structure the investment in a manner that it earns a reasonable return.

8.1.2. CHANGE IN LAW

A) CHANGE IN LAW - OPERATIONS

CGPL filed a Petition for its claim under Change in Law relevant to Indian provisions for the period FY12, FY13 and FY14 in June 2015 and CERC passed the order on 17th March 2017, which is consistent with the orders passed by CERC for other generators seeking relief under change in law operations.

B) CHANGE IN LAW - CONSTRUCTION

Petition for claiming the impact of Change in Law - Construction has been filed before CERC in July 2016. The matter has been admitted and is yet to be heard.

8.1.3. PETITION SEEKING IN-PRINCIPLE APPROVAL FOR CAPEX AND OPEX TO COMPLY WITH NEW ENVIRONMENT NORMS

The Ministry of Environment, Forest and Climate Change (MoEF&CC), vide its notification dated 7th December 2015, has revised the environment emissions norms mandating all thermal power plants to comply with new/revised norms. Your Company had filed a petition with CERC seeking in-principle approval for the capital expenditure in order to secure finance from the financial institutions. Meanwhile, your Company is already in compliance with the new norms related to Suspended Particulate Matter (SPM) etc. Though your Company was all prepared to move ahead and complete requirements on time, but for regulatory delays, it is believed that implementations of the proposed regulations is likely to be postponed.

8.1.4. SUO-MOTU PETITION BY CERC ON DECLARATION OF COMMERCIAL OPERATION OF UNITS 20, 30, 40 & 50 OF MUNDRA UMPP

Based on representations made by an individual before Ministry of Corporate Affairs and Securities and Exchange Board of India (SEBI) on the issue of declaration of commercial operations dates for Units 20, 30, 40 and 50 of Mundra UMPP, the matter was referred to CERC and a suo-motu petition has been initiated in the matter. When the matter was listed and heard before CERC on maintainability on 24th May 2016, issues on locus standi of the individual and jurisdiction of CERC were raised by the Company. The matter has been heard by CERC and order reserved on the issue of maintainability of the proceedings. In December 2016, Energy Watchdog has filed an intervention application before CERC with a prayer to allow it to intervene/ participate in the above referred suo-motu petition. On this issue, CEA and WRLDC had earlier reviewed all inputs and given their acceptance on COD dates.

8.2. MUMBAI OPERATIONS

8.2.1. MULTI YEAR TARIFF ORDERS OF MERC

The Multi Year Tariff (MYT) petitions for Mumbai generation, transmission and distribution businesses of the Company were filed with MERC during the year, which included truing-up for FY15 and provisional truing-up for FY16, as also the Annual Revenue Requirement (ARR) for 3rd MYT Control Period from FY17 to FY20 was filed. MERC passed its MYT order for generation business on 8th August 2016; for transmission business on 30th June 2016 and for distribution business on 21st October 2016. Review petitions with MERC and appeals with APTEL have been filed challenging the disallowance by MERC in the tariff orders.

8.2.2. NETWORK ROLL-OUT PLAN

Post the judgement of APTEL in November 2014, your Company submitted its revised network rollout plan in Case No. 182 of 2014. MERC passed an interim order in the said petition on 9th November 2015, directing constitution of a committee to examine and finalize the operational specific matters/physical rollout of network for the consideration of MERC. On 28th March 2016, the committee provided its recommendation to MERC for its consideration and a public hearing was conducted on 21st June 2016. The network rollout plan of your Company is currently pending order of the Commission.

8.2.3. DISTRIBUTION LICENSES - APPEAL FILED BY R-INFRA AND BEST

Appeal filed by Reliance Infrastructure Limited (R-Infra) challenging the distribution license granted to Tata Power -Distribution in August 2014 is pending before APTEL. Further, appeals filed by R-Infra and Brihanmumbai Electric Supply & Transport Undertaking (BEST) against the interim order dated 9th November 2016, passed by MERC, are also pending before APTEL.

8.2.4. MID TERM REVIEW ORDERS - CIVIL APPEAL FILED WITH HON'BLE SUPREME COURT

A civil appeal has been filed by your Company before the Supreme Court challenging the judgement of APTEL in Review Petition No. 13 of 2016 and order dated 3rd June 2016 in appeal nos. 244 and 246 of 2015 dismissing the appeals and review petition filed by Tata Power-Generation and Transmission against the mid-term review orders issued by MERC. The civil appeal was heard on 30th January 2017 and is currently pending before the Supreme Court.

8.2.5. KEY JUDGEMENT - CHALLENGING EOI BY MERC FOR GRANT OF LICENSE

A critical judgement has been passed by APTEL on 4th November 2016, dismissing appeal no. 243 of 2016 filed by BEST against MERC, challenging the invitation for expression of interest issued by MERC for grant of licence to Tata Power - Distribution.

APTEL dismissed the appeal on the grounds that the points raised by BEST have been, inter alia, covered by the judgement of the Supreme Court that there can be a parallel licensee in the area where a local authority is licensed to supply electricity.

8.2.6. KEY JUDGEMENT - ALLOWING TATA POWER TO SUPPLY OUTSIDE THE LICENSE AREA

MERC passed an order dated 10th May 2016, in Case No. 43 of 2016 allowing Tata Power to continue to supply power to six consumers who fall outside the licence area of Tata Power. MERC also disallowed Maharashtra State Electricity Distribution Company Limited's (MSEDCL) claim on seeking cross subsidy surcharge from the six consumers in its area of supply. MSEDCL's revenue petition is pending for hearing.

8.2.7. STANDBY CHARGES

On an appeal filed by your Company, the Supreme Court had stayed the operation of the APTEL order in 2007, subject to the condition that your Company deposits an amount of Rs 227 crore and submits a bank guarantee for an equal amount. Your Company has complied with both the conditions. R-Infra has also subsequently filed an appeal before the Supreme Court challenging the APTEL order. Both the appeals have been admitted in 2007. The matter was part heard during the year and the hearings are yet to be completed.

