DIRECTORS' REPORT-2005-06

The Board of Directors take immense pleasure in presenting the 36

th

Annual Report on the business and operations of the Corporation with the

audited statement of accounts for the year ended March 31, 2006.

I. Financial Performance

Financial Results

For the year ended

March 31, 2006

(Rs. in crores)

For the year ended

March 31, 2005

(Rs. in crores)

Gross income from

Sale of energy

2521 2483

Other income 149 134

Total Income 2670 2617

Operating expenditure 1710 1766

Operating profit 960 851

Finance Charges, Depn.,

Extraordinary items &

prior period adjustments

625 589

Profit before tax 335 262

Provision for Tax

Deferred tax

28

55

22

1

Profit after tax 252 239

Profit

• Profit before tax during the year was at Rs.335 crores as against

Rs. 262 crores during the previous year.

Turnover

• Turnover during the year was Rs. 2521 crores as against Rs. 2483

crores during the previous year. This was on account of higher hydel

generation.

Generation

• Generation during the year was 19889 mus as against 18993 mus during

the previous year on account of higher hydel generation.

Dividend

• A dividend of Rs. 20 per share as in previous years has been proposed.

The total dividend outgo will be Rs.13.26 Crores

Special Reserve

• An amount equivalent to 2.5% of the profit after tax is transferred to a

separate Reserve to meet the contingencies in operation and

maintenance of the plants.

2

II. Financial Management

Financial Initiatives

With the regulatory environment prevailing in the State, the company has

been pursuing with various initiatives to reduce the cost of borrowings. The

total savings during the year 2005-06 is Rs.86.36 crores. The details are:

� On account of availment of Short Term Loan during the period at lower

rate of interest, KPCL has saved an amount of Rs.76.58 crores, in

comparison with the rate of interest of Rupee Term Loan and Working

Capital Loan.

� Conversion of Working Capital in to STL & RTL in to FCNR(B) has

resulted in savings of Rs.5.33 crores.

� Savings of Rs.4.45 crores during the currency of the loan on Debt

restructuring of PFC loans amounting to Rs.102.70 crores.

III. Realisation of dues from KPTCL/ESCOMs

a) As part of the reforms in the power sector, GoK vide GO No. EN 131

PSR 2003 Bangalore dated 10.05.2005 ordered for assignment of

PPAs to all the ESCOMs for purchase of power from KPCL w.e.f.

10.06.2005. Accordingly, KPCL has been selling power directly to

ESCOMs w.e.f. 10.06.2005. The total realisation from KPTCL/

ESCOMs during the year was at Rs.2117 crores. The Company has

taken up with the Government of Karnataka, to ensure 100% current

monthly billing payment together with definite time frame for

liquidation of old dues and allocation of outstanding dues of KPTCL

amongst ESCOMs.

b) For the first time in the history of the Company, energy was sold to

other trading agencies outside the State of Karnataka under Open

Access, which realized an amount of Rs.83 crores during the year.

IV. Power Purchase Agreements

The Power Purchase Agreements for the existing hydel stations and RTPS

Units 1 to 7 were approved by KERC with parameters that were adverse to

the Company. The Company approached the Hon’ble High Court of

Karnataka to issue appropriate directions to KERC.

High Court of Karnataka has granted stay on the execution of PPAs and has

heard the parties. It is hoped that the judgement will be delivered soon.

In view of the stay of Hon’ble High Court on revised PPAs the energy bills

on KPTCL/ESCOMs are raised as per the methodology followed prior to

3

initialing of PPAs with KPTCL. GOK vide GO dated 10.05.2005 has

directed KPTCL to assign the PPAs in favour of ESCOMs for direct

purchase of power from the Company.

Accordingly, the revenues reported continue to be based on the above

procedure.

V. Corporate Governance

a) Best Practices

♦ To meet the challenges of a competitive scenario in the power sector

♦ Cost consciousness and transparency in transactions

♦ Adaptations to reduce time and cost element in project execution

♦ Benchmarking with the best in India and abroad

♦ Proper budgetary control system

♦ Financial and commercial systems to ensure fair play for stakeholders like

vendors, contractors and lenders.

♦ Importance for obtaining lawful consents, permits and clearances in the

activities. Contractors, suppliers and other business associates are

expected to comply with all relevant legal requirements.

♦ To reflect faithful compliance to the tenets of public governance.

♦ Savings to be obtained through a professional approach in design,

execution and operation & maintenance of projects.

♦ Enhancement of knowledge and skills of employees through training

b) Social contributions

♦ Donations to the Chief Minister’s Relief Fund, social welfare and child

care programmes

♦ Maintaining aesthetic gardens at the Kidwai Oncology Hospital, project

locations, Corporate Office and park with an attractive water fountain in

front of Vidhana Soudha

♦ Supporting Rehabilitation and Resettlement measures

♦ Passing on the benefit of cost cutting in construction, finance and

operations to the consumers

♦ High performance levels to reduce cost and ensure reliable power supply

♦ Adopting people friendly approach including settlement through Lok

adalath. About 150 cases in Kali project involving about Rs. 14 crores

have already been settled. Further, efforts are on to convince the other

landlosers also to go in for similar settlement.

♦ Making available corporation-run schools, hospitals and community

centers for the general public in the project area

♦ Maintaining interior roads near project locations

♦ Strict compliance to environmental laws, regulations and norms

4

c) Research and Development

The Corporation has created separate task forces to take up R&D

activities in order to optimize generation from the existing plants through

improvements and also to adopt new technology for higher efficiencies in

operation and maintenance of plants. Some other areas where newer

technologies have been adopted are as follows:

i) Renovation and modernization of existing plants are contemplated on

a continuous basis

ii) The level monitoring of Talakalale Dam with GSM based technology

has been implemented for optimum usage of water resource

iii) Condition monitoring of generator transformers healthiness has been

initiated which will decrease the failure rate

Further, newer construction techniques are also studied for speeding up

construction of future power projects.

d) Board of Directors

Shriyuths:

1. N Dharam Singh - Chairman (upto 13.02.06)

2. HD Kumaraswamy - Chairman (from 13.02.06)

3. HD Revanna - Vice Chairman (upto 13.02.06

& from 03.07.06)

