Tata Power Company

The Directors are pleased to present their Eighty-ninth Annual Report
 on the business and operations of the Company and the statements of
 account for the year ended 31st March, 2008.
 
 1.  FINANCIAL RESULTS
 
                                                  FY 2008        FY 2007
                                                 (Rupees        (Rupees
                                                  crores)        crores)
 
 (a) Net Sales / Income from Other Operations    5,915.91      4,715.32
 
 (b) Operating Expenditure                       4,979.27      3,991.88
 
 (c) Operating Profit                              936.64        723.44
 
 (d) Add: Other Income.                            465.84        343.99
 
 (e) Less: Interest and Finance charges.           141.86        189.50
 
 (f) Profit before Depreciation and Tax          1,260.62        877.93
 
 (g) Less: Depreciation                            290.50        291.92
 
 (h) Profit before tax                             970.12        586.01
 
 (i) Less/(Add): Provision for taxes 
 (including provision for
 deferred tax and fringe benefit tax).             100.22       (110.79)
 
 (j) Net Profit after tax                          869.90        696.80
 
 (k) Less: Statutory appropriations                 58.59         22.83
 
 (l) Distributable Profits.                        811.31        673.97
 
 (m) Add: Balance brought forward from 
 the previous year                               1,963.66      1,666.15
 
 (n) Balance                                     2,774.97      2,340.12
 
 which the Directors have appropriated 
 as under to :
 
 (i) Proposed Dividend                             231.98        188.22
 
 (ii) Dividend                                       9.40           -
 
 (iii) Additional Income-tax on Dividend            26.95         31.99
 
 (iv) Debenture Redemption Reserve                  51.42          6.25
 
 (v) General Reserve                               350.00        150.00
 
 TOTAL.                                            669.75        376.46
 
 Leaving a balance of                            2,105.22      1,963.66
 to be carried forward
 
 2.  FINANCIAL HIGHLIGHTS
 
 During the year, the Company reported its highest ever Profit after Tax
 of Rs. 869.90 crores, as against Rs. 696.80 crores for the previous
 year, a growth of 24.8%. The Operating Revenue is also higher at Rs.
 5,915.51 crores, as against Rs. 4,715.32 crores after certain tax
 adjustments, a growth of 25.5%.
 
 During the previous year, the Company had reversed tax provisions
 aggregating Rs. 181.74 crores (current year Rs. 28.61 crores)
 pertaining to the Mumbai Licence Area, which according to regulation,
 has been treated as a rebate. Without this adjustment, the Operating
 Revenue is higher by 21.39%, mainly owing to higher volumes sold
 coupled with the new Tariff approved by the Regulator in Mumbai Licence
 Area for FY 08. Similarly, the Operating Profit went up by 6.64% due to
 operational efficiencies and higher volume of business.
 
 The other income of Rs. 465.84 crores (previous year Rs. 343.99 crores)
 is higher predominantly on account of higher gain on sale of long term
 investments during the year.
 
 During the year, the Equity Share Capital of the Company increased by
 Rs. 22.80 crores on account of the preferential issue of Equity Shares
 to Tata Sons Limited (Tata Sons) and the conversion of the Foreign
 Currency Convertible Bonds.
 
 Earnings per Share (Basic) showed an increase of 13.6% to Rs. 38.64 as
 against Rs. 34.02 in the previous year.
 
 The Consolidated Revenue at Rs. 10,890.86 crores grew by 68.18% and the
 Profit After tax at Rs. 1,055.07 crores grew by 38.90% as against Rs.
 6,475.64 and Rs. 759.61 crores respectively, for the previous year.
 The increase in Consolidated Revenue is primarily on account of
 contribution from the overseas Coal companies where the Company
 acquired a 30% stake in June, 2007.
 
 3.  DIVIDEND
 
 Your Directors are pleased to recommend for the approval of the
 shareholders, a dividend of 105% (Rs. 10.50 per share) (FY 07 dividend
 Rs. 9.50 per share).
 
 4.  POWER BUSINESS
 
 4.1.  Operational Highlights
 
 The Company generated 14,717 Million Units (MUs) of power from all its
 power plants during the year as compared to 14,269 MUs in the previous
 year, an increase of 3.14%.
 
 4.2.  Tata Power Licence Area Business - Mumbai
 
 4.2.1. Trombay Thermal Power Station
 
 The Trombay Thermal Power Station generated 10,002 MUs during the year
 as compared to 9,180 MUs generated in the previous year, an increase of
 8.95%. The station recorded the highest ever generation crossing the
 10,000 mark for the first time while surpassing the earlier record of
 9,511 MUs in FY 05.
 
 4.2.2. Hydro Stations – Bhira, Bhivpuri and Khopoli
 
 The three hydro power plants collectively generated 1,489 MUs during
 the year, as against 2,138 MUs in the previous year. The lower
 generation is on account of the restriction imposed by Krishna Water
 Tribunal Award.
 