8.2.8. ENERGY CHARGES AND ‘TAKE OR PAY' OBLIGATION

MERC directed R-Infra to pay Rs 323.87 crore to Tata Power towards its ‘Take or Pay' obligation for the years 1998-99 and 1999-2000. On an appeal filed by R-Infra, APTEL upheld Tata Power's contention with regard to payment for energy charges but reduced the rate of interest. As regards the ‘Take or Pay' obligation, APTEL has ordered that the issue should be examined afresh by MERC after the decision of the Supreme Court in the appeals relating to the distribution license and rebates given by R-Infra. Tata Power and R-Infra have filed appeals with Supreme Court. The Supreme Court, vide its order dated 14th December 2009, has granted stay against the APTEL order and has directed R-Infra to deposit with the Supreme Court a sum of Rs 25 crore and furnish a bank guarantee for the balance amount. No hearings were held during the year on this matter.

8.2.9. ENTRY TAX

Your Company had filed a writ in the High Court at Bombay (HC) challenging the constitutional validity of the Maharashtra Entry Tax Act. HC, vide its order dated 2nd August 2016, dismissed the writ petition. Aggrieved, your Company filed Special Leave Petition (SLP) in the Supreme Court. Vide its order dated 21st October 2016, the Supreme Court passed the order staying the demand of Entry tax, by extending the interim stay earlier granted by the High Court. There is no date fixed for further hearing of the matter and the same will come up in due course.

8.3. JOJOBERA OPERATIONS

8.3.1. APTEL JUDGEMENT FOR JOJOBERA UNIT 2 and UNIT 3

APTEL, in August 2016, passed a favourable order in an appeal filed by your Company challenging some of the findings of the Jharkhand State Electricity Regulatory Commission (JSERC) in the Annual Performance Review (APR) order for FY13 for Jojobera Unit 2 and Unit 3.

8.3.2. ANNUAL PERFORMANCE REVIEW (APR) ORDER FOR FY15-16 FOR JOJOBERA UNIT 2 AND UNIT 3

In January 2017, JSERC passed the APR order for FY16 including truing-up for FY14 and FY15 and revised true-up for FY13 in light of the judgement of APTEL. JSERC has also allowed claims of your Company while carrying out the true-up for FY14 and FY15.

8.3.3. APPROVAL OF THE REVISED PPA OF JOJOBERA UNIT 2 & UNIT 3

JSERC had earlier directed your Company to renegotiate the terms and conditions of the Power Purchase Agreement (PPA) with Tata Steel Distribution Licensee (TSDL) for Jojobera Unit 2 and Unit 3 subsequent to their transition to the regulatory regime. Accordingly, the PPA for the above Units was re-negotiated with TSDL and submitted before JSERC for its approval. JSERC has, in August 2016, accorded its approval on the Revised PPA for Jojobera Unit 2 and Unit 3, which has now been taken up for execution between your Company and TSDL.

8.4. MAITHON POWER LIMITED (MPL)

8.4.1. APPEAL FILED AGAINST DISALLOWANCES BY CERC IN MPL TARIFF ORDER

In May 2016, APTEL passed its judgement on the appeal filed by MPL against the partial disallowance by CERC in its order dated 19th November 2014 of the Interest during Construction (IDC) and cost of secondary fuel oil consumption. APTEL has upheld the findings of CERC and dismissed the plea of MPL. MPL thereafter, has filed a petition for review of the above judgement before APTEL and an appeal with the Supreme Court against APTEL's judgment. Both the submissions are pending before the respective forums.

8.4.2. APPEAL FILED CHALLENGING DERC ORDER

MPL has challenged, before APTEL, the findings of Delhi Electricity Regulatory Commission (DERC) regarding the jurisdiction of the appropriate Commission pertaining to resolution of disputes arising out of the medium-term PPA between MPL and the Delhi discoms for the period October 2010 to March 2012. APTEL, in its judgement, has directed MPL to approach CERC for resolution of the disputes. Accordingly, MPL has approached CERC with a petition for resolution of the disputes.

8.4.3. TARIFF PETITION FOR FY14-19

MPL has filed a Petition for determination of the tariff for the period FY14-19 along with the truing-up for FY11-14 on 1st June 2015, before CERC. The proceedings in the above matter has been completed in December 2016 and the order is reserved.

8.4.4. PETITION SEEKING IN-PRINCIPLE APPROVAL FOR CAPEX SCHEMES FOR MEETING NEW ENVIRONMENT NORMS

MoEF&CC, vide its notification dated 7th December 2015, has revised the environment emissions norms, mandating all thermal power plants to comply with new/revised norms. Petition (72/MP/2016) filed by MPL seeking in-principle approval of abstract scheme of capex in compliance with new environmental norms has been disposed o_ by CERC directing MPL to approach CEA and MoEF&CC to decide the optimum technology and associated costs, for phasing of implementation of different environment measures and to then approach CERC based on the approval of CEA and direction of MoEF&CC. MPL has approached CEA and MoEF&CC as per directions of CERC.

8.4.5. PETITION SEEKING CLARIFICATION ON METHODOLOGY OF AVAILABILITY

MPL has filed a miscellaneous petition before CERC seeking clarification on the methodology of computation of availability for generating stations where PPA with the beneficiaries is based on contracted capacity and not on government allocated percentages as in the case of central generating stations. The proceedings in the above matter have been completed in October 2016 and the order is reserved.

8.4.6. GRADE SLIPPAGE

CERC, in 2014 Regulations, changed the methodology of measurement of Gross Calorific Value (GCV) from ‘as _red' to ‘as received' basis. TPDDL had filed Petition before CERC against National Thermal Power Corporation (NTPC), Damodar Valley Corporation (DVC) and MPL for measurement of GCV in accordance with the 2014 Regulations. CERC passed directions laying down the procedure for measurement of GCV and CERC is examining the progress made by generating companies in compliance with its directions. MPL has filed affidavits listing out the existing procedure and seeking relaxation in the method prescribed by CERC. The matter is pending before CERC for orders.

