Summer Training Report

SUMMER TRAINING REPORT

10May

Submitted By: Praveen Kumar GJU09091(3

SUMMER TRAINING REPORT10May2010 to 19June2010

Submitted By:-

Praveen Kumar

GJU09091(3 sem)

SUMMER TRAINING REPORT 2010

INDEX

• INFORMATION ABOUT

TRANING

• ACKNOWLEDGEMENT

• INTRODUCTION

� ABOUT NTPC

• ABOUT BTPS

• FINANCE DEPARTMENT

• STUDY ON ECONOMIC VALUE

ADDED

Training at BTPS

I was appointed to do six-week training at this esteemed organization from 10

May to 19 June 2010. In these six weeks. I was assigned to visit various

division of the Finance department which is as follow:

1. Establishment

2. Commercial

3. Cash & Bank

4. Books Section

5. Concurrence(Works)

6. Concurrence(Purchase)

7. Works Payment

8. Store Payment

This six-week training was a very educational adventure for me. It was really

amazing to see the plant by yourself and learn how finance, which is one of

our daily requirements of life, is managed in the production of electricity.

This report has been made by self-experience at BTPS. The material in this

report has been gathered from my textbooks, senior student report, and

trainer manual provided by training department. The specification &

principles are at learned by me from the employee of each division.

(PRAVEEN KUMAR)

ACKNOWLEDGEMENT

With profound respect and gratitude, I take the opportunity to convey my

thanks to complete the training here. I do extend my heartfelt thanks to Mrs. Rachna Singh for providing me

this opportunity to be a part of this esteemed organization.

I am extremely grateful to all the financial staff of BTPS/NTPC for their

co-operation and guidance that helped me a lot during the course of

training. I have learnt a lot working under them and I will always be

indebted of them for this value addition in me.

I would also like to thank the training in charge of NIILM SCHOOLOF

BUSINESS (NEW DELHI) and all the faculty member of FINANCE

department for their effort of constant co-operation

Which have been significant factor in the accomplishment of my industrial

Training

I do extend my heartfelt thanks to Navneet Goel DGM (FINANCE)

(PRAVEEN KUMAR)

NTPCNTPCNTPCNTPC

NATIONAL THERMAL POWER

CORPORATION LTD

NTPC PROFILE

1. Scenario of power sector in India 2. Company Profile:-

� Introduction � History � Evolution � Mission � Vision

3. Organizational Structure 4. Core Value 5. Station Detail 6. Diversified Growth 7. Operation Growth 8Award Details 9. SWOT Analysis 10. Competitors overview 11. Future Expansion

SCENARIO OF POWER IN INDIA

Growth of economy calls for a watching rate of growth in infrastructure

facilities. Power sector is one of the major aspects of this infrastructure

building. Some prominent people like the Ex Chairman of GE Jack Welch

have gone to the extent of saying, “you don’’’’t have a chance to stand in the

21st century without lots of power………Without this you miss the next

revolution.” Moreover, the growth rate of demand for power in developing

countries is generally higher than that of GDP. In India, the elasticity ratio

was 3.06 in 1st plan, and peaked at 5.11 during 3rd plan and came down to

1.65 in 80‟‟‟‟s. For 90‟‟‟‟s a ratio of around 1.5 was projected. Hence, in order to

support a growth of GDP of around 7% the rate of growth of power supply of

10%is required. If we look at current scenario, electricity consumption in

India has more than doubled in the last decade, outpacing the economic

growth. If we analyze the various statistics of Indian power sector, we will find

that the generating capacity has gone up tremendously from a meager

1712MW in 1950 to a whooping 112000MW today.

Generating capacity has grown manifold from 1,712 MW in

than 112,000 MW today.

At the same as a result of growing installed capacity, the power produced has

also gone up. In 1950, the total power produced by Indian power sector was a

meager 50BU and that is now 587.3BU. The Indian govt. emphasize

of independence in power generation and in all subsequent five

allocated budget for power sector development was increased. But despite all

these efforts by our govt., there is an acute power shortage in the country.

GROWTH OVER YEARS:

period:

Generating capacity has grown manifold from 1,712 MW in

than 112,000 MW today.



meager 50BU and that is now 587.3BU. The Indian govt. emphasize

of independence in power generation and in all subsequent five



GROWTH OVER YEARS: installed capacity around the end of

Generating capacity has grown manifold from 1,712 MW in 1950 to more



meager 50BU and that is now 587.3BU. The Indian govt. emphasized the need

of independence in power generation and in all subsequent five-year plans the



installed capacity around the end of

0

50000

100000

150000

200000

250000

Installed capacity(MW)Installed capacity(MW)

Installed capacity(MW) MW

company profile

Introduction: India’s largest power company, NTPC was set up in 1975 to accelerate power development

in India. NTPC is emerging as

chain of the power generation business. Apart from power generation, which is the

mainstay of the company, NTPC has al

utilization and coal mining.

The total installed capacity of the company is 31,704 MW (including JVs) with 15 coal

based and 7 gas based stations, located across the country. In addition under JVs, 3

stations are coal based & another station uses naptha/LNG as fuel. By 2017, the p

generation portfolio is expected to have a diversified fuel mix with coal based capacity of

around 53000 MW, 10000 MW through gas, 9000 MW through Hydro generation, about

company profile:-

Introduction:

India’s largest power company, NTPC was set up in 1975 to accelerate power development

in India. NTPC is emerging as a diversified power major with presence in the entire value


mainstay of the company, NTPC has already ventured into consultancy, power trading, ash



stations are coal based & another station uses naptha/LNG as fuel. By 2017, the p



India’s largest power company, NTPC was set up in 1975 to accelerate power development

a diversified power major with presence in the entire value


consultancy, power trading, ash



stations are coal based & another station uses naptha/LNG as fuel. By 2017, the power



2000 MW from nuclear sources and around 1000 MW from Renewable Energy Sources

(RES). NTPC has adopted a multi

addition through green field projects, expansion of existing stations, joint ventures,

subsidiaries and takeover of stations.

NTPC has been operating its plants at high

18.10% of the total national capacity it contributes 28.60% of total power generation due to

its focus on high efficiency.


RES). NTPC has adopted a multi-pronged growth strategy which includes capacity


subsidiaries and takeover of stations.

NTPC has been operating its plants at high efficiency levels. Although the company has



pronged growth strategy which includes capacity


efficiency levels. Although the company has


In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5

fresh issue and 5.25% as offer for sale by Government of India. NTPC thus became a listed

company in November 2004 with the government holding 89.5% of the equity share

capital. The rest is held by Institutional Investors and the Public. The issue

resounding success. NTPC is among the largest five companies in India in terms of market

capitalization.

In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5



capital. The rest is held by Institutional Investors and the Public. The issue


In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as



capital. The rest is held by Institutional Investors and the Public. The issue was a


History: The company was incorporated

private limited company under the name

Limited, and the word 'Private' was

Notification issued by the Government

The use of word 'private'. In

On September 30,1985, our Company was converted from a

a public limited company.Subsequently,

present name NTPC LIMITED and a fresh certificate of incorporation was issued on

October 28, 2005.

Major events: 1975 - Incorporation of Company.

1977 - NTPC acquired the f

The first batch of executive trainees joined the company.

1978 – Takeover of management of the Badarpur Project.

construction of the first transmission network singrauli

was incorporated on 7on 7on 7on 7 November, 1975November, 1975November, 1975November, 1975 under the Companies

private limited company under the name National Thermal Power Corporation Private

Limited, and the word 'Private' was deleted on September 30, 1976 consequent upon the

issued by the Government of India. Exempting government companies from

In their name.

On September 30,1985, our Company was converted from a Private Limited company into

a public limited company.Subsequently,the name of our Company was changed to its


Incorporation of Company.

acquired the first patch of land at Singrauli.

batch of executive trainees joined the company.

management of the Badarpur Project.

construction of the first transmission network singrauli – korba

under the Companies Act as a

Power Corporation Private

September 30, 1976 consequent upon the

government companies from

Private Limited company into

the name of our Company was changed to its


korba

1982 - Commissioning of the first 200MW unit at Singrauli

Center for education at Power Management Institute, Delhi

established.

First direct foreign currency borrowing . a consortium of foreign

banks,

led by Standard Chartered Merchant

298.41 million for the Rihand project

1983 – in the very first year

of Rs 4.51 corer in the financial year

1984 - The transmission line based on High Voltage Direct Current

(¡°HVDC¡±) technology, commissioned for power transmission from

Rihand to Delhi Singrauli project received World Bank loan of US$

150 million through GOI.

1985 –This year marked the completion of decade existance.NTPC achieved a generating capacity of 11 unites of 200 MW The GOI approved the setting of three gas based combined cycle projects

Commissioning of the first 200MW unit at Singrauli



led by Standard Chartered Merchant Bank extends a loan of GBP

298.41 million for the Rihand project.

in the very first year of commercial operation , NTPC earned

of Rs 4.51 corer in the financial year 1982-83.

transmission line based on High Voltage Direct Current



150 million through GOI.

This year marked the completion of decade (1975- 1985) existance.NTPC achieved a generating capacity of 220 MW11 unites of 200 MW each at its various projects in country.The GOI approved the setting of three gas based combined cycle projects



Bank extends a loan of GBP

earned a profit

transmission line based on High Voltage Direct Current



of NTPC’s 220 MW commissioning

each at its various projects in country. The GOI approved the setting of three gas based combined cycle projects

by NTPC in KAWAT in Gujrat For these projects which was the largest single loan in the history of bank.

1986 - Synchronized first 500MW unit at Singrauli Our Company became one of the first PSUs to issue bonds in the debt market

1987 – Crossed the 5,000 MW

1988 - The First syndicated Japanese loan of 30 billion JPY raised

1989 - Consultancy division of our Company launched

(88 MW) of our Company’s first gas based combined cycle power

plant at Anta, Rajasthan commissioned

1990 – Total installed capacity crossed

1992 - First acquisition by our Company of Feroze

Unchahar Thermal Power Station (2x210MW) from Uttar

Pradesh Rajya Vidyut Utpadan Nigam of Uttar Pradesh The

by NTPC in KAWAT in Gujrat , Auraiya in U.P. and Anta in Rajasthan.For these projects, the WORLD BANK agreed to provide US$ 48 million,which was the largest single loan in the history of bank.

Synchronized first 500MW unit at Singrauli Our Company became one of the first PSUs to issue bonds in the debt market

5,000 MW installed capacity mark.

First syndicated Japanese loan of 30 billion JPY raised

Consultancy division of our Company launched First unit

of our Company’s first gas based combined cycle power

plant at Anta, Rajasthan commissioned.

Total installed capacity crossed 10,000MW.

First acquisition by our Company of Feroze Gandhi

Unchahar Thermal Power Station (2x210MW) from Uttar


, Auraiya in U.P. and Anta in Rajasthan. the WORLD BANK agreed to provide US$ 48 million,

Synchronized first 500MW unit at Singrauli Our Company became one of the first PSUs to issue bonds in the debt market.

First syndicated Japanese loan of 30 billion JPY raised.

of our Company’s first gas based combined cycle power


transmission systems owned by our Company were transferred

to Power Grid Corporation of India Limited (¡°PGCIL ¡±) pursuant

to legislation by the Parliament of India

1993 - IBRD extended direct loan of US0 million to our Company under time slice concept for its projects

1994 - 15,000 MW of installed capacity achieved Maiden

declaration of dividend of

(Gujarat) becomes our first thermal power station to have

commissioned an integrated

1995 – NTPC celebrated A new logo was adopted. NTPC took over the Orissa State Electricity Bo

1997 - 'Navratna' status granted by the GoI100 billion units

generation in one year achieved A consortium of foreign



to legislation by the Parliament of India.

IBRD extended direct loan of US0 million to our Company under time slice concept for its projects.

15,000 MW of installed capacity achieved Maiden

declaration of dividend of Rs. 650 million Jhanor-Gandhar

(Gujarat) becomes our first thermal power station to have

commissioned an integrated Liquid Waste Treatment Plant

NTPC celebrated 20yrs of its existence. A new logo was adopted. NTPC took over the 460 MW Talcher Thermal Power Station from Orissa State Electricity Board.

status granted by the GoI100 billion units

generation in one year achieved A consortium of foreign



Gandhar

Liquid Waste Treatment Plant.

Talcher Thermal Power Station from

banks led by Sumitomo Bank, Hong Kong extends foreign

currency loan of 5 billion Japanese Yen for the first time

without GOI guarantee

1998 - Commissioned the first Naphtha based plant at Kayamkulam with a capacity of 350 MW

1999 - Our Company.s Dadri thermal power project, Uttar

Pradesh adjudged the best in India with a PLF of 96.12%

Dadri thermal power project, Uttar Pradesh certified with

ISO 14001

2000 - Commenced constr project of 800 MW capacity in Himachal Pradesh.

2002 - Three wholly owned subsidiaries, viz., NTPC Electric

Supply Company Limited, NTPC Hydro Limited and NTPC

Vidyut Vyapar Nigam Limited incorporated ESP

[Electrostatic precipitators) set up at Talcher power plant

20,000 MW installed capacity mark exceeded

2003 - Our Company undertook debt re


currency loan of 5 billion Japanese Yen for the first time

guarantee.

