I have always started this letter by sharing with you the operationaland financial achievements of RattanIndia Power during the year. The past year has been achallenging one due to outbreak of COVID-19 which has caused irreparable damage tohumanity as well as caused economic disruption globally and in India. However the Companyhas taken proactive measures to ensure safety of its employees as well as support thecommunity. I write to you today with pride that in spite of the continued impact of thepandemic including the second wave of Covid-19 hitting the nation towards the end of theFinancial Year (2020-2021) and difficulties that businesses across the country/globe havefaced it has been an exciting and extra-ordinary year for your Company.
I am happy to share that our efforts towards the resolution of thestress that your Company had been facing in the past years through the One TimeSettlement' Scheme (OTS) with the original lenders (a group of 12 lenders with PowerFinance Corporation Limited as Lead Lender) to the Amravati Project concluded on 31December 2019 has started bearing fruits. You would appreciate that your Company has beensuccessfully servicing its debt obligations and paid Rs 1219 Crores towards debtservicing(including principal and interest) during the previous 5 quarters (from January2020 till March 2021) including pre-payment of Rs 200 Crores. This has been a commendableperformance indeed especially given the fact that the Company has not sought anyfinancial or fiscal support from the schemes announced by the Government to supportindustries and business during this pandemic even though there was overall businessslowdown during these difficult and stressful times.
The Indian economy which was gradually on the recovery path post theimpact of the first wave of Covid-19 last year had again lost the pace of recovery due tothis resurgence. However India's long term growth prospects continues to bepositive with the World Bank continuing to be bullish about the growth of the Indianeconomy projecting a growth of 7.5 percent in 2022-23. We would be having a fullyvaccinated and healthy work-force to address any concerns arising out of a slow-down and aresultant delay in its economic recovery as the country has set a target to vaccinate itsentire adult population by December 2021.
Despite all odds that the country has faced in general in the recentchallenging times India's energy sector has witnessed multifaceted growth buoyed bypolicy interventions reforms and investments. Various initiatives taken by the country inthe past including the introduction of various key policies like 100% electrificationand electricity for all under the SAUBHAGYA program and improvement in the transmissionconnectivity across various regions would be the key drivers contributing to the futureincrease in electricity demand in India. Growing out of the shadows of the pandemicIndia's demand for electricity continues to grow with peak demand touching anall-time high of 200.57 GW on 7 July 2021.
India's focus on electric mobility will also add significantly tothe current demand. Currently only 1% of the total vehicles sold in the country areelectric which provides a huge market opportunity for growth in sale and adoption ofelectric vehicles. With the country having set its target to move to a 100% electriceco-system by 2030 it is estimated to create an additional requirement of 70terawatt-hours of electricity.
India's distribution sector continues to be the Achilles Heel forthe growth and financial viability of the entire power sector. We too like othergenerating companies continue to be inextricably linked to the viability of the Discoms.The Government of India continues to focus on improving the efficiency of the distributionsector and has announced measures to reform the sector and promote private participationin the distribution sector and providing choices to consumers. In this regard the UnionFinance Minister in her last budget speech has announced a reforms-based andresults-linked Revamped Distribution Sector Scheme with a five-year outlay of Rs 3.06Trillion tied to financial performance. Improvement in the health of the distributionsegment augurs well for the upstream business segments like generation and transmission.The expected competition in the distribution segment would further bring in efficiency forthe entire power sector.
The proposed introduction of the amendments to the Electricity Act 2003through the Electricity Amendment Bill 2021 is also set to bring about much required keychanges in the functioning of the sector. Apart from offering greater choice to consumersby de-licensing of the distribution business it is also proposed to strengthen theregulatory commissions to expedite the process of recovery of revenues which have beenotherwise locked up in long drawn litigations.
Stellar performance in spite of the continued impact of the Pandemic:
Your Amravati plant continued to be available to supply at 100% plantavailability. Your Company also managed to secure a favourable order from the MaharashtraElectricity Regulatory Commission (MERC) on 31 December 2020 which has made the plantsignificantly competitive in the State Merit Order Schedule and as a result we havesuccessfully achieved a plant load factor (PLF) of 86% at your Amravati plant in thefourth quarter for FY2021. Amravati plant would continue to be extremely competitiveresulting in higher PLF going forward and contributing to the Nation's development byproviding reliable cost-effective and efficient base load supply.
Your Company is also undertaking a holistic and organisation widetransformation exercise to achieve excellence in performance under key areas related tooperational financial and business in order to have a meaningful impact on theprofitability of the Company. Apart from the above your Company is also working to makethe existing processes more robust and resilient to deal with the new normal.
The Company after sustaining losses for a consecutive 9 quartersshowed profits from the second quarter of the financial year FY 2020-21 ending the yearwith an EBIDTA of Rs 988.22 Crores and Profit After Tax (PAT) of Rs 96.71 Crores.
In addition to this your Company continues to strive to improve itsmargins on a regular basis and the Company worked with its lenders to bring about areduction in annual interest costs from 13.5% to 12.25 % for a part of its outstandingdebt resulting in considerable savings for the Company.
This also reflects in the rating of the Company which secured a ratingof BBB- for its long term debt (with "Stable" outlook) and a rating of A3 forits short term debt.
Efforts to resolve stress and improve value to our Shareholders:
RattanIndia Power Limited is one of the top 10 power generationcompanies with 2700 MW of commissioned capacities (1350 MW at Amravati and 1350 MW atNashik). Amravati Plant is supplying power to Maharashtra State Electricity DistributionCompany Limited (MSEDCL) through a 25 year long term PPA. The Company is focused oncontinuous improvement in plant efficiency and availability and has the requisiteexpertise to ensure that we have some of the most efficient power plants in the country.We are continuously striving to review and improve our internal systems and processes toalign them with the very best in the industry.
Over the last few months we have also increased our efforts to workwith the lenders and stakeholders for our Sinnar Project at Nashik to resolve the currentstress and given the attractiveness of the Sinnar Project we are extremely hopeful thatwe would be able to resolve the issues going forward
Our response to Covid-19:
Like most businesses globally and more specifically in India we toohave been facing a threat of getting impacted because of the Covid-19 pandemic. In orderto ensure that the Plant continues to be available 100% to generate and supply wecontinue to focus on making the plant a safe and secure place for our employees workersand vendors. Our operations and HSE teams have been working round-the-clock byintroducing and enforcing rigorous cleaning and sanitation protocols regular health andwellness checks and implementing changes within our facilities to comply with prescribedsocial distancing norms. As a result we have been able to achieve 100% plant availabilityfor the whole of the financial year 2020-21.
Lastly on behalf of the Board I take this opportunity to thank allour stakeholders - Shareholders Customers Vendors Employees Bankers FinancialInstitutions new partners in the Amravati Project and other partners for reposing theirfaith on us and motivating us to excel across all facets of our business. I look forwardto your support and confidence in the Board of your company to help us to achieve a betteryear ahead as the country continues to emerge out of the shadows of the pandemic. I wouldlike to end by reiterating our continued commitment to excel in everything we do.
Thank you and wishing you all the very best.
|Rajiv Rattan |