8.5. POWERLINKS TRANSMISSION LIMITED (PTL)

8.5.1. TRUING-UP FOR FY10 TO FY13 FOR PTL

CERC, in May 2016, passed the true-up orders for FY10 to FY13 for transmission assets of PTL pertaining to eastern, northern and ER-NR inter-connector region. CERC, in the above order, had approved the annual transmission charges along with the transmission majoration factor for above period. However, CERC has directed its sta_ to examine the issue of transmission majoration factor and its impact to review the continuation of transmission majoration factor for subsequent years.

8.6. OTHER MATTERS

The Company has had a number of contracts with the M. Pallonji group of companies (MP) over last several years. These include contracts related to barging, dredging, shipping and contracts for painting of the Company's power stations at Trombay, hydros and Jojobera.

Some of the contracts were awarded long-term as new capital equipment had to be deployed and significant cost and logistics benefits would be achieved vis--vis the then prevalent arrangement to get coal to Trombay station. The Company had followed the requisite processes in award of the contracts and necessary approvals from the Board Committees / Management have been taken as required as per the Schedule of Authorities prevailing at various times.

9. RISKS AND CONCERNS

Your Company is faced with risks of different types, all of which need different approaches for mitigation. Details of various risks faced by the Company are provided in section 4 of MD&A of this Annual Report.

10. RISK MANAGEMENT FRAMEWORK AND INTERNAL FINANCIAL CONTROLS

Risk Management Framework:

Based on the Risk Management Policy (https://www.tatapower.com/aboutus/pdf/risk-management-policy. pdf)(alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website), a standardized Risk Management Process and System has been implemented across Tata Power Group. Risk plans have been framed for all identified risks and uploaded in the system with mitigation action, target dates and responsibility. This has enabled continuous tracking of status of mitigation action and monitoring of Risk Mitigation Completion Index (RMCI). The Risk Register contains the mitigation plans for eleven categories of risk. Eight Functional Risk Management Committees (FRMCs) closely monitor and review the risk plans. This year, standardisation of risks and mitigation measures was taken up as an exercise to ensure uniformity of risks across Tata Power Group and learning and sharing. All risks have been classified into strategic, tactical and operational risks. Apex Risk Management Committee (ARMC) meets every quarter to review major strategic and tactical risks, identify new risks and assess the status of mitigation measures. As per the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a Risk Management Committee (RMC) was constituted which currently comprises 3 Independent Directors, 1 Executive Director, the Chief Financial Officer and the Chief Risk Officer. The RMC meets regularly to review critical strategic risks and summary of top risks of each of the eleven categories and their status in terms of mitigation actions. To increase focus on critical risk groups, all risks have been grouped into 20 risk themes. In FY15, British Standards Institution (BSI) conferred the ‘Statement of Compliance' on Tata Power for ISO 31000:2009 – a recognition that implies that the Company has strong processes for risk identification, management and mitigation. Tata Power is the first power company in India to get this recognition. In FY16, BSI did the assessment of Tata Power and its eight major subsidiaries (viz. CGPL, MPL, TPDDL, TPTCL, TPSSL, TPREL, PTL and IEL) and conferred the ‘Statement of Compliance' for Tata Power Group for ISO 31000:2009. This year, Tata Power Group has again been recommended for conferring the Statement of Compliance, basis BSI's recent assessment in February 2017.

Internal financial controls and systems:

The Company has its internal audit function which endeavours to make meaningful contributions to the organisation's overall governance, risk management and internal controls. The function reviews and ensures sustained effectiveness of Internal Financial Controls (IFC) by adopting a systematic approach to its work.

As per the provisions of Section 177 of the Companies Act, 2013 (the Act) and the Audit Committee Charter adopted by the Board of Directors, one of the roles and responsibilities of the Audit Committee, is to review the effectiveness of the Company's internal control system, including financial controls, information technology security and its control.

Section 143(3) of the Act provides that the Statutory Auditor's Report shall state whether the Company has an adequate IFC system in place and the operating effectiveness of such controls, for FY16 and beyond.

As per Section 134 of the Act, Directors of listed companies, based on the representations received from the management, are to confirm in the Directors Responsibility Statement that IFC are adequate, as also operating effectively.

With this objective in mind and to fulfil the requirements of the Act, in FY16, the in-house internal audit team, with the support of two expert audit firms, performed the test of design and test of effectiveness of IFC. Scoping was done based on major classes of transactions and account balances. Seven key business cycles, general IT controls and Entity Level controls were considered for review. The Internal Audit and Risk Management (IARM) function has generally adopted Committee of Sponsoring Organizations (COSO) framework. COSO is a leading framework which provides guidance on the design and evaluation of internal controls. This has been done for 5 elements and 17 principles, which provides assurance of financial controls in place at the level of functional heads and at top management level. This has helped in assessing the effectiveness and efficiency of operational controls, enhanced governance and consideration of anti-fraud expectations, reliability of financial reporting and statutory compliances. Attributes with internal control deficiencies are identified with action plans to be pursued, responsibility centres and target dates for compliances.

For the Business Process level, controls are evaluated through internal audits and Control Self-Assessment (CSA). These CSAs have also been rolled out across other Tata Power group companies too. The effectiveness of the IFC was then tested by an external consultant who found no significant defficiencies. Further, the statutory auditor, through their independent testing of IFC, has also issued an unmodified opinion.

All processes of the Company have been classified under vital, essential and desirable, based on the analysis of process impact on Company's Strategic Objectives. Post the audit, process is rated through the Risk Control Index and Process Robustness

Index given by the Internal Auditors. Also, theme based audits are carried out for certain areas impacted by changing external environment. Significant observations, including recommendations for improvement of the business processes are reviewed by the Management before reporting to the Audit Committee. The Audit Committee then reviews the Internal Audit reports and the status of implementation of the agreed action plan. Post recognition of ‘General Conformance to International Audit Standards' from Institute of Internal Auditors (IIA Global) in 2013, quality review of audit reports is carried out as per IIA global guidelines before the report is issued. Internal audit process has been standardized across the Tata Power group.