Commissioned the first Naphtha based plant at Kayamkulam with a capacity of 350 MW.

Our Company.s Dadri thermal power project, Uttar

Pradesh adjudged the best in India with a PLF of 96.12%


Commenced construction of the first hydro – electricity powerproject of 800 MW capacity in Himachal Pradesh.

Three wholly owned subsidiaries, viz., NTPC Electric


Vidyut Vyapar Nigam Limited incorporated ESP

[Electrostatic precipitators) set up at Talcher power plant

20,000 MW installed capacity mark exceeded.

Our Company undertook debt re-structuring. Raised



electricity power


funds through bonds (Series XIII and XIV) Construction of

first hydro-electric power project of 800 MW capacity in

Himachal Pradesh commenced after

2004 - The award of contract for the first Super Critical Thermal

Power Plant at Sipat Reached a total installed capacity of 22,249

MW with the Talcher Unit V getting synchronized on May 13, 2004

Our Company.s Feroze Gandhi Unchahar Thermal station achieves

a record PLF of 87.43% in current year up from 18.02% in February

92 when it was taken over by us LIC extends credit facility for

Rs. 70 billion. Rs. 40 billion is in the form of unsecured loans and

Rs30 billion is in the form of bonds Our Company makes its debut issue

of euro bonds amounting to USD 200 million in the international

market First coal mining block allotted Listing of our Equity Shares

on the Stock Exchanges

2005 - Our Company received the International Project Managem

Award 2005 for its Simhadri project at the International Project Management Association World Congress. Oil block allocated under NELP V Our Company adopted core values 'BCOMIT' (Buisness Ethics, Customer Focus, Organisational Pride, Mutual Respect and Trust, Innovation and Speed and Total Quality for Excellence) Our Company ranked as the Third Great Place to work for in India for second time in succession by a survey conducted by Grow Talent and Business World 2005

2006 - Badarpur Thermal Power Station having an installed capacity of 705 MW transferred to

2007 - MOC, GOT granted in


electric power project of 800 MW capacity in

Himachal Pradesh commenced after the investment approval.

The award of contract for the first Super Critical Thermal





it was taken over by us LIC extends credit facility for


30 billion is in the form of bonds Our Company makes its debut issue



on the Stock Exchanges.

Our Company received the International Project Managem

Award 2005 for its Simhadri project at the International ProjectManagement Association World Congress. Oil block allocated underNELP V Our Company adopted core values 'BCOMIT' (Buisness Ethics, Customer Focus, Organisational Pride, MutualRespect and Trust, Innovation and Speed and Total Quality forExcellence) Our Company ranked as the Third Great Place to workfor in India for second time in succession by a survey conductedby Grow Talent and Business World 2005.

Badarpur Thermal Power Station having an installed capacity of 705 MW transferred to our Company.

granted in-principle approval for allocation of a


approval.

The award of contract for the first Super Critical Thermal





it was taken over by us LIC extends credit facility for


30 billion is in the form of bonds Our Company makes its debut issue



Our Company received the International Project Management

Award 2005 for its Simhadri project at the International Project Management Association World Congress. Oil block allocated under

(Buisness Ethics, Customer Focus, Organisational Pride, Mutual Respect and Trust, Innovation and Speed and Total Quality for Excellence) Our Company ranked as the Third Great Place to work for in India for second time in succession by a survey conducted

Badarpur Thermal Power Station having an installed capacity

principle approval for allocation of a new

coal block, Chatti conditions stipulated in the approval letter. The share of reserves is estimated to be 354 Million Tonnes

2008 - Our Company adjudged as the Star PSU Board expanded by appointment of five independent Directors India Power Award conferred on Centre for Power Efficiency and Environmental Protection

2009 - Memorandum of understanding entered into with the Nuclea

Power Corporation of India Limited (NPCIL) for deve lopment of

nuclear power in India 30,000 MW installed capacity mark crossed

Long term fuel supply agreement signed with Coal India Limited

for supply of coal to our power stations for a period of 20 years

Our Company acquired 44.6% of presently paid

Kerala and Transformers and Electricals Kerala Limited from

Government of Kerala at a total consideration of Rs. 313.4 million,

subject to final price to be based on the valuation of the assets

of Kerala and Transformers and Electricals Kerala Limited.

Kerala and Transformers and Electricals Kerala Limited is

engaged in manufacturing and repair of heavy duty transformers

International Gold Star Quality Award conferred on Centre for

Power Efficiency and Environmental Protection.

NTPC enters MOU with Nuclear Power Corpo

(NPCIL) to work together for development of Nuclear Power in India

and for this purpose to form a Joint Venture Company for setting up

Nuclear Power Projects.

coal block, Chatti-Bariatu (South) to our Company subject to theconditions stipulated in the approval letter. The share of reserves

estimated to be 354 Million Tonnes.

Our Company adjudged as the Star PSU - 2008 Board expanded by appointment of five independent Directors India Power Award conferred on Centre for Power Efficiency andEnvironmental Protection.

Memorandum of understanding entered into with the Nuclea





Our Company acquired 44.6% of presently paid-up capital of





Kerala and Transformers and Electricals Kerala Limited is

manufacturing and repair of heavy duty transformers


Power Efficiency and Environmental Protection.

NTPC enters MOU with Nuclear Power Corporation of India Ltd.



Nuclear Power Projects.

Bariatu (South) to our Company subject to the conditions stipulated in the approval letter. The share of reserves

Board expanded by appointment of five independent Directors India Power Award conferred on Centre for Power Efficiency and

Memorandum of understanding entered into with the Nuclea





up capital of





manufacturing and repair of heavy duty transformers


ration of India Ltd.



Evolution:-

1975

1977

2004

NTPC was established in

100% ownership by the Government Of

India. In the last 30 years , NTPC has grown

into the largest power utility in India.

In 1997 , GOV granted NTPC status oo

of “Navratan” being one of the nine jewe

jewels of India, enhancing the powers to

the Board Of Directors.

NTPC became a listed company with

majority Government ownership 89.5%

NTPC becomes third largest by

capitalization or listed companies.

in 1975 with

by the Government Of

India. In the last 30 years , NTPC has grown

largest power utility in India.

In 1997 , GOV granted NTPC status oo

of “Navratan” being one of the nine jewe

jewels of India, enhancing the powers to

NTPC became a listed company with

majority Government ownership 89.5%

NTPC becomes third largest by market

capitalization or listed companies.

LTD

2005

2008

2009

The company rechristened as NTPC

LTD in line with its changing business

portfolio and transform itself

thermal power utility to an integrated

utility.

National Thermal Power Corporation

is the largest power generation com

pany in India. Forbes Global 2000 &

2009 ranked it 317th in the world.

Memorandum of understanding

that into with the Nuclear

Corporation of India Ltd(NPCIL).

In India 30,000MW installed capa

city mark crossed.

The company rechristened as NTPC

LTD in line with its changing business

portfolio and transform itself from a

thermal power utility to an integrated

National Thermal Power Corporation

is the largest power generation com-

pany in India. Forbes Global 2000 &

2009 ranked it 317th in the world.

Memorandum of understanding

with the Nuclear Power

Corporation of India Ltd(NPCIL).

In India 30,000MW installed capa-

city mark crossed.

A public sector company, it was incorporated in the year 1975 to accelerate power

development in the country as a wholly owned company o

present, Government of India holds 89.5% of the total equity shares of the company and

the balance 10.5% is held by FIIs, Domestic Banks, Public and others. Within a span of 31

years, NTPC has emerged as a truly national power

facilities in all the major regions of the

Today NTPC is the largest power generating company in India and contributes one

of the thermal energy generated in the country. NTPC has 463 ranking the world

2000‟‟‟‟s companies which are improved from last year rank i.e. 486. Over all these years

NTPC has been an organization which has delivered expected performance in all the

spheres of its business activities and meeting all the challenges for growth

through adoption of excellent management system and practices.

The success of NTPC is the result of a modest but systematic beginning. NTPC known as

the NAVRATANS of PSU‟‟‟‟

major stakeholder. Railway are


development in the country as a wholly owned company of the Government of India. At



years, NTPC has emerged as a truly national power company, with power generating

facilities in all the major regions of the country.

Today NTPC is the largest power generating company in India and contributes one

of the thermal energy generated in the country. NTPC has 463 ranking the world

s companies which are improved from last year rank i.e. 486. Over all these years


spheres of its business activities and meeting all the challenges for growth

through adoption of excellent management system and practices.


‟‟‟‟S have central govt. and the finding agencies as one of their

Railway are the major supplier of NTPC.


f the Government of India. At



company, with power generating

Today NTPC is the largest power generating company in India and contributes one-fourth

of the thermal energy generated in the country. NTPC has 463 ranking the world top class

s companies which are improved from last year rank i.e. 486. Over all these years


spheres of its business activities and meeting all the challenges for growth and operation


S have central govt. and the finding agencies as one of their

If anything which is manufactured is to be sold out. In the same manner NTPC also has

some of its buyers. The main buyers who purchase electricity from NTPC are; the state

electricity board (SEB‟‟‟‟S) and the state govt.

Goal of establishment:

State Electricity Boards were not able to cope up with the situation



S) and the state govt.

Goal of establishment: To bridge the huge electricity supply-

State Electricity Boards were not able to cope up with the situation.



-demand gap and the

Mission:-

“Develop and provide reliable power, related products and services at

prices, integrating multiple energy sources with innovative and eco

technologies and contribute to society"

• Make a reliable and available quality power in

competative prices and ensure timely realization of revenues.

• Adopt a broad based capacity portfolio including Hydro Power , LNG Nuclear

Power , and non- conventional and eco

• Plan and speedily implement power projects using state of the art tecnologie

“Develop and provide reliable power, related products and services at

prices, integrating multiple energy sources with innovative and eco

technologies and contribute to society"

Make a reliable and available quality power in increasingly large quantities

competative prices and ensure timely realization of revenues.

a broad based capacity portfolio including Hydro Power , LNG Nuclear

conventional and eco- friendly fuels.

implement power projects using state of the art tecnologie

“Develop and provide reliable power, related products and services at competitive

prices, integrating multiple energy sources with innovative and eco–friendly

increasingly large quantities at

a broad based capacity portfolio including Hydro Power , LNG Nuclear

implement power projects using state of the art tecnologie

• Develop a strong portfolio of profitable business in overseas market including

technical services, generating assets

• Continuously attract and develop committed human resources to match w

standards.

• Leads developmental efforts in the Indian power sector including assisting state

utility reform, policy recover.

• Be a socially responsible corporate utility with thrust on environment protection,

ash utilization, community development, energy conservation.

Contribution of different sources of power generation:

Develop a strong portfolio of profitable business in overseas market including

technical services, generating assets etc.

Continuously attract and develop committed human resources to match w

Leads developmental efforts in the Indian power sector including assisting state

utility reform, policy recover.

cially responsible corporate utility with thrust on environment protection,


different sources of power generation:

Develop a strong portfolio of profitable business in overseas market including

Continuously attract and develop committed human resources to match world

Leads developmental efforts in the Indian power sector including assisting state

cially responsible corporate utility with thrust on environment protection,


different sources of power generation:

THERMAL 93392.64 HYDRO 36647.76 NUCLEAR 4120 OTHERS 13242.41

THERMAL 93392.64

HYDRO 36647.76

OTHERS 13242.41

THERMAL

HYDRO

OTHER

NUCLEAR

VISION:- “To be one of the world’s largest and best power utilities, powering India’s growth.”

““““A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth,

with increasing global presence."with increasing global presence."with increasing global presence."with increasing global presence."

To realize this vision, NTPC has drawn up a detailed Corporate Plan for the period 1997

2012 which represents the company's collective optimism and enthusiasm, inspired by a

glorious past, a vibrant present and a brilliant future. The Plan has been prepared in

in consultation the committed, competent and confident members of the NTPC family. The

road map that has been charted out was after a thorough scan of the strengths and

weaknesses within the organization as well as opportunities and threats in the environm

Considering multidimensional opportunities in the energy sector, NTPC will adopt a multi

pronged growth strategy for capacity addition through Greenfield sites, expansion of

existing stations, takeovers and joint ventures. The capacity addition plans

drawn up for the fifteen-year period using all the above strategies to enable the corporation

to become a 40,000 MW company by 2012 A.D.