 4.2.3. Transmission and Distribution
 
 The growth in Mumbai transmission load during the year has been about
 7%. In order to meet this load growth, line capacity augmentation has
 been carried out in North Mumbai area. Furthermore, a new 145 kV GIS
 (Gas Insulated Switchgear) Receiving Station has also been
 commissioned. The Islanding Scheme for Mumbai has been strengthened by
 providing Numerical Protection System.
 
 4.2.4. Sales
 
 The sales in Mumbai Licence Area were higher at 11,645 MUs as against
 11,218 MUs during the previous year. Sales from Mumbai Licence Area to
 consumers outside Licence Area stood at 219 MUs as against 286 MUs
 during the previous year.
 
 4.3.  Tata Power Captive Power Plant/Independent Power Producer
 Business
 
 4.3.1. Jojobera Thermal Power Station
 
 The Jojobera Thermal Power Station recorded a generation of 2,862 MUs
 during the year as compared to 2,731 MUs in the previous year. Logic
 modification has been carried out in Units 2, 3, 4 for successful
 islanding in case of load throw off thereby improving plant
 reliability.
 
 4.3.2. Belgaum Power Station
 
 The Belgaum Independent Power Plant (IPP) generated 237 MUs during the
 year as compared to 189 MUs in the previous year due to increased
 demand in Karnataka. For the first time, third party power sale of
 2,699 MUs was made from Belgaum through Tata Power Trading Company
 Limited (Tata Power Trading).
 
 4.4.  Wind Generation
 
 During the year, the Company commissioned additional wind power
 capacity of 12.8 MW at Khandke and 3.75 MW at Bramanvel in Maharashtra.
 At the end of the year, the total capacity stood at 78.65 MW with 50.4
 MW at Khandke, 11.25 MW at Bramanvel and 17 MW at Supa. The collective
 generation by these three wind farms was 127 MUs during the year as
 against 29 MUs generated in the previous year.
 
 4.5.  Tata Power – New Generation Projects
 
 4.5.1. 250 MW Expansion Project at Trombay Thermal Power Station
 
 The 250 MW imported coal based plant at Trombay is progressing as per
 plan and is scheduled to be commissioned in the second quarter of FY
 09. The capacity is proposed to be sold to BEST, Tata Power
 Distribution in Mumbai Licence Area and Tata Power Trading.
 
 4.5.2. Haldia Power Plant
 
 The first unit of 45 MW has been synchronized with the grid and is
 expected to get into commercial production in the second quarter of FY
 09. The second unit of 45 MW is expected to be commissioned by the
 third quarter of FY 09. The Company is also setting up an additional
 unit of 30 MW, which is expected to be commissioned in the last quarter
 of FY 09. The plants will utilize hot coke oven gases to produce steam
 for power generation. The Company has tied up 20 MW of power sales to
 West Bengal State Electricity Board. The sale of balance power will be
 through Tata Power Trading.
 
 4.5.3. Wind
 
 The Company proposes to commission additional capacity of 22.5 MW in
 Maharashtra and 100.8 MW in Gujarat and Karnataka in the third quarter
 of FY 09.
 
 4.5.4. Diesel Generation Capacity
 
 Of the planned 100 MW capacity, 40 MW machines are in an advanced stage
 of commissioning and are expected to be synchronized by the second
 quarter of FY 09. The installation of the remaining 60 MW engines is
 under review in the light of high fuel cost.
 
 4.5.5. Captive Power Plants for Tata Steel
 
 Industrial Energy Limited (IEL), a joint venture company promoted by
 Tata Power (74%) and Tata Steel Limited (Tata Steel) (26%) is
 implementing the following projects:
 
 Power House 6 for Tata Steel Works, Jamshedpur
 
 A 120 MW power plant is being constructed at Tata Steel works,
 Jamshedpur for use by Tata Steel. The plant will utilize waste blast
 furnace and coke oven gases of Tata Steel to generate power. The
 project is expected to be commissioned by the third quarter of FY 09.
 
 Unit 5 at Jojobera
 
 A 120 MW power plant is planned at the Company’s existing site at
 Jojobera. IEL has placed orders for major equipment. The project is
 expected to be commissioned in the third quarter of FY 10.
 
 Other Units
 
 The Company is in the process of taking further steps in acquiring land
 in Orissa for setting up captive units for Tata Steel. The Company is
 also acquiring land at the same location to set up IPP plants using
 coal blocks allotted to the Company.
 
 4.5.6. Coastal Gujarat Power Limited
 
 The project of approximately Rs.17, 000 crores is being funded through
 a debt equity mix of 75:25. The financing comprises of equity of Rs.
 4,250 crores, External Commercial Borrowings (ECB) of upto USD 1.8
 billion and Rupee Loans of upto Rs. 5,850 crores. Coastal Gujarat Power
 Limited (CGPL) has successfully tied up the entire debt requirement
 through a consortium of overseas and domestic lenders, namely The
 Export-Import Bank of Korea, International Finance Corporation, Asian
 Development Bank, Korea Export Insurance Corporation, BNP Paribas and a
 consortium of Indian banks led by State Bank of India, including India
 Infrastructure Finance Co. Ltd. The financing agreements were signed in
 April, 2008.
 