4. KC Reddy

5. LV Nagarajan - Managing Director

6. SM Zafrulla - Technical Director

7. D Vishnuvardhan Reddy - Finance Director

8. M Nellaiappan - Director (HR) (06.04.05 to 13.03.06 &

from 06.04.06)

9. Dilip Rau

10. SV Ranganath - (upto 22.05.06)

11. Sudhakar Rao - (upto 14.09.05 & from 22.05.06)

12. N.Gokul Ram - (from 14.09.05)

13. V Madhu - (upto 14.09.05)

14.Bharat Lal - (from 14.09.05)

15. AK Tripathy

16. HS Mahesh - (upto 03.07.2006)

17. PR Mallikarjuna

18. K Sankappa Shetty

19. V Sreenivasa Murthy

20. SV Nesargi - (26.10.05 to 31.10.05)

The Board places on record its appreciation of the services rendered

by the outgoing/ceased Directors during their tenure.

5

e) Meetings of the Board, sub-committees & management committees

pertaining to the financial year

i) Board level

Board : Four

Technical Committee : Fourteen

Audit Committee : Three

Sub Committees –

Board : Two

Tech. Committee : Two

Empowered Committee

(For sourcing of Gas to Bidadi Project) : Three

ii) Management

Management Control & Review : Twenty two

(at corporate office)

Heads of the Departments : One

iii) Audit Committee

Pursuant to Sec. 292 A of the Companies Act, Audit Committee has been

constituted in July 2004 comprising Sriyuths PR Mallikarjuna, K Sankappa

Shetty and V Sreenivasa Murthy as members.

The Audit Committee reviewed the half yearly and 3

rd

quarterly accounts in

its meetings dated 21.01.2006 & 31.03.2006. It also reviewed the budget

proposals for the year 2006-07.

In its meeting on 01.08.06, the Committee reviewed in detail the annual

accounts for the year 2005-06 and recommended the same for consideration

by the Board.

iv) General Body Meetings

Annual General Meetings

Meeting No.

& Date

Held at Special

Resolutions

33 – 29.09.2003

Room No. 645, Chambers of

Principal Secretary, Energy Dept.,

GoK, MS Building,

Bangalore-560 001

Nil

34 – 22.09.2004

Regd. Office, No. 82, Shakti

Bhavan, Race Course Road,

Bangalore-560 001

Nil

35 – 26.09.2005

Room No. 236, Chamber of

Principal Secretary, Energy Dept.,

GoK, 2

nd

Floor, Vikas Soudha,

Bangalore-560 001

Yes, Amendment to the

Memorandum of

Association - inclusion of

provisions for trading

6

VI. Capital Expenditure

The Corporation has incurred an amount of Rs. 692 crores towards capital

expenditure during the year.

VII. Physical Achievements

• Generation of 19889 mus.

• Thermal generation of 9164.73 mus.

• Wind Power Generation of 15.09 mus

• Plant Load Factor (PLF) of 71.17% at Raichur Thermal Power

Station with availability factor of 89.12%

• Capacity addition of 110 mws at ADPH

VIII. Operational Performance

Operational performance in terms of plant availability factor, plant load

factor, forced outages, specific coal and oil consumption per kwh and

auxiliary consumption was maintained at optimum level. The performance

parameters of thermal and major hydel projects for the years are indicated

below:

A. Generation Performance

Generation

2005-2006

(in mus)

2004-2005

(in mus)

Thermal 9165 10731

Hydro + Wind 10724 8262

Total 19889 18993

The hydel generation during the year was more by 2462 mus due to good

inflows into the major reservoirs. However, thermal generation was

maintained at optimum level to meet the demand despite constraints in part

load operation due to grid requirements.

B. Performance of RTPS

Particulars 2005-2006 2004-2005

Generation in mus 9165 10731

Aux. Consumption in mus 790.65 931.8

Aux. Consumption in % 8.63 8.6

Plant Load Factor 71.17 83.33

Coal consumption in (lakh MT) 60.51 69.41

Specific Coal consumption (kg/kwh) 0.66 0.647

Specific Oil consumption (ml/Kwh) 0.736 0.604

Plant Availability Factor 89.12 88.12

Units in operation 7 7

7

RTPS continued to operate at high levels of efficiency. The Company has

been found to conform to the Environmental Management System Standard

ISO 14001:2004 for RTPS. The Certificate is for all activities related to Coal

Based Power Generation including Operation & Maintenance along with

support Facilities like Medical & Colony Services.

C. 1) Performance of Major Hydro Stations

Stations Availability

Factor (%)

% Auxiliary

Consumption

Sharavathi 96.85 0.64

Nagjhari 90.74 1.81

Varahi 99.22 2.23

2) Significant performance by minor hydel stations:

Minor Stations 2005-06 2004-05

Availability

Factor in %age

Generation

In mu

Availability

Factor in %age

Generation

in mu

Gerusoppa 95.93 556.39 95.93 437.90

Kadra 96.89 345.92 96.89 231.51

Kodasalli 91.01 331.25 91.01 217.89

Ghataprabha 99.04 122.54 99.04 96.80

D. Station wise generation in mus

Stations 2005-06 2004-05

Raichur Thermal Power Station 9164.73 10730.91

Sharavathi Generating Station 4865.64 3854.66

Gerusoppa Dam Powerhouse 556.39 437.90

Linganamakki Dam Powerhouse 274.62 193.87

Nagjhari Powerhouse 2162.33 1719.95

Supa Dam Powerhouse 357.56 295.99

Kadra Dam Powerhouse 345.92 231.51

Kodasalli Dam Powerhouse 331.25 217.89

Varahi Underground Powerhouse 971.84 974.00

Mani Dam Powerhouse 20.67 22.47

Almatti Dam Powerhouse 598.65 139.21

Ghataprabha Dam Powerhouse 122.54 96.80

Bhadra Dam Powerhouse 76.28 41.40

Kalmala, Sirwar, Ganekal &

Mallapur

25.42 21.70

Kappatagudda Wind Farm 15.09 15.05

Total 19888.94 18993.31

8

IX. Capacity Additions

Project

Capacity

in mws

Date of

Commissioning

Almatti Dam Powerhouse – Unit 5 55 6

th

July,2005

Almatti Dam Powerhouse – Unit 6 55 10

th

August, 2005

Total 110

During the year, hydel reservoirs reached the following levels

Reservoir Full level

Minimum

Drawdown

Level

Highest

level

in 2005-06

Date

%

capacity

Linganamakki 1819.00 ft 1715 ft 1819 ft 20.08.05

&

29.08.05

100

Supa 564.00 mtrs 524.30 mtrs 560.90 mtrs 04.11.05 91.03

Mani 594.36 mtrs 565.10 mtrs 591.60 mtrs 06.11.05 83.65

X. On going projects

a) Almatti Dam Power House (290 mws)

