directors’ report · project by m/s. ntpc limited in karnataka state 3200 2 udupi power...

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2nd Annual Report 2008-2009

Dear members,

The Board of Directors have pleasure in presenting the 2nd Annual Report on the working of the Company, together with the Audited Accounts for the year ended March 31, 2009.

II. BACKGROUND

Government of Karnataka accorded approval in April, 2007 for constitution of a Special Purpose Vehicle (SPV) viz., Power Company of Karnataka Limited (PCKL) to supplement the efforts of KPCL in capacity addition. PCKL was incorporated on 20th August, 2007 under the Companies Act, 1956 with an initial Authorised Capital of Rs. Five Crores and commenced its operation w.e.f. 16th October, 2007. Each ESCOM has invested a sum of Rs. One Crore which includes Rs. One Lakh towards Equity Share Capital and Rs. Ninety Nine Lakhs towards ‘seed money’.

To bridge the gap between availability and demand of power, PCKL facilitates the establishment of various generation projects through the bidding route. PCKL also co-ordinates the procurement of power from different sources for allocation among ESCOMs, and facilitates trading and related activities. On behalf of the ESCOMs, it procures power through Case.1 Tariff based competitive bidding based on guidelines of the Ministry of Power, Govt. of India.

ACTIVITIES:

• Facilitating land acquisition, allocation of water by the State Government, and allocation of fuel linkages/coal blocks by Government of India.

• Appointment of consultants for preparation of EIA & detailed project report,power evacuation system pertaining to projects through Case.2 Competitive Bidding route.

• Forecasting energy availability on behalf of ESCOMs.

• Negotiations with Traders for short term procurement and preparation of PPA’s on behalf of ESCOMs.

• Scrutiny of Power Purchase Agreements of Conventional Power Plants being developed by IPPs and Ultra Mega Power Projects by Central Government undertakings, to ensure compliance with technical and commercial parameters.

DIRECTORS’ REPORT

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Power Company Of Karnataka Limited

• Issuing clarifications to ESCOMs on issues pertaining to power purchases in respect of both Conventional Projects and UMPPs.

• Accounting of energy exported/imported from various sources including barter arrangements and bilateral exchanges.

• Representing the ESCOMs in SRPC

• Verification of Regional Energy Accounting claims.

• Assignment of Non-conventional Energy (NCE) projects among ESCOMs.

• Accounting of power allocation from CGS by Government of India.

• All issues pertaining to Central Electricity Regulatory Commission matters including parawise replies to the petitions filed by CGS/CTU’s and attending CERC hearings.

• Preparation of documents and other related preliminary activities for procurement of power under competitive bidding.

• Maintenance of Indian Energy Exchange transactions on behalf of ESCOMs.

• Energy procurement from high cost energy sources.

• Verification and scrutiny of high cost energy procurement bills

• Invitation of tenders for procuring power to meet the short term power deficit as recommended by the Power Review Committee of Karnataka

III. FINANCIAL PERFORMANCE(Amount in Rs)

Financial Results For the year ended March

31,2009

For the year ended March

31,2008

Gross Income 43,10,633 16,07,570

Gross Expenditure 4,99,02,831 47,294

Profit/Loss before Depreciation & Interest -4,55,92,198 15,60,276

Profit/Loss before Taxation -4,57,67,775 15,08,365

Net Profit/Loss after Tax -4,69,93,523 9,16,468

The company has incurred a loss of Rs 4.69 Crores in FY 2009 vis-à-vis net profit of Rs 0.09 Crores in the previous year due to fraudulent action of the then Director (Commercial) in parking Rs. 18 crores of company funds in personal insurance policies in the names of senior executives of M/s Bajaj Allianz Life Insurance Company Limited, which were shown as assigned to PCKL on the basis of invalid documents, there was a value erosion of Rs. 4.98 Crores which has been treated as capital loss during FY 2008-2009.

It was noted by the Board, in the Extraordinary Board Meeting convened on 20th March, 2009, that the then Director (Commercial), had kept the CMD and the Board

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totally in the dark. It was therefore decided to withdraw the amount from M/s Bajaj Allianz Life Insurance Company Limited to avoid further loss to the Company. A complaint has been lodged before IRDA and a case of Criminal Conspiracy and cheating has been filed inter alia against the seven executives of Bajaj Allianz Insurance Company Ltd. The Department of Public Enterprise, GoK has also directed all PSUs in the State of Karnataka not to deposit any funds with M/s. Bajaj Allianz Life Insurance Company Limited.

IV. Capital Expenditure

Rupees 10 Crores released by GOK for Gulbarga thermal power project has been deposited with the Deputy Commissioner’s office Gulbarga for land acquisition

V. Achievements

• Tripartite MOU between GOK, PCKL and NTPC Limited was signed on 12th January 2009 for establishing 4000MW power project at Kudgi in Bijapur District by NTPC Limited.

• PCKL facilitated banking of energy with other States /Utilities on barter basis to be returned during their needy times. The transactions that have taken place during financial year are detalied below

1. 162.37 MUs banked energy was returned by M/S Lanco Electric Power Limited during April and May 08

2. 37.93 MUs Energy banked with BSES Rajdhani Delhi through M/S Kalayani Power in July 08

3. 26 MUs Energy banked by NDPL through M/S Kalayani Power was returned during September 08.

4. 23.20 MUs Energy was banked by M/S GMR Energy trading during Nov and Dec 08.

• PPA has been signed with M/s. VBC Ferro Alloys Limited, Hyderabad on 27th February 09 for supply of 600 MW on medium term basis

• Monitoring and co-ordinating with other conventional power projects developers with whom PPA signed/ to be signed.

Action taken to address severe power crisis during 2008-09 by procuring power on short term basis :

The Power Review Committee of Karnataka met on 1-07-2008 to review and to take stock of the power situation in the State due to delayed monsoon and reduced inflows to the major Hydel reservoirs and directed PCKL to invite tenders for procuring the deficit power and also to seek financial assistance from GOK.

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Acordingly, the Cabinet on 10-07-2008 directed PCKL to invite tenders for procuring the deficit power for the months of Oct 08 to May 09 in two phases.

GOK invoked Section 11(1) directing the Generators located in the State to maintain their full plants load factor and to supply their entire exportable capacity to the State Grid for the period from January to May 2009.

To meet the power requirement for February 2009 and March 2009, a delegation headed by the Hon’ble Minister of Energy, GOK met the Hon’ble Chief Ministers of Chattisgarh and Gujarat. This enabled the State to procure power from these two States.

For the period from 01-04-08 to 31-03-09 power was purchased from the following sources:

Sl.No Source Energy Purchased (in MU)

Amount in Rs. (Crores)

1 M/s GMR 588.52 384.71

2 Co generation 557.86 372.09

3 M/s JSW 441.64 298.71

4 Chattisgarh (PTC) 212.84 166.59

5 Bio Mass 85.25 42.62

6 IEX 44.86 28.15

7 NTPC VVNL 16.86 13.47

8 GUVNL 7.61 4.88

9 Tata Power Trading 1.49 1.16

Grand Total 1956.92 1312.38

The above procurement was made after due diligence and observing necessary formalities

VI. PERFORMANCE:

1. Towards capacity addition in the long term, PCKL is carrying out bid processing activities for establishing 3 coal based thermal power projects of 1000 MW each at Ghataprabha at Belgaum district, Gulbarga in Gulbarga district and Chamalapura in Mysore district, through tariff based competitive bidding process.

2. Projects initiated by PCKL under Case I competitive bidding guidelines of Ministry of Power, GoI (location and fuel not specified) are as follows:

a. Procurement of 2500 MW power on long term basis from the Developers/Generators/Traders. RFP document are modified as per the direction of the KERC, and issued to qualified bidder for submission of bids.

b. Establishment of 5 MW and Part thereof capacity power plants at Taluka level in the State of Karnataka-RFP documents issued to qualified bidders for submission of bids.

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3. The status of Gulbarga project initiated under Case.2 guidelines of MOP are as follows:

a. Order issued by the Deputy Commissioner, Gulbarga under Sec 4(1) of Land Acquisition Act on 26.03.2009 for acquisition of 1500 acres of Land for the project

b. Application made before the Ministry of Coal for fuel linkage on 17th June 2008 for long term coal linkage for quantity of 6.3 MT per annum for a period of 25 years Gulbarga project is listed with serial no.172

c. 2.06 TMC of water per annum has been allocated by GoK.

d. MOEF has issued terms of reference(TOR) vide letter dated 10th February 2009

e. Other technical studies are under way.

f. Approval from Hon’ble KERC for bidding documents is awaited.

The Ghataprabha thermal project is in the stage of land acquisition of 1300acres. Chamalapura thermal power project has been kept on hold.

