LADIES & GENTLEMEN,
It gives me great pleasure in welcoming you all to the 25th Annual
General Meeting of your Company, a momentous year in the PFC history as
we celebrate completion of 25 years of operation. Your Company has
crossed many impressive milestones in this journey which has made us
the most dominant player in the sector.
Your Company is the youngest to enter the list of the top 10 Profit
making public sector undertakings as per PSE Survey Report of
Department of Public Enterprises released in February, 2011. PFC is
ranked 35th based on net worth in a listing of top 500 companies
according to Dun & Bradstreet. Your Company also figures among the top
500 global financial brands (Ranked 376th), according to Brand Finance
Plc of UK. PFC got listed in Global 2000 leading Companies (Ranked
1195th), only 57 Companies from India figured in this list.
The Indian power sector had a different landscape when your Company
started operations. Your Company acted as the change agent in turning
around the sector into a viable investment proposition. Today your
Company performs a variety of functions like funding power projects,
implementing key development schemes and offering diverse products and
services like consultancy and advisory in the power sector. Your
Company is also looking at business diversification in related areas,
but more on that later.
INDIAN ECONOMY
The Indian economy during fiscal 2011 has been characterized by robust
economic growth and steady fiscal consolidation. Inflation continues
to be high even though it has come down significantly from where it
was at the start of the fiscal year. This has been a classic year of
economic recovery for India. The economy remained on the path of rapid
resurgence, which began in fiscal 2009 and has virtually returned to
the high growth path that it had achieved during fiscal 2008, before
the global financial crisis and economic meltdown. India''s growth story
this year has been remarkable by any standards.
One of the major requirements for sustainable and inclusive economic
growth is an extensive and efficient infrastructure network. It is
critical for the effective functioning of the economy and industry. The
key to global competitiveness of the Indian economy lies in building a
high class infrastructure. Among the 10 infrastructure sectors, power
is the most critical. Of the USD 500 billion investment in
infrastructure required during the 11th plan, power is the largest
head, accounting for about a third of the overall fund requirement.
Investment requirements will only increase in the 12th plan, as demand
for power grows. Your Company is well positioned to take advantage of
these opportunities.
OUTLOOK ON POWER SECTOR
Power sector at this point of time is undergoing crucial changes in
terms of huge capacity addition, higher efficiency, increased private
power participation, competitive pricing and improved regulatory
framework. The power requirement in India is expected to grow manifold
in the coming years as a result of industrial and urban expansion. Govt
of India has responded positively by accelerating the capacity addition
from 21,180 MW in 10th Plan to 39,631 MW in the 11th plan upto 31st
July, 2011. It is expected that approximately 52,000 MW will be added
by end of 11th Plan, leading to almost two and a half times that of
10th Plan. In addition, 16 UMPPs have been identified, out of which 4
UMPPs have already been awarded. This initiative will immensely
contribute in achieving the targeted capacity addition of 93,000 MW in
12th Plan (including 12,000 MW slippages from 11th Plan). On the same
lines, Govt of India has also initiated development of large
Transmission Systems through private sector participation. 11 such
Independent Transmission Projects (ITPs) have been identified by the
Empowered Committee.
In spite of impressive growth in capacity addition and transmission
infrastructure, the distribution sector continues to be the weak spot.
The financial health of distribution utilities in the country is a
matter of concern. The financial losses have shown increase in the last
few years. While the utilities should make serious efforts to reduce
the Aggregate Technical and Commercial (AT&C)
losses there should be adequate tariff to recover the cost of supply.
You will be happy to note that in the Conference of Power Ministers
held on 13th July, 2011 on Distribution Reforms, about 14 resolutions
were passed unanimously aiming at reforming the distribution sector.
Some of the major resolutions include (1) Distribution utilities file
the Annual Tariff Revision Petition by December-January of the
preceding financial year to the State Regulators as stipulated in the
National Tariff Policy (2) automatic pass through in tariff for any
increase in fuel cost (3) clearance of all outstanding subsidies to the
utilities and ensure advance payment of subsidy (4) the accounts of the
utilities are audited upto the financial year 2009-10 and the accounts
of a financial year are audited by Sept of the next financial year,
henceforth.
Govt of India has also initiated various reform measures to address the
issue of distribution sector losses. These include: (i) Re-structured
Accelerated Power Development and Reform Programme (R-APDRP) which
focuses on actual, demonstrable performance in terms of sustained loss
reduction; (ii) Procurement of Power by Competitive bidding, which
focuses on the concept of competitive tariffs that leads to economical
power procurement by DISCOMs thereby increasing their viability and
(iii) Franchisee models. Some of franchisee models implemented have
shown that this could be a possible viable alternative to existing
distribution business. In addition to these three, other initiatives to
reduce distribution losses include constitution of a High Level Panel
on Financial Position of Distribution Utilities under Shri V. K.
