2011-12 has been a significant year. 13 July 2011 saw the unveiling of
our new corporate identity: the RP-Sanjiv Goenka Group. Covering 10
companies across five business verticals, the Group has an asset base
of Rs.14,000 crore; Rs.9,000 crore in revenues; Rs.4,500 crore in
market capitalisation; 100,000 shareholders; and 16,000 employees.
The business verticals under the Group are:
- Power and Natural Resources. This covers your Company, CESC Limited;
Noida Power Company Limited and Integrated Coal Mining Limited.
- Carbon Black which involves Phillips Carbon Black Limited.
- Retail. This incorporates Spencer''s Retail Limited; Music World
Retail Limited; and Au Bon Pain Cafe India Limited.
- Media and Entertainment. This has Saregama India Limited and Open
Media Network Limited.
- Infrastructure, which is represented by CESC Properties Limited.
The logo of this new group is derived from an arrow-head, which
represents speed, focus and progressiveness. Six such arrow- heads
converge to a common goal, which forms the ''Dhanuchakra'' -orthe logo
identifying the Group.
Let me now move on to the performance of CESC, or your Company. A good
place for a significant fiduciary to begin is the financials.
During 2011-12, total income from operations of CESC as a standalone
entity rose by 12.6% to Rs.4,781.9 crore. Input prices increased
considerably on account of coal costs. Despite that, earnings before
interest, depreciation and taxes (EBIDTA) went up by 8.8% to Rs.1,258.6
crore. Profit before depreciation and taxation (PBDT) increased by
11.5% to Rs.982.8 crore. And your Company''s profit after taxes (PAT)
rose by 13.5% to Rs.554.3 crore. You will agree that these are
I would now like to touch upon some key performance parameters.
- Generation from your Company''s three units at Budge Budge, Southern
and Titagarh increased by 3.6% in 2011-12 to 8,692 million units.
During the year, CESC''s composite plant load factor for the three
plants was almost 88%, versus the national average of 73.3%.
- Several initiatives were taken to improve power distribution and
ensure an almost zero load-shedding status for Kolkata. Some of these
were: (i) increasing the capacities of existing substations; (ii)
commissioning four new distribution stations; (iii) significantly
increasing the network of underground cables across the licensed area
and (iv) installing over 328,000 new meters-either as new connections
or as replacements.
- In addition, your Company is executing some larger projects to
upgrade its distribution network, such as (i) successfully
commissioning a fourth transformer at its Eastern Metropolitan
substation; (ii) setting up a new substation at Dum Dum and the
Barrackpur Trunk Road and (iii) a receiving station at Rishra, which
will allow CESC to import additional power and further improve
reliability and security of supply in the western part of the licensed
I am happy to inform you that the 2 x 300 MW coal fired thermal power
project at Chandrapur in Maharashtra is on schedule. Construction work
is in its advanced stages. The two units are expected to be
commissioned in April 2013 and July 2013.
Equally, all requisite clearances-including the environmental ones -are
in place for the 2 x 300 MW thermal power project at Haldia in West
The Group has also moved on to renewables. In Kutch (Gujarat), it set
up a 9 MW solar power project using photovoltaic technology. The plant
was commissioned on 9 March 2012 and was dedicated to the nation on 19
April 2012 by the Hon''ble Chief Minister of Gujarat, Shri Narendra
Modi. Another solar power project is on theanvilatBikanerinRajasthan.
Let me now move on to two concerns, and one potential opportunity.
The first concern is coal scarcity. This is a serious problem for coal
fired thermal producers across India. At the end of February this year,
more than 30 power plants had coal stock of less than a week and some
25 or so of less than five days. The domestic coal deficit was only
partially met by using imported coal. As it stands, it seems unlikely
that domestic coal output will meet the power demand in the Twelfth
Five Year Plan (2012-17). Consequently, many fuel supply agreements
may not deliver the coal these promise.
Your Company has attempted to deal with this crisis by locking in
imported coal. Thanks to the Group''s owning over 11% equity ownership
of coal mining assets in South Africa, as well as executing long term
supply agreements, your Company should have access to sufficient
imported coal over the foreseeable future. The first delivery of such
coal is expected in 2014.
The second concern is the pricing of power. As coal costs rise, so too
will be the pressure on pricing. Against this will be the concerns of
state governments and state electricity boards - which will try to
politically resist such pass-through whenever it can.
Generation-cum-distribution companies such as yours will have to do a
tight balancing act between the needs of the state governments on the
one hand and shareholder value on the other. Such tight rope walking
may increase in the medium term.
Now to the potential opportunity. I am often asked the following
question: Given CESC''s century-long experience in power distribution,
why aren''t you considering more such plays in different geographies
across India? My answer is this: Yes. We have the capabilities and
the competencies. And we are always exploring for the ''right''
territories, provided these come with the ''right'' conditions and at
I want to end this letter with a request. Please wish the RP-Sanjiv
Goenka Group all the success. We need your support and good wishes.
This Group, built on a legacy of over a century, has more to deliver.
With best regards,
13 June 2012 Vice-Chairman