VII. Projects on hand:

The projects supervised by PCKL are as follows:Sl No

Name of the Projects Karnataka Share in MW

1 Kudugi 4000 MW Super Critical Thermal Power Project by M/s. NTPC Limited in Karnataka State

3200

2 Udupi Power Project-1200 MW established by UPCL in Karnataka state 1080

3 Kaiga 4th unit- Installed Capacity 220MW in Karnataka State 60

4 234.6 MW Jurala Project 117.3

5 4000 MW Krishnapatnam Ultra Mega Power Project 792

6 500 MW NLC TPS stage II expansion 110

7 1000 MW Tuticorn TPS 262

8 1000 MW Simhadri TPS 140

9 1500 MW Vallur TPS 125

10 4000 MW Munge, Maharastra UMPP 500

11 4000 MW Tamil Nadu Coastal UMPP 800

12 2000 MW KundanKulam Atomic Power Station (APS) 442

13 500 MW M/s. Hassan Thermal Power Pvt Ltd in Karnataka State 500

VIII. Projects in initial Stage Kaiga Expansion

• A letter was addressed from Hon’ble Chief Minister, GOK to Hon’ble Prime Minister, GOI and copied to Chairman Atomic Energy Commission & Secretary to GOI, Dept., of Atomic Energy, Mumbai with a request to consider expansion of Kaiga Atomic Power Project by another two units viz. 2 x 700 MW.

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• The Chairman, Atomic Power Commission was requested by GOK for deputation of the Technical team for Kaiga expansion which is expected shortly.

IX. Statutory Auditors

The C&AG of India appointed M/s A.R.Vishwanathan & Co., Chartered Accountants, Bangalore as Statutory Auditors for auditing the Accounts of PCKL for the financial Year ending 31st March 2009.

X. Particulars of employees under section 217(2A):

The information under section 217(2A) of Companies Act 1956, read with Company (Particulars of employees) Rules, 1976 may be taken as Nil.

XI. Audit Committee

Though the provision relating to constitution of Audit Committee, as of now is not applicable to PCKL, PCKL at its Board meeting held on 20th June 2009 constituted an Audit Committee, in the furtherance of Good Governance.

The present composition of Audit Committee is as follows:

1. Sri. Tushar Giri Nath, I.A.S Chairman of Audit Committee2. Sri. K. Jairaj, I.A.S Member3. Sri. S. Sumanth Member4. Authorized Signatory, PCKL Convener

Statutory Auditors and Officers in charge of Internal Audit and Accounts are invited to the Audit committee meetings.

XII. Board Meetings

The meetings of the Board of Directors are normally held at the Registered office at Kaveri Bhavan, KG Road, Bangalore. Meetings of the Board of Directors are scheduled in advance for which notice is given to each Director in writing. The agenda and other relevant notes are circulated to the Directors in advance. During the year 2008-09, the Board met six times. The meetings were held as below:

Sl no Meeting No Held on

1 3rd Meeting 10th June 2008

2 4th Meeting 27th September 2008

3 5th Meeting 24th November 2008

4 6th Meeting 29th December 2008

5 7th Meeting 19th January 2009

6 Extraordinary Meeting 20th March 2009

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The following were the Board of Directors of PCKL as on the date of AGM

1. Smt. G. Latha Krishna Rao, I.A.S Chairperson2. Sri. M.Naveen Kumar, IA&AS Managing Director3. Sri. K. Jairaj, I.A.S Director 4. Sri. Tushar Giri Nath, I.A.S Director 5. Sri. S. Sumanth Director

XIII. Way Ahead

In order to provide uninterrupted and quality power supply at minimum cost to consumer and to reduce prevailing gap between demand and supply of electricity in the State, PCKL will expand facilitate establishment of new power projects in the State. The Company is also initiating the preliminary work for establishing the Gas based Power Plants along the Dhabhol-Bangalore corridor as well as Greenfield Nuclear Regional Power Project as an alternative to the Thermal Power Projects.

XIV. Directors’ Responsibility Statement: Pursuant to the requirement under Section 217(2A) of the Companies Act, 1956, the

Directors based on the information received from the operating management confirms that

• In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures

• Accounting policies have been selected and applied consistently and judgments and estimates are made 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 the period.

• Proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

• Annual accounts have been prepared on a ‘going concern’ basis.

XV. Acknowledgements

The Board of Directors would like to place on record its appreciation for all the assistance and guidance extended by the Government of Karnataka, Government of India, KPTCL, ESCOMs, Registrar of Companies and others for the co-operation and active support rendered to PCKL, in its endeavours. The Board of Directors would also like to place on record their appreciation of the dedication and commitment displayed by the officers and staff of the Company during the year. Sd/-

(M.Naveen Kumar, IA & AS)Managing Director

PCKL, Bangalore

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BALANCE SHEET ABSTRACT AND COMPANy’S GENERAL BUSINESS PROFILE

REGISTRATION DETAILS

Registration No. 43640

Balance Sheet Dated 31.03.2009 State Code 8

CAPITAL RAISED DURING THE yEAR (AMOUNT IN RS. THOUSANDS)

Public Issue Nil Right Issue Nil

Bonus Issue Nil Private placement 0

POSITION OF MOBILISATION AND DEPLOyMENT OF FUNDS (AMOUNT IN RS THOUSANDS)

Total Liability 421102 Total Assets 421102

Sources of funds Application of funds

Paid up capital 500 Net Fixed Assets 1861

Share application money 200000 Net Current Assets 266996

Reserves & Surplus 1052 Miscellaneous Expenditure. 106168

Unsecured Loans 200000 Loss in P & L 46077

Security Deposit 19500

Deferred Tax Liabliity 50

PERFORMANCE OF COMPANy (AMOUNT IN RS.THOUSANDS)

Turnover 4311 Total Expenditure 50079

Profit before tax -45768 Profit after Tax -46994

Earning per share(in Rs) 0.00 Dividend rate % 0

GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANy

Item Code No. (ITC Code). Products Description.

----- Special Purpose Vehicle as per Electricity Act,2003.

(Amount in Rs.)

For A.R. Viswanathan & Co. Chartered Accountants

Sd/-(Venkatachalam)

PartnerMembership No. 19546

Sd/-(D.C.Prabhavathi)

Joint Director(Commercial)PCKL, Bangalore

Sd/-(Tushar Giri Nath, I.A.S.,)

DirectorPCKL, Bangalore

Sd/-(M.Naveen Kumar, IA & AS)

Managing DirectorPCKL, Bangalore

BANGALOREDate : 17-09-2009

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COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF POWER COMPANy OF KARNATAKA LIMITED, BANGALORE FOR THE yEAR ENDED 31 MARCH 2009.

The preparation of financial statement of Power Company of Karnataka Limited, Bangalore for the year ended 31 March 2009 in accordance with the financial reporting framework prescribed under Companies Act, 1956, is the responsibility of the management of the Company. The Statutory Auditors appointed by the Comptroller and Auditor General of India under Section 619(2) of the Companies Act, 1956, are responsible for expressing opinion on these financial statements under Section 227 of the Companies Act, 1956 based on independent audit in accordance with the auditing and assurance standards prescribed by their professional body the Institute of Chartered Accountants of India. This is stated to have been done by them vide their Audit Report dated 17 September 2009.

I, on behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit, under Section 619 (3) (b) of the Companies Act, 1956 of the financial statements of “Power Company of Karnataka Limited, Bangalore” for the year ended 31st March 2009. This supplementary audit has been carried out independently without access to the working papers of the Statutory Auditors and is limited primarily of inquiries of the Statutory Auditors and Company personnel and a selective examination of some of the accounting records. In view of the revisions made in the financial statements by the management, as a result of my audit observations highlighted during supplementary audit as indicated in the Note No.15 of the Notes forming part of Accounts (Schedule 22 B), I have no further comments to offer upon or supplement to the Statutory Auditors’ Report under Section 619(4) of the Companies Act, 1956.

For and on behalf of theComptroller & Auditor General of India

Sd/-(USHA SANKAR)

PRINCIPAL ACCOUNTANT GENERAL(CIVIL & COMMERCIAL AUDIT)

KARNATAKA, BANGALORE

BANGALOREDATED : 25th September 2009

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AUDITOR’S REPORTTo The Members of Power Company of Karnataka Limited

We have audited the attached Balance Sheet of Power Company of Karnataka Limited (herein after called PCKL or the Company) as at 31st March 2009, and the Profit and Loss Account and the cash flow statement for the year ended on that date annexed thereto, in compliance with letter No. CA/V/COY/KARNATAKA,PCKL(1)/843 dated 08/09/2008 u/s 619 (B) read with sub-section 2 of Section 619 of Companies Act. 1956 from the Comptroller & Auditor General of India. Therefore this report on the revised accounts supersedes our earlier report dated 19th August 2009. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

The Company is incorporated as a Special Purpose Vehicle to act as a facilitator to any prospective entrepreneur for establishment of electric power generation / supply units or to do any act in the field of power generation and trading in purchase and sale of electric power and augmentation of power facilities in the state of Karnataka. The Company is governed under the provisions of Electricity Act, 2003 read with the rules and regulations issued there under. The application of this said Act is in consonance with Section 616C of the Companies Act, 1956. Accordingly, the Company has compiled the accounts adopting the principles and policies as enunciated in the Electricity (Supply) Annual Accounting Rules, 1985 to the extent applicable.