Shunglu (former CAG), constitution of Task Force on private
participation in power distribution and Rating of Distribution
Utilities.
PERFORMANCE HIGHLIGHTS
Your Company has come a long way since 25 years when it started its
lending operations in the fiscal 1988 with a modest sanction of Rs.107
Crores and disbursement of Rs. 101 Crore. In comparison, your Company
has sanctioned Rs.75,197 Crores and disbursed close to Rs.34,122 Crore
including R-APDRP during the just concluded fiscal 2011, which is quite
creditable. With this, cumulative sanctions move to Rs.3,45,726 Crore
and cumulative disbursements to Rs.1,73,049 Crore as on March 31, 2011.
Your Company has supported the capacity addition in power sector
significantly by providing financial support to 31,462 MW during the
11th Plan and 48,573 MW so far in the 12th Plan.
The fiscal 2011 has been yet another year of impressive growth in loan
assets of 25% with a net Profit of about Rs.2,620 Crore. The operating
income touched a new level of Rs.10,128 Crore showing an increase of
26% over previous year. Personnel and Administration expenses in the
fiscal 2011 were 0.09% of Loan Assets. Your Company has also maintained
very low levels of net NPAs of 0.20% of loan assets.
Long Term Infrastructure Bonds and Tax free Bonds : Your Company by
virtue of its Infrastructure Finance Company (IFC) status has become
eligible to issue Long Term Infrastructure Bonds u/s 80CCF of Income
Tax Act, 1961. The Company collected a total of Rs.235 Crore from the
market in this fiscal 2011 and intends to tap the market again in the
next fiscal 2012 with an issue size of Rs.6,900 Crore. Additionally,
the Company has been allocated tax free bonds of Rs. 5000 Crore for
issuance in the next fiscal 2012.
Ratings: In the fiscal 2011, International credit rating agencies
Moody''s, Fitch and Standard & Poor''s have given to your Company, long
term foreign currency issuer ratings of Baa3, BBB- & BBB-
respectively, which are at par with sovereign rating. The long term
domestic borrowing programme (including bank loans) got the highest
safety rating of AAA and LAAA respectively by CRISIL and ICRA.
Further, short term domestic borrowing programme of your Company
(including bank loans) was awarded the highest rating of P1 and
A1 respectively by CRISIL & ICRA. PFC is an ISO 9001:2008 certified
Company.
Further Public Offer (FPO): PFC successfully closed its FPO despite
tough market conditions during the first quarter of fiscal 2012. The
issue got a phenomenal response and was subscribed 4.31 times. The
issue was priced at Rs.203 (5% discount to Retail & Employees). The
offering comprised of fresh issue of 17,21,65,005 equity shares by the
Company and an offer for sale (disinvestment) of 5,73,88,335 equity
shares by Government of India. Post-issue, the holding of the
Government of India stands at 73.72% and the balance is held by public.
The Company raised an amount of Rs. 3,433 Crore from issue of fresh
shares to the public.
Restructured Accelerated Power Development & Reform Programme
(R-APDRP): Your Company, as nodal agency, has contributed signifi
cantly during the year in implementation of R-APDRP programme. Your
Company cumulatively upto fiscal 2011 (i) Sanctioned Part A (IT)
schemes of all eligible 1,401 towns (ii) Sanctioned Part-A (SCADA)
schemes for 28 out of 60 eligible towns and (iii) Sanctioned Part-B
schemes for 823 of 1,100 eligible towns. During this year (fiscal 2011)
your Company sanctioned Rs.13,665 Crore of projects against the MoU
target of Rs.9,000 Crore set for PFC, which include Rs.147 Crore for
Part-A (IT) covering projects of 23 towns, Rs.603 Crore for Part-A
(SCADA) of 25 projects and Rs.12,915 Crore for Part-B projects of 584
towns.
Your Company has also disbursed the entire amount of Rs.2,257 Crore
released by Ministry of Power (MoP) during the fiscal 2011 upto March
31, 2011 to the State Utilities.
During this fiscal 2011, ring fencing of 810 towns was completed as
against the MoU target of 350 towns. Recognizing the need and to keep
pace with technology and contemporary knowledge and skill, PFC imparted
training on various themes for various levels of Power Utility
personnel across the country. Training was imparted for 35,895 mandays,
against the MoU target of 4,000.
