CORPORATE OBJECTIVES

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3 CORPORATE OBJECTIVES To realise the vision and mission, eight key corporate objectives have been identified. These objectives would provide the link between the defined mission and the functional strategies: Business portfolio growth To further consolidate NTPC's position as the leading thermal power generation company in India and establish a presence in hydro power segment. To broad base the generation mix by evaluating conventional and non-conventional sources of energy to ensure long run competitiveness and mitigate fuel risks. To diversify across the power value chain in India by considering backward and forward integration into areas such as power trading, transmission, distribution, coal mining, coal beneficiation, etc. To develop a portfolio of generation assets in international markets. To establish a strong services brand in the domestic and international markets. Customer Focus To foster a collaborative style of working with customers, growing to be a preferred brand for supply of quality power. To expand the relationship with existing customers by offering a bouquet of services in addition to supply of power e.g. trading, energy consulting, distribution consulting, management practices. To expand the future customer portfolio through profitable diversification into downstream businesses, inter alia retail distribution and direct supply. To ensure rapid commercial decision making, using customer specific information, with adequate concern for the interests of the customer. Agile Corporation To ensure effectiveness in business decisions and responsiveness to changes in the business environment by: - Adopting a portfolio approach to new business development. - Continuous and co-ordinated assessment of the business environment to identify and respond to opportunities and threats. To develop a learning organisation having knowledge-based competitive edge in current and future businesses. To effectively leverage Information Technology to ensure speedy decision making across the organisation. Performance Leadership To continuously improve on project execution time and cost in order to sustain long run competitiveness in generation. To operate & maintain NTPC stations at par with the best-run utilities in the world with respect to availability, reliability, efficiency, productivity and costs. To effectively leverage Information Technology to drive process efficiencies. To aim for performance excellence in the diversification businesses. To embed quality in all systems and processes. Human Resource Development To enhance organisational performance by institutionalising an objective and open performance management system. To align individual and organisational needs and develop business leaders by implementing a career development system. To enhance commitment of employees by recognising and rewarding high performance. To build and sustain a learning organisation of competent world-class professionals. To institutionalise core values and create a culture of teambuilding, empowerment, equity, innovation and openness which would motivate employees and enable achievement of strategic objectives. Financial Soundness To maintain and improve the financial soundness of NTPC by prudent management of the financial resources. To continuously strive to reduce the cost of capital through prudent management of deployed funds, leveraging opportunities in domestic and international financial markets. To develop appropriate commercial policies and processes which would ensure remunerative tariffs and minimise receivables. To continuously strive for reduction in cost of power generation by improving operating practices. Sustainable Power Development To contribute to sustainable power development by discharging corporate social responsibilities. To lead the sector in the areas of resettlement and rehabilitation and environment protection including effective ash-utilisation, peripheral development and energy conservation practices. To lead developmental efforts in the Indian power sector through efforts at policy advocacy, assisting customers in reform, disseminating best practices in the operations and management of power plants etc. Research and Development To pioneer the adoption of reliable, efficient and cost-effective technologies by carrying out fundamental and applied research in alternate fuels and technologies. To carry out research and development of breakthrough techniques in power plant construction and operation that can lead to more efficient, reliable and environment friendly operation of power plants in the country. To disseminate the technologies to other players in the sector and in the long run generating revenue through proprietary technologies. 30th Annual Report 1

4 REFERENCE INFORMATION Registered Office Bankers NTPC Bhawan, SCOPE Complex, Allahabad Bank 7,Institutional Area, Lodi Road, Andhra Bank New Delhi Bank of Baroda Phone No. : Canara Bank Fax No. : Central Bank of India Web site : Dena Bank Indian Bank Subsidiaries Indian Overseas Bank NTPC Electric Supply Company Ltd. ICICI Bank Ltd. NTPC Hydro Ltd. Jammu & Kashmir Bank Ltd. NTPC Vidyut Vyapar Nigam Ltd. Oriental Bank of Commerce Pipavav Power Development Company Ltd. Punjab National Bank Punjab & Sind Bank Ragistrar & Share Transfer Agent State Bank of Bikaner & Jaipur Karvy Computershare Pvt. Ltd. State Bank of Mysore Karvy House, 46, Avenue 4, Street No. 1 State Bank of Hydrabad Banjara Hills, Hyderabad State Bank of India Phone No. : State Bank of Patiala Fax No. : State Bank of Travancore E- Mail Id : ntpcipo@karvy.com State Bank of Saurashtra UCO Bank Shares listed at Union Bank of India National Stock Exchange of India Limited United Bank of India Bombay Stock Exchange Limited Vijaya Bank Depositories National Securities Depository Limited Central Depository Services (India) Limited Company Secretary A.K. Rastogi Auditors M/s Kalani & Co. M/s Amit Ray & Co. M/s Umamaheswara Rao & Co. M/s S.N. Nanda & Co. M/s T. R. Chadha & Co. 2 30th Annual Report

5 CONTENTS Letter to Shareholders... 5 Notice of AGM... 6 Awards & Accolades Station-wise Generation Selected Financial Information Board of Directors Senior Management Team Directors Report Management Discussion and Analysis Report on Corporate Governance Accounting Policies Balance Sheet Profit & Loss Account Cash Flow Statement Auditors Report Employee Cost Summary Revenue Expenditure on Social Overheads Fund Flow Statement Subsidiary Companies Consolidated Financial Statements th Annual Report 3

6 THE YEAR AT A GLANCE Commercial Generation Million Units Sale of Energy Rs Million Profit before tax Profit after tax Dividend 23087* Dividend tax Retained Earnings Net Fixed Assets Net Worth Loan Funds Capital Employed Net Cash From Operations Value Added No. of Employees # Value added per employee Rs Million Debt to Equity Ratio Return on Capital Employed (%) % Face Value per share Rs Dividend Per share 2.80* 2.40 Book Value per Share # excluding JVs, Subsidiaries and BTPS (owned by NTPC w.e.f. 1 st June, 2006) * including final dividend recommended by the Board 4 30th Annual Report

7 LETTER TO SHAREHOLDERS Dear Shareholders, NTPC Ltd. is marching ahead from strength to strength. During the year , our stations performed at the highest ever plant load factor of 87.54% and generated billion units of electricity which was 7.40% higher than the previous year s generation of billion units and accounted for almost 28% of power generated in India. Our gross revenues for the year were Rs. 287 billion and grew by more than 15% over the previous year. Our reported profit after tax for the year was almost the same as in the previous year at Rs. 58 billion. However, on an adjusted basis the profits grew by almost 18%. We believe that the Indian Economy is on robust growth trajectory and the Indian Power Sector also has an immense potential to grow. We believe that we are well positioned to be a part of this growth story and play our role as one of the growth engines of the economy. Our strategy is to increase our already substantial (nearly 20%) market share in the Indian Power sector through rapid capacity expansion. We are planning to be a 51 GW company by the year 2012 and 70 GW plus company by Currently we are a 26 GW company. We are presently executing projects having capacities of more than 11 GW. We plan to add capacities on our own as well as through joint ventures and subsidiaries. We know that there are challenges in the sector. Availability of fuel at an affordable price is a major challenge. We have adopted a strategy of backward integration and are entering into coal mining and exploration for gas. We would also be increasing the share of hydro projects in our portfolio and we are also exploring the possibility of putting up nuclear power projects. We have made arrangements to meet the near-term supplies through coal imports and spotbuying of gas. The financial health of our customers is also a key concern for us. The reforms taking place in the sector have begun to yield results and are likely to improve the financial health of the customers. For the third consecutive year, we have been able to realize 100% of the amounts due from our customers. We are taking a number of initiatives to partner our customers in improving their operations and management practices and thereby their health. We are operating in a regulated environment and there are risks attached to it. However, we believe that regulators would continue to incentivise efficiency and we have strategies to continuously improve our efficiency in operations through technological upgradations, modernization, adoption of best practices and global benchmarking. We expect greater infusion of market oriented features in the regulated power sector scenario. To take advantage of such a shift, we have earmarked some of the upcoming capacities as Merchant Power Plants. The formation of two of our subsidiary companies, one for distribution and the other for power trading are also part of the strategy for leveraging our strengths in the changed scenario. Our company has one of the world s finest teams of power professionals and they are acknowledged for their can do it spirit. We have a very well conceived plan for quantum growth and diversification which our team is fully equipped to implement. I am sure that you will be happy to be a part of our exciting journey of growth and excellence and to share the benefits thereof. With best wishes, (T. Sankaralingam) Chairman & Managing Director 30th Annual Report 5

8 NOTICE Notice is hereby given that the Thirtieth Annual General Meeting of the members of NTPC Limited will be held on Tuesday, September 19, 2006 at a.m. at NDMC Indoor Stadium, Talkatora Garden, New Delhi to transact the following business: Ordinary Business 1. To receive, consider and adopt the audited Balance Sheet as at March 31, 2006 and Profit & Loss Account for the financial year ended on that date together with Report of the Board of Directors and Auditors thereon. 2. To confirm interim dividend and declare final dividend for the year To appoint a Director in place of Shri R.S. Sharma, who retires by rotation and being eligible, offers himself for reappointment. 4. To appoint a Director in place of Shri R.K. Jain, who retires by rotation and being eligible, offers himself for reappointment. 5. To appoint a Director in place of Shri A.K. Singhal, who retires by rotation and being eligible, offers himself for reappointment. 6. To fix the remuneration of the Auditors. By order of the Board of Directors Regd. Office: NTPC Bhawan, 7, Institutional Area, Lodi Road, New Delhi Date: August 4, 2006 (A.K. Rastogi) Company Secretary NOTES :- 1. A Member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of himself/herself and the proxy need not be a Member of the Company. In order to be effective, the Proxy form duly completed should be deposited at the registered office of the company not less than forty-eight hours before the scheduled time of the Annual General Meeting. Blank proxy form is enclosed. 2. As required by clause 49 of the Listing Agreement entered into with the Stock Exchanges the relevant details of Shri R.S. Sharma, Shri R.K. Jain and Shri A.K. Singhal, Directors retiring by rotation and seeking re-appointment under Item No. 3, 4 and 5 aforesaid in accordance with applicable provisions of the Articles of Association of the Company as well as those directors who have been appointed since the last Annual General Meeting are also annexed. The tenure of Shri R.S. Sharma, Shri R.K. Jain and Shri A.K. Singhal is upto October 7, 2009, December 31, 2009 and July 31, 2010 respectively as per terms of their appointment by the Government of India. 3. The Register of Members and Share Transfer Books of the Company will remain closed from September 1, 2006 to September 15, 2006 (both days inclusive). The dividend on equity shares, as recommended by the Board of Directors, subject to the provisions of section 206A of the Companies Act, 1956, if declared at the Annual General Meeting, will be paid on or after September 22, 2006 to the Members or their mandates whose names appear on the Company s Register of Members on September 15, 2006 in respect of physical shares. In respect of dematerialized shares, the dividend will be payable to the beneficial owners of the shares whose names appear in the Statement of Beneficial Ownership furnished by National Securities Depository Limited and Central Depository Services (India) Limited at the close of business hours on August 31, th Annual Report

9 4. Members are requested to:- i) note that copies of Annual Report will not be distributed at the Annual General Meeting. ii) bring their copies of Annual Report, Notice and Attendance Slip duly completed and signed at the meeting. iii) deliver duly completed and signed Attendance Slip at the entrance of the meeting venue as entry to the Hall will be strictly on the basis of the entry slip available at the counters at the venue to be exchanged with the attendance slip. iv) quote their Folio / Client ID & DP ID Nos. in all correspondence. v) note that due to strict security reasons mobile phones, brief cases, eatables and other belongings are not allowed inside the Hall. vi) note that no gifts/coupons will be distributed at the Annual General Meeting. 5. Members are advised to submit their Electronic Clearing System (ECS) mandates, to enable the Company to make remittance by means of ECS. Those holding shares in physical form may obtain and send the ECS mandate form to Karvy Computershare Private Limited, Registrar & Transfer Agent of the Company. Those holding shares in Electronic Form may obtain and send the ECS mandate form directly to their Depository Participant (DP). Those who have already furnished the ECS Mandate Form to the Company/ Registrar & Transfer Agent /DP with complete details need not send it again. The shareholders who do not wish to opt for ECS facility may please mail their bankers name, branch address and account number to Karvy Computershare Private Limited, Registrar & Transfer Agent of the Company to enable them to print these details on the dividend warrants. 6. Members holding shares in different folios in physical mode are requested to apply to the Company or its Registrar & Transfer Agent for consolidation and send relevant Share Certificates for consolidation. 7. The Board of Directors in its meeting held on January 30, 2006 had declared an interim 20% on the paidup equity share capital of the company. Members who have not received or not encashed their dividend warrants may approach Karvy Computershare Private Limited, Registrar & Transfer Agent of the Company, for revalidating the warrants or for obtaining duplicate warrants. 8. Pursuant to Section 205A read with Section 205C of the Companies Act, 1956, the dividend amounts which remain unpaid / unclaimed for a period of seven years, are required to be transferred to the Investors Education & Protection Fund of the Central Government. After such transfer, there remains no claim of the members whatsoever on the said amount. Therefore, Members are advised to encash their Dividend warrants immediately. 9. Members may avail of the facility of nomination in terms of Section 109A of the Companies Act,1956 by nominating in the Form-2B as prescribed in the Companies (Central Government s) General Rules and Forms, 1956, any person to whom their shares in the Company shall vest on occurrence of events stated in the Form. Form-2B is to be submitted in duplicate to Karvy Computershare Private Limited, Registrar & Transfer Agent of the Company. In case of shares held in dematerialized form, the nomination has to be lodged with the respective Depository Participant. 10. Annual listing fee for the year has been paid to all Stock Exchanges wherein shares of the Company are listed. 11. Pursuant to Section 619(2) of the Companies Act, 1956, the Auditors of a Government Company are to be appointed or re-appointed by the Comptroller and Auditor General of India (C & AG) and in terms of Clause (aa) of sub-section (8) of Section 224 of the Companies Act, 1956 their remuneration has to be fixed by the Company in the Annual General Meeting. The Members of the Company in the 29 th Annual General Meeting held on September 23, 2005 authorised the Board of Directors to fix the remuneration of Statutory Auditors for the year Accordingly, the Board of Directors fixed audit fee of Rs.40,00,000/- for the Statutory Auditors for the financial year in addition to applicable service tax and reimbursement of actual traveling and out-of-pocket expenses for visits to accounting units. Further, Statutory Auditors of the Company for the year has been appointed by C&AG of India, the Members may authorise the Board to fix an appropriate remuneration of Auditors as may be deemed fit by the Board. 30th Annual Report 7

10 12. Corporate Members intending to send their authorized representatives to attend the Meeting are requested to send a certified copy of the Board Resolution authorizing their representative to attend and vote on their behalf at the Meeting. 13. Member are requested to notify immediately any change of address: i. to their Depository Participants (DP) in respect of shares held in dematerialized form, and ii. to the Company at its Registered Office or to its Registrar & Transfer Agent, Karvy Computershare Pvt. Ltd. in respect of their physical shares, if any, quoting their folio number. 14. Members desirous of getting any information on any items of business of this Meeting are requested to address their queries to Shri A.K. Kundu, Executive Director (Finance) and Public Spokesperson of the Company at the registered office of the company at least ten days prior to the date of the meeting, so that the information required can be made readily available at the meeting. 15. All documents referred to in the accompanying notice are open for inspection at the registered office of the Company on all working days (barring Saturday and Sunday) between a.m. to 1.00 p.m. prior to the Annual General Meeting. BRIEF RESUME OF THE DIRECTORS SEEKING RE-ELECTION AND ALSO OF DIRECTORS APPOINTED SINCE LAST ANNUAL GENERAL MEETING Directors seeking re-election at the 30 th AGM Name Shri R.S. Sharma Shri R.K. Jain Shri A.K. Singhal Date of Birth & Age / 56 yrs / 57 yrs / 52 yrs. Date of Appointment Qualifications Graduate in Mechanical Engineering Graduate in Mechanical Engineering Chartered Accountant Expertise in specific functional area Shri R.S. Sharma has vast and rich experience of around 35 years in Thermal Power Stations. Prior to joining NTPC, he has worked in Madhya Pradesh State Electricity Board. He also served as Executive Director (Commercial) looking after the Commercial Functions of the company. He has been author to a number of Technical papers on various subjects of Power Plant Operation & Maintenance. Shri R.K. Jain has vast experience of over 34 years in thermal and gas power projects in the area of Project Planning, Conceptualisation, Design/ Engineering, Contract & Materials etc. He has also served as General Manager (Consultancy & Joint Ventures), Executive Director (Corporate Contract & Materials) and Executive Director (National Capital Region). Shri A.K. Singhal has with him vast and rich professional experience of over 29 years of handling all the facets in Corporate Finance and Accounts. Prior to joining NTPC in 2001, he was the Executive Director (Finance) in National Fertilizers Limited (NFL) as head of Finance & Accounts department. He held various managerial positions in Krishak Bharati Cooperative Limited (KRIBHCO) and Engineering Projects of India Limited (EPIL). Directorship held in other companies Part-time Chairman 1 NTPC SAIL Power Co. Pvt. Ltd. 2 Bhilai Electric Supply Company Private Limited Part-time Director 1. NTPC Electric Supply Co. Ltd. 2. NTPC Vidyut Vyapar Nigam Ltd. 3. PTC India Ltd. Part-time Director 1 NTPC Tamil Nadu Energy Co. Ltd. 2 NTPC Electric Supply Company Ltd. Part-time Chairman 1. Utility Powertech Limited Part-time Director 1. NTPC-Electric Supply Company Ltd. 2. NTPC Vidyut Vyapar Nigam Ltd. 3. NTPC Tamil Nadu Energy Co. Ltd. 4. NTPC Hydro Ltd. 5. NTPC-SAIL Power Company Pvt. Ltd. 6. Bhilai Electric Supply Company Pvt. Ltd. 7. NTPC Alstom Power Services Pvt. Ltd. 8. Ratnagiri Gas and Power Pvt. Ltd. 8 30th Annual Report

11 Memberships/ Chairmanship of Committees across all Public Companies NTPC Vidyut Vyapar Nigam Ltd. Member Audit Committee NTPC Limited Member Shareholders/ Investors Grievance Committee NTPC Vidyut Vyapar Nigam Ltd. Member Audit Committee NTPC Hydro Limited Member Audit Committee Directors appointed since last Annual General Meeting held on September 23, 2005 Name Prof. Ashok Misra Dr. R.K. Pachauri Shri G.P. Gupta Shri M. I. Beg Shri R.C. Shrivastav Date of Birth & Age /59 yrs /66 yrs /65 yrs /67 yrs /56 yrs Date of Appointment Qualifications Chemical Engineering from IIT, M. Sc. and Ph.D. in Polymer Science & Engineering Ph.D in Industrial Engineering and Ph.D in Economics, Master of Science in Industrial Engineering Post Graduate in Commerce Master in Economics and Bachelor of Science in Electrical Engineering Graduate in Electrical Engineering Expertise in specific functional area Prof. Ashok Misra is a Bachelor of Technology in Chemical Engineering from Indian Institute of Technology and a Master of Science in Chemical Engineering from Tufts University, USA. He also did his Master of Science and Ph.D. in Polymer Science & Engineering from University of Massachusetts, USA. Prof. Ashok Misra also successfully completed his EDP from Kellogs School of Management, Northwestern University, USA. Currently he is a Director, Indian Institute of Technology, Mumbai. Dr. R.K. Pachauri, a Padma Bhushan awardee, obtained a Master of Science in Industrial Engineering, Ph.D in Industrial Engineering and Ph.D in Economics from North Carolina State University, Raleigh, North Carolina, USA. He assumed his current responsibilities as the head of Tata Energy Research Institute, New Delhi (now known as The Energy and Resources Institute) in 1981, first as Director and since April 2001, as Director-General. Shri G.P. Gupta has been the Chairman and Managing Director of IDBI & Chairman of UTI. He has 40 years of experience in various financial institutions and held Directorships in various organizations like LIC, GIC, EXIM Bank, IFCI and BHEL in the past. Shri Mirza Ishtiaq Beg is former Chairman of Central Electricity Authority & Ex-officio Secretary to the Government of India. He obtained Master degree in Economics and Bachelor of Science in Electrical Engineering. Shri M.I. Beg was with Central Electricity Authority for 34 years and has been earlier on the Board of Power Finance Corporation Limited and Nuclear Power Corporation of India Limited. Shri R.C. Shrivastav has a rich and diverse experience of more than 30 years in the power sector. He started his carrier in power plant operation in captive power plant of Steel Authority of India Limited. He joined NTPC in 1981 and worked in various capacities in the areas of construction, commissioning and operation & maintenance of power stations as well as corporate operation services. Directorship held in other companies Part-time Director 1. Reliance Industries Limited Part-time Director 1. Oil and Natural Gas Corporation Limited Part-time Chairman 1. EMKAY Share & Stock Brokers Limited Part-time Director 1. PTC India Limited 2. Jammu and Kashmir Bank Limited 3. Swaraj Engines Limited 30th Annual Report 9

12 4. Aditya Birla Nuvo Limited 5. Su-Raj Diamonds & Jewellery Limited 6. Birla Sun Life Insurance Company Limited 7. M.P. Power Generating Company Limited 8. SIDBI Venture Capital Limited 9. Power Finance Corporation Limited 10. Shree Digvijay Cement Company Limited 11. Hindustan Aeronautics Ltd. Memberships/ Chairmanship of Committees across all Public Companies NTPC Limited Member Audit Committee NTPC Limited Chairman Audit Committee Power Finance Corporation Limited NTPC Limited Member Audit Committee NTPC Limited Member Shareholders/ Investors Grievance Committee Chairman Audit Committee Jammu and Kashmir Bank Limited Member Audit Committee Member Investors Grievance Committee Swaraj Engines Limited Member Audit Committee Birla Sun Life Insurance Company Limited Member Audit Committee Aditya Birla Nuvo Limited Member Audit Committee PTC India Limited Member Audit Committee Hindustan Aeronautics Ltd. Member Audit Committee Shree Digvijay Cement Company Limited Member Audit Committee 10 30th Annual Report

13 AWARDS & ACCOLADES NTPC has received the International Project Management Award 2005 for its Simhadri project at the International Project Management Association World Congress. NTPC is the only Asian Company to receive this award. Shri C.P. Jain, ex CMD, NTPC has been adjudged Ernst and Young Manager Entrepreneur of the Year for the year 2005 NTPC was recipient of Golden Peacock Environment Management Award instituted by the World Environment Foundation for the year 2006 Amity Excellence in Corporate Social Responsibility Award for Social Welfare was awarded to NTPC during the International Business Summit in February, 2006 NTPC was ranked as Third Great Place to Work for in India for the second time in succession by a survey conducted by Grow Talent and Business World 2005 NTPC was awarded MOU Award for Excellence in Performance for and ranked first among the top ten Public Sector Enterprises. NTPC has received the award for Innovative HR Practices at world HR Congress in February, NTPC has bagged the Platts Global Energy Award 2005 for the Community Development Programme of the Year. NTPC has bagged the BML Munjal Award for encouraging Learning and Development and using it as a strategic HR tool. 30th Annual Report 11

14 12 30th Annual Report

15 STATION-WISE GENERATION STATIONS Capacity(MW) Gen. (MU)Gross Northern Region Singrauli Rihand Unchahar Tanda National Capital Region Dadri ( Coal ) Anta ( Gas ) Auraiya ( Gas ) Dadri ( Gas ) Faridabad ( Gas ) Western Region Korba Vindhyachal Kawas ( Gas ) Jhanor Gandhar ( Gas ) Eastern Region Farakka Kahalgaon Talcher - Kaniha Talcher -Thermal Southern Region Ramagundam Simhadri Rajiv Gandhi CCP ( Liquid Fuel ) Total Badarpur (Owned by NTPC w.e.f. 1 st June, 2006) th Annual Report 13

16 14 30th Annual Report

17 SELECTED FINANCIAL INFORMATION Rs. in Million A) Operating Income Earned from Sale of Energy Consultancy & Other Income Total Paid & Provided for Fuel Employees Remuneration & Benefits Generation, Administration & other expenses Provision (Net) 334 (6160) (3813) Prior Period/Extra Ordinary Items 2488 (102) (500) Profit before depreciation, Interest & Finance Charges and Tax Depreciation Profit before Interest & Finance Charges and Tax Interest & Finance Cost Profit before tax Tax (Net) Profit after tax Dividend Dividend tax Retained Profit B) What is Owned Gross Fixed Assets Less : Depreciation Net block Capital Work-in-progress, Construction Stores & Advances Investments Current Assets, Loans & Advances Total Net Assets C) What is Owed Long Term Loans Working Capital Loans Current Liabilities & Provisions Total Liabilities D) Others Deferred Revenue - Advance against deprectiaion Development surcharge fund Total E) Net Worth Share Capital Reserves & Surplus Miscellaneous Expenditure (To the extent not written off or adjusted) (87) (72) Net Worth F) Capital Employed G) Value Added H) No. of Shares I) No. of Employees* J) Ratios Return on Capital Employed (%) Return on Net Worth (%) Book Value per Share (Rs.) Current Ratio Debt to Equity Value Added/Employee (Rs. Million) * Excluding JVs, Subsidiaries, BTPS (owned by NTPC w.e.f. 1 st June, 2006) & BALCO 30th Annual Report 15

18 DIRECTORS PROFILE Shri T.Sankaralingam (58 yrs) has been serving the power sector for the past 37 years. Before joining NTPC in 1977, he was associated with TNEB and BHEL. Prior to taking over as Chairman and Managing Director, NTPC Limited, on April 01, 2006, he has been Director (Projects) since August Shri Sankaralingam has rich hands-on experience in all facets of electricity generation and transmission. In recognition of his expertise, he has been elected as Vice-Chairman of CIGRE, India and awarded Eminent Engineer Award by Institution of Engineers. He is a Member of IEEE, USA; Honorary Fellow of Project Management Association; Member of the Committee appointed by Government of India to evaluate adoption of 800 MW Super Critical Units; Member of Expert Committee of CERC to formulate the Operational Norms for Tariff under ABT Regime; Member of the Board of University of Petroleum and Energy Studies; Member of Steering Committee of Centre for Research on Energy Security, TERI. Shri T. Sankaralingam was holding 8894 equity shares in the company as on March 31, Shri Chandan Roy (56 yrs), Director (Operations) is a graduate in Mechanical Engineering. A power engineer of repute with rich and varied experience of about 34 years in different areas of power station design, engineering and O&M. He has held various responsible positions in India and abroad. In NTPC, he has served various divisions like Engineering, Operation Services and Regional Head Quarter. Prior to joining us, he worked for ACC Vickers Babcock Ltd. and Babcock & Wilcox, London. He joined the Board in January He is also Chairman of Ratnagiri Gas and Power Private Limited, a Joint Venture of NTPC and GAIL (India) Limited. Shri Chandan Roy was holding equity shares in the company as on March 31, Shri R.S. Sharma (56 Yrs.), started his career in Madhya Pradesh State Electricity Board in Power Generation in the year 1971 and worked in unit operation and various areas of plant maintenance. He joined NTPC in early February, 1980 and headed various projects of NTPC, prior to joining as Executive Director (Corporate Planning). He also served as Executive Director (Commercial) looking after the Commercial Functions of the company. He has taken over as Director (Commercial) since October, He has very vast and varied experience of around 35 years in various functions of large thermal power stations in the country. He has been the author of number of Technical Papers on various subjects of Power Plant Operation & Maintenance. Shri R.S. Sharma was holding 2304 equity shares in the company as on March 31, Shri R.K. Jain (57 Yrs), Director (Technical) since May 5, 2005, has vast experience of over 34 years in thermal and gas power projects in the area of Project Planning, Conceptualisation, Design/ Engineering, Contract & Materials etc. He has also served as General Manager (Consultancy & Joint Ventures), Executive Director (Corporate Contract & Materials) and Executive Director (National Capital Region). Prior to joining NTPC in 1977, he worked with Central Electricity Authority. As Director (Technical), he is responsible for Engineering/Design of Thermal and Hydro Power Plants, Consultancy Services and Information Technology, induction of new technologies like Supercritical Units, nonconventional energy resources. He has also been responsible for NTPC s globalisation initiatives in the areas of Operation & Maintenance and Engineering Services for Power Plants in other countries. Shri R.K. Jain was holding 369 equity shares in the company as on March 31, th Annual Report

19 Shri A.K. Singhal (52 yrs), Director (Finance) since August 2005, comes with rich experience of 29 years of Corporate Finance Management. He is also a member of All India Management Association (AIMA) and Institute of Internal Auditors (IIA). Prior to joining NTPC in 2001, he was the Executive Director (Finance) in National Fertilizers Limited (NFL) as head of Finance & Accounts department. He held various managerial positions in Krishak Bharati Cooperative Limited (KRIBHCO) and Engineering Projects of India Limited (EPIL). As Finance Director on the Board of NTPC, he is responsible for formulating financial strategies and plans to enable the company in achieving its Vision. He gives directions with respect to the entire gamut of Financial Management of the organization including timely financial resource mobilization at minimum possible cost from Domestic & Global sources including equity issues, optimum utilization of funds, formulation of company s annual financial budget and undertaking budgetary controls. He is also responsible for designing internal control systems commensurate with the size of the organization and for ensuring compliance of such systems. Being responsible for compliances of Company Law and other statutory requirements, he also gives direction to the Corporate Governance framework of the company. After company became listed, he has been acting as one of the vital links between the shareholders of the company and the rest of the Board. Shri A.K. Singhal was holding equity shares in the company as on March 31, Shri R.C. Shrivastav (56 yrs.), Director (Human Resources) is a Graduate in Electrical Engineering. He has a rich and diverse experience of more than 30 years in the power sector. He started his carrier in power plant operation in captive power plant of Steel Authority of India Limited. He joined NTPC in 1981 and worked in various capacities in the areas of construction, commissioning and operation & maintenance of power stations as well as corporate operation services. He headed a number of power stations of NTPC and was elevated to the post of Executive Director (Southern Region) in He later handled the responsibility as Chief Executive Officer of NTPC Electric Supply Company Limited, a wholly owned subsidiary Company of NTPC engaged in electricity distribution before appointment as Director (HR) of NTPC in May As Director (HR) Shri Shrivastav is overall in-charge of Human Resource function for the entire organization. He is also responsible for Power Management Institute of NTPC and other corporate functions such as Industrial Safety, Resettlement & Rehabilitation, Corporate Communication and Corporate Social Responsibility. Shri R.C. Shrivastav was holding 2304 equity shares in the company as on March 31, Shri M. Sahoo (52 yrs), is an Indian Administrative Services Officer from Andhra Pradesh State cadre. Prior to joining Ministry of Power, Government of India, with effect from July 1, 2002, Shri M. Sahoo has held the positions of Secretary, Finance and Secretary, Urban Development, Government of Andhra Pradesh. He is on the Board of the Company as a part-time Director nominated by the Government of India with effect from July Shri M. Sahoo was holding equity shares in the company as on March 31, Shri Harish Chandra (59 yrs.), an Indian Administrative Services officer of Uttar Pradesh Cadre, has over 30 yrs. of experience in various Deptts. of Government of Uttar Pradesh. Prior to joining as Joint Secretary, Ministry of Power, Government of India, he has held the positions of Commissioner, Deptt. of Revenue, Secretary, Deptt. of Public Enterprises, Secretary, Deptt. of Finance and Principal Secretary, Deptt. of Revenue in Government of Uttar Pradesh. As Joint Secretary of the Union Ministry of Power, he is on the Board of the Company as Government of India nominee with effect from July 11, Shri Harish Chandra was holding NIL equity shares in the company as on March 31, th Annual Report 17

20 Dr. R.K. Pachauri (66 yrs), a Padma Bhushan awardee, obtained a Master of Science in Industrial Engineering in 1972, Ph.D in Industrial Engineering and a Ph.D in Economics from North Carolina State University, Raleigh, North Carolina, USA. He assumed his current responsibilities as the head of Tata Energy Research Institute, New Delhi (now known as The Energy and Resources Institute) in 1981, first as Director and since April 2001, as Director-General. He has been on the Board of the Company with effect from January 30, 2006 as a non-official part-time director. Dr. R.K. Pachauri was holding 1850 equity shares in the company as on March 31, Prof. Ashok Misra (59 yrs) is a Bachelor of Technology in Chemical Engineering from Indian Institute of Technology and a Master of Science in Chemical Engineering from Tufts University, USA. He also did his Master of Science and Ph.D. in Polymer Science & Engineering from University of Massachusetts, USA. Prof. Ashok Misra also successfully completed his EDP from Kellogs School of Management, Northwestern University, USA. Currently he is a Director at Indian Institute of Technology, Mumbai. He authored one book on Polymers, published several articles in international journals and has been awarded six patents. He is a member of several scientific associations and societies. He is also on the Board of Reliance Industries Limited. He has been on the Board of the Company with effect from January 30, 2006 as a non-official part-time director. Prof. Ashok Misra was holding 369 equity shares in the company as on March 31, Shri Gian Prakash Gupta (65 yrs), Post Graduate in Commerce, was the Chairman and Managing Director of IDBI & Chairman of UTI. He has 40 years of experience in various financial institutions and held Directorships in various organizations like LIC, GIC, EXIM Bank, IFCI and BHEL in the past. He is presently on the Board of various companies namely NALCO, Hindustan Aeronautics Ltd., PTC and Indo Gulf Fertilizers Limited. He has been on the Board of the Company with effect from January 30, 2006 as a non-official part-time director. Shri Gian Prakash Gupta was holding 3714 equity shares in the company as on March 31, Shri Mirza Ishtiaq Beg (67 yrs) is former Chairman of Central Electricity Authority & Ex-officio Secretary to the Government of India. He obtained Master degree in Economics and Bachelor of Science in Electrical Engineering. Shri M.I. Beg was with Central Electricity Authority for 34 years and has been on the Board of Power Finance Corporation Limited and Nuclear Power Corporation of India Limited. He has undergone 6 months training in Design and Construction of Power Project at New Brunswiek, Canada. He has been on the Board of the Company with effect from January 30, 2006 as a nonofficial part-time director. Shri Mirza Ishtiaq Beg was holding 214 equity shares in the company as on March 31, Shri G.S. Sarna (51 yrs), is an Indian Revenue Service Officer. Prior to the present deputation as the Chief Vigilance Officer, NTPC Ltd., he was Commissioner of Central Excise. In the Customs he has held similar senior appointments at the International Airport and the Air Cargo at Delhi besides having been also on deputation in the Commerce Ministry th Annual Report

21 SENIOR MANAGEMENT TEAM S. No. Executive Directors 1 Dubey,Kailash Bihari 2 Jha,M. 3 Trivedi,S. 4 Agarwal,G.K. 5 Sonde,R.R. 6 Rao,Karanam Prakasa 7 Singh,B.P. 8 Jha,J. 9 Yadav,S.R. 10 Sharma,R.S. 11 Kapoor,L.M. 12 Parswal,I.S. 13 Misra,Narendra Nath 14 Dave,Ambarish Nath 15 Kundu,A.K. 16 Perwaiz,M.A.A. 17 Kumar,Swatantra 18 Sharma,S.C.D. 19 Kumar,Dinesh 20 Pandey, I. B. General Managers 1 Pandey,S.N. 2 Chakrabarti,A.K. 3 Nebhnani,M.C. 4 Ray,Manoj Kumar 5 Maitra,A.K. 6 Mohapatra,J. 7 Vishwa Roop 8 Banerjee,Some Nath 9 Gupta,Vijay 10 Choudhary,V.N. 11 Chakraborty,Pradip Kumar 12 Prasad,L. 13 Chatterjee,T.K. 14 Chowdhury,B. 15 Jiban Krishna, S. 16 Jain,V.B.K. 17 Dr Chandra,S. 18 Sen,R.N. 19 Mattoo,R.L. 20 Krishnamurthy,R. 21 Jawada,Vinod Kumar 22 Bose,Sankar Lal S. No. S. No. 23 Chatterjee,Subir 24 Chaturvedi,A. 25 Gupta,L.D. 26 Datt,R. 27 Modi,P.K. 28 Binepal,H.S. 29 Sharma,N.K. 30 Soin,Malvinder Singh 31 Agrawal,G.D. 32 Kapoor,I.J. 33 Chawla,M.S. 34 Banerji,Ashok Kumar 35 Gopal,Ram 36 De,S.B. 37 Kurien,Ashoka 38 Roy,P.K. 39 Pradhan,Bisikeshan 40 Agrawal,P.K. 41 Maken,O.P. 42 Kristam,Siva Kumar 43 Sohal,T.R. 44 R Ramesh 45 Dutta,S.K. 46 Krishna,Gopal 47 Kumar,A. 48 Gupta,R.P. 49 Joshi,D.P. 50 Sharma,Vinod 51 Jha,A.K. 52 Agrawal,D.K. 53 Kishore Sharma,K. 54 Ganeshan,Amudhan 55 Anand,Sharad 56 Pandey,S.C. 57 Deshpande,G.J. 58 Reddy,V.K. 59 Ahuja,Anil Kumar 60 Seth,K.K. 61 Kumbhaj,P.C. 62 Sikri,R.K. 63 Mehrotra,R.N. 64 Alapati,Radhakrishna 65 Paranjothi,Muthu Kumar 66 Gupta,Vinay Kumar 67 Saha,N.K. 68 Bose,Suprakash Kumar 69 Pathak,Ram Bachan 70 Chatterjee,A. 71 Gahlowt,Rajendra Kumar Singh 72 Singh,M.P. 73 Kumar,A. 74 Dhar,S.K. 75 Singh,Radhey Shyam 76 Yadav,B.N. 77 Agrawal,D. 78 Khetarpal,Rakesh 79 Goel,S.N. 80 Ganguly,Satyendranath 81 Chudhari,A. 82 Sharma,A.K. 83 Gupta,V.K. 84 Bisht,B.S. 85 Rao,M.K.V.R. 86 Gaur,R.K. 87 Panda,K.K. Posted in Subsidiary/Joint Venture Companies and others S. No. Executive Directors 1. Agrawal, S.B. 2. Ghosh, B.C. 3. Singh, Shailendra Pal 4. Sivaramakrishnan, Krishnamurthy General Managers 1. Banerjee, Mukul 2. Sinha, Shiva Kumar 3. Agarwal, Kamal Kumar 4. Jain, D.K. 5. Saxena, A.K. 6. Choudhary, Dilip Kumar 7. Dhup, Rakesh Chander 8. Mehta, J.K. 9. Mukherjee, Biswanath 10. Narayanan, Kannan 11. Pani, U.P. 12. Roy, Saptarshi 13. R, Venkateswaran 30th Annual Report 19

22 DIRECTORS REPORT Dear Members, Your Directors are pleased to present the 30th Annual Report and the audited accounts for the year ended March 31, FINANCIAL RESULTS Rs. Million Income Sale of Energy Consultancy Other income (Including energy internally consumed) Gross Revenue Expenditure Fuel Employees Remuneration & Benefits Generation, Administration & other expenses Interest Finance charge Depreciation Total Expenditure Profit before tax, provisions and prior period adjustments Tax Profit after tax but before provisions and prior period adjustments Less : Prior Period Adjustments (Net) 2488 (102) Provisions (Net) 334 (6160) Net Profit after tax Appropriations: Transfer to Bonds Redemption Reserve Interim Dividend Proposed Dividend Tax on Dividend Transfer to General Reserve Transfer to Capital Reserve CHANGE OF NAME As approved by you in last Annual General Meeting, your company had changed its name from National Thermal Power Corporation Limited to NTPC Limited. FINANCIAL PERFORMANCE Total revenues of the company for the year increased by 15.38% to Rs. 287,507 million from Rs. 249,179 million during the previous year. Profit after tax but before provisions and prior period adjustments increased by 17.79% to Rs. 61,024 million from Rs. 51,808 million. Net profit after tax increased marginally to Rs. 58,202 million from Rs. 58,070 million. DIVIDEND Your Directors have recommended a final dividend of Rs per share in addition to Rs. 2 per share of interim dividend paid in February The dividend for the year thus aggregates to Rs.2.80 per share as against Rs per share paid last year. The final dividend shall be paid after your approval at the Annual General Meeting. The total dividend pay-out for the year amounting to Rs. 23,087 million represents 40% of the profits after tax as against a dividend pay-out of 34% in the previous year. The dividend has been recommended in accordance with the Company s policy of balancing dividend pay-out with the need of internal accruals for its growth plans. Your Directors believe that growth of the company through capacity addition would lead to increase in shareholder value. OPERATIONAL PERFORMANCE During the year the power stations of the company generated billion units of electricity which was 27.68% of the total power generated in India. The power generated by the company has registered an increase of 20 30th Annual Report

23 7.40% over the previous year s generation of billion units. During the year the coal stations of the company operated at a plant load factor of 87.54% as compared to 87.51% during the previous year. Gas stations of the company operated at a plant load factor of 65.81% as compared to 65.35% in the previous year. The average availability for coal and gas stations for the year was 89.91% and 82.15% respectively. COMMERCIAL PERFORMANCE During the year, your company realized in full, the amounts due from customers against bills raised for sale of power. The Company would also make all efforts to ensure that the realizations are maintained at these levels in the future. A detailed discussion on the operations and performance for the year is given in the Management Discussion and Analysis included as a separate section in the annual report. INSTALLED CAPACITY Presently your company owns 25,140 MW and partly owns 1,054 MW through joint venture companies. Details of the capacities are given below: MW Owned by NTPC Coal 21,185 Gas 3,955 Sub-total 25,140 Joint ventures SAIL (Coal) 314 Ratnagiri (Gas) 740 Sub-total 1,054 Total 26,194 CAPACITY ADDITION PROGRAM Your company had announced a capacity addition program of about MW for the period During the year the company commissioned the second unit at its Rihand project ahead of schedule. A 500 MW unit of Vindhyachal project has also been commissioned in July Thus the capacities aggregating to 4500 MW out of the announced program have already been commissioned. During the year, your directors have given investment approval for putting up a 500 MW unit at the existing power plant located at Korba. In June 2006, your directors have approved investment proposal for setting up of a 600 MW hydro-electric power plant located at Loharinag Pala in the state of Uttaranchal. The project would comprise four units of 150 MW each. In July 2006, investment approvals have been given for a 500 MW unit at Farakka power plant and setting up two units of 490 MW each at the National Capital Power Station at Dadri. All these power projects except Dadri are envisaged to be set up as merchant power plants. Thus, capacities cumulating to 11,050 MW are under construction. Out of these efforts are being made to commission 3210 MW in the year The company has also prepared feasibility / detailed project reports in respect of certain projects and these are under various stages of clearances. The company is also identifying new sites for setting up of power projects and based on availability of infrastructure, fuel availability, etc. these locations would be added to the plans at a future date. The company has also submitted a Request for Qualification for the ultra mega project having a capacity of 4000 MW located at Sasan in the state of Madhya Pradesh. CAPACITY ADDITION THROUGH SUBSIDIARIES AND JOINT VENTURES Besides adding capacities on its own, your company has also plans to add capacities through some of its subsidiaries and joint ventures. Hydro projects planned for implementation by NTPC Hydro Limited, a wholly owned subsidiary of the company are as follows: Project Location Capacity Lata Tapovan Uttaranchal 171 MW Rammam-III West Bengal 120 MW Details of the projects being implemented and planed for implementation through joint ventures are given below: JV Partner Company Project location and capacity Steel Authority NTPC-BHILAI Expansion of existing of India Limited Electric Supply capacity by adding (SAIL) Company 2x 250 MW of coal Private based units. The Limited expansion is under execution and is scheduled for commissioning by the year Tamil Nadu NTPC Tamil A coal based project Electricity Nadu Energy having a capacity of Board Company Ltd 1000 MW located at Ennore in the State of Tamil Nadu. 30th Annual Report 21

24 Indian Railways. Company under A coal based project NTPC will have formation having a capacity of 49% equity 1000 MW located at participation Nabinagar in the and 51% will State of Bihar. be contributed by Railways Gujarat Power Presently A coal based power Corporation Pipavav Power plant having a Limited and Development capacity of 1000 MW Gujarat Corporation located at Pipavav in Electricity Limited, the State of Gujarat. Board. An MOU is a wholly was signed for owned forming a Joint subsidiary Venture of NTPC Company CAPACITY ADDITION THROUGH ACQUISITIONS During the year your company made an investment of Rs million for a 28.33% stake in Ratnagiri Gas and Power Private Limited, a company formed as a joint venture between your company, GAIL, Indian Financial Institutions and Maharashtra SEB Holding Co. Ltd. to take over the 2150 MW(net) gas based Dabhol Power Project. The joint venture company has already restarted the existing capacity of 740 MW. Your company entered into an understanding with the Government of Bihar and the Bihar State Electricity Board for takeover of 220 MW Muzzafarpur Thermal Power Station by setting up of a joint venture company of NTPC and Bihar State Electricity Board. Your company will have a minimum of 51% and upto 74% stake in this joint venture company. Your company is also contemplating to take over an existing power plant located at Bongaigaon in the state of Assam. The existing assets would be dismantled and a new plant with 500/750 MW capacity comprising two or three units of 250 MW each would be constructed at the same location. The Government of India has transferred the generation assets of the 705 MW Badarpur Thermal Power Station located at New Delhi to your company w.e.f. 1st June Until now, your company was managing this power station on behalf of the government. The power station is being taken over at net book value, excluding land; land is being given on a 50 years lease. The consideration to be paid by the company is to be communicated by government. The power station has been performing well with the Plant Load Factor of the station for the year being 87%. The tariff for the station would be determined by the regulator as per the existing regulations. Your company would be drawing up plans for renovation and modernization of the station and would also consider expansion of the power station. GLOBALISATION INITIATIVES Your company is keenly pursuing proposals to increase its footprint in different parts of the world. The company provides consultancy services in engineering, project management, construction management, operation and maintenance of power plants to clients within as well as outside India. In order to scout for more business opportunities in the Middle East countries, your company is in the process of setting up a representative office in Dubai. PROJECTS PLANNED Initially the Company had a capacity addition programme of 17,333 MW in XI Plan, which has now been enhanced to 21,941 MW. Taking into account all the plans and agreements, the list of the projects which the company is working on for commissioning upto the year 2012 and beyond are presently as follows: MW Sr. Name of the Capacity By no. Project March 2007 Ongoing Projects 1. Vindhyachal-III Kahalgaon-II, Phase I Kahalgaon-II, Phase II Unchahar-III Sipat II Sipat-I Barh Korba-III Bhilai Power expansion Koldam HEPP Loharinag Pala HEPP Farakka-III NCTPP-II, Dadri Sub-total of ongoing projects New Projects 14. Tapovan Vishnugad HEPP North Karanpura Nabinagar-JV with Railways 22 30th Annual Report

25 17. Lata Tapovan HEPP through NTPC Hydro Ltd. 18. Rammam III HEPP through NTPC Hydro Ltd Rajiv Gandhi-II CCPP Ennore -JV with TNEB Simhadri-II Barh-II Darlipali - Integrated Power Project Bongaigaon, Assam Mauda, Maharashtra Ultra Mega Power Project Kawas-II, Gujarat Gandhar-II, Gujarat Sub-total of new projects TOTAL FINANCING OF NEW PROJECTS Your company is undertaking an aggressive capacity addition program after having assessed the requirement of finances for putting up these capacities. All the planned capacity addition programs are to be financed with a debt to equity ratio of 70:30. Your directors believe that internal accruals of the company would be sufficient to finance the equity portion of the investments. As far as the debt component is concerned, your directors believe that your company is well positioned to raise the required borrowing, as your company is presently geared with a debt to equity (MTN) programme for USD 1 billion to finance its capital expenditure requirement. The first offering off the MTN shelf was made by issuing 10-year Fixed Rate Notes amounting to USD 300 million. The issue was the first corporate deal out of India for a 10-year bond deal since The issue was over-subscribed by more than five times. The Notes, maturing in March 2016, were priced at 140 bps over the benchmark ten-years US Treasury with a coupon of 5.875%. FUEL SECURITY Fuel is one of the vital inputs for maintaining continued operation of a power plant and it is the responsibility of the generator to ensure availability of fuel for its power stations. Your company has a policy of securing long term tie-up for fuel before investment decisions are made for a project. Even though the cost of fuel is a pass- through to the customers, your company always attempts to procure fuel for its stations at the most competitive rates to ensure that the tariff of its stations is competitive. With a view to ensure fuel supply for its power plants and competitive price of fuel, the company had evolved a strategy for backward integration to enter into coal mining and oil & gas exploration activities. COAL MINING The Government of India has allotted six coal mining blocks to the company for captive use. The government has also allotted two mining blocks to be developed through a joint venture between the company and Coal India Limited. All these mining blocks together have a production potential of more than 50 million tonnes per annum. Your company has initiated activities for development of these mines and first of these mines is expected to start production of coal by the year EXPLORATION ACTIVITIES A consortium comprising NTPC Ltd, Canoro Resources Ltd and Geopetrol International has been allotted a petroleum block in the state of Arunachal Pradesh under the fifth round New Exploration Licensing Policy (NELP-V) of the Government of India. The Production Sharing Contract has been signed with the government and exploration activities at site have commenced. Your company is also planning to bid for more exploration blocks under the next round of bidding. ratio of Your company would tap domestic as well as overseas markets for raising borrowings. During the year your company had successfully established a Medium Term Note The company is also exploring the possibility of equity participation / investment in different elements of Liquified Natural Gas (LNG) Value Chain viz. Exploration & Production (E&P), Liquefaction, Re-gasification etc in various countries. 30th Annual Report 23