Internal audit plan is executed by an in-house audit team with support from expert Internal Audit firms. This risk based audit plan has been used for subsidiaries and other group companies as well. Your Company has also started its journey towards digitalization through enhanced data analysis on audits which will result in improved quality and focused audits. Assessment mechanism for measuring the existence and effectiveness of controls are established by the fact that the Value Added Index, which is a measure of effectiveness and contribution of the internal audit to top management and Audit Committee, has improved over the years and so has the Risk Control Index (RCI), thereby giving assurance to management of efficiency and effectiveness of the IFC. The action taken statistics emerging out of internal audit reports for last three years reflect an increase in implementation percentage achieved through rigorous and systematic follow up. Further, the total number of action points has decreased over the last three years, thereby reflecting an improvement in the system and processes.

On review of the internal audit observations and action taken on audit observations, we can state that there are no adverse observations having material impact on financials or commercial implications or material non-compliances which have not been acted upon.

Control Self-Assessment: The Company continued the CSA process this year, whereby responses of all process owners are used to assess internal controls in each process. It was also extended to seven other Tata Power group companies. This helps the Company to identify focus audit areas, design the audit plan and support CEO/CFO certification for internal controls. The CSA questionnaire is designed to test effectiveness of deployment of existing controls for processes which are not to be audited as per the audit plan. The responses received from process owners on the questionnaire are analysed and validated through spot audits. This ensures optimum coverage of audit universe to provide assurance on the operating effectiveness based on results of evaluation across all processes.

Process Robustness Index (PRI): The processes are examined to assess their robustness, primarily from the perspective of system driven controls (SAP, CRM, Documentum etc.), which ensures that deviations from the defined process do not occur due to manual errors. In case controls have not been embedded in the system, other compensating controls such as maker-checker are exercised to assess the robustness of the process. This index is computed on the basis of existence of robust controls and not on the basis of extent of implementation of these controls. Your Company has obtained a copyright for this PRI scoring methodology. The scores for RCI and PRI for the past 3 years are listed below: (Table 7)

Scores FY17 FY16 FY15
Risk control index (RCI) 92 91 88
Process robustness index (PRI) 52 44 40

11. SAFETY

Safety is a core value of the Company. The Company has adopted a structured approach towards implementation of Safety Policies and Programs and integrating safety with critical business processes to continuously improve safety performance. Safety organisation has been established for developing and implementing Safety Management Systems and to facilitate a change in culture through leadership interventions to mitigate risks.

Safety Statistics FY17: (Table 8)

Sl. No. Safety Parameters in your Company's work jurisdiction (Tata Power, CGPL, MPL, IEL, CTTL, PTL, TPDDL and TPSSL) FY17 FY16
1 Fatality (Number) 2 3
2 LTIFR (Lost Time Injuries Frequency Rate per million man hours) 0.23 0.20
3 Total Injury Frequency Rate (No of injuries per million man hours) 4.67 5.16
4 First Aid Cases (Number) 190 325

The Company is deeply aggrieved by the fatalities and accidents. It treats any fatality in any of its premises, of any of its employees, contractor/associate's employees or any third party with equal gravitas and is committed to taking the entire working environment and behaviour to the highest safety standards.

Your Company has increased its Efforts on safety during the year and has taken the following additional steps in FY17 to improve safety:

Coaching to further improve Felt Leadership at all levels

Implemented the contractors' safety code of conduct to improve capability and capacity of contractors

Structured Reward and Recognition Program which includes consequences and rewards in General Conditions of

Contracts (GCC) for associates and contractors

Enhanced Capability building through competency based training programs, at TPSDI's state of the art skill building schools, for high risk activities across all levels

Improvements in the mobile application ‘Suraksha' on safety for incident reporting

High visibility safety tours by leadership

Risk Based Audit program to evaluate implementation of standards and effectiveness of management system

Implementation of SAP EHSM to integrate safety with business process

12. SUSTAINABILITY

Your Company successfully completed 100 years of operations and remains committed to the legacy of being a responsible corporate citizen. It has practised sustainability over these 100 years and thus, reinforced the core value of Leadership with Care. For your Company, sustainability is care for the environment, care for the customers and shareholders, care for the community and care for our people.

The Company's Efforts on sustainability were recognized at various platforms and a testimony of this was the various awards bestowed upon your Company. The Company has received a high rating of ‘A' for its sustainability performance according to a new assessment done by Confederation of Indian Industry (CII). It is based on a comprehensive assessment of environmental, social and governance analysis of companies which helps them to measure performance as well as identify risks that challenge sustainability of their business.

The year also saw the launch of the Company's 7th Sustainability Report for FY16, and the first one to be prepared in accordance with the latest G4 Guidelines of the Global Reporting Initiative (GRI).

12.1. CARE FOR OUR COMMUNITY/COMMUNITY RELATIONS

Your Company has actively worked on the key focus areas in Corporate Social Responsibility (CSR) of education, health, livelihood and employability, social capital and financial inclusivity, as well as rural energy.

Your Company has a unique governance system for Sustainability as a strategic theme. This is guided by the Sustainability Advisory Council (SAC) comprising eminent experts from various fields impacting sustainability. Your Company's standalone CSR spend for FY17 stood at _ 22.79 crore against the Companies Act requirement of Rs 21.84 crore. Additionally, as a part of disaster relief operations, the Company contributed towards relief Efforts in Assam. Besides this, 5 employees were selected to be trained as project managers to be deployed as part of Tata Group relief Efforts.

Independent monitoring, effectiveness of implementation and impact assessment were undertaken to provide feedback and to refine, realign the programs so that the extent and effectiveness of the initiatives could be improved in pursuance of Tata Power's objective to improve the quality of life of the community and to get the community's tacit or implied acceptance of the Company's co-existence with them. Details of the CSR activities of your Company and its key subsidiaries are listed in the MD&A section of this Annual Report. Annual report of CSR activities is provided in Annexure-II.

12.2. AFFIRMATIVE ACTION

Under its Affirmative Action (AA) program, your Company has implemented several initiatives for Employment, Entrepreneurship, Employability, Education and Essential Amenities for the communities around its operating sites.