Ultra Mega Power Project: Your Company has been designated as the
''Nodal Agency'' by Ministry of Power, Government of India, for
facilitating development of Ultra Mega Power Projects (UMPPs), with a
capacity of about 4,000 MW each. As on March, 2011, twelve Special
Purpose Vehicle (SPVs) have been established by the Company for these
UMPPs to undertake preliminary site investigation activities necessary
for conducting the bidding process for these projects. So far, four (4)
SPVs namely Coastal Gujarat Power Ltd. for Mundra UMPP in Gujarat,
Sasan Power Ltd. for Sasan UMPP in Madhya Pradesh, Coastal Andhra Power
Ltd. for Krishnapatnam UMPP in Andhra Pradesh and Jharkhand Integrated
Power Ltd. for Tilaiya UMPP in Jharkhand have been transferred to the
successful bidders. The Orissa UMPP received response from 20 bidders
and the evaluation is in process, whereas Chhattisgarh UMPP is at
Request for Qualification (RfQ) stage. The remaining 10 identified
UMPPs are in the pipeline which are at various stages of development.
Independent Transmission Projects (ITPs): PFC Consulting Limited
(PFCCL), a wholly owned subsidiary of your Company is nominated as ''Bid
Process Coordinator'' for Independent Transmission Projects by Ministry
of Power, Govt. of India.
Special Purpose Vehicles (SPVs) have been incorporated for the above
purpose, one by PFC namely East North Interconnection Company Limited
(ENICL) and three by PFC Consulting Limited (a wholly owned subsidiary
of PFC) namely Jabalpur Transmission Company Limited (JTCL), Bhopal
Dhule Transmission Company Limited (BDTCL) and Nagapattinam-Madhugiri
Transmission Company Limited (NMTCL). ENICL, JTCL and BDTCL have
already been transferred to successful developers and the RFQ responses
for NMTCL are under evaluation.
Corporate Social Responsibility: Your Company has implemented its
Corporate Social Responsibility (CSR) Policy with an aim to ensure that
the Company becomes a socially responsible corporate entity
contributing towards quality of life of the society at large without
compromising on ecological conditions. During the year, your Company
has allocated an amount of Rs.12 Crore and taken several initiatives
which includes (i) construction of houses for the fl ood affected
marginalized sections of the population in Andhra Pradesh (400Nos) (ii)
distribution of Solar Lanterns in 169 Villages for people who do not
have access to electricity (iii) construction of primary school and
construction of fl ood protection wall in Ladakh.
BUSINESS EXPANSION THROUGH VERTICALS
PFC Consulting Ltd: In 1999, Consultancy Services Group (CSG) was
created to offer consultancy services in power sector. To provide
exclusive focus to this business, CSG in 2008 was converted into a
wholly owned subsidiary of PFC namely PFC Consulting Ltd (PFCCL). PFCCL
is now providing wide ranging services related to power sector with a
diverse client base of 37 clients spread across 20 states. During the
fiscal 2011, PFCCL has earned a total income of Rs. 52.60 crore and
earned a net Profit of Rs.26.95 crore.
PFC Green Energy Limited: Your Company believes that the renewable
energy space in India provides significant untapped potential. To tap
this opportunity, the Renewables business group of PFC was converted
into PFC Green Energy Limited as a wholly owned subsidiary of the
Company. This company will exclusively extend finance and financial
services to promote green (renewable and non-conventional) sources of
energy with an authorised capital of Rs.1,200 crore and subscribed
share capital of Rs.0.05 crore. The Company received its certificate of
commencement of business on July 30, 2011.
PFC Capital Advisory Services Limited: With an aim to harness the huge
business potential offered by power sector in the consortium lending
operations space, PFC converted its Consortium Lending business group
into PFC Capital Advisory Services Ltd, a wholly owned subsidiary of
PFC. This company got incorporated on July 18, 2011 to exclusively
syndicate and make financial arrangements for the projects /
enterprises in the areas of power, energy, infrastructure and other
industries. The authorised share capital of the Company is Rs.1 crore
and the initial paid up share capital of the Company is Rs. 0.10 crore.
Facilitation Group: Your Company has created this business group to tap
opportunities in allied sector like power equipment, gas
transportation, coal mining etc which have a backward linkage to power
sector. The group has already started its business by financing large
project for its expansion of power equipment manufacturing / production
facilities. Your Company is expanding this business with several
funding proposals in hand to finance power equipment manufacturing
facilities like the solar PV facilities.
Power Trading through Power Exchanges : To promote short term trading
through power exchange, your Company had promoted National Power
Exchange Ltd (NPEX), jointly with NTPC, NHPC and TCS during fiscal 2009
and contributed Rs.2.19 Crore (being 16.66% of paid up equity up to
March 2011) towards equity contribution.
Your Company has also contributed Rs.1.75 Crore (being 4.37% of paid up
equity up to March 2011) towards equity contribution in Power Exchange
India Ltd., promoted by NSE and NCDEX.