For the application of other provisions of the Companies Act. (barring Section 619B and 619(2)-appointment of Auditors and subject to Section 616(C), the Company is a public limited company.

We conducted the audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about, whether the financial statements are free from material misstatement. An audit includes examining on test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditor’s Report) Order 2003, as amended by the Companies (Auditor’s Report) Amendment Order 2004 issued by the Government of India, pursuant to sub-section (4A) of Section 227 of the Companies Act. 1956, we enclose in the annexure a report on matters specified in Para 4 and 5 of the said order.

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We report that :

• We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit.

• In our opinion, proper books of accounts as required by law have been kept by the Company, in so far as it appears from our examination of those books.

• The Balance Sheet, Profit & Loss Account and Cash Flow Statements dealt with by this report are in agreement with the books of accounts.

• In our opinion, the Balance Sheet and Profit & Loss account dealt with by this report comply with the Accounting Standards referred to in sub-section 3C of Section 211 of the Companies Act, 1956 read with accounting policies adopted by the Company under its given operational requirements except in case of AS 15 – Employee Benefits – Contribution towards Pension Fund, Gratuity Fund and Provision towards unutilized portion of leave encashment not being determined on the basis of current actuarial valuation. The consequential effect in this regard on Profit & Loss and Current Liabilities as disclosed in the financial statements, could not be determined. Consequently the same could not been quantified.

• On the basis of the written representation received from the Directors as on 31st March, 2009 and taken on record by Board of Directors, we report that none of the Directors are disqualified as on 31st March 2009 from being appointed as Director in terms of clause (g) of sub-section (1) of Section 274 of Companies Act. 1956.

In the course of our audit, we observe

1. The Company had received from ESCOMs Rs. 20 crores as share application money. The paid up share capital of Rs. 5 lakhs plus the application money is over and above the authorized capital of the company which is Rs. 5 crores only. During the year, the Company has not taken efforts to increase the authorized capital and allot shares to the share deposit holders. Rs. 20 crores was received for the purpose of obtaining license in power trading in the national level by augmenting the stipulated net worth required for this purpose.

2. Vide Government Order EN 138 ppc 2006 Bangalore dated 1st September 2007 the State Power Procurement Co-ordination Cell (SPPCC) was merged with PCKL. The company accordingly has taken over fixed assets of erstwhile SPPCC at the written down value Rs. 10,52,080/- and the liability for the same has been parked as Contribution towards cost of capital assets received from all the five ESCOMs and perhaps KPTCL. However, there is no Government Order or an agreement on take over cost to be classified as Contribution from those entities. In the absence of any order to classify the cost as contribution from those entities and also the confirmation as to take over the Assets from the entities concerned, the company has till date charged and absorbed the applicable depreciation of Rs. 76,872 on the take over assets.

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3. Refer the Significant Accounting Policy No. 6 for application of seed money received from the ESCOMs. No Memorandum of Understanding or an agreement have been entered into with ESCOMs as to the nature and quantum of allocatable expenditure to be made to them. The Company has during this financial year incurred administrative & establishment expenditure of Rs. 2,20,76,386 and allocated / transferred this amount equally to the five ESCOMs.

4. Refer Significant Accounting Policy No. 7 for treatment of Other Income. The Company has accounted Interest on bank deposits of Rs. 42,94,291 as its Income during this financial year. Similarly, the loss suffered in the investments has been treated as Company’s own operational loss and accordingly accounted in the books. Refer Note 4 of Notes forming part of Accounts.

5. Refer to Significant Accounting Policy No.8 for employee benefits: The Company has contributed to employee benefits Rs. 20,40,975 in terms and at the rates as prescribed by the Pension & Gratuity Trust as being applicable to the employees of Karnataka Power Transmission Corporation Limited (the parent organization of the deputed employees to PCKL).

The said contributed amounts have been aggregated and transferred by way of allocation of expenditure to the five ESCOMs. Pension, Gratuity and Earned Leave encashment Funds in respect of PCKL employees on deputation of PCKL are held in the books of parent organization ie., KPTCL.

6. (1) The Company has undertaken the online trading of power in the Indian Energy Exchange on behalf of the ESCOMs. The monetary transactions of this activity are routed through two bank accounts opened in the name of PKCL and the same are accordingly reflected in separate books of accounts. These services are performed by the Company with no remuneration charged or earned for these services. The transactions in this regard were recorded in the transaction books in the sequence as they happened. Consequential liability, if any, arising from corresponding / responding parties resulting in any omission or commission in these transactions on accrual basis, therefore cannot ascertained.

(2) Refer Note 12 and 13 of Notes forming part of accounts. Transactions regarding IEX and high cost power purchases and sales undertaken on behalf of the ESCOMs on no loss and no profit basis have been reflected in the notes and not reflected in financial statement, i.e, P & L a/c. However, the same have been reckoned in the Cash Flow Statement.

7 (1) During the year under report, the Company had received and accounted in its books an amount of Rs. 13.02 crores on realization of investments made in Unit Gain Plus Single Premium non participating Policies with Bajaj Allianz Life Insurance Corporation (BALIC) against original investment of Rs. 18.00 crores made in January, 2008. The realization of investments had resulted in a loss of Rs. 4.98 crores to the Company. The financial results of the Company for the year includes the loss suffered in the investments.

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(2) The loss suffered in the operations made in the investment is net balance arrived at by deducting the value realized from Rs. 18 crores originally invested in BALIC policies. The operations in the investments, seen from the transaction statements made available to audit, had underwent several switching operations done between the Equity Plus and Cash Plus portfolios (policies) of the said BALIC during the period the investments were in vogue.

(3) The subject operations in the investments and alleged unauthorized dealings in the investments is reported as under investigation in departmental proceedings, Pending the outcome of such an investigation. The Company (PCKL) has taken up the alleged mis-dealings on the part of the Insurance Company (BALIC) before the National Consumer Disputes Redressal Commission, New Delhi and the Insurance Regulatory and Development Authority, Hyderabad.

8. The balance in ‘Revenue Deposit’, ‘Loans and Advances’ and ‘Current Liabilities’ are subject to reconciliation and confirmation.

9. The work in progress of Gulbarga project includes Rs. 10 crores deposited for land acquisition with civil authorities.

10. Fixed assets of Rs. 20.22 lakhs (gross) includes assets taken over from erstwhile SPPCC of KPTCL and reported in the accounts as contribution from ESCOMs / KPTCL. The title / ownership to the assets have not been transferred to the Company. The Company has however treated them as a transferred asset and claimed depreciation of Rs. 76,872 till 31st March, 2009. The nature of comments made in paras 1 to 10, does not warrant any quantification of observation for the purpose of assessing impact on the financial results of the Company for the year.

In our opinion and to the best of our knowledge and belief and according to the information and explanations given to us, the said accounts read together with notes thereon give the information required by the Companies Act, 1956, in the manner so required, in conformity with the accounting principles generally accepted in India, subject to paras 1 to 10 above, give a true fair view :

(a) In the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2009;

(b) In the case of Profit and Loss account, of the loss for the year ended as on that date;

(c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Place : Bangalore Date : 17th September, 2009

For A.R. Vishwanathan& Co.,Chartered Accountants

Sd/-(A.V. Venkatachalam)

PartnerMembership No : 19546

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ANNEXURE TO AUDITOR’S REPROT(Referred to in paragraph 5 of our report of even date)

(i)

(a) The Company has maintained proper records showing particulars including quantitative details and situation of fixed assets.

(b) During the year, based on the information and explanation given to us. We report that no substantial part of Fixed Assets has been disposed off by the Company.

(ii) According to information and explanations given to us, the Company does not hold inventory. The question of inventory records being maintained and being physically verified by the management in a phased manner at reasonable intervals at this juncture does not arise.

(iii) According to information and explanation given to us the Company has not taken any loan secured or unsecured from Companies, Firms or other parties listed in the Register maintained under Section 301 of the Companies Act. 1956. Hence, our comment regarding rate of interest and other terms and conditions of any agreement does not arise.

(iv) During the financial year 2008-09, a lapse in internal controls has been reported in the area of investments made by the Company in Bajaj Allianz LIC on the transactions made in the previous year. Based on the information given to us, it is understood that the Officer authorizing the transaction has acted without proper authority resulting in a loss of Rs. 4.98 crores to the Company. However, during the course of our audit, we have not observed any other continuing failure to correct major weaknesses in the internal control system.