26 The company is also exploring the possibility of sourcing gas from Nigeria. NEAR TERM STRATEGIES Besides the above long term strategies for securing fuel for its power plants, your company has also adopted measures to secure coal and gas in the short term for its existing stations. The company would resort to import of coal to overcome any temporary shortages. Your directors have also approved a proposal of the company to secure gas supplies in the spot market subject to the customers of the company agreeing to the prices at which such gas is procured. The company has also entered into an understanding with Petronet LNG Limited for exploring supply of gas for its existing stations. LEVERAGING COMPANY S CAPABILITIES FOR GOVERNMENT INITIATIVES The Government of India reposes a lot of confidence on your company s abilities in implementing plans and projects. This confidence has led the Government of India to make your company a partner in a number of its initiatives. Some of the key initiatives in which your company is partnering the government are: RAJIV GANDHI GRAMEEN VIDHYUTIKARAN YOJANA (RGGVY) Ministry of Power has introduced the scheme Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY) which aims at providing electricity in all villages and habitations in four years and provides access to electricity to all rural households. Subsidy towards capital expenditure to the tune of 90% under the scheme will be provided, through Rural Electrification Corporation Limited (REC),a Government of India enterprise, which is the nodal agency for implementation of the scheme. Your company has entered into an understanding with the REC for assisting them in the execution of Rural Electrification projects in the States of Chattisgarh, Madhya Pradesh and Orissa. PARTNERSHIP IN EXCELLENCE Central electricity authority (CEA) has identified 26 power stations which are operating at a PLF of less than 60%. Under Accelerated Generation & Supply Programme (AG&SP) of Ministry of Power, it has been decided that these stations would enter into partnership with better performing utilities, so as to achieve an improvement in performance in shortest possible time. Your Company has been made a partner in 15 of these stations. JOINT VENTURES AND SUBSIDIARIES Your company has formed a number of joint venture and subsidiary companies for undertaking specific business activities. The names of these companies and the percentage of your company s stake in them are as follows: NTPC Vidyut Vyapar Nigam Limited 100% NTPC-SAIL Power Company Pvt. Limited 50% NTPC Tamilnadu Energy Co. Limited 50% Subsidiaries NTPC Electric Supply Co. Limited 100% Bhilai Electric Supply Co. Pvt. Limited 50% NTPC Limited Joint Ventures PTC India Limited 8% Pipavav Power Development Co. Ltd 100% NTPC Alstom Power Services Pvt. Limited 50% Ratnagiri Gas and Power Private Ltd 28.33% The performance of these companies as well as the Consolidated Financial Statements are briefly discussed in the Management Discussion & Analysis section. The financial statements of subsidiaries along with the respective Directors report are placed elsewhere in this annual report. STATUTORY AND OTHER INFORMATION Information required to be furnished as per the Companies Act, 1956, Listing Agreement with Stock Exchanges, Government guidelines etc. is annexed to this report as below: Particulars Management Discussion & Analysis Report on Corporate Governance Information on conservation of energy, technology absorption and foreign exchange earnings and outgo Information as per Companies (Particulars of Employees) Rules, 1975 Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies NTPC Hydro Limited 100% Utility Powertech Limited 50% Annexure I II III IV V 24 30th Annual Report

27 Review of the Accounts for the year ended March 31, 2006 by C& AG Statistical data of the grievances Statistical information on persons belonging to Scheduled Caste / Tribe categories Information on Physically Challenged persons UNGC Communications on progress VI VII VIII FIXED DEPOSITS The cumulative deposits received by your company from 1068 depositors as at March 31, 2006 stood at Rs 778 million. Further an amount of Rs. 8 million has not been claimed on maturity by 148 depositors as on that date. STATUTORY AUDITORS The Statutory Auditors of your Company are appointed by the Comptroller & Auditor General of India. M/s. Kalani & Co., Amit Ray & Co., Umamaheswara Rao & Co., S.N. Nanda & Co.and T.R. Chadha & Co. were appointed as Joint Statutory Auditors for the financial year MANAGEMENT COMMENTS ON STATUTORY AUDITORS REPORT In their report, the statutory auditors of the company have drawn the attention of the members to Note no.3 and 5 of Schedule 27 to the financial statements. The note 3 referred by the Auditors explains the basis for recognition of sales revenue. The Central Electricity Regulatory Commission (CERC) has directed by notification that pending determination of tariff effective from 1 st April 2004, billing of sales shall continue to be done on the same basis as on 31 st March The amount so billed shall however be subject to adjustment after final determination of tariff. Sales as per CERC regulations are likely to be lower than the billed amount and accordingly, the same has been dealt with in the books of accounts by provisionally recognizing sales on the basis of tariff worked out as per CERC regulations pending final determination of tariff by CERC. This fact has been explained in note no. 3(a) of the Annual Accounts. The note 5 pertains to non-recognition of company s share of net profits of Badarpur Thermal Power Station for the years to Till May 31, 2006 the company has been managing this station on behalf of the Government of India. In terms of the management contract with the Government, the company was entitled for a certain fee as well as a share in the profits of the station. However, the Government of India is yet to sanction in full the share of IX X profits, which are due to the company for the period to Due to uncertainty of realization in the absence of sanction by the Government of India, the company has not given recognition to the income in its accounts. COST AUDIT Subsequent to Department of Company Affairs notifying Cost Accounting Records (Electricity Industry) Rules, 2001 in December 2001, Cost Audit Branch of the Ministry of Company Affairs issued orders dated 16th September 2005, directing audit of the cost accounts maintained at the company s generating stations, from the financial year onwards. Cost Auditors for the year were appointed with the approval of Central Government for conduct of cost audit and have submitted the Cost Audit report in terms of the said orders and the Cost Audit (Report) Rules, BOARD OF DIRECTORS Prof. Ashok Misra, Dr. R.K. Pachauri, Shri M.I. Beg, Shri G.P. Gupta took over as non-official part-time Directors w.e.f January 30, Shri C.P. Jain ceased to be the Chairman & Managing Director of the Company with effect from March 31, 2006 on superannuation. The Board wishes to place on record its deep appreciation for the valuable services rendered by Shri C.P. Jain during his association with NTPC. Shri T. Sankaralingam took over as the Chairman & Managing Director with effect from April 1, Shri R.C. Shrivastav has taken over as Director (Human Resources) with effect from May 24, In accordance with the provisions of Article 41(iii) of the Articles of Association of the company, S/Shri R.S. Sharma, R.K. Jain and A.K. Singhal, Directors shall retire by rotation at the Annual General Meeting of your company and, being eligible, offer themselves for re-election. DIRECTORS RESPONSIBILITY STATEMENT As required under Section 217(2AA) of the Companies Act, 1956 your Directors confirm that: 1. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; 2. the Directors had selected such accounting policies and applied them consistently and made judgments 30th Annual Report 25

28 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; 3. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and 4. the Directors had prepared the Annual Accounts on a going concern basis. ACKNOWLEDGEMENT Your directors also convey their gratitude to the shareholders, various International and Indian Banks, Financial Institutions for the confidence reposed by them in the company. The Board also appreciates the contribution of contractors, vendors and consultants in the implementation of various projects of the Company. We also acknowledge the constructive suggestions received from Government and the Statutory Auditors. We wish to place on record our appreciation for the untiring efforts and contributions made by the employees at all levels to ensure that the company continues to grow and excel. For and on behalf of the Board of Directors Your Directors acknowledge with deep sense of appreciation the co-operation received from the Government of India, particularly the Ministry of Power, Ministry of Finance, Ministry of Environment & Forests, Ministry of Coal, Ministry of Petroleum & Natural Gas, Planning Commission, Department of Public Enterprises, Central Electricity Authority, Central Electricity Regulatory Commission, State Governments, Regional Electricity Boards and State Electricity Boards. Place: New Delhi Date: July 31, 2006 (T. Sankaralingam) Chairman & Managing Director 26 30th Annual Report

29 MANAGEMENT DISCUSSION AND ANALYSIS Annex-I to Directors Report INDUSTRY OVERVIEW Capacities As on March 31, 2006, India s power system had an installed generation capacity of 124,287 MW. During the year the total power generated in the country was billion. As far as the ownership of the power generating capacities are concerned, the state government owned generating utilities accounted for 55% of the capacities, while the Central Government owned power utilities accounted for approximately 32% and private players accounted for approximately 13%. The capacities owned by us (including through joint ventures) were 24,249 MW as on 31 st March 2006 which represents a share of 19.51% of the country s capacity while our share in generation was 27.68% with a generation of billion units. Demand and Supply Although electricity generation capacity has increased substantially in recent years, the demand for electricity in India is still substantially higher than the available supply. In the year , India faced an energy shortage of approximately 8.3% of total energy requirement and 12.3% of peak demand requirement. The following table presents data showing the gap between the total requirement for electricity versus its availability from fiscal 2002 to fiscal Actual Power Supply Position Fiscal Requirement Availability Surplus/Deficit Year (+/-) (million (million (million (%) units) units) units) , ,350-39, % , ,890-48, % , ,398-39, % , ,115-43, % , ,511-52, % Source: Ministry of Power Annual Report, CEA Executive Summary, March 2006 Consumption The end users of power in India can be broadly classified into industrial, agricultural, domestic and commercial categories. The share of each of these categories in the consumption of electricity during the fiscal 2005 was approximately 36%, 23%, 25% and 8% respectively. The balance of sales pertained to various other consumers. The per capita consumption of electricity is quite low in comparison to the global average. The following table compares per capita electricity consumption in India, with some other countries and the world average consumption as of Country Per Capita Electricity Consumption in Kwh United States of America Australia United Kingdom 6614 Brazil 2183 China 1484 Egypt 1287 India 569 World Average 2465 Source: UNDP Human Development Indicators 2005 Capacity Utilisation Capacity utilisation in the Indian power sector, as measured by plant load factor (PLF) has been improving over the years and the PLF for coal-fired plants has increased from 63.0% in fiscal 1996 to 73.6% in fiscal Transmission and Distribution In India, the power transmission and distribution (T&D) system is a three-tier structure comprising regional grids, state grids and distribution networks. The distribution network and the state grids are owned and operated by SEBs or state governments through SEBs. Most of the interstate transmission links are owned and operated by Powergrid Corporation of India Limited. In order to facilitate the transfer of power between neighbouring states, state grids are interconnected to form regional grids. Peak demand does not occur simultaneously in all states giving rise to situations in which there is surplus of power in one state while another state faces a deficit. The regional grids facilitate transfers of power from a surplus state to a deficit state. The grids also facilitate the optimal scheduling of maintenance outages and better co-ordination between the power plants. The regional grids are to be gradually integrated to form a national grid enabling interregional transfer of power thereby facilitating a more optimal 30th Annual Report 27

30 utilisation of the national generating capacity. At present, the national grid has a capacity of 9,000 MW and it is expected that same would be of the order of 30,000 MW by fiscal The T&D system in India is characterized by high losses including technical as well as commercial losses which on an average were 31% during as compared to T&D losses of 10 to 15% in developed countries. Regulatory Framework Responsibility for the development of the power industry is shared between the Central Government and the State governments. The Electricity Act 2003 provides the overall legislative framework for the sector. The Ministry of Power (MoP) oversees the operation of all Central Sector Power utilities. The government has also set up Central Electricity Authority which advises the MoP on electricity policy and technical matters. The government has also constituted Central Electricity Regulatory Commission ( CERC ) as per legislative requirement to regulate the tariffs for the Central Power utilities and other entities with interstate generation or transmission operations. The Electricity Act also requires state governments to set up State Electricity Regulatory Commissions for the rationalization of energy tariffs and the formulation of policy within each state. As of March 31, 2006, twenty-four states have set up their regulatory commissions. Recent Policy Initiatives of Government with respect to Power Sector Ultra Mega Power Projects The Ministry of Power, Govt. of India, in association with CEA and Power Finance Corporation Ltd., has launched an initiative for development of coal based Ultra Mega Power Projects in India, each with a capacity of 4000 MW or above. These projects will be awarded to developers on the basis of tariff based competitive bidding. The government has identified seven sites for setting up ultra mega projects. Request For Qualification (RFQ) documents have been sought by the government for two of these projects namely, Sasan in Madhya Pradesh and Mundra in Gujarat. NTPC has submitted RFQ for the Sasan project. National Electricity Policy Government of India has also formulated the National Electricity Policy as required under the Electricity Act. The policy aims to accelerate development of the power sector, provide supply of electricity to all areas and protect interests of consumers and other stakeholders. The objectives of the policy include access to electricity to all households by the year 2012, power demand to be fully met, supply of reliable and quality power, per capita availability of electricity to be increased to over 1000 units by 2012, commercial viability of electricity sector and protection of consumers interests. The Policy has set the goal of adding new generation capacity of more than one lakh MW by the year 2012 including a spinning reserve of 5% in the system. Tariff Policy As required under the Electricity Act the Government of India has notified a Tariff Policy. The tariff policy is aimed at providing policy framework for regulators both at the central and State level for determining tariff for various constituents in the power sector. The policy emphasises the need to balance the requirement for promoting investments in the power sector against the need to reduce end-user tariff. It also requires regulators to continue with the systems of setting norms for operations which would provide incentive for efficiency in operations. Competition NTPC is the largest power generating company in India having a market share of nearly 20% of the installed capacity in the country and nearly 28% of the electricity generated in the country. The reforms taking place in the sector are expected to bring in more investments into sector and thus competition is expected to increase. We believe that NTPC is well positioned to take benefit of the opportunities in the sector and maintain its market share. Risk Management The strategies we have adopted for our growth are rapid capacity expansion by adding larger capacities in shorter time spans, foray into hydroelectric power, securing fuel supply by undertaking mining business and stepping into natural gas value chain. We also have the strategy of maintaining high levels of operational efficiencies so that we are always assured of high availability and generation of our plants which also enable us to earn efficiency gains from our operations. We are aware of the fact that the execution of these strategies may be impacted by certain risks. Since the inception of the company we are having systems and practices which have helped us in identifying risks and taking measures to mitigate those risks. As a further step towards institutionalising this system we have now put in place a Risk Management Policy. As an initial step the policy has identified the risks being faced by the company, the short-term as well long-term measures to mitigate those risks and also a reporting system which would enable critical risks beyond certain tolerance levels to be reported for further action. We are also in the process of putting a risk management tool across the company which would enable 28 30th Annual Report

31 smooth implementation of the Risk Management Policy and integrate the same at all working levels. The risk assessment which has been carried by the company has identified the following risks: Fuel Risk Operational Risks Project Implementation Risks Regulatory Risks Business Risks Customer Risk Asset Risks Financial Risks Human Resource risk IT Risks Fuel availability & Pricing Machine/ System breakdown & spares availability, water availability Suppliers /Agencies not meeting the project requirements, Hydro-Geological Surprises, Dependence on single source, Equipment, technology, experience of contractor/ supplier/ manufacturer, New Technological product/ systems, proven ness of equipment Adverse change in tariff Regulation, policy, environment regulation etc. Non-compliance of contractual commitments in international business, Entry in newer business areas Revenue Realisation, Transmission risk Natural calamities like storm, hurricane earthquake,flood etc Fire- explosion/ implosion and other major accidents Funding Risk, Foreign Exchange Fluctuations, Financial Frauds Attraction / Retention of quality people, Safety & Security Failure of servers for Business Applications, Failure of Business Applications The company has identified mitigation measures for all of these risks and the same are also communicated to various levels In the company. Internal Control The Company has a sound system of Internal Controls for financial reporting of various transactions, efficiency of operations and compliance with relevant laws and regulations. Suitable delegation of powers and guidelines for accounting has been issued for uniform compliance. In order to ensure that all checks and balances are in place and all internal control systems are in order, regular and exhaustive internal audits are conducted by experienced firms of Chartered Accountants in close co-ordination with Company s own Internal Audit Department. Besides, the Company has two Committees of the Board viz. Audit Committee and Committee on Management Controls which periodically review the important findings of different Audits keeping a close watch on compliance with Internal Control System. Performance During The Year Operations The power stations of the company performed well during the year. Details of the electricity generated and capacity utilisation levels are as follows: Fiscal 2006 Fiscal 2005 Million units Gross generation Commercial generation Electricity sold out of commercial generation Plant Load Factor in % Coal-fired stations Gas-fired stations Human Resources The employees on the rolls of the company and productivity parameters for fiscal 2006 and 2005 are given below: Fiscal 2006 Fiscal 2005 NTPC Number of Employees 21,870 21,420 Man / MW ratio Generation per employee Subsidiaries & Joint Ventures Employees of NTPC posted in subsidiaries and joint ventures Total Number of employees 24,044 23,491 The success of human resource initiatives of the company is reflected in the low attrition rate of 0.41% for the executives of the company. NTPC has been ranked fifth among the top ten Best companies to work for in India by Mercer HR Consulting-Business Today Survey 2005 and the 3rd Great Place to work for in India by a reputed Human Resources consultant Grow Talent and Business World. To achieve the ambitious growth targets, the company has evolved a Leadership Assessment and Development system for identifying potential leaders for strengthening the succession planning process. For this purpose the 30th Annual Report 29

32 company has partnered Ernst & Young, one of the leading international HR consulting firm and has developed a comprehensive Leadership Competency Model. Training And Development Continual training and upgradation of skills of its employees is an area of special focus of the company. The Power Management Institute (PMI) located at NOIDA near Delhi is the company s apex training and development centre providing planned as well as need-based programmes in technical, managerial and information technology areas. Employees of other companies in the power sector too participate in the training programs conducted by the institute. During the fiscal 2006, 330 training programs were conducted against 321 programs in the previous year. The number of participants to whom training was given during the year was 8439 as against 7855 in the previous year. The institute was awarded The Golden Peacock National Training Award for the year 2005 by the Institute of Directors, New Delhi in recognition of PMI s outstanding contribution in the area of training and development of power professionals across the nation. This was the third successive year that PMI received this award. Corporate Social Responsibility The Company has always appreciated its social responsibility as a part of its Corporate Governance philosophy. It follows the global practice of addressing CSR issues in an integrated multi stake-holder approach covering the environment and social aspects. In its endeavor to discharge its responsibility, it has undertaken activities in the following areas: Resettlement & Rehabilitation: The company is committed to help the people who are displaced because of execution of its projects and has been making efforts to improve the Socio-economic status of Project Affected Persons (PAPs). In line with its social objective, the company has focused on effective resettlement and rehabilitation of its PAPs and also Community Development works in and around the projects. The Company has formulated policies which are aligned with National Policy on R&R of Govt. of India. The company has also formulated and adopted CSR-CD policy for carrying out CSR activities in remote rural areas adjoining the company stations, which are socioeconomically backward and deficient in basic civic amenities. Under this policy, company is providing financial support essentially in the areas of Primary Education, Community Health, Basic Infrastructure Development, and Vocational Training etc in rural areas. Starting of Quality circles, establishment of District Disability Rehabilitation Centres and similar such efforts are being made in the villages in the periphery of company stations as a part of this policy. Global Compact The Global Compact of UN is the largest voluntary corporate responsibility initiative, with nearly 2000 companies participating from over 80 countries. Keenly conscious of its social responsibilities, the company became member of Global Compact. The company is committed to adhering to the principles of global compact. As per the recent policy of Global Compact Office on Communication on Progress, a report on the progress made in this area is at Annex-X to the Directors Report. Distributed Generation As a part of its CSR activities, the company for the past two years has been taking up Distributed Generation projects for rural electrification through non-conventional energy sources. To take this initiative forward, the company has entered into an understanding with The Energy and Resources Institute (TERI) for implementation of distributed generation projects in villages in India. TERI would provide assistance in identifying potential villages, preparation of pre-feasibility report(s), achieving financial closure for such projects with maximum grant component from local and international sources. NTPC Foundation The Company has set up a Foundation for addressing the niche domains of social development at National level with special focus on Physically Challenged Persons. A Development Centre for the Physically Challenged Persons is planned to be developed by the Foundation and land has already been acquired for setting up the same. During the year the company made a contribution of Rs. 65 million to Uttaranchal Forest Trust Hospital, Haldwani for purchase of advanced Medical Equipment. A contribution of Rs. 30 million was also made to the Government of Uttaranchal to create an NTPC Chair to serve as Director of Centre of Excellence in Public Policy, Regulatory and Strategic Studies in the School of Social Sciences. In the month of June 2006, the company has committed a financial assistance of Rs million to Hyderabad Eye Research Foundation for establishing special services at Bhubaneswar Eye Institute. Technological Developments New Initiatives: The company is constantly looking to introduce new technologies in its effort to attain higher 30 30th Annual Report

33 levels of efficiency and economy in its operation. Some of the technologies being introduced by the company are: Introduction of 800 MW capacity units: Presently the largest unit sizes of units being set up by the company are 660 MW which are under construction at two locations. Higher size super critical units are planned for integrated coal based thermal power projects with captive mining in the states of Orissa and Chattisgarh. This technology will not only result in improvement in thermal efficiency but also reduce emissions of greenhouse gases significantly. Such integrated plants shall have benefits of fuel availability at lower cost and low project cost due to economy of scale. Integrated Gasification Combined Cycle (IGCC) Technology: The company is implementing a plan for development of an IGCC pilot plant of a capacity of 100 MW for power generation. IGCC is an upcoming clean coal technology which is likely to give efficiency level higher than the conventional coal fired plants. Energy Technologies Centre: The company has set up an Energy Technologies Centre with a mandate of being a world class Research Institute. The Center will work in both fundamental and applied research with ultimate objective of developing the technologies both within and outside India. The center would develop technologies through collaborative research with best of the R&D and academic institutions in India. The Company has a Research and Development centre which provides technical support to all power stations of the company as well as of other power utilities. The engineers at the R&D centre have examined, analysed and solved various operational problems referred by stations. R&D centre has developed Fly-Ash based product for part replacement of cement to be used for general building construction. R&D centre took initiative for Distributed Power Generation in rural areas through Bio-Diesel, which can be produced locally at village level by a simple method developed by R&D. This probably is the first initiative to use Bio Diesel for Distributed Power Generation. Environment The Company has taken a number of measures for improvements in the area of Environment Management. It has initiated several measures for mitigating green house gas (GHG) emission by adopting more efficient technology such as adoption of super critical parameters, renovation and modernization of older stations etc. As a result of sound environment management systems and practices adopted, all operating stations of the company have been accredited with ISO Certification. The reduction in GHG emission is one of the critical issues internationally. The Kyoto Protocol, which has been adopted by more than 150 countries, is an international treaty that requires the member countries to reduce their GHG emissions. This treaty recognizes the Clean Development Mechanism (CDM) as one of the means available to the industrialized countries to reduce their GHG emission by investing in emission reducing projects in developing countries as an alternative to costly emission reductions in their own countries. As India is also one such investing destination for industrialized countries, post Kyoto scenario is seen by the Company as an opportunity for further demonstrate its commitment for clean environment. The Company is identifying the potential areas to take advantage on CDM benefits by working on a number of projects which fulfils the emission reduction requirement. Financial Discussion and analysis A Results of operations 1 Gross Revenue Rs Million Fiscal 2006 Fiscal 2005 Units of electricity sold (million units) Revenues Amount in Rs. Million Energy Sales (Excl. 260, ,069 Electricity Duty) Energy Internally Consumed Consultancy Other income (excluding 8,003 6,525 income related to one time settlement scheme & surcharge) Gross Revenue (excl. income 269, ,175 related to one time settlement & surcharge) Income related to one time 18,075 17,004 settlement scheme & surcharge Gross Revenue 287, ,179 The gross revenue of the company comprises sale of electricity, revenue from consultancy and other services, and interest earned on investments such as term deposits and bonds issued under one-time-settlement scheme. The gross revenue of the company for the fiscal 2006 was Rs. 287,507 million as against Rs. 249,179 million in the previous year registering an increase of 15.38%. 1.1 Sale of Electricity Revenue from sale of electricity for the fiscal 2006 were Rs. 260,701 million which constituted 90.68% of gross revenue. The revenue from sale of electricity has increased by 15.83% over the previous year s revenue of Rs. 225,069 million primarily because of a 7.6% 30th Annual Report 31

34 increase in units sold, as a result of increase in the commercial capacity by 1,000 MW and higher PLF of existing capacities and higher variable charges. Our average selling price this year was Rs per unit compared to Rs.1.52 per unit in the previous year. We sell electricity to bulk consumers comprising mainly electricity utilities owned by State Governments. Sale of electricity is made pursuant to long-term power purchase agreements, which run for 25 years in the case of most of our coal-fired plants and 15 years in the case of most of our gas-fired plants, which is the estimated average life of the plants. The agreements are typically renewed or extended upon expiry of the initial term. In the past, we have had difficulty recovering our dues from the SEBs. After the implementation of the One Time Settlement Scheme and signing of Tripartite Agreements under which the SEBs were required to establish letters of credit ( LCs ) to cover 105% of our average monthly billing to them for the preceding 12 months the realization of the amounts due from the customers for the sale of electricity has been 100% for the past three years. 1.2 Tariffs Our charges for electricity are based on tariff rates set by the Central Electricity Regulatory Commission (CERC). The tariff rates reflect a fixed charge based on plant availability, variable charges based primarily on fuel costs and an unscheduled interchange charge which is a payment (or penalty) designed to create incentives for grid discipline. The CERC sets our tariff rates on a plant-by-plant basis on the basis of the tariff norms it has promulgated. From April 1, 2004, our tariffs are determined pursuant to the CERC s tariff regulations that are applicable for fiscal 2005 to fiscal The following are the significant elements of the fixed charges permissible under the regulations: The return on equity at 14%, on a post-tax basis based on a prescribed 70:30 debt to equity ratio for new projects Actual interest cost incurred on debt Interest on working capital determined on a normative basis Depreciation on plant and machinery calculated at 3.6% for coal based stations and 6% for gas based stations Operation and maintenance costs determined normatively by the CERC based on class of unit, on a per megawatt basis Variable charges on the electricity sold are determined on the basis of landed cost of fuel applied on quantity of fuel determined on the basis of norms for heat rate, auxiliary consumption, specific oil consumption etc. Besides the fixed capacity charges and the variable charges, the other elements of tariff are: Incentives payable at the rate of Rs per unit for operating plants at PLF of more than 80% Exchange rate variations as per Regulations The unscheduled interchange charge payable (or receivable) at rates prescribed in the regulations 1.3 Provisional Tariffs In any fiscal year, there are a number of stations for which CERC tariffs are unavailable because the CERC has not yet fixed the final tariff. However, we book revenues based on our assessment of the likely final tariff based on the CERC regulations. When CERC fixes the final tariff for these stations, we make adjustments to our revenues on the basis of the final order to the extent of the difference between the provisionally booked revenues and the revenues based on the tariffs determined by CERC. 1.4 Consultancy Services We also earned Rs. 452 million as revenue from consultancy services as against Rs. 333 million in the previous year and other sources. We intend to expand our consultancy business and enter certain new businesses. 1.5 Other Income Our other income in fiscal 2006 was Rs. 26,078 million as compared to Rs.23,529 million in the fiscal The other income earned by us comprised the following: Rs Million Fiscal 2006 Fiscal 2005 Income related to one-timesettlement scheme & surcharge i) Interest for the year 15,413 14,763 ii) Previous year interest (non-recurring) 2,278 (219) iii) Late payment Surcharge (non-recurring) 384 2,460 Sub-total 18,075 17,004 Income on investment of surplus cash 6,401 4,839 Dividend from JVs and Subsidiaries th Annual Report

35 Income earned on other heads such as hire charges, profit on disposal of assets, etc 2,111 2,628 Total 26,735 24,588 Less: Transfer to incidental expenditure during construction period 657 1,059 Net other income 26,078 23, Adjusted Gross Revenue The gross revenue reported for the year includes certain revenues pertaining to previous years. The revenues from sale of electricity for the fiscal 2006 includes Rs.3,522 million pertaining to previous years which have been recognized in sales due to revision in the amounts billed based on the orders of the CERC /Appellate Tribunal issued during the year, issue of final tariff orders by CERC for the period upto 31 st March 2004 for certain stations and CERC admitting additional capital expenditure for some of the stations. Similarly, for fiscal 2005, an amount of Rs.3,689 million pertaining to previous years were included in the sales. Interest on bonds under one time settlement scheme recognized during the year includes arrear interest of Rs.2,278 million pursuant to issue of bonds by the states of Bihar and Jharkhand retrospectively with effect from October 1, In the last fiscal, the amount of long-term advance to Government of National Capital Territory of Delhi was reduced with effect from October 1, 2001 resulting in an adjustment of interest amounting to Rs.219 million. If the revenues relating to previous years are adjusted, the gross revenue for the fiscal 2006 and fiscal 2005 would be as follows: Rs. Million Fiscal 2006 Fiscal 2005 Gross Revenue 287, ,179 Less: Sales of previous years 3,522 3,689 Arrears of interest on bonds 2,662 2,241 under one time settlement scheme and Late payment surcharge Adjusted Gross Revenue 281, ,249 2 Expenditures 2.1 Expenditure related to operations Rs.Million Expenditures Fiscal Rs per Fiscal Rs per 2006 kwh 2005 kwh Commercial Generation (Mus) Fuel 163, , Employees 9, , remuneration and benefits Generation, 12, , administration and other expenses Total 186, , The expenditure incurred on fuel, employees, generation, administration and other expenses for the fiscal 2006 was Rs. 186,352 million which is 17.85% more than the expenditure of Rs. 158,120 million on these heads in the last year. In terms of expenses per unit of power produced it was Rs per unit in fiscal 2006 in comparison to Rs per unit in the previous year. A discussion on each of these heads is given below Fuel The primary fuels we use in power generation are coal and natural gas. We also use oil as a secondary fuel for our coal-fired plants and use naphtha as an alternate fuel in our gas-fired plants. Expenditure on fuel constituted 88% of the total expenditure on the above heads as compared to 87% in the previous year. Expenditure on fuel was Rs. 163,947 million in fiscal 2006 in comparison to Rs. 137,235 million in fiscal 2005 representing an increase of 19.46%. The higher fuel expenses were mainly due to increases in fuel prices, use of imported coal as well as increased fuel consumption due to higher generation. Fuel cost per unit generated increased to Rs in fiscal 2006 from Rs in fiscal Under the tariff norms set by the CERC, we are allowed to pass on our fuel charges through the tariff, provided we meet certain operating parameters. We purchase coal pursuant to long term coal supply arrangements with subsidiaries of Coal India Limited and with Singareni Collieries Limited. The price is determined by a formula 30th Annual Report 33

36 comprising a base price with an agreed price adjustment mechanism. The price also depends on the heat value of the coal. During the year our coal based stations consumed 105 million tones of coal as against 94 million tones in the fiscal To overcome temporary shortages in the coal supply, we have also resorted to import of coal during the fiscal The company during the year tied up with MMTC Ltd. and State Trading Corporation Ltd. for supplies of 2.1 million metric tones and 1.9 million metric tones respectively of imported coal of which 3.3 million metric tones has been received. We source gas domestically under an administered price and supply regime. Our main gas supplier is GAIL. Gas prices are fixed by the Ministry of Petroleum and Natural Gas. We received a supply of MMSCMD of gas during the fiscal 2006 as against MMSCMD received in fiscal The company is making all efforts to source gas from open market for its existing stations so as to improve the capacity utilization at these stations. Some of our gas based stations also use Naptha for operations depending upon the demand from our customers Employees Remuneration and Benefits Employees remuneration and benefits expenses include salaries and wages, bonuses, allowances, benefits, contribution to provident and other funds and welfare expenses. Employee pay scales are determined by our Board based on the guidelines provided by the Government. For our unionised employees, pay scales are decided by our Board as part of a negotiated settlement based on the DPE guidelines. For our employees are affiliated with workers unions, we have a 10 year agreement that fixes their wages and benefits which is valid until December For our non-unionised employees, pay scales are decided by our Board as per Government guidelines after consulting with the relevant employee associations. These pay scales are valid until December Employees remuneration and benefits expenses represent approximately 5% of our operational expenses. Employees remuneration and other benefits increased by 9.76% to Rs. 9,684 million in fiscal 2006 from Rs. 8,823 million in fiscal This increase was primarily due to regular annual pay increments, which are generally 4%, increases in dearness allowance which is linked to price index and also due to increase in number of employees. We had 24,044 employees on our payroll as of March 31, 2006, compared to 23,491 employees as of March 31, The employee cost per unit of generation was Rs the same as in the previous year Generation, Administration and Other Expenses Generation, administration and other expenses consist primarily of repair and maintenance of buildings, plant and machinery, power and water charges, security, insurance, training and recruitment expenses and expenses for travel and communication. These expenses represent approximately 7% of our operational expenditures in fiscal These expenses increased by 5.5% to Rs. 12,721 million in fiscal 2006 from Rs.12,062 million in fiscal However, in terms of expenses per unit of generation it was Rs in fiscal 2006 as against Rs in the previous year. One of the main items of expenditure under this head is Repair & Maintenance which has increased by 11.63% to Rs.7,813 million from Rs.6,999 million. In terms of expenses per unit of generation, repair and maintenance on plant and machinery was Rs per unit almost the same as in the previous year. 2.2 Depreciation The depreciation charged to the profit and loss account increased during the year to Rs. 20,477 million as compared to Rs.19,584 million in fiscal 2005, mainly because of the increase in gross block to Rs. 460,396 million from Rs. 431,062 million in the fiscal The increase in gross block is largely on account of commencement of commercial operation of 2 units of 500 MW each at Rihand and Talcher. As per the accounting policy of the company, depreciation is charged on straight line method as per the rates given in schedule set forth in the Companies Act, 1956 except for some items for which depreciation at higher rates is charged th Annual Report

37 2.3 Provisions made (and written back) During the fiscal 2006, the company had made provisions amounting to Rs. 357 million in comparision to Rs. 75 million provided for in fiscal The provisions were made mainly in respect of doubtful advances and claims and for other items. During the fiscal 2006, the company had also written back provisions made in earlier years amounting to Rs. 23 million in comparison to Rs. 6,235 million of provisions written back in fiscal Interest and Finance Charges The interest and finance charges for the fiscal 2006 were Rs. 17,632 million in comparison to Rs. 16,955 million in fiscal The details of interest and finance charges are tabulated below: Rs.Million Interest on borrowings 11,852 10,308 Finance Charges 13,159 12,315 Total 25,011 22,623 Less: Adjustments and transfers Exchange differences regarded 2, as adjustment to interest costs Interest and finance charges 4,910 5,100 capitalised Net interest and finance charges 17,632 16,955 Our borrowings are denominated in Rupees and foreign currencies. The exchange differences in respect of overseas borrowings relating to fixed assets/capital work-in-progress acquired from a country outside India is treated as part of carrying cost. However, in case the fixed assets/capital work-in-progress is acquired within India, the exchange differences are added to when unfavourable (and reduced from, if favourable) to interest cost to the extent regarded as interest charges as per the accounting standards applicable in India. During the fiscal 2006, a favorable exchange rate variation amounting to Rs. 2,469 million was reduced from the interest expenses while an amount of Rs. 568 million was reduced from interest cost in fiscal For the fiscal 2006 an amount of Rs. 4,910 million relating to interest and finance charges of projects under construction were capitalized while the corresponding amount for the previous year was Rs. 5,100 million. The Finance charges also include, among other things, the rebates to customers paid pursuant to one time settlement scheme amounting to Rs million in comparison to Rs million in the previous year. The increase includes arrears of rebate amounting to Rs. 892 million paid on bonds which were issued this year with retrospective effect from October 1, In the last fiscal, the amount of long-term advance to Government of National Capital Territory of Delhi was reduced with effect from October 1, 2001 resulting in an adjustment in rebate under Scheme for settlement of SEB dues amounting to Rs.134 million. The adjusted interest and finance charges without taking into account the exchange differences considered as adjustment to interest costs and rebate paid in arrears are as follows: Rs. Million Adjusted interest cost 7,314 6,398 Adjusted finance charges 11,895 11,259 Adjusted Interest and 19,209 17,657 Finance charges The rebate under one time settlement scheme at the rate of 4% of the bond issued under the scheme was payable upto March 31, Taking into account 100% realization of amounts billed during the last three years, the company has decided to continue with a modified rebate scheme. Under the revised scheme (made effective from April 1, 2006) an incentive at the rate of 2% (1% semi annual) per annum of the bonds outstanding may be paid to customers who are making the payments as per the company s revised scheme. 2.5 Prior period income / expenditure Certain elements of income and expenditure have been charged to the profit and loss account relating to previous years. For the fiscal 2006 a net amount of Rs. 2,488 million was charged to the profit and loss account as prior period expenditure while a net amount of Rs. 102 million was booked as prior period income in the previous year. Of the net prior period expenditure amounting to Rs. 2,488 million, a sum of Rs. 1,986 million relates to adjustment consequent upon the change in accounting of exchange differences on loans contracted prior to 1 st April 2000 as explained in note 13(a) of the Notes on Accounts(Schedule 27). 3 Profit before tax, provisions and prior period adjustments The profit of the company before tax and prior period adjustments for the current and the previous year both on reported and adjusted basis is tabulated below: 30th Annual Report 35

38 Rs.Million Reported Adjusted Fiscal Fiscal Fiscal Fiscal Gross Revenue 287, , , ,249 Expenditure related 186, , , ,120 to operations Depreciation 20,477 19,584 20,477 19,584 Interest and Finance 17,632 16,955 19,209 17,657 charges Profit before tax, 63,046 54,520 55,285 47,888 provisons and prior period adjustments 4 Provision for Tax The company provides for current tax, deferred tax and fringe benefit tax computed in accordance with provisions of Income Tax Act, As per tariff regulations, the company recovers actual tax payments in respect of generation business from its customers while taxes on the income from all other activities are borne by the company. Rs.Million Fiscal 2006 Fiscal 2005 Current Deferred Fringe Total Current Deferred Total tax tax benefit tax tax tax Provision 13,497 2, ,360 10,390 (1,710) 8,680 for current year Adjustment (5,536) - (5,536) (332) - (332) - for earlier years (Recoverable (5,666) (2,654) (197) (8,517) (7,346) 1,710 (5,636) from) / payable to customers Capitalised (275) - (10) (285) Net provision 2, ,022 2,712-2,712 Net provision of tax for the fiscal 2006 was Rs million in comparison to Rs million in the fiscal The reduction in the tax is mainly on account of adjustment of taxes for earlier years. 5 Profit After Tax before provisions made and written back and prior period adjustments Rs.Million Reported Adjusted Fiscal Fiscal Fiscal Fiscal Profit before tax, 63,046 54,520 55,285 47,888 provisons and prior period adjustments Tax 2,022 2,712 2,022 2,712 Profit after tax 61,024 51,808 53,263 45,176 (before provisions and prior period adjustments) The profits as above on a reported basis have grown by 17.79% while on an adjusted basis have grown by 17.90%. 6 Net Profit After Tax The net profit after tax after provisions (made and written back) and prior period adjustments on a reported and adjusted basis are as follows: Rs.Million Reported Adjusted Fiscal Fiscal Fiscal Fiscal Profit after tax (before provisions and prior period adjustments) 61,024 51,808 53,263 45,176 Provisions (net of write back) ,160 Prior period adjustments -2, Net profit after tax 58,202 58,070 53,263 45,176 On a reported basis, the net profit after tax for the current fiscal has remained almost at the same level in comparison to previous fiscal. However, on an adjusted basis, the net profit after tax has grown by 17.90%. 7 Segment-wise performance For the purpose of compiling segment-wise results, the business of the company is segregated into Generation and other business. The company s principal business is generation and sale of bulk power. Other business includes providing consultancy, project management and supervision, oil and gas exploration and coal mining th Annual Report

39 The profit before tax and interest for the Generation business for the fiscal 2006 was Rs. 45,837 million and for the Other Business it was Rs. 224 million. B Financial Condition 1 Net worth The networth of the company at the end of fiscal 2006 was Rs. 449,587 million an increase of Rs. 31,824 million over the previous year mainly due to retained earnings. 2 Loan Funds Our loans outstanding as at March 31, 2006 stood at Rs. 201,973 million in comparision to Rs. 170,878 million as at March 31, A summary of the loans outstanding is given below: Rs.Million As at March 31 st % change Secured Loans Bonds 47,044 32,077 47% Foreign Currency terms loans 10,274 12,319-17% Other % Sub-total 57,327 44,407 29% Unsecured Loans Fixed Deposits 778 4,159-81% Bonds 5, % Foreign Currency Bonds / Notes 22,475 8, % Foreign Currency Term loans 33,336 32,608 2% Rupee term loans 87,821 75,339 17% Loans from Government of India % Sub-total 144, ,471 14% Total 201, ,878 18% The change in the loans outstanding is mainly because of the borrowings and repayments made during the year. During the year the company issued one series of rupee denominated bonds through private placement amounting to Rs.10,000 million. The bonds carry a coupon of 7.125% p.a.. The bonds have been issued for a period of 14 years with redemptions in equal semiannual installments beginning at the end of three years. We also issued US$ 300 million Fixed Rate Notes (Rs. 13,485 million) during the year with coupon of 5.875% p.a. payable semi-annually and maturity of 10 years. These Notes were issued under Medium Term Note Programme of USD 1 billion established during February 2006 to finance capital expenditure of our projects. The credit rating by CRISIL and ICRA of the company as an issuer, the rating for rupee bonds issued and fixed deposits program continued to be AAA. The foreign currency rating for the company is BB+ with positive outlook which is at par with the sovereign rating of the country. The ratings have been assigned by Standard & Poors and Fitch Ratings. The debt to equity ratio at the end of fiscal 2006 of the company went up to 0.45 from 0.41 at the end the previous fiscal. The maturity profile of the borrowings by the Company is as under: Rs.Million Rupee Foreign Total Loans Currency loans Within 1 year 12,115 3,467 15, years 36,609 6,385 42, years 38,987 15,619 54, years 37,677 24,631 62,308 Beyond 10 years 10,500 15,983 26,483 Total 135,888 66, ,973 3 Fixed Assets Rs.Million As at March 31 st % Change Gross block 460, ,062 7% Net Block 230, ,148 3% Capital Work-in- Progress 103,999 67,063 55% Construction stores and advances 32,341 32,189 0% Total fixed assets 367, ,400 14% 30th Annual Report 37

40 During the year we added Rs. 29,334 million to our gross block mainly on account of capitalization of the capital-works-in-progress pertaining to projects which were commercialized during the year. With capital expenditure being incurred on various on-going projects the capital-work-in-progress has shown a substantial increase. 4 Investments Our investments comprise bonds issued by various state governments under the one-time-settlement scheme, equity investments in joint venture and subsidiary companies and investments out of surplus cash in various instruments as per the policy of the company. The broad break-up of our investments is as follows: Rs.Million As at March 31 st Bonds issued under One time settlement scheme 171, ,107 Investments in Joint Ventures 6,818 1,318 Investment in subsidiaries Investment of surplus cash in various instruments 8,508 32,504 Others Bonds against dues (issued prior to one time settlement scheme) 5,306 7,428 Investments of development surcharge on behalf of customers 193 2,368 Total investments 192, ,977 The State governments of Bihar and Jharkhand had during the year issued bonds under the one-timesettlement scheme amounting to Rs. 7,655 million. During the year, we invested Rs. 5,000 million for a stake of 28.33% as a joint venture partner in Ratnagiri Gas and Power Private Ltd which was formed for taking over the assets of the erstwhile Dabhol Power Project. A major portion of surplus cash during the year was kept as term deposit with banks and are included in the current assets. There has been decrease in our investments during the year due to maturity of many of these instruments and also return of investments made against development surcharge explained below. Investments of Development Surcharge During the earlier years, we had recovered development surcharge from our customers, as provided under the tariff regulations at that time. Such development surcharge was required by CERC regulations to be kept invested in various interest yielding tax free instruments till the time they were utilized in construction of projects as permissible under the Regulations. However, the recovery of development surcharge has been done away with in subsequent regulations and these investments are to be transferred back to the customers from whom they were recovered. We have since returned these to all of our customers after completing certain formalities. 5 Current Assets The current assets and current liabilities as at March 31, 2006 and March 31, 2005 and the changes therein were as follows: Rs.Million As at March 31 st Change Current Assets Amount % of Amount % of Amount % current current assets assets Inventories 23,405 15% 17,819 14% 5,586 31% Sundry Debtors 8,678 6% 13,747 11% -5,069-37% Cash and Bank balances 84,714 54% 60,783 47% 23,931 39% Other Current Assets 10,161 6% 9,764 7% 397 4% Loans and Advances 30,287 19% 26,993 21% 3,294 12% Total Current Assets 157, % 129, % 28,139 22% A major part of current asset comprised Cash and Bank balances. As at March 31, 2006, the cash and bank balances stood at Rs. 84,714 million being 54% of the total current assets in comparison to Rs. 60,783 million as at March 31, 2005 which was 47% of the total current assets as on that date. Of these, Rs. 82,887 million were kept as term deposits with banks as on March 31, 2006 while the term deposits for the last year was Rs. 57,050 million. The next largest component of our current assets is Loans and Advances which mainly include a sum of Rs. 9,573 million as loan to the government of Delhi subsequent to the conversion of the dues of Delhi Vidyut Board into loan under the one-time-settlement scheme. The government of Delhi pays us 8.5% tax-free interest on these Bonds. The other loans and advances are mostly loan and advances to employees given for various purposes such as building of house, purchase of vehicles etc. as per the policies of the company th Annual Report

41 Inventories as at March 31, 2006 were Rs. 23,405 million being 15%of current assets as against Rs. 17,819 million as on March 31, 2005 which was 14% of the current assets as on that date. Our inventories mainly comprise components and spares and coal which we maintain for operating our plants. Components and spares were Rs. 12,894 million as against Rs. 11,904 million in the last year. Coal inventories amounted to Rs. 7,476 million as against Rs. 3,115 million in the previous year indicating improved coal supply position. 6 Current Liabilities Rs.Million As at March 31 st Change Current Assets Amount % of Amount % of Amount % current current liabilities liabilities Liabilities 49,102 80% 52,306 78% -3,204-6% Provisions 12,300 20% 15,161 22% -2,861-19% Total Current Liabiities 61, % 67, % -6,065-9% Our current liabilities as at March 31, 2006 were Rs. 49,102 million as against Rs. 52,306 million in the previous year. Our current liabilities mainly comprise creditors for capital expenditure, creditors for supply of goods and services, deposits and retention money from contractors. The liabilities for these at the end of the year stood at Rs. 36,057 million as against Rs. 33,168 million in the previous year. Besides these, we also owed a sum of Rs. 9,886 million to our customers as against Rs. 14,431 million in the previous year. These sums include amount payable to the customers since we are billing our customers for electricity on provisional tariffs as per directions of CERC, which are higher than the tariffs estimated by us as per CERC Regulations. These amounts would be paid or adjusted against future billings as and when the final tariff for various stations are determined by the regulator. 7 Provisions As at March 31, 2006 we had provisions for certain liabilities outstanding amounting Rs. 12,300 million as against Rs. 15,161 million on 31 st March This mainly comprised Rs. 6,596 million as proposed dividend which we would be paying to our shareholders after they approve the same in the shareholders meeting. We also had a provision outstanding of Rs. 4,770 million towards retirement benefits payable to our employees. 8 Cash flows The cash and cash equivalents and cash flows on various activities for the past five years are tabulated below: Rs.Million For the year ended March 31 st Opening Cash and cash equivalents 60,783 66,351 23,894 13,659 12,015 Net cash from operating activities 62,064 50,998 58,118 47,402 29,372 Net cash used in investing activities (27,136) (64,136) (24,597) (31,881) (28,377) Net cash flow from financing activities (10,997) 7,570 8,873 (5,271) 630 Intangibles 63 (15) 19 Change in Cash and cash equivalents 23,931 (5,568) 42,457 10,235 1,644 Closing cash and cash equivalents 84,714 60,783 66,351 23,894 13,659 Our net cash from operating activities for the year ended March 31, 2006 increased by 22% from the previous year. The net cash from operating activities was Rs. 62,064 million as against Rs. 50,998 million for the previous year. Our net cash used in investing activities decreased to Rs 27,136 million in fiscal 2006 from Rs. 64,136 million in the previous year. Cash flows on investing activities arise from expenditure on setting up power projects, investment of surplus cash in various securities, investments of development surcharge recovered from customers (refer para 4.1 above), investments in joint ventures and subsidiaries. The cash utilised for purchase of fixed assets increased by 25% from Rs. 53,699 million in the previous year to Rs. 66,956 million during this year. Cash was also realized on maturity of certain investments during the year. 30th Annual Report 39

42 During the year we used Rs. 10,997 million of cash on financing activities. In the previous year we had a net inflow of Rs. 7,570 million from financing activities mainly due to receipt of Rs. 26,841 million as proceeds from our initial public offering of shares. During the current year we had inflow of Rs. 48,226 million from long term borrowings as against Rs. 29,592 million in the previous year. The cash used for repayment of long term borrowings this year was Rs. 17,131 million as against Rs. 13,242 million repaid in the previous year. The cash used for paying dividend and the tax thereon was Rs. 30,087 million as against Rs. 23,397 million in the previous year. Business and Financial Review of Subsidiaries The company has formed four wholly owned subsidiaries. The financial statements of these subsidiaries are included in this Annual Report elsewhere. Their performance is briefly discussed here: a) NTPC Electric Supply Company Limited (NESCL) The financial highlights of the Company are as under: Particulars Fiscal 2006 Fiscal 2005 Rs.Million NTPC s investment in equity Gross Income Profit After Tax Rs Per Share Book Value per share Earnings Per Share NESCL was incorporated with the main object of undertaking business of distribution and supply of electrical energy. The company is exploring business opportunities in various states of the country. However, the company has not yet been assigned any distribution circle. The company is however carrying out the work of Advisor-cum-consultant for Ministry of Power, Government of India for implementation of schemes under the Accelerated Power Development and Reforms Program (APDRP). The company is also involved in the execution of work under the government s rural electrification program namely Rajiv Gandhi Grameen Vidyuti-Karan Yojana. The Company is also rendering Project management and supervision services to Madhya Kshetra Vidyut Vitaran Company Ltd., a distribution company of the government of Madhya Pradesh. The Company has proposed a dividend of Rs.1 million this fiscal year. b) NTPC Vidyut Vyapar Nigam Limited (NVVN) The financial highlights of the Company are as under: Particulars Fiscal 2006 Fiscal 2005 Rs.Million NTPC s investment in equity Gross Income 4,441 5,992 Profit After Tax Rs. Per Share Book Value per share Earnings per share The company was formed with an objective to undertake business of trading of electric power. During the year the company transacted business with 18 utilities spread all over the country and traded 1643 million units of electricity in comparison to 2616 million units traded in the previous year. NVVN is also engaged in facilitating development of Power exchange in India. The Company has during this fiscal paid an interim dividend of Rs.10 million and recommended final dividend of Rs.10 million. c) NTPC Hydro Limited (NHL) The financial highlights of the Company are as under: Particulars Fiscal 2006 Fiscal 2005 Rs.Million NTPC s investment in equity Loss Rs per share Book Value per share Earnings per share (5.71) (13.85) The company was formed with an objective to develop small and medium hydroelectric power projects up to 250 MW. Presently the company is implementing two projects namely, Lata Tapovan hydro electric project (171 MW) in the state of Uttranchal. and Rammam-III (120 MW) in the state of West Bengal. Implementation 40 30th Annual Report