 In addition to the orders for Boiler Island and Turbine Generators
 awarded earlier in the year, 72 % of the equipment ordering has been
 done and civil works have commenced at site.
 
 The Company has formed a 100% subsidiary TPC Energy Asia Pte. Ltd., now
 renamed as Trust Energy Resources Pte. Ltd., as the vehicle for owning
 ships and for meeting the coal logistics requirements.  CGPL has formed
 a 100% subsidiary in Singapore, Energy Eastern Pte. Ltd. (EEPL). EEPL
 has already entered into long-term charter party agreements which will
 meet a part of the shipping requirements of CGPL.
 
 All other arrangements for making speedy progress have been made. CGPL
 is targeting an accelerated schedule, with the first of the five units
 to be commissioned in September, 2011.
 
 4.5.7. Maithon Joint Venture Project
 
 Maithon Power Limited (MPL), a joint venture between the Company and
 Damodar Valley Corporation (DVC) has signed contracts for all major
 equipments. Civil works have commenced at site.
 
 Of the 1,050 MW, MPL proposes to sell 300 MW to DVC and is in active
 discussions with various distribution licencees for sale of the balance
 power.
 
 The first unit is expected to be commissioned in the third quarter of
 FY 11 and the second unit by end of FY 11. The estimated project cost
 of Rs. 4,450 crores is being funded on a debt-equity ratio of 70:30.
 MPL completed debt syndication with a consortium led by State Bank of
 India for Rupee term loans aggregating Rs. 3,115 crores in February,
 2008 and has drawn down the initial from all the lenders.
 
 4.5.8. Coastal Maharashtra Project
 
 The process of acquiring land for the project is making progress. Bids
 have been received for the equipment package and are being processed.
 The Company hopes to achieve speedy progress once the land acquisition
 is complete.
 
 4.6.  Tata Power’s investment in Indonesian Coal Companies
 
 During the year, the Company completed its acquisition of a 30% stake
 in two major Indonesian coal companies, PT Kaltim Prima Coal and PT
 Arutmin Indonesia and related trading companies (“coal companies”)
 owned by PT Bumi Resources Tbk for a consideration of approximately USD
 1.2 billion. The acquisition was made through Special Purpose Vehicles
 (SPVs) formed in Mauritius and Cyprus.
 
 The acquisition was funded by a one year bridge loan of USD 950 million
 fully guaranteed by the Company.  The Company recently refinanced this
 bridge loan. The refinancing consists of two long term facilities, a
 non-recourse facility for USD 590 million and a facility of USD 270
 million with recourse to the Company.  The balance bridge facility
 amounting to USD 90 million has been repaid through a short-term loan
 of USD 40 million, usage of surplus funds of USD 20 million and the
 Company remitting USD 30 million from India.
 
 The Company has also entered into an off-take agreement which entitles
 the Company to 10.1 million tonnes (+/- 20%, at the Company’s option).
 Along with existing contracts, this would cover the bulk of the
 Company’s requirement of imported coal till 2014.
 
 Post the acquisition, the Company has been taking adequate steps to
 monitor the performance of the coal companies. PT Kaltim Prima Coal and
 PT Arutmin Indonesia together produced 54.2 million tonnes of coal in
 2007, as against 50.7 million tones in 2006. The Company expects the
 performance of the coal companies to be robust, given the substantial
 increase in international coal prices over the last year.
 
 4.7.  Captive Coal Blocks
 
 Tubed Coal Mines Limited
 
 The Company was allotted the Tubed coal block jointly with Hindalco
 Industries Limited. This block is estimated to have about 120 million
 tonnes of reserves and is located in the Latehar district of Jharkhand.
 The Company’s share of coal mined is expected to support a 500 MW coal
 fired thermal plant. Both Hindalco Industries Limited and the Company
 have formed the joint venture company - Tubed Coal Mines Limited to
 mine the coal. The allotment of the coal block has been challenged in
 the Calcutta High Court and the hearing is in progress.
 
 Mandakini Coal Company Limited
 
 The Company has also been allotted the Mandakini coal block located in
 the Angul district of Orissa, along with Monnet Ispat & Energy Limited
 and Jindal Photo Limited. The coal block is estimated to have reserves
 of 291 million tonnes. The Company’s share of coal mined is expected to
 support a 1000 MW coal fired power plant.
 
 The Company proposes to set up IPP plants using these captive coal
 blocks.
 