(NTPC) a global giant in the power sector was set up on 7th Novemb

objective to accelerate the electricity generation by planning, promoting and organizing

integrated development of thermal power in India.

engineering, construction engineering, construction engineering, construction engineering, construction

provides consultancy in the area of power plant constructions and power generation to

companies in India and abroad. As on date the installed capacity

through its 15 coal based (22,895 MW), 7 gas based (3,955 MW) and 4 Joint through its 15 coal based (22,895 MW), 7 gas based (3,955 MW) and 4 Joint through its 15 coal based (22,895 MW), 7 gas based (3,955 MW) and 4 Joint through its 15 coal based (22,895 MW), 7 gas based (3,955 MW) and 4 Joint

VentureVentureVentureVenture Projects (1,054 MW). NTPC acquired 50% equity of the SAIL Power Supply

Corporation Ltd. (SPSCL). This JV company operates the captive power plants of

Durgapur (120 MW), Rourkela (120 MW) and Bhilai (74 MW). NTPC also has Durgapur (120 MW), Rourkela (120 MW) and Bhilai (74 MW). NTPC also has Durgapur (120 MW), Rourkela (120 MW) and Bhilai (74 MW). NTPC also has Durgapur (120 MW), Rourkela (120 MW) and Bhilai (74 MW). NTPC also has

28.33% stake in Ratnagiri Gas & Powe28.33% stake in Ratnagiri Gas & Powe28.33% stake in Ratnagiri Gas & Powe28.33% stake in Ratnagiri Gas & Powe

“To be one of the world’s largest and best power utilities, powering India’s

A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth,

with increasing global presence."with increasing global presence."with increasing global presence."with increasing global presence."

this vision, NTPC has drawn up a detailed Corporate Plan for the period 1997


glorious past, a vibrant present and a brilliant future. The Plan has been prepared in



weaknesses within the organization as well as opportunities and threats in the environm

Considering multidimensional opportunities in the energy sector, NTPC will adopt a multi


existing stations, takeovers and joint ventures. The capacity addition plans

year period using all the above strategies to enable the corporation

to become a 40,000 MW company by 2012 A.D. National Thermal Power Corporation Ltd.

(NTPC) a global giant in the power sector was set up on 7th Novemb


integrated development of thermal power in India. NTPC‟‟‟‟

engineering, construction engineering, construction engineering, construction engineering, construction and operation of power generating plants. It also


companies in India and abroad. As on date the installed capacity of NTPC is 27,904 MW of NTPC is 27,904 MW of NTPC is 27,904 MW of NTPC is 27,904 MW


rojects (1,054 MW). NTPC acquired 50% equity of the SAIL Power Supply



28.33% stake in Ratnagiri Gas & Powe28.33% stake in Ratnagiri Gas & Powe28.33% stake in Ratnagiri Gas & Powe28.33% stake in Ratnagiri Gas & Power Private Limited (RGPPL)r Private Limited (RGPPL)r Private Limited (RGPPL)r Private Limited (RGPPL)

“To be one of the world’s largest and best power utilities, powering India’s

A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth, A world class integrated power major, powering India’s growth,

this vision, NTPC has drawn up a detailed Corporate Plan for the period 1997-


glorious past, a vibrant present and a brilliant future. The Plan has been prepared in-house



weaknesses within the organization as well as opportunities and threats in the environment.

Considering multidimensional opportunities in the energy sector, NTPC will adopt a multi-


existing stations, takeovers and joint ventures. The capacity addition plans that we have

year period using all the above strategies to enable the corporation

National Thermal Power Corporation Ltd.

(NTPC) a global giant in the power sector was set up on 7th November 1975, with an


‟‟‟‟s core business is

and operation of power generating plants. It also


of NTPC is 27,904 MW of NTPC is 27,904 MW of NTPC is 27,904 MW of NTPC is 27,904 MW


rojects (1,054 MW). NTPC acquired 50% equity of the SAIL Power Supply



r Private Limited (RGPPL)r Private Limited (RGPPL)r Private Limited (RGPPL)r Private Limited (RGPPL) a joint venture

company between NTPC, GAIL, Indian Financial Institutions and Maharashtra SEB

Holding Co. Ltd .

\\

Organizational Structure:

Organization structure includes three levels of management

top management, then region level

management & last as planning level


Organizational Structure:-

Organization structure includes three levels of management i.e. corporate level

region level comprising management of SBU regional level

planning level management as GMs of various plants


i.e. corporate level including

comprising management of SBU regional level

management as GMs of various plants

Core Value:

This corporate plan provides details of the overall agenda for NTPC. The successful

delivery of this agenda would require a committed work force that identifies with and

supports the vision. To ensure realization of this corporate agenda, a set of core v

should be central to, and govern each activity of the organization. Known as one of the

NAVRATAN ‟‟‟‟S of the PSU

(BCOMIT):

BBBBusiness Ethics

CCCCustomer Focus

OOOOrganizational & Professional Pride

MMMMutual Respect & Trust

IIIInnovation & Speed

TTTTotal Quality for Excellence



supports the vision. To ensure realization of this corporate agenda, a set of core v


PSU‟‟‟‟S NTPC has its following core values. They

rganizational & Professional Pride

utual Respect & Trust

otal Quality for Excellence



supports the vision. To ensure realization of this corporate agenda, a set of core values


has its following core values. They are known as

Station Detail: Coal Based Power Stations

COAL BASED(Owned by NTPC)

1. Singrauli

2. Korba

3. Ramagundam

4. Farakka

5. Vindhyachal

6. Rihand

7. Kahalgaon

8. NCTPP, Dadri

9. Talcher Kaniha

10. Feroze Gandhi, Unchahar

11. Talcher Thermal

12. Simhadri

13. Tanda

14. Badarpur

15. Sipat-II

Total

:-

Coal Based Power Stations:

COAL BASED(Owned by

STATE COMMISSIONEDCAPACITY(MW)

Uttar Pradesh

Chhattisgarh

Andhra Pradesh

West Bengal

Madhya Pradesh

Uttar Pradesh

Bihar

Uttar Pradesh

Orissa

Feroze Gandhi, Unchahar Uttar Pradesh

Orissa

Andhra Pradesh

Uttar Pradesh

Delhi

Chhattisgarh

24,885

COMMISSIONED CAPACITY(MW)

2,000

2,100

2,600

1,600

3,260

2,000

2,340

1,330

3,000

1,050

460

1,000

440

705

1,000

24,885

Hydro Based Power Projects

NTPC has increased thrust on hydro development for a balanced portfolio for long term

sustainability. The first step in this direction was taken by initiating investment in Koldam

Hydro Electric Power Project located on Satluj river in Bilaspur district of Himachal

Pradesh. Two other hydro projects under construction are Tapovan Vishnugad and

Loharinag Pala. On all these projects construction activities are in full swing

Projects:





Loharinag Pala. On all these projects construction activities are in full swing





Loharinag Pala. On all these projects construction activities are in full swing.

HYDRO BASED

1. Koldam (HEPP)

2. Loharinag Pala (HEPP)

3. Tapovan Vishnugad (HEPP)

Total

Gas/Liquid Fuel Based Power Stations The details of NTPC gas based power stations are as follows GAS BASED

(Owned by NTPC)

1. Anta

2. Auraiya

3. Kawas

4. Dadri

5. Jhanor-Gandhar

6. Rajiv Gandhi CCPP Kayamkulam

7. Faridabad

Total

HYDRO BASED STATE

CAPACITY(MW)

Koldam (HEPP) Himachal Pradesh

Loharinag Pala (HEPP) Uttarakhand

Tapovan Vishnugad Uttarakhand

Gas/Liquid Fuel Based Power Stations:

of NTPC gas based power stations are as follows:-

STATE COMMISSIONEDCAPACITY(MW)

Rajasthan 413

Uttar Pradesh 652

Gujarat 645

Uttar Pradesh 817

Gujarat 648

CCPP Kerala 350

Haryana 430

3,955

APPROVED CAPACITY(MW)

800

600

520

1,920

COMMISSIONED CAPACITY(MW)

3,955

Diversified Growth

NTPC’s quest for diversification started with its foray into Hydro Power. It has, since then,

been moving towards becoming a highly diversified company through backward, forward

and lateral integration. The company is well on its way to becoming ‘an Integ

Major’, having entered Hydro Power, Coal Mining, Power Trading, Equipment

Manufacturing and Power Distribution. NTPC has made long strides in developing its Ash

Utilization business. In its pursuit of diversification, NTPC has also developed st

alliances and joint ventures with leading national and international companies.

Hydro PowerHydro PowerHydro PowerHydro Power:::: In order to give impetus to hydro power growth in the country and to have a balanced

portfolio of power generation, NTPC entered hydro power business wit

Koldam hydro project in Himachal Pradesh. Two more projects have also been taken up in

Uttarakhand. A wholly owned subsidiary, NTPC Hydro Ltd., is setting up hydro projects

of capacities up to 250 MW.

Coal Mining:Coal Mining:Coal Mining:Coal Mining: In a major backward integration move to create fuel security, NTPC has ventured into coal

mining business with an aim to meet about 20% of its coal requirement from its captive

mines by 2017. The Government of India has so far allotted 7 coal blocks to NTPC,

including 2 blocks to be developed through joint venture route. Coal Production is likely to

start in 2009-10.

Power Trading:Power Trading:Power Trading:Power Trading: 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly ow ned subsidiary was created for

trading power leading to optimal utilization of NTPC’s assets. It is the second largest

power trading company in the country. In order to facilitate power trading in the coun

Growth :-



and lateral integration. The company is well on its way to becoming ‘an Integ



Utilization business. In its pursuit of diversification, NTPC has also developed st


In order to give impetus to hydro power growth in the country and to have a balanced

portfolio of power generation, NTPC entered hydro power business wit



integration move to create fuel security, NTPC has ventured into coal



s to be developed through joint venture route. Coal Production is likely to

'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly ow ned subsidiary was created for


power trading company in the country. In order to facilitate power trading in the coun



and lateral integration. The company is well on its way to becoming ‘an Integrated Power



Utilization business. In its pursuit of diversification, NTPC has also developed strategic


In order to give impetus to hydro power growth in the country and to have a balanced

portfolio of power generation, NTPC entered hydro power business with the 800 MW



integration move to create fuel security, NTPC has ventured into coal



s to be developed through joint venture route. Coal Production is likely to

'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly ow ned subsidiary was created for


power trading company in the country. In order to facilitate power trading in the country,

‘National Power Exchange Ltd.’, a JV between NTPC, NHPC, PFC and TCS has been

formed for operating a Power Exchange.

Ash Business:Ash Business:Ash Business:Ash Business:

NTPC has focused on the utilization of ash generated by its power stations to convert the

challenge of ash disposal into an opportunity. Ash is being used as a raw material input for

cement companies and brick manufacturers. NVVN is engaged in the business of Fly Ash

export and sale to domestic customers. Joint ventures with cement companies are being

planned to set up cement grinding units in the vicinity of NTPC stations.

Power DistributionPower DistributionPower DistributionPower Distribution:::: ‘NTPC Electric Supply Company Ltd.’ (NESCL), a wholly owned subsidiary of NTPC, was

set up for distribution of power. NESCL is actively engaged in ‘Rajiv Gandhi Gramin

Vidyutikaran Yojana’programme for rural electrifica tion and also working as 'Advisor

cum Consultant' for Ministry of Power for implementatio n of Accelerated Power

Development and Reforms Program

Equipment Manufacturing:Equipment Manufacturing:Equipment Manufacturing:Equipment Manufacturing: Enormous growth in power sector necessitates augmentation of power equipment

manufacturing capacity. NTPC has formed JVs with BHEL and Bharat Forge Ltd. for

power plant equipment manufacturing. NTPC has also acquired stake in Transformers

and Electricals Kerela Ltd. (TELK) for manufacturin g and repair of transformers.


formed for operating a Power Exchange.


l into an opportunity. Ash is being used as a raw material input for



p cement grinding units in the vicinity of NTPC stations.

‘NTPC Electric Supply Company Ltd.’ (NESCL), a wholly owned subsidiary of NTPC, was



Consultant' for Ministry of Power for implementatio n of Accelerated Power

Programme(APDRP) launched by Government of India.

Equipment Manufacturing:Equipment Manufacturing:Equipment Manufacturing:Equipment Manufacturing:

Enormous growth in power sector necessitates augmentation of power equipment






l into an opportunity. Ash is being used as a raw material input for



p cement grinding units in the vicinity of NTPC stations.

‘NTPC Electric Supply Company Ltd.’ (NESCL), a wholly owned subsidiary of NTPC, was



Consultant' for Ministry of Power for implementatio n of Accelerated Power

me(APDRP) launched by Government of India.

Enormous growth in power sector necessitates augmentation of power equipment




Operation Growth

In terms of operations, NTPC has always been considerably above the national average.

The availability factor for coal based power stations has increased from 89.32% in 1998

to 91.76% in 2009-10, which compares favourably with international standards. The PLF

has increased from 76.6% in 1998

Growth:-


The availability factor for coal based power stations has increased from 89.32% in 1998

10, which compares favourably with international standards. The PLF

has increased from 76.6% in 1998-99 to 90.81% during the year 2009-10.


The availability factor for coal based power stations has increased from 89.32% in 1998-99

10, which compares favourably with international standards. The PLF

10.

The table below shows that while the installed capacity has increased by 62.15% in the last

twelve years the generation has increased by 99.84%.

DESCRIPTION UNIT

Installed Capacity MW

Generation MUs


twelve years the generation has increased by 99.84%.

UNIT 1998-99 2009-10 % OF INCREASE

MW 17,786 28,840

MUs 1,09,505 2,18,840


% OF INCREASE

62.15

99.84

The table below shows the detailed operational performance of coal based stations over the

years.