43 activities for the above projects have been initiated and the projects are scheduled to be commissioned by March d) Pipavav Power Development Company Limited The financial highlights of the company are given below: Particulars Fiscal 2006 Fiscal 2005 NTPC s investment in equity (Rs. Million) Loss (Rs.) 40,083 24,252 Book Value per share (Rs) Earnings per share (Rs) (0.11) (0.07) We had entered into an understanding with Gujarat Power Corporation Ltd (GPCL) and Gujarat Electricity Board to set up 1000 MW Thermal Power Project at Pipavav in Gujarat through a joint venture between NTPC and GPCL. The company is presently a wholly owned subsidiary of NTPC and shall be converted to a Joint venture Company by transferring 50% of our shareholding to GPCL. Site Specific Studies for the project are in progress. Draft Shareholders Agreement is ready and shall be finalized and signed after allocation of Distribution Circle. Business And Financial Review Of Joint Venture Companies a) PTC India Limited The financial highlights of the Company are as under: Particulars Fiscal 2006 Fiscal 2005 Rs.Million NTPC s investment in equity Gross Income 31,206 20,373 Profit After Tax Rs per Share Book Value per share Earnings per share The main objective of the company includes trading of power, import/export of power and purchase of power from identified private power projects and sells it to identified SEBs/others. The Company has a paidup capital of Rs.1500 million had 8% equity contribution each from NTPC, Power Grid Corporation of India Ltd., Power Finance Corporation Limited and NHPC and the balance from Damodar Valley Corporation, Financial Institutions, Banks and general public. PTC has traded a total 10,119 MUs in the fiscal 2006 as compared to 8,887 MUs in fiscal 2005 registering an increase of 13.86%. The Company has paid a dividend of 150 million for financial year as compared to 120 million for financial year and correspondingly share of NTPC dividend increased to 12 million from 9.6 million. b) Utility Powertech Limited (UPL) The financial highlights of the Company are as under: Particulars Fiscal 2006 Fiscal 2005 Rs.Million NTPC s investment in equity Gross Income 1,478 1,125 Profit After Tax Rs Per Share Book Value per share Earnings per share UPL is a 50:50 joint venture company of NTPC and Reliance Energy Limited formed to take up assignments of construction, erection and supervision in power sector and other sectors in India and abroad. The company has in the current year paid the same being Rs.30 million as in the previous year. NTPC s share amounts to Rs.15 million. c) NTPC-SAIL Power Company Pvt. Ltd. (NSPCL) and Bhilai Electric Supply Company Private Limited (BESCL) The financial highlights of these companies are as under: Particulars Fiscal 2006 Fiscal 2005 NSPCL BESCL NSPCL BESCL Rs Million NTPC s investment in equity , Gross Income 1, , Profit After Tax Rs. Per Share Book Value per share Earnings per share These joint venture companies were formed for operating and maintaining the captive power plants of Steel Authority of India Limited (SAIL). The total capacity under operation of these companies is 314 MW. These companies generated 2454 MU in the current year as compared to 2447 MU last year. 30th Annual Report 41

44 BESCL is also implementing the expansion of power plant at Bhilai by adding two 250 MW units. Construction activities are progressing as per schedule at the site. NSPCL and BESCL have declared a dividend of Rs.75 million and Rs.15 million respectively. e) NTPC-ALSTOM Power Services Private Limited (NASL) The financial highlights of the Company are as under: Particulars Fiscal 2006 Fiscal 2005 Rs.Million NTPC s investment in equity Gross Income Profit After Tax Rs Per Share Book Value per share Earnings per share NASL is a joint venture company with equal equity contribution from NTPC and Alstom Power Generation AG, Germany. The company was formed for taking up Renovation & Modernization assignments of power plants both in India and abroad. The company has proposed a dividend of Rs.7.2 million and the share of NTPC is Rs. 3.6 million. f) NTPC Tamil Nadu Energy Company Ltd. The company is formed as a 50:50 joint venture between NTPC and Tamil Nadu Electricity Board to set up a coal-based power station of 1000 MW capacity, at Ennore, using Ennore port infrastructure facilities. All site specific studies have been completed. The draft Feasibility Report is ready and would be finalized after receiving data on the price of land and allocation of coal mine block The construction activities are yet to commence. The expenses incurred by the company during the year resulted in a loss of Rs.3 million for the fiscal 2006 as against a loss of Rs.2 million in the previous year. g) Ratnagiri Gas And Power Pvt. Limited Ratnagiri Gas and Power Pvt Ltd has been formed as joint venture between NTPC, GAIL, MSEB Holding Company Limited and Indian Financial institutions with NTPC having a stake of 28.33% for taking over and operating erstwhile Dabhol Power Project. Consolidated Financial Statements of NTPC Ltd, its Subsidiaries and Joint Venture Companies The consolidated Financial statements have been prepared in accordance with Accounting Standards (AS)-21 Consolidated Financial Statements and Accounting Standards(AS)27- Financial reporting of Interests in Joint Ventures and are included in this Annual Report. A brief summary of the results on a consolidated basis is given below: Rs million Fiscal 2006 Fiscal 2005 Gross Revenue 296, ,125 Profit before tax 60,510 61,075 Profit after Tax 58,408 58,286 Net Cash from operating activities 63,037 51,545 CAUTIONARY STATEMENT Statements in the Management Discussion and Analysis and in the Directors Report, describing the Company s objectives, projections and estimates, contain words or phrases such as will, aim, believe, expect, intend, estimate, plan, objective, contemplate, project and similar expressions or variations of such expressions, are forward-looking and progressive within the meaning of applicable laws and regulations. Actual results may vary materially from those expressed or implied by the forward looking statements due to risks or uncertainties associated therewith depending upon economic conditions, government policies and other incidental factors. Readers are cautioned not to place undue reliance on these forwardlooking statements. Place: New Delhi Date: July 31, 2006 For and on behalf of the Board of Directors (T. Sankaralingam) Chairman & Managing Director 42 30th Annual Report

45 REPORT ON CORPORATE GOVERNANCE Annex-II to Directors Report Corporate Governance is a process that aims to meet shareholders aspirations and societal expectations. It is a commitment that is backed by the fundamental belief of maximising shareholders value, transparency in functioning, values and mutual trust amongst all the constituents of organisation. Its not a discipline imposed by a Regulator, rather a culture that guides the Board, management and employees to function towards best interest of stakeholders. In our Company, Corporate Governance philosophy stems from our belief that corporate governance is a key element in improving efficiency and growth as well as enhancing investor confidence and accordingly the Corporate Governance philosophy has been scripted as under: As a good corporate citizen, the Company is committed to sound corporate practices based on conscience, openness, fairness, professionalism and accountability in building confidence of its various stakeholders in it thereby paving the way for its long term success. We are making continuous efforts to adopt the best practices in corporate governance and we believe that the practices we are putting into place for the company shall go beyond adherence to regulatory framework. Our corporate structure, business and disclosure practices have been aligned to our Corporate Governance Philosophy. 2. BOARD OF DIRECTORS 2.1 Size of the Board We are a Government Company within the meaning of section 617 of the Companies Act, 1956 as the President of India presently holds 89.5% of the total paid-up share capital. As per Articles of Association of the company, the powers to appoint Directors rest with the President of India. In terms of the Articles of Association of the Company strength of our Board shall not be less than four Directors or more than twenty Directors. These Directors may be either whole-time functional Directors or part-time Directors. 2.2 Composition of the Board As on 31 st March 2006 the Board comprised twelve directors out of which six were whole-time functional directors including the Chairman & Managing Director. Two directors are nominees of the Government of India. The Board also has four independent directors who have been appointed by the Government of India through a search committee constituted for the purpose. The directors bring to the Board wide range of experience and skills. Brief profile of the Directors is set out elsewhere in the Annual Report. The listing agreements with stock exchanges stipulate that half of the board members to be independent directors. The company has requested Government of India to initiate necessary steps for appointment of adequate number of independent Directors so that Board composition be in compliance with the Listing Agreement. Details regarding Independent Directors on the Board of the Company during the year is as under: Period Requirement Actual April 1, 2005 to August 26, August 27, 2005 to January 29, January 30, 2006 to March 31, Age limit and tenure of Directors The age limit of the Chairman & Managing Director and other whole-time functional directors is 60 Years. The Chairman & Managing Director and other whole time Functional Directors are appointed for a period of five years from the date of taking over of charge or till the date of superannuation of the incumbent, or till further instructions from the Government of India, whichever event occurs earlier. Government Nominees representing Ministry of Power, Government of India retire from the Board on ceasing to be officials of the Ministry of Power. Independent Directors are appointed by the Government of India usually for tenure of three years. 2.4 Board Meetings The meetings of the Board of Directors are normally held at the Company s registered office in New Delhi. The Company has defined procedures for meetings of the Board of Directors and Committees thereof so as to facilitate decision-making in an informed and efficient manner. Thirteen Board Meetings were held during the financial year on April 8, May 28, June 13, July 9, July 27, August 12, September 10, September 27, October 27, December 7, 2005, January 30, March 14, March 24, Details of number of Board meetings attended by Directors, attendance at last AGM, number of other directorships/committee memberships (viz., Audit Committee and Shareholders Grievance Committee as per SEBI s Corporate Governance Code) held by them during the year are tabulated below: 30th Annual Report 43

46 S. Directors Meeting No. of Attendance Number Number of No. held during Board at the last of other Committee respective Meetings AGM Directorships memberships in tenures of Attended (held on held on companies Directors ) on As Chairman As Member Functional Directors 1 Sh. C.P.Jain Chairman & Managing Director Yes Sh. K.K. Sinha Director (HR) (Upto ) 3 3 NA* NA* NA* NA* 3 Sh. P.Narasimharamulu Director (Finance) (Upto ) 5 5 NA* NA* NA* NA* 4 Sh. T. Sankaralingam Director (Projects) Yes Sh. Chandan Roy Director (Operations) Yes Shri R.S. Sharma Director (Commercial) Yes Shri R.K. Jain Director (Technical) (From ) Yes Shri A.K. Singhal Director (Finance) (From ) 8 8 Yes 9-3 Non-executive Directors (Government Nominees) 9 Sh. M.Sahoo JS&FA,Ministry of Power Yes Sh. Arvind Jadhav JS (Thermal), Ministry of Power (Upto ) 4 2 NA* NA* NA* NA* 11 Shri Harish Chandra JS(Thermal), Ministry of Power (From ) 9 7 No Independent Directors 12 Dr. R.K. Pachauri Director-General, TERI (Upto and from ) 8 1 NA* Prof. Ashok Misra Director IIT, Powai (From ) 2 2 NA* Shri G.P. Gupta Ex-CMD, IDBI (From ) 2 2 NA* Shri M.I. Beg Ex-Chairman, CEA (From ) 2 2 NA* *NA indicates that concerned person was not a Director on NTPC s Board on the relevant date th Annual Report

47 2.5 Information placed before the Board of Directors, inter alia, include: The Board has complete access to any information within the Company. The information regularly supplied to the Board includes: Annual operating plans and budgets and any updates. Capital Budgets and any updates. Annual Accounts, Directors Report etc. Quarterly results of the company. Minutes of meetings of Audit Committee and other Committees of the Board. The information on recruitment and promotion of Sr. Officers to the level of Executive Director which is just below the Board level and of Company Secretary. Fatal or serious accidents, dangerous occurrences etc. Operational highlights and substantial non-payment for goods sold by the company. Major investments, formation of subsidiaries and Joint Ventures, Strategic Alliances etc. Award of large contracts. Disclosure of Interest by Directors about directorship and committee positions occupied by them in other companies. Quarterly Report on foreign exchange exposures. Any significant development in Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme, etc. Non-Compliance of any regulatory, statutory or listing requirements and shareholders services such as nonpayment of dividend, delay in share transfer etc. Short term investment of surplus funds. Information relating to major legal disputes. Other materially important information. 3. COMMITTEES OF THE BOARD OF DIRECTORS The Board has established the following Committees:- i) Audit Committee. ii) Shareholders /Investors Grievance Committee. iii) Committee on Management Controls. iv) Contracts Sub- Committee. v) Project Sub Committee. vi) Investment/Contribution Sub-Committee. vii) Committee of the Board for allotment and postallotment activities of NTPC s Securities. 3.1 AUDIT COMMITTEE The constitution, quorum, scope etc. of the Audit Committee are in line with the Navratna Guidelines, the Companies Act, 1956 and provisions of Listing Agreement. Scope of Audit Committee 1. Discussion with Auditors periodically about internal control systems and the scope of audit including observations of the auditors. 2. Reviewing, with the management, the quarterly and half-yearly financial statements before submission to the Board for approval. 3. Ensure Compliance of Internal Control Systems. 4. Oversight of the company s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 5. Noting appointment and removal of external auditors. Recommending the fixation of audit fee of external auditors and also approval for payment for any other services. 6. Reviewing, with the management, the annual financial statements before submission to the board for approval, with particular reference to: a. Matters required to be included in the Director s Responsibility Statement to be included in the Board s report in terms of clause (2AA) of section 217 of the Companies Act, 1956; b. Changes, if any, in accounting policies and practices and reasons for the same; c. Major accounting entries involving estimates based on the exercise of judgment by management; d. Significant adjustments made in the financial statements arising out of audit findings; 30th Annual Report 45

48 e. Compliance with listing and other legal requirements relating to financial statements; f. Disclosure of any related party transactions; g. Qualifications in the draft audit report. 7. Reviewing, with the management, performance of statutory and internal auditors, the adequacy of internal control systems and suggestion for improvement of the same. 8. Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. 9. Discussion with internal auditors any significant findings and follow up there on. Review of internal audit observations outstanding for more than two years. 10. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. 11. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as have post-audit discussion to ascertain any area of concern. 12. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors. 13. Review of observations of C&AG including status of Government Audit paras. 14. To review the functioning of the Whistle Blower mechanism, as and when the same is formulated and made effective. 15. Investigation into any matter in relation to the items specified above or referred to it by the Board. Constitution The Audit Committee has been constituted with the membership of: i) Joint Secretary & Financial Advisor (JS & FA), Ministry of Power (MOP), Government of India nominated on the Board of NTPC and ii) Three independent Directors to be nominated by the Board from time to time. Composition During the year the composition of the Audit Committee underwent changes from time to time. However, it became compliant with the Listing requirements w.e.f. February 15 th 2006 consequent to the appointment of Independent Directors by the Government of India. During the year details of composition of Audit Committee has been as under: Period Membership Independent Directors Requirement Actual Requirement Actual April 1, 2005 to August 26, 2005 August 27, 2005 to December 6, 2005 December 7, 2005 to February 14, 2006 February 15, 2006 to March 31, 2006 As on 31 st March 2006, the Audit Committee comprised the following members:- Shri G.P. Gupta Shri M. Sahoo Dr. R.K. Pachauri Shri M.I. Beg Independent Director JS & FA, MOP Independent Director Independent Director Senior most independent Director on the Audit Committee shall be Chairman of the Audit Committee. Director (Finance), Head of Internal Audit and the Statutory Auditors are invited in the Audit Committee Meeting for interacting with the members of the committee. Senior executives from various functions are also invited as and when required to provide necessary inputs to the committee. Meetings and Attendance Six meetings of the Audit Committee were held during the financial year on April 20, June 13, July 27, August 11, October 27, 2005 and January 30, The details of the meetings of Audit-Committee attended by the members are as under: th Annual Report

49 Members of Meetings held Meetings Audit Committee during his tenure attended Shri M. Sahoo 6 6 Dr. R.K. Pachauri (upto and from ) Shri Arvind Jadhav (upto ) 2 1 Shri Harish Chandra ( to ) 4 3 Shri T. Sankaralingam ( to ) 1 1 Shri G.P. Gupta (from ) No meetings were Shri M.I. Beg held during their tenure (from ) Director (Finance), Head of Internal Audit were present in all Audit Committee Meetings held during the year under review as invitees as per requirement of Listing Agreement. 3.2 SHAREHOLDERS /INVESTORS GRIEVANCE COMMITTEE The Company has constituted Shareholders / Investors Grievance Committee. Scope of the Committee This Committee looks into redressal of Shareholders and Investors complaints like delay in transfer of shares, nonreceipt of Balance Sheet, non-receipt of declared dividend etc. as well as complaints/grievances of the Bondholders and also of the Depositors under the Public Deposit Scheme. Constitution The Committee has been constituted with the membership of: i) One Nominee Director of Ministry of Power represented on the Board of NTPC ii) Director (Finance), NTPC and iii) Director (HR) or Director (Technical), NTPC. Composition As on 31 st March 2006, this committee comprised the following Directors : Shri M. Sahoo Government Nominee Shri R.K. Jain Director (Technical) Shri A.K. Singhal Director (Finance) Shri M. Sahoo is the Chairman of the Committee. Meeting and Attendance Two meeting of the Shareholders /Investors Grievance Committee were held during the financial year on July 27, 2005 and February 16, Members of Meetings Meetings Shareholders / Investors held attended Grievance Committee Shri M. Sahoo 2 2 Shri R.K. Jain 2 1 Shri A.K. Singhal 2 2 Name and designation of Compliance Officer Shri A.K. Rastogi, Company Secretary is the compliance officer in terms of Clause 47 of the Listing Agreement. Investor Grievances During the financial year ending 31 st March 2006, Company has attended its investor grievances expeditiously except for the cases constrained by disputes or legal impediments. The status of the complaints during the year are as under: Particulars Opening Received Resolved Pending Balance during during as on the year the year SEBI / Stock NIL Exchange complaints Other IPO related complaints Other Dividend related complaints Total Investor complaints shown pending as on March 31, 2006 have been attended subsequently. Number of pending share transfers As on March 31, 2006, no share transfer request was pending. Share Transfers have been effected during the year well within the time prescribed by the Stock Exchanges and a certificate to this effect duly signed by a Practicing Company Secretary has been furnished to Stock Exchanges. 3.3 COMMITTEE ON MANAGEMENT CONTROLS On being conferred enhanced autonomy by the Government of India under Navratna Guidelines, this committee was constituted for establishing transparent and effective system of internal monitoring. This Committee, inter alia, reviews the Management Control Systems, significant deviations in project implementation and construction, operation and maintenance budgets etc. As on March 31, 2006, the committee comprised the following Directors: 30th Annual Report 47

50 Shri M. Sahoo Shri Chandan Roy Shri A.K. Singhal Prof. Ashok Misra Government nominee Director (Operations) Director (Finance) Independent Director 3.4 COMMITTEE FOR CONTRACTS This Committee has been constituted for approval of award of contracts of value exceeding Rs. 25 crore but not exceeding Rs.100 crore and consultancy assignments exceeding Rs. 2 crore each. As on March 31, 2006, the Committee for Contracts comprised the following members: Shri C.P.Jain Shri T. Sankaralingam Shri M.Sahoo Shri R.K. Jain Shri Harish Chandra Shri A.K. Singhal Chairman & Managing Director Director (Projects) Government nominee Director (Technical) Government nominee Director (Finance) 3.5 PROJECT COMMITTEE The Project Committee examines and makes recommendations to the Board on proposals for Investment in New/Expansion Projects and Feasibility Reports of new projects. As on 31st March 2006, the Committee comprised the following members: Shri C.P.Jain Shri T. Sankaralingam Shri M. Sahoo Shri Chandan Roy Shri R.S. Sharma Shri R.K. Jain Shri Harish Chandra Shri A.K. Singhal Shri M.I. Beg Chairman & Managing Director Director (Projects) Government nominee Director (Operations) Director (Commercial) Director (Technical) Government nominee Director (Finance) Independent Director 3.6 INVESTMENT/CONTRIBUTION COMMITTEE The terms of reference of Investment/Contribution Committee of the Board is for deployment of surplus funds as per Govt. Guidelines issued from time to time, and acceptance of Bonds/Debt Instruments in lieu of settled dues with State Electricity Boards or State Transmission Companies and deciding terms and conditions thereof. This committee also approves contribution/donation for national, public, benevolent or charitable cause, purpose or object or other funds not directly related to the business of the company or welfare of its employees between Rs. 5 lakh to Rs. 20 lakh subject to maximum limit of Rs. 1 crore in a year. As on 31st March 2006, the Committee comprised the following Members: Shri C.P.Jain Shri Chandan Roy Shri A.K. Singhal Chairman & Managing Director Director (Operations) Director (Finance) In case of investment of funds and contribution matters Director (HR) and in case of Commercial matters Director (Commercial) are co-opted in the meeting. 3.7 COMMITTEE FOR ALLOTMENT AND POST-ALLOTMENT ACTIVITIES OF NTPC S SECURITIES The Committee has been constituted for Allotment and Post-allotment activities of Company s Securities. The scope of work of this committee is allotment, issue, Certificate/ Letter of allotment, transfer, transmission, re-materialisation, issue of duplicate certificates, consolidation/split of NTPC s domestic and foreign Securities. As on 31st March 2006, the Committee comprised the following Members: Shri T. Sankaralingam Shri A.K. Singhal Shri Chandan Roy Shri R.K. Jain Director (Projects) Director (Finance) Director (Operations) Director (Technical) 3.8 REMUNERATION COMMITTEE/ REMUNERATION OF DIRECTORS Our Company, being a Central Public Sector Undertaking, the appointment, tenure and remuneration of Directors are decided by the President of India. Hence, the Board does not decide remuneration of the Directors. Independent Directors are paid only sitting fees at rate fixed by the Board within the ceiling fixed under the Companies Act, 1956 and approved by the Government for attending the Board Meetings as well as Committee Meetings. Details of remuneration of functional Directors of the company: 48 30th Annual Report

51 (in Rupees) Sl. Name of the Director Salary Benefits Bonus/ Performance Total No. Commission Linked Incentives 1 Sh. C.P.Jain 1,741, , ,036 2,173,237 2 Sh. K.K. Sinha (upto ) 716, ,214-49, ,127 3 Sh. P.Narasimharamulu (upto ) 901, ,078-84,396 1,138,613 4 Sh. T. Sankaralingam 597, , , ,361 5 Sh. Chandan Roy 576, , ,877 1,420,688 6 Sh. R.S. Sharma 868, , ,619 1,206,771 7 Shri R.K. Jain (From ) 722, , , ,418 8 Shri A.K. Singhal (From ) 514,192 78, , ,112 Performance linked incentives paid is based on the incentive scheme applicable to all employees of the company. Details of payments towards sitting fees to independent Directors during the year are given below: (in Rupees) Name of Part-time non-official Directors Sitting Fees Total Board Meeting Committee Meeting Dr. R.K. Pachauri(Upto and From ) 10,000 40,000 50,000 Prof. Ashok Misra (From ) 20,000 10,000 30,000 Shri G.P. Gupta (From ) 20,000-20,000 Shri M.I. Beg (From ) 20,000 10,000 30, GENERAL BODY MEETINGS Annual General Meeting Date, time and location where the last three Annual General Meetings were held are as under: Date September 24, 2003 July 29, 2004 September 23, 2005 Time 3.00 P.M 2.00 P.M A.M. Venue NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Siri Fort Auditorium Complex, August Lodi Road, New Delhi Kranti Marg, New Delhi Special NIL NIL Change of name of the Company Resolution from National Thermal Power Corporation Limited to NTPC Limited Special Resolution passed through Postal Ballot Company has passed a Special Resolution to amend the existing Clause 4 of the Main Objects under the Object Clause of the Memorandum of Association of the Company by bifurcating it in two separate sub-clauses in a more enlarged and explicit manner for undertaking diversified range of fuel related activities. Notice dated 23 rd April 2005 was served to all shareholders for voting through postal ballot as per provisions of section 192A of the Companies Act, 1956, read with the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 and said special resolution was approved by the Shareholders on 26 th May Ms. Madhurima Mukherjee, partner, M/s. Amarchand & Mangaldas & Suresh A. Shroff & Co. was appointed as scrutinizer to conduct Postal Ballot. Out of total 40,520 Ballot Papers received 37,867 (representing 99.90% of total votes cast) voted in favour of the resolution. No special resolution is proposed to be passed through Postal Ballot at the Annual General Meeting. 30th Annual Report 49

52 5. DISCLOSURES The transactions with related parties contain (i) payment to companies under Joint Venture Agreement and on account of contracts for works/ services, (ii) remuneration to key management personnel and (iii) equity contribution to subsidiaries, which are not in nature of potential conflicts with interest of the company at large. Details of related party transactions are included in the Notes to the Accounts as per Accounting Standard 18 issued by the Institute of Chartered Accountants of India. The company has complied with all the requirements of the Listing Agreement with Stock Exchanges as well as Regulations and Guidelines prescribed by SEBI. There were no penalties or strictures imposed on the company by any statutory authorities for non-compliance on any matter related to capital markets, during the last three years. The Company has adopted all suggested items to be included in the Report on Corporate Governance. Information on adoption (and compliance) / non-adoption of the non-mandatory requirements is at Annex MEANS OF COMMUNICATION The Company communicates with its shareholders through its Annual Report, General Meetings and disclosures through web site. The Company also communicates with its institutional shareholders through a combination of analysts briefing and individual discussions as also participation at investor conferences from time to time. Information and latest updates and announcement regarding the company can be accessed at company s website: including the following: Quarterly / Half-yearly / Annual Financial Results Shareholding Pattern Transcripts of conferences with analysts Corporate disclosures made from time to time to Stock Exchanges Quarterly results Newspapers Date of publication of results for the quarter ended Financial Express Jansatta These results are also displayed at Company s website Official Releases and Presentations The Company s official news releases, other press coverage, presentations made to institutional investors or to the analysts were also made on the website. In order to make the general public aware of the achievements of the company, a press conference is held after the close of the financial year where the highlights of the company during the year are briefed to the Press for information of the stakeholders with prior intimation to the Stock Exchanges. 7. CODE OF CONDUCT The Board of Directors has laid down two separate Codes of Conduct - one for Board Members and another for Senior Management Personnel in alignment with Company s Vision and Values to achieve the Mission & Objectives and aims at enhancing ethical and transparent process in managing the affairs of the Company. A copy each of the Codes of Conduct is available at the website of the Company. Based on the affirmation received from Board Members and Senior Management Personnel, declaration regarding compliance of Codes of Conduct made by the Chairman & Managing Director is given below: All the members of the Board and Senior Management Personnel have affirmed compliance of respective Code of Conduct for the financial year ended on March 31, (T. Sankaralingam) Chairman & Managing Director 8. Code of Insider Trading In pursuance of the Securities Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 the Board has laid down Code of Conduct for Prevention of Insider Trading with the objective of preventing purchase and/or sale of shares of the Company by an Insider on the basis of unpublished price sensitive information. Under this Code, Insiders (Officers and Designated Employees) are prevented from dealing in the Company s shares during the closure of Trading Window. To deal in Securities, beyond limits specified permission of Compliance Officer is required. All Directors/Officers/Designated Employees are also required to disclose related information periodically as defined in the Code, which in turn, is being forwarded to Stock Exchanges, wherever necessary. Company Secretary has been designated as Compliance Officer for this Code. 9. SHAREHOLDERS INFORMATION i) Annual General Meeting Date : September 19, 2006 Time : a.m. Venue : NDMC Indoor Stadium, Talkatora Garden, New Delhi ii) Financial Calendar for FY th Annual Report

53 Particulars Date Accounting Period April 1, 2006 to March 31, 2007 Unaudited financial results for the Announcement within a month from the first three quarters end of each quarter FourthQuarter Results Announcement of Audited Accounts on or before June 30, 2007 AGM (Next year) September 2007 (Tentative) iii) Book Closure The Register of Members and Share Transfer Books of the Company will remain closed from September 1, 2006 to September 15, 2006 (both days inclusive). iv) Payment of Dividend The Board of Directors of the Company has recommended payment of a final Dividend of 8% (Rs. 0.8 per share) for the financial year ended March 31, 2006 in addition to the Interim Dividend of 20% (Rs. 2 per share) paid on February 27, The record date for the payment of Dividend is August 31, v) Dividend History Year Total paid-up Total amount of Date of AGM in Date of payment capital dividend paid which dividend (Rs. in crore) (Rs. in crore) was declared * * * Date of Board Meeting for interim dividend. vi) Listing on Stock Exchanges NTPC equity shares are listed on the following Stock Exchanges: National Stock Exchange of India Limited Bombay Stock Exchange Limited Scrip Code: NTPC EQ Scrip Code: Stock Code : ISIN INE733E01010 vii) Market Price - NSE Month High (Rs.) Low (Rs.) Closing (Rs.) April May June July August September October November December January February March viii) Market Price Data BSE Month High (Rs.) Low (Rs.) Closing (Rs.) April May June July August September October November December January February March th Annual Report 51

54 ix) Performance in comparison to indices xii) Distribution of Shareholding Shares held by different categories of shareholders and according to the size of holdings as on 31 st March 2006 are given below: x) Registrar and Transfer Agent Karvy Computershare Pvt. Ltd Karvy House, 46, Avenue 4, Street No. 1 Banjara Hills, Hyderabad Phone No. : Fax No. : id : ntpcipo@karvy.com xi) Share Transfer System Entire share transfer activities under physical segment are being carried out by Karvy Computershare Private Limited. The share transfer system consists of activities like receipt of shares along with transfer deed from transferees, its verification, preparation of Memorandum of transfers etc. Shares transfers are approved by Sub- Committee of the Board for Allotment and Postallotment activities of NTPC s Securities. Pursuant to clause 47(C) of the Listing Agreement with Stock Exchanges, certificate on half-yearly basis confirming due compliance of share transfer formalities by the Company from Practicing Company Secretary have been submitted to Stock Exchange within stipulated time. According to Size a. Distribution of shareholding according to size, % of holding as on March : Number Number % of Total No. % of of shares of share share of shares shares holders holders % % % % % % % % % % % % % % and above % % Total % % b. Shareholding pattern as on March 31, 2006 Category Total no. of shares % to Equity GOI FIIs Indian Public Banks & FI Private Corp. Bodies Mutual Funds NRI / OCBs Others Total c. Major Shareholders Details of Shareholders holding more than 1% of the paid-up capital of the Company as on March 31, 2006 are given below: 52 30th Annual Report

55 Name of No. of % to Paid- Category Shareholder Shares up Capital Government of India Government Capital Research MNGT.Co Foreign A/C Capt. Institutional World Investor Growth & income fund xiii) Dematerialisation of Shares The shares of the Company are in compulsory dematerialsed segment and are available for trading system of both National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Limited (CDSL). Secretarial Audit Report for reconciliation of the share capital of the Company obtained from Practicing Company Secretary have been submitted to Stock Exchange within stipulated time. No. of shares held in dematerialized and physical mode No. of shares % of total capital issued Held in dematerialized form in CDSL Held indematerialized form in NSDL Physical Total The names and addresses of the Depositories are as under: 1. National Securities Depository Ltd. Trade World, 4 th Floor Kamala Mills Compound Senapathi Bapat Marg, Lower Parel, Mumbai Central Depository Services (India) Limited Phiroze Jeejeebhoy Towers 28 th Floor, Dalal Street, Mumbai xiv) Outstanding GDRs/ADRs/Warrants or any Convertible instruments, conversion date and likely impact on equity No GDRs/ADRs/Warrants or any Convertible instruments has been issued by the Company xv) Locations of NTPC plants i) Address for correspondence: NTPC Bhawan, SCOPE Complex 7, Institutional Area, Lodi Road, New Delhi The phone numbers, fax numbers and ids for communication are given below: Telephone No. Fax No. Registered Office Investor Services Department id isd@ntpc.co.in Public Spokesperson Mr. A.K. Kundu, Executive Director (Finance) id akkundu@ntpc.co.in Company Secretary Mr. Anil Kumar Rastogi id akrastogi@ntpc.co.in For and on behalf of Board of Directors Place: New Delhi Date: 31 st July, 2006 (T. Sankaralingam) Chairman & Managing Director 30th Annual Report 53

56 Annex-1 Non-Mandatory requirements 1. The Board: The Company is headed by an executive Chairman. No Independent Director has been appointed for the period exceeding, in the aggregate, a period of nine years, on the Board of the company. 2. Remuneration Committee: This aspect has been dealt elaborately in para 3.8 of this Report. 3. Shareholders' rights: Separate half-yearly report has not been sent to each household of shareholders. However, the financial results for the half-year ended September 30, 2005 were published in Financial Express and Jansatta dated October 28, 2005 and also put up on website of the company. 4. Audit Qualification: The financial statement for the year has no audit qualifications. 5. Training to Board Members: Board Members are deputed to attend various training programmes, seminars, conferences, meets etc. from time to time. 6. Mechanism for evaluating non-executive Board Members: Not yet adopted by the Company. 7. Whistle Blower Policy: The Company has not adopted/introduced Whistle Blower Policy. However, the Company has not denied access to any employee to approach the Management. To the Members NTPC Limited We have examined the compliance of conditions of corporate governance by NTPC Limited, for the year ended on March 31, 2006 as stipulated in clause 49 of Listing Agreements in respect of Equity Shares of the said Company with Stock Exchanges. The compliance of conditions of corporate governance is the responsibility of the management. Our examination is limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that, except the composition of the Board of Directors and Audit Committee as reported in para 2.2 and para 3.1 of Report on Corporate Governance, the Company has complied with the conditions of Corporate Governance as stipulated in the Listing Agreements. We further state that, such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For Kalani & Co. Chartered Accountants (K.L. Jhanwar) Partner M. No For Umamaheswara Rao & Co. Chartered Accountants (G. Sivaramakrishna Prasad) Partner M. No For T.R. Chadha & Co. Chartered Accountants (Sanjay Gupta) Partner M. No For Amit Ray & Co.Chartered Accountants (Amitava Ray) Partner M. No For S.N. Nanda & Co. Chartered Accountants (S.N. Nanda) Partner M.No Place: New Delhi Date: 31 st July, th Annual Report

57 Annex-III to Directors Report PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988: A. CONSERVATION OF ENERGY: a) Energy conservation measures taken: Some of the important energy conservation measures taken during the year in different areas are as under: ENERGY AUDITS During the year , 103 in-house energy audits in the areas of auxiliary power consumption, water balance, cooling water system, compressed air, coal handling plant, MGR, Lub Oil System, Air Conditioning, ash handling system, GT compressors, GT open cycle efficiency, WHRB performance, lighting, thermal insulation etc. were carried out at different stations of NTPC. In addition, a workshop on Energy Conservation Potential in Air Pre-heaters and Draft System was also conducted at NTPC- Dadri. During the year, bids for carrying out energy audits of 14 external power utilities and other industries were also submitted through the Consultancy Wing of NTPC. Till now 446 executives of NTPC have passed the Energy Auditors Examination of Bureau of Energy Efficiency to become accredited energy auditors. In addition, 9 executives have also qualified to be the Certified Energy Managers. The details of various measures taken during the year under various heads of energy conservation are as below: AUXILIARY POWER CONSUMPTION Operation of CW pumps & cooling towers based on ambient conditions and actual requirement of plants (at Anta, Simhadri, Kawas, Dadri-gas & Coal and Unchahar etc) monitoring of running hours for auxiliary cooling water pumps, air compressors etc (at Farakka, Kahalgaon, Talcher Thermal, Unchahar, Rihand, Simhadri, Vindhyachal etc.), use of vapour absorption system for air conditioning (at Ramagundam, Korba, Farakka, Vindhyachal), use of energy savers for window air conditioners (at Talcher Thermal, Singrauli, Kawas, Korba etc), polymer coating of pump internals to reduce friction and power consumption (at Kawas etc) are some of the measures taken to reduce APC. LIGHTING Installation of timer switches in plant and Township lighting (at Anta etc), use of energy savers (at Kawas etc), replacement of conventional GLS lamps and conventional FLTs with CFLs and conventional FLTs with energy efficient tube lights (at Dadri-gas etc), Lighting voltage optimization, replacement of HPMV Lamps with HPSV lamps and cleaning of light fittings (at Unchahar, Singrauli etc), use of electronic ballasts (at Gandhar & Kayamkulam etc) use of CFLs, HPSV lamps, metal halide lamps and energy efficient tube lights (at Singrauli etc). HEAT ENERGY Re-use of recovered coal from settling tank & yard (at Dadri-Coal etc), repair of thermal insulation and cladding (at Farakka, Unchahar, Singrauli, Ramagundam, Badarpur etc), external cleaning of WHRB tubes with ammonia (at Auraiya etc), conco tube cleaning of condenser tubes (at Talcher Thermal etc). FUEL OIL Using MPSP internals in coal mills and reduction in unit start-up and shut-down time (at Farakka etc), LUBRICANTS On-line centrifuging mill gear box lub. oil (at Kahalgaon etc), use of waste lub.oil for marshalling yard fittings works (at Badarpur etc), Attending lub oil leakages and changing / topping up oil on actual condition basis (at Badarpur and Farakka etc), recycling of used up oils for reuse (at Kahalgaon, Talcher Thermal and Vindhyachal etc). DM WATER Attending DM water / steam leakages (at Kahalgaon etc), diverting drip of chimney steam condenser to hot well (at Talcher Thermal etc), Installation of SWAS recycle system (at Kawas etc). MISCELLANEOUS WATER Collecting waste water in the sump and re-pumping it to ash water sump (at Talcher Thermal etc), maintaining appropriate COC in circulating water system (at Jhanor-Gandhar), bringing clarified water headers from underground level to ground level for timely detecting and attending water leakages (at Talcher Thermal etc). 30th Annual Report 55

58 DIESEL / MGR FUEL Adoption of 4 rake operation from 3 rake operation (at Korba), hauling of empty rake with a single loco (at Korba), monitoring and reducing of idle running of locos and dozers, monitoring cycle time of MGR (at Dadri-Coal & Rihand etc). NON CONVENTIONAL ENERGY Using solar water heaters in canteen and guest houses (Talcher Thermal etc). b) Additional investments and proposals for reduction in consumption of energy: Provision of Rs millions has been kept in BE for different energy conservation schemes like : - Energy meters, power analysers and other portable energy audit instruments and on-line energy monitoring system - Vapor absorption system for Air Conditioning - Energy efficient devices in lighting - Solar water heaters, solar PV lighting and solar PV pumps. c) Impact of measures taken for energy conservation : Savings achieved during on account of specific efforts for energy conservation :- S.No Area/Activities Savings Energy Unit Qty. of units Rs. (Million) (1) Electricals (including MU savings in lighting) MU (2) Heat Energy (equivalent MT of coal) MT (3) Fuel Oil KL (4) D. M. Water MT (5) Miscellaneous Water M.Cu.M (6) Diesel/MGR Fuel KL (7) Lubricants KL (8) Miscellaneous/NCES 0.06 Grand Total Savings achieved during was Rs. 414 Million B. TECHNOLOGY ABSORPTION Efforts made towards technology as per Form-B (Form-B is enclosed) C. FOREIGN EXCHANGE EARNINGS AND OUTGO Activities relating to export initiative taken to increase export, development of new export markets for products and services and export plan: Total Foreign Exchange Used/Earned Rs./Million 1. Foreign Exchange Outgo a) Value of Imports calculated on CIF basis: Capital Goods 6380 Spare Parts 518 b) Expenditure: Professional and Consultancy Charges 10 Interest 1849 Others Foreign Exchange Earned Consultancy 3 Interest 3 Others th Annual Report

59 Form-B FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION OF TECHNOLOGY Research & Development (R&D) 1.0 Specific areas in which R&D activities have been carried out during : a. Rejuvenation studies of aged corrugated liner using solution heat treatment & analysis of microstructure & mechanical properties. b. Process optimization of trans-esterification for bio-diesel preparation by villagers from non-edible oil. c. Study of metallurgical degradation of blade coating in gas turbines. d. Development of technique for rapid assessment of integrity of paints/organic coatings. e. Number of visits were made by R&D Experts to various stations for condition assessment, failure analysis and to solve/analyse their specific problems, and help them in increasing the availability & reliability of the units. f. R&D has developed Fly-Ash based product for part replacement of cement to be used for general building construction and has also developed fly-ash based Utensil Cleaning Powder which also contains Satritha as an organic content. g. R&D has signed a MOU with BARC for developing software for on-line blade failure & shaft crack detection in turbine generators. h. Problem of high exit gas temperature at Auraiya has been studied and root cause analysis has been carried out. Recommendations for controlling high exit gas temperatures have been given. Fouled HRSGs were cleaned using alkaline water washing procedure developed by R&D. i. Detailed investigations are being carried out to improve the performance of cooling towers and chemical treatments based on non-proprietary chemicals are being developed for Talcher Kaniha, Unchahar, Gandhar and Auraiya. j. RSOP project assigned by Ministry of Power through CPRI, on Ways and means of estimating and controlling colloidal silica in raw & DM water is on the verge of completion. k. Environmental Appraisal of all the operating stations assessing air & water quality, condition of monitoring equipment, etc has been carried out. l. R&D provided Consultancy for oxide characterization & solvent selection for acid cleaning of boilers at IP Station, Delhi; Panipat Thermal station, Haryana; Lehra Mohabbat Station, Punjab; Muzzaffarpur station, etc 2.0 Benefits derived as a result of above R&D: R&D activities as carried out have helped in increasing the availability, reliability and efficiency of the stations. Development of value added products from flyash will help in generating new markets and thus help in increasing its utilization. Process of trans-esterification as developed will make available bio-diesel fuel for distributed generation. Rejuvenation studies will help in refurbishment of GT components thereby increasing their life. Consultancy provided to various utilities in terms of characterization of oxides selection of solvent for chemical cleaning of boiler tubes will help the utilities in improving the efficiency of boilers. The timely and scientific failure analysis of various components helped in identifying the cause of failure and thus providing necessary input for taking corrective action in preventing re-occurrence of similar failures thereby increasing the availability of power plant equipment. 3.0 Future Plans 1. It is intended to appoint Indian Institute of Science (IISc) Bangalore as consultants for up-gradation of R&D Centre to make it World class. The Consultants will carry out benchmarking & gap analysis, recommend the Centres of Excellence to be created, and prepare the road map. 30th Annual Report 57

60 2. R&D will be working with BARC for hardware procurement & software development for developing techniques for online blade damage detection & shaft crack detection. 3. R&D will work on application of techniques of fracture toughness through Small Punch & coating assessment through eddy current and for further reducing boiler tube failures by employing predictive method of Boiler Tube Failure at critical locations. 4. Four research projects will also be undertaken, namely - Weldability study of Hot gas path components made of Inconel 617, development of testing procedure for eddy current examination of steam turbine blades in insitu condition, to study the effectiveness of ion-exchange resin for controlling acidity levels in FRF system w.r.t. fuller earth and to resolve the problem of deposition and fouling of cooling tower fills and cooling water system of Talcher Kaniha and Gandhar stations. 4.0 Expenditure of R&D (Rs./Millions) a) Capital 5 3 b) Recurring c) Total d) Total R&D expenditure as a percentage of total turnover % % 5.0 Technology Absorption, Adaptation and Innovation Particulars of some of the important technology imported during last five (5) years are as follows: S.No. Technology Year Stations 1. Performance Analysis, Diagnostics and Optimization 2004 Implemented in Simhadri will be Software calculates the Equipment Performance and continued in future Projects. deviation and deviation from ideal conditions, together with reason for shortfall, indicating losses in Rupee terms. This package also calculates set point, which will result in optimized Heat Rate or Specific Coal consumption. 2 Super critical Technology with 247 Kg/cm 2 Steam Pressure 2004 Being implemented at Sipat and 540/568 MS/RH steam temperature is adopted for its (3x660 MW), Barh (3x660MW) improvement in thermal efficiency and reduced emission and North Karanpura STPP. of green house gasses. 3 Boiler Flame Analysis System (BFAS) observes the flame 2005 Implemented in Simhadri. intensity and regulates the secondary air flow for achieving optimized combustion KV Switchyard & associated equipments including 2005 Being implemented at Sipat 24KV/ 765KV Generator Step up (GSU) Trans-former. 5 Switchyard Control & Data Acquisition (SCADA) System do - based on universal protocol IEC For and on behalf of the Board of Directors Place: New Delhi Dated: July 31, 2006 (T. Sankaralingam) Chairman & Managing Director 58 30th Annual Report

61 PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT, 1956 Annex- IV to Directors Report Name Designation and Remuneration Qualification Date of Exp. Age Last Employment Remarks Nature of duties Commencement (Yrs.) (Yrs.) held of Employment Employed for whole of the Year NIL Employed for the part of the Year Bajaj H L Executive Director M.Sc. Elec. Engg BHEL Resigned Chohdda S P Mgr. (PE), CC Dip. (Mech) Inspector of Engg. Deptt. Retired Gupta O P GM (Fin.), CC SAS Scooter India Limited Retired Hirani M GM (R&D), CC BE (Elect), MBA Renusagar Power Plant Retired Kalia Om Prakash GM (ES), CC M.Sc. (Mech. Engg.) EIL VRS Kaushik A K Dy. Mgr. (F&A), CC B.Com BHEL Expired Narasimharamulu P Director (Finance) CA, LLB, M.Com Indo Nippon Precision Retired Bearings Ltd. Pattanayak N G Sr. Mgr. (AUD), CC B.Tech HCL VRS Raghavaiha B V S GM (F&A), CC FCWA Ballarpur Industries Limited Retired Rawat Ganesh Singh GM, CC PGDPM Retired Sharma D S ED (OS), CC BE, ME Tata Consult. Engg. Retired Sinha K K Director (HR) B.A. (Hons.) Economics, HSCL Resigned M.A. Labr. & Social Welfr. Singh Mohar AE (PE-C&I), CC ITI (D.Man) CEA Retired Vadhera Sudhir AGM (CP), CC B.Sc. Mech. Engg., PG Dip Escorts Employees Resigned Comp. Sc., PG Dip.Bus. Mgt. Ancillaries Limited Notes: 1 Persons named above were Directors/ employees of the Company. 2 Remuneration includes salary, allowances, leave encashment, leave travel concession, payment for subsidized leased accommodation, reimbursement of medical expenses to employees and employer s contribution to Provident Fund and other funds. However, it does not include the monetary value of the medical treatment provided in the Company s dispensaries/hospitals at Project sites, since it can not be quantified employees-wise. In addition, the employees are entitled to gratuity/group insurance in accordance with Company s Rules. 3 None of the employees listed above is related to any director of the company. 4 Remuneration mentioned above is inclusive of retirement /separation benefits paid during the year and is not indicative of any regular remuneration structure of Directors/ employees of the Company For and on behalf of the Board of Directors Place: New Delhi (T. Sankaralingam) Date: July 31, 2006 Chairman & Managing Director 30th Annual Report 59

62 Annex-V to Directors Report STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES NAME OF THE PIPAVAV NTPC NTPC VIDYUT NTPC HYDRO SUBSIDIARY POWER ELECTRIC VYAPAR NIGAM LTD. DEVELOPMENT SUPPLY LTD. COMPANY LTD. COMPANY LTD. 1. Financial year of the Subsidiary March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 ended on 2. Date from which they became December 20, 2001 August 21, 2002 November 1, 2002 December 12, 2002 Subsidiary 3. Share of the subsidiary held by the company as on March 31, 2006 a) Number & face value equity equity equity equity shares of Rs. 10/- shares of Rs. 10/- shares of Rs. 10/- shares of Rs. 10/- each each each each b) Extent of holding 100% 100% 100% 100% 4. The net aggregate amount of the subsidiary companies Profit/(loss) so far as it concerns the member of the holding company a) Not dealt with in the holding company s accounts i) For the financial year ended (Rs ) Rs Rs (Rs ) March 31, 2006 ii) Upto the previous financial years (Rs ) Rs Rs (Rs ) of the subsidiary company b) Dealt with in the holding company s accounts i) For the financial year ended Nil Nil Nil Nil March 31, 2006 ii) For the previous financial year of Nil Nil Nil Nil the subsidiary company since they become the holding company s subsidiaries For and on behalf of Board of Directors Place : New Delhi Dated : July 31, 2006 (T. Sankaralingam) Chairman & Managing Director 60 30th Annual Report

63 Annex-VI to Directors Report REVIEW OF ACCOUNTS OF NTPC LIMITED ( FORMERLY NATIONAL THERMAL POWER CORPORATION LTD.), NEW DELHI FOR THE YEAR ENDED 31 ST MARCH 2006 BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA. NOTE: This review of accounts has been prepared without taking into account comments under Section 619(4) of the Companies Act, 1956, and qualifications contained in the Statutory Auditor s Report. 1. FINANCIAL POSITION The table below summaries the financial position of the Company under broad headings for the last three years (Rs. in Million) Liabilities a) Paid up capital i) Government ii) Indian banks and financial institutions iii) Foreign banks and foreign companies/institutions iv) Public in India and/or outside b) Reserves and Surplus i ) Free Reserves and Surplus ii) Share Premium Account iii) Foreign Project Reserve iv) Capital Reserve c) Borrowings i) From Government of India ii) From Financial Institutions iii) Foreign Currency Loans iv) Cash Credit v) Others vi) Interest Accrued and Due d) i) Current Liabilities & Provisions ii) Provision for Gratuity e) i) Deferred Tax Liability ii) Advance Against Depreciation iii) Development Surcharge Fund Total Assets f) Gross Block g) Less: Depreciation h) Net Block i) Capital Work-in-Progress & Construction Stores & Advances j ) Investments k) Current Assets, Loans & Advances l) Deferred Tax Assets m) Misc. Expenditure (to the extent not written off or adjusted) n) Accumulated Loss Total th Annual Report 61