Equity Financing: Your Company is endeavouring to make a mark in the
area of equity investment so as to capitalize on its vast domain
experience, attained over 25 years of operations in power sector debt
financing. PFC aims to leverage its financial strength, large debt
providing capability and power sector expertise to invest in equity of
attractive power projects. Over a period of time, your Company proposes
to build an equity portfolio of power assets which could provide
consistent gains in the form of dividend and /or capital appreciation.
Nuclear Funding: Your Company has signed a Memorandum of Understanding
(MoU) with Nuclear Power Corporation of India Ltd (NPCIL) in October,
2010 to offer financial assistance as well as other services to NPCIL
for its nuclear power capacity addition in the next 20 years. NPCIL has
requested your Company to provide debt financial assistance for its 2
nuclear power projects costing about Rs.24,000 Crore.
Banking Business : Your Company is currently in the preliminary stages
of evaluating the possibility of foray into banking and is in the
process of appointing a consultant in connection with such initiative.
Acquisition Advisory Services: Your Company being a dominant player in
the sector is seeing a fundamental shift of players from government
sector to private sector. It believes that increasingly private players
will play significant role in power sector and will consolidate their
position in the sector. This business group namely Acquisition Advisory
Services is formed to tap the mergers and acquisition opportunities in
the power sector due to the above referred phenomena. This company will
provide advisory services ranging from identification of target
projects / players, potential M&A opportunities and also provide
techno- commercial appraisal of target projects / players.
FUTURE STRATEGY
As a part of the sustainable strategy to expand business, your Company
intends to fl oat independent business verticals in the form of
subsidiaries. As indicated above, your Company has already 3
subsidiaries in place which have developed expertise in their
respective niche areas of business to tap the significant business
potential. The other business groups in your Company will adopt a
similar approach of spinning off into independent subsidiaries as they
grow and develop expertise in such areas.
The future strategy therefore is to sustain the growth momentum of your
Company by further consolidation in power sector and strengthening of
these business verticals so as to enable them to grow into a strong
Companies with sound financials. As a part of Corporate Plan, your
Company has also identified other potential business areas like foray
into international markets, insurance, capacity building initiatives,
strategic alliance with domestic and international institutions etc,
whose feasibility will be explored and developed on the above lines to
further fuel the growth of your Company.
While your Company is committed to accelerate growth, your Company will
continue to achieve the best standards of Corporate Governance with
emphasis on authority and freedom of the management coupled with
transparency, accountability and professionalism in their working with
the aim of enhancing long term economic value of all the stakeholders
and the society at large.
AWARDS & ACCOLADES
Your Company''s performance has been recognized time and again and the
same is reflected in various awards / accolades received. PFC received
SCOPE Commendation Certificate in the category of Best Managed Bank,
Financial Institution or Insurance Company for the year 2009-10 from
H.E. President of India Smt. Pratibha Devisingh Patil, the MoU Award
of Excellence in Performance for 7th time in the category of
Excellence in Financial Services Sector from Hon''ble Prime Minister
of India Dr Manmohan Singh, the ICT for India Award 2010 for
excellence in performance for R-APDRP from Hon''ble Union Minister Shri
S. Jaipal Reddy, the 3rd PSU Awards 2011 in the category of Gentle
Giant, The Largest Navratna (Non-Manufacturing) from Hon''ble Union
Power Minister Shri Sushilkumar Shinde.
ACKNOWLEDGEMENTS:
would like to place on record my sincere thanks to the Board of
Directors, Shareholders, investors and valued clients for reposing
faith in the Company. I also place on record the support of a
motivated, dedicated and highly committed PFC team
take this opportunity to express my sincere and grateful thanks to the
unstinted support of Hon''ble Union Minister of Power, Hon''ble Union
Minister of State for Power, Secretary (Power), Officials of the
Ministry of Power, Ministry of Finance, Reserve Bank of india,
Department of Public Enterprises, Securities and Exchange Board of
India, National Stock Exchange of India Limited, Bombay Stock Exchange
Limited, Planning Commission, CEA, C&AG, Statutory Auditors and other
concerned Government departments/ agencies at the Central and State
level, World Bank, the Asian Development Bank, USAID, KfW of Germany,
EDC of Canada and various international financial institutions/banks,
Commercial Banks, Financial Institutions, Registrars and other agencies
for their continuous support. I extend my sincere thanks to the Print &
Electronic Media for their untiring support as well.
I hope the coming years will further strengthen our relationship with
all stakeholders for a sustainable growth and performance of your
Company
(Satnam Singh)
Chairman & Managing Director
New Delhi
26th August, 2011
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