 4.8.  Tata Power Subsidiaries – Distribution, Transmission and Power
 Trading
 
 4.8.1. North Delhi Power Limited
 
 North Delhi Power Limited (NDPL) has become a subsidiary from January,
 2008, post the Company’s acquisition of an additional 2% stake from
 Tata Sons. NDPL has posted a revenue of Rs. 2,287.23 crores during the
 year, a growth of 11.45% and a net profit of Rs. 281.58 crores during
 the year as compared to Rs.185.79 crores in the previous year. The
 Aggregate Technical and Commercial (AT&C) Losses have been reduced from
 23.70% at the end of FY 07 (53.4% at the time of takeover of the
 business in July, 2002) to 18.50% at the end of FY 08 against the
 regulatory target of 22.03%.
 
 4.8.2. Powerlinks Transmission Limited
 
 Powerlinks Transmission Limited (Powerlinks), a joint venture with
 Power Grid Corporation of India Ltd.  is successfully operating and
 maintaining the 400 kV Tala Transmission System associated with the
 Tala Hydroelectric Project, since September, 2006. It has maintained an
 average availability of 99.70%.
 
 Powerlinks has earned revenues of Rs. 245.21 crores and a Profit after
 Tax of Rs. 58.41 crores in FY 08 which is the first full year of
 operation.
 
 4.8.3. Tata Power Trading Company Limited
 
 Tata Power Trading Company Ltd. traded 1,711 MUs during the year as
 compared to 1,205 MUs in the previous year, thereby resulting in an
 increase in revenues by 46.33% to Rs. 883.51 crores from Rs. 603.75
 crores in the previous year. The Profit after Tax increased to Rs. 4.30
 crores as against Rs. 3.84 crores in the previous year.
 
 The profit margins continue to remain under pressure on account of the
 regulation issued by the CERC which restricts the trading margin for
 the power traders at 4 paise per unit.
 
 4.9.  Financing
 
 During the year, the Company raised long term project loans of Rs.300
 crores from Asian Development Bank and Indian Renewal Energy
 Development Agency Limited for its wind project, Rs. 250 crores from
 Infrastructure Development Finance Company Limited for its Haldia
 project and a corporate loan of Rs. 300 crores from Industrial
 Development Bank of India Ltd (IDBI).
 
 USD 175.80 million of the Company’s Foreign Currency Convertible Bonds
 (FCCB) of USD 200 million has been converted into Equity Shares as of
 March 31, 2008.
 
 The Company made a Preferential Issue of Equity Shares and Warrants to
 Tata Sons in accordance with the Chapter XIII of the SEBI (Disclosure
 and Investor Protection) Guidelines, 2000 (SEBI DIP Guidelines).
 Accordingly, the Company allotted 98,94,000 Equity Shares of Rs.10 each
 at a premium of Rs.577.08 per Share, determined in terms of SEBI DIP
 Guidelines and 1,03,89,000 Warrants with an option to Tata Sons to
 subscribe to 1 Equity Share of Rs.10 each per Warrant which option
 shall be exercisable after 1st April, 2008 but on or before 17th
 December, 2008. These Warrants are convertible into Equity Shares at a
 price not lower than Rs.1,351.63 per Equity Share, determined in terms
 of SEBI DIP Guidelines.
 
 Consequent to the issue of shares to Tata Sons during the year and
 conversion of the FCCB, the Equity Share Capital of the Company has
 increased from Rs. 197.92 crores to Rs. 220.72 crores.
 
 The Company has divested some of its investments including telecom
 investments realizing Rs.380 crores towards meeting a part of its
 funding requirements for expansion projects.
 
 The Credit Rating agencies had placed the Company on credit watch
 following the Company’s decision to acquire equity in Indonesian coal
 companies and to execute the Mundra Ultra Mega Power Project (Mundra
 UMPP). While both CRISIL and ICRA have retained the highest rating for
 the Company’s short- term paper, they have revised the long-term rating
 downwards by 2 notches to ‘AA/Stable’ and ‘LAA /Negative’ respectively,
 reflecting their opinion of the increase in the overall business and
 financial risk profile of the Company arising primarily from the large
 investments being planned. Standard & Poor’s and Moody’s have lowered
 the Company’s corporate credit rating to ‘BB–’ from ‘BB+’ and to ‘Ba3’
 from ‘Ba1’. Moody’s has also lowered the Company’s senior unsecured
 bond rating to B1 from Ba2.
 
 The rating agencies have, however, noted that the acquisition of an
 equity stake in the coal companies provides the Company with fuel
 security for a major part of the coal requirement for the Mundra UMPP.
 Also, cash infusion through the preferential offer to Tata Sons is seen
 as a positive from the credit perspective. The rating continues to be
 supported by the stable cash flows from its licensee business, its
 superior operating parameters and the financial flexibility derived
 from being a part of the Tata group.  The long maturity profile of the
 existing debt stock on the Company’s books is also a protective factor
 from the debt servicing perspective.
 