OPERATIONAL PERFORMANCE OF COAL BASED

Year Generation(BU)

2009-10

218.84

2008-09

206.94

2007-08 2006-07

200.86 188.67

2005-06

170.88

2004-05

159.11

2003-04

149.16

2002-03

140.86

2001-02

133.20

2000-01

130.10

1999-00

118.70

1998-99

109.50


OPERATIONAL PERFORMANCE OF COAL BASED NTPC STATIONS

Generation(BU) PLF(%) Availability Factor (%)

90.81 91.76

91.14 92.47

92.24 89.43

92.12 90.09

87.52 89.91

87.51 91.20

84.40 88.79

83.57 88.70

81.11 89.09

81.80 88.54

80.39 90.06

76.60 89.36


NTPC STATIONS

Award Details NTPC has a glorious record of excellence in every field of its activities ever since its

inception in 1975. Leading the country’s power sector with a vision to become a 75,000

MW company by 2017, we take pride in our people and their performance which has been

acknowledged time and again at various national and international fora.

S.no Awards

1. Company RankingsAward

2. Environment Awards

3. HR Awards

4. Safety Awards

5. Performance Awards

6. International Gold Star Award for Quality 2009

7. India Pride Awards

Details:-

NTPC has a glorious record of excellence in every field of its activities ever since its




Instituted by

Company Rankings

Business Standard. Star Company (Public Sector Undertaking) of the year

Awards

Institute of Directors. Significant contribution in protecting the environment

World HRD congress Great Places to Workinnovative HR practices.

Institute of Directors for Occupational Health & Safety

Awards IPMA International Project Management Award 2008.

International Gold Star for Quality 2009

Centre for Power Efficiency & Environmental Protection (CenPEEP)

Recognition of outstanding commitment to Quality, Excellence and Leadership contributing towards the success for India in the business world.

Awards Union Home Minister. Shri P.

Chidambaram

For excellence in Energy and Power Category.

NTPC has a glorious record of excellence in every field of its activities ever since its




Remarks

Star Company (Public Sector Undertaking) of the year Significant contribution in protecting the environment

Great Places to Work & for innovative HR practices.

for Occupational Health & Safety -2008’

International Project Management Award 2008.

Recognition of outstanding commitment to Quality, Excellence and Leadership contributing towards the success for India in the business world.

For excellence in Energy and Power Category.

8. ICAI Award

S.no Awards

9.

International Project Management Award,2008

10. Exim Excellence Award 2008

11. India Power Awards 2008

12. Enterprise Excellence Award

The Institute of Chartered Accountants of India

For Excellence in Financial Reporting

Instituted by

International Project

International Project Management Association (IPMA)

Project Excellence in Vindhyachal (2X500 MW).project was implemented in record time with excellent environmental and economic performanceThe Project Excellence Award is annuallyto the most successful project teams in the world

Award Confederation of Indian Industry(CII)

‘Significant Achievement’Strong Commitment to Excel’

Awards Council of Power Utilities Its commitment the issues of environment protection in India, while simultaneously supporting economic growth and development.

Enterprise Excellence Indian Institution of Industrial Engineering

For its financial and operational strength assessed perspectives Strength, Achievements, Internal Processes, Innovation & Learning and External Customer Orientation.

or Excellence in Financial Reporting

Remarks

Project Excellence in Vindhyachal – Stage III (2X500 MW). project was implemented in record time with excellent environmental and economic performance The Project Excellence Award is annually awarded to the most successful project teams in the world ‘Significant Achievement’ Strong Commitment to Excel’

Its commitment to address the issues of environment protection in India, while simultaneously supporting economic growth and development.

For its financial and operational strength assessed under 5 perspectives - Financial Strength, Achievements, Internal Processes, Innovation & Learning and External Customer Orientation.

SWOT Analysis

StrengthsStrengthsStrengthsStrengths::::

� Largest market share in domestic power generation and a broad customer

portfolio across the country.

Threats

SWOT Analysis:-

Largest market share in domestic power generation and a broad customer

across the country.

SWOTSWOTSWOTSWOT

Strengths

Weakness

Opportunitie

Largest market share in domestic power generation and a broad customer

� Excellent track record of performance in project implementation and plant

operation.

� Diversified thermal generation portfolio multiple and fuels.

� Navaratna status.

� High brand equity among shareholders.

� Strong balance sheet

� Engineering skills in project configuration and package design.

� Turnaround ability for old plants

Tanda and Unchahar.

� High credit rating that is i

� In house training facility

of the sector.

WeaknessWeaknessWeaknessWeakness::::

� Low risk diversification of business portfolio generation assets.

� Poor financial

Excellent track record of performance in project implementation and plant

Diversified thermal generation portfolio multiple and fuels.

brand equity among shareholders.

rong balance sheet – ability to raise low cost debt.

Engineering skills in project configuration and package design.

Turnaround ability for old plants – demonstrated in the takeover plants of Talcher,

High credit rating that is indicative of the confidence of lenders.

In house training facility (PMI),CENPEEP, R&D(PMI),CENPEEP, R&D(PMI),CENPEEP, R&D(PMI),CENPEEP, R&D etc that assist in development

Low risk diversification of business portfolio consists primarily of

oor financial health of customer.

Excellent track record of performance in project implementation and plant

Engineering skills in project configuration and package design.

demonstrated in the takeover plants of Talcher,

ndicative of the confidence of lenders.

etc that assist in development

consists primarily of

� Functional orientation hampering across functional perspective in decision

making.

� Long and multi layered procurement process

process delay.

� Fragmented IT architecture.

� Gaps in HR systems such as

career development.

� Hierarchy for decision making that effects responsiveness.

� Role ambiguity and dilution within different lends of the

Opportunities Opportunities Opportunities Opportunities ::::

� Expand generation capacities by

maintain the position of a dominant generating utility in the Indian Power sector.

� Broad base fuel mix by considering imported coal, gas, domestic coal,

nuclear power etc.With a mitigate fuel risk and maintaining lo

competitiveness.

Functional orientation hampering across functional perspective in decision

Long and multi layered procurement process leading to long lead times and

Fragmented IT architecture.

Gaps in HR systems such as performance management, awards and incentive

erarchy for decision making that effects responsiveness.

Role ambiguity and dilution within different lends of the

Expand generation capacities by putting up thermal & hydro capacities,


Broad base fuel mix by considering imported coal, gas, domestic coal,

nuclear power etc.With a mitigate fuel risk and maintaining long run

Functional orientation hampering across functional perspective in decision

leading to long lead times and

performance management, awards and incentive

erarchy for decision making that effects responsiveness.

Role ambiguity and dilution within different lends of the organization.

putting up thermal & hydro capacities,


Broad base fuel mix by considering imported coal, gas, domestic coal,

ng run

� Expand services for

as well as international market.

� Backward integrate into fuel management to exercise greater control and

understanding of supply economics.

� Lead the development

energy sources especially in the distributed generation mode.

� Improve collections by

role in allocation of new plants.

� Execute increased number of power

Projects status, thereby reducing the cost of the p

� Forward integrate into the distribution business in India.

ThreatsThreatsThreatsThreats::::

� Limited experience of operating

competition.

Expand services for EPC, R&M, and O&MEPC, R&M, and O&MEPC, R&M, and O&MEPC, R&M, and O&M activities in the domestic

as well as international market.

Backward integrate into fuel management to exercise greater control and

understanding of supply economics.

Lead the development and commercial deployment of non

gy sources especially in the distributed generation mode.

collections by trading, direct sales to bulk customers and the active

role in allocation of new plants.

increased number of power plants that classify for Mega Power

Projects status, thereby reducing the cost of the projects and power generated.

Forward integrate into the distribution business in India.

Limited experience of operating in a truly liberalized environment with

activities in the domestic

Backward integrate into fuel management to exercise greater control and

and commercial deployment of non – conventional

trading, direct sales to bulk customers and the active

plants that classify for Mega Power

and power generated.

Forward integrate into the distribution business in India.

in a truly liberalized environment with

� Limited experience of operating in an independently regulated system.

� Redirecting power may be constrained by inter

� Downward regulatory and competitive pressure on

� Stringent norms for approval of increase in capital costs for projects in

event of time overrun.

� Stringent environmental norms in the future may add to the cost of

generation.

� Absence of an independent regular for coal

private investments lending to the risk of low availability of coal in the future.

Limited experience of operating in an independently regulated system.

Redirecting power may be constrained by inter- regional connectivity

Downward regulatory and competitive pressure on tariffs.

Stringent norms for approval of increase in capital costs for projects in

event of time overrun.

Stringent environmental norms in the future may add to the cost of

Absence of an independent regular for coal industry and the delay in


Limited experience of operating in an independently regulated system.

regional connectivity

tariffs.

Stringent norms for approval of increase in capital costs for projects in

Stringent environmental norms in the future may add to the cost of

industry and the delay in


Competitors overview Tata PowerTata PowerTata PowerTata Power:::: Tata power is India‟‟‟‟s largest private sector power utility. Its revenues are $ 1 bn. Its Profit

after tax is $ 137 mn$ 137 mn$ 137 mn$ 137 mn. Its generation capacity is

the capacity is 1800 MW. It has presence in generation, transmission and distribution of

power. It supplies power to Mumbai and Delhi regions.

Business strategy: The core business of Tata Power Company is to generate, transmit and distribute

electricity. The Company operates in two business segments: Power and Other services.

The Power segment is engaged in generation, transmission and distribution of electrici

The other services segment includes electronic equipment, broadband services, and project

consultancy and oil exploration.

Competitors overview:-

s largest private sector power utility. Its revenues are $ 1 bn. Its Profit

. Its generation capacity is 2300 MW2300 MW2300 MW2300 MW. Out of that in Mumbai,

capacity is 1800 MW. It has presence in generation, transmission and distribution of

power. It supplies power to Mumbai and Delhi regions.

The core business of Tata Power Company is to generate, transmit and distribute


The Power segment is engaged in generation, transmission and distribution of electrici


consultancy and oil exploration.

s largest private sector power utility. Its revenues are $ 1 bn. Its Profit

. Out of that in Mumbai,

capacity is 1800 MW. It has presence in generation, transmission and distribution of

The core business of Tata Power Company is to generate, transmit and distribute


The Power segment is engaged in generation, transmission and distribution of electricity.


Reliance EnergyReliance EnergyReliance EnergyReliance Energy::::----

Reliance Energy Ltd (REL) formerly known as

(BSES) (BSES) (BSES) (BSES)

is a part of the Anil Dhirubhai Ambani Groupthe Anil Dhirubhai Ambani Groupthe Anil Dhirubhai Ambani Groupthe Anil Dhirubhai Ambani Group

company in

the private sector in India which came into existence when it took over BSES in 2002. The company is the sole distributor of electricity to consumers in the su

It also runs power generation, transmission and distribution businesses in other parts of

Maharashtra, Goa and Andhra Pradesh. REL has significant presence in the field of

execution of the Power projects on EPC (Engineering, Procurement and Commissioning)

basis.

Reliance Energy Ltd (REL) formerly known as Bombay Suburban Electric Supply Bombay Suburban Electric Supply Bombay Suburban Electric Supply Bombay Suburban Electric Supply

the Anil Dhirubhai Ambani Groupthe Anil Dhirubhai Ambani Groupthe Anil Dhirubhai Ambani Groupthe Anil Dhirubhai Ambani Group. It is an integrated power utility

the private sector in India which came into existence when it took over BSES in 2002.

The company is the sole distributor of electricity to consumers in the su




Bombay Suburban Electric Supply Bombay Suburban Electric Supply Bombay Suburban Electric Supply Bombay Suburban Electric Supply

. It is an integrated power utility

the private sector in India which came into existence when it took over BSES in 2002.

The company is the sole distributor of electricity to consumers in the suburbs of Mumbai.