(v) According to the information and explanations given to us, there are no transactions made in pursuance of contracts or arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956. Hence, our comments regarding the reasonableness of pricing of transactions involved in such contracts and arrangements does not arise. There are however, some transactions undertaken by the Company on behalf of the ESCOMs like power purchase and sales to the ESCOMs done with no remunerations charged and taken credit in the Company’s account.

(vi) The Company has not accepted any deposits from the public during the year, under Section 58(A) and 58(AA) of the Companies Act, 1956. Further, the Company is not in receipt of any orders, in this regard from the Company Law Board. During the year the company has received Rs. 20 crores from Government of Karnataka as refundable unsecured loan without any financial charges stipulated on it.

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(vii) Since the paid up capital and free reserves of the Company does not exceed Rs. 50.00 lakhs as at the commencement of the financial year 2008-09, it need not have a regular internal audit system. However, considering the nature of power projects initiated and embarked upon the company, the company should develop an effective internal audit system.

(viii) The Company as reported to us has not been brought under the purview of “The Cost Accounting Records (Electricity Industry) Rules, 2001”.

(ix) (a) The unit is generally regular in depositing undisputed statutory dues including Provident Fund, Sales Tax, Cess and any other statutory dues.

(b) According to the information and explanations given to us there are no dues of Sales Tax, Wealth Tax and Cess, which have not been deposited on account of any dispute.

(x) Since the company has been registered for a period of less than five years, this clause on accumulated losses as at the end of the year and the incurrence of cash losses during the current and preceding financial year is not applicable.

(xi) In our opinion and according to information and explanations given to us. The Company has not defaulted in repayment of its dues to Banks, and financial institutions.

(xii) According to the information and explanations given to us, the company has not granted loans and advances on the basis security by way of pledge on shares debentures.

(xiii) The Company is not a Chit fund, Nidhi or Mutual Benefit Trust/Society. Accordingly, the provisions of the para 4 (xiii) of the Companies (Auditor’s Report) Order, 2003 do not apply.

(xiv) According to information given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of the para 4(xiv) of the Companies (Auditor’s Report) Order, 2003 do not apply.

(xv) According to information given to us, the Company has not given any guarantee for the loans taken by others from Banks or financial institutions.

(xvi) In our opinion and according to information and explanations given to us, the Company has not availed any term loans, hence the question of application of funds for the purpose for which they were obtained, does not arise.

(xvii) According to information and explanations given to us, the Company has not obtained any loan on short-term basis excepting the loan taken from the Government of Karnataka for the specific purpose of land acquisition for the projects. Hence, the question of any short term borrowing being applied for long term investment does not arise.

(xviii) According to information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

16


(xix) The Company has not issued any debentures. Hence, the point of creating security in respect of debentures issued does not arise.

(xx) According to information and explanations given to us, the Company has not raised any money from public issues during the year.

(xxi) On the basis of verification of records and information and explanations produced to us, we report that action is being initiated on the alleged irregularities & fraud committed in the investment portfolio transactions which has resulted in a loss of Rs. 4.98 crores to the Company for which departmental proceeding have been initiated against an ex-director of the Company.

Place : Bangalore Date : 17th September, 2009

For A.R. Vishwanathan& Co.,Chartered Accountants


PartnerMembership No : 19546

17


Addendum to Directors’ report for the period ended 31st march 2009

Sl no Observation of Statutory Auditor Management’s Reply1. The Company had received from ESCOMs

Rs. 20 crores as share application money. The paid up share capital of Rs. 5 lakhs plus the application money is over and above the authorized capital of the company which is Rs. 5 crores only. During the year, the Company has not taken efforts to increase the authorized capital and allot shares to the share deposit holders. Rs. 20 crores was received for the purpose of obtaining license in power trading in the national level by augmenting the stipulated net worth required for this purpose.

As per the advise of Statutory Auditors & Resident Audit it was accounted under Share Deposit pending allotment. Further, a Note was floated for increasing of share capital. The process of increase of the Authorised Capital and allotment of shares to the share deposit holders is under progress.

2. Vide Government Order EN 138 ppc 2006 Bangalore dated 1st September 2007 the State Power Procurement Co-ordination Cell (SPPCC) was merged with PCKL. The company accordingly has taken over fixed assets or erstwhile SPPCC at the written down value Rs. 10,52,080/- and the liability for the same has been parked as Contribution towards cost of capital assets received from all the five ESCOMs and perhaps KPTCL. However, there is no Government Order or an agreement on take over cost to be classified as Contribution from those entities. In the absence of any order to classify the cost as contribution from those entities and also the confirmation as to take over the Assets from the entities concerned, the company has till date charged and absorbed the applicable depreciation of Rs. 76,872 on the take over assets.

As per the Government Order EN 138 ppc 2006 Bangalore, dated 1st September 2007 the State Power procurement Co-ordination Cell (SPPCC) was merged with PCKL. Accordingly, Fixed Assets of erstwhile i.e, SPPCC was also taken over by PCKL and necessary entries incorporated in Accounts. Charging of depreciation is in order.

18


3. Refer the Significant Accounting Policy No. 6 for application of seed money received from the ESCOMs. No Memorandum of Understanding or an agreement have been entered into with ESCOMs as to the nature and quantum of allocatable expenditure to be made to them. The Company has during this financial year incurred administrative & establishment expenditure of Rs. 2,20,76,386 and allocated / transferred this amount equally to the five ESCOMs.

As per the policy adopted by the Company the Revenue Expenditure is allocated/transferred equally among ESCOMs which has also been accepted by all the ESCOMs and required confirmation has also been received in this regard from respective ESCOMs/

4 Refer Significant Accounting Policy No. 7 for treatment of Other Income. The Company has accounted Interest on bank deposits of Rs. 42,94,291 as its Income during this financial year. Similarly, the loss suffered in the investments has been treated as Company’s own operational loss and accordingly accounted in the books. Refer Note 4 of Notes forming part of Accounts.

Factual.

5 Refer to Significant Accounting Policy No.8 for employee benefits: The Company has contributed to employee benefits Rs. 20,40,975 in terms and at the rates as prescribed by the Pension & Gratuity Trust as being applicable to the employees of Karnataka Power Transmission Corporation Limited (the parent organization of the deputed employees to PCKL). The said contributed amounts have been aggregated and transferred by way of allocation of expenditure to the five ESCOMs. Pension, Gratuity and Earned Leave encashment Funds in respect of PCKL employees on deputation of PCKL are held in the books of parent organization ie., KPTCL.

Factual.

No funds on this account is maintained in the KPTCL, KPTCL & ESCOMs Pension and Gratuity Trust is maintaining the said Account.

19


6 (1) The Company has undertaken the online trading of power in the Indian Energy Exchange on behalf of the ESCOMs. The monetary transactions of this activity are routed through two bank accounts opened in the name of PKCL and the same are accordingly reflected in separate books of accounts. These services are performed by the Company with no remuneration charged or earned for these services. The transactions in this regard were recorded in the transaction books in the sequence as they happened. Consequential liability, if any, arising from corresponding / responding parties resulting in any omission or commission in these transactions on accrual basis, therefore cannot ascertained.(2) Refer Note 12 and 13 of Notes forming part of accounts. Transactions regarding IEX and high cost power purchases and sales undertaken on behalf of the ESCOMs on no loss and no profit basis have been reflected in the notes and not reflected in financial statement, i.e, P & L a/c. However, the same have been reckoned in the Cash Flow Statement.

The details of transactions regarding IEX and high cost power purchases and sales undertaken on behalf of ESCOMs are brought in Notes to Accounts. However, the balance amount held on Current A/c of IEX transactions and high cost power purchase are depicted in Balance Sheet separately.

Factual

7 (1) During the year under report, the Company had received and accounted in its books an amount of Rs. 13.02 crores on realization of investments made in Unit Gain Plus Single Premium non participating Policies with Bajaj Allianz Life Insurance Corporation (BALIC) against original investment of Rs. 18.00 crores made in January, 2008. The realization of investments had resulted in a loss of Rs. 4.98 crores to the Company. The financial results of the Company for the year includes the loss suffered in the investments.

Factual

20


Sd/-(D.C. Prabhavathi)

Joint Director (Commercial)PCKL, Bangalore.

(2) The loss suffered in the operations made in the investment is net balance arrived at by deducting the value realized from Rs. 18 crores originally invested in BALIC policies. The operations in the investments, seen from the transaction statements made available to audit, had underwent several switching operations done between the Equity Plus and Cash Plus portfolios (policies) of the said BALIC during the period the investments were in vogue.(3) The subject operations in the investments and alleged unauthorized dealings in the investments is reported as under investigation in departmental proceedings, Pending the outcome of such an investigation. The Company (PCKL) has taken up the alleged mis-dealings on the part of the Insurance Company (BALIC) before the National Consumer Disputes Redressal Commission, New Delhi and the Insurance Regulatory and Development Authority, Hyderabad.