The estimated cost of the project is Rs.674.38 crores. It has one unit of 15

MW and five units each of 55 MW. Construction of power house is

completed and all the units are already commissioned. The completed cost

of the project is Rs. 525 crores. The work completion ceremony was held at

ADPH on 25.08.2005. The cumulative generation upto March 2006 is 740

MU. The power house has bagged an award by CEA during 2004-05 for

best executed hydro power project.

b. Bellary Thermal Power Station (1x500 mw)

Implementation of Bellary Thermal Power Project (1x500 MW) with an

estimated completion cost of Rs.2100 crores has been taken up on fast-track

basis through EPC route from 29.12.03. M/s Bharat Heavy Electricals Ltd.

are the EPC contractor. The Contract schedule for implementation of the

Project is 36 months for synchronization and 39 months for commissioning.

The detailed Engineering for manufacture of various equipment including

BTG & auxiliaries and BoP equipment/system has been completed.

Manufacture & Supply of equipment from various units of BHEL and their

sub-vendors are progressively getting completed by September-October

2006. In view of heavy order position with BHEL, they are not in a position

to adhere to their supply schedule particularly from the critical units of

Trichy, Ranipet & Hardwar. This is impeding the progress of the Project.

Top level review meetings are being periodically held to speed up

manufacture & supply of equipment from the critical units to ensure

continuity of erection of components at Site.

9

Civil & Structural steel works in BTG Island, Transformer yard, Switch yard

& Water system area are in advanced stage of completion. In addition, the

works on auxiliary plant buildings are also in advanced stage of completion.

The civil works pertaining to BoP equipment/system viz., Ash handling,

Coal handling & Fuel oil handling system are in progress.

The works pertaining to RC Chimney & Natural Draft Cooling Tower are

nearing completion.

The important event of “Boiler Hydro test” was achieved on 11.5.2006.

Focus now is on the next important event of Boiler Light-up scheduled by

28.9.2006.

Erection of major equipment viz., Boiler, ESP, Mills, Fans, Heaters, Switch

gears, Switchyard equipment, Turbine & Condenser are in progress.

Water supply works from Maralihalla to BTPS Plant site including civil

works at Maralihalla, Laying, Jointing & Testing of MS pipeline &

Construction of Raw water pond are in progress. In addition, other non-EPC

works of construction of Ash pond, Railway siding & Marshalling yard and

Roads & Drains in the Plant area are in progress.

Land: Absolute sale deed in respect of 1157 acres of private land and 549.27

acres (VSL land) has been registered on 20.06.06 with the Sub Registrar,

Bellary.

Cumulative financial progress achieved on the Project up to end of June

2006: Rs.1315 crores.

The project is expected to be ready for supply of power to the State grid from

December 2006.

c) Up-rating of Nagjhari Power House (45 mws)

The existing units of 135 mws are planned to be up-rated to 150 mws

capacity. Units 1, 2 & 3 have been up-rated. Presently U-4 is under R, M

& U works. On observing cracks developed in U-4 rotor spiders the rotor

spiders are being replaced for units 4, 5 & 6 with new ones. Unit 4 is likely

to be commissioned by August 2007. Units 5 & 6 are likely to be

commissioned during 2008 & 2009 respectively.

d) Bidadi Combined Cycle Power Plant (1400 mws)

• Bidadi Combined Cycle Power Plant is planned as a state of the art gas

based project at Bidadi near Bangalore, the main load centre. This

project will also provide the anchor load for gas supply to Karnataka.

10

• Treated sewerage water from the BWSSB plant at Vrishabhavathi

valley, Bangalore will be used for the plant. Water supply pipeline

already laid for 700 mws is being shifted in view of construction of

four-lane Bangalore-Mysore Road. The shifting work is in progress.

Studies are in progress for laying second pipeline for catering to 100%

requirement of Bidadi CCPP. KPCL has spent about Rs.27 crores for

land, water supply scheme, compound wall and some works on

marshalling yard. The estimated cost of the project is Rs. 3750 crores.

Environmental clearance has been obtained from MOEF.

• Notification for pre-qualification for EPC works including financing of

EPC cost was issued on 16.6.2003. Bids were opened on 15.9.2003.

Four Bidders were pre-qualified. Bid documents have been issued to

these pre-qualified bidders during June 2004. The schedule for

implementation of power plant will be firmed up based on finalisation

of gas supply bids.

• Bid notification for “Request for Qualification” for supply of natural

gas/Re gasified LNG was issued on 23.05.2003. Techno Commercial

bids received from the following firms were opened on 24.03.2004:

A. M/s. Petronet LNG Limited (ONGC, BPCL) – RLNG

B. M/s. Reliance Industries Limited – NG

C. M/s.Kakinada IOLC (IOC, Petronas & Kakinada Sea Ports) – RLNG

• Since the three pre-qualified bidders did not submit the price bids for

supply of gas on the scheduled date of 30.12.2004, the Board in its adj.