The major programs carried out in the neighbourhood of the operating plants and projects are Skill Development Programs for youth (Industrial Training Institutes, Business Process Outsourcing training and Vocational Trainings), entrepreneurial programs like _y ash brick making/supporting Self Help Groups (SHG), and support for educational initiatives for school children like scholarships and coaching classes in the evenings along with assistance in the development of adequate infrastructure. The Company continued its work in areas beyond its areas of operations, such as in Jawhar taluka, Palghar district of Maharashtra, which has a tribal population of over 90% of the total population with a vast majority of them below the poverty line. The activities here include initiatives like generating livelihood opportunities to improve sub-economic status, integrated watershed management program, capacity building through a participatory approach, women's empowerment through SHGs and a Village Development Council (VDC) for sustainable development. The VDC has elected members from the village, as well as a Tata Power representative and are responsible for the sustainable development of the village.

12.3. CARE FOR OUR ENVIRONMENT

The Company, during the year, addressed various aspects of resource conservation, energy efficiency, carbon footprint, renewable power generation, biodiversity and green buildings. Details of initiatives undertaken are given in MD&A Section 9.1.3

12.4. CLUB ENERJI

Tata Power's Club Enerji is focused on school students to champion the noble cause of conservation of resources and enhance moral and civic values. The Club has been ceaselessly working towards creating responsible citizens of tomorrow who focus not only on conserving energy and natural resources (like fossil fuel - coal, oil, gas, water; managing waste; a_orestation), but also conserve civic, ethical and moral values in society at large. Tata Power Club Enerji is a sustainability initiative aimed at creating awareness among school students, who in turn, sensitise their families and neighbourhood towards energy and resource conservation through dynamic and innovative measures. The current program is based on the four stage model of Educate (sensitise school children about energy conservation practices), Engage (empower energy champions to spread awareness amongst peers and the community), Enhance (enthuse schools to participate and contribute to Club Enerji initiatives) and Empower (create self-sustaining Mini Clubs that will lead the movement). Recognizing the immense value that schools and school children can bring to the initiative and taking due consideration of the social need, Tata Power started "Tata Power Club Enerji" in 2007 to propagate efficient usage of energy and to educate the society on climate change issues. Club Enerji covers 500 schools across Mumbai, Delhi, Pune, Ahmedabad, Bengaluru, Kolkata, Belgaum, Jamshedpur, Lonavala and five more cities. It has reached out to more than 1.28 crore citizens, collectively saved 17.26 million units of electricity - equivalent to saving 17,000 tons of CO2. All over India, 1,337 Mini Clubs have also been formed under the Club Enerji initiative.

Tata Power Club Enerji also launched its comprehensive Online Module in November 2015 with an aim to reach out to a larger audience with a vision of transformation and adoption of a holistic and robust approach towards conservation. The module, since its launch, has also reached out to audiences in new international geographies like Philippines, UAE, USA, UK and South Africa and newer national geographies like Chandigarh, Hyderabad and Chennai.

Club Enerji & Greenolution was presented at IIM – Ahmedabad in Feb 2017 in a TEDx IIM Ahmedabad event held on the topic: "Driving Conservation by shaping the future generations".

12.5. DEMAND-SIDE MANAGEMENT

Your Company has been at the forefront of propagating energy conservation and efficiency.

Demand-side management (DSM) refers to cooperative activities between the utility and its customers to implement options for increasing the efficiency of energy utilization, with resulting benefits to the customer, utility and society as a whole. Industrial, commercial and residential consumers in the city have unique usage patterns. Under "Be Green" initiative, your Company gives an opportunity to Mumbai consumers to exchange their old, inefficient electrical appliances for new, 5 star rated energy efficient appliances at a discounted price. The Company has partnered with leading consumer appliance manufacturers for energy efficient equipment. The consumers appreciate these initiatives as it helps to reduce their energy cost by 30% to 50% without compromising on their comfort and convenience.

During this financial year, these programs received a good response and more than 13,000 energy efficient appliances (LED tube lights, ceiling fans, refrigerators and split ACs) have been distributed in FY17. HVAC Audit, Pump Audit, Power Quality Audit were carried out through Energy Audit program this year. These audits helped consumers to focus on the areas which offer the greatest scope for energy savings. Your Company also facilitated the implementation of National-level Program (DELP/UJALA) which is being implemented by M/s. EESL, a Union Govt. Undertaking, and aims to increase the penetration of LED lighting technology in the residential sector. The DELP/UJALA program witnessed the distribution of more than 1.1 lakh LED bulbs for Tata Power consumers in Mumbai during FY17.

12.6. SUSTAINABILITY REPORTING

Your Company has adopted the latest Global Reporting Initiative (GRI) G4 guidelines to report on its sustainability performance. The report, prepared in accordance with the comprehensive criteria, is specific to the Indian operations of your Company viz. generation, transmission and distribution of power and highlights the sustainability performance of your Company. The Company's Sustainability Report is hosted on its website: https://www.tatapower.com/sustainability/sustainability-communications.aspx (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website)

12.7. BUSINESS RESPONSIBILITY REPORT (BRR)

The Business Responsibility Reporting was in line with the SEBI requirement based on the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business' notified by Ministry of Corporate Affairs (MCA), Government of India, in July 2011. Your Company reported its performance for FY17 as per the BRR framework, describing initiatives taken from an environmental, social and governance perspective. The BRR is hosted on the Company website: https://www.tatapower.com/investor-relations/brr. aspx (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website).

12.8. INTEGRATED REPORTING (IR)

Your Company prides itself in making voluntary disclosures to keep its stakeholders fully informed on all aspects of its business. It has decided to take steps to further enhance the disclosures and information provided in its annual report in alignment with the Integrated Reporting <IR> framework by International Integrated Reporting Council (IIRC).

13. TRANSITION TO INDIAN ACCOUNTING STANDARDS

With effect from 1st April 2016, your Company was required to align its accounting policies and disclosures with new Indian Accounting Standards or IndAS. Consequently, the financial statements to be issued thereafter are different from those issued from the previous set. Apart from differences in the way assets, liabilities, income, expenses and losses are measured, even the disclosure requirements, as also the various statements comprising the financial report, have substantially changed.