Factual

Besides, criminal complaints have also been lodged against officers of BALIC & the then Director (Commerical), PCKL.

8 The balance in ‘Revenue Deposit’, ‘Loans and Advances’ and ‘Current Liabilities’ are subject to reconciliation and confirmation.

Respective schedules are maintained. The same has been reconciled and verified.

9 The work in progress of Gulbarga project includes Rs. 10 crores deposited for land acquisition with civil authorities.

Factual

10 Fixed assets of Rs. 20.22 lakhs (gross) includes assets taken over from erstwhile SPPCC of KPTCL and reported in the accounts as contribution from ESCOMs / KPTCL. The title / ownership to the assets have not been transferred to the Company. The Company has however treated them as a transferred asset and claimed depreciation of Rs. 76,872 till 31st March, 2009.

Factual

21


BALANCE SHEET AS AT 31ST MARCH 2009Sl. No.

Particulars Sch No

Account Code

As At 31.03.2009 As At 31.03.2008

I SOURCES OF FUNDS :-

1 Share holders Funds

Share Capital 1 52.301 5 00 000 5 00 000

Share Deposit 1A 52.308 to 52.312

20 00 00 000 20 00 00 000

Reserves and Surplus 2 55.112 10 52 080 19 68 548

20 15 52 080 20 24 68 548

2 Unsecured Loans 3 46.936 & 46.437

20 00 00 000

3 Other Funds

Security Deposits 4 47 & 48 1 94 99 847 4 15 76 233

4 Deferred Tax Liability 4A 46.802 49 897 49 897

TOTAL 42 11 01 824 24 40 94 678

II APPLICATION OF FUNDS :-

1 Fixed Assets 5 10 & 12

(a) Gross Block 20 21 685 11 24 000

(b) Less: Depreciation 1 60 751 51 761

18 60 934 10 72 239

2 Investments 6 20 & 28 - Nil - 18 00 00 000

3 Current Assets

(a) Interest accrued on Inv. & Deposits 7 28.210 4 63 376 5 28 808

(b) Cash and Bank balances 8 20 & 24 31 80 42 247 7 80 00 985

(c) Loans and Advances 9 25 to 27 & 28

2 98 41 982 25 44 500

(d) Other Assets 10 28.4 to 28.9

5 736 - Nil -

34 83 53 341 8 10 74 293

Less:- Current Liabilities & Provisions 11 40 to 55 8 13 57 521 2 02 86 590

Net Current Assets 26 69 95 820 6 07 87 703

4 Miscellaneous Expenditure ( to the extent not written off pertaining to start-up cost of projects pending transfer to prospective bidders)

12 19 10 61 68 014 22 34 736

5 Loss in Profit & Loss Account 2 58 4 60 77 055 4 60 77 055

TOTAL 42 11 01 824 24 40 94 678

Significant Accounting Polices and Notes to Accounts form part of the Balance sheet

22

(Amount in Rs.)


Sd/-(Venkatachalam)

PartnerMembership No. 19546 (D.C.Prabhavathi)


(Tushar Giri Nath, I.A.S.,)Director

PCKL, Bangalore


PCKL, BangaloreBANGALOREDate : 17-09-2009

Sd/- Sd/- Sd/-

22


PROFIT AND LOSS ACCOUNT AS AT 31ST MARCH 2009

SL. NO.

PARTICULARS SCH. NO

ACCOUNT CODE

CURRENT yEAR 2008-09

PREVIOUS yEAR 2007-08

I INCOME

1 Other Income 13 62 43 10 633 16 07 570

TOTAL 43 10 633 16 07 570

II EXPENDITURE

1 Repairs and Maintenance 14 74 3 25 683 28 937

2 Employee Cost 15 75 1 40 66 901 43 76 356

3 Administrative and Other Expenses 16 76 77 63 053 38 07 107

4 Other Expenses 17 79 4 98 23 580 4 02 161

5 Less: Revenue expenditure allocation to ESCOMs

18 61 2 20 76 386 85 67 267

SUB-TOTAL 4 99 02 831 47 294

TOTAL 4 99 02 831 47 294

III PROFIT(+)/LOSS(-) BEFORE DEPRECIATION AND INTEREST

-4 55 92 198 15 60 276

1 Less: Depreciation (Net) 19 77 1 08 990 51 761

IV PROFIT(+)/LOSS(-) BEFORE INTEREST AND TAXES

-4 57 01 188 15 08 515

1 Add:Interest and other Bank Charges 20 78 & 80 66 587 150

V PROFIT(+)/LOSS(-) BEFORE TAX -4 57 67 775 15 08 365

1 Provision for Taxation - Current Tax 21 81.1 11 00 000 5 00 0002 Fringe Benefit Tax 81.101 1 25 748 42 000

3 Deferred Tax 81.201 49 897

VI NET PROFIT(+)/LOSS(-) AFTER TAXATION

-4 69 93 523 9 16 468

NET PROFIT(+)/LOSS(-)

Balance of profit brought over from Previous years

9 16 468

Balance carried over -4 60 77 055

VII APPROPRIATIONS - Nil -

Balance Carried to Balance Sheet -4 60 77 055

Significant Accounting Polices and Notes to Accounts forming part of the Profit and Loss Account

22

(Amount in Rs.)


Sd/-(Venkatachalam)


(D.C.Prabhavathi)Joint Director(Commercial)

PCKL, Bangalore

(Tushar Giri Nath, I.A.S.,)Director

PCKL, Bangalore


PCKL, Bangalore


Sd/- Sd/- Sd/-

23


SCHEDULE : 01 SHARE CAPITAL

SL. NO

PARTICULARS ACCOUNT CODE

CURRENT yEAR 2008-09 PREVIOUS yEAR 2007-08

1 Authorised Capital Rs.5.00 Crores in the form of 50000 shares of Rs.1000 each vide G.O.No.EN 138 PPC 2006, Bangalore dated 12.7.2007.

5 00 00 000 5 00 00 000

2 Issued, Subscribed and Paid up :- Rs.1.00 Lakh towards equity share capital of the proposed new company as noted below: (a) One equity share of Rs.1000/- on behalf of Principal Secretary, Energy Department. (b) One equity share of Rs.1000/- on behalf of Managing Director, KPTCL. (c) 98 equity shares of Rs.1000/- each on behalf of respective Escoms.

52.30152.30252.30352.30452.30552.30652.307

5 000 5 000

98 000 98 000 98 000 98 000 98 000

5 00 000

5 000 5 000

98 000 98 000 98 000 98 000 98 000

5 00 000

TOTAL 5 00 000 5 00 000

SCHEDULE : 1A SHARE DEPOSIT PENDING ALLOTMENT

SL. NO



1 Share Deposit pending allotment BESCOM

52.308 10 00 00 000 10 00 00 000

2 Share Deposit pending allotment MESCOM

52.309 2 50 00 000 2 50 00 000

3 Share Deposit pending allotment CESC

52.310 2 50 00 000 2 50 00 000

4 Share Deposit pending allotment HESCOM

52.311 2 50 00 000 2 50 00 000

5 Share Deposit pending allotment GESCOM

52.312 2 50 00 000 2 50 00 000

TOTAL 20 00 00 000 20 00 00 000

(Amount in Rs.)

(Amount in Rs.)

24


SCHEDULE : 02 RESERVES AND SURPLUS

SL. NO



Profit & Loss Account:

1 Surplus in Profit and Loss Account (Previous Year)

58 9 16 468 9 16 468

2 Deficit in Profit and Loss Account

58 -4 69 93 523

TOTAL -4 60 77 055

3 Contribution towards cost of capital assets received from all the five ESCOMs

55.112 10 52 080 10 52 080

TOTAL -4 50 24 975 19 68 548

Annexure to Schedule 02 - Reserves and surplus

Particulars ACCOUNT CODE

Opening Balance

Additions Deletions Balance as at 31.03.2009

1 Deficit in Profit and Loss Account

58 9 16 468 -4 69 93 523 -4 60 77 055

TOTAL 9 16 468 -4 69 93 523 -4 60 77 055

(Amount in Rs.)

(Amount in Rs.)