199th meeting held on 9.5.2005 had constituted an empowered

committee comprising Dr. MR Srinivasan, former Chairman, Atomic

Energy Commission of India, Principal Secretary, GoK Energy

Department, Prof. Soundaranayagan, formerly of IISc, Shri AC Bhaskar,

Scientist E of GTRE, Managing Director, Technical Director, Finance

Director, KPCL to explore the options for obtaining gas for Bidadi Combined

Cycle Project. The Committee has submitted the report to the Board and the

same has been accepted.

e) Varahi Hydro Electric Project 2

nd

Stage - (2 x 115 mws)

• Varahi Hydro Electric Project was conceived and designed for

implementation in two stages. First stage comprises of two units of 115

mws each at Varahi Under Ground Power House and these units have

already been commissioned in the year 1989 and 1990 and a provision

for addition of two more units of same capacity has been made for the

second stage. These additional units provide peaking assistance to the

grid.

• Govt. of Karnataka vide GO No. DE89 PPC 2000 dated 28.10.2003 has

allotted the VHEP Stage-II scheme to KPCL for implementation. The

11

estimated cost of the project is Rs. 291.00 crores. Statutory clearances

for the project have been obtained.

• Civil works are entrusted to M/s IHP- SNC consortium and the work is

in progress.

• Bids for EPC of E&M works have been finalised and work awarded to

M/s VA Tech India Ltd. Period of implementation is 28 months from

zero date.

f) Bellary Thermal Power Station - Stage-II (1X500 MWs)

GoK has allotted additional 500 mws project Unit.2 stage-II to KPCL

vide GO. No.DE186PPC1997/15.07.2002. Detailed Project Report is

ready. All statutory clearances are being obtained. The cost of the work

is estimated at about Rs. 2106 crores. The annual energy generation

would be 3504 mus at 80% PLF. The work is likely to be completed in

38/41 months from zero date.

g) Raichur Thermal Power Station - Unit-8 (250mws)

This is an Expansion Power Unit adjacent to existing 7 Units of capacity

1x210 mws. GoK allotted the project to KPCL on 23.06.2003. It is now

proposed to go in for 250 mws unit as BHEL has phased out the 210

series and also the 250 mws unit is more efficient and proven. The

estimated project cost is Rs.925 crores. No additional land & water is

required.

Statutory clearances are obtained/are in process.

Geo-technical and soil investigations are in progress. Planned time of

completion is 28/30 months.

h) Gundia High Head Scheme (400 mws)

The Board of Directors has approved the implementation of the 400

mws Gundia High Head Scheme. Studies are underway for preparation

of Detailed Project Report.

i) Others

• GoK by Order No. DE 35 PSR dated 11.4.2003 has approved the

merger of M/s Visveswaraya Vidyuth Nigam Limited with KPCL.

Formal application along with scheme of merger to the Department

of Company Affairs (DCA) under Sec. 396 of the Companies Act has

been filed on 31.7.2003. Approval of DCA is awaited.

• KPCL in association with Indian Institute of Science has taken up

two bio mass projects at Bethamangala in Kolar district (412 KW) and

Kushalnagar in Kodagu district (107 KW) at a total estimated cost of

12

Rs.158 lakhs and Rs.45 lakhs with MNES subsidy support of Rs.64

lakhs and Rs.16.5 lakhs respectively. These units will provide

captive power supply for water supply schemes. All the civil

engineering works have been completed. Assembly and erection of

gasifier and engine are also completed. Formal inauguration of

Bethamangala plant was done by MD, KPCL on 16.06.2006.

• Company has prepared vision 2025 identifying future sites and

expansion projects with possible capacity of about a total of 20000

MWs for four block periods of 5 years. This has been adopted by the

Board and MD authorized to initiate preparatory action.

• Further, Government of India has proposed to setup a 4000 MW Ultra

Mega Project near Tadadi in Uttar Kannada District with equity

participation of about Rs.500 crores by GoK through KPCL.

XI. New Projects

The Corporation has taken up projects in Hydel, Thermal, Combined cycle

power plant, and R,M & U works as under:

Under execution

a) Bellary Thermal Power Station – Stage I 500 mws

b) Uprating of NPH(units 4,5 & 6) 45 mws

Under Tender/award

c) Bidadi Combined Cycle Power Plant 1400 mws

d) Varahi Hydro Electric Project Stage –II 230 mws

e) Bellary Thermal Power Station – Stage II 500 mws

f) RTPS Unit 8 250 mws

Under Preparation

g) Gundia High Head Scheme 400 mws

]

XII. Management of Coal

Coal for RTPS

Coal requirement at RTPS is about 23,000 tonnes per day for operation

of seven units at full load.

Supply linkage of coal is from (i)Singareni Collieries, Andhra Pradesh,

(ii) Western Coalfields, Maharashtra, (iii) Mahanadi Coalfields, Talcher,

Orissa. Coal was also sourced from South Eastern Coalfields Ltd.,

Chattisgarh.

13

Coal receipt during the year 2005-2006 was 66.57 lakh tonnes including

imported coal of 1.12 lakh MT as against 70.82 lakh tonnes in 2004-

2005 to ensure PLF at 69.48%. Colliery wise breakup is as below:

Qty. of Coal (Lakh tonnes)

Colliery

Washed Raw Total

WCL 20.57 --- 20.57

SCCL 15.19 14.13 29.32

SECL 0.95 --- 0.95

MCL --- 14.61 14.61

Total 36.71 28.74 65.45

The specific coal consumption for the year 2005-2006 is around 0.645

Kg/Kwh.

As a part of strategy to make continuous improvement in coal

procurement and also meet the MoEF regulation that all power stations

located at a distance of more than 1000 Kms. shall use coal with ash

content less than 34% only, washeries have been established on BOO

basis in SCCL, WCL and MCL areas.

However, washed coal is being received only from SCCL and WCL. As

an alternative to long lead MCL washed coal, washed coal has been

taken from SECL in All-rail route.

The weighted average of ash content at RTPS for the year 2005-2006

was about 30.99%. The entire coal received at RTPS is analysed and

sampled by mechanical process using the Auger Sampling Unit.

Coal for BTPS:

Govt. of India have allotted dedicated coal mines in Wardha Valley of

Maharashtra. A joint venture of KPCL named KEMTA Ltd., is

developing the coal mine. Various steps towards land acquisition,

environment clearances, mining lease are being obtained. Coal is

required at Bellary by December 2006.