The significant changes that have affected the net worth and the Profits are on account of the following:

a) effect of some erstwhile subsidiaries (IEL, PTL and Dugar Hydro) re-classified as Joint Ventures (JV) and change to Equity Accounting for JVs and reclassified subsidiaries. JVs and erstwhile subsidiaries were earlier consolidated on line by line basis;

b) Tata Power Jojobera Plant and IEL PPA arrangements categorized as Finance Lease, their assets derecognized and treated as Lease Receivables;

c) Fair valuation of current and non-current investments other than investments in subsidiaries, joint ventures and associates. However, certain unquoted investments in Tata group companies have been valued at cost as their fair value based on appropriate methodology is not materially different from their carrying cost;

d) effective Interest Rate (EIR) Method adopted for Long term borrowings and debentures;

e) Fair valuation of forward and option contracts and IRS;

f) Preference shares considered as compound/debt instrument;

g) Consider Interest and Commission charges for Interest free loan and Guarantee issued to group companies;

h) Reversal of proposed dividend and Dividend Distribution Tax thereon;

i) Change in Deferred Tax computation from P & L approach to Balance Sheet approach;

j) De-recognition of Interest on Forex Loan Capitalized;

k) Revamping of the notes to the accounts and much more elaborate disclosures

14. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Directors

Ms. Anjali Bansal, Ms. Vibha Padalkar and Mr Sanjay V. Bhandarkar were appointed as Additional Directors of the Company with effect from 14th October 2016, in accordance with Article 132 of the Company's Articles of Association and Section 161 of the Act. They hold Office only upto the date of the forthcoming Annual General Meeting (AGM) and a Notice under Section 160(1) of the Act has been received from a Member signifying his intention to propose their appointment as Directors. They were also appointed as Independent Directors for a period of 5 years with effect from 14th October 2016 upto 13th October 2021, subject to approval of the Members at the ensuing AGM.

Mr. S. Padmanabhan was appointed as an Additional Director of the Company with effect from 16th December 2016, in accordance with Article 132 of the Company's Articles of Association and Section 161 of the Act. Mr. Padmanabhan holds Office only upto the date of the forthcoming AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying its intention to propose his appointment as Director. Mr. Padmanabhan was nominated as Chairman of the Board of Directors of the Company with effect from 3rd January 2017, by Tata Sons Limited (TSL) pursuant to Article 164(b) of the Company's Articles of Association, where TSL has the right to nominate the Chairman of the Board of Directors of the Company. He continued as Chairman till 10th February 2017 and thereafter, continues as Non-Executive Director on the Company's Board. Mr. N. Chandrasekaran was appointed as an Additional Director of the Company with effect from 11th February 2017, in accordance with Article 132 of the Company's Articles of Association and Section 161 of the Act. Mr. Chandrasekaran holds Office only upto the date of the forthcoming AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying its intention to propose his appointment as Director. Mr. Chandrasekaran was also nominated as Chairman of the Board of Directors of the Company with effect from 11th February 2017, by TSL, pursuant to Article 164(b) of the Company's Articles of Association. Mr. K. M. Chandrasekhar was appointed as an Additional Director of the Company with effect from 4th May 2017, in accordance with Article 132 of the Company's Articles of Association and Section 161 of the Act. Mr. Chandrasekhar holds Office only upto the date of the forthcoming AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying his intention to propose his appointment as Director. Mr. Chandrasekhar was also appointed as an Independent Director for a period of 5 years with effect from 4th May 2017 upto 3rd May 2022, subject to approval of the Members at the ensuing AGM. Mr. Ashok S. Sethi was re-appointed as COO and Executive Director of the Company for a period commencing from 1st April 2017 till 30th April 2019. His re-appointment and the remuneration payable to him require approval of the Members at the ensuing AGM.

Mr. Cyrus P. Mistry, Non-Executive Chairman on your Company's Board, resigned as Director effective 19th December 2016. Consequently, Mr. Mistry ceased to be Chairman of the Board of Directors of the Company. Consequent upon their completing 75 years of age, as required by the guidelines adopted by the Company for retirement of Non-Executive Directors, Mr. Piyush G. Mankad, Mr. Ashok K. Basu and Dr. Homiar S. Vachha, Independent Directors on your Company's Board, ceased to be Directors of the Company effective 18th November 2016, 24th March 2017 and 23rd April 2017, respectively.

The Board of Directors place on record their deep appreciation for the contribution of these Directors during their tenure. In accordance with the requirements of the Act and the Company's Articles of Association, Ms. Sandhya S. Kudtarkar retires by rotation and is eligible for re-appointment.

Nine Board Meetings were held during the year. For further details, please refer to Report on Corporate Governance, which forms a part of this Report.

In terms of Section 149 of the Act, Mr. N. H. Mirza, Mr. D. M. Satwalekar, Ms. Anjali Bansal, Ms. Vibha Padalkar, Mr. S. V. Bhandarkar and Mr. K. M. Chandrasekhar are the Independent Directors of the Company. The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the Act.

Key Managerial Personnel

In terms of Section 203 of the Act, the following are the Key Managerial Personnel (KMP) of the Company:

Mr. Anil Sardana, CEO and Managing Director

Mr. Ashok S. Sethi, COO and Executive Director

Mr. Ramesh N. Subramanyam, Chief Financial Officer

Mr. Hanoz M. Mistry, Company Secretary

15. ANNUAL EVALUATION OF BOARD PERFORMANCE AND PERFORMANCE OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS

Pursuant to the provisions of the Act and Regulation 25 of the Listing Regulations, the Board has carried out an annual evaluation of its own performance, performance of the Directors individually as well as the evaluation of the working of its Committees. The following process was adopted for Board evaluation:

i) Feedback was sought from each Director about their views on the performance of the Board, covering various criteria such as degree of fulfilment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning, Board culture and dynamics, quality of relationship between the Board and the Management and efficacy of communication with external stakeholders. Feedback was also taken from every Director on his assessment of the performance of each of the other Directors.

ii) The Nomination and Remuneration Committee (NRC) then discussed the above feedback received from all the Directors.