Future Expansion NTPC has formulated a long term Corporate Plan upto 2017. In line with the Corporate

Plan, the capacity addition under

PROJECTS.no CoalCoalCoalCoal 1. NCTPP II ( 2 x 490)

2 Korba III ( 1 x 500)

3 Sipat I (3 x 660) 4. Farakka III ( 1 x 500)

5. Indira Gandhi STPPx 500)

6. Simhadri II ( 2 x 500)7. Vallur I - JV with TNEB ( 2 x 500)

8. Vallur Stage-I Phase

9. Bongaigaon(3 x 250)

10. Mauda ( 2 x 500)

11. Rihand III(2X500)

12. Vindhyachal-IV (2X500)

13. Nabinagar TPP-JV with Railways (4 x 250)

14. Barh II (2 X 660)

15. Barh I (3 X 660)

HydroHydroHydroHydro 1. Koldam HEPP ( 4 x 200)

2. Loharinag Pala HEPP ( 4x 150)

3. Tapovan Vishnugad HEPP (4 x 130)

Total

Future Expansion:-

NTPC has formulated a long term Corporate Plan upto 2017. In line with the Corporate

Plan, the capacity addition under implementation stage is presented below:

PROJECT

Uttar Pradesh

Chhattisgarh

ChhattisgarhFarakka III ( 1 x 500) West Bengal

Indira Gandhi STPP- JV with IPGCL & HPGCL ( 3

Haryana

Simhadri II ( 2 x 500) Andhra PradeshJV with TNEB ( 2 x 500) Tamilnadu

I Phase-II -JV with TNEB ( 1 x 500) Tamilnadu

Assam

Maharashta

Uttar Pradesh

IV (2X500) Madhya Pradesh

JV with Railways (4 x 250) Bihar

Bihar

Bihar

Koldam HEPP ( 4 x 200) Himachal Pradesh

Loharinag Pala HEPP ( 4x 150) Uttarakhand

Tapovan Vishnugad HEPP (4 x 130) Uttarakhand

NTPC has formulated a long term Corporate Plan upto 2017. In line with the Corporate

implementation stage is presented below:

STATE MW

Uttar Pradesh 980

Chhattisgarh 500

Chhattisgarh 1980 West Bengal 500

Haryana 1500

Andhra Pradesh 1000 Tamilnadu 1000

Tamilnadu 500

Assam 750

Maharashta 1000

Uttar Pradesh 1000

Madhya Pradesh

1000

Bihar 1000

Bihar 1320

Bihar 1980

Himachal Pradesh

800

Uttarakhand 600

Uttarakhand 520

17930

BADARPUR THERMAL POWER STATION

BTPSBTPSBTPSBTPS

BTPS PROFILE

Introduction

Organizational Structure

Company Social Responsibility

Awards

Introduction :

BADARPUR THERMAL POWER BADARPUR THERMAL POWER BADARPUR THERMAL POWER BADARPUR THERMAL POWER

Ministry of Energy and is managed by NATIONAL THERMAL POWER

CORPORATION (NTPC) since

management the installed capacity was 300 MW and under NTPC two more unites of 210

MW, each were erected and commissioned.

BTPS was conceived in 1965 to meet the growing electricity demand of Northern Region.

The site construction work started in

commissioning of its first unit on 26th July 1973, 2

’78 & 5th unit in ’8 last 29 years & in the 30 year operation

:-

BADARPUR THERMAL POWER BADARPUR THERMAL POWER BADARPUR THERMAL POWER BADARPUR THERMAL POWER STATIONSTATIONSTATIONSTATION is owned by GOVT. OF INDIA,


CORPORATION (NTPC) since 1 April , 19781 April , 19781 April , 19781 April , 1978. At the time of change over

capacity was 300 MW and under NTPC two more unites of 210

rected and commissioned.


The site construction work started in 1968196819681968 and plant became operational with the

commissioning of its first unit on 26th July 1973, 2nd unit in ;74 , 3rd unit in ’75 , 4

last 29 years & in the 30 year operation BTPSBTPSBTPSBTPS

owned by GOVT. OF INDIA,


. At the time of change over

capacity was 300 MW and under NTPC two more unites of 210


plant became operational with the

unit in ’75 , 4th unit in

BTPSBTPSBTPSBTPS has been moving

from strength to strength. It achieved new heights in Generation, Availability and

substantial reduction in inputs; thereb

performance, towards its end

old & ageing unites, PLF of BTPS has remained higher than the National Average for the

last 16 consecutive years. In the t

current FY and Achieved all our MOU Targets with Excellent Rating.

There is total five unites in the thermal power station , details of the various unites are:

3 units * 95 = 285

2 units * 210 = 420

The installed capacity of the BTPS is 705

The coal sources include:

CCL (Center Coal Field Ltd.)CCL (Center Coal Field Ltd.)CCL (Center Coal Field Ltd.)CCL (Center Coal Field Ltd.)

BCCL (Bharat Coking Coal Ltd. )BCCL (Bharat Coking Coal Ltd. )BCCL (Bharat Coking Coal Ltd. )BCCL (Bharat Coking Coal Ltd. )

ECL (Eastern Coal Field Ltd.)ECL (Eastern Coal Field Ltd.)ECL (Eastern Coal Field Ltd.)ECL (Eastern Coal Field Ltd.)


substantial reduction in inputs; thereby demonstrating overall efficiency in plant

performance, towards its end-objective of providing power to the Capital. In spite of the


last 16 consecutive years. In the top 20 power station of India BTPS has got 8th position in

Achieved all our MOU Targets with Excellent Rating.


lled capacity of the BTPS is 705 MW.

CCL (Center Coal Field Ltd.)CCL (Center Coal Field Ltd.)CCL (Center Coal Field Ltd.)CCL (Center Coal Field Ltd.)

BCCL (Bharat Coking Coal Ltd. )BCCL (Bharat Coking Coal Ltd. )BCCL (Bharat Coking Coal Ltd. )BCCL (Bharat Coking Coal Ltd. )

ECL (Eastern Coal Field Ltd.)ECL (Eastern Coal Field Ltd.)ECL (Eastern Coal Field Ltd.)ECL (Eastern Coal Field Ltd.)


y demonstrating overall efficiency in plant

objective of providing power to the Capital. In spite of the


of India BTPS has got 8th position in

Achieved all our MOU Targets with Excellent Rating.


The water supplied is taken from Agra irrigation canal and is used for cooling. There are

cooling towers provided so that the plant can operate in the closed cycle. BTPS is designed

and engineered by the central water and power.



and engineered by the central water and power.



Organizational Structure s.no Structure

1. Approved capacity

2. Installed capacity

3. Location

4. Coal source

5. Beneficiary state

6. Water source

7. Unit sizes

8. Manpower

9. Coal Consumption

10. Residential Quarters

Organizational Structure:-

Structure Numbers, Quantity, Rupees , MW, Location

705

New Delhi

Jharia and Bokaro

Delhi, since 1 April, 1987.

Agra canal

3 units * 95

2 units * 210

Executive : 374 Supervisor : 217Workmen : 1079

3.9 Million Tones P.A.

Residential Quarters

1201

Numbers, Quantity, Rupees , MW, Location

705 MW

705 MW

New Delhi

Jharia and Bokaro (Bihar)

Delhi, since 1 April, 1987.

Agra canal

Executive : 374 Supervisor : 217 Workmen : 1079

3.9 Million Tones P.A.

Corporate Social Responsibility BTPS plays a important role

better environment , increasing industrial harmony and improving the standard of life of

its employees.

Human Resources

Development

Social Responsibility:-

BTPS plays a important role in Corporate Social Responsibility activities like creating a


CSRCSRCSRCSR

Betterment of

Environment

Social Role

Industrial Harmony

Resources Development

Responsibility activities like creating a


Efforts For the betterment of Environment: As a responsible corporate citizen the station has been

the environment clear and pollution free.

Generation of green

plantation, careful ash disposal and

Social Role: BTPS has progressive philosophy which aims to

and the general masses. Among the facilities provided are

schools namely KENDRIYA KENDRIYA KENDRIYA KENDRIYA

centers, banks, mother dairy outlet, recreational facilities,

sports facilities.

The villagers in the vicinity have been assisted medically by setting up free

medical camps for eye operation, cancer detection, and diabetes and family measures.

Industrial Harmony Communication channels with unions and association and regular periodic meeting helps

in reducing employee grievances to a minimum level.

Some of the schemes in operation are adult literacy, worker’s education,

worker’s participation in management etc.

Efforts For the betterment of Environment:

corporate citizen the station has been making concrete

the environment clear and pollution free.

Generation of green-power, major thrust to contain the emission level, mass tree

plantation, careful ash disposal and productive ash utilization.

progressive philosophy which aims to enhance the quality of life of its employees

and the general masses. Among the facilities provided are self sufficient

KENDRIYA KENDRIYA KENDRIYA KENDRIYA VIDYALAYAVIDYALAYAVIDYALAYAVIDYALAYA and NOTRENOTRENOTRENOTRE

banks, mother dairy outlet, recreational facilities, hospital, medical amenities and


cal camps for eye operation, cancer detection, and diabetes and family measures.

Industrial Harmony :

Communication channels with unions and association and regular periodic meeting helps

in reducing employee grievances to a minimum level.


worker’s participation in management etc.

Efforts For the betterment of Environment:

making concrete effort in making

, major thrust to contain the emission level, mass tree

quality of life of its employees

self sufficient township with two

DAME, DAME, DAME, DAME, shopping

hospital, medical amenities and


cal camps for eye operation, cancer detection, and diabetes and family measures.

Communication channels with unions and association and regular periodic meeting helps


Human Resources Development: BTPS conducts regular training for skill up gradation. Multi

exploiting the potential for the employees in different disciplines. Careful training has

resulted in increase in the ratio of the million unit’s generation per man.

Human Resources Development:

conducts regular training for skill up gradation. Multi - skilling is being stressed for



skilling is being stressed for



Awards Bagged by BTPS: BTPS has bagged many awards and certification not only for its plant management, safety

measure but also for its sensitive corporate role.

To name few awards

Safety Award, Vishwakarma RSafety Award, Vishwakarma RSafety Award, Vishwakarma RSafety Award, Vishwakarma R

Sujhao Yojana, Environment Excellence Awards, Best Young Sujhao Yojana, Environment Excellence Awards, Best Young Sujhao Yojana, Environment Excellence Awards, Best Young Sujhao Yojana, Environment Excellence Awards, Best Young

Manager Awards, Quality Circle Best Of The Session Awards, Manager Awards, Quality Circle Best Of The Session Awards, Manager Awards, Quality Circle Best Of The Session Awards, Manager Awards, Quality Circle Best Of The Session Awards,

Environment Awards etc.Environment Awards etc.Environment Awards etc.Environment Awards etc.

The station is proud recipient

Indian Standard (BIS). The BTPS hospital has also been awarded the ISO 9002

certification.

Awards Bagged by BTPS:

BTPS has bagged many awards and certification not only for its plant management, safety

measure but also for its sensitive corporate role.

To name few awards Meritorious Productivity, Meritorious Productivity, Meritorious Productivity, Meritorious Productivity, Incentive Awards, Incentive Awards, Incentive Awards, Incentive Awards,

Safety Award, Vishwakarma RSafety Award, Vishwakarma RSafety Award, Vishwakarma RSafety Award, Vishwakarma Rashtriya Puraskar, Delhi Sharmik ashtriya Puraskar, Delhi Sharmik ashtriya Puraskar, Delhi Sharmik ashtriya Puraskar, Delhi Sharmik



Environment Awards etc.Environment Awards etc.Environment Awards etc.Environment Awards etc.

recipient ISO ISO ISO ISO 9002900290029002 and 14001140011400114001 certification by the Bureau of


BTPS has bagged many awards and certification not only for its plant management, safety

Incentive Awards, Incentive Awards, Incentive Awards, Incentive Awards,

ashtriya Puraskar, Delhi Sharmik ashtriya Puraskar, Delhi Sharmik ashtriya Puraskar, Delhi Sharmik ashtriya Puraskar, Delhi Sharmik



certification by the Bureau of


FINANCE

FINANCE

Sources of revenue & Expenditure

Accounting policies

Function of finance department

Finance Management in NTPC: National Thermal Power Corporation Ltd(NTPC), some of the largest power sectors in

the country has its objectives to manage the financial operations in

commercial utility practice and to generate returns as per government guidelines. The

finance function can be described as a function concer

cost, optimizing the use its resources, maximizing profits

associates with records keeping of all transactions in accordance with accepted principle of

accounting.

NTPC have the corporate office who are mainly concerned with planning, policy making

and major finance investment a

management and consolidation of account.

The Main Sources of Revenue & Expenditure of BTPS: Sources of Revenue:

Sale of energy.

Rest from residential building.

Finance Management in NTPC:

National Thermal Power Corporation Ltd(NTPC), some of the largest power sectors in

the country has its objectives to manage the financial operations in accordance with sound


finance function can be described as a function concerned with raising resources at least

cost, optimizing the use its resources, maximizing profits and minimizing wises. Finance is



and major finance investment and expenditure decisions besides, control , cash

management and consolidation of account.

The Main Sources of Revenue & Expenditure of BTPS:

Sources of Revenue:

Rest from residential building.

National Thermal Power Corporation Ltd(NTPC), some of the largest power sectors in

accordance with sound


ned with raising resources at least

and minimizing wises. Finance is



nd expenditure decisions besides, control , cash

The Main Sources of Revenue & Expenditure of BTPS:

Interest

� Depreciation

� Investment.

� Bank deposits

� Over standing dues.

Other receipts

Sources of Expenditure

Fuel.

Water charge

Depreciation reserve fund.

Investment.

Bank deposits.

Over standing dues.

Other receipts

of Expenditure:

e

Lubricants and Grease.

Salaries, Wages and Allowances contribution to provident fund.

Repair and Maintenance

Building and civil works

Boiler plant and equipment, Cash handling equipments.

Ancillary equipment.

Cooling water system and wolfing tower.

Electrical equipment.

Lubricants and Grease.


Maintenance:

Building and civil works

Boiler plant and equipment, Cash handling equipments.

Ancillary equipment.

Cooling water system and wolfing tower.

Electrical equipment.


Miscellaneous charges

Depreciation.

