Ladies and Gentlemen,
 
 It gives me immense pleasure to welcome you on the occasion of the 42nd
 Annual General Meeting of your Company.
 
 I am privileged to be heading a Navratna Company which has
 established a record of excellent all-round performance, consistent
 growth and profitability, especially over the last five years. From a
 humble beginning in 1969, when the company financed mainly pumpset
 energisation and village electrification schemes, your Company today has
 become one of the leading public financial institutions in the country,
 catering to financing needs of almost the entire power infrastructure
 space in India.
 
 The company''s annual report and audited accounts for the year ended
 31st March, 2011 have been with you for some time now and with your
 permission, I shall take these as read. I take this opportunity to
 share my views on the economic scenario and to present the performance
 highlights of your Company.
 
 OUTLOOK ON ECONOMY
 
 The year gone by has seen several developments in the economic
 landscape in India and abroad. At the same time, continuing efforts for
 consolidation of fiscal position of countries in Europe, events in the
 Middle East and North Africa, rising oil prices and emerging inflation
 trends in many countries have emerged as challenges impacting the
 global growth outlook. The coordinated efforts of respective governments
 and central banks across the nations in fiscal and monetary policy
 calling for vigilant financial discipline have shown gradual improvement
 in the state of world economy. However, the latest data from IMF
 indicates that global economic growth is likely to moderate from 5% in
 2010 to 4.4% in 2011. Growth is projected to decelerate in advanced
 economies due to the waning impact of fiscal stimuli, high oil and
 commodities prices.
 
 During 2010-11 Indian economy registered growth of 8.5% compared to a
 growth of 8% achieved in the financial year 2009-10. The growth for the
 current financial year 2011-12 is expected to moderate due to higher
 inflationary pressures and high level of interest rates, which may
 further get augmented due to slow down in the capital expansion plans
 of corporates due to higher borrowing costs. Reserve Bank of India
 (RBI), in its policy announcement in July 2011, has raised the repo and
 reverse repo rates by a further 50 basis points to 8% and 7%
 respectively, making for an increase of 325 basis points in key policy
 rates over the last 17 months. While the impact of these changes may
 create periodic volatility in the short term, we expect Indian economy
 to sustain high growth rates over the medium and long term on the back
 of its strong fundamentals.
 
 Outlook On Power Sector
 
 The Power Sector, being the key infrastructure area, will be at the
 centre stage driving India on a higher economic growth path. The power
 generation capacity has increased substantially in recent years.
 
 The installed generation capacity of the country at the end of fiscal
 2011 stands at 173.6 GW. During the first four years of the XI Plan,
 34,462 MW of capacity was added against the Eleventh Plan Mid Term
 Appraisal target of 62,374 MW. Delays/slippages of long term coal
 linkages to the projects identified and failure to achieve planned
 targets from captive coal mine blocks has to some extent affected the
 generation capacity addition plan. These bottlenecks have resulted in
 slippage of planned capacity addition targets and increased dependence
 of generating companies on imported coal, thereby having a cascading
 effect on cost of production.
 
 According to the report of the Working Group on Power for XI Plan of
 the Government of India, the overall requirement of funds for the power
 sector has been estimated at Rs.10,31,600 crore.  For the XII Plan
 period, CEA estimates that in order to meet the projected demand
 requirement by 2017, capacity addition of 100,000 MW would be required
 and including additions required in commensurate transmission and
 distribution network expansion, the total fund requirement for the plan
 period would be about Rs.11,00,000 crore.
 
 Further, the distribution system, which happens to be the weakest link
 in the entire power value chain and mostly falling in the ambit of
 State Discoms, needs to be augmented, upgraded and strengthened to
 match with the anticipated growth in generation and transmission
 capacities on one hand, and the need to bring down high AT&C losses on
 the other. The total fund requirement for sub-transmission and
 distribution system development for urban and rural areas, during the
 XI Plan period is estimated at Rs.2,87,000 crore inclusive of APDRP and
 RGGVY schemes. Further, CEA estimates that for the XII Plan period, the
 total fund requirement for the distribution sector would be about
 Rs.3,71,000 crore. The Restructured APDRP (R-APDRP) scheme of Government
 of India seeks to address the twin issues of the SEBs /Discoms, namely
 limited resource availability and conventional technology.
 Implementation of HVDS, feeder separation, smart grid technologies, IT
 intervention and use of energy efficient equipments are being taken up
 vigorously for better and efficient management of the distribution
 system. The performance orientation built into the R-APDRP is expected
 to bring investments as well as improvement in this sector. Ongoing
 implementation of RGGVY on the other hand has led to creation of
 massive Rural
 
 Electricity Distribution Backbone infrastructure for enabling access of
 power for one and all and immensely contributing to inclusive
 development of the country. Government of India has also set up India
 Smart Grid Task Force to evolve a road map for modernizing the existing
 electricity T&D grid of the country with information, communication and
 automation technology to provide quality and reliable power to meet the
 need of 21st century new age society.
 