XIII. Management of Ash

Fly ash disposal is a major environmental concern in thermal power

stations, KPCL has taken several steps to promote fly ash utilisation as

per MoEF notification. Fly ash is being issued free of cost to SSI units.

Leading cement manufacturers in the country have tied up with KPCL

for lifting fly ash to an extent of about 2500 metric tonnes every day.

Besides several small - scale industries, brick manufacturing units are

also utilising about 300 metric tonnes per day. The operation and

14

maintenance of silos and issue of fly ash to users from Units 3,4,5 & 6

has been entrusted to M/s. ARV Cement Society. In respect of Units

1,2, & 7 M/s. ACC has installed the necessary equipment for fly ash

collection at their cost. Such type of arrangement is unique in the

country. Fly ash utilisation at RTPS is rapidly increasing and present

utilisation is 60 to 65% of the ash production. RTPS is one of the

leading power plants in achieving higher utilisation of fly ash in the

country. Further, the users have proposed transport of ash through rail

by having a dedicated siding. Total production of fly ash during 2005-

06 was 15.47 lakh MT and 9.53 lakh MT of fly ash was lifted.

KPCL has established a “ Centre of Fly Ash Utilization Technology and

Environment Conservation” at Raichur Thermal Power Station in

consultation with Central Power Research Institute as consultant under

Indo Norwegian Environment Programme at a cost of Rs. 58 million.

Presently, in the above center RGRHDC (Rajiv Gandhi Rural Housing

Development Corporation) is manufacturing various fly ash products and

are being utilized by them for housing. Value addition to fly ash has

been given through the development of construction materials. This

centre will demonstrate various process technologies for the manufacture

of construction materials like brick, hollow concrete blocks, mosaic tiles

etc., In addition to conducting training programme to raise the

awareness among entrepreneurs, civil contractors, governmental and

other agencies about the potential benefits by using fly ash in the

building material. The Centre would enable fly ash utilisation through

introduction of better ash management techniques, thereby bringing

environmental and socio-economic benefits to Raichur and neighbouring

districts.

XIV. Environmental Safeguard Measures

• Compensatory afforestation programme has been implemented to an

extent of 6500 hectares in hydel projects.

• At Raichur, over an area of 258 ha. around 2.41 lakh seedlings have been

planted as a part of Green belt development.

• In upcoming Bellary Thermal Project afforestation programme is being

implemented in an area of 220 ha. much earlier to the commencement of

civil and electro-mechanical works of the project. Up to date progress

achieved is 1.75 lakh saplings in an area 196 ha.

• Cumulative impact Assessment study in the Sharavathi River basin has

been done by Indian Institute of Science, Bangalore

• Fostering Aqua culture at reservoirs.

• Catchment area treatment for Sharavathi and Kalinadi basins

• Regular monitoring of air and water qualities at RTPS

15

• Providing sewage treatment plants at project colonies

• Zero discharge concept is being implemented for the ash pond water and

effluents at RTPS

• Washeries for coal have been established

• Environment cells are in operation in the projects

• Constitution of Project Level Environmental Committees to review the

environmental stipulations and compliance.

XV. Management initiatives for improvement

i) Deputation to Foreign Countries

• 2 Directors and 4 Executives were sent on deputation to China,

Thailand and Germany to study the complex engineering,

technological advancement, magnitude of the civil and

electromechanical works and excellent rehabilitation and resettlement

measures undertaken, operation & maintenance and also for inspection

of equipments at manufacturer’s site being supplied by M/s. BHEL,

Generator supplying agency. Also 4 Directors visited USA and Europe

for inspection of manufacturer’s works and industrial visits.

ii) Career growth scheme

One hundred employees were promoted to the levels of Executive

Directors, Chief Engineer and Superintending Engineer, Executive

Engineer, Assistant Executive Engineer, Junior Engineer during the

year. 205 employees were upgraded/re-designated as under during the

year:

To the level of EEs & equivalent : 7

To the level of AEEs & equivalent : --

To the level of AEs & equivalent : 14

To the level of AAOs and OMs : 7

Workmen levels : 177

iii) Deputation of employees to other Organisations

The services of the officers of the Corporation are sought by GoK

and other organisations. During the year, services of 97 engineers, 30

non-engineering officers and 37 workmen have been spared on

deputation basis.

iv) Induction

During the year 249 employees were inducted by way of recruitment

(including recruitment for backlog posts)/absorption of Trainees

/Compassionate appointments. This includes 157 Electrical /Mechanical

Engineers.

16

v) Training

Every year the Corporation conducts training programmes for the benefit

of the employees and the company. During the year 2005-06, 45 inhouse

training programmes were conducted. In addition to inhouse

programmes, the Corporation has also nominated employees to 45

external training programmes conducted by various training agencies.

Totally 1149 employees consisting of 1078 corporate and 71 noncorporate cadre benefited from the training. Overall cost of training was

Rs.30 lakhs.

Inhouse training programmes

o Energy Audit & Energy Conservation

o 7 Habits of Highly Effective People

o Executive Effectiveness

o Advanced Power System Protection

o RLA & Life Extension of Generator & Transformer

o Finance Act

o Maintenance of Power Transformers

o Management of Working Capital

o 3 ‘A’s for Change

o Work Place Vitalisation

o Green Productivity

o Quality Cost

o Current Trend in Quality Management

o Team Building & Team Leader Development

o Women Empowerment - Be a Woman of Substance

o Tax Management

o Criticality in Generation Management

o Power System & SCADA

o Circuit Breakers & Transformer Oil

o Indian Electricity Act & Rules

o TPM

o Static Excitation System & Current Problems in Operation of Power

Houses

o Availability based Tariff & Electricity Regulatory Issues

o Access to Success

o Energy Management System

External training programmes:

o NDT Methods, Diagnosis & Execution of Repairs

o Cutting Costs through Efficient Cooling Tower Operation

o National Workshop on Advanced Power System Protection

o National Management Forum-2005

o Seminar-cum-Exposition on Energy Conservation & Industrial Waste

Management

17

o Geographical Information System

o Seminar on Service Tax

o Application of Controlled blasting in Civil Engg. Projects

o National Seminar on Project Management - Emerging Trend

o Krupashraya Samavesha

o National Convention on Corporate Communication - “Beyond Words”