 5.  TATA POWER - OTHER BUSINESS
 
 5.1.  Strategic Electronics Division
 
 Strategic Electronics Division (SED) registered an operating revenue of
 Rs. 54.84 crores during the current financial year, against Rs. 51
 crores during the previous year. SED has achieved CMMI level 3 maturity
 and therefore is qualified to address foreign defence requirements
 including that of United States Department of Defense through the
 Defence Offset Programs.
 
 With the Government of India progressively opening up defence
 production to the private sector, SED is emerging as a Prime Contractor
 and Large Systems Integrator in areas such as Launchers, Electronic
 Warfare, Air Defence, Airfi eld Modernization, Mobile Command Post/
 Telemetry, Tank & Gun Electronics, Battlefi eld Management System and
 Tactical Communication System. SED ended the year with an order backlog
 of Rs. 176 crores.
 
 6.  ENERGY CONSERVATION AND ENVIRONMENT PROTECTION
 
 6.1.  Energy Conservation
 
 As part of the Company’s energy conservation initiative, the Company
 has conducted several programmes on Energy conservation and Safety
 awareness in schools in Mumbai.
 
 Consistent control and various energy conservation initiatives which
 include use of Flat Belts for Belt Driven Systems, replacement of
 Reciprocating Chillers with energy efficient Screw Chiller for
 Operations and efficiency enhancement of Auxiliary Cooling Water Pumps
 by application of Energy Improvement Coatings resulted in the lowest
 ever auxiliary consumption for Trombay Thermal Power station during the
 year.
 
 6.2.  Environment
 
 Concern for the environment is of paramount importance for the Company.
 During the year, all the operating units exercised great care to
 improve on the required environmental norms for emissions as stipulated
 by respective state pollution control boards and Ministry of
 Environment and Forests (MoEF), using amongst other things, technology
 and state-of-the-art equipment. The current trend of authorities is to
 impose emission norms similar to World Bank standards for new projects.
 The Company’s plant at Trombay has amongst the lowest SO2 emissions in
 the world, next only to Sweden and better than plants in Western Europe
 and North America.
 
 A study was completed to assess the CO2 footprint of Tata Power by
 Ernst & Young. The results are being analyzed and an action plan for
 reducing the CO2 foot print across the Company is being worked out.
 
 During the year, more than 3,000 saplings were planted in and around
 Belgaum plant premises and over 10 lakhs saplings were planted in our
 hydro lakes catchment area for sustaining the indigenous species in the
 area.
 
 7.  TATA BUSINESS EXCELLENCE MODEL
 
 During the year, the Company continued to give a major thrust to the
 Tata Business Excellence Model through various interventions, aimed at
 aligning and integrating the organization towards higher performance
 capabilities.
 
 Organisational Transformation (OT) was identified as one of the
 critical success factors to achieve our strategic intent. A model for
 OT was evolved, which focuses on developing competencies for current
 and future needs, creating a culture of continuous improvement,
 customer centricity, innovation, teamwork, and higher levels of
 integration between current businesses and project teams. To further
 the alignment between strategic plans and individual goals, Strategy
 Deployment Matrix was introduced. EPM (Enterprise process manual) has
 been adopted for enhancing the process based management. The
 involvement of personnel in improvement initiatives like 5S, Quality
 Circles etc. has increased. Knowledge management interventions were
 further strengthened through a detailed study of the knowledge assets
 and needs in the organization, which resulted in the definition of a
 detailed roadmap which is under implementation.  To take the
 organization further ahead in its journey towards higher performance
 standards, the Company further re-inforced benchmarking of performance
 measures with group companies, industry peers and other majors. These
 initiatives will help the Company in delivering superior value to all
 the stakeholders.
 
 8.  RISK MANAGEMENT
 
 As part of the Risk Management Process, during the year the Company
 reviewed the various risks and finalized mitigation plans which were
 reviewed by the Risk Management Committee. The Risk Management Policy
 was reviewed and revised. The risk areas identified by the Risk
 Management Process were covered by the Internal Audit Plan.
 
 9.  REGULATORY MATTERS
 
 Tariff Order for FY 09
 
 Maharashtra Electricity Regulatory Commission (MERC) passed the Tariff
 Orders for FY 09 in respect of Generation, Transmission and
 Distribution function of the Company in Mumbai Licence Area. Further,
 MERC, in the Tariff Orders has, in accordance with the approved Power
 Purchase Agreement, considered a capacity of 477 MW from the Company’s
 generating capacity in Mumbai and 50 MW from the upcoming Unit 8.
 
 Appellate Tribunal for Electricity Order on Disallowance of Expenditure
 for FY 05 and FY 06 MERC, in its Order dated October, 2006 disapproved
 a part of the actual expenditure incurred for the years FY 05 and FY
 06. An appeal was filed by the Company in Appellate Tribunal for
 Electricity (ATE) on these disallowances. The ATE upheld the issues
 raised by the Company in the Appeal.
 