 During the recent Power Ministers'' conference, the Hon''ble Union Power
 Minister, Shri Sushilkumar Shinde, called upon the states to take
 effective steps to ameliorate the poor financial condition of power
 distribution utilities and also urged the State Power Ministers to take
 stock of the situation in their states, devise a utility-wise
 turnaround plan and monitor its implementation at the highest level
 before the situation becomes unsustainable. Besides the fuel
 including transport supply constraints, environment issues may also
 impact the growth of power sector if concurrent policy related steps
 are not taken in time. Further, the Shunglu Committee, which is
 reviewing the financial position of the country''s power distribution
 utilities, is also expected to submit its report by September, 2011.
 
 PERFORMANCE HIGHLIGHTS OF FISCAL 2011
 
 Your Company continued to register higher growth and record performance
 for the year 2010-11, in key areas of Disbursements of Loans,
 Recoveries, Operating Income and Profits. A total sum of Rs.24,519 crore
 (excluding subsidy under RGGVY) was disbursed during the year 2010-11,
 up by 16%, as against Rs.21,132 crore disbursed in the previous year. A
 sum of Rs.16,951.31 crore was recovered towards principal and interest,
 during the year as against Rs.12,496.12 crore in the previous year. The
 Gross Non-Performing Assets (NPAs) were negligible and stood at Rs.19.54
 crore (i.e. 0.02% of Gross Loan Assets) at the end of the year. The
 Operating Income went up to Rs.8,256.91 crore, up by 26%, from Rs.6,549.76
 crore in the previous year. The Profit after Tax increased to Rs.2,569.93
 crore, up by 28%, from Rs.2,001.42 crore for the previous year. The
 earning per share (EPS) increased to Rs.26.30, up by 14% from Rs.23.06 in
 the previous year.
 
 Your Company mobilized Rs.25,855.35 crore from the market during the year
 2010-11. This includes loans from Commercial Banks, issue of Capital
 Gain Tax Exemption Bonds, Infrastructure Bonds, Non- Priority Sector
 Bonds and Commercial Paper, External Commercial Borrowings, Official
 Development Assistance (ODA), Loans from KFW Germany and Japan
 International Cooperation Agency (JICA). During FY 2010-11, Company
 mobilized USD 1170 million
 
 (Rs.5308.87 crore) from International market at very competitive rates.
 Out of this, USD 500 million was raised through Reg S Bond and USD 670
 million through syndicated Term Loan facilities. These bonds are listed
 on the Singapore Stock Exchange (SGX).
 
 Your Company constantly reviews and revises its lending and operation
 policies/ procedures to suitably align with market requirements as also
 with its corporate objectives. In spite of growing competition in the
 market as well as concerns on account of factors like high government
 borrowings, increase in RBI policy rates and rise in inflation, your
 Company has been able to maintain healthy spreads, with the help of
 judicious mix of diverse sources of borrowing including the External
 Commercial Borrowings (ECB), helping in balancing its objectives of
 business growth and profitability during the year.
 
 Your Company has been funding power generation, transmission and
 distribution projects besides electrification of villages and pumpset
 energisation.
 
 During the year 2010-11, the Company sanctioned 34 nos. of generation
 loans including additional loan assistance with total financial outlay
 of Rs.40,101 crore, including consortium financing with other financial
 institutions. Since 2002-03 and up to 31.03.2011, REC has sanctioned
 cumulative financial assistance of Rs.1,43,904.76 crore for generation
 projects.
 
 Your Company continued to play an active role in creating new
 infrastructure and improving the existing ones under the transmission
 and distribution network in the country. During the year 2010 -11, the
 company sanctioned a total sum of Rs.22,207.68 crore and disbursed a
 total sum of Rs.9,235.70 crore for transmission and distribution
 projects.
 
 The Government of India is according topmost priority to rural
 electrification to realise the objectives of Power to all villages and
 Power for all through its fagship programme Rajiv Gandhi Gramin
 Vidyutikaran Yojna (RGGVY). Under the scheme 90% capital subsidy is
 being provided by Govt. of India for overall cost of the projects.
 Under this RGGVY programme, cumulatively up to 31.03.2011, works in
 96,562 un-Electrified villages have been completed and connections to
 159.80 lacs BPL households have been released. During the year 2010-11,
 your Company disbursed a total sum of Rs.4,415.49 crore (including
 Government Subsidy of Rs.3,997.83 crore).
 