o National Conference on case studies in Geotechnical Engg. -

(GEOPRACTICE-2005)

o Customer Meet at Chennai

o Developing Collaborative Strategies for Financing State Sector Projects

o Testing of Transformer Oil

o National Symposium on “Energy Conservation Measures in Generating

Sector”

o Energy Meters & Relays

o Recent advances in Water Resources Development and Management -

International Seminar

o Power System Protection

o 18

th

KSOGA Conference 2005

o Seminar on “Industrial Security & Future Trends”

o National Symposium on “Energy Conservation measures in Generation

Sector”

o International Congress on Fly Ash

o Emerging Trends in Operation & Maintenance of Hydro Power Stations

o Geophysical Investigations for Engineering Projects

o National Conference on HYDRO 2005

o 49

th

All India Congress of Obstetrics & Gynaecology

o National Seminar on Restoration, Rehabilitation & Reliability Structures -

2005

o Electrical Safety

o Advanced Computer Training

o Conference on Software Testing - Effective Practices

o 5

th

Structural Engineering Convention

o Power Quality Measurement

o International Seminar on “Power Transmission Research Interests &

Challenges”

o International Seminar on “Instrument Transformers”

o National Conference on “Role of Civil Engineers in Disaster Management

& Mitigation”

o Gender Equality & Harassment at work place

o Annual Seminar on “Marketing & Advertising”

o Quality Management in Design, Installation and Effective Maintenance of

Hydro Power Plants

o International HR Confluence 2006

o Seminar on “5

th

Coaltrans India”

o Seminar on MCA-21, E-Filing & Digital Signature

o “Green Productivity” & “Knowledge, Management on Integrated

Management Systems”

18

XVI. Consultancy & Engineering Services Department (CESD)

¾ Ministry of Environment and Forests, Government of India has

accorded Environmental clearance for setting up 1 X 210 MW

Raichur Thermal Power expansion Project as Unit- 8.

¾ Application seeking Consent for establishment of 1 X 500 MW,

Bellary Thermal Power expansion Project has been submitted to

Karnataka State Pollution Control Board.

¾ Tenders have been invited from reputed consultants for conducting

EIA studies for the following proposed six thermal power projects:

1. Chamalapura T.P.S. 500 MW

2. R.T.P.S. – 2 500 MW

3. Kowshika T.P.S. 2x500 MW

4. Kudagi T.P.S, 2x500 MW

5. Nandur T.P.S. 500 MW

6. Ghataprabha T.P.S. 500 MW

¾ New Projects - I. Under Investigation:

At the initiative of the Corporation, and in view of the demand

forecast for the State in future, the Govt. of Karnataka has allotted

following thermal power projects for implementation during the XI

Plan, vide its order No. EN 76 PPC 2006 dated 13.07.2006. These are

under investigation:

Sl.

No

Name of Project Units IC in

MW

District

1 Kudgi T.P.S. 2 X 500 1000 Bijapur

2 Kowshika T.P.S. 2 X 500 1000 Hassan

3 RTPS – II 1 X 500 500 Raichur

4 Nandur T.P.S. 1 X 500 500 Gulbarga

5 Chamalapura T.P.S. 1 X 500 500 Mysore

6 Ghataprabha T.P.S. 1 X 500 500 Belgaum

Total 4000

¾ Ultra mega power project- 4000 MW

Preparatory steps for identifying and setting up of Ultra Mega Power

Station near to the coast of Karnataka by CEA & Power Ministry,

GOI.

¾ Works in progress during the year 2005-06:

Water supply scheme to Soraba Town Water availability study in

Varada River for Karnataka Urban Water Supply and Drainage

Board work has been completed on consultancy basis.

19

¾ Expected new assignments - Preparation of DPRs for Kali stageIII, Aghanashini and other HEPS in Karnataka has been stalled as per

direction of State Government.

XVII. Public Deposits

The Corporation dispensed with accepting the deposits from public. Deposits

from past and present employees were accepted/renewed till September

2005. Highest amount of deposits held during the year were Rs.48.55 crores

and the balance at the end of the year stood at Rs. 2.91 crores. Unclaimed /

Unpaid deposits stood at Rs. 1.19 crores. Unclaimed deposits for over 7 years

amounting to Rs. 1.64 lakhs have been transferred to Investors’ Protection &

Education Fund.

XVIII. Personnel, Industrial Relations and Welfare

Particulars of employees As on

31.3.2006

As on

31.3.2005

Total strength 6437 6453

Corporate 2332 2265

Workmen 4105 4188

Deployment on Construction & Erection 453 556

Deployment on O & M 3215 3270

Deployment on auxiliary service 2639 2627

Entry of employees 249 147

Exit of employees* 265 149

Exit of employees under VRS* 1 524

SC employees- in percentage 14.29 14.21

ST employees- in percentage 3.23 3.09

Handicapped employees in percentage 0.4 0.46

Ex-servicemen 0.68 0.542

Man/mw ratio 1.39 1.42

*Employees retired / VES/resignation/removal taken from 31.03.05 to 31.03.06

Break up under Corporate Cadre as on 31

st

March 2006

A. Engineering Cadre Nos.

Technical Director 1

Executive Director 5

Chief Engineer 11

Superintending Engineer 57

Executive Engineer 257

Asst. Executive Engineer 535

Asst. Engineer 462

Junior Engineer 331

Total 1659

B. Non-Engineering Cadre Nos.

Director (HR) 1

General Manager (CE equivalent) 6

DGM (SE equivalent) 12

AGM (EE equivalent) 49

Pos/AOs/LOs etc. (AEE equivalent) 146

ALOs/Asst. Accounts Officer (AE equivalent) 165

OMs, JPOs, JPROs etc. (JE equivalent) 292

20

Total 671

There were 1058 Graduate Engineers on 31.3.2006. Industrial relations were

cordial during the year.

Vigilance

Continued Vigilance was kept in all project areas.

