RPGCOM :: June 2009

Interview
‘CESC is set to generate greater shareholder value’

RPG Enterprises vice-chairman Sanjiv Goenka speaks on the road ahead for the power major and the expansion plans of PCBL

It’s the season of annual reports and communication to shareholders from group companies. What is CESC doing on this front this year?

June and July, traditionally, are months for Annual Reports and AGMs. While the Annual Report is a company’s most important corporate document, the AGM, over the years, has become an integral part of corporate democracy – a forum where equity shareholders ask questions and comment on the accounts.

This year, the content of the CESC Annual Report, just mailed to shareholders, has been vastly enriched. A note from the Chairman is the latest addition --- it begins with a reference to FY’09 which was “a tough year for the world economy”.

In a nut-shell, “the first-half witnessed the highest commodity prices, whereas the second-half saw the biggest economic meltdown since the Great Depression. The Indian GDP shrank from 9.1% in ’08 to 6.8% in ’09.” A look at the future indicates that CESC, after serving Kolkata for 110 years, is planning to install power plants outside Kolkata – West Bengal, Bihar, Jharkhand and Orissa.

The second-half of 2008-09 was marked by a lower rate of growth as far as CESC is concerned, but the Chairman has seen the “downturn playing out in the current year” and the emergence of stronger growth in 2010.

What additional information will shareholders of CESC, who are also consumers of
power, get from the annual report this year?

There is an air of confidence in CESC which is set to achieve healthy growth in the
coming days and generate greater shareholder value.

In the meantime, the third unit at Budge Budge (250 MW) is fast nearing completion. Of special interest to consumers is the implementation of a project which will enable CESC to bring power from Budge Budge Unit-3 to its licensed area. The project involves erecting 85 kms of 220 kV double circuit overhead lines and some associated work. There have been some hurdles, mainly involving Right of Way, but the management hopes to complete this project at the earliest.

The section Management Discussion and Analysis is full of interesting information this time. For instance, in ’09 India’s total installed generation capacity was 148,000 MW. Between 2003 and 2009, power generation grew from 543.4 billion units (BU) to 723.6 BU. However, India’s per capita power consumption is still quite low, around 700 kWh, compared to the world average of 2600 kWh. In spite of increased generation capacity, India is still facing an average peak demand shortfall of 12%. Of the four coal-based CESC generating stations, New Cossipore is the oldest – commissioned in 1949. The three pulverized fuel generating stations, ie Budge Budge, Southern and Titagarh, recorded a combined PLF of more than 97% during ’09, Budge Budge PLF being more than 100%. All the three CESC pulverized fuel power stations were amongst the top power stations in the country on the basis of PLF – a proof of the generating efficiencies that the Company has created over a period of time.

What is the outlook for Phillips Carbon Black Limited for FY10?

At Phillips Carbon Black, the focus in ’09 was co-generation power. At Durgapur, commercial operation of 30 MW co-generation power plant began on April 1, 2009. PCBL’s total installed capacity is expected to reach 60.50 MW during FY’10 with the commissioning of 16 MW CPP at Mundra, Gujarat. Meanwhile, the green field carbon black plant at Mundra is nearing completion. The plant will have an annual capacity of 90,000 MT.

However, global carbon black demand suffered a setback during FY’09, with the result, PCBL’s production volume during FY ’09 came down to 212,154 MT from 250,484 MT achieved in the previous year.