64 o) Working Capital [k- d(i) -c (vi)] p) Capital Employed [h + o] q) Net Worth [a+ b (i)+b (ii) - (n + m)] r) Net Worth per rupee of Paid-up Capital (in Rs.) SOURCES AND UTILISATION OF FUNDS Funds amounting to Rs Million from internal and external sources were realised and utilised during the year as detailed below: (Rs. in Million) Sources of Funds a) Funds from operations: Profit after tax Add: Depreciation b) Increase in Borrowings c) Increase in Advance Against Depreciation 1034 d) Decrease in Investments Total Utilisation of funds a) Increase in Working Capital (excluding Proposed Dividend & Tax on Proposed Dividend) b) Increase in Capital Work in Progress and Construction Stores & Advances c) Increase in Fixed assets d) Dividend & Dividend Tax paid Total WORKING RESULTS The working results of the Company for the last three years ending 31 st March 2006 are given below (Rs. in Million) (i) Turnover (including Electricity Duty & Consultancy Income ) (ii) Other income (iii) Profit Before Tax, Prior Period & Extra Ordinary Items (iv) Prior Period & Extra Ordinary Items 183 (102) 2488 (v) Profit Before Tax (vi) Provision for Taxation (vii) Profit After Tax (viii) Interim Dividend and Dividend Tax (ix) Proposed Dividend and Dividend Tax RATIO ANALYSIS Some important ratios on the financial health and working of the Company at the end of the last three years ending 31 st March 2006 are as under: i) Liquidity ratio Current ratio [k/{d(i)+c(vi)}] ii) Debt equity ratio Long term debt to net worth {c(i to iii)+c (v)/q)] th Annual Report

65 Profitabily Ratios (in percentage) a) Profit Before Tax to : i) Capital Employed {3(v)/p} ii) Net Worth {3(v)/q} iii) Turnover (including Electricity Duty & Consultancy income ) {3(v)/3(i)} b) Profit After Tax to Equity c) Earning per Share (in Rs) INVENTORY LEVELS The inventory levels at the close of the last three years ending 31 st March 2006 are as under: (Rs. in Million) i) Coal, Fuel Oil and Naptha ii) Chemicals and Consumables iii) Components and Spares iv) Loose tools v) Others SUNDRY DEBTORS The Sundry debtors and Sales in the last three years ending 31 st March 2006 are as follows: (Rs. in Million) As at Sundry Debtors Turnover Pecentage 31st March (including Electricity of Sundry Duty & Debtors to Consultancy ) Turnover Considered Considered Total Good Doubtful Sundry debtors to turnover decreased from 9.74 percent in to 6.48 percent in The age-wise break-up of the Sundry debtors at the end of 31 st March 2006 is as under: Debtors Outstanding for (Rs. in Million) Less than six months 8022 Six months to one year 75 One year to three years 584 More than three years 8360 Total Place: New Delhi Dated: 7 th July, 2006 (Meera Swraup) Principal Director of Commercial Audit and Ex-officio Member Audit Board-III, New Delhi 30th Annual Report 63

66 COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF NTPC LIMITED, NEW DELHI, FOR THE YEAR ENDED 31 MARCH 2006 I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors Report under Section 619(4) of the Companies Act, 1956, on the accounts of NTPC Limited, New Delhi for the year ended 31st March Place: New Delhi Dated: 7 th July, 2006 (Meera Swraup) Principal Director of Commercial Audit and Ex-officio Member Audit Board-III, New Delhi 64 30th Annual Report

67 STATISTICAL DATA OF GRIEVANCE CASES Annex- VII to Directors Report S. No. Particulars Public Grievance Cases Staff Grievances Cases 1. Grievance cases outstanding at the beginning of the year Grievance cases received during the year Grievance cases disposed of during the year Grievance Cases outstanding at the end of - 5 the year For and on behalf of the Board of Directors Place : New Delhi Dated : July 31, 2006 (T. Sankaralingam) Chairman & Managing Director 30th Annual Report 65

68 STATISTICAL INFORMATION ON RESERVATION OF SCs/STs FOR THE YEAR 2005 Annex-VIII to Directors Report Representation of SCs/STs as on : Group Employees on Roll SCs %age STs %age A B C D Total Recruitment of SCs/STs during the year Group Total Recruitment SCs %age STs %age (1) (2) (3) (4) (5) (6) A B C D Total Promotions of SCs/STs during the year Group Total SCs %age STs %age (1) (2) (3) (4) (5) (6) A B C D Total The guidelines on reservation were followed in letter and spirit. - Welfare measures as under were taken by NTPC for SC/ST employees and students: i) Award of Annual Scholarship to SC/ST students pursuing Degree/ Diploma in Engineering courses and MBA/ PGDBM (HR/Finance) courses. Degree (Engg.)/MBA/PGDBM(HR/Finance) : Rs.1500/-pm Diploma (Engg.) : Rs.1000/-pm ii) NTPC Gold medal award with XISS, Ranchi for one student each topping the merit list of SC/ST candidates in Personnel Management course and Rural Development course. iii) Liaison Officers for SC/STs have been nominated at each project/rhq for handling SC/ST related matters. iv) Annual Conference of Liaison Officers was organized to make such officers aware of developments in reservation policy so as to ensure proper implementation of the same. For and on behalf of the Board of Directors Place : New Delhi Dated : July 31, 2006 (T. Sankaralingam) Chairman & Managing Director 66 30th Annual Report

69 PHYSICALLY CHALLENGED PERSONS With a view to focus on its role as a socially responsible and socially conscious organization, NTPC has endeavoured to take responsibility for adequate representation of physically challenged persons in its workforce. 128 and 169 physically challenged persons were recruited in separate phases. With this there are a total of 406 physically challenged persons on the rolls of NTPC. Some of the other initiatives taken for the welfare of physically challenged persons by NTPC are as under: - Screen reading software and Braille shorthand machines has been made available. - Sign language training for the employees in general, where hearing impaired candidates is posted. - Barrier free access to physically challenged has been provided. - Allotments of quarters to physically challenged are being generally made on the ground floor. - Special parking enclosure near the ramp at the office entrance as well as PH friendly toilet and lift at CC and Projects. - Wherever required, gates/door of the quarter has been widened and wider covers provided on drains to facilitate movement. - At CC procurement of stationery items like files, envelopes are mainly being done from NGOs/Agencies like ADDI, MUSKAN, Blind Relief Association who are working for physically challenged thereby creating indirect employment. - Shops have been allotted in NTPC Townships to challenged persons so that they may earn their livelihood. Similarly, PCOs within/outside plant premises are also allotted to physically challenged persons. - Regular Interactive meetings are being organized with physically challenged employees number of Rs. 1500/- per month/ per student are given to PH students pursuing Degree in Engineering Course number of Rs. 1500/- per month/ per student are given to PH students pursuing MBA/ PGDBM Course Telephone booths have been installed in different corners of Delhi for disabled persons, to support VRC s efforts for financial assistance to disabled persons who were allotted such booths. - In our Vindhyachal Project, a school named Asha Kiran for deaf/ dumb and mentally retarded children, is running. - Inclusive education at all the three schools located at Dadri project has started. Annex-IX to Directors Report - Petty contracts like book binding, scribbling pad preparation from waste paper, file binding, furniture repair, screen printing, spiral binding, painting contract are also being given to disabled persons. - Physically challenged (Orthopaedically handicapped) employees have been allowed to purchase a three wheeler vehicle with a hand fitted engine against their normal entitlement (advance for scooter /motorcycle /moped) under NTPC Conveyance Advance Rules. - Reimbursement towards low vision aids, dark glasses etc, subject to maximum of Rs. 1000/- every year has been introduced. Similarly hearing aid: behind the ear model for each ear restricted to Rs. 10,000/- or actual cost, whichever is lower has been introduced. 30th Annual Report 67

70 Representation of Physically challenged in NTPC: Group Emp. on Roll No. of Persons Percentage Backlog with Physically Vacancies* disabilities actually employed A B C D Total * vacancies have been advertised for filling up in the ongoing recruitment exercise as backlog vacancies. For and on behalf of the Board of Directors Place : New Delhi Dated : July 31, 2006 (T. Sankaralingam) Chairman & Managing Director 68 30th Annual Report

71 UNGC Communications on Progress ( ) Annex-X to Directors Report NTPC expresses its continued support for the Global Compact and its commitment to take action in this regard, as was communicated by the Chairman & Managing Director, NTPC in his letter dated May 29, 2001 addressed to Secretary General, United Nations. NTPC has posted the brief of Global Compact and its commitment to the principles of GC on its website at The principles of GC were also communicated to all employees through in-house magazines, internal training programmes and posters. NTPC actively participated in the 2 nd National Convention of Global Compact Society held at Delhi on 2 nd Feb wherein NTPC s initiatives in implementing the Global Compact principles were shared with the participants of the Convention. Human Rights: Principle 1-2 Most of NTPC s 20 operating power stations are located in remote rural areas which are socio-economically backward and deficient in the basic civic amenities. NTPC, as responsible corporate citizen has been addressing the issue of community development in the neighbourhood areas of its stations, which had been impacted due to establishment of the project. While, this has been initially administered as part of resettlement and rehabilitation effort, NTPC recognized its social responsibility to continue community and peripheral development works where the same has been closed under R&R policy. Towards this, NTPC during adopted Corporate Social Responsibility Community Development (CSR- CD) Policy, July 04. Under this policy NTPC allocated a fund of Rs. 54 million to 20 operating stations for carrying out community development work in the area of health, education, drinking water and peripheral development. NTPC provided financial assistance to various Institutions/ Bodies as detailed below: (i) Rs million to Uttaranchal Forest Trust Hospital, Haldwani for purchase of advanced Medical Equipment. (ii) Rs million for setting up 3 Community Information Centres in Lakshwadeep Islands. (iii) Rs. 1.0 million to Him Jyoti Foundation, Dehradun for two perpetual student s scholarships. (iv) Rs million to Mahavir International, Delhi for Mobile Clinic. (v) Rs million to M/s VIDYA, Delhi for support to their capacity building programme for 200 women. (vi) Rs million to Business & Community Foundation, Delhi for organizing Abilities MELA. (vii) Rs 0.13 million to Rath Mahavidyalaya, Uttaranchal for purchase of Personal Computers. (viii) Rs. 0.1 million to M/s APARNA, Delhi for their environment based project and apprenticeship training for youth. Labour Standard: Principle 3-6 For addressing the issue of labour standard in comprehensive manner, NTPC has decided to adopt international standards like SA-8000 and OHSAS During the year , three of the NTPC stations viz. Badarpur, Simhadri and Talcher Thermal received SA-8000 accreditation while Anta, Auraiya and Simhadri were accredited in and Ramagundam was accredited in the year Similarly, three of NTPC stations viz. Rihand, Singrauli and Badarpur received accreditation under OHSAS during bringing all the 20 operating stations under accreditation of OHSAS Environment: Principle 7-9 Towards its commitment to environment NTPC has decided to adopt ISO and obtained accreditation for all its 20 operating stations. During the year , Talcher Thermal and Talcher Kaniha have been re-certified. For and on behalf of the Board of Directors Place : New Delhi Dated : July 31, 2006 (T. Sankaralingam) Chairman & Managing Director 30th Annual Report 69

72 ACCOUNTING POLICIES 1. GRANTS-IN-AID 1.1 Grants-in-aid received from the Central Government or other authorities towards capital expenditure as well as consumers contribution to capital works are treated initially as capital reserve and subsequently adjusted as income in the same proportion as the depreciation written off on the assets acquired out of the grants. 1.2 Where the ownership of the assets acquired out of the grants vests with the government, the grants are adjusted in the carrying cost of such assets. 1.3 Grants from Government and other agencies towards revenue expenditure are recognized over the period in which the related costs are incurred and are deducted from the related expenses. 2. FIXED ASSETS 2.1 Fixed Assets are shown at historical cost. 2.2 Intangible assets are recorded at their cost of acquisition. 2.3 Capital expenditure on assets not owned by the Company is reflected as a distinct item in Capital Work-in- Progress till the period of completion and thereafter in the Fixed Assets. 2.4 Deposits, payments/liabilities made provisionally towards compensation, rehabilitation and other expenses relatable to land in possession are treated as cost of land. 2.5 In the case of commissioned assets, where final settlement of bills with contractors is yet to be effected, capitalisation is done on provisional basis subject to necessary adjustment in the year of final settlement. 2.6 Assets and systems common to more than one generating unit are capitalised on the basis of engineering estimates/assessments. 3. CAPITAL WORK-IN-PROGRESS 3.1 In respect of supply-cum-erection contracts, the value of supplies received at site and accepted is treated as Capital Work-in-Progress. 3.2 Incidental Expenditure during Construction (net) including corporate office expenses (allocated to the projects pro-rata to the annual capital expenditure) for the year, is apportioned to Capital Work-in-Progress on the basis of accretions thereto. 3.3 Deposit work/cost plus contracts are accounted for on the basis of statements of account received from the contractors. 3.4 Claims for price variation/exchange rate variation in case of contracts are accounted for on acceptance. 4. OIL AND GAS EXPLORATION COSTS 4.1 The Company follows Successful Efforts Method for accounting of oil & gas exploration activities. 4.2 Cost of surveys and prospecting activities conducted in the search of oil and gas are expensed in the year in which these are incurred. 4.3 All acquisition costs are initially capitalized as Exploratory Wells-in-Progress under Capital Work-in-Progress. 5. DEVELOPMENT OF COAL MINES Expenditure on exploration of new coal deposits is capitalized as Development of coal mines under Capital Work-in-Progress till the mines project is brought to revenue account th Annual Report

73 6. FOREIGN CURRENCY TRANSACTIONS 6.1 Foreign currency transactions are initially recorded at the rates of exchange ruling at the date of transaction. 6.2 At the balance sheet date, foreign currency monetary items are reported using the closing rate. Non-monetary items denominated in foreign currency are reported at the exchange rate ruling at the date of transaction. 6.3 Exchange differences in respect of loans/deposits/liabilities relating to fixed assets/capital work-in-progress acquired from a country outside India are adjusted in the carrying cost of related assets. 6.4 Exchange differences in respect of loans relating to fixed assets/capital work-in-progress acquired within India to the extent regarded as an adjustment to interest cost are treated as borrowing cost. 6.5 Exchange differences, in respect of loans (other than regarded as borrowing cost)/deposits/liabilities relating to fixed assets/capital work-in-progress acquired within India, arising out of transactions entered prior to , are adjusted in the carrying cost of related assets. Such exchange differences in respect of transactions entered after are treated as Incidental Expenditure During Construction till the assets are ready for their intended use. 6.6 Other exchange differences are recognized as income or expense in the period in which they arise. 7. BORROWING COSTS Borrowing costs attributable to the fixed assets during their construction/renovation and modernisation are capitalised. Such borrowing costs are apportioned on the average balance of capital work-in-progress for the year. Other borrowing costs are recognised as an expense in the period in which they are incurred. 8. INVESTMENTS 8.1 Current Investments are valued at lower of cost and fair value determined on an individual investment basis. 8.2 Long term investments are carried at cost. Provision is made for diminution, other than temporary, in the value of such investments. 8.3 Premium paid on long term investments is amortised over the period remaining to maturity. 9. INVENTORIES 9.1 Inventories are valued at the lower of cost, determined on weighted average basis, and net realizable value. 9.2 Dimunition in value of obsolete and unserviceable stores and spares is ascertained on review and provided for. 10. PROFIT AND LOSS ACCOUNT 10.1 INCOME RECOGNITION Sale of energy is accounted for based on tariff rates approved by the Central Electricity Regulatory Commission. In case of power stations where the tariff rates are yet to be approved /agreed with beneficiaries, provisional rates are adopted The incentives/disincentives are accounted for based on the norms notified/approved by the Central Electricity Regulatory Commission or agreements with the beneficiaries. In cases of power stations where the same have not been notified/approved/agreed with beneficiaries, incentives/disincentives are accounted for on provisional basis. 30th Annual Report 71

74 Advance against depreciation, forming part of tariff to facilitate repayment of loans, is reduced from sales and considered as deferred revenue to be included in sales in subsequent years The surcharge on late payment/overdue sundry debtors for sale of energy is recognized when no significant uncertainty as to measurability or collectability exists Interest/surcharge recoverable on advances to suppliers as well as warranty claims/liquidated damages are not treated as accrued due to uncertainty of realisation/acceptance and are therefore accounted for on receipt/acceptances Income from Consultancy service is accounted for on the basis of actual progress/technical assessment of work executed, in line with the terms of respective consultancy contracts Claims for reimbursement of expenditure are recognized as other income, as per the terms of Consultancy service contracts Scrap other than steel scrap is accounted for in the accounts as and when sold Insurance claims for loss of profit are accounted for in the year of acceptance. Other insurance claims are accounted for based on certainty of realisation EXPENDITURE Depreciation is charged on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956 except for the following assets in respect of which depreciation is charged at the rates mentioned below: a) Kutcha Roads % b) Enabling works - residential buildings including their internal electrification % - non-residential buildings including their internal electrification, water supply, sewerage & drainage works, railway sidings, aerodromes, helipads and airstrips % Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/up to the month in which the asset is available for use/disposal Assets costing up to Rs.5000/- are fully depreciated in the year of capitalization Cost of Computer software recognized as intangible assets is amortised on straight line method over a period of legal right to use or 3 years, whichever is earlier Where the cost of depreciable assets has undergone a change during the year due to increase/decrease in long term liabilities on account of exchange fluctuation, price adjustment, change in duties or similar factors, the unamortised balance of such asset is depreciated prospectively over the residual life determined on the basis of the rate of depreciation Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the residual useful life of the related plant and machinery th Annual Report

75 Capital expenditure on assets not owned by the Company is amortised over a period of 4 years from the year in which the first unit of project concerned comes into commercial operation and thereafter from the year in which the relevant asset becomes available for use. However, such expenditure for community development in case of stations fully under operation is charged off to revenue Leasehold buildings are amortised over the lease period or 30 years, whichever is lower. Leasehold land and buildings, whose lease period is yet to be finalised, are amortised over a period of 30 years Expenses on training, recruitment and ex-gratia payments under Voluntary Retirement Scheme are charged to revenue in the year of incurrence Research and development expenses, other than fixed assets, are charged to revenue in the year of incurrence Preliminary expenses on account of new projects incurred prior to approval of feasibility report are charged to revenue in the year of incurrence Expenditure on leave travel concession to employees is recognized in the year of availment due to uncertainties in accrual Expenses common to operation and construction activities are allocated to Profit and Loss Account and Incidental Expenditure during Construction in proportion of sales to annual capital outlay in the case of Corporate Office and sales to accretion to Capital Work-in-Progress in the case of projects Net pre-commissioning income/expenditure is adjusted directly in the cost of related assets and systems Prepaid expenses and prior period expenses/income of items of Rs.100,000/- and below are charged to natural heads of accounts Carpet coal is charged off to coal consumption. However, during pre-commissioning period, carpet coal is retained in inventories and charged off to consumption in the first year of commercial operation. Windage and handling losses of coal as per norms are included in cost of coal. 11. RETIREMENT BENEFITS 11.1 The liability for retirement benefits of employees in respect of Provident Fund and Gratuity, which is ascertained annually on actuarial valuation at the year end, are accrued and funded separately The liabilities for leave encashment and post retirement medical benefits to employees are accounted for on accrual basis based on actuarial valuation at the year end. 12. FINANCE LEASES 12.1 Assets taken on lease are capitalized at fair value or net present value of the minimum lease payments, whichever is lower Depreciation on the assets taken on lease is charged at the rate applicable to similar type of fixed assets as per Accounting Policy If the leased assets are returnable to the lessor on the expiry of the lease period, depreciation is charged over its useful life or lease period, whichever is shorter Lease payments made are apportioned between the finance charges and reduction of the outstanding liability in respect of assets taken on lease. 30th Annual Report 73

76 BALANCE SHEET AS AT T 31st MARCH 2006 Rs. million SCHEDULE NO. SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital 1 82,455 82,455 Reserves and surplus 2 367, , , ,763 Deferred Revenue on account of Advance Against Depreciation 3 4,408 3,374 LOAN FUNDS Secured loans 4 57,327 44,407 Unsecured loans 5 144, , , ,878 Deferred Tax Liability (Net) 53,224 50,570 Less: Recoverable 53,223 50, TOTAL 655, ,016 APPLICATION OF FUNDS FIXED ASSETS 6 Gross Block 460, ,062 Less: Depreciation 229, ,914 Net Block 230, ,148 Capital Work-in-Progress 7 103,999 67,063 Construction stores and advances 8 32,341 32, , ,400 INVESTMENTS 9 192, ,977 CURRENT ASSETS, LOANS AND ADVANCES Inventories 10 23,405 17,819 Sundry debtors 11 8,678 13,747 Cash and bank balances 12 84,714 60,783 Other current assets 13 10,161 9,764 Loans and advances 14 30,287 26, , ,106 LESS: CURRENT LIABILITIES AND PROVISIONS Liabilities 15 49,102 52,306 Provisions 16 12,300 15,161 61,402 67,467 Net current assets 95,843 61,639 TOTAL 655, ,016 Contingent liabilities 17 Notes on accounts 27 Schedules 1 to 27 and accounting policies form integral part of accounts. Place : New Delhi Dated : 31 st May 2006 For and on behalf of the Board of Directors ( A.K.RASTOGI ) (A.K.SINGHAL) ( T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Gaurav Nanda ) (Sanjay Gupta) Partner Partner M No M No th Annual Report

77 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006 Rs. million SCHEDULE Current Year Previous Year NO. INCOME Sales (Gross) , ,076 Less: Electricity duty 1,757 1,674 Sales (Net) 261, ,402 Energy internally consumed Provisions written back ,235 Other income 20 26,078 23,529 Total 287, ,414 EXPENDITURE Fuel 163, ,235 Employees remuneration and benefits 21 9,684 8,823 Generation, Administration & other expenses 22 12,721 12,062 Depreciation 20,477 19,584 Provisions Interest and finance charges 24 17,632 16,955 Total 224, ,734 Profit before Tax and Prior Period Adjustments 62,712 60,680 Prior Period income/ expenditure (net) 25 2,488 (102) Profit before tax 60,224 60,782 Provision for : Current tax 7,961 10,058 Deferred tax 2,654 (1,710) Fringe Benefit tax Less: Recoverable Current tax 5,666 7,346 Deferred tax 2,654 (1,710) Fringe Benefit tax Transferred to Incidental Expenditure during construction 285-2,022 2,712 Profit after tax 58,202 58,070 Balance brought forward Write back from Bond Redemption Reserve Write back from Foreign Project Reserve 2 2 Balance available for appropriation 59,032 58,655 Transfer to Bonds Redemption Reserve 2,926 2,351 Transfer to Capital Reserve Transfer to General Reserve 29,000 33,000 Dividend Interim 16,491 9,895 Proposed 6,596 9,895 Tax on Dividend Interim 2,313 1,292 Proposed 925 1,388 Balance carried to Balance Sheet Incidental expenditure during construction 26 Earning Per Share (Equity shares, face value Rs.10/- each) - Basic and Diluted For and on behalf of the Board of Directors (A.K.RASTOGI) (A.K.SINGHAL) ( T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Gaurav Nanda ) (Sanjay Gupta) Partner Partner Place : New Delhi Dated : 31 st May 2006 M No M No th Annual Report 75

78 Schedule 1 CAPITAL Rs. million AUTHORISED 10,000,000,000 equity shares of Rs.10/- each (Previous year 10,000,000,000 equity shares of Rs.10/- each) 100, ,000 ISSUED, SUBSCRIBED AND PAID-UP 8,245,464,400 equity shares of Rs.10/- each fully paid-up (Previous year 8,245,464,400 equity shares of Rs.10/- each fully paid-up) 82,455 82,455 Schedule 2 RESERVES AND SURPLUS Capital Reserve As per last Balance Sheet 1,279 1,259 Add : Additions during the year Less : Adjustments during the year - 2 1,308 1,279 Share Premium Account As per last Balance Sheet 22,334 - Add : Additions during the year - 22,511 Less : Adjustment of share issue expenses during the year ,281 22,334 Bonds Redemption Reserve As per last Balance Sheet 6,405 4,071 Add : Transfer from Profit & Loss Account 2,926 2,351 Less : Write back during the year ,315 6,405 Foreign Project Reserve As per last Balance Sheet 2 4 Less : Write back during the year 2 2 *Rs /- * 2 General Reserve As per last Balance Sheet 304, ,476 Add : Transfer from Profit & Loss Account 29,000 33, , ,476 Surplus, balance in Profit & Loss Account Total 367, ,308 Schedule 3 DEFERRED REVENUE - on account of Advance Against Depreciation As per last Balance Sheet 3,374 1,591 Add : Revenue deferred during the year 1,505 1,791 Less: Revenue recognised during the year Total 4,408 3, th Annual Report

79 Schedule 4 SECURED LOANS Bonds 10.00% Secured Non-Convertible Taxable Bonds of Rs. 10,00,000/- each with five equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of the 6 th year and in annual instalments thereafter upto the end of 10 th year respectively from 5 th September 2001 (Twelfth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds of Rs. 10,00,000/- each redeemable at par in ten equal annual instalments commencing from the end of 6 th year and upto the end of 15 th year respectively from 18 th April 2002 (Thirteenth Issue -Part A - Private Placement) % Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds of Rs. 10,00,000/- each with ten equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of the 6 th year and in annual instalments thereafter upto the end of 15 th year respectively from 30 th April 2002 (Thirteenth Issue - Part B - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each with two equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of 4 th and 5 th year respectively from 1 st August 2002 (Fourteenth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 1,00,000/- each redeemable at par in three annual instalments of 30%, 30% and 40% commencing from 28 th September 2004 (Fifteenth Issue - Part C - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each redeemable at par on 10 th April 2018 (Sixteenth Issue -Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each redeemable at par on 1 st May 2023 (Seventeenth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each with five equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of 6 th year and in annual instalments thereafter upto the end of 10 th year respectively from 15 th September 2003 (Eighteenth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each redeemable at par on 12 th January 2019 (Nineteenth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par semi-annually commencing from 23 rd September 2009 and ending on 23 rd March 2019 (Twentieth Issue - Private Placement) % Secured Non-cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par semi-annually commencing from 2 nd August 2010 and ending on 2 nd February 2020 (Twenty first issue - Private Placement) 7 Loans and Advances from Banks Foreign Currency Term Loans (Guaranteed by Government of India) (Due for repayment within one year Rs.1,702 million, Previous year Rs.1,633 million) 8 Other Loans and Advances Obligations under finance lease (Due for repayment within one year Rs. 4 million, Previous Year Rs. 3 million) 9 TOTAL Rs. million ,000 5,000 7,500 7,500 7,500 7,500 5,000 5, ,000 1, ,000 5, ,000-10,000-10,274 12, ,327 44,407 30th Annual Report 77

80 Schedule 4 SECURED LOANS Note: 1 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Company s Bankers on such movable assets hypothecated to them for working capital requirement and (III) Equitable Mortgage by deposit of title deeds of the immovable properties pertaining to Singrauli Super Thermal Power Station. 2 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Company s Bankers on such movable assets hypothecated to them for working capital requirement and (III) Equitable mortgage of the immovable properties pertaining to Singrauli Super Thermal Power Station by extension of charge already created. 3 Secured by (I) English mortgage of the office premises of the Company at Mumbai and (II) Equitable mortgage by deposit of title deeds of the immovable properties pertaining to National Capital Power Station. 4 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Company s Bankers on such movable assets hypothecated to them for working capital requirement and (III) Equitable mortgage of the immovable properties pertaining to National Capital Power Station by extension of charge already created. 5 Secured by (I) English mortgage of the office premises of the Company at Mumbai and (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Company s Bankers on such movable assets hypothecated to them for working capital requirement. 6 Secured by (I) English mortgage of the office premises of the Company at Mumbai and (II) Equitable mortgage by deposit of title deeds of the immovable properties pertaining to Ramagundam Super Thermal Power Station. 7 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and future movable assets (excluding receivables) of Barh Super Thermal Power Project as first charge, ranking pari passu with charge already created in favour of Trustee for other Series of Bonds and (III) Equitable mortgage of the immovable properties pertaining to Ramagundam Super Thermal Power Station by extension of charge already created. 8 Secured by English mortage/hypothecation of all the present and future fixed and movable assets of Rihand Super Thermal Power Station as first charge, ranking pari-passu with charge already created, subject to however, Company s Banker s first charge on certain movable assets hyphothecated to them for working capital requirement. 9 Secured against fixed assets obtained under finance lease th Annual Report

81 Schedule 5 UNSECURED LOANS Fixed Deposits Rs. million ,159 (Due for repayment within one year Rs. 449 million, Previous year Rs. 3,337 million) Bonds 7.552% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par semi-annually commencing from 23 rd September 2009 and ending on 23 rd March 2019 (Twentieth Issue - Private Placement - shown under Secured Loans in current year on creation of security). Foreign Currency Bonds / Notes 5.50 % Eurobonds due for repayment on 10 th March % Fixed Rate Notes due for repayment on 2 nd March 2016 Other Loans and Advances TOTAL From Banks and Financial Institutions Foreign Currency Term Loans (Guaranteed by Government of India) (Due for repayment within one year Rs.181 million, Previous year Rs. Nil) Other Foreign Currency Term Loans (Due for repayment within one year Rs.1,584 million, Previous year Rs.1,667 million) Rupee Term Loans (Due for repayment within one year Rs.8,963 million, Previous year Rs.7,618 million) From Others Loans from Government of India (Due for repayment within one year Rs.156 million, Previous year Rs.315 million) - 5,000 8,990 8,814 13,485-23,064 24,723 10,272 7,885 87,821 75, , ,471 30th Annual Report 79

82 Schedule 6 FIXED ASSETS Rs. million Gross Block Depreciation Net Block As at Deductions/ As at As at For Deductions/ Upto As at As at Additions Adjustments the Year Adjustments TANGIBLE ASSETS Land : (including development) Freehold 9, (364) 10, ,440 9,977 Leasehold 1, (117) 2, (9) 332 2,240 1,576 Roads,bridges, culverts & helipads 3, , ,103 3,018 Building : Freehold Main plant 16, (41) 16,758 7, (7) 8,515 8,243 8,328 Others 14, (19) 15,138 3, ,070 11,068 10,780 Leasehold Temporary erection Water Supply, drainage & sewerage system 4, ,985 1, ,478 3,507 3,732 MGR track and signalling system 6, (25) 6,385 4, (4) 4,504 1,881 2,112 Railway Siding 2, (3) 2, ,710 1,809 Earth Dam Reservoir 1, , ,132 1,212 Plant and machinery 358,736 26, , ,222 19, , , ,514 Furniture, fixtures & other office equipment 3, ,307 2, ,181 1,126 1,045 EDP, WP machines and SATCOM equipment 2, ,326 1, , Vehicles including speedboats Construction equipment , Electrical Installations 1, (40) 1, Communication Equipments Hospital Equipments Laboratory and workshop equipments Leased assets - Vehicles Capital expenditure on assets not owned by the Company 1, (46) 1, Assets of Government Less:Grants from Government Assets held for disposal valued at net book value or net realisable value whichever is less INTANGIBLE ASSETS Land - Right of Use 7 - (6) Software (1) Total 431,062 29, , ,914 21, , , ,148 Previous year 400,281 29,588 (1,193) 431, ,736 20, , , ,545 Deduction/Adjustments from Gross Block includes Current Year Previous Year Disposal/Retirement of assets Cost adjustments (41) 483 Assets capitalised with retrospective effect / Write back of excess capitalisation (816) (1,172) Depreciation on construction equipment capitalised as IEDC 6 1 Others 585 (1,103) 80 30th Annual Report

83 Rs. million Deduction/Adjustments from Depreciation includes Current Year Previous Year Disposal/Retirement of assets Assets capitalised with retrospective effect / Write back of excess capitalisation (171) (305) Depreciation on construction equipment capitalised as IEDC 6 1 Others 40 (11) Depreciation for the the year is allocated as given below:- Charged to Profit & Loss account 20,477 19,584 Adjustment in Cost of Coal / Fuel oil 1, Transferred to Incidental Expenditure during Construction (Schedule 26) ,697 20,258 Schedule 7 CAPITAL WORK-IN-PROGRESS As at Deductions & As at Additions Adjustments Capitalised Development of land 1, ,876 Roads, bridges, culverts & helipads (91) Piling and foundation 1, ,918 Buildings : Main plant 2,968 1,306 1, ,735 Others 1,018 1, ,627 Temporary erection Water supply, drainage and sewerage system Hydraulic works, Barrages, Dams, Tunnels, and Power Channel 4,005 2, ,476 MGR track and signalling system 48 1, ,363 Railway siding Earth dam reservoir Plant and machinery : On own account On supply-cum-erection contract 54,316 54,050 (1,238) 26,326 83,278 Furniture, fixtures and other office equipment (8) EDP/WP Machines & SATCOM equipment Construction Equipments Electrical installations Communication equipment Intangible assets - software Capital expenditure on assets not owned by the company Exploratory Wells-in-Progress (* Rs.55,900/-) - * - - * Development of Coal Mines ,640 63, , ,301 Expenditure pending allocation Survey, investigation, consultancy and supervision charges Difference in exchange on foreign currency loans Expenditure towards diversion of forest land ,027 Pre-commisioning expenses (net) Incidental expenditure during construction 53 6, ,625 Less: Allocated to Capital Work-in-Progress - 5, ,583 67,186 65,802 1,002 27, ,128 Less: Provision for unserviceable works Total 67,063 65,796 1,002 27, ,999 Previous Year 56,413 39, ,245 67,063 30th Annual Report 81

84 Schedule 8 CONSTRUCTION STORES AND ADVANCES Rs. million CONSTRUCTION STORES * (At cost) Steel 3,066 3,452 Cement Others 9,113 6,978 12,264 10,526 Less: Provision for shortage ,259 10,521 ADVANCES FOR CAPITAL EXPENDITURE Secured Unsecured, considered good Covered by bank guarantees 15,777 17,333 Others 4,077 4,286 Considered doubtful ,156 21,734 Less:Provision for bad & doubtful advances ,082 21,668 Total 32,341 32,189 *includes material in transit, under inspection and with contractors 9,473 7, th Annual Report

85 Schedule 9 INVESTMENTS Rs. million Number of Face value per shares/bonds/ share/bond/ securities security Current Year/ Current Year/ (Previous Year) (Previous Year) (Rs.) I. LONG TERM (Trade - unless otherwise specified) A) Quoted a) Government of India Dated Securities (Non-Trade) ,084 5,102 ( ) (100) (Includes Rs. NIL as balance of unutilised monies raised by issue of shares, previous year Rs.5,102 million) Less:- Amortisation of Premium 413-4,671 5,102 b) Trust Securities ( # ) 6.60% UTI - ARS NCB Tax Free Bonds, ( ) (100) 6.75% UTI - NCB Tax Free Bonds, (110481) (100) c) Bonds ( # ) 7.75% IRFC Non Taxable Bonds (Series XXVII), (135) ( ) 8.50% Housing and Urban Development Corporation Limited (HUDCO) Gujarat Punar Nirman Tax-Free Bonds Series 1A, 2007 (177) (500000) 10.40% Power Finance Corporation Ltd. Unsecured Tax-Free Bonds (Series I), 2008 (872) (100000) 4.75% Nuclear Power Corporation of India Ltd. Secured Non Convertible Bonds (LOA), Series XXIV, 2019 (7) ( ) 10.40% Nuclear Power Corporation of India Ltd. Tax-Free Secured Non Convertible Bonds, Series XI A2, 2007 (1771) (100000) 10.50% Nuclear Power Corporation of India Ltd. Tax-Free Secured Redeemable Non-Convertible Bonds, Series XII (LOA), 2013 (138) (100000) 9.50% National Textile Corporation Limited Tax-Free Non Convertible Bonds, 2006 (3436) (100000) 5.00% NABARD Unsecured, Non-Convertible Tax-Free Bonds, Series IV G, 2008 (15597) (10000) 8.25% Nuclear Power Corporation of India Ltd. Tax-Free Secured Redeemable NCB SR-15 (LOA), 2016 (1561) (100000) 8.20% Nuclear Power Corporation of India Ltd. Tax- Free Secured * 119 Redeemable NCB SR-18 (LOA), 2012 (*Rs.1,07,296/-) (1113) (100000) 5.15 % Non Priority Sector Tax-Free Housing and Urban Development Corporation Limited (HUDCO) Bonds Series XXXIV, 2014 (286) ( ) d) Equity Shares in Joint Venture Company PTC India Ltd ( ) (10) Sub Total (A) 4,958 7,158 30th Annual Report 83

86 Schedule 9 INVESTMENTS B) Unquoted a) Bonds i) 8.50 % Tax-Free State Government Special Bonds of the Government of ( ## ) Rs. million Number of Face value per shares/bonds/ share/bond/ securities security Current Year/ Current Year/ (Previous Year) (Previous Year) (Rs.) Andhra Pradesh ,607 12,607 ( ) (1000) Assam (514640) (1000) Bihar ,944 14,667 ( ) (1000) Chattisgarh ,832 4,832 ( ) (1000) Gujarat ,372 8,372 ( ) (1000) Haryana ,750 10,750 ( ) (1000) Himachal Pradesh (333880) (1000) Jammu and Kashmir ,674 3,674 ( ) (1000) Jharkhand ,601 6,223 ( ) (1000) Karnataka ,966 1,966 ( ) (1000) Kerala ,024 10,024 ( ) (1000) Madhya Pradesh ,308 8,308 ( ) (1000) Maharashtra ,814 3,814 ( ) (1000) Orissa ,029 11,029 ( ) (1000) Punjab ,462 3,462 ( ) (1000) Rajasthan ,900 2,900 ( ) (1000) Sikkim (341960) (1000) Tamil Nadu ,651 4,651 ( ) (1000) Uttar Pradesh ,899 39,899 ( ) (1000) Uttaranchal ,996 3,996 ( ) (1000) West Bengal ,742 11,742 ( ) (1000) 84 30th Annual Report

87 Schedule 9 INVESTMENTS ii) Other Bonds Rs. million Number of Face value per shares/bonds/ share/bond/ securities security Current Year/ Current Year/ (Previous Year) (Previous Year) (Rs.) 12.50% Secured Non-Convertible Redeemable Western Electricity ,030 Supply Company (WESCO) Bonds, Series - I/2000, 2007 (10300) (100000) 12.50% Secured Non-Convertible Redeemable North Eastern ,169 1,670 Electricity Supply Company (NESCO) Bonds, Series - I/2000, 2007 (16700) (100000) 12.50% Secured Non-convertible Redeemable Southern Electricity ,300 Supply Company (SOUTHCO) Bonds, Series - I/2000, 2007 (13000) (100000) 10.00% Secured Non-Cumulative Non-Convertible Redeemable Grid Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003, 03/02,2009 (2660) (100000) 10.00% Secured Non-Cumulative Non-Convertible Redeemable Grid ,709 1,953 Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003, (19536) (100000) 04-09/02, % Secured Non-Cumulative Non-Convertible Redeemable Grid Corporation of Orissa (GRIDCO) Power Bonds, (5970) (100000) Series-1/ /02, % Secured Non-Cumulative Non-Convertible Redeemable Grid Corporation of Orissa (GRIDCO) Power Bonds, (6119) (100000) Series-1/2003, 02/02 &11/02, % Secured Non-Convertible Redeemable Tax free PSU Bonds (VIII issue) - North Eastern Electric Power Corporation Ltd. (NEEPCO) (281) ( ) Bonds, 2010 # 8.75%IREDA (Tax-Free) Bonds (Series IX), 2008 # (42175) (1000) 6.00%IREDA (Tax-Free) Bonds (Series X), 2013 # (48235) (1000) 5.50%IREDA (Tax- Free) Bonds (Series XI), 2013 # (38445) (1000) b) Equity Shares in Joint Venture Companies Utility Powertech Ltd ( ) (10) NTPC-Alstom Power Services Private Ltd ( ) (10) NTPC-SAIL Power Company Private Ltd ( ) (10) Bhilai Electric Supply Company Private Ltd , ( ) (10) NTPC-Tamil Nadu Energy Company Ltd (500000) (10) c) Equity Shares in Subsidiary Companies Pipavav Power Development Company Ltd (365000) (10) NTPC Electric Supply Company Ltd * * *(current year Rs. 8,09,100/-, previous year Rs.8,09,100/-) (80910) (10) NTPC Vidyut Vyapar Nigam Ltd ( ) (10) NTPC Hydro Ltd ( ) (10) d) Share application money pending allotment in : NTPC Hydro Ltd. - 2 Ratnagiri Gas & Power Private Ltd. 5,000 - e) Shares in Cooperative Societies ß ß Sub Total (B) 184, ,417 Sub Total ( I ) 189, ,575 30th Annual Report 85

88 Schedule 9 INVESTMENTS Rs. million Number of Face value per shares/bonds/ share/bond/ securities security Current Year/ Current Year/ (Previous Year) (Previous Year) (Rs.) II. CURRENT (Non - Trade - Quoted) Government of India Treasury Bills ,837 27,079 ( ) (100) Government of India Dated Securities ( ) (100) Sub Total ( II ) 3,837 27,402 Total ( I + II ) 192, ,977 Quoted Investments Book Value 8,795 34,560 Market Value 9,516 35,249 Unquoted Investments Book Value 184, ,417 During the year the following current investments were purchased and realised on maturity (at cost) Government of India Treasury bills 42,051 3,432 Dated Securities 70 - (#) Development Surcharge Fund Investments (# #) Includes bonds of Rs.34,353 million (previous year Rs. 32,821 million) permitted for transfer/trading by Reserve Bank of India. Balance can be transferred/ traded subject to prior approval of Reserve Bank of India. ß Shares in Co-operative societies (unquoted) NTPC Employees Consumers and Thrift Co-operative ,000 5,000 Society Ltd. Korba (500) (10) Rs. Rs. NTPC Employees Consumers and Thrift Cooperative ,500 2,500 Society Ltd. Ramagundam (250) (10) NTPC Employees Consumers Cooperative Society Ltd. Farakka ,000 5,000 (500) (10) NTPC Employees Consumers Cooperative Society Ltd. Vindhyachal ,700 2,700 (108) (25) NTPC Employees Consumers Cooperative Society Ltd. Anta ,000 5,000 (500) (10) NTPC Employees Consumers Cooperative Society Ltd. Kawas ,000 5,000 (500) (10) NTPC Employees Consumers Cooperative Society Ltd. Kaniha ,000 5,000 (250) (20) 30,200 30, th Annual Report

89 Schedule 10 INVENTORIES Rs. million (Valuation as per Accounting Policy No. 9) Components and spares 12,894 11,904 Loose tools Coal 7,476 3,115 Fuel Oil Naphtha Chemicals & consumables Others Steel Scrap ,629 18,015 Less: Provision for shortage Provision for obsolete/ unserviceable items Total 23,405 17,819 Inventories include stores in transit Schedule 11 SUNDRY DEBTORS Debts outstanding over six months Unsecured, considered good 656 7,866 Considered doubtful 8,363 8,360 9,019 16,226 Other debts Unsecured, considered good 8,022 5,881 17,041 22,107 Less: Provision for bad & doubtful debts 8,363 8,360 Total 8,678 13,747 Schedule 12 CASH & BANK BALANCES Cash on hand (includes cheques, drafts, stamps on hand Rs.150 million, 153 1,569 previous year Rs.1,566 million) Remittances in transit Balance with Reserve Bank of India earmarked for fixed deposits from public Balances with scheduled banks (a) Current Account (b) 1,294 1,746 Term Deposit Account (c)(d) 82,887 57,050 Balance with other banks Call Deposit Account West Merchant Bank Limited,London (maximum amount outstanding at any time during the year Rs.60 million, previous year Rs.60 million) Total 84,714 60,783 (a) Includes Rs.1,00,007/-(previous Year Rs.4,32,570/- ) in respect of Development Surcharge. (b) Includes Rs.44 million of Unclaimed Dividend (previous year Rs.37 million) (c) Rs. 14 million (previous year Rs.11 million) deposited as security with Government authorities/as per court orders. (d) Includes Rs.Nil as balance of unutilised monies raised by issue of shares (previous year Rs.11,316 million). 30th Annual Report 87

90 Schedule 13 OTHER CURRENT ASSETS Rs. million Interest accrued : Bonds 8,615 8,640 Development surcharge investments 6 59 Government of India Dated Securities Term Deposits Others Others Recoverables Total 10,161 9,764 Schedule 14 LOANS AND ADVANCES LOANS Employees (including accrued interest) Secured 4,575 4,696 Unsecured, considered good 1,053 1,082 Considered doubtful 1 1 Government of India (for transfer of transmission systems) Unsecured, considered good Loan to State Government in settlement of dues from customers Unsecured, considered good 9,573 9,573 Others Secured Unsecured, considered good ADVANCES (recoverable in cash or kind for value to be received) Subsidiary Companies Unsecured, considered good Contractors & suppliers, including material issued on loan Secured 6 2 Unsecured, considered good Considered doubtful 1 3 Employees (including imprest) Unsecured, considered good Considered doubtful 1 1 Others Unsecured, considered good Considered doubtful ,116 18,332 Claims recoverable Unsecured, considered good 965 1,012 Considered doubtful Less: Provision for bad and doubtful loans, advances and claims 18,789 19,318 DEPOSITS Deposits with customs, port trust and others (#) Advance tax deposit & tax deducted at source 35,731 18,590 Less: Provision 25,103 11,606 10,628 6,984 Total 30,287 26,993 (#) Sales Tax deposited under protest with sales tax authorities Due from Directors & Officers of the Company Directors 1 1 Officers Maximum Amount Directors 2 2 Officers th Annual Report

91 Schedule 15 CURRENT LIABILITIES Rs. million Sundry Creditors For capital expenditure Other than Small Scale Industrial Undertakings 11,692 12,216 For goods and services Small Scale Industrial Undertakings 8 14 Others 13,049 11,578 Book overdraft Deposits, retention money from contractors and others 11,289 9,473 Less: Investments held as security ,057 33,168 Advances from customers and others 9,886 14,431 Investor Education and Protection Fund shall be credited by Unpaid matured Bonds (*Rs.2,000/-) * 1 Interest accrued on unpaid matured deposits/bonds (*Rs.3,10,366/-) * 1 Other liabilities 977 2,999 Unclaimed dividend (#) Interest Accrued but not due : Loans from Government of India 9 21 Foreign currency loans/bonds Term loans in Indian currency Bonds 1, Fixed deposits from public Total 49,102 52,306 (#) No amount is due for payment to Investor Education and Protection Fund Schedule 16 PROVISIONS Fringe Benefit Tax Additions during the year Less:Advance tax deposited Proposed dividend As per last balance sheet 9,895 10,823 Additions during the year 6,596 9,895 Amounts used during the year 9,895 10,823 6,596 9,895 Tax on proposed dividend As per last balance sheet 1,388 1,387 Additions during the year 925 1,388 Amounts used during the year 1,388 1, ,388 Retirement benefits As per last balance sheet 3,867 3,193 Additions during the year 1,279 1,095 Amounts used during the year ,770 3,867 Tariff adjustment As per last balance sheet Additions during the year - - Amounts reversed during the year Others As per last balance sheet 11 8 Additions during the year 1 4 Amounts written off during the year 3 - Amounts reversed during the year Total 12,300 15,161 30th Annual Report 89

92 Schedule 17 CONTIGENT LIABILITIES Rs. million Claims against the Company not acknowledged as debt in respect of: Capital works 7,153 7,084 Land compensation cases 3,166 5,508 Others 6,902 5,802 Disputed Income Tax demand * 11, Disputed Sales Tax demand Letters of Credit other than for capital expenditure 2,951 1,008 Others Total 31,662 19,668 * Possible reimbursement Rs.6,662 million (Previous year Nil) Schedule 18 SALES Current Year Previous Year Energy Sales (including Electricity Duty) 263, ,526 Less : Advance against Depreciation deferred 1,505 1,791 Add: Revenue recognised out of Advance against Depreciation , ,743 Consultancy, project management and supervision fees (including turnkey construction projects) Total 262, ,076 Schedule 19 PROVISIONS WRITTEN BACK Doubtful debts - 5,927 Doubtful advances and claims 5 5 Doubtful construction advances 1 3 Adjustment in tariff Shortage in construction stores 2 1 Shortage in stores 9 9 Obsolescence in stores 6 2 Others - 2 Total 23 6, th Annual Report

93 Schedule 20 OTHER INCOME Rs. million Current Year Previous Year Income from Long Term Investments Trade Dividend from Subsidiaries 30 6 Dividend from Joint Ventures Interest Government Securities (8.5% tax free bonds issued by the State Governments) 16,877 13,949 Other Bonds (Gross) (Tax deducted at source Rs.161 million, Previous year Rs.195 million ) Non-Trade Interest from Government of India Securities (Gross) Less: Amortisation of premium Income from Current Investments (Non-Trade) Interest from Government of India Securities (Gross) (Tax deducted at source Nil) 14 6 Income on redemption of Government of India Treasury Bills 1, Income from Others Interest (Gross) (Tax deducted at source Rs.1,159 million, Previous year Rs.76 million ) Loan to State Government in settlement of dues from customers Public Deposit Account with Government of India - 3,573 Indian banks 4,780 1,065 Foreign banks 3 2 Employees loans Others Interest on Income Tax refunds 1,151 - Less: Refundable to customers 1, Surcharge on late payment from customers 384 2,460 Hire charges for equipment Profit on disposal of fixed assets Miscellaneous income 1,012 1,313 26,735 24,588 Less:Income transferred to Incidental expenditure during construction-schedule ,059 Total 26,078 23,529 Schedule 21 EMPLOYEES REMUNERATION AND BENEFITS Salaries, wages, bonus, allowances & benefits 8,582 7,584 Contribution to provident and other funds Welfare expenses 1,807 1,726 11,375 10,164 Less: Adjusted in fuel cost Transferred to Development of Coal Mines 12 - Transferred to incidental expenditure during construction - Schedule 26 1,157 1,136 Total 9,684 8,823 30th Annual Report 91