 Standby Charges
 
 On an appeal filed by the Company, the Supreme Court has stayed the
 operation of the ATE order, subject to the condition that the Company
 deposits an amount of Rs. 227 crores and submits a bank guarantee for
 an equal amount. The Company has complied with the condition. Reliance
 Infrastructure Limited (RInfra) has also subsequently filed an appeal
 before the Supreme Court challenging the ATE Order. Both the Appeals
 have been admitted, but no date for hearing of the Appeals has been
 fixed.
 
 Distribution Licence in Mumbai
 
 The Company has filed an Appeal with the Supreme Court against the
 above ATE Order. The hearing was completed in December, 2007 and the
 judgement is awaited.
 
 Energy Charges and Take or Pay Obligation
 
 MERC directed RInfra to pay Rs. 323.87 crores to the Company towards
 the difference between the rate of Rs. 1.77 per kwh paid and Rs. 2.09
 per kwh payable for the energy drawn at 220 kv interconnection and
 towards its Take or Pay obligation for the years 1998-99 and 1999-2000.
 On an Appeal filed by RInfra the ATE upheld the Company’s contention
 with regard to payment for Energy Charges but reduced the rate of
 interest. As per the ATE Order, the amount payable works out to Rs.
 56.12 crores (including interest), as on 31st May, 2008. As regards the
 Take or Pay obligation, the ATE has ordered that the issue should be
 examined afresh by MERC after the decision of the Supreme Court in the
 Appeals relating to the distribution licence and rebates given by
 RInfra.
 
 RInfra has filed an Appeal in the Supreme Court against the ATE’s
 Order. The Supreme Court has directed the Company not to take any
 coercive action until it hears RInfra’s application for stay of the ATE
 Order.  The Company is in the process of filing its Appeal in the
 Supreme Court against the same Order of the ATE .
 
 10.  HUMAN RESOURCES DEVELOPMENT
 
 During the year, the focus continued on creating a cadre of competent
 and engaged workforce to achieve organizational objectives. To this
 end, a number of initiatives such as talent management system,
 succession planning, competency mapping and reward and recognition
 system were put in place.
 
 For the new projects coming up at different locations in the country,
 appropriate organization structure with benchmarked manning standards
 have been put in place.
 
 During the year, industrial relations remained cordial and a long-term
 settlement with the union was finalized through negotiations and mutual
 understanding.
 
 11.  FOREIGN EXCHANGE EARNINGS / OUTGO
 
 The foreign exchange earnings of the Company during the year under
 review amounted to Rs. 18.82 crores (previous year Rs. 104.31 crores),
 mainly on account of Euro Notes currency swaps, interest earned on
 Foreign Currency Convertible Bonds (FCCB) funds parked abroad and
 project exports. The foreign exchange outflow during the year was Rs.
 2,072.67 crores (previous year Rs. 1,015.71 crores), mainly on account
 of fuel purchase of Rs. 1,423.24 crores (previous year Rs. 822.52
 crores), repayment of foreign currency loans with interest thereon, NRI
 dividends and FCCB interest of Rs. 578.65 crores (previous year Rs.
 82.96 crores) and purchase of capital equipment, components and spares
 and other miscellaneous expenses of Rs. 70.78 crores (previous year Rs.
 110.23 crores).
 
 12.  SAFETY
 
 The Company is working with DuPont to guide it on its journey to Safety
 Excellence starting early FY 09.  The entire effort will be led by the
 leadership team of the Company with wide involvement of employees at
 all levels to bring about a significant improvement in the safety
 culture of the organization.
 
 DuPont will support the Company to achieve the desired objectives and
 ensure consistency and effectiveness in implementation through
 consulting, training, coaching and handholding.
 
 13.  COMMUNITY DEVELOPMENT AND CORPORATE SOCIAL RESPONSIBILITY (CSR)
 
 The Company continued its emphasis on CSR activities through resource
 conservation, environment protection and enrichment and development of
 local communities in its area of operation. Regular medical check ups
 were carried out and medicines provided at the Company’s health
 centres. A number of health awareness programmes, including Suraksha
 Rally on HIV/AIDS involving students and communities, eye camps, blood
 donation camps were organized at different locations.
 
 The Company has organized a Jan Jagruti Abhiyan in schools and
 communities, educating them about electrical safety, thus helping in
 reducing line tripping and electrical accidents under overhead lines.
 Energy conservation programmes were conducted in schools. A number of
 training programmes were carried out for developing self employment
 opportunities among the rural population.
 
 The communities were supported by developing infrastructure for
 education, sanitation, accessibility at remote areas and providing
 drinking water schemes.
 
 CSR teams of CGPL and MPL commenced interacting with the community to
 assess their needs and the interaction has resulted in a positive
 relationship. Issues such as infrastructure needs, employment and
 employability, health, education and livelihood are now being addressed
 by the teams in collaboration/ communication with the community.
 