General Administration Charges:

Salaries and allowances contribution to provident and other funds.

Welfare and Administrative expenses.

Other Charges:

Interest on Government capital A/C.

Interest on Government current

Miscellaneous charges

General Administration Charges:


Welfare and Administrative expenses.

:

Government capital A/C.

Interest on Government current A/C.


Accounting policies Revenue:

1. Fixed Assets

Fixed assets are shown at historical cost.

Deposits, payment/ liabilities made provision towards compensation ,

rehabilitation and other expenses relate to land in possession are treated as

cost of land.

In the case of commissioned assets, where final settlement of bills with

contracts is yet to be effected , capitalization is done on provisional basis

subject to necessary adjustment in the year of settlement.

2. Capital work in progress

In respect of supply cum executive contracts the value of supply received at site

and accepted is taken as capital work in progress.

Interest on capital expenditure financed out of Government capital. It is

treated as revenue expenditure.

Incidental expenditure during

work in progress.

Accounting policies:-

Fixed assets are shown at historical cost.






Capital work in progress

upply cum executive contracts the value of supply received at site

and accepted is taken as capital work in progress.


treated as revenue expenditure.

Incidental expenditure during construction for the year is appointed to capital

work in progress.






upply cum executive contracts the value of supply received at site


construction for the year is appointed to capital

Inventories:

Inventories are valued at cost, an weighted average basis.

Value of scrap including steel scrap is accounted of in the accounts as and when

sold.

Expenditure:

Depreciation is charged on straight

Depreciation on fixed assets is provided from the year following that in which the assets become available for use.

Inventories are valued at cost, an weighted average basis.


Depreciation is charged on straight line method.

Depreciation on fixed assets is provided from the year following that in which the assets become available for use.


Depreciation on fixed assets is provided from the year following that in which the

Function of finance department

This department handles all the process starting from coal handling to generation

and transmission of electricity

Store section

Coal

Function of finance department:

department handles all the process starting from coal handling to generation

and transmission of electricity.

Finance Finance Finance Finance departmentdepartmentdepartmentdepartment

Cash in bank

Work station

Store section

department handles all the process starting from coal handling to generation

Establishment

Concurrence

Brief Detail of finance section

Cash In Bank:

There are two section in it:

Receipt:Receipt:Receipt:Receipt: In this all the money from sales will go to the

corporate sector

Payments :Payments :Payments :Payments : It involves employee refund, tour advance, water charges,

electricity charges, hospital charges etc.

This section also do the periodic reconciliation of bank statement.

NTPC has accounts in three banks:

ESTABLISHMENT:

This section covers benefits for the employeees. The benefits includes child education,

increment, provident fund, medical etc.

Briefly

Child educationChild educationChild educationChild education

from kg to 12th and after school Rs 2000/month for college + Rs 2000 extra for hostel

Brief Detail of finance section:-

In this all the money from sales will go to the company’s centralise

It involves employee refund, tour advance, water charges,

electricity charges, hospital charges etc.

This section also do the periodic reconciliation of bank statement.

NTPC has accounts in three banks: Central bank of India, state bank of India & ICICI.

ESTABLISHMENT:


increment, provident fund, medical etc.

Child educationChild educationChild educationChild education: any employee who is having 2 kids will get Rs 900/month

and after school Rs 2000/month for college + Rs 2000 extra for hostel

company’s centralise

It involves employee refund, tour advance, water charges,

Central bank of India, state bank of India & ICICI.


kids will get Rs 900/month

and after school Rs 2000/month for college + Rs 2000 extra for hostel

fee. All this payment is made only after the receipt is submitted to the finance

department by the employee. However the employees children are

the merit scholarship which is Rs.9000/month.

Increment :Increment :Increment :Increment : this is given to the employee on the basis of their designation.

For workmen category that is from W1 toW8: 3% of basic pay

For W8 and above which supervisor category: 3.5% of b

For all the executive : 4% of basic pay

Medical:Medical:Medical:Medical: This facility is for all the regular employees and their dependents.

Under the medical facility all the hospitals which is outside the company premises

should registered under the CGHS (central

reason for this registration is that all the medical payments is non taxable which is

a sort of bonus for the company.

NTPC has an agreement with the hospitals outside the company premises which is

known as their panel hospitals so any employee goes to that hospital he/she will not

have to pay any amount from their pocket they just have to submit the receipt of

their bill to the finance department and they will pay on their behalf.

Provident fund:Provident fund:Provident fund:Provident fund:

out of which 8.33% goes to pension and rest goes to the fund. However the


department by the employee. However the employees children are

the merit scholarship which is Rs.9000/month.

this is given to the employee on the basis of their designation.

For workmen category that is from W1 toW8: 3% of basic pay

For W8 and above which supervisor category: 3.5% of basic pay

For all the executive : 4% of basic pay

This facility is for all the regular employees and their dependents.


should registered under the CGHS (central government health scheme). The main


a sort of bonus for the company.


own as their panel hospitals so any employee goes to that hospital he/she will not



Provident fund:Provident fund:Provident fund:Provident fund: : Under this the company will pay 12% of their basic pay



department by the employee. However the employees children are elso entitled for

this is given to the employee on the basis of their designation.

asic pay

This facility is for all the regular employees and their dependents.


government health scheme). The main



own as their panel hospitals so any employee goes to that hospital he/she will not



nder this the company will pay 12% of their basic pay


employee, in case of emergency can withdraw from their fund as a loan which they

have to refund according to their paying capaci

Along with these benefits there are many other benefits which the company offers

to their employees like:

Conveyance maintenance:

Rs.1595/month, all supervisor will get Rs. 1190/month & all workmen

month.

Transport allowance:

540/month,for all workmen Rs.435/month.

House rent allowance:House rent allowance:House rent allowance:House rent allowance:

company’s quarter will get t

Fixed Fixed Fixed Fixed compensatory allowance:compensatory allowance:compensatory allowance:compensatory allowance:

company quarters and 1110% of basic pay for those who live in company quarters.

Lease:Lease:Lease:Lease: those who do not live in company quarters and who do not want HRA (only for

executive level) will get 17130/month as lease.


have to refund according to their paying capacity.


like:

Conveyance maintenance: like for motor cycle, for all the executive will get

Rs.1595/month, all supervisor will get Rs. 1190/month & all workmen

For all the executive Rs.675/month, for all supervisors Rs.

540/month,for all workmen Rs.435/month.

House rent allowance:House rent allowance:House rent allowance:House rent allowance: This is 30% of basic pay. Those who are not staying in

company’s quarter will get this allowance.

compensatory allowance:compensatory allowance:compensatory allowance:compensatory allowance: 5% of basic pay for those who do not live in


those who do not live in company quarters and who do not want HRA (only for

executive level) will get 17130/month as lease.



like for motor cycle, for all the executive will get

Rs.1595/month, all supervisor will get Rs. 1190/month & all workmen will get rs. 790/

For all the executive Rs.675/month, for all supervisors Rs.

This is 30% of basic pay. Those who are not staying in

5% of basic pay for those who do not live in


those who do not live in company quarters and who do not want HRA (only for

CONCURRENCE : This department actually verifies the requirement which is raised by the indenting

department and also verifies the amount

This section take care of purchase concurrence and works concurrence. Purchase

concurrence involves purchase of various office items and works concurrence involves

hiring servicing consultancy etc.

WORK STATION :

This section involves repairs & maintenance of

repair of machinery, oiling in fans, maintenance of A.C., computers etc. under this section

billing is also done after deducting the TDS under section 194(k). at the time of payment

tax is deducted from the bill of s

of the year tax certificate is given to the supplier.

STORE SECTION :

It involves the payment of the material. Material involvea coal, other office expenses like

furniture, almirahs, capital goo

CONCURRENCE :

This department actually verifies the requirement which is raised by the indenting

department and also verifies the amount which is charges by the supplier is genuine or not.

take care of purchase concurrence and works concurrence. Purchase


hiring servicing consultancy etc.

WORK STATION :

This section involves repairs & maintenance of various office item and plant item like



tax is deducted from the bill of supplier and the balance is paid to the supplier. At the end

of the year tax certificate is given to the supplier.

STORE SECTION :


furniture, almirahs, capital goods like boiler, maintenance charges.

This department actually verifies the requirement which is raised by the indenting

which is charges by the supplier is genuine or not.

take care of purchase concurrence and works concurrence. Purchase


various office item and plant item like



upplier and the balance is paid to the supplier. At the end


The payment through this section is direct or via bank. However the main supplier of

capital goods is BHEL.

Another important fact in this section is that approx Rs 1 cr. Per annum is spent on the

filteration of water. The water is supplied by Agra canal which stores Yamuna water but

due to toxicity element huge expenditure incurred every year for the filteration.

COAL :

basically there are three supplier of coal

CCL (Central Coal field limited):CCL (Central Coal field limited):CCL (Central Coal field limited):CCL (Central Coal field limited):

tonne. According to NTPC, their coal is of very low grade.

BCCL(Bharat cooking coal limited):BCCL(Bharat cooking coal limited):BCCL(Bharat cooking coal limited):BCCL(Bharat cooking coal limited):

950/metric tonne.

ECI ECI ECI ECI ((((Eastern coal fields limited):Eastern coal fields limited):Eastern coal fields limited):Eastern coal fields limited):

tonne.

There was a very interesting fact which I came across in this section is that the cost

of transportation (freight charges) exceeds the cost of coal.



The water is supplied by Agra canal which stores Yamuna water but


basically there are three supplier of coal

CCL (Central Coal field limited):CCL (Central Coal field limited):CCL (Central Coal field limited):CCL (Central Coal field limited): They supply coal for rs 1000/metric

tonne. According to NTPC, their coal is of very low grade.

BCCL(Bharat cooking coal limited):BCCL(Bharat cooking coal limited):BCCL(Bharat cooking coal limited):BCCL(Bharat cooking coal limited): They supply coal for rs

Eastern coal fields limited):Eastern coal fields limited):Eastern coal fields limited):Eastern coal fields limited): They supply coal of rsv2200/metric


of transportation (freight charges) exceeds the cost of coal.



The water is supplied by Agra canal which stores Yamuna water but


They supply coal for rs 1000/metric

They supply coal for rs

They supply coal of rsv2200/metric


There is very precise information regarding the freight charges which I came to

know:

From 3 - 5 Km : There will be no cost

5 - 10 Km : rs 40

10 - 20 :rs 70

More than 20 Km : on actual basis (depend upon slabs of transport company).

C & M department(contracts and material):

This is another department which is related with finance department. Any item re

the plant whether parts of machinery or even a new machine is first approve by this

department and then finance department comes into picture This department is

responsible for issuing of tenders regarding the various plant items. Under this depart

there are three types of tenders

Single tender: This type of tender is issued for particular supplier of materials

like original equipment manufacturer. For NTPC, BHEL is the original equipment

manufacturer.


There will be no cost



This is another department which is related with finance department. Any item re



responsible for issuing of tenders regarding the various plant items. Under this depart

there are three types of tenders

This type of tender is issued for particular supplier of materials





This is another department which is related with finance department. Any item regarding



responsible for issuing of tenders regarding the various plant items. Under this department

This type of tender is issued for particular supplier of materials


Limited tender :

issued for the limited supplier.

Open tender : This type of tender is issued when the purchasing items are

substantial and huge amount is involved. Any party can bid in this tender

Complete procedurefor purchasing any item is as follows:

Raising of inquiry by the indenting department

Budget presentation

Budget approval by the financial authority. At this point concurrence comes into

picture.

Selection of material

Material which is is to be purchased is as

grades etc.

Availability of stock

Final list of materials with complete specification.

Collection of information both primary or secondry who can supply the required

material.

Quality checks

This type of tender is issued when the items are limited. It is

issued for the limited supplier.

This type of tender is issued when the purchasing items are


purchasing any item is as follows:

Raising of inquiry by the indenting department


Material which is is to be purchased is as per the quality specification like ISO,

Final list of materials with complete specification.


is issued when the items are limited. It is

This type of tender is issued when the purchasing items are



per the quality specification like ISO,


Based on the material

or open tender is required

Based on the material and their specification tender is issued whether single, limited

or open tender is required.

and their specification tender is issued whether single, limited

Study On Economic Value Added

Research Methodology

Economic Value Added

� Objective of the study

� Background of EVA

� Definition of EVA

� Concept of EVA

� Characteristics

� Steps in EVA calculation

� Interpretation

Calculation of Economic Value Added

Research Methodology Meaning: It is a way to systematically

of how research is done scientifically. Under it we study the various steps that are generally

adopted by a researcher in studying his research problem along with the logic behind them.

It is necessary for the researcher to know not only the research methods/techniques but

also the methodology.

Objectives of research:

The purpose of the research is to discover answers to the questions through the application

of scientific procedures. The main a

and which has not been discovered as yet. Though each research study has its own specific

purpose, we think of research objectives as falling into a number of following broad

categories:

To gain familiarity with the phenomenon or to achieve new insights into it(studies

with these objects in view are termed as

research studies).