94 Schedule 22 GENERATION, ADMINISTRATION & OTHER EXPENSES Current Year Rs. million Previous Year Power charges Less: Recovered from contractors & employees Water charges Stores consumed Rent Less:Recoveries Repairs & Maintenance Buildings Plant & Machinery Power stations ,229 Construction equipment ,051 6,249 Others Insurance Rates and taxes Water Cess & Environment Protection Cess Training & Recruitment expenses Less: Fees for training and application Communication expenses Travelling Expenses Tender expenses Less: Receipt from sale of tenders Payment to Auditors Advertisement and publicity Security expenses Entertainment expenses Expenses for guest house Less:Recoveries Education expenses Brokerage & commission 7 9 Donations 4 97 Community development and welfare expenses Less: Grants-in-aid Ash utilisation & marketing expenses Less: Sale of ash products Books and periodicals Professional charges and consultancy fees Legal Expenses EDP hire and other charges Printing and stationery Miscellaneous expenses Stores written off 2 3 Claims/Advances written off - 2 Survey & Investigation expenses written off 13 4 Loss on disposal/write-off of fixed assets Loss on maturity of current Investments 6-14,251 13,142 Less: Adjusted in cost of fuel Transferred to Development of Coal Mines 19 - Transferred to incidental expenditure during construction - Schedule Total 12,721 12,062 Stores consumption included in repairs and maintenance 4,453 3, th Annual Report

95 Schedule 23 PROVISIONS Rs. million Current Year Previous Year Doubtful debts 3 - Doubtful advances and claims Doubtful advances for construction 9 - Shortage in stores 9 7 Obsolescence in stores Shortage in construction stores 3 2 Unserviceable capital work-in-progress 6 4 Others 1 5 Total Schedule 24 INTEREST AND FINANCE CHARGES Interest on : Bonds 3,301 2,814 Loans from Government of India Foreign Currency Term Loans 1,155 1,282 Rupee Term loans 6,388 4,959 Public deposits Foreign currency Bonds/Notes Others Exchange differences regarded as adjustment to interest costs (2,469) (568) 9,383 9,740 Finance Charges : Bonds servicing & public deposit expenses Guarantee Fee Management Fee - 85 Commitment charges/ Exposure premium 99 1,069 Rebate under Scheme for Settlement of SEB dues 8,047 6,813 Rebate to customers 4,244 3,828 Reimbursement of L.C.charges on Sales Realisation Bank Charges 8 8 Bond Issue Expenses 2 5 Exchange differences Foreign currency Bonds/ Notes issue expenses 98 - Others ,159 12,315 22,542 22,055 Less: Interest and Finance charges capitalised by transfer to 4,910 5,100 incidental expenditure during construction - Schedule 26 Total 17,632 16,955 30th Annual Report 93

96 Schedule 25 PRIOR PERIOD INCOME/EXPENDITURE (NET) Rs. million Current Year Previous Year INCOME Sales 35 1,080 Others ,102 EXPENDITURE Salary, wages, bonus, allowances & benefits 3 (8) Repairs and Maintenance Depreciation Interest 2, Advertisement and publicity - 1 Professional consultancy charges - 12 Rates & Taxes 64 (1) Power charges - (27) Insurance (6) - Rent 12 - Fuel - (201) Others ,561 1,003 2,522 (99) Less: Incidental expenditure during construction - Schedule Total 2,488 (102) 94 30th Annual Report

97 Schedule 26 INCIDENTAL EXPENDITURE DURING CONSTRUCTION Rs. million Current Year Previous Year A. Employees remuneration and other benefits Salaries, wages, allowances and benefits Contribution to provident and other funds Welfare expenses Total (A) 1,157 1,136 B. Other Expenses Power charges Less: Recovered from contractors & employees Water charges 3 - Rent Repairs & maintenance Buildings Construction equipment 1 11 Others Insurance 5 4 Rates and taxes Communication expenses Travelling expenses Tender expenses Less: Income from sale of tenders Payment to Auditors 2 2 Advertisement and publicity Security expenses Entertainment expenses 13 1 Guest house expenses 4 3 Education expenses - 1 Books and periodicals 3 4 Community development expenses 7 4 Professional charges and consultancy fee Legal expenses 3 3 EDP Hire and other charges 9 9 Printing and stationery Miscellaneous expenses Total (B) Depreciation (C) Total (A+B+C) 2,002 1,914 30th Annual Report 95

98 Rs. million D. Interest and Finance Charges Current Year Previous Year Interest on Bonds Foreign Currency Term Loans 67 2 Rupee Term loans 3,210 2,738 Foreign currency Bonds/Notes Finance Charges Guarantee Fee - 1,069 Commitment charges 11 - Management fee / arrangers fees Exchange differences Foreign currency Bonds/Notes issue expenses 98 - Others Total (D) 4,910 5,100 E. Less Other Income Interest from Indian Banks Employees Government of India Securities out of unutilised monies raised by issue of shares Less: Amortisation of premium Others Hire Charges 8 6 Sale of scrap 1 - Miscellaneous income Total (E) 657 1,059 F. Prior Period Adjustments 34 3 G. Income / Fringe Benefit Tax GRAND TOTAL (A+B+C+D-E+F+G) 6,574 5, th Annual Report

99 Schedule 27 NOTES ON ACCOUNTS 1. The name of the Company has changed from National Thermal Power Corporation Limited to NTPC Limited with effect from 28 th October, a) The conveyancing of the title to 5,665 acres of freehold land of value Rs. 2,571 million (previous year 7,157 acres, value Rs. 3,126 million) and execution of lease agreements for 6,873 acres of value Rs. 849 million (previous year 6,940 acres, value Rs.733 million) in favour of the Company are awaiting completion of legal formalities. b) Land shown in the books does not include cost of 1,148 acres (previous year 1,148 acres) of land in possession of the Company. This will be accounted for on settlement of the price thereof by the State Government Authorities. Land includes 345 acres of value Rs.28 million (previous year 345 acres value Rs.28 million) not in possession of the Company. c) Land includes amount of Rs. 1,206 million (previous year Rs.1,128 million) deposited with various authorities in respect of land in possession which is subject to adjustment on final determination of price. d) The cost of Right of Use of land for laying pipelines amounting to Rs.13 million (previous year Rs.7 million) is included under intangible assets. 3. a) The Central Electricity Regulatory Commission (CERC) has notified by regulations in March 2004, the terms and conditions for determination of tariff applicable with effect from 1 st April 2004 for a period of five years. Pending final determination of tariff for the period 1 st April 2004 onwards, CERC has directed by notification that on provisional basis, the annual fixed charges as applicable on 31 st March 2004 shall be billed at target availability and variable charges based on norms of operation notified in Regulations, The amount billed for the year on this basis is Rs. 268,301 million (previous year Rs.230,663 million). Since the amount billed is subject to adjustment with effect from 1 st April 2004, pending final determination of the tariff by CERC, sales amounting to Rs. 257,179 million (previous year Rs.221,380 million) for the year have been provisionally recognised on the basis of principles enunciated by the CERC in Regulations, Further, Rs. 603 million pertaining to previous year has been recognised in sales due to revision in the amounts provisionally billed based on orders of the CERC/Appellate Tribunal for Electricity. b) CERC has issued orders in December 2000 with respect to the tariff norms, principles and Availability Based Tariff (ABT). The company filed an appeal against the orders of CERC before the Delhi High Court which has since been transferred to the Appellate Tribunal for Electricity. Pending disposal of the appeal, CERC has notified by regulations, the terms and conditions for determination of tariff, effective from 1 st April 2001 to 31 st March CERC issued final tariff orders based on above regulations in respect of all the stations up to 31 st March, 2004 except for Rihand STPS Stage-I. During the year in respect of Rihand STPS Stage-I, an amount of Rs. 101 million has been accounted for in sales (reduction of Rs.39 million in the previous year) in line with above regulations and principles followed in the final tariff orders issued for other stations of the company. In case of stations for which final tariff orders have been issued by the CERC for the period up to 31 st March, 2004, sales for the said period amounting to Rs. 2,282 million (previous year Rs.2,768 million) has been accounted for during the year. Based on the orders of CERC admitting the additional capital expenditure for some of the stations for the period and the principles enunciated therein, Rs. 536 million (previous year Rs.474 million) has been provisionally accounted as sales during the year which is to be billed on issuance of station specific tariff orders by CERC. 4. Depreciation has been charged at the rates specified in Schedule XIV of the Companies Act,1956 except as stated in accounting policy No The Government of India in January 2006 notified the Tariff Policy under the provisions of the Electricity Act, 2003 which provides that the rates of depreciation notified by the CERC would be applicable for the purpose of tariffs as well as accounting. Subsequent to the notification of the Tariff Policy, CERC has not notified the rates of depreciation. The Company has been advised that the Tariff Policy cannot override the provisions of the Companies Act,1956 and it is required to follow Schedule XIV of the Companies Act,1956 in the absence of any specific deviation contained in the Electricity Act, 2003 which could be said to have been saved by Sec.616 of the Companies Act,1956. The Company has also been advised that there is no such provision in the Electricity Act,2003 either prescribing the rates of depreciation for the generating company or otherwise empowering any authority for providing depreciation rates for accounting purposes in supercession of the provisions of the Companies Act, Due to uncertainty of realisation in the absence of sanction by the Government of India (GOI), the company s share of net annual profits of Badarpur Thermal Power Station for the years to amounting to Rs. 1,155 million (previous year Rs. 1,174 million) being balance receivable in terms of the management contract with the GOI has not been recognised. 6. CERC notification dated 26 th March,2001 in respect of tariff norms for the period directed to collect Development Surcharge from beneficiaries. Subsequently, CERC vide its order dated 9 th November 2004 directed that the amount collected and invested in instruments corresponding to the amount contributed by each of the state utilities with interest shall be transferred in the name of concerned utility at the latter s expense. The company paid/adjusted the same as per CERC directions and the outstanding balance yet to be transferred as on 31 st March, 2006 is as under: (Rs. Million) Sl. No. Description of the Account Schedule No Investment in different tax-free bonds Bank balance in Current Account 12 * ** 3 Interest accrued on Sl. No Total *Rs.1,00,007/- **Rs.4,32,570/- 30th Annual Report 97

100 7. Pursuant to the Government of India Scheme for Settlement of Dues of State Electricity Boards (Scheme), Governments of Jharkhand and Bihar issued notifications during December 2005 for issue of 8.5% Tax-Free special bonds with effect from 1 st October 2001 for Rs.3,378 million and Rs. 4,277 million respectively towards outstanding dues. Accordingly, Investment of Rs. 7,655 million, interest income on the bonds amounting to Rs.2,928 million, rebate of Rs.1,198 million payable to State Electricity Boards/Successor Entities under the Scheme have been recognised, including Rs.2,278 million towards interest and Rs.892 million towards rebate pertaining to the period upto 31 st March, In accordance with the Uttar Pradesh Electricity Reforms (Transfer of Tanda Generation Undertaking) Scheme 2000, the assets for Rs.6,070 million (previous Year Rs.6,070 million) of Tanda Power Station of UP State Electricity Board (UPSEB) were handed over to the Company free from all encumbrances. However, the charge created by UPSEB in favour of Life Insurance Corporation of India (LIC) before the assets were taken over is still to be vacated by LIC. 9. The company has provided Rs.3,401 million in previous years in respect of amounts reimbursable to Government of India (GOI) in terms of Public Notice No.38 dated 5 th November, 1999 and Public Notice No.42 dated 10 th October, 2002 towards cash equivalent of the relevant deemed export benefits paid by GOI to the contractors for Talcher Super Thermal Power Project Stage-II based upon the details provided by the contractors. During the year, Rs.2678 million was paid on receipt of procedural details from the GOI for depositing the amount. The balance provision has been revised to Rs.91 million on the basis of additional information received from the contractors, and the difference of Rs.632 million was adjusted against the related assets. No interest has been provided on the reimbursable amounts as there is no stipulation for payment of interest in the public notices cited above. 10. The Company has raised Rs.26,840 million through public issue of shares in The entire proceeds of the issue, net of issue expenses, were utilised for part financing the capital expenditure on the specified projects. 11. Out of Rs.109 million accounted as recoverable from the Government of India (GOI) towards its share of expenses for the initial public issue of shares made in the previous year, the GOI has approved payment of Rs.56 million. Consequently, an amount of Rs.53 million has been adjusted against the Share Premium Account. 12. a) Balances shown under advances, creditors and material lying with contractors/ fabricators and material issued on loan in so far as these have since not been realised/ discharged or adjusted are subject to confirmation/reconciliation and consequential adjustment, if any. b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet. 13. Effects of change in Accounting Policies a) Exchange differences on foreign currency loans contracted before 1 st April, 2000 for acquisition of fixed assets within India were hitherto adjusted in the carrying cost of related fixed assets. In line with the opinion received from the Institute of Chartered Accountants of India during the year, the Company has treated such exchange differences to the extent regarded as adjustment to interest cost as borrowing costs w.e.f. 1 st April Consequently, during the current year there has been decrease in Interest and Finance charges by Rs.1,364 million, increase in Depreciation by Rs.166 million, Prior period adjustment of Rs.1,986 million and decrease in the Profit by Rs.788 million. b) In pursuance of Accounting Policy No.8.3, Rs.413 million has been amortised during the year out of the premium paid on long term investments which was hitherto not being done. As a result profit for the year is lower by Rs.45 million and Capital Work-In-Progress is higher by Rs.368 million. c) Expenses by way of repairs and maintenance, depreciation, employee cost and insurance charges relating to the coal handling system used for bringing coal to its present location and condition at the power stations have been considered for valuation of the coal during the year which was hitherto not being done. The total expenses incurred under these items during the year are Rs.1,090 million. Due to inclusion of the above expenses, the closing stock of coal and profit for the year is more by Rs.82 million. 14. The effect of foreign exchange fluctuation during the year is as under : i) The amount of exchange differences (net) credited to the Profit & Loss Account is Rs. 2 million (previous year credit, Rs.9 million). ii) The amount of exchange differences debited to the carrying amount of fixed assets and Capital Work-in-Progress is Rs.317 million (previous year credit, Rs.145 million). 15. Revenue Grants recognised during the year in respect of expenditure incurred in the previous years amount to Rs.1 million (previous year Nil). 16. Borrowing costs capitalised during the year are Rs. 4,785 million (previous year Rs.5,100 million). 17. Segment information a) Business Segments: The Company s principal business is generation and sale of bulk power to SEBs/State utilities. Other business includes providing consultancy, project management and supervision, oil and gas exploration and coal mining. b) Segment Revenue and Expense: Revenue directly attributable to the segments is considered as Segment Revenue. Expenses directly attributable to the segments and common expenses allocated on a reasonable basis are considered as Segment Expenses. c) Segment Assets and Liabilities: Segment assets include all operating assets in respective segments comprising of net fixed assets and current assets, loans and advances. Construction work-in-progress, construction stores and advances are included in unallocated corporate and other assets. Segment liabilities include operating liabilities and provisions th Annual Report

101 Rs. Million Business Segments Generation Others Total Current Year Previous Year Current Year Previous Year Current Year Previous Year Revenue : Sale of Energy/Consultancy, Project Management and Supervision fees 260,701* 225,069* , ,402 Internal Consumption of Electricity Total 260, , , ,650 Segment Result 45,837# 49,467# ,061 49,655 Unallocated Corporate Interest and Other Income 24,659 19,843 Unallocated Corporate Expenses, Interest and Finance Charges 10,496 8,716 Income Taxes (Net) 2,022 2,712 Profit after Tax 58,202 58,070 Other information Segment Assets 266, , , ,867 Unallocated Corporate and Other Assets 449, ,616 Total Assets 266, , , ,483 Segment liabilities 37,620 38, ,834 38,250 Unallocated Corporate and other liabilities 225, ,095 Total liabilities 37,620 38, , ,345 Depreciation 20,320 19, ,321 19,439 Non-cash expenses other than Depreciation Capital Expenditure 65,854 54, ,886 54,704 * Includes Rs.3,522 million ( previous year Rs.3,689 million) for sales related to earlier years. # Segment result would have been Rs. 42,315 million (previous year Rs.45,778 million) without including the sales related to earlier years. d) The operations of the Company are mainly carried out within the country and therefore, geographical segments are inapplicable. 18. Related party disclosures a) Related parties: i) List of joint ventures: Utility Powertech Limited, NTPC-Alstom Power Services Private Ltd., PTC India Ltd. ii) Key Management Personnel: Shri C.P. Jain Chairman and Managing Director 1 Shri T. Sankaralingam Director (Projects) Shri K.K.Sinha Director (Human Resources) 2 Shri P. Narasimharamulu Director (Finance) 3 Shri Chandan Roy Director (Operations) Shri R.S.Sharma Director (Commercial) Shri R.K. Jain Director (Technical) 4 Shri A.K.Singhal Director (Finance) 5 1. Superannuated on 31 st March Resigned w.e.f 27 th June Superannuated on 31 st July W.e.f. 5 th May W.e.f. 1 st August th Annual Report 99

102 b) Transactions with the related parties at a (i) above are as follows : (Rs. Million) Particulars Current Year Previous Year Contracts for Works/ Services for services received by the company Transactions during the year Amount recoverable from related parties 42 6 Amount payable to related parties Contracts for Works/ Services for services provided by the company Transactions during the year Amount recoverable from related parties 3 2 Dividend Received Deputation of Employees Transactions during the year 11 7 Amount recoverable from the related parties 2 1 c) Remuneration to key management personnel is Rs. 10 million (previous year Rs. 8 million) and amount of dues outstanding to the company as on 31 st March 2006 are Rs.1 million (previous year Rs.1 million). 19. Disclosure regarding leases a) Finance leases The Company has taken on lease certain vehicles and has the option to purchase the vehicles as per terms of the lease agreements, details of which are as under: Rs. million a) Outstanding balance of minimum lease payments Not later than one year 4 4 Later than one year and not later than five years 6 9 Total b) Present value of (a) above Not later than one year 4 3 Later than one year and not later than five years 5 8 Total 9 11 c) Finance Charges 1 2 b) Operating leases: The company s significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices and guest houses/transit camps. These leasing arrangements are usually renewable on mutually agreed terms but are not non-cancellable. Employees remuneration and benefits include Rs. 184 million (previous year Rs. 163 million) towards lease payments, net of recoveries, in respect of premises for residential use of employees. Lease payments in respect of premises for offices and guest house/transit camps are shown as Rent in Schedule 22 Generation, Administration and other expenses. Miscellaneous income in Schedule 20 Other Income, includes Rs.1 million (previous year Rs.1 million) towards sub-lease payments received/recoverable th Annual Report

103 20. Earnings per share The elements considered for calculation of Earning Per Share (Basic and Diluted) are as under: Current Year Previous year Net Profit after Tax used as numerator (Rs. Million) 58,202 58,070 Weighted average number of equity shares used as denominator 8,245,464,400 7,997,576,085 Earning Per Share Basic and Diluted (Rupees) Face value per share (Rupees) 10/- 10/- 21. Advances- due from subsidiaries (Rs. Million) Name of Subsidiary Outstanding balance Maximum amount NTPC Electric Supply Company Ltd NTPC Vidyut Vyapar Nigam Ltd Pipavav Power Development Company Ltd NTPC Hydro Ltd Total The item-wise details of deferred tax liability (net) are as under: (Rs. Million) Deferred tax liability i) Difference of Book depreciation and tax depreciation 62,656 57,109 Less: Deferred tax assets i) Provisions disallowed for tax purposes 9,336 5,199 ii) Disallowed u/s 43B of the Income Tax Act, ,340 9,432 6,539 Deferred Tax Liability (Net) 53,224 50,570 The net increase in the deferred tax liability of Rs.2,654 million (previous year decrease Rs.1,710 million) has been debited to Profit and Loss Account. However, the same is recoverable from customers. 23. Provision for current tax is after adjustment of refund amounting to Rs.5,536 million (previous year Rs.332 million) pertaining to previous years and consequent adjustment made in Income Tax recoverable is Rs.5,090 million (previous year Nil). 24. Research and Development expenditure charged to revenue during the year is Rs. 58 million (previous year Rs. 42 million). 25. Interest in joint ventures: a) Joint venture entities: Company Proportion of ownership interest as on Utility Powertech Limited 50% 50% NTPC-Alstom Power Services Private Limited 50% 50% PTC India Limited 8% 8 % NTPC-SAIL Power Company Private Limited 50% 50% Bhilai Electric Supply Company Private Limited 50% 50% NTPC-Tamilnadu Energy Company Limited 50% 50% Ratnagiri Gas and Power Private Ltd.* 28.33% NIL *Shareholders agreement is under execution 30th Annual Report 101

104 The above joint venture entities are incorporated in India. The Company s share of the assets and liabilities as on 31 st March, 2006 and income and expenses for the year in respect of joint venture entities based on audited accounts are given below: (Rs. Million) A Assets Long Term Assets 28,562 2,665 Current Assets 2,376 1,846 Total 30,938 4,511 B Liabilities Long Term Liabilities 22,824 2,148 Current Liabilities and Provisions 1, Total 24,549 3,029 C Contingent Liabilities 6 1 D Capital Commitments 7,762 6,708 Current Year Previous Year E Income 4,547 3,667 F Expenses 4,259 3,423 b) Joint venture operations: During the year the Company alongwith M/s Geopetrol International Inc. and M/s Canoro Resources Ltd., has participated in bidding under the Government of India New Exploration Licensing Policy-V for exploration and production of oil and gas and has been allotted Block AA-ONN-2003/2 in the State of Arunachal Pradesh. The Company together with other consortium members entered into a Production Sharing Contract with the Government of India. The Company is a non-operator and has 40% share in expenses, income, assets and liabilities with a minimum work programme commitment of Rs.621 million (previous year Nil) as per the Production Sharing Contract. The Company s share of assets and liabilities as at 31 st March,2006 and expenditure for the period ended on that day in respect of the above joint venture operations has been accounted for based on unaudited statement of accounts submitted by the operator. Rs.Million Expenses 2 Fixed Assets (# Rs.32,117/-) # Other Assets (* Rs.61,180/-) * Current Liabilities As required by Accounting Standard (AS-28) Impairment of Assets issued by the Institute of Chartered Accountants of India, the company has carried out the assessment of impairment of assets. There has been no impairment loss during the year. 27. i) During the year the Company reviewed the disclosure of contingent liabilities keeping in view the provisions of AS-29 Provisions, Contingent Liabilities and Contingent Assets issued by the Institute of Chartered Accountants of India as under: a) As on 31 st March, 2006 the estimated financial effect of claims for enhanced compensation for land pending before courts disclosed as contingent liability is based on judgment of the management, opinion of independent experts or experience of similar transactions. Such claims hitherto were disclosed based on the amounts claimed by the land losers, except to the extent the possibility of a liability was considered remote. b) As on 31 st March 2006 the estimated financial effect of claims for interest on amounts disputed, delayed payments etc. is based on the rate of interest claimed or 18%, whichever is lower, unless otherwise provided in any statute, agreement, order etc. Such claims were hitherto disclosed based on the rates demanded by the claimants. Consequently, contingent liabilities as at 31 st March, 2006 are lower by Rs.3,595 million. ii) The outflow on account of the claims against the company not acknowledged as debts, and tax disputes is contingent upon the decision of the courts/other authorities and may differ from the amounts disclosed as contingent liability on the basis of estimates th Annual Report

105 28. Foreign currency exposure not hedged by a derivative instrument or otherwise: Sl.No Particulars Currencies Amount Rs. Million a. Borrowings, including interest accrued but not due thereon. USD 36,977 20,348 JPY 28,574 32,303 Others 896 1,390 b. Sundry creditors/deposits and retention monies USD 4,729 3,450 EURO Others c. Sundry debtor and Bank balances GBP USD 6 - d. Unexecuted amount of contracts remaining to be executed USD 44,044 51,185 EURO 5,531 5,477 Others 1,187 1, The pre-commissioning expenses during the year amounting to Rs 1,312 million (previous year Rs 1,191 million) have been included in Fixed Assets/Capital work-in-progress after adjustment of pre-commissioning sales of Rs. 727 million (previous year Rs. 583 million) resulting in a net pre-commissioning expenditure of Rs. 585 million (previous year Rs.608 million). 30. Payment to the Statutory Auditors (Schedule 22) Rs. Million Current Year Previous Year Audit Fees 4 4 Tax audit Fees 2 1 Certification Fees 8 6 Reimbursements - Travelling Expenses Service Tax Less: Towards IPO certification included in Issue expenses List of Small Scale Industrial undertaking to whom payment is outstanding for more than 30 days as on 31 st March, 2006, to the extent available to the Company, is as under: Adarsh Engineering Works, Atlas Fasteners, Accurate Metal Industries, Aditya Air Products Pvt.Ltd, Avlani Engineering, Balaji Alum Industries, Bajrang Pharmaceuticals, Bhavesh Corporation, Balaji Industrial Products, Clean Filter Industries Pvt. Ltd., Central India Engineers, DASS & Sons, EDP Forms Pvt. Ltd., Flexer Rubber Pvt. Ltd., GEECO Enercon Pvt. Ltd., Gopal Steam Printing Works, Hivelm Industries, Insha Plastic Industries, IMECO Limited, Iyappan Engineering Ind. Pvt. Ltd., Jalan Engineering, Khera Instruments Pvt. Ltd., KPC Flexi Tubes, Kwality Tubes, Modi Gas Products, Poweraid (India) Pvt. Ltd., Prabhu Industries, Panja Valves, Precission Transmatic Dev., Rameswar Iron Foundry, Ray Enterprises, Rasvin Rubber Pvt. Ltd., Shree Vishnu Enterprises, Sudeep Industries Pvt. Ltd., SAP Industries, SPA Instruments (I) Pvt. Ltd., S.D. Instruments & Equipments, Steam & Mining Industries, Teletex Industrial Corpn., Technofab (India), Turbo Engineers (CBE), Upadhyay Valves Mfg., Udyogi Industries, Vishal Structure Fabricators. 32. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 135,587 million (previous year Rs.148,140 million). 33. Managerial remuneration paid/ payable to Directors (Rs. Million) Current year Previous year Salaries & Allowances 8 6 Contribution to provident fund & other funds including gratuity & group insurance 1 1 Other benefits 1 1 Directors fees * * * Rs.1,30,000/- (previous year Rs.3,00,000/-) 30th Annual Report 103

106 In addition to the above remuneration the whole time Directors have been allowed the use of staff car including for private journeys on payment of Rs.780/- per month, as contained in the Ministry of Finance (BPE) Circular No.2 (18)/pc/64 dt , as amended. 34. Licensed and Installed Capacities as at 31st March: Current year Previous year (As certified by Management) Licensed Capacity - Not applicable Installed Capacity (MW Commercial units) 23,497 22,497 Quantitative information in respect of Generation and Sale of Electricity (in MUs): a) Pre-commissioning period : Generation 1, Sales b) Commercial period : Generation 169, ,271 Sales 159, ,792 c) Value of imports calculated on CIF basis (Rs. Million): Capital goods 6, Spare parts d) Expenditure in foreign currency (Rs. Million): Professional and Consultancy fee Interest 1,849 1,906 Others 2,618 12,083 e) Value of Components, Stores and Spare parts consumed (Rs. Million): %age Amount %age Amount Imported , Indigenous (including fuel) , ,695 f) Earnings in foreign exchange (Rs. Million): Professional & Consultancy fee 3 - Interest 3 3 Others Previous year figures have been regrouped/rearranged wherever necessary. 36. Information pursuant to Part IV of Schedule VI of the Companies Act, th Annual Report

107 BALANCE SHEET ABSTRACT AND A COMPANY S GENERAL BUSINESS PROFILE I. Registration Details Registration No State Code: 5 5 Balance-sheet date II. Capital Raised during the year (Amount in Rs. Thousands) Public Issue N I L Rights Issue N I L Bonus Issue N I L Private Placement N I L III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities Total Assets Sources of Funds Paid-up Capital Reserves & Surplus Secured Loans Unsecured Loans Deferred Tax Liability Application of Funds Net Fixed Assets Investments Net Current Assets Misc. Expenditure N I L Accumulated Losses N I L IV. Performance of Company (Amount in Rs. Thousands) Turnover Total Expenditure Profit/Loss before tax Profit/Loss after tax Earning per share in Rs Dividend Rate % V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) Product Description: Item Code No. G E N E R A T I O N O F E L E C T R I C I T Y N A C O N S U L T A N C Y S E R V I C E S N A M A N A G E M E N T O F P O W E R S T A T I O N S N A For and on behalf of the Board of Directors ( A.K.RASTOGI ) (A.K.SINGHAL) ( T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Gaurav Nanda ) (Sanjay Gupta) Partner Partner M No M No Place : New Delhi Dated : 31 st May th Annual Report 105

108 CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006 Current Year Rs. Million Previous Year A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and Prior Period Adjustments Adjustment for: Depreciation Provisions Deferred revenue on account of Advance Against Depreciation Interest charges Guarantee Fee & Other Finance charges Interest/Income on Bonds/Investments (19195) (14991) Prior Period Adjustments (Net) (2488) 102 Dividend Income (148) (117) Provisions Written Back (23) (6235) Bonds issue and Servicing Expenses Loss on maturity of Current Investments Operating Profit before Working Capital Changes Adjustment for: Trade and Other Receivables (2589) (2835) Inventories (4510) 105 Trade Payables and Other Liabilities (73) (16319) Loans and Advances (1490) 3323 Other Current Assets (406) (467) (9068) (16193) Cash generated from operations Direct Taxes Paid (9319) (12959) Income Tax Recoverable Net Cash from Operating Activities - A B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (66956) (53699) Purchase of Investments (45959) (34167) Sale of Investment Invesment in Subsidiaries/Joint Ventures (5552) (430) Loans & Advances to Subsidiary (92) (52) Development Surcharge Account - (1358) Interest/Income on Bonds/Investment Received Dividend Received Net cash used in Investing Activities - B (27136) (64136) C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of Share capital (Including Premium) Proceeds from Long Term Borrowings Repayment of Long Term Borrowings (17131) (13242) Interest Paid (11383) (10323) Guarantee Fee & other Finance charges Paid (504) (1597) Dividend Paid (26386) (20718) Tax on Dividend (3701) (2679) Bonds issue and Servicing Expenses (118) (304) Net Cash flow from Financing Activities - C (10997) 7570 Net Increase/Decrease in Cash and Cash equivalents (A+B+C) (5568) Cash and cash equivalents (Opening balance) * Cash and cash equivalents (Closing balance) * NOTES : Cash and Cash Equivalents consists of Cash in Hand, Balance with Banks, Public Deposit Account and interest accrued thereon. Previous year s figures have been regrouped/rearranged wherever necessary. * Includes Rs. 14 Million deposited as security with Government Authorities as per court orders. For and on behalf of the Board of Directors ( A.K.RASTOGI ) (A.K.SINGHAL) ( T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Gaurav Nanda ) (Sanjay Gupta) Partner Partner Place : New Delhi Dated : 31 st May 2006 M No M No th Annual Report

109 AUDITORS REPORT To the Members of NTPC LIMITED 1. We have audited the attached Balance Sheet of NTPC LIMITED (formerly NATIONAL THERMAL POWER CORPORATION LIMITED) as at 31 st March, 2006, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. We draw attention to: (i) Note No. 3 of Schedule 27 to the financial statements in respect of accounting of sales on provisional basis pending final determination of tariff by Central Electricity Regulatory Commission. (ii) Note No. 5 of Schedule 27 to the financial statements in respect of share of net annual profit of Badarpur Thermal Power Station amounting to Rs.1,155 million relating to earlier years not recognized as revenue. 5. Further to our comments in annexure referred to in para 3, and also para 4 above, we report that: a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; e) Being a Government company, pursuant to the Notification no. GSR 829(E) dated issued by Government of India, provisions of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956, are not applicable to the company; f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read with the Accounting Policies and Notes thereon in Schedule 27, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a. in the case of Balance Sheet, of the state of affairs of the company as at 31 st March, 2006, b. in the case of Profit and Loss Account, of the profit for the year ended on that date, and c. in the case of Cash Flow Statement, of the cash flows for the year ended on that date. For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (V. Umamaheswara Rao) Partner Partner Partner M.No M.No M.No For S.N.Nanda & Co. Chartered Accountants For T.R.Chadha & Co. Chartered Accountants (Gaurav Nanda) (Sanjay Gupta) Partner Partner M.No M.No Place : New Delhi Dated : 31 st May, th Annual Report 107

110 ANNEXURE TO THE AUDITORS REPORT Statement referred to in paragraph (3) of our report of even date to the members of NTPC LIMITED (Formerly National Thermal Power Corporation Ltd.) on the accounts for the year ended 31 st March, 2006 (i) (a) The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) (c) All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification. Substantial part of the fixed assets has not been disposed off during the year. (ii) (a) The inventory has been physically verified by the management at reasonable intervals. (b) (c) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. The Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventories, wherever material, have been properly dealt with in the books of account. (iii) (a) The company has not granted any loans secured or unsecured to any company, firm or other party covered in the register maintained under section 301 of the Companies Act, In view of clause (iii) (a) above, the clauses (iii) (b), (iii) (c) and (iii) (d) are not applicable. (e) The company has not taken any loans secured or unsecured from any company, firm, or other party covered in register maintained under section 301 of the Companies Act, In view of (iii) (e) above, the clauses (iii) (f) and (iii) (g) are not applicable. (iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and the nature of its business for purchase of inventory and fixed assets and for sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control systems. (v) (a) According to the information and explanations given to us, during the year under audit there have been no contracts or arrangements which need to be entered in the register maintained under section 301 of the Companies Act, (b) In view of clause (v) (a) above, the clause (v) (b) is not applicable. (vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve bank of India or any court or any other tribunal. (vii) In our opinion, the company has an internal audit system commensurate with the size and the nature of its business. However, it needs to be further strengthened. (viii) We have broadly reviewed the accounts and records maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made detailed examination of the records with a view to determine whether they are accurate and complete. (ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, income tax, sales-tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues have generally been regularly deposited with the appropriate authorities except outstanding dues in respect of electricity duty amounting to Rs.0.49 million as at 31 st March, 2006 due for a period of more than six months from the date they became payable. However, the same has since been deposited by the company. (b) The disputed statutory dues aggregating to Rs.191 million that have not been deposited on account of matters pending before appropriate authorities are detailed below : Sl.No. Name of Statute Nature of dues Forum where the dispute is pending Rs. Million 1 Central Sales Tax and Sales Tax Acts Sales Tax Additional Commissioner of Sales Taxes 81 of Various States Commissioner of Sales Taxes 25 Dy. Commissioner of Sales/ Commercial Taxes 12 High Court th Annual Report

111 Sl.No. Name of Statute Nature of dues Forum where the dispute is pending Rs. million Sales Tax Tribunal 5 Joint Commissioner (Appeal) Trade tax 9 Revenue Board *(Rs.25645) * 2 Water (Prevention & Water/Pollution Appellate Authority, Control of Pollution) Cess Pollution Control Board 31 Cess Act 1977 (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) Total 191 The company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders. According to the information and explanations given to us, company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. The company is not a chit fund or a nidhi / mutual benefit fund/ society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor s Report) Order, 2003 are not applicable to the company. The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor s Report) Order, 2003 are not applicable to the company. Company has not given any guarantees for loans taken by others from banks or financial institutions. In our opinion, the term loans have been applied for the purpose for which they were raised. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment. (xviii) According to the information and explanations given to us, the company has not made preferential allotment of shares during the year. (xix) According to the information and explanations given to us, during the year covered by our audit report, the company has created security in respect of the Bonds issued by the Company. (xx) We have verified the end use of the money raised by public issue as disclosed in Schedule 27 Notes on Accounts forming part of the financial statements. (xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (V. Umamaheswara Rao) Partner Partner Partner M.No M.No M.No For S.N.Nanda & Co. Chartered Accountants For T.R.Chadha & Co. Chartered Accountants (Gaurav Nanda) (Sanjay Gupta) Partner Partner M.No M.No Place : New Delhi Dated : 31 st May, th Annual Report 109

112 EMPLOYEE COST SUMMARY (Rs. million) Description A. Salaries, wages & benefits* (incl.provident Fund and other contributions) 2,618 3,411 4,363 5,789 7,082 7,494 7,590 8,180 8,248 9,568 B. Other Benefits 1. Welfare expenses ,044 1,359 1,352 1,430 1,723 1, Township Educational & school facilities Medical facilities Subsidised transport Social & cultural activities Subsidised canteen Total ( B ) 1,301 1,810 1,799 1,982 2,305 2,540 2,567 2,903 3,251 3,298 Total ( A+B ) 3,919 5,221 6,162 7,771 9,387 10,034 10,157 11,083 11,499 12, Year end number of employees ** 21,407 20,710 20,798 21,265 21,289 21,383 21,408 20,971 21,420 21, Average number of employees 21,320 21,059 20,754 21,032 21,277 21,336 21,396 21,190 21,196 21, Average Salary, wages & benefits per employee per annum (Rs.) 122, , , , , , , , , , Average cost of other benefits per employee per annum (Rs.) 61,023 85,949 86,682 94, , , , , , , Average cost of employees remuneration & benefits per annum (Rs.) 183, , , , , , , , , ,410 * Excluding payment to personnel employed for social amenities ** Excluding BTPS, BCPP and Joint Venture Companies. REVENUE EXPENDITURE ON SOCIAL OVERHEADS FOR THE YEAR ENDED 31st MARCH 2006 (Rs. million) Particulars Township Educational Medical Subsidised Social and Subsidised Total Land Scaping Previous and School facilities Transport Cultural Canteen and Wasteland Year Facilities Activities development 1 Payment to employees Material consumed Rates and taxes Welfare expenses Others including repairs & maintenance Depreciation Sub-total (1 to 6) Less : Recoveries Net expenditure (7-8) Previous Year th Annual Report

113 FUND FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006 Rs. million Current Year Previous Year A. STATEMENT OF SOURCES AND APPLICATION OF FUNDS SOURCES Fund Generated from Operating Activities Proceeds from issue of Share Capital (including premium) (53) Deferred revenue on account of Advance Against Depreciation Interest/ Income on Bonds/Investments received Sale of Investment Dividend received on Investments Proceeds from Long Term Borrowings APPLICATION Expenditure on Fixed Assets Purchase of Investment Investment in Subsidiaries/Joint Ventures Bonds under One Time Settlement Scheme Repayment of Long Term Borrowings Interest Guarantee Commission and other finance charges Development Surcharge Fund Dividend Dividend Tax Net Increase / Decrease in Working Capital B. STATEMENT OF CHANGES IN WORKING CAPITAL Cash and Bank Balances Inventories Trade and Other Receivables (5069) 9048 Trade Payables & Other Liabilities Loans and Advances 3294 (227) Other Current Assets 397 (70305) Net Increase / Decrease in Working Capital C. FUND FROM OPERATIONS Net Profit before tax, Prior Period Adjustments andextra Ordinary Items Adjustment for: Depreciation Interest Guarantee Commission and other finance charges Interest / Income on Bonds / Investment received (19195) (14991) Prior Period Adjustment (Net) (2488) 102 Dividend Income (148) (117) Operating Profit Direct Taxes (Net of income tax recoverable) (2022) (2712) Fund Generated from Operating Activities th Annual Report 111

114 SUBSIDIARY COMPANIES NTPC ELECTRIC SUPPLY COMPANY LIMITED (A wholly owned subsidiary of NTPC Limited) DIRECTORS REPORT To The Members, Your Directors have pleasure in presenting their Fourth Annual Report on the working of the Company for the financial year ended on 31 st March 2006 together with Audited Accounts and Auditors Report. OPERATIONAL REVIEW The activities as Advisor-cum-Consultant under the Accelerated Power Development Reforms Programme (APDRP), an initiative taken by the Ministry of Power (MoP) for power development reforms, have been undertaken by your company. A Memorandum of Understanding was signed between NTPC and Rural Electrification Corporation Ltd. (REC) to carry out rural electrification of villages and households in West Bengal under the Government of India s Accelerated Rural Electrification Program. A quadripartite agreement was signed between West Bengal State Electricity Board, Government of West Bengal, NTPC and REC for the same. Upon merging of the AREP with MoP s programme of rural electrification under the name of Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), the earlier agreement was revised in line with the new scheme. NTPC has also been asked, under this new scheme, to carry out rural electrification works in the states of Chattisgarh, Jharkhand, Orissa and Madhya Pradesh for which quadripartite Agreements have been signed between REC, NTPC, respective State Governments and State Utilities. Under a Supplementary Agreement, your Company has been assigned to take up these works on behalf of NTPC. As per these Agreements, your Company will be executing turnkey works in Kharagpur area (Blocks I and II) of West Midnapur district of West Bengal, five districts of Chattisgarh, eight districts of Jharkhand, twelve districts of Orissa and four districts of Madhya Pradesh. In Kharagpur, where the work is in progress, Distribution Transformers have already been charged in 11 villages. Quadripartite Agreements, along with Supplementary Agreements, have also been signed for consultancy work of post award Project Monitoring and Quality Assurance services during execution of RGGVY works in the states of Madhya Pradesh and Uttaranchal. As per these Agreements, your Company will be providing services for all the three Discoms of Madhya Pradesh and all thirteen districts of Uttaranchal. Your Company has also been providing consultancy works in the areas of Project Monitoring, Quality Assurance and Inspection of APDRP work of Bhopal and Gwalior regions by Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Ltd. Similar assignments of consultancy work in Indore and Ujjain circles, along with eight districts of Western Zone of Madhya Pradesh Paschim Kshetra Vidyut Vitran Company Ltd., was successfully carried out during the financial year. Chandigarh Administration has entrusted the turnkey contract for design, supply, erection, testing and commissioning of 2 x 20 MVA sub-station along with associated HT lines at Manimajra to your company, which is in progress. Your Company has also been entrusted, by the Uttaranchal Power Corporation Ltd., an assignment of carrying out third party inspection of their stock materials. The Company is yet to undertake commercial activities in the are of distribution of power. It is exploring various options in this field. FINANCIAL RESULTS During the current year, the Company has recorded gross revenue of Rs million (previous year Rs million) and a profit before tax of Rs million as compared to the profit before tax of Rs million in the previous year. The profit after tax is Rs million (previous year Rs million) and a sum of Rs million was transferred to General Reserve during the current financial year. DIVIDEND Your Directors have recommended a maiden dividend of Rs.1.36 million, % of the paid up equity share capital of the Company for the financial year The dividend shall be paid after your approval at this Annual General Meeting. PARTICULARS OF EMPLOYEES During the period under review the Company had no employees of the category, which falls, under section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, FIXED DEPOSITS The company has not accepted any fixed deposit during the period ending 31 st March CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING & OUTGO There are no significant particulars, relating to conservation of energy, technology absorption under the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988, as your Company does not own any manufacturing facility. During the period under review there are no foreign exchange earnings and outgo. DIRECTORS Shri C.P.Jain ceased to be Chairman of the Company w.e.f A.N. consequent upon his superannuation from the services of NTPC Limited. The Board places on record its deep appreciation for the valuable contributions made by Shri C.P.Jain. Pursuant to the Articles of Association of the Company, the Chairman & Managing Director of NTPC Limited shall be the ex-officio part-time Chairman on the Board of the Company. On taking over as the Chairman & Managing Director of NTPC Limited, Shri T. Sankaralingam was appointed as Chairman of the Company w.e.f AUDITORS REPORT AND C&AG REVIEW The Comptroller & Auditor General of India (C&AG) has appointed M/s Kanwalia & Company, Chartered Accountants as the Statutory Auditor of the Company for the financial year ending There are no adverse comments, observations or reservations in the auditors report on the accounts of the comapany. C&AG vide letter dated has decided not to review the report of the Auditors on the accounts of the Company for the year ended 31 st March 2006 and as such has no comments to make under Section 619(4) of the Companies Act, A copy of the certificate issued by C&AG in this regard is enclosed as Annex-1. DIRCTORS RESPONSIBILITY STATEMENT As required under Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that: i) in the preparation of annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; ii) the directors had selected such accounting policies and applied them consistently and made judgments 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; iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and iv) the directors had prepared the annual accounts on a going concern basis. ACKNOWLEDGEMENT The Board of Directors wish to place on record their appreciation for the support and co-operation extended by the Ministry of Power, various state governments, various state utilities, various customers, NTPC Ltd., the Auditors, the Bankers and the employees of the Company. For and on behalf of the Board of Directors (T. SANKARALINGAM) CHAIRMAN Place: New Delhi Date: ANNEXURE-I COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF NTPC ELECTRIC SUPPLY COMPANY LIMITED, NEW DELHI FOR THE YEAR ENDED,31 ST MARCH, 2006 The Comptroller and Auditor General of India has decided not to review the report of the Auditors on the accounts of NTPC Electric Supply Company Limited., New Delhi for the year ended 31st March 2006 and as such he has no comments to make under Section 619(4) of the Companies Act, 1956 (Meera Swraup) Place: New Delhi Principal Director of Commercial Audit and Dated: 2 June, 2006 Ex-officio Member Audit Board-III New Delhi SIGNIFICANT ACCOUNTING POLICIES A. Fixed Assets 1. Fixed Assets are shown at historical cost. 2. Intangible assets are recorded at their cost of acquisition. B. Income Recognition 1. Income from consultancy service is accounted for on the basis of actual progress/ technical assessment of work executed, in line with the terms of respective consultancy contracts. 2. Claims for reimbursement of expenditure are recognised as other income, as per the terms of consultancy service contracts. C. Expenditure 1. Depreciation is charged on straight-line method at the rates specified in Schedule XIV of the Companies Act, Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/up to the month in which the asset is available for use/ disposal. 3. Assets costing up to Rs. 5,000/- are fully depreciated in the year of capitalisation. 4. Cost of computer software recognized as intangible assets is amortised on straightline method over a period of legal right to use or 3 years, whichever is earlier. 5. Where the cost of depreciable assets has undergone a change during the year due to increase/decrease in long term liabilities on account of exchange fluctuation, price adjustment, change in duties or similar factors, the unamortised balance of such asset is depreciated prospectively over the residual life determined on the basis of the rate of depreciation. 6. Expenditure on training, recruitment and ex-gratia payments under voluntary retirement scheme are charged to revenue in the year of incurrence. 7. Expenditure on leave travel concession to employees is recognised in the year of availment due to uncertainties in accrual. 8. Pre-paid expenses and prior period expenses/income of items of Rs. 1,00,000/- and below are charged to natural heads of accounts. 9. The liabilities for retirement benefits in respect of gratuity, leave encashment and post-retirement medical benefits are ascertained annually by the Holding Company on actuarial valuation at the year-end. The company provides for retirement benefits in respect of provident fund, gratuity, leave encashment and post-retirement medical benefits as apportioned by the Holding Company th Annual Report

115 NTPC ELECTRIC SUPPLY COMPANY LIMITED BALANCE SHEET AS AT 31ST MARCH 2006 Rs. Sch. No SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital Reserves & Surplus TOTAL APPLICATION OF FUNDS Fixed Assets 3 Gross Block Less: Depreciation Net Block CURRENT ASSETS, LOANS AND ADVANCES Sundry Debtors Cash and Bank Balances Other Current Assets Loans & Advances LESS : CURRENT LIABILITIES AND PROVISIONS Liabilities Provisions Net Current Assets Deferred Tax Assets Miscellaneous Expenditure (to the extent not written off or adjusted) TOTAL Notes on Accounts 16 Schedules 1 to 16, accounting policies and cashflow statement form integral part of Accounts. As per our attached report of even date For Kanwalia & Co. Chartered Accountants For & on behalf of the Board of Directors (B. K. Kanwalia) (A. K. Singhal) (T. Sankaralingam) Partner Director Chairman Place: New Delhi Dated: 24 th May, 2006 NTPC ELECTRIC SUPPLY COMPANY LIMITED SCHEDULES FORMING PART OF BALANCE SHEET NTPC ELECTRIC SUPPLY COMPANY LIMITED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006 Rs. Sch. No. Current Year Previous Year INCOME Sales Other Income TOTAL EXPENDITURE Employees Remuneration and Benefits Administration and Other Expenses Depreciation Finance Charges TOTAL Profit before tax Provision for - Current Tax Fringe Benefit Tax Deferred Tax (6253) Profit after tax Balance brought forward (62903) Balance available for appropriation Transfer to General Reserve Proposed Dividend Tax on Proposed Dividend Balance carried to Balance sheet Earning per Share (Equity shares, face value Rs.10/- each) - Basic and Diluted For Kanwalia & Co. Chartered Accountants For & on behalf of the Board of Directors (B K Kanwalia) (A. K. Singhal) (T. Sankaralingam) Partner Director Chairman Place: New Delhi Dated: 24 th May, 2006 SCHEDULE 1 CAPITAL Rs Authorised 10,000,000 equity shares of Rs. 10/- each (Previous year 10,000,000 equity shares of Rs. 10/- each) Issued, Subscribed and Paid-Up 80,910 equity shares of Rs. 10/- each (Previous year 80,910 equity shares of Rs. 10/- each) are held by the holding company, NTPC Ltd. and its nominees SCHEDULE 2 RESERVES AND SURPLUS Rs General Reserve As per last Balance Sheet - - Add: Transfer from Profit & Loss Account Surplus, balance in Profit & Loss Account SCHEDULE 3 FIXED ASSETS Rs. GROSS BLOCK DEPRECIATION NET BLOCK As at Deductions / As at As at For the Deductions / Up to As at As at Additions Adjustments year Adjustments Furniture, Fixtures & Other Office Equipments EDP & WP Machines Intangible Assets - Software Total Previous year th Annual Report 113