XIX. Auditors

The C&AG has appointed M/s Singhvi, Dev & Unni, Chartered Accountants,

as the Statutory Auditors for the year 2005-06. The firm visited all

accounting units, verified the records, obtained explanations and finalised the

audit work in a reasonable time.

Cost Audit compliance: Government of India has introduced cost audit for

Generation Companies from financial year 2005-06. Company has appointed

M/s. Rao, Murthy & Associates, Cost Accountants as Cost Auditors for this

year. Cost audit report is expected shortly.

XX. Review by the Comptroller & Auditor General

Comments on working results of the Corporation by the Comptroller and

Auditor General of India, forming part of this will be appended when

received.

XXI. Particulars as per Companies (Particulars of Employees)

Rules 1975 and as amended

None of the employees of the Company was in receipt of remuneration

amounting to Rs.24,00,000 and above per annum or at the rate of

Rs.2,00,000 and above per month during the financial year.

XXII. Subsidiary Company

The Corporation has one Subsidiary Company i.e. KPC Bidadi Power

Corporation (Private) Ltd. which was established to implement the combined

cycle project at Bidadi as a joint venture. The statement as required under

Section-212 of the Companies Act is appended.

XXIII. IT and Computerisation

The Corporation has taken a number of IT initiatives to meet its business

commitments. A few of the initiatives are as under:

a) Networked its various offices by establishing a wide area network

through satellite communication

b) Video Conferencing has been established at Bangalore, Jog,

Ambikanagar, Shakthinagar (RTPS) and Kuditini (BTPS)

c) Integrated Inventory Management System at RTPS & Hydel Projects

21

established

d) Fixed Asset Management System in place

e) Voice and data communication through MPLS circuits of BSNL has

been established at BTPS, RTPS, Bangalore, Jog, and Ambikanagar

and the same at Almatti is under implementation

f) OFC link between Nagjhari Powerhouse and Ambikanagar office

complex established

g) OFC link between Sharavathi generating station and Administrative

office at Jog established

h) KPCL website redesigned

i) All the software required for in –house needs developed by system staff

and are being maintained

j) Applications for recruitment of 200 engineers received on-line through

web and processed in a very short duration

XXIV. Corporate Communications

• Various publications have been brought out

• Media events have been held

• Sports meet and Drama have been held

• Bi-monthly house magazine Shakti Vahini was published

• Various functions and seminars arranged

• Participated in exhibition as a part of Karavali Utsav held at Karwar held

during Nov. 2005 and also participated in the All India level power

sector exhibition held at Ahmedabad

• Corporate films produced and screened

• Corporate Image Advertisements in newspapers and magazines released

on important occasions

XXV. Important Events

♦ May 05 - Least average ‘rake turn-over time’ of 5 hrs. 33 mints.

♦ 20.07.05 – Foundation day celebrations

♦ 23.07.05 – National Seminar on Energy Security

♦ 20.09.05 – BTPS – completion of turbo generator foundation

♦ 27.09.05 – RTPS Unit 6 in continuous operation since this date

♦ 22.11.05 – BTPS - Commencement of condenser erection

♦ Jan. 06 - Maximum coal rakes unloaded in a month: 226 nos.

♦ 21.02.06 - Maximum wagons tippled in a day: 614 nos

♦ 28.02.06 - Rs. 25.00 lakhs donated to Chief Minister’s Relief Fund

♦ 03.03.06 – BTPS - Commencement of turbine erection.

♦ 11.05.06 – BTPS - Boiler Hydro Test

♦ July 06 - KPCL bagged following National Awards conferred by CEA:

- ADPH Unit Nos. 3 & 6 selected as ‘Best Executed Hydro

Power Stations’ for 2004-05 & 2005-06 respectively.

22

- Varahi Underground Power House selected for ‘Best Hydro

Performance’ Award during 2005-06.

♦ 16.08.06 - Linganamakki Dam attained maximum level

♦ 17.08.06 - Mani Dam attained maximum level

XXVI. Directors’ Responsibility Statement

Pursuant to Section 217(2)(AA) of the Companies Act 1956, the Directors

wish to state that to the best of their knowledge:

i) in the preparation of the annual accounts, the applicable accounting standards

had been followed along with proper explanation relating to material departures;

ii) accounting policies have been selected and applied consistently and made

judgments 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 or loss of the company for that period;

iii) proper and sufficient care has been taken for the maintenance of adequate

accounting records in accordance with the provisions of this Act for

safeguarding the assets of the company and for preventing and detecting fraud

and other irregularities; and

iv) annual accounts have been prepared on a going concern basis.

XXVII. General

The Board would like to place on record its appreciation:

♦ Government of Karnataka, Government of India and other Agencies such

as CEA, CWC, Registrar of Companies for their assistance, guidance and

cooperation

♦ Financing agencies such as LIC, PFC, SIDBI, IDFC, IDBI, ICICI Bank,

HDFC, State Bank of India, Canara Bank, Syndicate Bank, State Bank of

Mysore, Vijaya Bank, Union Bank of India, Punjab National Bank, Indian

Overseas Bank, Central Bank of India, Federal Bank, Allahabad Bank,

Bank of India, ING-Vysya Bank, State Bank of Patiala, State Bank of

Travancore, Andhra Bank, Corporation Bank, Development Credit Bank,

State Bank of Hyderabad, UCO Bank, United Bank of India, Indian Bank,

Dena Bank, State Bank of Bikaner & Jaipur South Indian Bank, Oriental

Bank of Commerce, Jammu & Kashmir Bank, and Lakshmi Vilas Bank,

for their financial support

♦ the depositors and the general public, for supporting the activities of the

company

♦ the media

♦ Employees’ Unions and Associations, for their collective participation

The Board would also like to place on record its appreciation of the dedicated

services rendered by the employees of the Corporation.