Research Methodology:-

It is a way to systematically solve the research problem. It may be understood as a science



cessary for the researcher to know not only the research methods/techniques but

Objectives of research:


of scientific procedures. The main aim of research is to find out the truth which is hidden



liarity with the phenomenon or to achieve new insights into it(studies

with these objects in view are termed as exploratory or

solve the research problem. It may be understood as a science



cessary for the researcher to know not only the research methods/techniques but


im of research is to find out the truth which is hidden



liarity with the phenomenon or to achieve new insights into it(studies

exploratory or formulative

To portray accurately the characteristics of particular individual, situations or a

group (studies with this object in view are termed as

To determine the frequency with which something occurs or with which it is

associated with something else(studies with this object in view are known as

diagnostic research)

To test the hypothesis of a casual relationship between variables(studies with this

object in view are known as

Need & Importa

Research includes scientific and inductive thinking and it promotes the development

of logical habits of thinking and organization.

The role of several fields of applied economics, whether related to business or to the

economy as a whole, has greatly increased n modern times.

Research provides the basis for nearly all government policies in or economic

system.


group (studies with this object in view are termed as descriptive


th something else(studies with this object in view are known as

research).


object in view are known as hypothesis-testing research studies)

Need & Importance of Research:


of logical habits of thinking and organization.


whole, has greatly increased n modern times.



descriptive research).


th something else(studies with this object in view are known as


research studies).




Research has its special significance in solving various operational and planning

problems of business and industry.

Research is equally important for social scientists in studying social relationships

and in seeking answers to various social problems.

Methodology:- Primary method: In this method of data collection, data is collected either by the statistician himself

correspondents or the person employed by him. It is obtained by design to fulfill the data

are original in character and are also generated in a large number of surveys conducted

mostly by government and by institutional and research bodies. Such

done in either of the following ways i.e.

Methods of collecting primary data are:

Direct Personal Investigation

Indirect Oral Investigation

Information from correspondents


problems of business and industry.

arch is equally important for social scientists in studying social relationships

and in seeking answers to various social problems.

Primary method:

In this method of data collection, data is collected either by the statistician himself



mostly by government and by institutional and research bodies. Such

done in either of the following ways i.e.

Methods of collecting primary data are:

Direct Personal Investigation

Indirect Oral Investigation

Information from correspondents


arch is equally important for social scientists in studying social relationships

In this method of data collection, data is collected either by the statistician himself or by his



mostly by government and by institutional and research bodies. Such collection can be

Mailed Questionnaire methods

Secondary Methods:

These are not originally collected but rather then obtained from published and

unpublished sources. If the investigator does not collect the data himself his representatives

uses the data that are already available(whether published or unpublished), the method

collecting is known as “Secondary Method of Data Collection”. Methods or sources of

collecting primary data are:

1. Published:

� Government publications

� Private publications etc.

2. Unpublished:

� Research inst

� Universities.

� Labor bureau, research workers and scholars etc.

Mailed Questionnaire methods

Secondary Methods:

are not originally collected but rather then obtained from published and


uses the data that are already available(whether published or unpublished), the method


collecting primary data are:

Government publications.

Private publications etc.

Research institutional and trade association.

Universities.

Labor bureau, research workers and scholars etc.

are not originally collected but rather then obtained from published and


uses the data that are already available(whether published or unpublished), the method of


Methods of data collection used in this project:

� In this project the primary method of data collection used is the financial reports

and annual booklets of the company

� In this project the second

Websites.

In this project, I have collected the data with the help of websites, search engines, in house

magazines, annual reports, books etc.

As far as methodology is concerned, this is mainly on assumption

using capital expenditure decisions which include cost and benefits and appraisal criteria

like internal rate of return (IRR)

Limitations of

No study is free from limitations which are caused by constraints of time, mone

knowledge base and similar facts. An attempt was made to broad base the study as far as

possible, however it is but natural that the study also suffers from some limitations which

are mentioned below

Methods of data collection used in this project:

In this project the primary method of data collection used is the financial reports

and annual booklets of the company.

In this project the secondary method of data collection used is:

Websites.


magazines, annual reports, books etc.

As far as methodology is concerned, this is mainly on assumption basis however, I will be


like internal rate of return (IRR) .

Study:

No study is free from limitations which are caused by constraints of time, mone



Methods of data collection used in this project:-

In this project the primary method of data collection used is the financial reports


basis however, I will be


No study is free from limitations which are caused by constraints of time, money,



It is practically very difficult to complete this

constraint was one of the limitations

The primary data collection is one of the limitations of this project as per the organization

rules and regulations, providing such data is against the rule.

It is practically very difficult to complete this project in a short span of time , hence time

constraint was one of the limitations.


rules and regulations, providing such data is against the rule.

project in a short span of time , hence time


Economic Value Added

Objective of the Study:

This study has the following objectives:

To examine whether NTPC has been able to generate value for its shareholders.

To compute the performance of the company by applying

indicators like ROI and EVA

Also this study seeks to clarify the concept of EVA especially

from the viewpoint of business unit controlling. The obje

Firstly, the study describes the theory and characteristics of EVA. This gives the

framework to discuss the main objectives: How companies should use EVA considering

both its favorable and unfavorable features? In this contex

recommendations of how EVA should be used as a management tool. This study tries to

bring together the relevant theoretical issues and controlling practices.

Background of EVA:

EVA is not a new concept. An accounting perform

defined to be operating profit subtracted with capital charge. EVA is thus one variation of

Economic Value Added:-

Objective of the Study:-

This study has the following objectives:-


To compute the performance of the company by applying traditional performance

indicators like ROI and EVA


from the viewpoint of business unit controlling. The objective of the study is twofold.



both its favorable and unfavorable features? In this context, the study also offers some



Background of EVA:

EVA is not a new concept. An accounting performance measures called residual income is



traditional performance


ctive of the study is twofold.



t, the study also offers some



ance measures called residual income is


residual income with adjustments to how one calculates income and capital. The concept of

residual income was given by Al

total net gains less the interest on invested capital at the current rate. The EVA concept is

often called Economic Profit (EP) in order to avoid problems caused by the trade marking.

On other hand the name “EVA” is so popular and well known that often all residual

income concepts are called EVA although they do not include even the main elements.

Definition of EVA:

EVA is a residual income that subtracts the cost of capital from the operating

generated by a business. In other words, EVA measures whether the operating profit is

enough, compared to the total cost of capital. EVA is simply after tax operating profit

minus the total annual cost of capital. Unlike the traditional measures of

where only a part of the cost of capital(cost of debt) is deducted, EVA requires deductions

of full cost of capital(cost of debt as well as cost of equity).

Just earning profit is not enough, a business should earn sufficient profit to

cover its cost of capital and create surplus to grow. Stated simply, any profit

earned over and above the cost of capital is Economic Value Added.


residual income was given by Alfred Marshall in 1890. Marshall defined economic profit as



the name “EVA” is so popular and well known that often all residual

are called EVA although they do not include even the main elements.

Definition of EVA:

EVA is a residual income that subtracts the cost of capital from the operating



minus the total annual cost of capital. Unlike the traditional measures of


of full cost of capital(cost of debt as well as cost of equity).


over its cost of capital and create surplus to grow. Stated simply, any profit



fred Marshall in 1890. Marshall defined economic profit as



the name “EVA” is so popular and well known that often all residual

are called EVA although they do not include even the main elements.

EVA is a residual income that subtracts the cost of capital from the operating profit



minus the total annual cost of capital. Unlike the traditional measures of accounting profit



over its cost of capital and create surplus to grow. Stated simply, any profit


Concept of EVA:

The idea behind the EVA is that shareholders must earn a return that compensates the risk

taken. In other words, equity capital has to earn at least same return as similarly risky

investments at equity markets. If that is not the case, then there is no real profit made and

actually the company operates at a loss from the view point of sharehold

hand if EVA is zero, this should be treated as sufficient achievement because the

shareholders have earned a return that compensates the risk. This approach using average

risk adjusted market return as a minimum requirement is justified s

return is easily obtained from diversified long term stock market return reflects the

average return that the public companies generate from their operations. EVA is an

estimate of true “economic” profit

short of the required minimum rate of return that shareholder and lenders could get by

investing in other securities of comparable risk.

Concept of EVA:




actually the company operates at a loss from the view point of sharehold



risk adjusted market return as a minimum requirement is justified s



“economic” profit or the amount by which earnings ex


investing in other securities of comparable risk.




actually the company operates at a loss from the view point of shareholders. On the other



risk adjusted market return as a minimum requirement is justified since that average



or the amount by which earnings exceed or fall


Characteristics of EVA:

The main theory behind EVA

EVA measures whether the operating profit is enough compared to the total cost of capital

employed. EVA is defined as Net operating profit after

capital charge:

EVA=NOPAT EVA=NOPAT EVA=NOPAT EVA=NOPAT –––– CAPITAL COSTCAPITAL COSTCAPITAL COSTCAPITAL COST

EVA=NOPAT EVA=NOPAT EVA=NOPAT EVA=NOPAT ––––COST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EM

WHERE:

NOPAT =Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1

Cost of capital =

Cost of capital or weighted average cost of capital

equity capital and interest bearing debt. Cost of equity capital is the opportunity return

from an investment with same risk as the company has.

Characteristics of EVA:-

The main theory behind EVA:


employed. EVA is defined as Net operating profit after taxes (NOPAT) subtracted with a

CAPITAL COSTCAPITAL COSTCAPITAL COSTCAPITAL COST

COST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EM

Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1

Cost of capital =Cost of equity *Proportion of equity from

capita +Cost of debt

*Proportion of debt from capital*(1

Cost of capital or weighted average cost of capital (WACC) is the average cost of both


from an investment with same risk as the company has.


NOPAT) subtracted with a

COST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EMCOST OF CAPITAL *CAPITAL EMPLOYEDPLOYEDPLOYEDPLOYED

Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1Net operating profit after tax or {EBIT(1----TAX)}TAX)}TAX)}TAX)}

oportion of equity from

*Proportion of debt from capital*(1-tax rate).

(WACC) is the average cost of both


Cost of equity is usually defined with Capital pricing model (CAPM). The

cost of debt is naturally more straightforward, since its cost is explicit. Cost of debt

includes the tax shield due to tax allowance on interest expenses.

Capital employed =capital +reserves and surplus +secured

loans+ unsecured

Steps in EVA calculation

EVA computation requires some basic steps. The common steps are here that may be

modified due to the typical nature of business or processes where it has been used.

Step 1:

Collect and Review Financial Statements

EVA is based on the financial data produced by traditional accounting systems. Most of the

data come from either income statement or balance sheet both of which are available from

general purpose financial statements.

Cost of equity is usually defined with Capital pricing model (CAPM). The


includes the tax shield due to tax allowance on interest expenses.

capital +reserves and surplus +secured

loans+ unsecured loans.

Steps in EVA calculation:-



Collect and Review Financial Statements

is based on the financial data produced by traditional accounting systems. Most of the


general purpose financial statements.

Cost of equity is usually defined with Capital pricing model (CAPM). The estimation of


capital +reserves and surplus +secured



is based on the financial data produced by traditional accounting systems. Most of the


Step 2:-

Identify the company’s structure

A company’s capital structure comprises all of the money invested in the company

Either by the owner or by borrowing from outsiders. It is the proportions of debt

instrument and preferred and common stock of a company’s balance sheet.

However it can be computed by anyone of the following methods:

DIRECT METHOD: By adding all interest bearing debt (both short and long term) to

owner’s equity.

INDIRECT METHOD:

liabilities (or total assets).

Step 3:-

Determine the company’s weighted average cost of capital (WACC)

Estimation of cost of capital is a great challenge so far as EVA calculation for a company is

concerned. The cost of capital depends primarily on the use of fund, not the so

depends on other factors like financial structures, business risks, current interest level,

investors expectations and so on. It is the minimum acceptable rate of return on new

investment made by the firm from the viewpoint of the creditors and in

securities. Some financial management tools are available in this case to calculate the cost

of capital. A common and simple method is Weighted Average Cost of Capital (WACC).

structure




can be computed by anyone of the following methods:

By adding all interest bearing debt (both short and long term) to

By subtracting all non interest bearing liabilities from total

Determine the company’s weighted average cost of capital (WACC)


concerned. The cost of capital depends primarily on the use of fund, not the so



investment made by the firm from the viewpoint of the creditors and in






By adding all interest bearing debt (both short and long term) to

By subtracting all non interest bearing liabilities from total


concerned. The cost of capital depends primarily on the use of fund, not the source. It



investment made by the firm from the viewpoint of the creditors and investors in the firm’s



For calculating WACC we have to know a lot of other issues like

Components of capital employed like equity, debt etc

Respective weight of various components into total amount of capital employed

Factors that affect the risk and return of various

The overall cost of capital is the weighted average of the costs of the various components of

the capital structure

Step 4:-

Calculate the company’s Net Operating Profit after Tax (NOPAT)

NOPAT is a measure of a company

activities and disregarding its capital structure. NOPAT is derived from NOP or EBIT

simply by subtracting calculated taxes from

Step5:-

Calculation of economic value added

Finally, the EVA can be calculated by subtracting capital charges from NOPAT i.e.