116 Rs SCHEDULE 4 SUNDRY DEBTORS Debts outstanding over six months - Unsecured, considered good Other debts - Unsecured, considered good SCHEDULE 5 CASH AND BANK BALANCES Cash on hand (includes cheques & drafts on hand ) Balances with scheduled banks - Current Account Term Deposit Account Cheques & Drafts on hand SCHEDULE 6 OTHER CURRENT ASSETS Interest accrued on Short Term Deposits with Indian banks SCHEDULE 7 LOANS & ADVANCES ADVANCES Employees - Unsecured, considered good Others - Unsecured, considered good DEPOSITS Advance tax deposit & tax deducted at source Less: Provision SCHEDULE 8 CURRENT LIABILITIES Sundry Creditors For goods and services Deposits, retention money from contractors and others Advances from customers and others Other liabilities Amount received against deposit works Amount payable to NTPC Ltd SCHEDULE 9 PROVISIONS Proposed Dividend As per last Balance Sheet - - Additions during the year Amounts used during the year Tax on Proposed Dividend As per last Balance Sheet - - Additions during the year Amounts used during the year SCHEDULE 10 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Preliminary (Incorporation) Expenses Balances as per last Balance Sheet Additions during the year - - Less: Deductions/Adjustments SCHEDULE 11 SALES Consultancy, Project Management and Supervision Fees Current Year Previous SCHEDULE 12 OTHER INCOME Reimbursibles billed to clients Interest from Indian Banks (Gross) (Tax deducted at source Rs , previous year Rs. 5672) SCHEDULE 13 EMPLOYEES REMUNERATION AND BENEFITS Salaries, wages, bonus, allowances & benefits Contribution to provident and other funds Welfare expenses SCHEDULE 14 ADMINISTRATION AND OTHER EXPENSES Power Charges Rent Repairs and Maintenance Building Others Insurance Training and Recruitment Expenses Communication Expenses Traveling Expenses Tender Expenses Less: Receipt from sale of tenders Payment to Auditors Audit Fees Tax Audit Fees In other capacity Entertainment Expenses Expenses for Transit Camp Prefeasibility Study Expenses Preliminary Expenses Written Off Books and periodicals Professional charges & consultancy fees EDP hire and other charges Printing and stationary Miscellaneous expenses SCHEDULE 15 FINANCE CHARGES Bank Charges SCHEDULE 16 Notes on Accounts 1) Related Party Disclosures a. The Company is a wholly owned subsidiary of NTPC Ltd. (formerly National Thermal Power Corporation Limited). b. Key Management Personnel (appointed by the Holding Company, i.e. NTPC Ltd.) Shri C. P. Jain Chairman Shri K. K. Sinha Director Ceased to be Director w.e.f. 1 st April 2005 Shri P. Narasimharamulu Director Ceased to be Director w.e.f. 1 st April 2005 Shri R. S. Sharma Director Shri R. K. Jain Director Shri A. K. Singhal Director Appointed w.e.f. 1 st April 2005 Shri G. K. Agarwal Director Appointed w.e.f. 1 st April 2005 c. The Key Management Personnel are on appointment to the Company on parttime basis from the Holding Company, NTPC Ltd. The Company pays no remuneration to the key management personnel as their remuneration (being full-time employees of the Holding Company) is paid by NTPC Ltd. 2) The Company is operating in a single segment, that is providing consultancy, project management and supervision services. 3) All the employees of the Company are on secondment from the Holding Company, i.e. NTPC Ltd. 4) Earning per share: The elements considered for calculation of Earnings per share (Basic & Diluted) are as under: Rs th Annual Report

117 Current Year Previous Year Net Profit after Tax used as numerator (Rupees) Weighted average number of equity shares used as denominator Earning per share (Rupees) Basic & Diluted Face value per share (Rupees) ) Disclosure regarding Operating Leases: The company s significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices and transit camps. These leasing arrangements are usually renewable on mutually agreed terms but are not non-cancellable. Employees remuneration and benefits include Rs.52,10,555/- (Previous year Rs. 38,80,146/-) towards lease payments, net of recoveries, in respect of premises for residential use of employees. Lease payments in respect of premises for offices and transit camps are shown as Rent in Schedule 13 - Administration and other expenses. 6) The item-wise details of Deferred Tax Asset are as under: Rs i) Difference of Book depreciation and Tax 3,530 - depreciation ii) Provisions disallowed for tax purposes 2,723 - Deferred Tax Asset 6,253 - The net increase in the deferred tax asset of Rs. 6,253/- (Previous year decrease Rs. 35,191/-) has been credited to Profit and Loss Account. 7) Previous year s figures have been regrouped/rearranged wherever necessary. For Kanwalia & Co. Chartered Accountants For & on behalf of the Board of Directors (B. K. Kanwalia) (A. K. Singhal) (T. Sankaralingam) Partner Director Chairman Place: New Delhi Dated: 24 th May, 2006 INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY S GENERAL BUSINESS PROFILE: 1. Registration Detail State Code: Registration No. U D L G O I Date Month Year Balance Sheet Date Capital Raised during the year (Rs. in Thousands) Public Issue Right issue N I L N I L Bonus Issue Private Placement N I L N I L 3. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities Total Assets Source of Funds Paid up Capital Reserve & Surplus Secured Loans Unsecured Loans N I L N I L Deferred Tax Liability N I L Application of Funds Net Fixed Assets Investments N I L Net Current assets Deferred Tax Asset Misc. Expenditure Accumulated Losses N I L N I L 4. Performance of Company (Amount in Rs. Thousands) Turnover Total Expenditure Profit Before Tax Profit After Tax Earning Per Share in Rs. Dividend Rate (%) Generic name of three principal products/services of Company (As per monetary terms) Item Code No. N.A. (ITC Code) Product Description Consultancy Services For Kanwalia & Co. Chartered Accountants For & on behalf of the Board of Directors (B.K. Kanwalia) (A. K. Singhal) (T. Sankaralingam) Partner Director Chairman Place: New Delhi Date : 24 th May, 2006 CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006 Rs. Current Year Previous Year A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) before tax and Prior Period Adjustments Adjustment for: Depreciation Preliminary Expenses written off Interest Received ( ) (27123) Operating Profit before Working Capital Changes Adjustment for: Trade & Other Receivables ( ) ( ) Trade Payables & Other Liabilities Other Current Assets - - Loans & Advances (19730) Cash generated from operations Direct Taxes Paid Net Cash from Operating Activities - A B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (733842) - Interest Received Net cash flow from Investing Activities - B C. CASH FLOW FROM FINANCING ACTIVITIES Net Cash flow from Financing Activities - C - - D. OTHERS - - Net Increase/Decrease in Cash & Cash equivalents (A + B + C + D) Cash & cash equivalents (Opening balance) Cash & cash equivalents (Closing balance) Notes:Cash & Cash equivalents consist of Cash in Hand and Balance with Banks. Previous year s figures have been regrouped/rearranged wherever necessary As per our Report of even date For Kanwalia & Co. Chartered Accountants For & on behalf of the Board of Directors (B.K. Kanwalia) (A.K. Singhal) (T. Sankaralingam) Partner Director Chairman Place: New Delhi Dated: 24 th May, th Annual Report 115

118 AUDITORS REPORT To the Members of NTPC ELECTRIC SUPPLY COMPANY LTD. 1. We have audited the attached Balance Sheet of NTPC Electric Supply Company Ltd. (a wholly owned subsidiary of NTPC Ltd.) as at 31 st March 2006, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the Auditing Standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor s Report) Order, 2003 (as amended) issued by the Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in annexure referred to in para 3 above, we report that: (a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit; (b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (e) Being a Government company, pursuant to the Notification No. GSR 829(E) dated issued by Government of India, provisions of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956, are not applicable to the company; (f) In our opinion, and according to the best of our information and according to the explanations given to us, the said accounts read with the Accounting Policies and Notes thereon in Schedule 16, give the information required by the Companies Act, 1956 in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India: a in the case of Balance Sheet, of the state of affairs of the company as at 31st March 2006, b. in the case of Profit and Loss Account, of the profit for the year ended on that date, and c. in the case of Cash Flow statement, of the cash flows for the year ended on that date. For Kanwalia & Co. Chartered Accountants (B.K.Kanwalia) Partner Membership No.: 7719 Place: New Delhi Date : 24 th May, 2006 ANNEXURE TO THE AUDITORS REPORT Referred to in paragraph 3 of our report of even date. (i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) All the assets have been physically verified by the management during the year and there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No discrepancies were noticed on such verification. (c) No fixed assets have been disposed off during the year. (ii) (a) The company does not have inventory. Accordingly, the provisions of clause 4(ii) (b) & (c) of the Companies (Auditors Report) Order, 2003 are not applicable to the company. (iii) (a) The Company has not granted any loans secured or unsecured to any company, firm or other party covered in the register maintained under section 301 of the Companies Act In view of (iii) (a) above, the clauses (iii) (b), (iii) (c) and (iii) (d) are not applicable. (e) The Company has not taken any loans secured or unsecured from any company, firm or other party covered in the register maintained under section 301 of the Companies Act In view of (iii) (e) above, the clauses (iii) (f) and (iii) (g) are not applicable. (iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the company and nature of its business for purchase of fixed assets and for sale of services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control systems. (v) (a) The company has not carried out any transactions required to be entered in the register maintained under section 301 of the Companies Act (b) In view of clause (v) (a) above, the clause (v) (b) is not applicable. (vi) The Company has not accepted deposits from the public. (vii) The provisions of the Order related to internal audit are not applicable to the company as the paid up capital plus reserves of the company are less than Rs. 50 lac at the commencement of the year under audit and the average annual turnover for the three consecutive financial years immediately preceding the year under audit being less than Rs. 5 crore. However, in our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) The maintenance of cost records under section 209(1) (d) of the Companies Act 1956 is not applicable to the company, as the company has not commenced any activities related to distribution of electricity. (ix) (a) The Company is regular in depositing the statutory dues like Income Tax, Fringe Benefit Tax, Service Tax with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, wealth tax, sales tax, service tax, customs duty, excise duty and cess were in arrears, as at 31 st of March 2006 for a period of more than six months from the date they became payable. The provisions related to provident fund, investor education and protection fund and employees state insurance etc. along with the related provisions of clause (ix) (b) are not applicable to the company. (b) According to the information and explanation given to us, there are no dues of sales tax, income tax, customs duty, wealth tax, excise duty and cess, which have not been deposited on account of any dispute. (x) The company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year. (xi) Not applicable as the company has not taken any loans from any financial institution, bank or by way of issue of debentures. (xii) The company has not granted any loans or advances. (xiii) The company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor s Report) Order, 2003 are not applicable to the company. (xiv) The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor s Report) Order, 2003 are not applicable to the company. (xv) The company has not given any guarantees for loans taken by others from banks or financial institutions. (xvi) The company has not raised any term loams. (xvii)the company has not raised any short term or long-term funds. (xviii)the company has not made preferential allotment of shares to companies, firms or other parties listed in the registers maintained under Section 301 of the Companies Act, (xix) The company has not issued any debentures. (xx) The company has not raised money through a public issue. (xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. For Kanwalia & Co. Chartered Accountants (B.K.Kanwalia) Place : New Delhi Partner Date : 24 th May, 2006 Membership No.: th Annual Report

119 NTPC HYDRO LIMITED (A wholly owned subsidiary of NTPC Limited) DIRECTORS REPORT To, The Members, Your Directors have pleasure in presenting their fourth Annual Report on the performance of the Company for the financial year ended 31 st March 2006 together with the Audited Accounts and Auditors Report thereon. OPERATIONAL REVIEW Your Company s maiden venture is Lata-Tapovan Hydro Electric Power Project (3x57 MW) in the State of Uttaranchal. Detailed Project Report (DPR) of this project has been completed. Techno-Economic Clearance (TEC) from Central Electricity Authority (CEA) and Stage I & II clearance form Ministry of Environment & Forest has also been received. The project is scheduled for commissioning by March, Annual Generation from this project is estimated as approx. 869 MU of this 12% is earmarked as free power to the State of Uttranchal. The DPR of Rammam Stage-III Hydro Electric Power Project (3x40MW), in the State of West Bengal, has been completed and submitted to CEA for obtaining TEC. Ministry of Environment & Forest has also accorded stage-i & II approval. The implementation activities of this project are being initiated. The project is scheduled for commissioning by March Annual Generation from this project is estimated as approx MU out of which 85% of the power generated from this project shall be given to WBSEB and balance 15% shall rest with the Company. FINANCIAL REVIEW During the financial year ending 31 st March 2006 the company has incurred expenditure of Rs 69 million, out of which Rs. 36 million has been capitalized. The Company has incurred loss of Rs. 33 million during the financial year as against loss of Rs. 30 million during the last year. In addition, Rs. 2 million were incurred on fixed assets during the financial year. PARTICULARS OF EMPLOYEES There being no employee in the Company with earning over the specified amount, the particulars of employees as prescribed under Sec. 217(2A) of Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are not required to be given. FIXED DEPOSITS The Company has not accepted any fixed deposit during the period ending 31 st March, CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING & OUTGO Since the projects undertaken by the Company are in implementation stage, there are no significant particulars, relating to conservation of energy, technology absorption, under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rule,1988. During the period under review the Company had no earning in foreign exchange. However, an amount of Rs. 1,57,283 was spent in equivalent foreign currency on foreign training. AUDIT COMMITTEE As per the provisions of Section 292A of the Companies Act, 1956, the Board of Directors has constituted an Audit committee comprising of S/Shri T.Sankaralingam, A.K.Singhal and G.K.Agarwal, Directors. DIRECTORS Shri C.P.Jain ceased to be Director of the Company w.e.f. 31 st March 2006 consequent upon his superannuation from the services of NTPC Limited. Your Board places on record their deep appreciation for the valuable services rendered by Shri C.P. Jain during his tenure. Further, consequent upon appointment of Shri T.Sankaralingam as the Chairman & Managing Director of NTPC Limited, he was appointed as the Chairman of the Company. AUDITORS REPORT The Comptroller and Auditor General of India (C&AG) vide letter dated 30 th August, 2005 has appointed M/s S. R. Kapoor & Company, Chartered Accountants as Statutory Auditor of the Company for the financial year There is no adverse comment, observation or reservation in the auditors report on the accounts of the Company. COMPTROLLER & AUDITOR GENERAL REVIEW C&AG vide letter dated 7 th June, 2006 has decided not to review the report of the Auditors on the accounts of the company for the year ended 31 st March 2006 and as such has no comments to make under Section 619(4) of the Companies Act, A copy of the letter issued by C&AG in this regard is at Annex-I. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956 your Directors confirm that: i) in the preparation of the Annual Accounts for the financial year ended 31 st March 2006, the applicable accounting standards have been followed alongwith proper explanation relating to material departures; ii) the directors have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31 st March 2006 and of the loss of the company for the said period; iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and iv) the directors had prepared the annual accounts for the financial year ended 31 st March 2006, on going concern basis. ACKNOWLEDGEMENT The Board of Directors wish to place on record their appreciation for the support and co-operation extended by the NTPC Limited, the holding Company, Cental Electricity Authority and other agencies of Govt. of India/Govt. of Uttranchal/ Govt. of West Bengal, Auditors and the Bankers of the Company. For and on behalf of the Board of Directors Place: New Delhi (T. Sankaralingam) Dated: Chairman ANNEXURE-I COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF NTPC HYDRO LIMITED, NEW DELHI FOR THE YEAR ENDED,31 ST MARCH, 2006 The Comptroller and Auditor General of India has decided not to review the report of the Auditors on the accounts of NTPC Hydro Limited, New Delhi for the year ended 31st March 2006 and as such he has no comments to make under Section 619(4) of the Companies Act, 1956 Place: New Delhi Dated: 7 th June, 2006 (Meera Swraup) Principal Director of Commercial Audit and Ex-officio Member Audit Board-III New Delhi SIGNIFICANT ACCOUNTING POLICIES 1. FIXED ASSETS 1.1 Fixed Assets are shown at historical cost. 1.2 Intangible assets are recorded at their cost of acquisition. 1.3 Capital expenditure on assets not owned by the Company is reflected as a distinct item in Capital Work-in-Progress till the period of completion and thereafter in the Fixed Assets. 1.4 Deposits, payments/liabilities made provisionally towards compensation, rehabilitation and other expenses relatable to land in possession are treated as cost of land. 2. CAPITAL WORK-IN-PROGRESS 2.1 Incidental Expenditure during Construction (net) including corporate office expenses (allocated to the projects pro-rata to the annual capital expenditure) for the year is apportioned to Capital Work-in-Progress on the basis of accretions thereto. 2.2 Deposit work/ cost plus contracts are accounted for on the basis of statements of account received from the contractors. 3. PROFIT AND LOSS ACCOUNT EXPENDITURE 3.1 Depreciation is charged on straight line method at the rates specified in Schedule XIV of the Companies Act, Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/up to the month in which the asset is available for use/disposal. 3.3 Assets costing up to Rs. 5000/- are fully depreciated in the year of capitalization. 3.4 Capital expenditure referred to in Para 1.3 is amortised over a period of 4 years, from the year in which the first unit of project concerned comes into commercial operation and thereafter from the year in which the relevant asset becomes available for use. 3.5 Expenses on training are charged to revenue in the year of incurrence. 3.6 Expenditure on Leave Travel Concession to employees is recognized in the year of availment due to uncertainties in accrual. 3.7 Prepaid expenses and prior period expenses / income of items of Rs. 100,000/-and below are charged to natural heads of accounts. 4. RETIREMENT BENEFITS The liabilities for retirement benefits in respect of gratuity, leave encashment and Post Retirement Medical Scheme are ascertained annually by the holding company on actuarial valuation at the year end. The company provides for retirement benefits in respect of provident fund, gratuity, leave encashment and Post Retirement Medical Scheme as apportioned by the holding company. 30th Annual Report 117

120 NTPC HYDRO LIMITED BALANCE SHEET AS AT 31 ST MARCH 2006 Rs. SCHEDULE As at As at NO SOURCES OF FUNDS Capital 1 100,000,000 48,121, ,000,000 48,121,100 APPLICATION OF FUNDS Fixed Assets Gross Block 2 5,309,935 3,501,732 Less: Depreciation 802, ,918 Net Block 4,507,015 2,918,814 Capital Work In Progress 3 35,705, ,063 Construction Stores and Advances 4 1,194,698-41,407,532 3,580,877 Current Assets,Loans and Advances Cash and Bank balances 5 2,879,877 1,328,901 Loans and Advances 6 330, ,928 3,210,088 1,478,829 Less: Current Liabilities and Provisions Liabilities 7(a) 25,708,351 4,651,248 Provisions 7(b) 49,305-25,757,656 4,651,248 Net Current Assets (22,547,568) (3,172,419) Profit & Loss Account 81,140,036 47,712,642 TOTAL 100,000,000 48,121,100 Notes on Accounts 12 Schedules 1 to 12, significant accounting policies form integral part of accounts. For and on behalf of Board of Directors As per our report of even date For S.R. Kapur & Co. Chartered Accountants (D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman Place : New Delhi Dated: 25 th May 2006 NTPC HYDRO LIMITED SCHEDULES - FORMING PART OF ACCOUNTS Rs. As at As at SCHEDULE 1 CAPITAL AUTHORISED 25,000,000 Equity shares of Rs. 10/- each 250,000, ,000,000 (Previous year 10,000,000 Equity shares of Rs.10/- each) NTPC HYDRO LIMITED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2006 Rs. SCHEDULE Current Year Previous Year NO. EXPENDITURE Employees remuneration and benefits 8 10,684,979 10,870,779 Administration & other expenses 9 22,474,566 19,187,622 Depreciation 91, ,006 Finance charges 10 4,369 1,821 Total Expenditure 33,254,980 30,467,227 Loss before tax 33,254,980 30,467,227 Provision for Fringe Benefit Tax 577,494 - Less : FBT Allocated to IEDC (405,080) - Provision for Fringe benefit tax (Net) 172,414 - Loss after tax 33,427,394 30,467,227 Balance brought forward 47,712,642 17,245,415 Balance carried to Balance Sheet 81,140,036 47,712,642 Incidental Expenditure During Construction 11 Earning per share(basic/diluted) (5.71) (13.85) For and on behalf of Board of Directors As per our report of even date For S.R. Kapur & Co. Chartered Accountants (D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman Place : New Delhi Dated: 25 th May 2006 SCHEDULE 1 (Contd.) Rs. As at As at ISSUED, SUBSCRIBED AND PAID-UP 10,000,000 Equity shares of Rs. 10/- each 100,000,000 45,621,100 fully paid up (Previous year 4,562,110 Equity shares of Rs.10/- each fully paid up) held by the holding company, NTPC Limited and its nominees Share Capital Deposit - 2,500, ,000,000 48,121,100 SCHEDULE 2 FIXED ASSETS GROSS BLOCK (AT COST) DEPRECIATION NET BLOCK Rs. Fixed Assets As at Additions Deductions/ As on As at For the Deductions/ Upto As at As at Adjustments Year Adjustments Furniture,fixtures & other office 1,770, , ,961 1,716, , ,724 97, ,601 1,318,069 1,379,433 equipments EDP-Equipments 1,116,444 1,223,475 92,198 2,247, , ,601 3, ,996 1,883, ,313 Communication Equipments 55,500 18,784 34,284 40,000 42,304 3,739 6,043 40,000-13,196 Plant & Machinery - 11,640-11, ,317 - Capital expenditure on Assets 558, ,032-1,293, ,293, ,872 not owned by the Company 3,501,732 2,239, ,443 5,309, , , , ,920 4,507,015 2,918,814 Previous Year 1,216,459 2,312,192 26,919 3,501, , ,006 1, ,918 2,918,814 1,038,843 Depreciation for the yare is allocated as given below: Current Year Previous Year Charged to Profit & Loss Account 91,066 - Transferred to IEDC 236, , th Annual Report

121 SCHEDULE 3 CAPITAL WORK-IN-PROGRESS Rs. Fixed Assets As at Capitalise As at Additions during the Year Capital expenditure on Assets 662,063 72, ,032 - not owned by the company Survey, investigation, consultancy - 6,675,222-6,675,222 and supervision charges incidental Expenditure during - 29,030,597-29,030,597 construction 662,063 35,778, ,032 35,705,819 Previous Year - 662, ,063 SCHEDULE 4 CONSTRUCTION STORES AND ADVANCES Rs. As at As at Advance for Captial Expenditure 1,194,698 - Unsecured, considered good 1,194,698 - SCHEDULE 5 CASH & BANK BALANCES Balances with scheduled banks Current Account 2,879,877 1,328,901 2,879,877 1,328,901 SCHEDULE 6 LOANS AND ADVANCES Advances recoverable in cash or in kind or for value to be received Unsecured, considered good Employees 43,051 97,800 Others 287,160 52, , ,928 SCHEDULE 7 (a) CURRENT LIABILITIES Sundry Creditors for capital expenditure other than small scale undertakings 3,250,880 - Sundry Creditors for goods and services other than small scale undertakings 1,405,781 2,240,025 Amount payable to NTPC Ltd. 18,738,911 1,774,648 Deposits, retention money from contractors and others 1,906, ,307 Less: Investments held as security (76,810) (24,450) 25,225,017 4,249,530 Other Liabilities 483, ,718 25,708,351 4,651,248 SCHEDULE 7 (b) PROVISIONS Provisions for Fringe Benefit tax 577,494 - Less: Advance tax F.B.T. 528,189-49,305 - SCHEDULE 8 EMPLOYEES REMUNERATION AND BENEFITS Rs. Current Year Previous Year Employees remuneration and benefits Salaries,wages,bonus,allowances & benefits 22,787,328 8,126,256 Contribution to provident and other funds 2,422, ,815 Welfare Expenses 3,488,405 1,867,708 28,698,660 10,870,779 Less: Transferred to incidental expenditure during construction - Schedule 11 18,013,681-10,684,979 10,870,779 SCHEDULE 9 Rs. ADMINISTRATION & OTHER EXPENSES Current Year Previous Year Power Charges 188,063 58,332 Water Charges 6,859 5,622 Rent 3,584,668 1,785,932 Repairs & Maintenance Building 437, ,317 Others 1,649,956 - Others Insurance 4,791 - Environment Protection Cess 400,000 - Training & Recruitment Expenses 458, ,356 Communication Expenses 693, ,718 Inland Travel 4,336, ,063 Remuneration to Auditors Audit Fee 22,040 16,530 In Other Capacity 21,530 21,820 Publicity Expenses 37,000 - Entertainment Expenses 397, ,162 Transit Hostel Expenses 269, ,647 Books and Periodicals 21,381 20,748 Professional charges and consultancy fees 354,995 15,057 Legal Expenses 979,500 15,114 EDP Hire and other charges 319, ,478 Printing and Stationery 181,285 55,864 Survey, Investigaion, Cosultancy and Supervision Charges 17,012,328 13,177,615 Miscellaneous Expenses 1,466,688 1,148,247 32,844,630 19,187,622 Less: Transferred to incidental expenditure during construction - Schedule 11 10,370,064-22,474,566 19,187,622 SCHEDULE 10 FINANCE CHARGES Rs. Bank Charges 9,820 1,821 Less: Transferred to incidental expenditure during construction - Schedule 11 (5,451) - 4,369 1,821 SCHEDULE 11 INCIDENTAL EXPENDITURE DURING Rs. CONSTRUCTION Current Year Previous Year A. Employees remuneration and othre benefits Salaries,wages, allowances & benefits 14,869,569 - Contribution to provident and other funds 1,582,605 - Welfare Expenses 1,561,507 - Total (A) 18,013,681 - B. Othre Expenses Power Charges 132,505 - Water Charges 5,087 - Rent 2,442,400 - Repairs & Maintenance 1,326,264 Hiring of Vehicles 709,915 - Communication Expenses 462,330 - Travelling Expenses 2,665,249 - Advertainment and Publicity 32,000 - Entertainment Expenses 260,707 - Guest House Expenses 165,614 - Books and Periodicals 14,215 - Professional charges and consultancy fees 251,759 - Legal Expenses 979,000 - EDP Hire and other charges 218,527 - Printing and Stationery 102,911 - Miscellaneous Expenses 160,906 - Auditor s Remuneration in other capacity 38,060 Transport Vehicle Running Expenses 2,315 - Subscription to trade & other association Water Cess & Environment Protection Cess 400,000 - Total (B) 10,370,064 - C. Depreciation 236,321 - D. Interest & Finance Charges Capitalised Bank Charges 5,451 - Total (D) 5,451 - E. Tax provision on IEDC Income 405,080 Total (E) 405,080 Total (A+B+C+D+E) 29,030,597-30th Annual Report 119

122 NTPC HYDRO LIMITED SCHEDULE 12 NOTES ON ACCOUNT 1. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs lakhs. 2. Related Party Disclosures i) The Company is a wholly owned subsidiary of NTPC Ltd. ii) Key Management Perosnnel (appointed by the Holding Company i.e. NTPC Ltd.) Shri C.P. Jain Chairman * Shri T. Sankaralingam Director Shri A.K. Singhal Director Shri G.K. Agarwal Director *superannuated on iii) The Key Management Personnel are on appointment to the Company on part-time basis from the Holding Company NTPC Ltd. Company pays no remuneration to the key management personnel as their remuneration (being full-time employees of the Holding Company) is paid by NTPC Ltd. 3. Earning Per Share The elements considered for calculation of Earning Per Share (Basic and Diluted) are as under : Current Period Previous Year as on as on Net Loss used as numerator 33,427,394 30,467,227 Weighted Average number of equity 5,855,556 2,200,196.6 shares used as denominator Earning Per Share (Rupees) - Basic and (5.71) (13.85) Diluted Face value per share (Rupees) The company has capitalized incidental expenses during construction period w.e.f. 2nd August, 2005 relating to Lata Tapovan Project and Corporate Office as the Detailed Project Report (DPR) has been approved by the Board of Diretors in their meeting held on 2nd August, Further Rammam Project was also approved by the Board of Directors on 21st March, 2006 and accordingly incidental expenses during construction has been capitalized and Corporate Office expenses has been allocated to Lata Tapovan Project and Rammam Project in the ratio of capital expenditure of the projects. 5. Cost of building and trees has not been considered for working out the estimated amount of the contract remaining to be executed on capital account as the amount thereof shall be ascertained only after physical possession of the land. 6. Previous year s figures have been regrouped/rearranged wherever necessany. INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY S GENERAL BUSINESS PROFILE I Registration Details State Code : Registration No. U D L G O I II Balance-sheet date Capital Raised during the year (Rs. In Thousands). Public Issue N I L Rights Issue N I L Bonus Issue N I L Private Placement III Position of Mobilization and Deployment of Funds (Amount in Rs. Thousands) Total liabilities Total Assets Paid up Capital Capital Deposit Account N I L Secured Loans Reserve & Surplus N I L N I L Deferred Tax Liability Unsecured Loans N I L N I L Application of Funds Net Fixed Assets Investments N I L Net Current Assets Misc. Expenditure N I L Accumulated Losses IV. Performance of Company (Rs. in Thousands) Turnover (Including Other Income) Total Expenditure Loss before tax Loss after tax Earning per share in Rs. Dividend Rate % N I L V. Generic Names of Three principal Products/Services of Company (As per monetary terms) Product Description: Item Code G E N E R A T I O N O F E L E C T R I C I T Y N A For and on behalf of Board of Directors In terms of our report of even date For S.R. Kapur & Co. Chartered Accountants (D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman Place : New Delhi Dated: 25 th MAY 2006 NTPC HYDRO LIMITED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006 Rs. Current Year Previous Year A.CASH FLOW FROM OPERATING ACTIVITIES Net Loss (33,254,980) (30,467,227) Adjustment for: Depreciation 91, ,006 91,066 Operating Loss before Working (33,163,914) (30,060,221) Capital Changes Adjustment for: Trade Payables and Other Liabilities 21,106,408 2,656,211 Loans and Advances (180,283) (117,083) 20,926,125 2,539,128 Cash generated from operations (12,237,789) (27,521,093) Direct Taxes Paid (172,414) - Net Cash from Operating (12,410,203) (27,521,093) Activities-A B.CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets & (37,917,721) (2,949,040) CWIP & Const. Advance (50,327,924) (30,470,133) th Annual Report

123 Rs. Current Year Previous Year C.CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issuance of 51,878,900 30,573,000 share capital 51,878,900 30,573,000 Net Increase in Cash and 1,550, ,867 Cash equivalents(a+b+c) Cash and cash equivalents (Opening Balance) 1,328,901 1,226,034 Cash and cash equivalents (Closing Balance) 2,879,877 1,328,901 As per our report of even date For and on behalf of Board of Directors For S.R. Kapur & Co. Chartered Accountants (D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman Place : New Delhi Dated: 25 th May 2006 AUDITORS REPORT To the Members of NTPC Hydro Limited New Delhi 1. We have audited the attached Balance Sheet of NTPC HYDRO LIMITED, as at 31 st March, 2006, the Profit and Loss Account and also the Cash Flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2 We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor s Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to above, we report that:- i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. ii. In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books. iii. The Balance Sheet, Profit & Loss Account and Cash Flow statement dealt with by this report are in agreement with the books of account. iv. In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies act, 1956; v. We have been informed that the provisions of section 274(1)(g) of the Companies Act, 1956 are not applicable to the directors of the Company, pursuant to Circular No. 8/2002 dated 22 nd March, 2002 issued by Department of Company Affairs, Government of India as the company is wholly owned subsidiary of the Government Company. vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India; a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; b) in the case of the Profit and Loss Account, of the loss for the year ended on that date; and c) in the case of the Cash Flow statement, of the cash flow for the year ended on that date. for S.R. Kapur & Co. Chartered Accountants Place : New Delhi (D.K. Gupta) Dated: 25 th May 2006 Partner Membership No Annexure referred in paragraph 3 of Auditors Report to the Members of NTPC HYDRO LIMITED on the accounts for the year ended on 31 st March, 2006 i) a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b) All fixed assets have been physically verified by the management during the year which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification. c) In our opinion and according the information and explanations given to us no substantial part of fixed assets of the company have been disposed off during the year. ii) As the company has not purchased / sold goods during the year nor is there any opening stock, requirement of reporting on physical verification of stocks or maintenance of inventory records is not applicable. iii) The company has neither taken nor granted loans, secured or unsecured from/ to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act Accordingly paragraphs of clauses 4(iii)(b), (c) & (d) of the Companies Auditor s Report Order 2003 are not applicable. iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of fixed assets. The company has not made any purchase / sale. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control systems. v) a) According to the information and explanations given to us, we are of the opinion that the transactions that needed to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements during the year have been made at prices which are reasonable though company has made reimbursements only. vi) vii) According to the information and explanations given to us, the company has not accepted deposits under the provisions of section 58A & 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules In our opinion, the company has an internal audit system commensurate with the size and nature of its business. viii). The Central Government has prescribed the maintenance of cost records for Electricity Industry under section 209 (l)(d) of the Companies Act, As the company has not yet started its commercial production, clause 4(viii) of the Companies Auditor s Report Order, 2003 is not applicable. ix) (a) The company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it. (b) (c) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, sales tax, wealth-tax, service tax, customs duty, excise duty and cess were in arrears. According to the information and explanation given to us, there are no dues of sales tax, income tax, customs duty, wealth tax, excise duty and cess which have not been deposited on account of any dispute. x) As the company has been registered for a period of less than five years, the provisions of clause 4(x) of the Company (Auditor s Report) Order 2003 is not applicable. xi) According to the information and explanations given to us, the company has not taken loans from financial institution, banks or debenture holders. xii) The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures, and other securities. xiii) The company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor s Report) Order, 2003 is not applicable to the company. xiv) The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditor s Report) Order, 2003 is not applicable to the company. xv) The company has not given any guarantee for loans taken by others from banks or financial institutions. xvi) The company has not taken term loans during the year. xvii) The company has not raised short term or long term funds during the year. xviii) According to the information and explanations given to us, the company has made preferential allotment of shares to NTPC Limited holding company, covered in the register maintained under section 301 of the Companies Act, In our opinion, the price at which shares have been issued is not prejudicial to the interest of the company. xix) The Company has not issued debentures during the period covered by our audit. xx) The company has not raised money by public issue. xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. Place : New Delhi Dated: 25 th May 2006 for S.R. Kapur & Co. Chartered Accountants (D.K. Gupta) Partner Membership No th Annual Report 121

124 NTPC VIDYUT VYAPAR NIGAM LIMITED (A wholly owned subsidiary of NTPC Limted) DIRECTORS REPORT To the Members, Your Directors have pleasure in presenting the fourth Annual Report on the working of the Company for the financial year ended on 31 st March 2006 together with Audited Statement of Accounts, Auditors Report and Review by the Comptroller & Auditor General of India for the reporting period. FINANCIAL RESULTS (Amount in Rs.) Year ended Year ended 31 st March, st March, 2005 Income/Revenue 444,13,91,654 5,99,23,60,451 Profit before Tax 5,06,74,996 9,10,28,368 Less: Current Tax 1,69,37,865 3,37,54,101 Profit after current Tax 3,37,37,131 5,72,74,267 Provision for deferred Tax 4,67,212 (90,098) Profit after tax 3,32,69,919 5,73,64,365 Balance brought forward 4,50,20,176 1,18,94,920 Profit available for appropriation 7,82,90,095 6,92,59,285 Transfer to general reserve 8,31,748 14,34,109 Interim Dividend 1,00,00,000 - Proposed Dividend 1,00,00,000 2,00,00,000 Tax on Interim Dividend 14,02,500 - Tax on proposed Dividend 14,02,500 28,05,000 Surplus carried forward 5,46,53,347 4,50,20,176 DIVIDEND Your Directors have recommended a final dividend of Rs million, 5% on the paid up capital for the financial year , thus making the total dividend at Rs. 20 million, including the interim dividend of Rs million. POWER TRADING-BUSINESS During the year under review your company had traded MU amounting to Rs million as compared to MU of electricity amounting to Rs million in the year The trading activity also included NTPC s unrequisitioned surplus (URS) power of Liquid Fuel stations. The power trading activity has been affected due to licenses issued to many other new trading companies and the state power utilities resorting to the tender route for sale of power. NEW BUSINESS INITIATIVES During the year new business initiatives for export of Fly Ash and domestic sale of Cenosphere and certified Fly Ash as per IS 3812 part-i were started. The first consignment of 7508MT has been shipped on April 10, 2006 from Vizag port. The domestic sale of Cenosphere is being conducted through e-auction portal of MSTC Limited. An agreement to this effect was signed with them and one lot of 50MT has been auctioned and sold successfully during the year. INITIATIVE FOR SETTING UP OF POWER EXCHANGE AT NATIONAL LEVEL Your company had appointed a Consortium of Consultants viz. M/S CRISIL Ltd. and M/s Nordpool Consulting, Norway to prepare a detailed Project Report for establishment of a wholesale Power Exchange at National Level in India. The consultants have submitted the DPR. Appropriate further action is being considered by CERC in this matter. SYSTEMS DEVELOPMENT The Consortium of Consultants viz. M/s CRISIL Ltd. and M/s Millhouse Associates UK is also working for development of IT-enabled trading system for NVVN. PARTICULARS OF EMPLOYEES During the period under review the Company had no employees of the category, which falls, under section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, FIXED DEPOSITS The company has not accepted any fixed deposit during the period ending 31 st March CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING & OUTGO There are no significant particulars, relating to conservation of energy, technology absorption under the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988, as your Company does not own any manufacturing facility. During the period under review the Company had no earning in foreign exchange. However, an amount of Rs.92, 367/- only was spent in equivalent foreign currency. AUDIT COMMITTEE The Board of Directors during the year had constituted an Audit Committee comprising S/Shri Shyam Wadhera, R.S.Sharma & A.K.Singhal Directors pursuant to the requirement of section 292A of the Companies Act, Three meetings of the Audit Committee were held during the financial year BOARD OF DIRECTORS Shri C.P.Jain ceased to be Chairman of the Company w.e.f A.N. consequent upon his superannuation from the services of NTPC Limited. The Board places on record its deep appreciation for the valuable contributions made by Shri C.P.Jain, under whose dynamic leadership the Company was formed. Pursuant to the Articles of Association of the Company, the Chairman & Managing Director of NTPC Limited shall be the ex-officio part-time Chairman on the Board of the Company. On taking over as the Chairman & Managing Director of NTPC Limited, Shri T. Sankaralingam was appointed as Chairman of the Company w.e.f AUDIT REPORT & C & A G REVIEW The Comptroller and Auditor General of India (C & AG) has appointed M/s Rohtas & Hans, Chartered Accountants as Auditor of the Company for the financial year There are no adverse comments, observation or reservation in the auditors report on the accounts of the Company. The C&AG has reviewed the annual accounts for the year ended and has made no comment upon or supplement to the Auditors Report under Section 619 (4) of the Companies Act, Letter of C & AG on the accounts of the Company for the financial year are at Annexure-I. DIRECTORS RESPONSIBILITY STATEMENT As required under Section 217 (2AA) of the companies Act, 1956 your Directors confirm that: (i) in the preparation of annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) the Directors had selected such accounting policies and applied them consistently and made judgments 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; (iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting the fraud and other irregularities; (iv) the Directors had prepared the annual accounts on going concern basis. ACKNOWLEDGMENT The Board of Directors wish to place on record their appreciation for the support and co-operation extended by NTPC Limited, the Central Electricity Regulatory Commission, the valued customers of the Company, various State Electricity Boards, the Auditors and the Bankers of the Company. For and on behalf of the Board of Directors Place: New Delhi (T.SANKARALINGAM) Date: CHAIRMAN ANNEXURE-I COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF NTPC VIDYUT VYAPAR NIGAM LIMITED, NEW DELHI FOR THE YEAR ENDED,31 ST MARCH, 2006 I, have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors Report under section 619(4) of the Companies Act, 1956, on the accounts of NTPC Vidyut Vyapar Nigam Limited, New Delhi for the year ended 31 st March Place: New Delhi Dated: 22 June, 2006 (Meera Swraup) Principal Director of Commercial Audit and Ex-officio Member Audit Board-III New Delhi th Annual Report

125 NTPC VIDYUT VYAPAR NIGAM LTD. ACCOUNTING POLICIES 1 FIXED ASSETS 1.1 Fixed Assets are shown at historical cost. 1.2 Intangible assets are recorded at their cost of acquisition. 2 INVENTORIES 2.1 Inventories are valued at the lower of cost, determined on weighted average basis, and net realizable value. 3 FOREIGN CURRENCY TRANSACTIONS 3.1 Foreign currency transactions are initially recorded at the rates of exchange ruling at the date of transaction. 3.2 At the balance sheet date, foreign currency monetary items are reported using the closing rate. 4 PROFIT AND LOSS ACCOUNT 4.1 INCOME RECOGNITION Sale of energy is accounted for based on rates agreed with the customers The surcharge on late payment/overdue sundry debtors for sale of energy is recognized when no significant uncertainty as to measurability or collectability exists. 4.2 EXPENDITURE Depreciation is charged on straight-line method at the rates specified in Schedule XIV of the Companies Act, Depreciation on additions to/ deductions from fixed assets during the year is charged on pro-rata basis from/up to the month in which the asset is available for use/disposal Assets costing up to Rs.5000/- are fully depreciated in the year of capitalization Cost of Computer software recognized as intangible assets is amortized on straight-line method over a period of legal right to use or 3 years, whichever is earlier Expenses on training, recruitment and ex-gratia payments under Voluntary Retirement scheme are charged to revenue in the year of incurrence Expenditure on Leave Travel Concession to employees is recognized in the year of availment due to uncertainties in accrual Prepaid expenses and prior period expenses/income of items of Rs.1,00,000/- and below are charged to natural heads of accounts. 5 RETIREMENT BENEFITS 5.1 The liabilities for retirement benefits in respect of Gratuity, leave encashment and post retirement medical scheme are ascertained annually by the Holding Company i.e. NTPC Ltd. on actuarial valuation at the year end. The company provides for retirement benefits in respect of provident fund, gratuity, leave encashment and post retirement medical scheme as apportioned by the Holding Company. BALANCE SHEET AS AT 31 st MARCH 2006 (Rs.) Schedule No SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital Reserves & Surplus Deffered Tax Liability (Net) TOTAL APPLICATION OF FUNDS FIXED ASSETS 3 Gross Block Less: Depreciation Net Block CURRENT ASSETS, LOANS AND ADVANCES Inventories Sundry Debtors Cash and Bank balances Other Current Assets Loans and Advances LESS: CURRENT LIABILITIES AND PROVISIONS Liabilities Provisions Net Current Assets Deferred Tax Asset (Net) TOTAL Notes on accounts 14 Cash Flow Statement, Schedules 1 to 14 and accounting policies form integral part of accounts. For and on behalf of the Board of Directors As per our Report of even date For Rohtas & Hans Chartered Accountants (Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman M.No Place : New Delhi Dated: 26 th May 2006 NTPC VIDYUT VYPAR NIGAM LTD. PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2006 (Rs.) Schedule Current Previous No. Year Year INCOME Sales Power Ash/Ash products Rebate on power purchase Interest (Gross)(Tax deducted at source Rs /- Previous year Rs.58280/-) TOTAL EXPENDITURE Power purchase Open Access Charges Ash/Ash products collection, trading & selling Expenses Employees remuneration and benefits Administration & Other Expenses Rebate on power sale Depreciation Interest u/s 234C of Income Tax Act TOTAL Profit beforetax Provision for Tax: a) Current Tax b) Deferred Tax (90098) c) Fringe Benefit Tax Total (a+b+c) Profit after Tax Balance brought forward Balance available for appropriation Transfer to General Reserve Dividend - Interim Proposed Tax on Dividend - Interim Proposed Balance carried to Balance Sheet Earning per share (Equity share, face value Rs.10/- each)-basic and diluted For and on behalf of the Board of Directors As per our Report of even date For Rohtas & Hans Chartered Accountants (Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman M.No Place : New Delhi Dated: 26 th MAY 2006 NTPC VIDYUT VYPAR NIGAM LTD. SCHEDULES - FORMING PART OF ACCOUNTS SCHEDULE 1 (Rs.) CAPITAL AUTHORISED 2,00,00,000 equity shares of Rs. 10/-each (Previous Year 2,00,00,000 equity shares of Rs. 10/-each) ISSUED, SUBSCRIBED & PAID UP 2,00,00,000 equity shares of Rs. 10/-each fully paid-up (Previous Year 2,00,00,000 equity shares of Rs. 10/- each fully paid up) All shares are held by the holding company, NTPC Limited and its nominees SCHEDULE 2 RESERVES & SURPLUS General Reserve As per last Balance Sheet Add: Transfer from Profit and Loss Account Surplus, balance in Profit and Loss Account TOTAL th Annual Report 123

126 SCHEDULE 3 FIXED ASSETS (Rs.) GROSS BLOCK DEPRECIATION NET BLOCK As at Additions Deductions/ As at As at For the Deductions/ upto As at As at Adjustments Year Adjustments Furniture,fixtures & other office equipment EDP & WP machines Intangible assets-software Total Previous Year (Rs.) SCHEDULE INVENTORIES (Valuation as per Accounting Policy No.2) Fly Ash (packed bags) Packing material Cenosphere TOTAL SCHEDULE 5 SUNDRY DEBTORS Debts outstanding over six months - Unsecured, considered good Other debts - Unsecured, considered good TOTAL SCHEDULE 6 CASH & BANK BALANCES Cash on hand Balances with Scheduled Banks -Current Account Current account linked-term Deposit Account TOTAL SCHEDULE 7 OTHER CURRENT ASSETS Interest accrued SCHEDULE 8 LOANS AND ADVANCES ADVANCES (recoverable in cash or kind for value to be received) Advance deposit with RLDCs -Unsecured, considered good Earnest money deposit with suppliers -Unsecured, considered good Advance Income Tax Deposit & Tax deducted at source Less: Provision for Income Tax TOTAL SCHEDULE 9 CURRENT LIABILITIES Sundry Creditors For goods and services - Suppliers & Contractors NTPC Ltd. (Holding Company) Others Book Overdraft Deposits, retention money from buyers Advances from customers and others Other liabilities TOTAL SCHEDULE 10 PROVISIONS Proposed dividend As per last balance sheet Additions during the year Amounts used during the year Closing Balance (Proposed Dividend) (Rs.) Tax on proposed dividend As per last balance sheet Additions during the year Amounts used during the year Provision for Interest u/s 234C of Income Tax Act Less: Interest paid Provision for Fringe Benefit Tax Less: Fringe Benefit Tax paid TOTAL SCHEDULE 11 Current Previous ASH/ASH PRODUCTS COLLECTION, TRADING Year Year & SELLING EXPENSES Ash testing charges Cenospere collection charges E-auction charges TOTAL SCHEDULE 12 EMPLOYEES REMUNERATION AND BENEFITS Salaries,wages,bonus,allowances & benefits Contribution to provident and other funds Welfare expenses TOTAL SCHEDULE 13 ADMINISTRATION & OTHER EXPENSES Power Charges Repairs & Maintenance Leased building-residential Office Rates & Taxes Training & recruitment expenses Communication expenses Travelling expenses Tender expenses Less: Receipt from sale of tenders Remuneration to auditors Audit fee Tax audit fee In other capacity Out of pocket expenses Business promotion and advertisement Entertainment expenses Brokerage & commission Books and periodicals Professional charges and consultancy fee Legal Expenses EDP hire and other charges Printing & stationery Loss on disposal of fixed assets Bank and other Charges Miscellaneous expenses TOTAL SCHEDULE 14 NOTES ON ACCOUNTS 1. Balances shown under debtors, advances and creditors in so far as these have not been since realized/discharged or adjusted are subject to confirmation/reconciliation and consequential adjustment, if any. 2. The Sales and Purchase are recognized on the basis of monthly Regional Energy Accounts (REA) issued by the concerned Regional Electricity Boards (REBs) th Annual Report