25


SCHEDULE : 03 UNSECURED LOANS

SL. NO



1 Deposit received from Govt. towards Land Acquisition - Jewargi

46.936 10 00 00 000

2 Deposit received from Govt. towards Land Acquisition - Kudugi

46.937 10 00 00 000

TOTAL 20 00 00 000

SCHEDULE : 04 DEPOSITS FROM ESCOMS

SL. NO



1 Seed Money received from Five ESCOMs to meet revenue expenditure of PCKL :-

47.3

BESCOM 47.315 42 66 226 86 81 546

MESCOM 47.316 39 19 744 83 35 047

CESC 47.317 37 71 262 81 86 545

HESCOM 47.318 37 71 288 81 86 547

GESCOM 47.319 37 71 327 81 86 548

TOTAL 1 94 99 847 4 15 76 233

SCHEDULE : 04A DEFERRED TAX LIABILITy

SL. NO



1 Deferred Tax Liability 46.802 49 897 49 897

TOTAL 49 897 49 897

(Amount in Rs.)

(Amount in Rs.)

(Amount in Rs.)

26


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27


SCHEDULE : 06 INVESTMENTS

SL. NO



1 Investment with Bajaj Alliance

20.280 - Nil - 18 00 00 000

TOTAL - Nil - 18 00 00 000

SCHEDULE : 07 INTEREST ACCRUED ON DEPOSITS

SL. NO



1 Accrued and due on Deposits 28.210 4 63 376 5 28 808

TOTAL 4 63 376 5 28 808

SCHEDULE 8 : CASH AND BANK BALANCES

SL. NO



1 Cash Imprest with Staff – Accounts :-

Imprest 24.209 & 210

20 000 20 000

Cash on Hand 24.110 2 500

2 Disbursement Bank Account

Disbursement Bank Account - State Bank of Mysore

24.401 15 04 34 659 49 80 985

Fixed Deposit with State Bank of Mysore

28.958 14 70 00 000 7 30 00 000

HDFC-IEX-Bank Account (for IEX Transction)

24.701 2 05 85 088

TOTAL 31 80 42 247 7 80 00 985

(Amount in Rs.)

(Amount in Rs.)

(Amount in Rs.)

28


SCHEDULE 9 : CURRENT ASSETS

SL. NO



1 Interest free (Advance of TA, FA & Advance to staff against staff)

27.202, 203 & 205

95 800 44 500

2 Security Deposit with M/s. IEX

26.101 25 00 000 25 00 000

3 Interest Free (Advance to Contractors)

26.602 5 23 350

4 Income Tax paid in Advance 28.821 4 16 188

5 Fringe Benefit Tax paid in advance

28.845 25 900

6 Prepaid Expenses 28.820 1 08 474

7 Receivable towards power purchase through IEX - MESCOM

28.895 20 39 383

8 Receivable towards power purchase through IEX - HESCOM

28.897 1 31 53 084

9 Receivable towards power purchase through IEX - GESCOM

28.898 1 09 79 803

TOTAL 2 98 41 982 25 44 500

SCHEDULE 10 : OTHER ASSETS

SL. NO



1 Amount Recoverable from Employees

28.401 736 - Nil -

Other Claims:-

2 Deposit with others 28.935 5 000 - Nil -

TOTAL 5 736 - Nil -

(Amount in Rs.)

(Amount in Rs.)

29


SCHEDULE 11 : CURRENT LIABILITIES & PROVISIONS

SL. NO



1 Provision for Pension and Gratuity payable to P&G Trust

44.275 1 82 745 5 92 197

2 Staff Related Liabilities :-

Salary payable 44.310 100

Ex-Gratia payable 44.330 93 336 98 000

Bonus Payable 44.320 3 500

3 Other Liabilities and Provisions :-

Liability for Expenses 46.430 6 46 062 2 15 040

Income Tax payable [Contractors]

46.925 610

Provision for Sales Tax for VAT Tax

46.951 3 17 692

Security Deposit 46.101 13 76 269 15 90 842

Provision for Income Tax 46.800 16 00 000 5 00 000

Fringe Tax 46.801 1 67 748 42 000

Professional Tax 46.952 2 500

Reactive Energy Charges payable to KPTCL

46.432 21 63 403 54 02 538

Reactive Energy Charges payable to ESCOMs

46.433 21 477 45 65 383

Stale Cheques 46.910 72 592

Payable towards high cost power purchase charges-MESCOM

46.959 7 55 028

Payable towards high cost power purchase charges - HESCOM

46.960 71 45 691

Payable towards high cost power purchase charges- CESC

46.961 72 19 505

Payable towards high cost power purchase charges-GESCOM

46.962 53 56 196

Amount received from sale of bid document to be passed on to Chamalpura

47.936 11 53 846 11 53 846

Amount received from sale of bid document to be passed on to Ghataprabha

47.937 13 94 231 13 94 231

(Amount in Rs.)

30


Amount received from sale of bid document to be passed on to Jewargi

47.938 12 05 283 12 01 923

Amount received from Sale of documents to be passed on to respective projects [1000MW]

47.939


47.940 11 07 075 11 22 798


47.941 18 98 643 19 11 258

Amount received from Sale of documents to be passed on to respective projects - UMPP

47.942 10 000

Payable towards power purchase through IEX - BESCOM

28.894 3 24 28 999

Payable towards power purchase through IEX - CESC

28.896 1 43 28 360

Sub Total 8 03 29 989 2 01 10 958

4 Provisions :-

Leave Encashment 44.130 8 82 182 1 08 082

Family Benefit Fund 44.143 1 45 350 67 550

Sub-Total 10 27 532 1 75 632

TOTAL 8 13 57 521 2 02 86 590

(Amount in Rs.)

31


SCHEDULE 12 : PROJECT SPECIFIC (UNDER CASE II) MISCELLANEOUS EXPENDITURE

SL. NO



1 Miscellaneous expenditure on survey / feasibility studies of Chamalapura,Mysore, power projects pending transfer to prospective bidders

19.301 9 43 955 7 43 955

2 Miscellaneous expenditure on survey / feasibility studies of Ghataprabha, Belgaum power projects pending transfer to prospective bidders

19.302 14 64 824 7 46 826

3 Miscellaneous expenditure on survey / feasibility studies of Jewargi, Gulbarga power projects pending transfer to prospective bidders

19.303 10 27 55 361 7 43 955

4 Ultra Mega Power Project 19.304 10 03 874

TOTAL 10 61 68 014 22 34 736

SCHEDULE : 13 OTHER INCOME

SL. NO



1 Other Income - Interest :-

Interest on Bank Fixed Deposits

62.222 42 94 291 14 45 819

2 Other Income :-

Other Miscellaneous Receipts 62.917 3 374 1 61 751

Excess provision made in earlier years no longer required

62.923 12 968

TOTAL 43 10 633 16 07 570

(Amount in Rs.)

(Amount in Rs.)

32


SCHEDULE : 15 EMPLOyEE COST

SL. NO



1 Salaries 75.115 42 89 758 13 89 403

2 Dearness Pay 75.185 30 30 029 10 20 789

3 Dearness Allowance 75.315 19 70 893 5 42 297

4 Other Allowances 75.415 1 07 675 10 002

5 HRA Regular Employees 75.420 10 95 100 3 70 120

6 CCA 75.425 92 727 35 923

7 Exgratia 75.530 93 336 98 000

8 Bonus 75.510 3 500

Sub-Total 1 06 83 018 34 66 534

9 Medical Expenses Reimbursement

75.611 94 601 1 53 593

10 Leave Travel Assistance 75.612 10 013

11 Earned Leave Encashment 75.617 8 82 182 1 45 790

Sub-Total 9 86 796 2 99 383

12 Staff Welfare Expenses 75.763 48 42

13 Recreation Expenses 75.750 18 000

14 Fees for staff training courses held by outsiders

75.761 24 000

15 Pension & Grauity Contribution on Employees on Deputation

75.890 20 16 544 5 92 197

16 PCKL Employer Contribution to P&G Trust under (CPS) New defined Pension Scheme.

75.831 24 431 18 200

Sub-Total 20 83 023 6 10 439

TOTAL 1 37 52 837 43 76 356

17 Prior period charges transferred to Escoms

Prior Period Expenses 83.000 3 14 064.00 - Nil -

TOTAL 1 40 66 901 43 76 356

SCHEDULE : 14 REPAIRS AND MAINTENANCE

SL. NO



1 Office Equipments. 74.510 & 877

3 25 683 28 937

TOTAL 3 25 683 28 937

(Amount in Rs.)

(Amount in Rs.)