 INFRASTRUCTURE FINANCE COMPANY (IFC) STATUS
 
 In a significant development, RBI, vide its letter dated 17th
 September, 2010 has categorized your Company as an Infrastructure
 
 Finance Company (IFC). As an IFC, your Company is inter alia allowed to
 have additional exposure for lending purposes. In addition, your
 Company is now eligible for issuance of Infrastructure Bonds and
 raising funds up to US $ 500 million through External Commercial
 Borrowing (ECB) in a year under automatic route.
 
 OTHER INITIATIVES
 
 Your Company has an outstanding team of power professionals.  In order
 to sustain the strong work ethics and professionalism, your Company is
 taking a number of initiatives to further improve the entry level
 talent quality to establish a strong talent pool.  Your Company has
 also implemented pay scale revision for its employees, which include
 provision for performance related pay linked to performance of
 individual employee. During the year, many CSR initiatives were
 undertaken. One of such initiative was through the Homi Bhabha Centre
 for Science education, TIFR, Mumbai, wherein all the Olympiad winner
 students were awarded scholarships to promote education and excellence
 in these fields. Further, your Company for the Financial Year 2011-12
 has allocated an amount equivalent to 0.5% of Profit after Tax for
 implementation of programmes as per the CSR Policy. Another important
 initiative taken this year was voluntarily getting the Secretarial
 Audit conducted by Practicing Company Secretaries for the year 2010-11.
 
 MOU RATINGS, ACCOLADES AND AWARDS
 
 This is the 17th year in succession that REC has received Excellent
 rating since the year 1993-94 when the first MoU was signed with the
 Government. For the Financial Year 2010-11 also, the performance of the
 Company is poised to receive Excellent rating.
 
 Your Company''s performance has also been well recognised and the same
 is reffected in various awards and accolades received during the year.
 REC received india pride award 2010 for being adjudged the Best NBfC
 and also third dsij award 2010-11- speed king for fastest growing
 psus across maharatnas, Navratnas & miniratnas. your Company also
 featured in dun & Bradstreet''s india''s top psus 2011. One more feather
 in the cap was added when the Company was included in the Morgan
 Stanley Capital International (MSCI) Emerging Market Index.
 
 RATINGS
 
 Excellence in performance of your Company is also reffected in
 consistently obtaining the highest MoU rating i.e Excellent from the
 Government of India since 1993-94. REC''s International Credit rating
 has been pegged at that of Sovereign by leading overseas credit
 rating agencies such as Moody''s and Fitch. On the domestic front, your
 Company got the highest rating AAA from reputed agencies like CRISIL,
 CARE, Fitch & ICRA for its specific resource mobilization programme.
 Consistently high ratings bear testimony to REC''s stature as an
 institution with strong fundamentals and inherent financial strength.
 
 CORPORATE GOVERNANCE
 
 As a listed entity, your Company has been complying with the
 requirements of Corporate Governance as stipulated in the Listing
 Agreement and also the provisions notified by the Department of Public
 Enterprises, Government of India in this regard. As a part of Green
 Initiative in Corporate Governance, the Ministry of Corporate Afaffairs
 has also allowed Companies to send official notices/ documents to their
 shareholders electronically. Your Company, as a responsible corporate
 citizen, has also taken initiative by seeking consent of its
 shareholders for electronic delivery of documents such as Notice of
 AGM, Annual Report by e-mail. The response has been overwhelming.
 Accordingly, Annual Report 2010-11 is being sent to these shareholders
 by e-mail. I compliment and thank all shareholders, and hope that many
 more will join in our Green endeavour in the coming years.
 
 REC has implemented Quality Management Systems as per ISO 9001:2008
 standards in six major Divisions of Corporate Office and all Zonal /
 Project Offices across the country.
 
 Further, REC Data Centre along with support functions comprising of IT,
 HR, Legal, Administration and Finance has been certified the global
 ISO/IEC 27001:2005 security standard, by BSI Management Systems India
 Private Limited.
 
 SUBSIDIARY COMPANIES & JOINT VENTURE
 
 As on date, your Company has three Subsidiary Companies (1) REC
 Transmission Projects Company Limited (RECTPCL); (2) REC Power
 Distribution Company Limited (RECPDCL); (3) Vemagiri Transmission
 System Limited (VTSL) (a wholly owned subsidiary of RECTPCL).
 