 14.  GLOBAL COMPACT COMPLIANCE
 
 The Company has declared its support to the Global Compact Initiative
 taken up by the Secretary General of the United Nations in 2002. The
 Compact requires businesses to adhere to Ten Principles in the areas of
 Human Rights, Labour Standards, Environment and Anti-bribery. The
 Company submitted to the Global Compact website, its “Communication on
 Progress” as required, in respect of implementation of the Ten
 Principles in its business processes.
 
 15.  DISCLOSURE OF PARTICULARS
 
 Particulars required by the Companies (Disclosure of Particulars in the
 Report of Board of Directors) Rules, 1988 are given in the prescribed
 format as Annexure I to the Directors’ Report.
 
 Particulars of Employees: Information in accordance with the provisions
 of Section 217 (2A) of the Companies Act, 1956 (the Act), read with the
 Companies (Particulars of Employees) Rules, 1975, as amended, regarding
 employees is given in Annexure II to the Directors’ Report.
 
 16.  SUBSIDIARIES
 
 On an application made by the Company under Section 212(8) of the Act,
 the Central Government, vide letter dated 22nd April, 2008, exempted
 the Company from attaching a copy of the Balance Sheet, Profit and Loss
 Account, Directors’ Report and Auditors’ Report of the subsidiary
 companies and other documents required to be attached under Section
 212(1) of the Act to the Balance Sheet of the Company.  Accordingly,
 the said documents are not being attached with the Balance Sheet of the
 Company. A gist of the financial performance of the subsidiary
 companies is contained in the report. The Annual Accounts of the
 subsidiary companies are open for inspection by any member/investor and
 the Company will make available these documents/details upon request by
 any Member of the Company or to any investor of its subsidiary
 companies who may be interested in obtaining the same. Further, the
 Annual Accounts of the subsidiary companies will be kept open for
 inspection by any investor at the Company’s Head Office and that of the
 subsidiary company concerned.
 
 17.  DIRECTORS
 
 Mr A K Sardana relinquished his office as an Executive Director with
 effect from 3rd August, 2007.  Consequently, he ceased to be a Director
 of the Company with effect from the same date. Mr Sardana was appointed
 as an Additional Director with effect from 9th August, 2007. Mr Sardana
 resigned with effect from 2nd July, 2008. The Board placed on record
 its appreciation of the valuable contribution made to the Company by Mr
 Sardana.
 
 Mr G F Grove-White, Executive Director & Chief Operating Officer
 resigned with effect from 21st July, 2007. The Board placed on record
 its appreciation of the valuable contribution made to the Company by Mr
 Grove-White.
 
 Mr S Padmanabhan was appointed as an Additional Director with effect
 from 6th February, 2008, in accordance with Article 132 of the Articles
 of Association of the Company and Section 260 of the Act.  Mr
 Padmanabhan holds office only upto the date of the forthcoming Annual
 General Meeting (AGM) and a Notice under Section 257 of the Act has
 been received from a Member signifying his intention to propose Mr
 Padmanabhan’s appointment as a Director. The Board also appointed Mr
 Padmanabhan as an Executive Director with effect from the same date.
 His appointment and remuneration payable to him require the approval of
 the Members at the ensuing AGM.
 
 Mr D M Satwalekar was appointed as an Additional Director with effect
 from 12th February, 2008, in accordance with Article 132 of the
 Articles of Association of the Company and Section 260 of the Act.  Mr
 Satwalekar holds office only upto the date of the forthcoming AGM and a
 Notice under Section 257 of the Act has been received from a Member
 signifying his intention to propose Mr Satwalekar’s appointment as a
 Director.
 
 Mr B Agrawala was appointed as an Additional Director with effect from
 15th February, 2008, in accordance with Article 132 of the Articles of
 Association of the Company and Section 260 of the Act. Mr Agrawala
 holds office only upto the date of the forthcoming AGM and a Notice
 under Section 257 of the Act has been received from a Member signifying
 his intention to propose Mr Agrawala’s appointment as a Director. The
 Board also appointed Mr Agrawala as an Executive Director with effect
 from the same date.  His appointment and remuneration payable to him
 require the approval of the Members at the ensuing AGM.
 
 Dr R H Patil was appointed as an Additional Director with effect from
 3rd July, 2008, in accordance with Article 132 of the Articles of
 Association of the Company and Section 260 of the Act. Dr Patil holds
 office only upto the date of the forthcoming AGM and a Notice under
 Section 257 of the Act has been received from a Member signifying his
 intention to propose Dr Patil’s appointment as a Director.
 
 Mr P G Mankad was appointed as an Additional Director with effect from
 3rd July, 2008, in accordance with Article 132 of the Articles of
 Association of the Company and Section 260 of the Act. Mr Mankad holds
 office only upto the date of the forthcoming AGM and a Notice under
 Section 257 of the Act has been received from a Member signifying his
 intention to propose Mr Mankad’s appointment as a Director.
 
 Mr Syamal Gupta, a Director of your Company since February 1998,
 retires by rotation at the forthcoming AGM. He has conveyed his
 decision not to seek re-election. The Board has placed on record its
 appreciation of the valuable contribution made to the Company by Mr
 Gupta during his tenure as Director of the Company.
 