iii) Based on the inputs received, the Chairman of the NRC also made a presentation to the Independent Directors at their meeting, summarising the inputs received from the Directors as regards Board performance as a whole and of the Chairman. The performance of the Non-Independent Non-Executive Directors and Board Chairman was also reviewed by them.

iv) Post the meeting of the Independent Directors, their collective feedback on the performance of the Board (as a whole) was discussed by the Chairman of the NRC with the Chairman of the Board. It was also presented to the Board and a plan for improvement was agreed upon and is being pursued.

v) Every statutorily mandated Committee of the Board conducted a self-assessment of its performance and these assessments were presented to the Board for consideration. Areas on which the Committees of the Board were assessed included degree of fulfilment of key responsibilities, adequacy of Committee composition and effectiveness of meetings.

vi) Feedback was provided to the Directors, as appropriate. Significant highlights, learning and action points arising out of the evaluation were presented to the Board and action plans drawn up. During the year under report, the recommendations made in the previous year were satisfactorily implemented.

16. REMUNERATION POLICY FOR THE DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read with Part D of Schedule II to the Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity and Director Attributes, which is reproduced in Annexure-III and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company, which is reproduced in Annexure-IV to this Report.

17. COMMITTEES OF THE BOARD

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. The following statutory Committees constituted by the Board function according to their respective roles and defined scope:

Audit Committee of Directors

Nomination and Remuneration Committee

Corporate Social Responsibility Committee

Stakeholders Relationship Committee

Risk Management Committee

Details of composition, terms of reference and number of meetings held for respective committees are given in the Report on Corporate Governance.

The Board has laid down separate Codes of Conduct for Non-Executive Directors and Senior Management personnel of the Company and the same are posted on the Company's website at https://www.tatapower.com/aboutus/ pdf/Code-of-Conduct-NEDs.pdf. (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website). All Senior Management personnel have affrmed compliance with the Tata Code of Conduct (TCOC). The CEO & Managing Director has also confirmed and certified the same. The certification is enclosed at the end of the Report on Corporate Governance.

18. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

The information on conservation of energy and technology absorption stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is attached as Annexure - V.

19. PARTICULARS OF EMPLOYEES AND REMUNERATION

The information required under Section 197(12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is attached as Annexure - VI.

The information required under Rule 5(2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in the Annexure forming part of this Report. In terms of the first provision to Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. Any Member interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. None of the employees listed in the said Annexure is related to any Director of the Company.

Officers of the organisation are classified into five management work levels i.e. MA, MB, MC, MD and ME. The work levels are further divided into grades. Non-management employees are across different grades and also have been classified as unskilled, semi-skilled, skilled and highly skilled.

For the Officers, a benchmarking exercise was undertaken in FY17 on compensation with the help of a global consultancy firm specializing in remuneration and compensation. The benchmarking was to understand the comparative position of remuneration of the Company's Officers vis--vis Officers in equivalent grades in ten key companies in the energy and power sector. As per this report, the median salary of Officers at your Company in different grades was aligned to the market compensation.

20. RELATED PARTY TRANSACTIONS

In line with the requirements of the Act and the Listing Regulations, the Company has formulated a Policy on Related Party Transactions and the same is uploaded on the Company's website: https://www.tatapower. com/aboutus/pdf/policy-on-related-party-transactions.pdf (scan the adjacent QR Code to read the details on the Company website). Details of Related Party Transactions as per AOC-2 are provided in Annexure-VII.

21. DEPOSITS (Table 9)

Sl. No. Particulars Amount in _
1. Accepted during the year Nil
2. Remained unpaid or unclaimed at the end of the year*. 2,58,105
3. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved NA
At the beginning of the year
Maximum during the year
At the end of the year
4. Details of deposits which are not in compliance with the requirements of Chapter V of the Act NA

* This relates to deposits accepted under the Companies Act, 1956.

22. LOANS, GUARANTEES, SECURITIES AND INVESTMENTS

The Company, being an infrastructure company, is exempt from the provisions as applicable to loans, guarantees and securities under Section 186 of the Act. The details of investments are provided in the notes to the financial statements.

23. EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 of the Act and Rule 12 of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 is provided in Annexure-VIII.

24. AUDITORS

M/s Deloitte Haskins & Sells LLP (DHS LLP), who are the statutory auditors of your Company, hold Office until the conclusion of this year's AGM. The Board has recommended appointment of S R B C & CO. LLP (SRBC), Chartered Accountants, as statutory auditors of the Company in place of DHS LLP, the existing auditors of the Company, for a period of 5 years from the conclusion of this 98th Annual General Meeting (AGM) held in 2017 till the conclusion of the 103rd AGM to be held in 2022. In this connection, the attention of the Members is invited for approval of Item No. 5 of the Notice, for appointment of Statutory Auditors. Members will also be requested to pass a resolution (vide Item No.17 of the Notice) authorizing the Board of Directors to appoint Branch Auditors for the purpose of auditing the accounts maintained at the Branch Offices of the Company abroad.

25. AUDITORS' REPORT

The standalone and the consolidated financial statements of the Company have been prepared in accordance with Indian Accounting Standards (IndAS) notified under section 133 of the Companies Act, 2013.

The Auditor's Reports on the standalone and the consolidated financial statements contain the following qualification: As described in Note 34 (b) and (c) to the standalone IndAS financial statements and Note 34 (ii) and (iii) to the consolidated Ind AS financial statements, the fair value of unquoted equity shares of Tata Teleservices Limited (TTSL) has not been determined as at 31st March, 2017. We are, therefore, unable to comment on whether the carrying value of:

a) Investments in TTSL of Rs 384.88 crore represents the fair value of such investments as at 31st March 2017, and the consequent impact thereof on Other Comprehensive Income, and

b) ‘Other advance', which represent TTSL shares receivable from DoCoMo under a contractual obligation of Rs 138.55 crore as at 31st March, 2017 represents the fair value of such shares and the consequent impact thereof on the Statement of Profit and Loss.

Board's comments:

The valuation report in respect of investment in TTSL is available from the Company only as at 30th September 2016. The Auditors have qualified their report since TTSL was in the process of working out valuation as at 31st March 2017, when your Company's accounts were audited and adopted by the Board of Directors.