 RECTPCL, in its role as Bid Process Coordinator entrusted by Ministry
 of Power, Government of India, successfully completed the Bid Process
 for Raichur-Sholapur 765 kV single circuit Line - I. During the year,
 the SPV of the above project namely Raichur Sholapur Transmission
 Company Limited (RSTCL) (a wholly owned subsidiary of RECTPCL) was
 successfully transferred to a Consortium of M/s Patel Engineering
 Limited, M/s Simplex Infrastructures Limited and M/s BS TransComm
 Limited on 07.01.2011. After successful completion of three projects by
 RECTPCL, Government of India has further entrusted it three more
 transmission projects for selection of developer on Competitive Bidding
 route. Vemagiri Transmission System Limited (a wholly owned subsidiary
 of RECTPCL) has been incorporated on 21st April, 2011 in respect of
 Transmission System associated with IPPs of Vemagiri Area: Package A.
 In response to global notification for Request for Qualification (RFQ)
 for said project, RECTPCL has received responses from 28 bidders which
 include foreign bidders also. With the Government notification providing
 for procurement of all transmission services through competitive
 bidding route after 05.01.2011, RECTPCL is poised to see huge emerging
 business in terms of fee based professional consultancy services.
 
 Further, your Company along with three other PSUs namely NTPC,
 Powergrid and PFC as equal partners, had formed a joint Venture Company
 by the name of energy efficiency services limited (eesl) on December 10,
 2009. The total equity requirement for EESL is Rs.190 crore to be shared
 equally by the four PSUs. EESL shall take a lead in implementing energy
 efficiency projects, play a market creation role in promoting usage of
 energy efficient appliances, promote the concept of Energy Service
 Companies (ESCOs) and performance contracting, manage a partial risk
 guarantee fund to provide risk mitigation to ESCOs etc, besides taking
 over the current commercial roles being discharged by the Bureau of
 Energy Efficiency (BEE).
 
 FUTURE STRATEGY
 
 To accelerate growth of your Company, we are focussing on expanding the
 business of financing power sector projects to include projects having
 backward and forward linkages to power projects. Besides, we are also
 developing new opportunities to have fee based income from other allied
 business eg. consultancy.  The thrust of the Government of India on the
 renewable energy sector, and several policy initiatives on this front
 including the mandatory renewable energy purchase obligations imposed
 on the distribution companies are creating a favourable climate for
 this sector. Currently, the untapped potential in these technologies
 including hydro and biomass/ cogeneration is huge and a gradual shifit
 to renewable energy source is imminent. Your Company would like to
 build up capabilities of financing such projects and steps have been
 taken in this regard.
 
 Your company is also exploring the possibilities of financing equipment
 manufacturers, power purchase/sale through the india energy exchange
 and taking up the work of underwriting/ syndication of terms loans for
 generation projects of private sectors borrowers.
 
 Your Company shall strive to sustain and maintain consistent growth
 rate and surge ahead to attain still greater heights of performance, to
 match the expectations of all its stakeholders.
 
 While your Company is committed to accelerate growth in the past, your
 company will continue to achieve the best standards of Corporate
 Governance with emphasis on transparency, accountability and
 professionalism in working with the aim of enhancing long term economic
 value of all the stakeholders and society at large.
 
 ACKNOWLEDGEMENTS
 
 I take this opportunity to express my sincere gratitude for the immense
 support and guidance received by your Company from the Hon''ble Minister
 for Power, the Hon''ble Minister of State for Power, the Secretary
 (Power), the Joint Secretary (Rural Electrification) and other Officers in
 the Ministry of Power. I am also grateful to the Officers in the Ministry
 of Finance, Planning Commission and the Reserve Bank of India, the
 Comptroller & Auditor General of India, the Statutory Auditors of the
 Company, and the Secretarial Auditors for all their support and
 guidance extended in ensuring smooth and successful operations of the
 Company. I also express my gratitude to our lenders and investors for
 having reposed their trust in us.
 
 I would also like to express my thanks and appreciation to my esteemed
 colleagues on the Board and to all employees of REC for their
 unswerving committment to their work and to all the other stakeholders
 for their valuable support and cooperation, and reposing continued
 confidence in the Company''s performance.  I am confdent that with a
 dedicated and committed resource of employees and valuable support of
 our esteemed shareholders, your Company will continue to deliver its
 responsibilities and enhance value to its stakeholders.
 
 With best wishes,
 
                                                  (Hari das khunteta) 
                                         Chairman & managing director