 In accordance with the requirements of the Act and the Articles of
 Association of the Company, Mr R Gopalakrishnan also retires by
 rotation and is eligible for re-appointment.
 
 18.  AUDITORS
 
 Messrs. Deloitte Haskins & Sells (DHS), who are the Statutory Auditors
 of the Company, hold office until the conclusion of the ensuing Annual
 General Meeting. It is proposed to re-appoint DHS to examine and audit
 the accounts of the Company for FY 09. DHS has, under Section 224(1) of
 the Act, furnished a certificate of its eligibility for re-appointment.
 The Members will be requested, as usual, to appoint Auditors and to
 authorize the Board of Directors to fix their remuneration. In this
 connection, the attention of the Members is invited to Item No. 5 of
 the Notice. Members will also be requested to pass a resolution (vide
 Item No.16 of the Notice) authorizing the Board of Directors to appoint
 Hoda Vasi Chowdhury & Co. as the Branch Auditors of the Bangladesh
 Branch of the Company and to fix their remuneration. Vide the same
 resolution, Members are also requested to authorize the Board of
 Directors, in consultation with the Company’s Auditors, to appoint
 Auditors/Branch Auditors/Accountants for the purpose of auditing the
 accounts maintained in respect of other branches of the Company, if
 any, which may be opened during the year, in India and abroad.
 
 In accordance with the requirement of the Central Government and
 pursuant to Section 233B of the Act, the Company carries out an audit
 of cost accounts relating to electricity every year. Subject to the
 approval of the Central Government, the Company has appointed M/s. N I
 Mehta & Co. to audit the cost accounts relating to electricity for FY
 09.
 
 19.  AUDITORS’ REPORT
 
 The Notes to the Account referred to in Auditors’ Report of the Company
 are self explanatory and, therefore, do not call for any further
 explanation under Section 217 (3) of the Act.
 
 The consolidated statements of the Company have been prepared in
 accordance with Accounting Standard 21 on Consolidated Financial
 Statements, Accounting Standard 23 on Accounting of Investments in
 Associates and Accounting Standard 27 on Financial Reporting of
 Interest in Joint Ventures, issued by the Council of the Institute of
 Chartered Accountants of India.
 
 In para 6 of the Auditors’ Report on the Consolidated Financial
 Statements of the Company, the Auditors refer to Note 21 relating to
 the Operation and Financial position of NDPL included in the
 Consolidated Financial Statements. The Management is of the view that
 the abovementioned note arises out of issues related to transfer of the
 distribution business to NDPL from Delhi Vidyut Board. The Management
 is taking appropriate steps and continues to pursue with the Delhi
 Power Co. Ltd. (successor to Delhi Vidyut Board) and the Regulatory
 Commission to reconcile and resolve these outstanding issues. The
 financial impact of the above, if any, is not ascertainable.
 
 20.  CORPORATE GOVERNANCE
 
 To comply with conditions of Corporate Governance, pursuant to Clause
 49 of the Listing Agreements with the Stock Exchanges, a Management
 Discussion and Analysis Statement, Report on Corporate Governance and
 Auditor’s Certificate, are included in the Annual Report.
 
 21.  DIRECTORS’ REPONSIBILITY STATEMENT
 
 Pursuant to Section 217(2AA) of the Act, the Directors based on the
 representations received from the Operating Management, confirm that :
 
 i) in the preparation of the annual accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 all material departures;
 
 ii) they have, in the selection of the accounting policies, consulted
 the Statutory Auditors and have applied them consistently and made
 judgements and estimates that are reasonable and prudent so as to give
 a true and fair view of the state of affairs of the Company at the end
 of the financial year and of the profit of the Company for that period;
 
 iii) they have taken proper and sufficient care to the best of their
 knowledge and ability for the maintenance of adequate accounting
 records in accordance with the provisions of the Act, for safeguarding
 the assets of the Company and for preventing and detecting fraud and
 other irregularities;
 
 iv) they have prepared the annual accounts on a going concern basis.
 
 22.  ACKNOWLEDGEMENTS
 
 This year has been a year of investments and growth. On behalf of the
 Directors of the Company, I would like to place on record our deep
 appreciation to our Shareholders, Customers, Business Partners, Vendors
 both international and domestic, Bankers, Financial Institutions and
 Academic Institutions.
 
 The Directors are thankful to the Government of India and the various
 Ministries, the State Governments and the various Ministries, the
 Central and State Electricity Regulatory authorities, Corporation and
 Municipal authorities of Mumbai and other cities where we are
 operational.
 
 Finally, we appreciate and value the contributions made by all our
 employees and their families for making Tata Power what it is.
 
 
                                  On behalf of the Board of Directors,
 
                                  R. N. TATA
                                  Chairman
 
 Mumbai, 3rd July, 2008