127 3. Contingent liability: Claims against the company not acknowledged as Debts is Rs.NIL (Previous year-rs. NIL). 4. The effect of foreign exchange fluctuation during the year is as under: a) The amount of exchange difference debited to the Profit and Loss Account is Rs.3904/- (Previous year Rs. NIL) 5. Segment information Accounting standard (AS-17) Segment Reporting is applicable to the company but there are no reportable segments. 6. Related Party Disclosures a) The Company is a wholly owned subsidiary of NTPC Limited. b) Key Management Personnel (appointed by the Holding Company i.e. NTPC Limited.) Shri C.P.Jain Chairman Shri R.S.Sharma Director Shri Shyam Wadhera Director Shri Chandan Roy Director Shri A.K.Singhal Director Shri G.K.Agarwal Director c) The Key Management Personnel are on appointment to the Company on part-time basis from the Holding Company NTPC Limited. The Company pays no remuneration to the key management personnel as their remuneration (being full-time employees of the Holding Company) is paid by NTPC Limited. In case of Shri Shyam Wadhera, as he is full time employee of Power Finance Corporation Ltd. (PFC Ltd.), his remuneration is paid by PFC Ltd. 7. Earnings per share The elements considered for calculation of Earning per share (Basic) are as under: Current Year Previous Year Net Profit/(Loss) after Tax used as numerator (Rupees) Weighted average number of equity shares used as denominator Earning/(Loss) per share (Rupees) Face value per share (Rupees) In compliance of Accounting Standard 22 on Accounting for taxes on Income issued by the Institute of Chartered Accountants of India, the item wise details of Deferred tax liability (net) are as under: (Rs.) Deferred Tax liability i) Difference of Book depreciation and Tax depreciation Less: Deferred Tax Assets i) Provision disallowed for tax purpose ii) Disallowed u/s 43B of the Income Tax Act, Deferred Tax Liability/(Asset) (net) (23648) The net increase in the deferred tax liability of Rs /- (Previous year (-) Rs.90098/-) has been debited to Profit & Loss Account. 9. Licensed and Installed Capacities: a) Licensed Capacity - Not Applicable b) Installed Capacity - Not Applicable 10. Quantitative information: a) Purchase and sale of power (in KWH) Current Year Previous Year Purchase Sale b) Trading of Fly Ash and ash based products (MT) 50 NIL 11. Expenditure in foreign currency (Rs.) a) Training & recruitment expenses NIL b) Foreign travel NIL 12. All the employees of the company are on secondment from the Holding Company. 13. Previous year s figures have been regrouped/rearranged wherever necessary. For and on behalf of the Board of Directors As per our Report of even date For Rohtas & Hans Chartered Accountants (Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman M.No Place : New Delhi Dated: 26 th May 2006 INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY S GENERAL BUSINESS PROFILE I. Registration Detail State Code: Registration No. U D L G O I Date Month Year Balance Sheet Date II. Capital Raised during the year (Rs. in Thousand) Public Issue Right issue N I L N I L Bonus Issue Private Placement N I L N I L III.Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liability Total Assets Source of Funds Paid up Capital Reserves & Surplus Secured Loans Unsecured Loans N I L N I L Deferred Tax Liabilites Application of Funds Net Fixed Assets Investment N I L Net Current assets Misc. Expenditure N I L Accumulated Losses N I L IV. Performance of Company (Amount in Rs. Thousands) Turnover Total Expenditure Profit/Loss before Tax Profit After Tax Earning Per Share in Rs. Dividend Rate (%) V. Generic name of three Principal Products/Services of Company (As per monetary terms) Product Description Item Code No. 1. Trading of Electric Power N A 2. Trading of Fly Ash and Ash based products N A For and on behalf of the Board of Directors As per our Report of even date For Rohtas & Hans Chartered Accountants (Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman M.No Place : New Delhi Dated: 26 th May th Annual Report 125

128 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 ST MARCH 2006 (Rs.) Current Year Previous Year A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax Adjustment for: Depreciation Interest income ( ) (278713) Interest paid u/s 234C of Income tax Act Operating profit before Working Capital Changes Adjustment for: Inventories ( ) - Trade and Other Receivables ( ) Trade Payable and Other Liabilities Loans and Advances (15553) ( ) Cash generated from operations Direct Taxes Paid ( ) ( ) Net cash from Operating Activities-A B. CASH FLOW FROM INVESTING ACTIVITIES Expenditure on Fixed Assets (674722) ( ) Interest received Net Cash in Investing Activities -B ( ) C. CASH FLOW FROM FINANCING ACTIVITIES Dividend ( ) ( ) Tax on Dividend ( ) (814176) Net Cash flow from Financing Activities-C ( ) ( ) Net Increase/(Decrease) in Cash and Cash equivalents (A+B+C) Cash and Cash equivalents (Opening balance) * Cash and Cash equivalents (Closing balance)* *NOTE: Cash and Cash Equivalents consist of Cash in Hand & Balance with Banks. For and on behalf of the Board of Directors As per our Report of even date For Rohtas & Hans Chartered Accountants (Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam) Partner Company Secretary Director Chairman M.No Place : New Delhi Dated: 26 th MAY 2006 AUDITORS REPORT To the Members of NTPC Vidyut Vyapar Nigam Limited 1. We have audited the attached Balance Sheet of NTPC VIDYUT VYAPAR NIGAM LIMITED, as at 31st March 2006, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor s Report) Order, 2003 (as amended) issued by the Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said order. 4. Further to our comments in the Annexure referred to above, we report that: a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; b. In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; c. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; d In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; e Being a Government Company, pursuant to the Notification no. GSR 829 (E) dated issued by Government of India, provisions of Section 274 (1) (g) of the Companies Act, 1956, are not applicable to the Company; f. In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read with the Accounting Policies and Notes thereon in Schedule 14, give the information required by the Companies Act, 1956, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India; i. in the case of Balance Sheet, of the state of affairs of the Company as at 31 st March, 2006, ii. in the case of Profit and Loss Account, of the profit for the year ended on that date, and iii. in the case of Cash Flow Statement, of the cash flows for the year ended on that date. For Rohtas & Hans Chartered Accountants (Hans Kumar Jain) Partner M.N Place : New Delhi Dated : 26 th May 2006 Annexure to the Auditor s Report Statement referred to in paragraph (3) of our report of even date to the members of NTPC VIDYUT VYAPAR NIGAM LIMITED on the accounts for the year ended 31 st March (i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) Physical verification of fixed assets has been carried out by an independent Chartered Accountant firm appointed for the purpose, which in our opinion is considered reasonable having regard to the size and nature of its assets & no material discrepancies were noticed on such verification. (c) No substantial part of fixed assets has been disposed off during the year. (ii) (a) The physical verification of inventory has been conducted by the management. (b) The procedure of the physical verification of Inventory followed by the management is reasonable and adequate in relation to the size of the company and the nature of its business. (c) The company has maintained proper records of inventory and no material discrepancies were noticed on such verification. (iii) (a) The Company has not granted or taken any loans, secured or unsecured to/ from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, (b) In view of clause (iii) (a) above, the clause (iii) (b), (iii) (c) and (iii) (d), are not applicable. (iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and nature of its business with regard to purchase of Inventory, fixed assets and sale of goods. During the course of audit, we have not observed any continuing failure to correct major weaknesses in internal control systems. (v) (a) According to the information and explanation given to us, during the year under audit there have been no transaction which need to be entered into the register maintained under section 301 of the companies Act, (b) In view of clause (v) (a) above, the clause (v) (b) is not applicable. (vi) The Company has not accepted deposits from the public th Annual Report

129 (vii) The Company has appointed a Chartered Accountant firm separately to conduct Internal audit during the year and in our opinion, this is commensurate with the size of the company and nature of its business. (viii)the Central Government has not prescribed maintenance of cost records under section 209(l)(d) of the Companies Act, (ix) (a) The employees of NVVN are on secondment basis from its holding company i.e. NTPC Ltd. Both companies are regular in depositing undisputed statutory dues including dues like Provident Fund, Income Tax, Sales Tax and Service Tax etc. with appropriate authorities. According to the information and explanations given to us, there are no undisputed Provident Fund, Income Tax, Sales Tax and Service Tax etc. in arrear as at for a period of more than six months from the date they became payable. (b) In view of clause (ix) (a) above, the clause (ix) (b) is not applicable. (x) The clause is not applicable. (xi) The clause is not applicable. (xii) The clause is not applicable. (xiii) The clause (xiii) (a), (b), (c) and (d) are not applicable. (xiv) The clause is not applicable. (xv) The clause is not applicable. (xvi) The clause is not applicable. (xvii) The clause is not applicable. (xviii)the clause is not applicable. (xix) The clause is not applicable. (xx) The clause is not applicable (xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit. For Rohtas & Hans Chartered Accountants Place : New Delhi Dated : 26 th May 2006 To, PIPAVAV POWER DEVELOPMENT COMPANY LIMITED (A wholly owned subsidiary of NTPC Limted) DIRECTORS REPORT (Hans Kumar Jain) Partner M.N The Members, Your Directors have pleasure in presenting their 5 th Annual Report and Audited statement of Accounts for the financial year ended 31 st March 2006 together with the Auditors Report thereon. OPERATIONAL REVIEW During the period under review, studies pertaining to fuel transportation and seismic study have been completed. Environmental Impact Assessment study, Area drainage study and feasibility study are in progress. Various agencies like NTPC Vidyut Vyapar Nigam Ltd. and Madhya Pradesh State Electricity Board have expressed their willingness for purchasing power from the proposed power project carried out by the Company. Efforts are on for obtaining Mega Power Project status. The Company has applied for allotment of Nuagaon, Telishahi coal mine block and is pursuing the matter with concerned authorities. FINANCIAL REVIEW During the year Company has incurred loss of Rs. 40,083/- as against loss of Rs. 24,252/- incurred last year. PARTICULARS OF EMPLOYEES Since, the company has no employee on the rolls, the particulars prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are not applicable. AUDITORS REPORT The Comptroller and Auditor General of India (C&AG) has appointed M/s Sanjeev Chopra & Company, Chartered Accountants as Auditor of the Company for the financial year There are no adverse comments, observation or reservation in the auditors report on the accounts of the Company. COMPTROLLERS & AUDITOR GENERAL REVIEW C&AG vide letter dated 7 th June, 2006 has decided not to review the report of the Auditors on the accounts of the company for the year ended 31 st March 2006 and as such has no comments to make under Section 619(4) of the Companies Act, A copy of the letter issued by C&AG in this regard is at Annex-I. SECRETARIAL COMPLIANCE REPORT The Company appointed M/s. K.K. Malhotra & Company, Company Secretaries for the Certificate of compliance under Section 383A(1) of the Companies Act, 1956 for the financial year The Certificate is attached with the Directors Report as Annex-II. FIXED DEPOSITS The Company has not accepted any fixed deposit during the period ending 31 st March CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING & OUTGO Since the Company s activities are in project formulation stage and no commercial activity was carried out by the Company, particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo are not applicable to the Company. DIRECTORS RESPONSIBILITY STATEMENT As required under Section 217(2AA) of the Companies Act, 1956 your Directors confirm that: i) In the preparation of the Annual Accounts, the applicable accounting standards had been followed alongwith proper explanation relating to material departures; ii) The Directors had selected such accounting policies 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 as on 31 st March 2006 and of the loss of the company for that period; iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and iv) The Directors had prepared the annual accounts on going concern basis. DIRECTORS Smt. Vijaylaxmi Joshi, Chairman and Managing Director, Gujarat State Electricity Corporation Limited was nominated by Gujarat State Electricity Corporation to the Board of the Company w.e.f.24 th July, Dr. Joy I. Cheenath, ceased to be Director of the Company w.e.f. 14 th March Directors place on record deep appreciation for valuable contributions made by him. ACKNOWLEDGEMENT The Board of Directors wish to place on record their appreciation for the support and co-operation extended by the Union Ministry of Power, Government of Gujarat, NTPC Ltd., Gujarat Power Corporation Ltd., Gujarat State Electricity Corporation and other agencies of Govt. of India/Govt. of Gujarat, Auditors and the Bankers of the company. For and on behalf of the Board of Directors Place: New Delhi Dated:14 th June, 2006 (T. Sankaralingam) Chairman COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF PIPAVAV POWER DEVELOPMENT COMPANY LIMITED, NEW DELHI FOR THE YEAR ENDED,31ST MARCH, 2006 The Comptroller and Auditor General of India has decided not to review the report of the Auditors on the accounts of Pipavav Power Development Company Limited. New Delhi for the year ended 31st March 2006 and as such he has no comments to make under Section 619(4) of the Companies Act, 1956 Place: New Delhi Dated: 7th June, 2006 (Meera Swraup) Principal Director of Commercial Audit and Ex-officio Member Audit Board-III New Delhi 30th Annual Report 127

130 Annex-II The Members Pipavav Power Development Company Limited We have examined the registers, records, books and papers of PIPAVAV POWER DEVELOPMENT COMPANY LIMITED (the Company) as required to be maintained under the Companies Act, 1956 (the Act) and the rules made thereunder and also the provisions contained in the Memorandum and Articles of Association of the company for the financial year ended 31 March, 2006 (Financial Year). In our opinion and to the best of our information and according to the examination carried out by us and explanations furnished to us by the company, its officers and agents and on the basis of the Auditors Report, we certify that in respect of the aforesaid financial year: 1. The company has kept and maintained all registers as stated in the Annexure A to this certificate, as per the provisions of the Act and the rules made thereunder and all entries therein have been duly recorded. 2. The company has duly filed the forms and returns as stated in the Annexure B to this certificate, with the Registrar of Companies, Regional Director, Central Government, Company Law Board or other authorities within the time prescribed under the Act and the rules made there under. 3. The Company being a public limited company, comments are not required. 4. The Board of Directors duly met 4(Four) times respectively on 30/5/2005, 28/9/2005, 23/12/2005 and 25/03/2006 in respect of which meeting proper notices were given and the proceedings were properly recorded and signed including the circular resolutions passed in the Minutes Book maintained for the purpose. 5. The company has not closed its Register of members or Debenture holders during the financial year. 6. Tte Annual General Meeting for the financial year ended on 31 st March, 2005 was held on 15th July 2005 after giving due notice to the members of the company and other concerned and the resolutions passed thereat were duly recorded in Minutes Book maintained for the purpose. 7. No Extra Ordinary General Meeting was held during the financial year. 8. The Company has not advanced any loans to its directors or persons or firms or companies referred to under section 295 of the Act during the financial year. 9. The Company has not entered into any contracts falling within the purview of section 297 ot the Act. 10. The Company was not required to make any entries in the register maintained under section 301(1) of the Act. However, it made all the necessary entries in the register maintained under section 301(3) of the Act. 11. As there were no instances falling within the purview of section 314 of the Act, the company has not obtained any approvals from the Board of Directors, Members or Central Government. 12. The Company has not issued any duplicate share certificates during the financial year. 13. The company has: (i) delivered all the certificates on Allotment of shares & lodgement thereof and on transfer/transmission of securities in accordance with the provisions of the Act. (ii) not deposited any amount in a separate Bank Account as no dividend was declared during the financial year. (iii) not posted warrants to any member of the company as no dividend was declared during the financial year. (iv) not transferred any amounts to the Investor Education and Protection Fund during the year. (v) duly complied with the requirements of section 217 of the Act. 14. The Board of Directors of the company is duly constituted and the appointment of directors, additional directors, alternate directors and directors to fill the casual vacancies have been duly made. 15. The company has not appointed any Managing Director/Whole time Director/ Manager during the financial year. 16. The company has not appointed any sole -selling agent during the financial year. 17. The company has not obtained any approvals of the Central Government, Company Law Board, Regional Director, Registrar and/or such other authorities prescribed under the various provisions of the Act during the financial year. 18. The Directors have disclosed their interest in other firms/companies to the Board of Directors pursuant to the provisions of the Act and the rules made there under. 19. The company has issued 5000 Equity Shares during the financial year and duly complied with the provisions of the Act. 20. The company has not bought back any shares during the financial year. 21. There was no redemption of preference shares or debentures during the financial year. 22. There were no transactions necessitating the Company to keep in abeyance rights to dividend, rights shares and bonus shares pending registration of transfer of shares. 23. The company has not invited/accepted any deposits including any unsecured loan falling within the purview of section 58 A during the financial year. 24. The company has not made any borrowing during the financial year ended 31st March, The company has not made any loans or advances or given guarantees or provided securities to other bodies corporate and consequently no entries have been made in the register kept for the purpose. 26. The company has not altered the provisions of the Memorandum with respect to situation of the company s registered office from one state to another during the year under scrutiny. 27. The company has not altered the provisions of the Memorandum with respect to the objects of the company during the financial year under scrutiny. 28 The company has not altered the provisions of the Memorandum with respect to the name of the company during the financial year under scrutiny. 29. The company has not altered the provisions of the Memorandum with respect to the share capital of the company during the financial year under scrutiny. 30. The company has not altered its Articles of Association during the financial year. 31. There was no prosecution initiated against or show cause notices received by the company and no fines or penalties or any other punishments were imposed on the company during the financial year, for offences under the Act. 32. The company has not received any money as security from its employees during the financial year. 33. The company has not constituted a separate provident Fund trust for its employees or any class of its employees as contemplated under section 418 of the Act. For K.K. Malhotra & Co. Company Secretaries Place : New Delhi K.K. Malhotra Date : 25 th May 2005 C.P. No. 446 Annexure A Registers as maintained by the company: 1. Register of members u/s Index of members u/s Registers of transfers. 4. Books of accounts u/s Register of contracts under which directors are interested u/s Register of Directors, Managing Director, Secretary, Manager u/s Register of Director s Shareholding u/s Register of Directors attendance. 9. Minutes books of General/Board Meetings. 10. Register of Share application & allotment. Annexure B Forms and Returns as filed by the Company with Registrar of Companies, Regional Director, Central Government or other authorities during the financial year ending 31 st March, Annual Return u/s 159 on 29/07// Balance Sheet u/s 220 on 27/07/ Compliance certificate u/s 383A on 27/07/ Form no. 32 u/s 303(2) on 17/08/2005. PIPAVAV POWER DEVELOPMENT COMPANY LIMITED BALANCE SHEET AS AT 31 ST MARCH 2006 (Rs.) Schedule No. SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital 1 37,00,000 36,50,000 APPLICATION OF FUNDS CURRENT ASSETS, LOANS AND ADVANCES Cash and Bank balances 2 30,379 17,632 Loans & Advances 3 6,05,00,000 6,05,00,000 6,05,30,379 6,05,17,632 LESS : CURRENT LIABILITIES AND PROVISIONS Liabilities 4 6,05,20,462 6,05,17,632 Net Current Assets 9,917 - Profit & Loss Account 36,90,083 36,50,000 TOTAL 37,00,000 36,50,000 Notes on Accounts 5 Schedules 1 to 5 form integral part of Annual Accounts. For and on behalf of Board of Directors (K. Prakasa Rao) (T. Sankaralingam) Director Chairman In terms of our report of even date For Sanjeev Chopra & Co. Chartered Accountants (Praveen Kumar) Partner Place : New Delhi Dated : 25 th May th Annual Report

131 PIPAVAV POWER DEVELOPMENT COMPANY LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2006 Rs. Current Year Previous Year EXPENDITURE Filing fees 3,000 2,000 Bank charges Secretarial audit fees 4,490 4,408 Audit fees 13,428 17,544 Travelling Expenses 18,075 - Miscellaneous Expenses 1,090 - Total 40,083 24,252 Profit/ (Loss) before Tax (40,083) (24,252) Balance brought forward (36,50,000) (36,25,748) Balance carried to Balance sheet (36,90,083) (36,50,000) Earnings per share (Equity share, face value Rs.10/- each) - Basic and Diluted (0.11) (0.07) For and on behalf of Board of Directors (K. Prakasa Rao) (T. Sankaralingam) Director Chairman In terms of our report of even date For Sanjeev Chopra & Co. Chartered Accountants (Praveen Kumar) Partner Place : New Delhi Dated : 25 th May 2006 PIPAVAV POWER DEVELOPMENT COMPANY LIMITED SCHEDULES - FORMING PART OF ACCOUNTS SCHEDULE 1 Rs. CAPITAL Authorised 1,00,00,000 equity shares of Rs. 10/- each 10,00,00,000 10,00,00,000 Issued, Subscribed and Paid-up 3,70,000 equity shares (Previous year 37,00,000 36,50,000 3,65,000 equity shares) of Rs. 10/- each held by the holding company, NTPC Limited and its nominees SCHEDULE 2 CASH AND BANK BALANCES Cash in hand Balance with scheduled Bank in Current Account 30,180 16,883 Total 30,379 17,632 SCHEDULE 3 LOANS & ADVANCES (Advances recoverable in cash or in kind or for value to be received) Unsecured, considered good Advance to Gujarat Power Corporation Limited 6,05,00,000 6,05,00,000 SCHEDULE 4 CURRENT LIABILITIES & PROVISIONS Sundry Creditors - For Goods & Services 20,462 17,632 Other Liabilities - Advance from NTPC Limited 6,05,00,000 6,05,00,000 Total 6,05,20,462 6,05,17,632 SCHEDULE-5 Notes on Accounts : 1. Pursuant to Presidential Directive received under Articles of Association of NTPC Limited, NTPC had paid a sum of Rs.6,05,00,000 for acquisition of 212 hectares of land in Amreli District of Gujarat to M/s Gujarat Power Corporation Ltd. (GPCL). The payment was made by NTPC on behalf of Pipavav Power Development Company Limited and accordingly it has been shown as advance to GPCL. The land is yet to be transferred in the name of the Company. 2. GPCL has given No Objection Certificate to Revenue Deptt. of Govt. of Gujarat for transfer of 3.68 hectare of land (out of 212 hectare) to Railways for laying new railway line between Rajula and Pipavav port. An amount of Rs lac has since been received by GPCL from Western Railways. Cost of 3.68 hectares of land transferred to Railways and received by GPCL shall be recovered from GPCL once the net cost of the land is determined as per the Joint Venture Agreement to be executed between NTPC, GPCL and Gujarat Urja Vikas Nigam Ltd. or its associates. 3. Related Party Disclosures : a. The company is a wholly owned subsidiary of NTPC Limited. b. Key Management Personnel [appointed by NTPC Limited, GPCL and Gujarat State Electricity Corporation Limited (GSECL)]: Sh. T. Sankaralingam Chairman Sh. S. Trivedi Director Sh. K. Prakasa Rao Director Dr. Joy I. Cheenath Director w.e.f Smt. Vijaylaxmi Joshi Director w.e.f c. The Key Management Personnel are on appointment to the company on parttime basis. The Company pays no remuneration to the key management personnel as their remuneration is paid by NTPC Limited or GPCL or GSECL. 4. Earning per Share : The elements considered for calculation of Earning per Share (Basic and Diluted) are as under : Current Year Previous Year Net Profit before Tax used as numerator (40,083) (24,252) Weighted Average number of Equity Shares used as denominator 3,65,096 3,65,000 Earning per Share Basic and Diluted (0.11) (0.07) Face value per share BALANCE SHEET ABSTRACT AND COMPANY S GENERAL BUSINESS PROFILE: 1. Registration Detail State Code : Registration No. U D L U G C Date Month Year Balance Sheet Date Capital Raised during the year (Amounts in Rs. Thousand) Public Issue Right issue N I L N I L Bonus Issue Private Placement N I L Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand) Total Liabilities Total Assets Source of Funds Paid up Capital Reserve & Surplus N I L Secured Loans Unsecured Loans N I L N I L Application of Funds Net Fixed Assets Investments N I L N I L Net Current assets Misc. Expenditure 1 0 N I L AccumulatedLosses Performance of Company (Amount in Rs. Thousand) Turnover Total Expenditure N I L 4 0 Loss Before Tax Loss After Tax Earning Per Share in Rs. Dividend (-) N I L 5. Generic name of three principal products/services of Company (As per monetary terms) Item Code No. - (ITC Code) Product Description - For and on behalf of the Board of Directors (K. Prakasa Rao) (T. Sankaralingam) Director Chairman In terms of our report of even date For Sanjeev Chopra & Co. Chartered Accountants (Praveen Kumar) Partner Place : New Delhi Dated : 25 th May th Annual Report 129

132 CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006 Rs Current Year Previous Year A. CASH FLOW FROM OPERATING ACTIVITIES Net Operating Profit (Loss) before working capital changes (40,083) (24,252) Adjustment for sundry creditors 2,830 2,512 Net Cash flow outgo from operating activities - A (37,253) (21,740) B. CASH FLOW FROM FINANCING ACTIVITIES Issue of share capital 50,000 - Net Cash flow (outgo) from Financing activities - B 50,000 - Net Increase (Decrease) in cash and cash equivalents (A+B) 12,747 (21,740) Cash & Cash equivalents (Opening Balance) 17,632 39,372 Cash & Cash equivalents (Closing Balance) 30,379 17,632 Note: Cash & Cash equivalents includes cash in hand and balance with banks. For and on behalf of Board of Directors (K. Prakasa Rao) (T. Sankaralingam) Director Chairman In terms of our report of even date For Sanjeev Chopra & Co. Chartered Accountants (Praveen Kumar) Partner Place : New Delhi Dated : 25 th May 2006 Auditor s Report To the Members of Pipavav Power Development Company Limited We have audited the attached balance sheet of Pipavav Power Development Company Limited, New Delhi as at 31st March 2006, the profit & loss account and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurances about whether the financial statements are free of material misstatement(s). An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We report that: (i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; (iii) The balance sheet, profit & loss account and cash flow statement dealt with by this report are in agreement with books of account; (iv) In our opinion, the balance sheet, profit & loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (v) Being a Government Company, clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not applicable to the company (Notification No. GSR 829 (E) dated issued by the Department of Company Affairs); (vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of balance sheet, of the state of affairs of the company as at 31st March, 2006; (b) in the case of profit & loss account, of the loss for the year ended on that date; and (c) in the case of cash flow statement, of the cash flows for the year ended on that date. As required by the Companies (Auditor s Report) Order, 2003 (the Order) issued by the Central government of India under sub-section (4 A) of section 227 of the Companies Act, 1956, we further report in terms of matters specified in paragraphs 4 and 5 of the said Order that: (i) Since the company has not commenced any business operations and is not having any fixed assets/stocks, clauses (i) & (ii) of the paragraph 4 of the Order are not applicable to the company; (ii) Since the company has neither granted nor taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under section 301 of Act, clause (iii) of the paragraph 4 of the Order is not applicable to the company; (iii) Since there is no inventory, fixed assets and sale of goods, clause (iv) of the paragraph 4 of the Order is not applicable to the company; (iv) According to the information given to us, there are no transactions that need to be entered in the register maintained u/s 301 of the Act, therefore clause (v) of the paragraph 4 of the Order is not applicable to the company; (v) According to the information and explanations given to us, the company has not accepted any deposits from public during the year, therefore, clause (vi) of the paragraph 4 of the Order is not applicable to the company; (vi) Since the company is neither a listed company and/nor having a paid up capital exceeding Rs. 50 Lakhs as at the commencement of the financial year concerned nor having an average annual turnover exceeding five crore rupees for a period of three consecutive financial years immediately preceding the financial year concerned, clause (vii) of the paragraph 4 of the Order is not applicable to the company; (vii) The Central Government has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 for the company, therefore, clause (viii) of the paragraph 4 of the Order is not applicable to the company; (viii) According to the information and explanations given to us, since the company has not commenced any business operations, various provisions with regard to payments of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, cess and any other statutory dues are not applicable to company for the time being, therefore, clause (ix) of the paragraph 4 of the Order is not applicable to the company; (ix) Since the company is in existence for a period less than five years, clause (x) of the paragraph 4 of the Order is not applicable to the company; (x) As per the information and explanations given to us, clause (xi) of the paragraph 4 of the Order is not applicable to the company, since there is no dues payable by the company to a financial institutions or bank or debenture holders; (xi) The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities, therefore, clause (xii) of the paragraph 4 of the Order is not applicable to the company; (xii) Since the company is not a chit fund/nidhi/mutual benefit fund/society, clause (xiii) of the paragraph 4 of the Order is not applicable to the company; (xiii) Since the company is not dealing or trading in shares, securities, debentures and other investments, clause (xiv) of the paragraph 4 of the Order is not applicable to the company; (xiv) As per the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions, therefore, clause (xv) of the paragraph 4 of the Order is not applicable to the company; (xv) Since the company has not taken/raised any loans, clauses (xvi) & (xvii) of the paragraph 4 of the Order are not applicable to the company; (xvi) As per the information and explanations given to us, the company has not given any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act, therefore, clause (xviii) of the paragraph 4 of the Order is not applicable to the company; (xvii) Since the company has not issued any debentures, clause (xix) of the paragraph 4 of the order is not applicable to the company; (xviii) Since the company has not raised money by public issue, clause (xx) of the paragraph 4 of the Order is not applicable to the company; (xix) As per information and explanations given to us, there are not frauds on or by the company has been noticed or reported during the year, therefore, clause (xxi) of the paragraph 4 of the Order is not applicable to the company. For Sanjeev Chopra & Company Chartered Accountants (Praveen Kumar) Place : New Delhi (M.S.No ) Date : 25 th May, 2006 Partner th Annual Report

133 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) ACCOUNTING POLICIES 1. GRANTS-IN-AID 1.1 Grants-in-aid received from the Central Government or other authorities towards capital expenditure as well as consumers contribution to capital works are treated initially as capital reserve and subsequently adjusted as income in the same proportion as the depreciation written off on the assets acquired out of the grants. 1.2 Where the ownership of the assets acquired out of the grants vests with the government, the grants are adjusted in the carrying cost of such assets. 1.3 Grants from Government and other agencies towards revenue expenditure are recognized over the period in which the related costs are incurred and are deducted from the related expenses. 2. FIXED ASSETS 2.1 Fixed Assets are shown at historical cost. 2.2 Intangible assets are recorded at their cost of acquisition. 2.3 Capital expenditure on assets not owned by the company is reflected as a distinct item in Capital Work-in-Progress till the period of completion and thereafter in the Fixed Assets. 2.4 Deposits, payments/liabilities made provisionally towards compensation, rehabilitation and other expenses relatable to land in possession are treated as cost of land. 2.5 In the case of commissioned assets, where final settlement of bills with contractors is yet to be effected, capitalisation is done on provisional basis subject to necessary adjustment in the year of final settlement. 2.6 Assets and systems common to more than one generating unit are capitalised on the basis of engineering estimates/ assessments. 3. CAPITAL WORK-IN-PROGRESS 3.1 In respect of supply-cum-erection contracts, the value of supplies received at site and accepted is treated as Capital Workin-Progress. 3.2 Incidental Expenditure during Construction (net) including corporate office expenses (allocated to the projects pro-rata to the annual capital expenditure) for the year, is apportioned to Capital Work-in-Progress on the basis of accretions thereto. 3.3 Deposit work/cost plus contracts are accounted for on the basis of statements of account received from the contractors. 3.4 Claims for price variation/exchange rate variation in case of contracts are accounted for on acceptance. 4. OIL AND GAS EXPLORATION COSTS 4.1 The Company follows Successful Efforts Method for accounting of oil and gas exploration activities. 4.2 Cost of surveys and prospecting activities conducted in the search of oil and gas are expensed in the year in which these are incurred. 4.3 All acquisition costs are initially capitalized as Exploratory Wells-in-Progress under Capital Work-in-Progress. 5. DEVELOPMENT OF COAL MINES Expenditure on exploration of new coal deposits is capitalized as Development of coal mines under Capital Work-in-Progress till the mines project is brought to revenue account. 6. FOREIGN CURRENCY TRANSACTIONS 6.1 Foreign currency transactions are initially recorded at the rates of exchange ruling at the date of transaction. 6.2 At the balance sheet date, foreign currency monetary items are reported using the closing rate. Non-monetary items denominated in foreign currency are reported at the exchange rate ruling at the date of transaction. 6.3 Exchange differences in respect of loans/deposits/liabilities relating to fixed assets/capital work-in-progress acquired from a country outside India are adjusted in the carrying cost of related assets. 6.4 Exchange differences in respect of loans relating to fixed assets/capital work-in-progress acquired within India to the extent regarded as an adjustment to interest cost are treated as borrowing cost. 6.5 Exchange differences, in respect of loans (other than regarded as borrowing cost)/deposits/liabilities relating to fixed assets/capital work-in-progress acquired within India, arising out of transactions entered prior to , are adjusted in the carrying cost of related assets. Such exchange differences in respect of transactions entered after are treated as Incidental Expenditure During Construction till the assets are ready for their intended use. 30th Annual Report 131

134 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) 6.6 Other exchange differences are recognized as income or expense in the period in which they arise. 7. BORROWING COSTS Borrowing costs attributable to the fixed assets during their construction/renovation and modernisation are capitalised. Such borrowing costs are apportioned on the average balance of capital work-in-progress for the year. Other borrowing costs are recognised as an expense in the period in which they are incurred. 8. INVESTMENTS 8.1 Current investments are valued at lower of cost and fair value determined on an individual investment basis. 8.2 Long term investments are carried at cost. Provision is made for diminution, other than temporary, in the value of such investments. 8.3 Premium paid on long term investments is amortised over the period remaining to maturity. 9. INVENTORIES 9.1 Inventories are valued at the lower of cost, determined on weighted average basis, and net realizable value. 9.2 Dimunition in value of obsolete and unserviceable stores and spares is ascertained on review and provided for. 10. PROFIT AND LOSS ACCOUNT 10.1 INCOME RECOGNITION Sale of energy is accounted for based on tariff rates approved by the Central Electricity Regulatory Commission. In case of power stations where the tariff rates are yet to be approved /agreed with beneficiaries, provisional rates are adopted The incentives/disincentives are accounted for based on the norms notified/approved by the Central Electricity Regulatory Commission or agreements with the beneficiaries. In cases of power stations where the same have not been notified/approved/agreed with beneficiaries, incentives/disincentives are accounted for on provisional basis Advance against depreciation, forming part of tariff to facilitate repayment of loans, is reduced from sales and considered as deferred revenue to be included in sales in subsequent years The surcharge on late payment/overdue sundry debtors for sale of energy is recognized when no significant uncertainty as to measurability or collectability exists Interest/surcharge recoverable on advances to suppliers as well as warranty claims/liquidated damages are not treated as accrued due to uncertainty of realisation/acceptance and are therefore accounted for on receipt/acceptances Income from Consultancy service is accounted for on the basis of actual progress/technical assessment of work executed, in line with the terms of respective consultancy contracts Claims for reimbursement of expenditure are recognized as other income, as per the terms of Consultancy service contracts Scrap other than steel scrap is accounted for in the accounts as and when sold Insurance claims for loss of profit are accounted for in the year of acceptance. Other insurance claims are accounted for based on certainty of realisation EXPENDITURE Depreciation is charged on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956 except for the following assets in respect of which depreciation is charged at the rates mentioned below: a) Kutcha Roads % b) Enabling works - residential buildings including their internal electrification 6.33 % - non-residential buildings including their internal electrification, % water supply, sewerage & drainage works, railway sidings, aerodromes, helipads and airstrips th Annual Report

135 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/up to the month in which the asset is available for use/disposal Assets costing up to Rs.5000/- are fully depreciated in the year of capitalization Cost of computer software recognized as intangible assets is amortised on straight line method over a period of legal right to use or 3 years, whichever is earlier Where the cost of depreciable assets has undergone a change during the year due to increase/decrease in long term liabilities on account of exchange fluctuation, price adjustment, change in duties or similar factors, the unamortised balance of such asset is depreciated prospectively over the residual life determined on the basis of the rate of depreciation Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the residual useful life of the related plant and machinery Capital expenditure on assets not owned by the company is amortised over a period of 4 years from the year in which the first unit of project concerned comes into commercial operation and thereafter from the year in which the relevant asset becomes available for use. However, such expenditure for community development in case of stations fully under operation is charged off to revenue Leasehold buildings are amortised over the lease period or 30 years, whichever is lower. Leasehold land and buildings, whose lease period is yet to be finalised, are amortised over a period of 30 years Expenses on training, recruitment and ex-gratia payments under Voluntary Retirement Scheme are charged to revenue in the year of incurrence Research and development expenses, other than fixed assets, are charged to revenue in the year of incurrence Preliminary expenses on account of new projects incurred prior to approval of feasibility report are charged to revenue in the year of incurrence Expenditure on leave travel concession to employees is recognized in the year of availment due to uncertainties in accrual Expenses common to operation and construction activities are allocated to Profit and Loss Account and Incidental Expenditure During Construction in proportion of sales to annual capital outlay in the case of Corporate Office and sales to accretion to Capital Work-in-Progress in the case of projects Net pre-commissioning income/expenditure is adjusted directly in the cost of related assets and systems Prepaid expenses and prior period expenses/income of items of Rs.100,000/- and below are charged to natural heads of accounts Carpet coal is charged off to coal consumption. However, during pre-commissioning period, carpet coal is retained in inventories and charged off to consumption in the first year of commercial operation. Windage and handling losses of coal as per norms are included in cost of coal. 11. RETIREMENT BENEFITS 11.1 The liability for retirement benefits of employees in respect of Provident Fund and Gratuity, which is ascertained annually on actuarial valuation at the year end, are accrued and funded separately The liabilities for leave encashment and post retirement medical benefits to employees are accounted for on accrual basis based on actuarial valuation at the year end. 12. FINANCE LEASES 12.1 Assets taken on lease are capitalized at fair value or net present value of the minimum lease payments, whichever is lower Depreciation on the assets taken on lease is charged at the rate applicable to similar type of fixed assets as per Accounting Policy If the leased assets are returnable to the lessor on the expiry of the lease period, depreciation is charged over its useful life or lease period, whichever is shorter Lease payments made are apportioned between the finance charges and reduction of the outstanding liability in respect of assets taken on lease. 30th Annual Report 133

136 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) BALANCE SHEET AS AT 31st MARCH 2006 Rs. Million SCHEDULE SOURCES OF FUNDS NO. SHAREHOLDERS FUNDS Capital 1 82,455 82,455 Reserves and surplus 2 367, , , ,076 Deferred Revenue on account of Advance Against Depreciation 3 4,408 3,374 LOAN FUNDS Secured loans 4 59,664 46,408 Unsecured loans 5 165, , , ,027 Deferred Tax Liability (Net) 53,479 50,791 Less: Recoverable 53,439 50, TOTAL 679, ,509 APPLICATION OF FUNDS GOODWILL ON CONSOLIDATION FIXED ASSETS 6 Gross Block 463, ,767 Less: Depreciation 230, ,779 Net Block 233, ,988 Capital Work-in-Progress 7 129,297 67,157 Construction stores and advances 8 33,504 32, , ,072 INVESTMENTS 9 185, ,565 CURRENT ASSETS, LOANS AND ADVANCES Inventories 10 23,679 18,002 Sundry debtors 11 9,725 14,673 Cash and bank balances 12 86,075 61,983 Other current assets 13 10,229 9,802 Loans and advances 14 30,597 27, , ,488 LESS: CURRENT LIABILITIES AND PROVISIONS Liabilities 15 51,152 53,304 Provisions 16 12,422 15,318 63,574 68,622 Net current assets 96,731 62,866 TOTAL 679, ,509 Contingent liabilities 17 Notes on accounts 27 Schedules 1 to 27 and accounting policies form integral part of accounts. For and on behalf of the Board of Directors ( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Bhavna Nanda ) (Sanjay Gupta) Partner Partner M No M No Place : New Delhi Dated : 31 st May th Annual Report

137 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006 Rs. Million SCHEDULE NO. Current Year Previous Year INCOME Sales (Gross) , ,738 Less:Electricity duty 1,938 1,825 Sales (Net) 269, ,913 Energy internally consumed Provisions written back ,236 Other income 20 26,244 23,728 Total 296, ,125 EXPENDITURE Fuel 163, ,248 Electricty purchased 6,189 7,303 Cost of material and services Employees remuneration and benefits 21 9,964 9,082 Generation, Administration & other expenses 22 13,148 12,497 Depreciation 20,710 19,824 Provisions Interest and finance charges 24 17,842 17,219 Total 233, ,152 Profit before Tax and Prior Period Adjustments 62,998 60,973 Prior Period income/ expenditure (net) 25 2,488 (102) Profit before tax 60,510 61,075 Provision for: Current tax 2,366 2,782 Fringe Benefit tax 16 - Less :Tansferred to Incidental expenditure during construction Profit after current tax 58,416 58,293 Provision for Deferred tax 8 7 Profit of the Group after tax 58,408 58,286 Balance brought forward 1, Write back from Bond Redemption Reserve Write back from Foreign Project Reserve 2 2 Balance available for appropriation 59,454 59,031 Transfer to Bonds Redemption Reserve 2,926 2,351 Transfer to Capital Reserve Transfer to General Reserve 29,039 33,022 Dividend Interim 16,501 9,895 Proposed 6,683 10,013 Tax on Dividend Interim Dividend 2,314 1,292 Proposed Dividend 937 1,408 Balance carried to Balance Sheet 1,025 1,028 Incidental expenditure during construction 26 Earning Per Share (Equity shares, face value Rs.10/- each) - Basic and Diluted Total Income includes Rs.4,547 million share of jointly controlled entities. Total Expenditure includes Rs. 4,259 million share of jointly controlled entities For and on behalf of the Board of Directors ( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Bhavna Nanda ) (Sanjay Gupta) Partner Partner M No M No Place : New Delhi Dated : 31 st May th Annual Report 135

138 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 1 Rs. million CAPITAL AUTHORISED 10,000,000,000 equity shares of Rs. 10/- each (Previous year 10,000,000,000 equity shares of Rs. 10/- each) 100, ,000 ISSUED, SUBSCRIBED AND PAID-UP 8,245,464,400 equity shares of Rs. 10/- each fully paid up (Previous year 8,245,464,400 equity shares of Rs. 10/- each fully paid up) 82,455 82,455 Schedule 2 RESERVES AND SURPLUS Capital Reserve As per last Balance Sheet 1,279 1,259 Add: Additions during the year Less: Adjustments during the year - 2 1,308 1,279 Share Premium Account As per last Balance Sheet 22, Add: Additions during the year - 22,511 Less : Adjustment of share issue expenses during the year ,307 22,360 Bonds Redemption Reserve As per last Balance Sheet 6,405 4,071 Add: Transfer from Profit and Loss Account 2,926 2,351 Less : Write back during the year ,315 6,405 Foreign Project Reserve As per last Balance Sheet 2 4 Less : Write back during the year 2 2 *Rs. 81,229 * 2 General Reserve As per last Balance Sheet 304, ,525 Add: Transfer from Profit and Loss Account 29,039 33,022 Add: Adjustment towards dividend , ,547 Surplus, balance in Profit & Loss Account 1,025 1,028 Total 367, ,621 Includes Rs.447 million share of jointly controlled entities. Schedule 3 DEFERRED REVENUE - on account of Advance Against Depreciation As per last Balance Sheet 3,374 1,591 Add: Revenue deferred during the year 1, Less: Revenue recognised during the year Total 4,408 3, th Annual Report

139 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 4 Rs. million SECURED LOANS Cash credit from scheduled banks (secured by the hypothecation of Stock & Book Debts of Bhilai Electric Supply Company Pvt. Ltd.) Bonds 10.00% Secured Non-Convertible Taxable Bonds of Rs.10,00,000/- each with five equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of the 6 th year in annual instalments thereafter upto the end of 10 th year respectively from 5 th September, 2001 (Twelfth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds of Rs. 10,00,000/- each redeemable at par in ten equal annual instalments commencing from the end of 6 th year and upto the end of 15 th year respectively from 18 th April 2002 (Thirteenth Issue -Part A - Private Placement) % Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds of Rs. 10,00,000/- each with ten equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of the 6 th year and in annual instalments thereafter upto the end of 15 th year resepectively from 30 th April, (Thirteenth Issue - Part B - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each with two equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of 4 th and 5 th year respectively from 1 st August, 2002 (Fourteenth issue - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 1,00,000/- each redeemable at par in three annual instalments of 30%, 30% and 40% commencing from 28 th September 2004 (Fifteenth Issue - Part C - Private Placement) % Secured Non-cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each redeemable at par on 10 th April 2018 (Sixteenth Issue -Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs10,00,000/- each redeemable at par on 1 st May 2023 (Seventeenth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs 10,00,000/- each with five equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of 6 th year and in annual instalments thereafter upto the end of 10 th year respectively from 15 th September 2003 (Eighteenth Issue - Private Placement) % Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs.10,00,000/- each redeemable at par on 12 th January, 2019 (Nineteenth Issue - Private Placement) % Secured Non Cumulative Non-Convertible Redeemable Taxable Bonds of Rs.20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par semi-annually commencing from 23 rd September 2009 and ending on 23 rd March 2019 (Twentieth Issue - Private Placement) % Secured Non-cumulative Non-convertible Reedemable Taxable Bonds of Rs.20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeembale at par semi-annually commencing from 2 nd August 2010 and ending on 2 nd February 2020 (Twenty first issue - Private Placement) 7 Loans and Advances from Banks Foreign Currency Term Loans (Guaranteed by Government of India) (Due for repayment within one year Rs.1,702 million, Previous year 1,633 million) 8 Rupee Term Loans (Due for repayment within one year Rs.300 million, Previous year Rs. 247 milion) ,000 5,000 7,500 7,500 7,500 7,500 5,000 5, ,000 1, ,000 5, ,000-10,000-10,274 12,319 1,682 1,453 Other Loans and Advances Rupee Term loans (Due for repayment within one year Rs.nil, Previous year Rs.Nil) 10 Obligation under finance lease (Due for repayment within one year Rs.4 million, Previous year Rs.3 million) 11 TOTAL Includes Rs. 2,337 million share of jointly controlled entities ,664 46,408 30th Annual Report 137

140 Schedule 4 SECURED LOANS NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Note: 1 Secured by (I) English mortgage of the office premises of National Thermal Power Corporation Ltd.at Mumbai, (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Company s Bankers on such moveable assets hypothecated to them for working capital requirement and (III) Equitable Mortgage by deposit of title deeds of the immovable properties pertaining to Singrauli Super Thermal Power Station. 2 Secured by (I) English mortgage of the office premises of National Thermal Power Corporation Ltd., the company at Mumbai, (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Comany s Bankers on such moveable assets hypothecated to them for working capital requirement and (III) Equitable mortagage of the immovable properties pertaining to Singrauli Super Thermal Power Station by extension of charge already created. 3 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai and (II) Equitable mortgage by deposit of title deeds of the immovable properties pertaining to National Capital Power Station. 4 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai, (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Company s Bankers on such moveable assets hypothecated to them for working capital requirement and (III) Equitable mortgage of the immovable properties pertaining to National Capital Power Station by extension of charge already created. 5 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai and (II) Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Company s Bankers on such moveable assets hypothecated to them for working capital requirement. 6 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai and (II) Equitable mortgage by deposit of title deeds of the immovable properties pertaining to Ramagundam Super Thermal Power Station. 7 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai, (II) Hypothecation of all the present and future moveable assets (excluding receivables) of Barh Super Thermal Power Project as first charge, ranking pari passu with charge already created in favour of Trustee for other Series of Bonds and (III) Equitable mortgage of the immovable properties pertaining to Ramagundam Super Thermal Power Station by extension of charge already created. 8 Secured by English mortgage/hypothecation of all the present and future fixed and movable assets of Rihand Super Thermal Power Station as first charge, ranking pari-passu with charge already created, subject to however, Company s Banker s first charge on certain moveable assets hypothecated to them for working capital requirement. 9 Secured by (I) Equitable mortagage/hypothecation of all the present and future fixed assets and movable assets of Bhilai Captive Power Plant II and Registered Office at New Delhi and (II) Secured by equitable mortgage/hypothecation of all the present and future fixed assets and movable assets of Bhilai Expansion Project and Secured by equitable mortgage/hypothecation/ranking paripassu of all present and future fixed and movable assets of Durgapur and Rourkela Captive Power Plants and Corporate Office, Delhi. 10 Secured by equitable mortgage/hypothecation of all the present and future assets and movable assets of Bhilai Expansion Project. 11 Secured against fixed assets obtained under finance lease th Annual Report

141 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 5 UNSECURED LOANS Rs. million Fixed Deposits (Due for repayment within one year Rs.449 million, Previous year Rs.3,337 million) 778 4,159 Bonds 7.552% Secured Non-Cummulative Non-Convertible Redeemable Taxable Bonds of - 5,000 Rs. 20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par semi-anually commencing from 23 rd September, 2009 and ending on 23 rd March 2019 (Twentieth Issue - Private Placement - shown under Secured Loans in current year on creation of security) Foreign Currency Bonds/ Notes 5.5% Eurobonds due for repayment on 10 th March ,990 8, % Fixed Rate Notes due for repayment on 2 nd March ,485 - Other Loans and Advances From Banks and Financial Institutions Foreign Currency Term Loans (Guaranteed by Government of India) (Due for repayment 23,064 24,723 within one year Rs.181 million, Previous year Nil) Other Foreign Currency Term Loans (Due for repayment within one year 10,272 7,885 Rs.1,584 million, Previous year Rs.1,667 million ) Rupee Term Loans (Due for repayment within one year Rs.8,963 million, 99,342 75,339 Previous year Rs. 7,618 million ) From Others Loan from Government of India (Due for repayment within one year Rs. 156 million, Previous year Rs. 315 million ) Others (Due for repayment within one year Rs.425 million, Previous year Rs. Nil) 8, TOTAL 165, ,619 Includes Rs. 20,487 million share of jointly controlled entities 30th Annual Report 139

142 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 6 FIXED ASSETS Rs. million Gross Block Depreciation Net Block As at Deductions/ As at As at For Deductions/ Upto As at As at Additions Adjustments the Year Adjustments TANGIBLE ASSETS Land : (including development) Freehold 9, (364) 10, ,542 9,977 Leasehold 1, (117) 2, (9) 333 2,583 1,580 Roads,bridges, culverts & helipads 3, , ,110 3,022 Building : Freehold Main plant 16, (41) 16,960 8, (7) 8,572 8,388 8,483 Others 14, (20) 15,391 3, ,110 11,281 10,987 Leasehold Temporary erection Water Supply, drainage & sewerage 4, ,988 1, ,478 3,510 3,735 MGR track and signalling system 6, (25) 6,385 4, (4) 4,504 1,881 2,112 Railway Siding 2, (3) 2, ,712 1,812 Earth Dam Reservoir 1, , ,131 1,212 Plant and machinery 360,915 26, , ,988 19, , , ,927 Furniture, fixtures & other office equipment 3, ,349 2, ,194 1,155 1,064 EDP, WP machines and SATCOM equipment 2, ,346 1, , Vehicles including speedboats Construction equipment , Electrical Installations 1, (40) 1, Communication Equipments Hospital Equipments Laboratory and workshop equipments Leased assets - Vehicles Capital expenditure on assets not owned by the Company 1, (47) 1, Assets held for disposal valued at net book value or net realisable value whichever is less Assets of Government Less:Grants from Government INTANGIBLE ASSETS Land- Right of Use 7 - (6) Software Total 433,767 29, , ,779 21, , , ,988 Previous year 402,917 29,644 (1,206) 433, ,362 20, , , ,555 Net Fixed Assets includes Rs.2,137 million share of jointly controlled entities th Annual Report