33


SCHEDULE : 16 ADMINISTRATION AND GENERAL EXPENSES

SL. NO



1 Administration Expenses :-

Pagers cellular phones E-mail, Telephone, Trunk call,

76.112 1 21 908 56 900

Postage 76.113 67 135 39 376

Mobile Charges 76.114 2 37 915 39 778

Revenue Receipts Stamps 76.115 645 12 565

Legal Charges 76.121 5 150 19 056

Consultancy Charges [PRDC] 76.123 2 45 410

Other Professional Charges 76.125 63 653 89 559

Audit Fees - Statutory Audit 76.122 60 665 44 944

Company Professional Tax 76.192 2 500 2 500

Remuneration paid to contract agencies/services obtained

76.129 4 08 085

Conveyance & Travel Expenses

76.131 To 76.135 & 76.137 to

76.139

24 90 998 3 67 366

Sub - Total 34 58 654 9 17 454

2 OTHER EXPENSES

Fees & Subscriptions 76.151 4 425 26 10 000

Books, periodicals and dairies 76.152 15 939 5 100

Printing & Stationery 76.153 3 11 122 1 30 202

Advertisement Expenses 76.155 36 28 492

Computer stationary and Floppies

76.156 26 442 5 134

Miscellaneous expenses 76.190 3 17 979 1 39 217

Sub - Total 43 04 399 28 89 653

TOTAL 77 63 053 38 07 107

(Amount in Rs.)

34


SCHEDULE : 17 OTHER EXPENSES

SL. NO



1 Other Expenses [Prelimiary Expenses incurred for formation of PCKL ]

79.730 - Nil - 402161

2 Loss on Investment due to surrender of policy

79.574 4 98 23 580

T O T A L 4 98 23 580 4 02 161

SCHEDULE : 18 REVENUE EXPENDITURE ALLOCATED TO ESCOMS

SL. NO



1 Revenue Receipts from ESCOMs

61.906 2 20 76 386 85 67 267

TOTAL 2 20 76 386 85 67 267

SCHEDULE : 19 DEPRECIATION

SL. NO



1 Depreciation on Furniture & Fixtures

77.180 11 894 4833

2 Depreciation on Office Equipments

77.190 97 096 46928

TOTAL 1 08 990 51 761

SCHEDULE : 20 - INTEREST AND OTHER CHARGES

SL. NO



1 Bank Charges 78.883 75 150

2 Other Interest & Finance Charges

78.820 66 512

TOTAL 66 587 150

(Amount in Rs.)

(Amount in Rs.)

(Amount in Rs.)

(Amount in Rs.)

35


SCHEDULE : 21 PROVISION FOR TAXATION

SL. NO



1 Income Tax - Current year 81.100 11 00 000 5 00 000

2 Fringe Benefit Tax 81.101 1 25 748 42 000

3 Deferred Tax 81.201 49 897

TOTAL 12 25 748 5 91 897

(Amount in Rs.)

36


SCHEDULE 22: Significant Accounting Policies and Notes forming part of the Accounts:-

A. Significant of Accounting Policies :-

1. Method of Accounting:- The Financial Statements are prepared under Historical Cost Convention, in accordance with provisions of the Companies Act, 1956. All income and expenditure having a material bearing on the financial statements are recognized on accrual basis.

2. Capital works in Progress :- Power Company of Karnataka Limited does not come across for commissioning of any project works on its own. However the expenses pertaining to establishment of 1000 MWs Coal based power projects on BOO basis are first charged as Capital works in Progress on refundable basis from the successful bidder of the respective power projects. The interest and finance charges payable up to the date of commissioning of power projects, on loans obtained for the projects, such expenses are also to be as the incidental expenses and maintained separately to transfer to capital works in progress.

3. Fixed Assets:- The furniture and fixture and other office equipments/assets are accounted at stated as cost of acquisition less accumulated depreciation.

4. Depreciation:-

a) The depreciation on all assets is provided on straight line method up to 90% of the original cost as per Electricity supply (Act) 1948, at the rates notified in the Notifications issued by CERC, instead of 95% of the original cost as per companies Act 1956.

b) Depreciation is provided from the beginning of the month during which the asset is acquired /commissioned and up to the end of the month immediately preceding the date of de-commission /scrap of asset.

5. Investments:- Long term Investments are valued at cost less provision for permanent diminution in value of such investments. Current investments are to be carried at lower of cost or fair value. Loss on sale of investment are charged off in the Profit & Loss of the company and absorbed by yet.

6. Allocation of Expenditure:- Allocation of revenue expenditure of a company will be equally transferred among the five distribution companies of Karnataka excluding the cost of depreciation on fixed assets.

7. Interest on Deposits:- The interest on short term deposits is to be accounted separately and treated as PCKL income.

8. Contribution towards Pension and Gratuity:- The monthly Employer contribution

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towards Pension and Gratuity in respect of Employees working in PCKL on deputation from KPTCL is remitted to Pension Trust. Similarly the monthly employee and employer contribution in respect of the Officers / Employees appointed on or after 01.04.2006 by KPTCL and deputed to PCKL, who are coming under new defined contribution pension scheme is also remitted to Pension Trust.

The rates prevailing and at which Pension & Gratuity contribution is being remitted to Pension & Gratuity trust is as detailed below.a) The employees who are appointed prior to 01.04.2006 and deputed to PCKL from KPTCL

i) Pension Contribution is 21% on basic and DA of the employee.ii) Gratuity Contribution is 1.77% on basic pay of the employee.

b) The employees who are appointed on or after 01.04.2006 and deputed to PCKL from KPTCL

Under New Defined Contribution Pension Scheme: Contributioni) Employee Contribution is at 10% on Basic Pay +DA +Dearness Pay and ii) Employer Contribution is at 10% on Basic Pay + DA +Dearness Pay.

The Company provides for the Earned Leave Encashment at 1/12th of the Salary and Wages debited to Profit & Loss Account of that Financial Year. No provision is made in respect of unutilized portion of earned leave standing to the credit of employees as on 31.03.2009.

9. Miscellaneous Receipts :- Amount received towards miscellaneous receipts such as sale of bid documents, tender fees etc., are accounted separately and treated as income of PCKL excluding the income received towards case–1 and case–2 power projects. The Income related to power projects under case - 2 are set apart as to transfer to capital works in progress whereas income related to case-1 power projects will be set of against its expenditure. In case the expenditure of case-1 power projects increases over and above the income of the projects, after adjusting the income the balance expenditure will be passed on to ESCOMs. The income and expenditure relating to PPAs till the finalization are accounted as PPA account and reflected accordingly in the balance sheet.

10. Chart of Accounts:- In order to maintain the various transactions of PCKL in consistent with the accounting principles/policies brought in the above para, the chart of accounts are drawn as per Electricity Supply Annual Accounts rules 1985, Government of India.

11. Impairment of Assets:- At each Balance Sheet date, carrying amounts of Tangible & Intangible Assets are reviewed to ascertain if there is any indication of assets having suffer impairment losses. If any such indication exits, the recoverable amount of such asset is estimated to determine the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash generating unit to which the asset belongs.

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12. Taxation:- Income Tax expense comprises current tax and deferred tax charge or credit. The deferred tax asset and deferred tax liability is calculated by applying tax laws rate that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets arises mainly on account of brought forward losses and unabsorbed depreciation under tax laws are recognized only if there is a virtual certainty of its realization supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization at each balance sheet date the carrying amount of deferred assets are reviewed to reassure realization.

B. Notes to Accounts :-

1. Accounting of initial authorized capital of Rs. 5 crores to be subscribed by five ESCOMs.

a) Out of Rs. 5 crores a sum of Rs. 5 lakhs being the paid up capital of the company subscribed by Five ESCOMs is accounted as shown in schedule - 1.

Sl. No. Details of Share holding No. of Equity share of Rs.

1000/- per share

1 Additional Chief Secretary to Government, Government of Karnataka, Energy Department

5 Shares

2 Managing Director, KPTCL 5 Shares

3 Managing Director, BESCOM 98 shares

4 Managing Director, MESCOM 98 shares

5 Managing Director, GESCOM 98 shares

6 Managing Director, HESCOM 98 shares

7 Managing Director, CESC 98 shares

b) The balance of Rs. 4.95 crores paid by five ESCOMs at the rate of Rs. 99 lakhs each towards seed money of Power Company of Karnataka Limited is treated as working capital and applied the same for revenue expenditure of the Company. Further, the PCKL has no liability to make payment towards interest on the seed money collected from five ESCOMs. After transfer of allocated expenditure to the ESCOMs the balances in their accounts are reflected in the books.

2. Seed Money received from ESCOMs:- The balance in respect of seed money shown in the accounts are subject to confirmation and reconciliation with the ESCOMs.

3. Share Deposit:- Rs. 20 crores collected from five ESCOMs towards net worth of Power Company of Karnataka Limited is accounted as Share Deposit pending allotment.

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4. Investments:- Rs. 18 crores invested in Bajaj Allianz Unit Gain (SP) was surrendered on 28.3.2009 and the net loss incurred in the investment due to value erosion of Rs. 4,98,23,580.00 debited to Profit & Loss Account and treated as the Company’s Loss. To realize the principal amount of investment, PCKL has filed petition against M/s. Bajaj Allianz Insurance Company Ltd., before the National Consumer Disputes Redressel Commission, New Delhi vide Complaint NO.73/2009 on 7.5.2009 and filed a complaint on 12.5.2009 before the Insurance Regulatory and Development Authority, Hyderabad, against the practices followed by BALIC. In the event of the loss amount being recovered at a later date, the same will be set off against the Capital loss for the purpose of income tax assessment proceedings in the year of receipt.