Sd/-

Bangalore (HD Kumaraswamy)

Dated:18.08.2006 Chairman

23

Information pursuant to the Companies (Disclosure of Particulars in the

Report of Board of Directors) Rules, 1988:

FORM-B

I. Research and Development (R & D)

1) Specific areas in which R & D carried out by the company

KPCL is involved in various R & D programmes in which Renovation &

Modernisation and Uprating of Thermal Plants/Hydel stations is one of the

activities being taken from time to time. Some of the measures undertaken along

with M/s BHEL are:

a) Smart Wall Blowing System

M/s. BHEL have recently developed an intelligent wall blowing system called

Smart Wall Blowing System. KPCL gave an opportunity to BHEL to install SWBS

at RTPS Unit – 3 Boiler to carry out R&D on SWBS. Based on the performance of

the system KPCL has taken up to install smart wall blowing system for other units

of RTPS in phased manner under R&M programmers. Purchase order was released

on M/s BHEL for Rs. 690 lakhs. Work is under progress. (Total estimated cost is

Rs. 850 lakhs)

b) High Performance Mills System (HPMS) for Unit 1 & 2

BHEL has developed modification of coal mills with HPMS system. With The High

Performance Mills System (HPMS) Performance of these mills are superior when

compared to existing mills due to consistency in fineness, reduction in mill rejects,

enhanced output of mills, higher life of rolls & bull ring segments etc. KPCL has

taken up work on up grading of Unit 1 & 2 mills with HPMS system. (Total

estimated cost is Rs. 435 lakhs)

c) RLA study of Unit 1

Remaining life assessment (RLA) and healthiness of the boiler pressure parts,

piping, valves, and turbine and generator components as per the recommendations

of OEM M/sBHEL for trouble free operation was carried out for RTPS unit 1

during major annual overhauling works. (Total estimated cost is Rs. 70 lakhs)

d) Boiler feed pump – Modification with upgraded Design cartridges – RTPS 1

& 2

Modification of Unit -1 Boiler feed pumps with upgraded Design cartridges is taken

up. Purchase order placed on M/s. BHEL. Work is under progress. Total estimated

cost is Rs.475 Lakhs)

Total expenditure : Rs.1830 lakhs

24

The Company is setting Biomass units at Bethmangala & Kushalnagar in Kolar and

Kodagu District respectively. The Projects are being implemented by IISc.

2) Benefits derived as a result of the above R & D

i) R & M of Raichur TPS: Does not arise as modification works are under

progress

ii) R & M of Hydel Stations: Uprating of all units of Sharavathy Generating

Station from 89.5 mws to 103.5 mws has been completed during earlier years.

Three units of Nagjhari Power house has been uprated from 135 mws to 150

mws. The Corporation has created separate task forces to take up R&D

activities in order to optimize generation from the existing plants through

improvements and also to adopt new technology for higher efficiencies in

operation and maintenance of plants.

iii) Renovation and modernization of existing plants are contemplated on a

continuous basis.

iv) The level monitoring of Talakalale Dam with GSM based technology has been

implemented for optimum usage water resource

v) Condition monitoring of Generator transformers healthiness has been initiated

which will decrease the failure rate.

Further, newer construction techniques are also studied for speeding up construction

of ongoing and new power projects.

3) Future Plan of action

R M & U of RTPS & Hydro Stations are taken up under AGSP scheme of GoI with

loan assistance from Power Finance Corporation. Expenditure incurred during the

year 2005-06 is Rs. 21.37 crores.

4) Expenditure on R & D

i) Capital }

ii) Recurring } refer items 1

iii) Total }& 3 above

iv) Total R & D expenditure as a percentage }

of total turnover

II. Energy Conservation, Technology absorption, adaptation and

innovation

1) Efforts are being made for technology absorption, adaptation and innovation:

i) Reduction in Auxiliary consumption & improvement in heat rate is being

constantly given priority;

ii) Performance monitoring units 1 to 3 & unit-5 at RTPS through the online

condenser tube cleaning system; and

iii) Utilisation of fly ash has been given a high priority.

2) In case of imported technology, (imported during the last 5 years reckoned from

the beginning of the financial year) following information may be furnished:

i) Technology imported …. Nil

ii) Year of import ….. not applicable

iii) Has the Technology been fully absorbed. ….. not applicable

25

iv) If not fully absorbed, areas where this has .…. not applicable

not taken place, reasons there for and future

plan of action

III. Foreign Exchange

a) Foreign Exchange Earnings : Nil

b) Foreign Exchange Outgo : 280.08 crores

(Import of - capital goods Rs.231.51 crores;

Import of coal: Rs.47.04 crores;

Spare parts & components Rs.1.49 crores

& Foreign Delegate Fee + Travel expenses

Rs.0.04 crores)

26

KARNATAKA POWER CORPORATION LIMITED

Statement Pursuant to Section 212 of the Companies Act, 1956, relating to

Subsidiary Company

1 Name of the Subsidiary … KPC Bidadi Power Corpn. Pvt. Ltd.

2 Financial year ended … March 31, 2006

3. Holding company’s interest… 100% equity

4. No. of shares held … 50,000 equity shares of Rs.10/- each

fully paid up.

5. The net aggregate of profits or losses for the current financial year of the

subsidiary so far as it concerns the members of the holding company –

a) Dealt with or provided for in the accounts of the holding company… nil

b) Not dealt with or provided for in the accounts of the holding company … nil

6. The net aggregate of profits or losses for previous financial year of the

subsidiary so far as it concerns the members of the holding company

a) Dealt with or provided for in the accounts of the holding company… nil

b) Not dealt with or provided for in the accounts of the holding company… nil

Statement Pursuant to Section 212(5) of the Companies Act, 1956,

relating to Subsidiary Company

1. There has been no change in the holding company’s interest in the subsidiary

between the end of the financial year of the subsidiary and that of the holding

company.

2. There has been no material change which has occurred in respect of the following

in the case of the subsidiary between the end of the financial year of the subsidiary

and that of the holding company.

a) Fixed assets of the subsidiary

b) Investments of the subsidiary

c) Moneys lent by the subsidiary

d) Moneys borrowed by the subsidiary for any purpose other than that of meeting

current liabilities.

Sd/- Sd/- Sd/- Sd/-

Shanthi Priya R Balasubramanian D Vishnuvardhan Reddy LV Nagarajan

GM(Accounts) GM(CA)&Comp. Secretary Finance Director Managing Director