26. COST AUDITOR AND COST AUDIT REPORT

M/s Sanjay Gupta and Associates, Cost Accountants, were appointed Cost Auditors of your Company for FY17.

In accordance with the requirement of the Central Government and pursuant to Section 148 of the Act, your Company carries out an annual audit of cost accounts relating to electricity. The Cost Audit Report and the Compliance Report of your Company for FY16, was filed on 30th August 2016 with the Ministry of Corporate Affairs through Extensive Business Reporting Language (XBRL) by M/s Sanjay Gupta and Associates, Cost Accountants, before the due date of 30th September 2016.

27. SECRETARIAL AUDIT REPORT

M/s. Parikh & Associates, Company Secretaries, were appointed as Secretarial Auditors of your Company to conduct a Secretarial Audit of records and documents of the Company for FY17. The Secretarial Audit Report confirms that the Company has complied with the provisions of the Act, Rules, Regulations, and Guidelines and that there were no deviations or non-compliances. The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks or disclaimers. The Secretarial Audit Report is provided in Annexure-IX.

28. CORPORATE GOVERNANCE

At Tata Power, we ensure that we evolve and follow the corporate governance guidelines and best practices sincerely, not just to boost long-term shareholder value, but also to respect minority rights. We consider it our inherent responsibility to disclose timely and accurate information regarding our operations and performance, as well as on the leadership and governance of the Company.

During the second half of the year under review, the Company witnessed a leadership change at Tata Sons Limited (our Promoter). During this period, there were allegations made regarding the ethics and governance of the Company. Clarifications were also sought by the Regulators with respect to certain business decisions and governance process.

We categorically deny these references and would like to impress upon you that your Company has the highest corporate governance standards, robust processes and a duly constituted and independent Board. Your Board exercises its independence both, in letter and spirit. Your Directors understand their fiduciary duties and have always acted in the best interests of the Company and will continue to do so. Equally, your Company has a professional and competent management to run the business. The Board compliments the management team in coping with the leadership transition seamlessly and in remaining steadfast towards achieving set objectives without getting distracted.

Further, during the course of the leadership transition, allegations were made with respect to certain contracts which had been awarded by the Company. In this regard, we would like to place on record the fact that after a careful consideration of the issues involved, the Audit Committee had requested the management to examine whether due process in award of contracts had been followed and necessary approvals had been sought from the concerned authorities, based on which the Audit Committee would decide next steps. The management had compiled the required information and submitted the required data to the Audit Committee. Based on the records, the current management has reviewed the old contracts awarded and confirmed that due process had been followed. The management has since then submitted to the Audit Committee a white paper on the subject, duly confirming that the Company has not been subjected to any commercial deterrent or loss, over the period of such contracts. The Audit Committee has now asked the (external) internal auditors of the Company to study the records and answer certain queries raised by the Audit Committee members. Findings are awaited from the internal auditor in this regard. Management is of the view that the allegations are incorrect.

Queries were also raised with regard to bidding and award of Mundra Project in 2006, which have been appropriately responded to.

The Company employed rigorous processes in preparation of all accounts/ financial statements including detailed review by the Board of Directors and the concerned Committees. The accounts and financial statements of the Company have also been reviewed by the statutory auditors. The Company reiterated that its annual reports, accounts and financial statements, as published from time to time, present a true and fair view of the state of Affairs of the Company and its business and the Company has disclosed all material facts as required under applicable laws.

Pursuant to Regulation 34 of the Listing Regulations and relevant sections of the Act, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors' Certificate are included in the Annual Report.

29. VIGIL MECHANISM

Your Company believes in the conduct of the Affairs of its constituents in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act, a vigil mechanism was established for directors and employees to report to the management instances of unethical behaviour, actual or suspected, fraud or violation of the Company's code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counselor (CEC)/Chairman of the Audit Committee of the Company for redressal.

30. DIRECTORS' RESPONSIBILITY STATEMENT

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants including audit of IFC for financial reporting by the statutory auditors and the reviews performed by management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's IFC were adequate and effective during FY17. Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirms that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures in the matter of valuation of certain unquoted investments and the adequacy of the provision for contractual obligation in the matter of NTT Docomo Inc.;

b) the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of Affairs of the Company at the end of the financial year and of the Profit of the Company for that period;

c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors had prepared the annual accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

f) the Directors had devised proper systems to ensure compliance with the provision of all applicable laws and that such systems were adequate and operating effectively.

31. ACKNOWLEDGEMENTS

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our shareholders, customers, business partners, vendors - both international and domestic, bankers, financial institutions and academic institutions for all the support rendered during the year.

The Directors are thankful to the Government of India, the various Ministries of the State Governments, the Central and State Electricity Regulatory authorities, communities in the neighbourhood of our operations, Municipal authorities of Mumbai, and local authorities in areas where we are operational in India; as also partners, governments and stakeholders in International geographies where the Company operates, for all the support rendered during the year.

Finally, we appreciate and value the contributions made by all our employees and their families for making Tata Power what it is.

On behalf of the Board of Directors,
N. Chandrasekaran
Chairman
Mumbai, 19th May 2017 (DIN: 00121863)

   

ATTENTION INVESTORS : Prevent unauthorised transactions in your account Update your mobile numbers / email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile / email at the end of the day .... Issued in the interest of Investors.    ||     Prevent Unauthorized Transactions in your demat account --> Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from CDSL on the same day........issued in the interest of investors.   ||    KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
DP SEBI REGN NO.: IN-DP-CDSL-518-2009 | DP ID: 12061400 | BSE CASH REG. NO.:INB-011327138 NSE CASH REG. No.:INB-231333635
NSE F&O.:INF-231333635 | MCX-SX :INE-261324334 | MCX FMC ID: MCX/TCM/CORP/1500 | NCDEXFMC ID : NCDEX/TCM/CORP/0858
@ 2015. ALL RIGHTS RESERVED. GIGANTIC SECURITIES LTD
Designed, developed and powered by C-MOTS Infotech (ISO 9001:2015 certified)