5. Fixed Assets: The value of fixed assets such as furniture and fixtures and other office equipments taken over from the State Power Procurement Co-ordination Centre and Power Company of Karnataka Limited are depicted in the accounts.

A: - Assets purchased by SPPCC during the period from 10.06.2005 to 31.10.2007 and taken over by PCKL as on 16.10.2007.

Sl. No. Particulars Amount in Rs

1 10.572 : Communication Equipment Telephone lines / Telephones

60360.00

2 10.573 : Communication Equipment Mobile Phones 63592.00

3 10.578 : Computers and Peripherals 555689.00

4 10.8 : Furniture & Fixtures 104814.00

5 10.904 : Duplicators/Xerox/Copiers 267625.00

Total 1052080.00

B: - Assets purchased by PCKL during the year i.e. from 1.4.2008 to 31.3.2009.

Sl. No. Particulars Amount in Rs.

1 10.8 : Furniture & Fixtures 88564.00

2 10.573 : Communication Equipment - Mobile Phones 83024.00

3 10.578 : Computers and Peripherals 597081.00

4 10.904 : Duplicators/Xerox/Copiers 129016.00

Total 897685.00

6. Depreciation:- Depreciation earned during the Financial Year 2008-09 and booked under revenue expenditure is not transferred to ESCOMs along with the other revenue expenditure of the company. Details are shown in Schedule - 5. Depreciation for the assets Rs.5000.00 and below will be at 100% in the year in which they are put to use.

7. Expenditure towards Power Project works:- In respect of establishing of 1000MWs coal based power projects at Chamalapura in Mysore district

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Ghataprabha in Belgaum district and Jewargi in Gulbarga district the consultancy services have been engaged for processing of bid documents, Geo-technical feasibility, Environment impact and Topographical Studies. The expenses towards consultancy services, related general expenses and other incidental expenses there on are charged to these projects on refundable basis from the successful bidder of the respective power projects. The Expenditure to be recoverable from the above said pending projects (pending sanction) are detailed in Schedule – 12.

8. Accounting of Revenue Expenditure:- Revenue expenditure incurred from the date of commencement of business activity of PCKL is primarily accounted in accordance with the nature of expenses. Further the start-up expenses incurred towards proposed coal based power projects at Chamalapura, Ghataprabha and Jewargi have been segregated and accounted separately.

9. Unsecured Loans:- In terms of Government of Karnataka Order No. EN 128 PPC 2008, Bangalore. dated 18.12.2008 a sum of Rs. 10 Crores towards UMPP at Kudugi and Order No. EN 126 PPC 2008, Bangalore. dated:12.01.2009 Rs. 10 Crores towards 1320MWs Power Project at Jewargi in Gulbarga district aggregating Rs.20 Crores towards Land Acquisition for these projects have been received and taken as loans from Government and no interest / finance charges applied on them, in the absence of any stipulation in this regard in the Government orders.

10 Disclosure regarding Micro, Small and Medium Enterprises Development Act:- Based on the information received from the enterprises from which the company has procured goods and services, there are no enterprises in the company’s books which have registered or qualified to be registered under Micro, Small and Medium Enterprises Act, 2006(MSME Act). Hence no disclosure in respect of amounts payable to such enterprises has been made in the financial statements as at 31st March 2009. Interest, if any, payable in accordance with the said Act, is not exempted the materials. The company has not received any claims from the suppliers under the said Act.

11 Deferred Tax: The Company has an overall deferred tax asset as on 31st March , 2009. As a policy of prudence, the asset has not been recognized.

12 Depiction of IEX Transactions:- The Company has opened and operates two bank accounts with HDFC-IEX client account and IEX settlement account to channelise the funds for Trading of Power in the Indian Energy Exchange on behalf of ESCOMs. Funds are received from ESCOMs/Government and paid to Indian Energy Exchange through these two accounts. During the year the company has procured power on behalf of the following ESCOMs to the extent indicated below:-

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Purchase of Power:-Name of ESCOMs Quantity in MUs Value of Power Traded in Crs.

BESCOM 22.13 15.68

MESCOM 3.59 1.96

CESC 5.04 3.04

HESCOM 8.08 4.52

GESCOM 6.07 3.39

Total 44.85 28.60 Funds Receipts and Payments details ESCOMs wise is as follows:-

Particulars BESCOM GESCOM HESCOM MESCOM CESC Total

Funds Received from ESCOMs

14.85 1.23 1.74 1.10 3.73 22.66

Govt Subsidy 4.07 1.06 1.46 0.67 0.74 8.00

Total Funds received by PCKL

18.92 2.29 3.20 1.77 4.47 30.66

Total payments 15.68 3.39 4.52 1.96 3.04 28.60

Balance with PCKL as on 31.03.2009

3.24 -1.10 -1.32 -0.19 1.43 2.06

Note:- + indicates amount payable by PCKL to ESCOMs. - indicates amount receivable by PCKL from ESCOMs.

13. High Cost Power Purchase:- Power Company of Karnataka Limited (PCKL) on behalf of ESCOMs except BESCOM had issued LOI to M/s JSWPTC for the period from 15.11.2008 to 31.01.2009 and from 16.11.2008 to 30.11.2008 to M/s NTPC VVNL.

Energy Purchased by PCKL from M/s. NTPC VVNL and M/s. JSW PTC for the above period is detailed below:-

Month Sources Energy in MUs Amount in Cr

November-2008 M/s. NTPC VVNLM/s. JSW PTC

14.9423.22

12.0420.02

December-2008 M/s. JSW PTC 123.23 80.51

January-2009 M/s. JSW PTC 99.83 61.57

Total 261.22 174.14

(Amount in Crs.)

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BANGALORE Date : 17-09-2009

The Payments were arranged by PCKL for the Energy Procured during the above period to M/s JSWPTC and M/s NTPC VVNL. ESCOM wise funds received and Payment details is follows:-

Particulars GESCOM HESCOM MESCOM CESC Total

Funds Received from ESCOMs 14.42 19.22 8.01 9.53 51.18

Govt Subsidy 35.31 47.09 20.19 22.41 125.00

Total Funds received by PCKL 49.73 66.31 28.20 31.94 176.18

Total payment 49.19 65.59 28.13 31.22 174.13

Balance with PCKL as on 31.03.2009

0.54 0.72 0.075 0.72 2.05

14. Pension / Gratuity / Earned Leave Provision:- The Company has during this Financial Year contributed Rs.20,16,544.00 towards the Employer’s share of contribution to Pension and Gratuity Trust maintained by KPTCL in respect of Employees deputed from KPTCL to PCKL. This amount, being administrative in nature, has been allocated to the ESCOMs. Also an amount of Rs.8,82,182.00 has been accounted as provision towards the Earned Leave Encashment and similarly allocated to ESCOMs.

15. The Annual Accounts of the Company approved by the Board vide Resolution dated 5th August, 2009 and reported upon by the Statutory Auditors on 19th August, 2009, has been revised in the light of the observations of the Comptroller and Auditor General of India during their supplementary audit under section 619 (4) of the Company’s Act, 1956, resulting in decrease in loss by 3.45 lakhs before tax and decrease in loss by 5.79 lakhs after tax.



Sd/-(Tushar Giri Nath, IAS)



Managing Director PCKL, Bangalore

(Amount in Crs.)

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CASH FLOW STATEMENT FOR THE FINANCIAL yEAR 2008-09

PARTICULARS AMOUNT Rs. in 000/s)AMOUNT

CASH FROM OPERATING ACTIVITy

Net Profit -45,768

Less : Depreciation 109

Less : Loss on Sale of Investment 49,824

Cash from Operating activities A 4165

CHANGES IN WORKING CAPITAL

Increase in Loans and advances and interest accrued -27,238

Increase in current liabilities 59,846

Net cash Generated from Operating Activities B 32,608

CASH FROM INVESTMENT ACTIVITY

Increase in capital WIP -103,933

Fixed Asset Additions -898

Realisation of Investments 130,176

Net Cash from Investing activities C 25,345

CASH FROM FINANCE ACTIVITY

Seed Money adjustments in ESCOM accounts -22,076

Loan from GOK 200,000

Net cash from Finance activities D 177924

Net Increase in Cash and cash Equivalents (A+B+C+D) 240041

Add : Opening balance in Cash 78,001

Closing balance of Cash and cash equivalents 318,042

As per our report of even dateFor A.R.Viswanathan & CO.

Chartered Accountants





Sd/-(Tushar Giri Nath, I.A.S.,)



Managing DirectorPCKL, Bangalore


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