143 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 7 CAPITAL WORK-IN-PROGRESS Rs. million As at Deductions & As at Additions Adjustments Capitalised Development of land 1, ,943 Roads, bridges, culverts & helipads (91) Piling and foundation 1, ,918 Buildings : Main plant 2,968 1,618 1, ,046 Others 1,022 1, ,634 Temporary erection Water supply, drainage and sewerage system Hydraulic works, Barrages, Dams, Tunnels, and Power Channel 4,005 2, ,476 MGR track and signalling system 48 1, ,363 Railway siding Earth dam reservoir Plant and machinery : On own account On supply-cum-erection contract 54,319 77,970 (1,238) 26, ,184 Furniture, fixtures and other office equipment (8) EDP/WP Machines & SATCOM equipment Construction Equipments Electrical installations Communication equipment Intangible assets - software Capital expenditure on assets not owned by the company Exploratory Wells-In-Progress (*Rs.55,900/-) - * - - * Development of Coal Mines ,659 88, , ,162 Expenditure pending allocation Survey, investigation, consultancy and supervision charges Difference in exchange on foreign loans Expenditure towards diversion of forest land ,027 Pre-commissioning expenses (net) Incidental expenditure during construction 55 7, ,073 Less: Allocated to Capital Work-in-Progress - 5, ,701 67,280 91,062 1,008 27, ,426 Less: Provision for unserviceable works Total 67,157 91,056 1,008 27, ,297 Previous Year 56,454 39, ,279 67,157 Includes Rs.25,263 million share of jointly controlled entities 30th Annual Report 141

144 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 8 CONSTRUCTION STORES AND ADVANCES Rs. million CONSTRUCTION STORES * (At cost) Steel 3,066 3,452 Cement Others 9,199 6,982 12,350 10,530 Less: Provision for shortages ,345 10,525 ADVANCES FOR CAPITAL EXPENDITURE Secured Unsecured, considered good Covered by bank guarantees 16,760 18,067 Others 4,170 4,286 Considered doubtful ,233 22,468 Less:Provision for bad & doubtful advances ,159 22,402 Total 33,504 32,927 * includes material in transit, under inspection and with contractors 9,474 7,455 Includes Rs.1,161 million share of jointly controlled entities th Annual Report

145 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 9 INVESTMENTS I. LONG TERM (Trade - unless otherwise specified) Rs. million Number of Face shares/bonds/ value per securities share/bond/ Current Year/ security (Previous Year) Current Year/ (Previous Year) (Rs.) A) Quoted a) Government of India Dated Securities (Non-Trade) (Includes Rs. Nil as balance of unutilised monies raised by issue of ( ) (100) shares, previous year Rs.5,102 million) Less:- Amortisation of Premium b) Trust Securities (#) 6.60% UTI - ARS NCB Tax Free Bonds, ( ) (100) 6.75% UTI - NCB Tax Free Bonds, (110481) (100) c) Bonds (#) 7.75% IRFC Non-Taxable Bonds (Series XXVII), (135) ( ) 8.50% Housing and Urban Development Corporation Limited (HUDCO) Gujarat Punar Nirman Tax-Free Bonds Series 1A, 2007 (177) (500000) 10.40% Power Finance Corporation Ltd. Unsecured Tax-Free Bonds (Series I), 2008 (872) (100000) 4.75% Nuclear Power Corporation of India Ltd. Secured Non Convertible Bonds (LOA), Series XXIV, 2019 (7) ( ) 10.40% Nuclear Power Corporation of India Ltd. Tax Free Secured Non-Convertible Bonds, Series XI A2, 2007 (1771) (100000) 10.50% Nuclear Power Corporation of India Ltd. Tax-Free Secured Redeemable Non-Convertible Bonds, Series XII (LOA), 2013 (138) (100000) 9.50% National Textile Corporation Limited Tax-Free Non-Convertible Bonds, 2006 (3436) (100000) 5.00% NABARD Unsecured, Non-Convertible Tax-Free Bonds, Series IV G, 2008 (15597) (10000) 8.25% Nuclear Power Corporation of India Ltd. Tax-Free Secured Redeemable NCB SR-15 (LOA), 2016 (1561) (100000) 8.20% Nuclear Power Corporation of India Ltd. Tax- Free Secured * 119 Redeemable NCB SR-18 (LOA), 2012 (*Rs.1,07,296/-) (1113) (100000) 5.15 % Non Priority Sector Tax-Free Housing and Urban Development Corporation Limited (HUDCO) Bonds Series XXXIV, 2014 (286) ( ) Sub Total (A) B) Unquoted a) Bonds i) 8.50 % Tax-Free State Government Special Bonds of the Government of (##) Andhra Pradesh ,607 12,607 ( ) (1000) Assam (514640) (1000) Bihar ,944 14,667 ( ) (1000) Chattisgarh ,832 4,832 ( ) (1000) Gujarat ,372 8,372 ( ) (1000) 30th Annual Report 143

146 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) ii) Rs. million Number of Face shares/bonds/ value per securities share/bond/ Current Year/ security (Previous Year) Current Year/ (Previous Year) (Rs.) Haryana ,750 10,750 ( ) (1000) Himachal Pradesh (333880) (1000) Jammu and Kashmir ,674 3,674 ( ) (1000) Jharkhand ,601 6,223 ( ) (1000) Karnataka ,966 1,966 ( ) (1000) Kerala ,024 10,024 ( ) (1000) Madhya Pradesh ,308 8,308 ( ) (1000) Maharashtra ,814 3,814 ( ) (1000) Orissa ,029 11,029 ( ) (1000) Punjab ,462 3,462 ( ) (1000) Rajasthan ,900 2,900 ( ) (1000) Sikkim (341960) (1000) Tamil Nadu ,651 4,651 ( ) (1000) Uttar Pradesh ,899 39,899 ( ) (1000) Uttaranchal ,996 3,996 ( ) (1000) West Bengal ,742 11,742 ( ) (1000) Other Bonds % Secured Non-convertible Redeemable Western Electricity Supply ,030 Company (WESCO) Bonds, Series - I/2000, 2007 (10300) (100000) % Secured Non-convertible Redeemable North Eastern Electricity ,670 Supply Company (NESCO) Bonds, Series - I/2000, 2007 (16700) (100000) % Secured Non-convertible Redeemable Southern Electricity Supply ,300 Company (SOUTHCO) Bonds, Series - I/2000, 2007 (13000) (100000) % Secured Non-Cumulative Non-Convertible Redeemable Grid Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003, 03/02,2009 (2660) (100000) % Secured Non-Cumulative Non-Convertible Redeemable Grid ,953 Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003, 04-09/02,2009 (19536) (100000) % Secured Non-Cumulative Non-Convertible Redeemable Grid Corporation of Orissa (GRIDCO) Power Bonds, Series-1/ /02,2009 (5970) (100000) % Secured Non-Cumulative Non-Convertible Redeemable Grid Corporation of Orissa (GRIDCO) Power Bonds Series-1/2003, 02/02 & (6119) (100000) 11/02, % Secured Non-Convertible Redeemable Tax free PSU Bonds (VIII issue) - North Eastern Electric Power Corporation Ltd. (NEEPCO) (281) ( ) Bonds, 2010 (#) 8.75 % IREDA (Tax-Free) Bonds (Series IX), 2008 (#) (42175) (1000) th Annual Report

147 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Rs. million Number of Face shares/bonds/ value per securities share/bond/ Current Year/ security (Previous Year) Current Year/ (Previous Year) (Rs.) 6.00 % IREDA (Tax-Free) Bonds (Series X), 2013 (#) (48235) (1000) 5.50 % IREDA (Tax- Free) Bonds (Series XI), 2013 (#) (38445) (1000) b) Others Sub Total (B) 177, ,103 Sub Total ( I ) 182, ,141 II. CURRENT (Non - Trade - Quoted) Government of India Treasury Bills ,837 27,079 ( ) (100) Government of India Dated Securities ( ) (100) Others (Non-Trade- Unquoted) Sub Total ( II ) 3,888 27,424 Total ( I + II ) 185, ,565 Includes Rs.153 million share of jointly controlled entities (#) Development Surcharge Fund Investments (##) Includes bonds of Rs.34,352 million (previous year Rs. 32,821 million) permitted for transfer/trading by Reserve Bank of India. Balance can be transferred/ traded subject to prior approval of Reserve Bank of India. 30th Annual Report 145

148 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Rs. million Schedule 10 INVENTORIES (Valuation as per Accounting Policy No. 9) Components and spares 12,966 11,956 Loose tools Coal 7,476 3,115 Fuel Oil Naphtha Chemicals & consumables Others Steel Scrap ,904 18,198 Less: Provision for shortages Provision for obsolete/ unserviceable items Total 23,679 18,002 Inventories include stores in transit Includes Rs.267 million share of jointly controlled entities Schedule 11 SUNDRY DEBTORS Debts outstanding over six months Unsecured, considered good 927 8,120 Considered doubtful 8,363 8,360 9,290 16,480 Other debts Unsecured, considered good 8,798 6,553 Considered doubtful - - 8,798 6,553 18,088 23,033 Less: Provision for bad & doubtful debts 8,363 8,360 Total 9,725 14,673 Includes Rs.654 million share of jointly controlled entities th Annual Report

149 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 12 Rs. million CASH & BANK BALANCES Cash on hand (includes cheques, drafts, stamps on hand of Rs.158 million, 162 1,597 previous year Rs.1,594 million) Remittances in transit Balance with Reserve Bank of India earmarked for fixed deposits from public Balances with scheduled banks (a) Current Account (b) 1,387 2,363 Term Deposit Account (c) (d) 84,146 57,605 Balance with other banks Call Deposit Account West Merchant Bank Limited,London (maximum amount outstanding at any time during the year Rs.60 million, previous year Rs.60 million) Total 86,075 61,983 Includes Rs.865 million share of jointly controlled entities (a) Includes Rs. 1,00,007/- (previous year Rs. 4,32,570) in respect of Development Surcharge. (b) Includes Rs.44 million of Unclaimed Dividend (previous year Rs. 37 million). (c) Rs.14 million (previous year Rs. 11 million) deposited as security with Government authorities/as per court orders. (d) Includes Rs.Nil as balance of unutilised monies raised by issue of shares (previous year Rs.11,316 million). Schedule 13 OTHER CURRENT ASSETS Interest accured : Bonds 8,615 8,640 Development surcharge investment 6 58 Government of India Dated Securities Term Deposits 1, Others Other Recoverables Total 10,229 9,802 Includes Rs.66 million share of jointly controlled entities 30th Annual Report 147

150 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 14 Rs. million LOANS AND ADVANCES LOANS Employees (including accrued interest) Secured 4,591 4,711 Unsecured, considered good 1,065 1,088 Considered doubtful 1 1 Government of India (for transfer of transmission systems) Unsecured, considered good Loan to State Government in settlement of dues from customers Unsecured, considered good 9,573 9,573 Others Secured Unsecured, considered good ADVANCES (recoverable in cash or kind for value to be received) Contractors & suppliers, including material issued on loan Secured 6 2 Unsecured, considered good Considered doubtful 1 3 Employees (including imprest) Unsecured, considered good Considered doubtful 1 1 Others Unsecured, considered good Considered doubtful ,140 18,334 Claims recoverable Unsecured, considered good 965 1,012 Considered doubtful Less: Provision for bad and doubtful loans, advances and claims ,813 19,320 DEPOSITS Deposits with customs, port trust and others (#) Advance tax deposit & tax deducted at source 36,158 18,772 Less: Provision 25,271 11,773 10,887 6,999 Total 30,597 27,028 (#) Sales Tax deposited under protest with sales tax authorities Includes Rs.479 million share of jointly controlled entities th Annual Report

151 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 15 Rs. million CURRENT LIABILITIES Sundry Creditors For capital expenditure Other than Small Scale Industrial Undertakings 12,010 12,222 For goods and services Small Scale Industrial Undertakings Others 13,939 12,272 Book Overdraft Deposits, retention money from contractors and others 11,534 9,490 Less: Investments held as security ,533 33,886 Advances from customers and others 9,968 14,609 Investor Education and Protection Fund shall be credited by Unpaid matured Bonds (* Rs.2,000/-) * 1 Interest accrued on unpaid matured deposits/bonds (*Rs.3,10,366/-) * 1 Other liabilities 1,421 3,099 Unclaimed dividend (#) Interest accrued but not due : Loans from Government of India 9 21 Foreign currency loans/bonds Term loans in Indian currency Bonds 1, Fixed deposits from public Total 51,152 53,304 (#) No amount is due for payment to Investor Education and Protection Fund Includes Rs.1,571 million share of jointly controlled entities 30th Annual Report 149

152 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 16 Rs. million PROVISIONS Fringe Benefit Tax Additions during the year Less: Advance tax deposited Proposed dividend As per last balance sheet 10,013 10,940 Additions during the year 6,683 10,013 Amounts used during the year 10,013 10,940 6,683 10,013 Tax on proposed dividend As per last balance sheet 1,408 1,402 Additions during the year 937 1,408 Amounts used during the year 1,408 1, ,408 Retirement benefits As per last balance sheet 3,871 3,196 Additions during the year 1,097 1,096 Amounts used during the year ,777 3,871 Tariff adjustment As per last balance sheet Additions during the year - - Amounts reversed during the year Others As per last balance sheet Additions during the year 1 6 Amounts used during the year 3 3 Amounts reversed during the year Total 12,422 15,318 Includes Rs.108 million share of jointly controlled entities th Annual Report

153 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 17 Rs. million CONTINGENT LIABILITIES Claims against the Company not acknowledged as debts in respect of: Capital Works 7,157 7,084 Land compensation cases 3,166 5,508 Others 6,904 5,803 Disputed Income Tax demand * 11, Disputed Sales Tax demand Letters of Credit other than for capital expenditure 2,951 1,008 Others Total 31,668 19,669 * Possible reimbursement Rs.6,662 million (Previous year Nil). Includes Rs.6 million share of jointly controlled entities Schedule 18 Current Year Previous Year SALES Energy Sales (including Electricity Duty) 270, ,082 Less : Advance Against Depreciation deferred 1,505 1,791 Add: Revenue recognised out of Advance Against Depreciation , ,299 Consultancy, project management and supervision fees 1,621 1,439 (including turnkey construction projects) Total 271, ,738 Includes Rs.4,646 million share of jointly controlled entities Schedule 19 PROVISIONS WRITTEN BACK Doubtful debts - 5,927 Doubtful claims and advances 5 5 Doubtful construction advances 1 3 Adjustment in Tariff Shortages in construction stores 2 1 Shortages in stores 9 9 Obsolescence in stores 6 2 Others - 3 Total 23 6,236 Includes Rs.Nil share of jointly controlled entities 30th Annual Report 151

154 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 20 OTHER INCOME Rs. million Current Year Previous Year Income from Long Term Investments Trade Dividend from Joint Ventures Interest (Gross) Government Securities (8.5% tax free bonds issued by the State Government) 16,877 13,949 Other Bonds (Tax deducted at source Rs.161 million, previous year Rs.195 million) Non -Trade Interest from Government of India Securities, Gross Less: Amortisation of premium Income from Current Investments (Non-Trade) Interest from Government of India Securities (Gross) (Tax deducted at source Nil) 14 6 Income on redemption of Government of India Securities 1, Income from Others Interest (Gross) (Tax deducted at source Rs. 1,165 million, previous Rs. 83 million ) Loan to State Government in settlement of dues from customers Public Deposit Account with Government of India - 3,573 Indian banks 4,839 1,097 Foreign banks 3 2 Employees loans Others Interest on Income Tax refunds 1,151 - Less: Refundable to customers 1, Surcharge on late payment from customers 384 2,460 Hire charges for equipment Profit on sale of fixed assets Miscellaneous income 1,158 1,485 26,912 24,790 Less:Income transferred to Incidental expenditure during construction-schedule ,062 Total 26,244 23,728 Includes Rs.82 million share of jointly controlled entities Schedule 21 EMPLOYEES REMUNERATION AND BENEFITS Employees remuneration and benefits Salaries, wages, bonus, allowances & benefits 8,842 7,795 Contribution to provident and other funds 1, Welfare expenses 1,849 1,758 11,703 10,432 Less: Adjusted in fuel cost Transferred to Development of Coal Mines 12 - Transferred to incidental expenditure during construction - Schedule 26 1,205 1,145 Total 9,964 9,082 Includes Rs.179 million share of jointly controlled entities th Annual Report

155 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 22 Rs. million GENERATION, ADMINISTRATION & OTHER EXPENSES Current Year Previous Year Power charges Less: Recovered from contractors/employees Water charges Stores consumed Rent Less: Recoveries Repairs & Maintenance Buildings Plant & Machinery Power station 7,236 6,431 Construction equipment ,244 6,451 Others Insurance Rates and taxes Water Cess & Environment Protection Cess Training & Recruitment expenses Less: Fees for training and application Communication expenses Travelling Expenses Tender expenses Less: Receipt from sale of tenders Payment to Auditors Advertisement and publicity Security expenses 1, Entertainment expenses Expenses for guest house Less:Recoveries Education expenses Brokerage & commission 7 9 Donations 4 97 Community development and welfare expenses Less: Grants-in-aid Ash utilisation & marketing expenses Less: Sale of ash products Books and periodicals Professional charges and consultancy fees Legal Expenses EDP hire and other charges Printing and stationery Miscellaneous expenses Stores written off 2 3 Claims/Advances written off - 2 Deferred revenue expenditure written off 6 16 Survey & Investigation expenses written off Loss on disposal/write-off of fixed assets Loss on maturity of current Investments 6-14,767 13,584 Less: Adjusted in cost of fuel Transferred to Development of Coal Mines 19 - Expenses transferred to incidental expenditure during construction - Schedule Total 13,148 12,497 Stores consumption included in repairs and maintenance 4,453 3,870 Includes Rs.368 million share of jointly controlled entities 30th Annual Report 153

156 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 23 PROVISIONS Rs. million Current Year Previous Year Doubtful debts 3 - Doubtful advances and claims Doubtful advances for construction 9 - Shortage in stores 10 7 Obsolescence in stores Shortage in construction stores 3 2 Unserviceable CWIP 6 4 Others 1 5 Total Includes Rs.1 million share of jointly controlled entities Schedule 24 INTEREST AND FINANCE CHARGES Interest on : Bonds 3,301 2,814 Loans from Government of India Foreign Currency Term Loans 1,155 1,282 Rupee Term loans 6,778 5,069 Public deposits Foreign currency Bonds/ Notes Others Exchange difference regarded as adjustment to interest cost (2,469) (568) 9,774 9,857 Finance Charges : Bonds servicing & public deposit expenses Guarantee Fee Management/Arrangers fee - 85 Commitment charges/ Exposure premium 99 1,069 Rebate under Scheme for Settlement of SEB dues 8,047 6,813 Rebate to customers 4,368 3,981 Reimbursement of L.C. Charges on Sales Realisation Bank Charges Bond Issue Expenses 2 5 Exchange differences Eurobonds/ Foreign currency notes issue expenses 98 - Others ,289 12,475 23,063 22,332 Less: Interest and Finance charges capitalised by transfer to incidental expenditure during construction - Schedule 26 5,221 5,113 Total 17,842 17,219 Includes Rs 125 million share of jointly controlled entities th Annual Report

157 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 25 PRIOR PERIOD INCOME/EXPENDITURE (NET) Rs. million Current Year Previous Year INCOME Sales 35 1,080 Others ,102 EXPENDITURE Salary, wages, bonus, allowances & benefits 3 (8) Repairs and Maintenance Depreciation Interest 2, Advertisement and publicity - 1 Professional consultancy charges - 12 Rates & Taxes 64 (1) Insurance (6) - Power Charges - (27) Rent 12 - Fuel - (201) Others ,561 1,003 2,522 (99) Less: Incidental expenditure during construction - Schedule Total 2,488 (102) Includes Rs.Nil share of jointly controlled entities 30th Annual Report 155

158 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 26 INCIDENTAL EXPENDITURE DURING CONSTRUCTION Rs. million Current Year Previous Year A. Employees remuneration and other benefits Salaries, wages, allowances and benefits Contribution to provident and other funds Welfare expenses Total (A) 1,205 1,145 B. Other Expenses Power Less: Recovered from contractors Water Charges 3 - Rent Repairs & maintenance Buildings Construction equipment 1 11 Others Insurance 29 4 Rates and taxes Communication expenses Travelling expenses Tender expenses Less: Income from sale of tenders Remuneration to Auditors 2 2 Advertisement and publicity Security expenses Entertainment expenses 13 1 Guest house expenses 5 3 Education expenses - 1 Books and periodicals 3 4 Community development expenses 7 4 Professional charges and consultancy fee Legal expenses 4 3 EDP Hire and other charges 9 9 Printing and stationery Miscellaneous expenses Total (B) Depreciation (C) Total (A+B+C) 2,145 1, th Annual Report

159 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) Schedule 26 INCIDENTAL EXPENDITURE DURING CONSTRUCTION Current Year Rs. million Previous Year D. Interest and Finance Charges Capitalised Interest on Bonds Foreign Currency Term Loans 67 2 Rupee Term loans 3,520 2,738 Foreign Currency Bonds/Notes issue expenses Finance Charges Guarantee Fee - 1,069 Commitment Charges 11 - Management fee / arrangers fees Exchange Differences Foreign Currency Bonds/Notes issue expenses 98 - Others Total (D) 5,221 5,113 E. Less Other Income Interest from Indian Banks Employees Government of India Securities out of unutilised monies raised by issue of shares Less:- Amortisation of premium Others Hire Charges 8 6 Sale of scrap 1 - Miscellaneous income TOTAL (E) 668 1,062 F. Prior Period Adjustments 34 3 G. Income/Fringe Benefit Tax GRAND TOTAL (A+B+C+D-E+F+G) 7,020 5,985 Includes Rs.419 million share of jointly controlled entities 30th Annual Report 157

160 SCHEDULE 27 NOTES ON ACCOUNTS NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) 1. The name of the Company has changed from National Thermal Power Corporation Limited to NTPC Limited with effect from 28 th October, BASIS OF CONSOLIDATION 2.1 The consolidated financial statements relate to NTPC Ltd. (The Company), its Subsidiaries and interest in Joint Ventures. a) Basis of Accounting: i) The financial statements of the subsidiary companies in the consolidation are drawn up to the same reporting date as of the company. ii) The consolidated financial statements have been prepared in accordance with Accounting Standards (AS) 21 - Consolidated Financial Statements and (AS) 27 Financial Reporting of Interest in Joint Ventures issued by the Institute of Chartered Accountants of India and generally accepted accounting principles. b) Principles of consolidation: The consolidated financial statements have been prepared as per the following principles: i) The financial statements of the company and its subsidiaries are combined on a line by line basis by adding together the book value of like items of assets, liabilities, income and expenses, after eliminating intra-group balances, intra-group transactions and unrealised profits or losses. ii) The consolidated financial statements include the interest of the company in joint ventures, which has been accounted for using the proportionate consolidation method of accounting and reporting whereby the company s share of each of assets, liabilities, income and expenses of a jointly controlled entity is considered as separate line item. iii) The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the company s separate financial statements except as otherwise stated in the notes to the accounts. iv) The difference between the cost of investment in the joint venture and the share of net assets at the time of acquisition of shares in the joint venture is identified in the financial statements as goodwill or capital reserve as the case may be. 2.2 The Subsidiary and Joint Venture companies considered in the financial statements are as follows: Name of the Company Subsidiary Companies: Proportion (%) of Shareholding as on NTPC Electric Supply Company Ltd NTPC Hydro Ltd Pipavav Power Development Company Ltd NTPC Vidyut Vyapar Nigam Ltd Joint Venture Companies: Utility Powertech Ltd NTPC -Alstom Power Services Private Ltd PTC India Ltd NTPC-SAIL Power Company Private Ltd Bhilai Electric Supply Company Private Ltd NTPC-Tamilnadu Energy Company Ltd Ratanagari Gas & Power Private Limited* Nil * Shareholders agreement is under execution All the above Companies are incorporated in India 2.3 Joint venture operations: During the year the Company alongwith M/s Geopetrol International Inc. and M/s Canoro Resources Ltd., has participated in bidding under the Government of India New Exploration Licensing Policy-V for exploration and production of oil and gas and has been allotted Block AA-ONN-2003/2 in the State of Arunachal Pradesh. The Company together with other consortium members entered into a Production Sharing Contract with the Government of India. The Company is a non-operator and has 40% share in expenses, income, assets and liabilities with a minimum work programme commitment of Rs.621 million (previous year Nil) as per the Production Sharing Contract th Annual Report

161 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) The Company s share of assets and liabilities as at 31 st March 2006 and expenditure for the period ended on that date in respect of the above joint venture operations has been accounted for based on unaudited statement of accounts submitted by the operator. Rs.Million Expenses 2 Fixed Assets (# Rs.32,117) # Other Assets (* Rs.61,180) * Current Liabilities 2 3. a) The conveyancing of the title to 5,665 acres of freehold land of value Rs. 2,571 million (previous year 7,157 acres, value Rs. 3,126 million) and execution of lease agreements for 6,873 acres of value Rs.849 million (previous year 6,940 acres, value Rs.733 million) in favour of the Company are awaiting completion of legal formalities. b) Land shown in the books does not include cost of 1,148 acres (previous year 1,148 acres) of land in possession of the Company. This will be accounted for on settlement of the price thereof by the State Government Authorities. Land includes 345 acres of value Rs. 28 million (previous year 345 acres value Rs.28 million) not in possession of the Company. c) Land includes amount of Rs. 1,206 million (previous year Rs.1,128 million) deposited with various authorities in respect of land in possession which is subject to adjustment on final determination of price. d) The cost of Right of Use of land for laying pipelines amounting to Rs.13 million (previous year Rs.7 million) is included under intangible assets e) At Pipavav Power Development Company Ltd.: (i) Pursuant to Presidential directive received under Articles of Association of the Company, the Company had paid a sum of Rs million for acquisition of 212 hectares of land in Amreli District of Gujarat to M/s Gujarat Power Corporation Ltd. (GPCL). The payment was made by the Company on behalf of Pipavav Power Development Company Limited and accordingly it has been shown as advance to GPCL. The land is yet to be transferred in the name of the Company. (ii) GPCL has given No Objection Certificate to Revenue Deptt. of Govt. of Gujarat for transfer of 3.68 hectare of land (out of 212 hectare) to Railways for laying new railway line between Rajula and Pipavav port. An amount of Rs.1.08 million has since been received by GPCL from Western Railways. Cost of 3.68 hectares of land transferred to Railways and received by GPCL shall be recovered from GPCL once the net cost of the land is determined as per the joint venture agreement to be executed between NTPC Ltd, GPCL and Gujrat Urja Vikas Nigam Ltd. or its associates. 4. a) The Central Electricity Regulatory Commission (CERC) has notified by regulations in March 2004, the terms and conditions for determination of tariff applicable with effect from 1 st April 2004 for a period of five years. Pending final determination of tariff for the period 1 st April 2004 onwards, CERC has directed by notification that on provisional basis, the annual fixed charges as applicable on 31 st March 2004 shall be billed at target availability and variable charges based on norms of operation notified in Regulation, The amount billed for the year on this basis is Rs. 268,301 million (previous year Rs.230,663 million). Since the amount billed is subject to adjustment with effect from 1 st April 2004, pending final determination of the tariff by CERC, sales amounting to Rs. 257,179 million (previous year Rs.221,380 million) for the year have been provisionally recognised on the basis of principles enunciated by the CERC in Regulations, Further, Rs. 603 million pertaining to previous year has been recognised in Sales due to revision in the amounts provisionally billed based on orders of the CERC/Appellate Tribunal for Electricity. b) CERC has issued orders in December 2000 with respect to the tariff norms, principles and Availability Based Tariff (ABT). The company filed an appeal against the orders of CERC before the Delhi High Court which has since been transferred to the Appellate Tribunal for Electricity. Pending disposal of the appeal, CERC has notified by regulations, the terms and conditions for determination of tariff, effective from 1 st April, 2001 to 31 st March CERC issued final tariff orders based on above regulations in respect of all the stations up to 31 st March 2004 except for Rihand STPS Stage-I. During the year in respect of Rihand STPS Stage-I, an amount of Rs. 101 million has been accounted for in sales (reduction of Rs.39 million in the previous year) in line with above regulations and principles followed in the final tariff orders issued for other stations of the company. In case of stations for which final tariff orders have been issued by the CERC for the period up to 31 st March, 2004, sales for the said period amounting to Rs. 2,282 million (previous year Rs.2768 million) has been accounted for during the year. Based on the orders of CERC admitting the additional capital expenditure for some of the stations for the period and the principles enunciated therein, Rs. 536 million (previous year Rs.474 million) has been provisionally accounted as sales during the year which is to be billed on issuance of station specific Tariff orders by CERC. 5. Depreciation has been charged at the rates specified in Schedule XIV of the Companies Act,1956 except as stated in accounting policy no The Government of India in January 2006 notified the Tariff Policy under the provisions of the Electricity Act, 2003 which provides that the rates of depreciation notified by the CERC would be applicable for the purpose of tariffs as well as accounting. Subsequent to the notification of the Tariff Policy, CERC has not notified the rates of depreciation. The Company has been advised that the Tariff Policy cannot override the provisions of the Companies Act, 1956 and it is required to follow Schedule XIV of the Companies Act, 1956 in the absence of any specific deviation contained in the Electricity Act, 2003 which could be said to have been saved by Sec.616 of the Companies Act, The Company has also been advised that there is no such provision in the Electricity Act, 2003 either prescribing the rates of depreciation for the generating company or otherwise empowering any authority for providing depreciation rates for accounting purposes in supercession of the provisions of Companies Act, th Annual Report 159

162 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) 6. Due to uncertainty of realisation in the absence of sanction by the GOI, the company s share of net annual profits of Badarpur Thermal Power Station for the years to amounting to Rs.1,155 million (previous year Rs.1,174 million) being balance receivable in terms of the management contract with the GOI has not been recognised. 7. CERC notification dated 26 th March 2001 in respect of tariff norms for the period directed to collect Development Surcharge from beneficiaries. Subsequently, CERC vide its order dated 9 th November 2004 directed that the amount collected and invested in instruments corresponding to the amount contributed by each of the state utilities with interest shall be transferred in the name of concerned utility at the latter s expense. The company paid/adjusted the same as per CERC directions and the outstanding balance to be transferred as on 31 st March is as under: (Rs. Million) Sl. No. Description of the Account Schedule No Investment in different tax-free bonds ,367 2 Bank balance in Current Account 12 * ** 3 Interest accrued on Sl. No Total 199 2,426 * Rs.1,00,007/- **Rs.4,32,570/- 8. Pursuant to the Government of India Scheme for Settlement of Dues of State Electricity Boards (Scheme), Governments of Jharkhand and Bihar issued notifications during December 2005 for issue of 8.5% Tax-Free special bonds with effect from 1 st October 2001 for Rs.3,378 million and Rs. 4,277 million respectively towards outstanding dues. Accordingly, Investment of Rs. 7,655 million, interest income on the bonds amounting to Rs.2,928 million, rebate of Rs.1,198 million payable to State Electricity Boards/Successor Entities under the Scheme have been recognised, including Rs.2,278 million towards interest and Rs.892 million towards Rebate pertaining to the period upto 31 st March In accordance with the Uttar Pradesh Electricity Reforms (Transfer of Tanda Generation Undertaking) Scheme 2000, the assets for Rs.6,070 million (previous Year Rs.6,070 million) of Tanda Power Station of UP State Electricity Board (UPSEB) were handed over to the Company free from all encumbrances. However, the charge created by UPSEB in favour of Life Insurance Corporation of India (LIC) before the assets were taken over is still to be vacated by LIC. 10. The Company has provided Rs.3,401 million in the previous years in respect of amounts reimbursable to Government of India (GOI) in terms of Public notice No.38 dated 5 th November 1999 and Public Notice No.42 dated 10 th October 2002 towards cash equivalent of the relevant deemed export benefits paid by GOI to the contractors for Talcher Super Thermal Power Project Stage-II based upon the details provided by the contractors. During the year Rs.2,678 million was paid on receipt of procedural details from the GOI for depositing the amount. The balance provision has been revised to Rs.91million on the basis of additional information received from the contractors, and the difference of Rs.632 million was adjusted against the related assets. No interest has been provided on the reimbursable amounts as there is no stipulation for payment of interest in the public notices cited above. 11. The Company has raised Rs.26,840 million through public issue of shares in The entire proceeds of the issue, net of issue expenses, were utilised for part financing the capital expenditure on the specified projects. 12. Out of Rs.109 million accounted as recoverable from the Government of India (GOI) towards its share of expenses for the initial public issue of shares made in the previous year, the GOI has approved payment of Rs.56 million. Consequently, an amount of Rs.53 million has been adjusted against the Share Premium Account. 13. a) Balances shown under advances, creditors and material lying with contractors/ fabricators and material issued on loan in so far as these have since not been realised/ discharged or adjusted are subject to confirmation/reconciliation and consequential adjustment, if any. b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet. 14. Effects of change in Accounting Policies: a) Exchange differences on foreign currency loans contracted before 1 st April, 2000 for acquisition of fixed assets within India were hitherto adjusted in the carrying cost of related fixed assets. In line with the opinion received from the Institute of Chartered Accountants of India during the year, the Company has treated such exchange differences to the extent regarded as adjustment to interest cost as borrowing costs w.e.f. 1 st April, Consequently, during the current year there has been decrease in Interest and Finance charges by Rs.1,364 million, increase in Depreciation by Rs.166 million, Prior period adjustment of Rs.1,986 million and decrease in the Profit by Rs.788 million. b) In pursuance of Accounting policy no.8.3, Rs.413 million has been amortised during the year out of the premium paid on long term investments which was hitherto not being done. As a result profit for the year is lower by Rs.45 million and Capital Work-In-Progress is higher by Rs.368 million. c) Expenses by way of repairs and maintenance, depreciation, employee cost and insurance charges relating to the coal handling system used for bringing coal to its present location and condition at the power stations have been considered for valuation of the coal during the year which was hitherto not being done. The total expenses incurred under these items during the year are Rs.1,090 million. Due to inclusion of the above expenses, the closing stock of coal and profit for the year is more by Rs.82 million th Annual Report

163 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) 15. The effect of foreign exchange fluctuation during the year is as under : i) The amount of exchange differences (net) credited to the Profit & Loss Account is Rs. 2 million (previous year credit, Rs.6 million). ii) The amount of exchange differences debited to the carrying amount of fixed assets and Capital Work-in-Progress is Rs.317 million (previous year credit, Rs.145 million). 16. Revenue Grants recognised during the year in respect of expenditure incurred in the previous years amount to Rs.1 million (previous year Nil ) 17. Borrowing costs capitalised during the year are Rs. 5,095 million (previous year Rs.5,113 million). 18. Segment information: a) Business Segments: Principal business of the Company, its subsidiaries & Joint Ventures is generation and sale of bulk power to SEBs/State utilities. Other business includes providing consultancy, project management and supervision, maintenance services, Power trading and distribution of bulk power, oil and gas exploration and coal mining. b) Segment Revenue and Expense: Revenue directly attributable to the segments is considered as Segment Revenue. Expenses directly attributable to the segments and common expenses allocated on a reasonable basis are considered as Segment Expenses. c) Segment Assets and Liabilities: Segment assets include all operating assets in respective segments comprising of net fixed assets and current assets, loans and advances. Construction work-in-progress, construction stores and advances are included in unallocated corporate and other assets. Segment liabilities include operating liabilities and provisions. Rs. Million Business Segments Total Generation Others Current Year Previous Year Current Year Previous Year Current Year Previous Year Revenue : Sale of Energy/Consultancy, Project Management and Supervision fees 261, ,009* 7,955 8, , ,913 Internal Consumption of Electricity Total 261, ,257 7,955 8, , ,161 Segment Result 46,029 49,589# ,407 49,947 Unallocated Corporate Interest and Other Income 24,679 19,958 Unallocated Corporate expenses, interest and finance charges 10,576 8,830 Income Taxes (Net) 2,102 2,789 Profit after Tax 58,408 58,286 Other information Segment assets 269, ,083 1,970 1, , ,720 Unallocated Corporate and other assets 471, ,411 Total assets 742, ,131 Segment liabilities 38,516 38,327 1,490 1,110 40,006 39,437 Unallocated Corporate and other liabilities 248, ,244 Total liabilities 288, ,681 Depreciation 20,549 19, ,554 19,679 Non-cash expenses other than Depreciation Capital Expenditure 92,027 55, ,063 55,555 * includes Rs.3,522 Million (previous year Rs.3,689 million) for Sales related to earlier years. # Segment result would have been Rs. 42,507 million (previous year Rs. 45,898 million) without including the Sales related to earlier years. 30th Annual Report 161

164 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) d) The operation of the Company, its subsidiaries and its Joint Ventures are mainly carried out within the country and therefore, geographical segments are inapplicable. 19. Related party disclosures a) Related parties: i) List of joint ventures: Utility Powertech Limited, NTPC-Alstom Power Services Private Ltd., PTC India Ltd. ii) Key Management Personnel: Shri C.P. Jain Superannuated on 31 st March 2006 Shri T. Sankaralingam Shri K.K.Sinha Resigned w.e.f 27 th June 2005 Shri P. Narasimharamulu Superannuated on 31 st July 2005 Shri Chandan Roy Shri R.S.Sharma Shri R.K. Jain W.e.f 5 th May 2005 Shri A.K.Singhal W.e.f 1 st Aug 2005 Shri G.K.Agarwal Shri S.Trivedi Shri K.Prakasa Rao Dr. Joy I.Cheenath W.e.f. 1 st May 2005 Smt Vijayalaxmi Joshi W.e.f 24 th July 2005 Shri Shyam Wadhera b) Transactions with the related parties at a (i) above are as follows : (Rs. Million) Particulars Current Year Previous Year Contracts for Works/ Services for services received by the company Transactions during the year Amount recoverable from related parties 42 6 Amount payable to related parties Contracts for Works/ Services for services provided by the company Transactions during the year Amount recoverable from related parties 3 2 Dividend Received Deputation of Employees Transactions during the year 11 7 Amount recoverable from the related parties 2 1 c) Remuneration to key management personnel is Rs. 13 million (previous year Rs. 8 million) and amount of dues outstanding to the company as on 31 st March 2006 are Rs.1 million (previous year Rs.1 million). 20. Disclosure regarding Leases: a) Finance Leases: The Company has taken on lease certain vehicles and has the option to purchase the vehicles as per terms of the lease agreements, details of which are as under: Rs. million a) Outstanding balance of minimum lease payments Not later than one year 4 4 Later than one year and not later than five years 6 9 Total b) Present value of (a) above Not later than one year 4 3 Later than one year and not later than five years 5 8 Total 9 11 c) Finance Charges th Annual Report

165 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) b) Operating leases : The company s significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices and guest houses/transit camps. These leasing arrangements are usually renewable on mutually agreed terms but are not non-cancellable. Employees remuneration and benefits include Rs. 189 million (previous year Rs. 163 million) towards lease payments, net of recoveries, in respect of premises for residential use of employees. Lease payments in respect of premises for offices and guest house/transit camps are shown as Rent in Schedule 22 Generation, Administration and other expenses. Miscellaneous income in Schedule 20 Other Income, includes Rs.1 million (previous year Rs.1 million) towards sub-lease payments received/recoverable. 21. Earnings Per Share: The elements considered for calculation of Earning Per Share (Basic and Diluted) are as under: Current Year Previous Year Net Profit after Tax used as numerator (Rs. Million) 58,408 58,286 Weighted Average number of equity shares used as denominator 8,245,464,400 7,997,576,085 Earning Per Share (Basic and Diluted) Rupees Face value per share (Rupees) 10/- 10/- 22. i) Current Tax: (Rs.Million) Current Tax for the year 13,599 10,472 Less: Written back from earlier years Less: Recoverable 10,787 7,358 Net current tax debited to Profit & Loss Account 2,366 2,782 ii) Deferred Tax: Deferred Tax Liability i) Difference of Book depreciation and Tax depreciation 62,914 57,410 ii) Others ,914 57,411 Less: Deferred Tax Assets i) Provisions disallowed for tax purposes 9,338 5,279 ii) Disallowed u/s 43B of the Income Tax Act, ,341 9,435 6,620 Deferred Tax Liability (Net) 53,479 50,791 The net increase in the deferred tax liability of Rs. 2,688 million (Previous year decrease Rs. 1,658) has been debited to Profit and Loss Account. Out of the same amount Rs. 2,680 million (Previous year decrease Rs million) is recoverable from customers. 23. Research and Development expenditure charged to revenue during the year is Rs. 58 million (Previous year Rs. 42 million). 24. As required by Accounting Standard (AS 28) Impairment of Assets issued by the Institute of Chartered Accountants of India, the company has carried out the assessment of impairment of assets. There has been no impairment loss during the year. 25. i) During the year the Company reviewed the disclosure of contingent liabilities keeping in view the provisions of AS-29 Provisions, Contingent Liabilities and Contingent Assets issued by the Institute of Chartered Accountants of India as under: a) As on 31 st March, 2006 the estimated financial effect of claims for enhanced compensation for land pending before courts disclosed as contingent liability is based on judgment of the management, opinion of independent experts or experience of similar transactions. Such claims hitherto were disclosed based on the amounts claimed by the land losers, except to the extent the possibility of a liability was considered remote. b) As on 31 st March, 2006 the estimated financial effect of claims for interest on amounts disputed, delayed payments etc. is based on the rate of interest claimed or 18%, whichever is lower, unless otherwise provided in any statute, agreement, order etc. Such claims were hitherto disclosed based on the rates demanded by the claimants. Consequently, contingent liabilities as at 31 st March, 2006 are lower by Rs.3,595 million. ii) The outflow on account of the claims against the company not acknowledged as debts, and tax disputes is contingent upon the decision of the courts/other authorities and may differ from the amounts disclosed as contingent liability on the basis of estimates. 30th Annual Report 163

166 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) 26. Foreign currency exposure not hedged by a derivative instrument or otherwise: Sl.No Particulars Currencies Amount Rs. Million a) Borrowings, including interest accrued but not due thereon. USD 36,977 20,348 JPY 28,574 32,303 Others 896 1,390 b) Sundry creditors/deposits and retention monies USD 4,729 3,450 EURO Others c) Sundry debtor and Bank balances GBP USD 6 - d) Unexecuted amount of contracts remaining to be executed USD 44,044 51,185 EURO 5,531 5,477 Others 1,187 1, The pre-commissioning expenses during the year amounting to Rs. 1,312 million (previous year Rs 1,191 million) have been included in Fixed Assets/Capital work-in-progress after adjustment of pre-commissioning sales of Rs.727 million (previous year Rs. 583 million) resulting in a net pre-commissioning expenditure of Rs. 585 million (previous year Rs.608 million) 28. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 143,379 million, (previous year Rs. 154,848 million) which includes an amount of Rs. 7,762 million (previous year Rs.6,708 million) in respect of Jointly Controlled Entities. 29. For certain items, the Company and its Joint Ventures have followed different accounting policies. However, impact of the same is not material. 30. Previous year figures have been regrouped/rearranged wherever necessary For and on behalf of the Board of Directors ( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Bhavna Nanda ) (Sanjay Gupta) Partner Partner M No M No Place : New Delhi Dated : 31 st May th Annual Report

167 NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.) CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006 Rs. Million Current Year Previous Year A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and Prior Period Adjustments Adjustment for: Depreciation Provisions Deferred revenue on account of Advance Against Depreciation Interest charges Guarantee Fee & other Finance charges Interest/Income on Bonds/Investment (19195) (14991) Prior Period Adjustments (Net) (2488) 102 Dividend Income (118) (113) Provisions Written Back (23) (6236) Deffered Revenue Expenditure Written off 6 16 Others (Bonds issue and Servicing Expenses) Loss on maturity of current Investment Operating Profit before Working Capital Changes Adjustment for: Trade and Other Receivables (2710) (2969) Inventories (4602) 99 Trade Payables and Other Liabilities 635 (16169) Loans and Advances (1614) 3154 Other Current Assets (436) (392) (8727) (16277) Cash generated from operations Direct Taxes Paid (9671) (13009) Income Tax Recoverable Net Cash from Operating Activities - A B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (92818) (54565) Investment in Goodwill (750) - Purchase of Investments (45959) (34219) Sale of Investment Development Surcharge Account - (1358) Interest/Income on Bonds/Investment Received Dividend Received Net cash used in Investing Activities - B (48129) (64570) C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of Share capital (Including Premium) Proceeds from Long Term Borrowings Repayment of Long Term Borrowings (17632) (13579) Interest Paid (11728) (10438) Guarantee Fee & other Finance charges Paid (504) (1597) Dividend Paid (26514) (20835) Tax on Dividend (3722) (2694) Others ( Equity /Bonds issue & Servicing Expenses) (118) (304) Net Cash flow from Financing Activities - C Net Increase/Decrease in Cash and Cash equivalents (A+B+C+D) (5303) Cash and cash equivalents (Opening balance) * Cash and cash equivalents (Closing balance) * NOTES : Cash and Cash Equivalents consists of Cash in Hand, Balance with Banks, Public Deposit Account and interest accrued thereon Previous year figures have been regrouped/rearranged wherever necessary. * Includes Rs.14 million deposited as security with Government Authorities as per court orders. For and on behalf of the Board of Directors ( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM) Company Secretary Director (Finance) Chairman & Managing Director As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Bhavna Nanda ) (Sanjay Gupta) Partner Partner M No M No Place : New Delhi Dated : 31 st May th Annual Report 165

168 AUDITORS REPORT TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED FINANCIAL STATEMENTS OF NTPC LIMITED (formerly National Thermal Power Corporation Ltd.), ITS SUBSIDIARIES AND JOINT VENTURES. 1. We have audited the attached Consolidated Balance Sheet of NTPC LIMITED (formerly National Thermal Power Corporation Limited) (the Company), its Subsidiaries and Joint Ventures (NTPC Group) as at 31 st March 2006 and also the Consolidated Profit & Loss Account and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company s Management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of the Company s following Subsidiaries and Joint Ventures which have been audited by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included in respect of the Subsidiaries and Joint Ventures, is based solely on the reports of the other auditors. The details of the assets, revenues and net cash flows in respect of these Subsidiaries and Joint Ventures to the extent to which they are reflected in the consolidated financial statements are given below: (Rs.Million) Name Total Assets Total Revenues Net Cash Flows Subsidiaries: NTPC Electric Supply Company Ltd NTPC Hydro Ltd Pipavav Power Development Company Ltd NTPC Vidyut Vyapar Nigam Ltd , Joint Ventures: Utility Powertech Ltd NTPC-Alstom Power Services Pvt. Ltd (7) PTC India Ltd , NTPC-SAIL Power Company Pvt. Ltd. 2, (67) Bhilai Electric Supply Company Pvt. Ltd. 2, (349) NTPC-Tamilnadu Energy Company Ltd Ratnagiri Gas & Power Pvt. Ltd.* 24, *Shareholders Agreement is under execution. 4. We report that the consolidated financial statements have been prepared by the Company s Management in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements and Accounting Standard (AS) 27, Financial Reporting of Interests in Joint Ventures issued by the Institute of Chartered Accountants of India. 5. We draw attention to: (i) Note no. 4 of Schedule 27 to the financial statements in respect of accounting of sales on provisional basis pending final determination of tariff by Central Electricity Regulatory Commission. (ii) Note no. 6 of Schedule 27 to the financial statements in respect of share of net annual profit of Badarpur Thermal Power Station amounting to Rs.1,155 million relating to earlier years not recognized as revenue. 6. Further to our comments in para 5 above, we report that on the basis of our audit, the information and explanations given to us and on the consideration of the separate audit reports on individual audited financial statements of the NTPC group, we are of the opinion that the said consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India, i) in case of Consolidated Balance Sheet, of the state of affairs of the NTPC Group as at 31 st March, 2006; ii) in case of Consolidated Profit & Loss Account, of the profit for the year ended on that date; and iii) in case of Consolidated Cash Flow Statement, of the cash flows for the year ended on that date. Place : New Delhi Dated : 31 st May 2006 As per our report of even date For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co. Chartered Accountants Chartered Accountants Chartered Accountants (Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad) Partner Partner Partner M No M No M No For S.N. Nanda & Co. For T.R. Chadha & Co. Chartered Accountants Chartered Accountants (Bhavna Nanda ) (Sanjay Gupta) Partner Partner M No M No th Annual Report

169 NTPC Limited (Formerly National Thermal Power Corporation Limited) Regd. Office : NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Lodi Road, New Delhi ATTENDANCE SLIP 30 th Annual General Meeting to be held on Tuesday, September 19, 2006 at a.m. NAME OF THE ATTENDING MEMEBR (IN BLOCK LETTERS) *Folio. No. DP ID No. Client ID No. No. of shares Held NAME OF PROXY (IN BLOCK LETTERS, TO BE FILLED IN IF THE PROXY ATTENDS INSTEAD OF THE MEMBER) I, hereby record my presence at the 30 th Annual General Meeting of the Company at NDMC Indoor Stadium, Talkatora Garden, New Delhi , on Tuesday, September 19, Signature of Member/Proxy *Applicable in case of shares held in Physical Form. NTPC Limited (Formerly National Thermal Power Corporation Limited) Regd. Office : NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Lodi Road, New Delhi DP ID : Client ID : No. of Shares FORM OF PROXY Regd. Folio No.: (in case of shares held in Physical Form) I/We of......in the District of... being a member/ members of the above named Company, hereby appoint... of... in the District of......or failing him/her...of of......in the District of as my/our proxy to vote for me/us on my/our behalf at the 30 th Annual General Meeting of the Company to be held on Tuesday, September 19, 2006 and at any adjournments thereof. Affix One Signed this...day of Rupee Revenue Stamp Signature This form is to be used in favour of resolution(s) no.and against resolution(s) no... Unless otherwise instructed, the Proxy will act as he thinks fit. Notes: a) The form should be signed across the stamp as per specimen signature registered with the Company. b) The form should be deposited at the Registered Office of the Company not less than forty-eight hours before the time for holding the Meeting. 30th Annual Report 167

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