EVA=NOPAT-CAPITAL EMPLOYED*WACC

If the EVA is positive, the company created value for its owner. If the EVA is negative

owner’s wealth gets reduced.

For calculating WACC we have to know a lot of other issues like

Components of capital employed like equity, debt etc.

Respective weight of various components into total amount of capital employed

Factors that affect the risk and return of various components in a capital structure.


Calculate the company’s Net Operating Profit after Tax (NOPAT)

NOPAT is a measure of a company’s cash generation capability from recurring business


simply by subtracting calculated taxes from NOP [NOPAT=EBIT (1NOP [NOPAT=EBIT (1NOP [NOPAT=EBIT (1NOP [NOPAT=EBIT (1

Calculation of economic value added


CAPITAL EMPLOYED*WACC


owner’s wealth gets reduced.

Respective weight of various components into total amount of capital employed.

mponents in a capital structure.


’s cash generation capability from recurring business


NOP [NOPAT=EBIT (1NOP [NOPAT=EBIT (1NOP [NOPAT=EBIT (1NOP [NOPAT=EBIT (1----TAX)]TAX)]TAX)]TAX)]



SCOPE OF EVA EVA fundamentally affects the Management System, motivation, mindset and

measurement aspects of the company.

In the present market scenario every second company is making an attempt to impress the

investors, with their excellent financial performance showing

investors, with their excellent financial showing the high growth rate. With the limited

resources available the investor is confused as to who is better and why? Here comes the

concept of EVA, which helps the investors in simpli

USES OF EVA:

� Measures Of Value Added Performance:

EVA concept will help organizations in evaluating and measuring their performance both

qualitatively and quantitatively. It shows financial performance with a new

or offers new approach especially for the companies where equity is viewed as free source

of funds and performance is measured by some earnings figure.

SCOPE OF EVA:-

fundamentally affects the Management System, motivation, mindset and

measurement aspects of the company.


investors, with their excellent financial performance showing the high growth rate. With



concept of EVA, which helps the investors in simplifying investment decision making.

USES OF EVA:-

Measures Of Value Added Performance:


qualitatively and quantitatively. It shows financial performance with a new


of funds and performance is measured by some earnings figure.

fundamentally affects the Management System, motivation, mindset and


the high growth rate. With



fying investment decision making.

Measures Of Value Added Performance:


qualitatively and quantitatively. It shows financial performance with a new pair of glasses


� Basis Of Decision Making:

It will help organization to align its management

based management system can provide the basis on which the companies can take

decisions related to the choice of strategy, investment activities related to research and

development , human development, capital allocation,

divesting business and goal setting.

� Device To Design And Implement Plan :

It can form a basis to devise and implement incentive plan/

that the only way in which managers can earn a high bonus is by creating more values for

shareholders. An EVA based incentive system will encourage managers to operate in such a

way as to minimize the EVA, not just of the operation they o

whole.

Benefits of EVA:

Provides insight of each period

It is a direct link to performance

Reduces cost of capital

Basis Of Decision Making:

It will help organization to align its management system to the EVA process. The EVA



development , human development, capital allocation, mergers and acquisitions,

divesting business and goal setting.

Device To Design And Implement Plan :

It can form a basis to devise and implement incentive plan/bonus. This



way as to minimize the EVA, not just of the operation they oversee, but of the company as a

Benefits of EVA:-

Provides insight of each period

It is a direct link to performance

Reduces cost of capital

system to the EVA process. The EVA



mergers and acquisitions,

Device To Design And Implement Plan :

bonus. This plan will ensure



versee, but of the company as a

Improves operational efficiency

Better management of assets

Easy to communicate to the employees

Helps managers to make better decisions by charging their operations for the cost of

capital

Limitations of

Not easy to use, too complicated for small business

Recommends inexpensive debts in order to reduce the cost of capital

A passive tool, measures past performance

EVA can be improved by investing in high return projects

return for the same capital base

Earn more profit without using more capital

Employ less capital

Invest capital in projec

Improves operational efficiency

Better management of assets

Easy to communicate to the employees


EVA:-

Not easy to use, too complicated for small business


measures past performance ways to improve EVA

EVA can be improved by investing in high return projects. By increasing the rate of

return for the same capital base

Earn more profit without using more capital

Invest capital in projects with greater return potential



EVA

By increasing the rate of

Interpretation: -

A positive EVA means the firm generated a return to invested capital that exceeds the

opportunity cost of capital.

The value of firm should increase

A negative EVA means the firm did not generate

capital.

The value of the firm should decline

Return On Investment

A performance measures used to evaluate the efficiency of an investment or to compare the

efficiency of a number of different investments. The return on investment, often called a

company’s return on total assets, measures the overall profit made on an inv

expressed as a percentage of the total invested. Like return on

return on investment measures a company’s profitability and its management’s ability to

generate profits from the funds investors have placed at its dispo

It is often said if a company’s operation cannot generate net profit as a percentage of the

amount invested greater than the interest rate on financial markets, its future is grim. In

finance rate of return also known as return on investment, rate of

return, is the ratio of money gained or lost on an investment relative to the amount of

money invested.

-


The value of firm should increase

A negative EVA means the firm did not generate sufficient return to cover its cost of

The value of the firm should decline

Return On Investment (ROI):



company’s return on total assets, measures the overall profit made on an inv

expressed as a percentage of the total invested. Like return on assets,

on investment measures a company’s profitability and its management’s ability to

generate profits from the funds investors have placed at its disposal.



finance rate of return also known as return on investment, rate of profit or sometimes just

is the ratio of money gained or lost on an investment relative to the amount of


sufficient return to cover its cost of



company’s return on total assets, measures the overall profit made on an investment

assets, or return on equity,

on investment measures a company’s profitability and its management’s ability to



profit or sometimes just

is the ratio of money gained or lost on an investment relative to the amount of

Return on investment analysis is one of the several approaches to build a financial business

case. The term means that the d

magnitude and training of expected gains to the investment costs.

Decision makers will also look for ways to improve ROI by reducing costs, increasing gains,

or accelerating gains.

The return on investment often called a company’s return on total assets, measures the

overall profit made on an investment expressed percentage of the amount invested. Like

return on assets, or return on equity return on investment measures a company’s

profitability an d its management’s ability to generate profit from the funds investors have

placed at its disposal.


amount invested greater than the interest rate on financial mark



money invested.

Return on investment analysis

case. The term means that the decision makers evaluate the investment by comparing the


Decision makers will also look for ways

or accelerating gains.





investment often called a company’s return on total assets, measures the



d its management’s ability to generate profit from the funds investors have










ecision makers evaluate the investment by comparing the


investment often called a company’s return on total assets, measures the



d its management’s ability to generate profit from the funds investors have


ets, its future is grim. In



is one of the several approaches to build a financial business


to improve ROI by reducing costs, increasing gains,




profitability and its management’s ability to generate profit from the funds investors have

placed at its disposal.

CALCULATION OF RETURN ON INVESTMENT

The basic return on investment can be found by dividing a company’s net profit(also called

as net earnings ) by the total investment (total debt plus total equity) and by multiplying by

100 to arrive at a percentage

Return on investment =net profit/ capital employed *100

Return on investment is a very popular metric because of its versatility and simplicity.

That is, if an investment does not have appositive ROI or if there are other opportunities

with a higher ROI, then the investment should not be undertaken.



on assets, or return on equity return on investment measures a company’s


CALCULATION OF RETURN ON INVESTMENT :

investment can be found by dividing a company’s net profit(also called


100 to arrive at a percentage

net profit/ capital employed *100

rn on investment is a very popular metric because of its versatility and simplicity.


with a higher ROI, then the investment should not be undertaken.



on assets, or return on equity return on investment measures a company’s


:-

investment can be found by dividing a company’s net profit(also called


net profit/ capital employed *100

rn on investment is a very popular metric because of its versatility and simplicity.


Calculation of Economic Value Added STATEMENT SHOWING EBIT & NOPAT PARTICULARS 2007

INCOME

NET SALES 370501

OTHER INCOME 29676

[A]

400177

EXPENDITURE

FUEL COST 220202

EMPLOYEE COST 18960

DEPRICIATION 21385

OTHER EXPENDITURE

19100

[B]

279647

EBIT (A-B) 120530

NOPAT=EBIT(1-TAX)

79562

Calculation of Economic Value Added

STATEMENT SHOWING EBIT & NOPAT :-

2007-08 2008-09

370501 419237

29676 33490

400177 452727

220202 271107

18960 24631

21385 23645

19100 19520

279647 338903

120530 113824

79562 75135

Calculation of Economic Value Added:-

2009-2010

463226

18987

482213

294627

24123

26500

20271

365521

116692

77028.389

CAPITAL EMPLOYED DEFINATION :- Capital employed is the value of assets that contributes to a company’s ability to generate

revenue. In general, it represents the capital investment necessary for a business to

function. Consequently, it is not measures of assets, but of a capital

share and long term liability.

PARTICULARS

NET WORTH

PAID & SHARE CAPITAL

RESERVE & SURPLUS

DEBENTURE REDEMPTION RESERVE

A

ADD-: SECURED LOANS

ADD-: UNSECURED LOANS

B

CAPITAL EMPLOYED(A+B)

CAPITAL EMPLOYED :-

Capital employed is the value of assets that contributes to a company’s ability to generate

it represents the capital investment necessary for a business to

function. Consequently, it is not measures of assets, but of a capital investment;

share and long term liability.

2007-08 2008-09

82455 82455

443931 491246

13602 16889

539988 590590

73147 89695

198759 255981

271906 345676

811894 936267

Capital employed is the value of assets that contributes to a company’s ability to generate

it represents the capital investment necessary for a business to

investment; stocks or

2009-2010

82455

541920

19867

644242

90799

287171

377970

1022212

COMPUTATION OF WEIGHTED AVERAGE COST OF

CAPITAL (WACC) FOR THE YEAR 2007

PARTICULARS AMOUNT

Equity, reserve and surplus

539988

Debt 271906

Total 811894

Weighted average cost of capital = ke * w1 + kd * w2

Working notes -:

• Cost of equity is taken as

14% as per govt. norms

• Cost of Debt = Total interest expenses * {(1

= 17981*(1


CAPITAL (WACC) FOR THE YEAR 2007 -08

AMOUNT WEIGHT COST

539988 66.5 0.14

271906 33.5 0.048

811894


=.14*66.5 + 0.048*33.5

= 10.92%

Cost of equity is taken as

14% as per govt. norms

Cost of Debt = Total interest expenses * {(1-effective tax rate)/total borrowing}

= 17981*(1-0.3399)/244844


TOTAL

9.31

1.61

10.92

effective tax rate)/total borrowing}

=0.048



PARTICULARS AMOUNT


590590

Debt 345676

Total 936267

Weighted average cost of capital

Working notes -:




AMOUNT WEIGHT COST

590590 63.07 0.14

345676 36.93 0.049

936267


=0.14*63.07+ 0.049*36.93

= 10.63%

taken as 14% as per the govt. norms


TOTAL

8.82

1.81

10.63

0.14*63.07+ 0.049*36.93

• Cost of Debt = Total interest expenses * {(1 =20229*(1

= 0.049

Where effective tax rate is taken to be 33.99% as per income tax act



PARTICULARS AMOUNT


644242

Debt 377970

Total 1022242


Cost of Debt = Total interest expenses * {(1-effective tax rate)/total borrowing}

=20229*(1-0.3399)/271906

= 0.049

Where effective tax rate is taken to be 33.99% as per income tax act



AMOUNT WEIGHT COST

644242 63.02 0.14

377970 36.98 0.035

1022242


= 0.14*63.02 + 0.035*36.98

= 10.11%



TOTAL

8.82

1.29

10.11

= 0.14*63.02 + 0.035*36.98

Working notes -:


• Cost of Debt = Total interest expenses * {(1

= 18089* (1

=0.0506

Comparison of EVA & ROI for the 3 financial years i.e. 20072009,2009-2010:- Statement showing EVA & ROI comparison of NTPC(In millions)

EVA CALCULATION

EBIT

TAX RATE

NOPAT

CAPITAL EMPLOYED WACC

EVA=NOPAT-(CAPITAL EMPLOYED*WACC) ROI=(EBIT/CAPITAL EMPLOYED)*100 Working notes (calculation of EVA) Year 2006-07: 71072-(730812*0.1133)

Cost of equity is taken as

Cost of Debt = Total interest expenses * {(1-effective tax rate)/total

= 18089* (1-0.03399)/345678

0.0506

Comparison of EVA & ROI for the 3 financial years i.e. 2007

Statement showing EVA & ROI comparison of NTPC(In millions):-

2006-07 2007-08 2008-09

107668 120530 113824

33.99% 33.99% 33.99%

71072 79562 75135

730812 811894 936267

11.33% 10.92% 10.63%

(11729) (9097) (24390)

14.73% 14.85% 12.16%

Working notes (calculation of EVA)

(730812*0.1133)


Comparison of EVA & ROI for the 3 financial years i.e. 2007-2008, 2008-

2009-2010

126945

33.99%

83796

1022242

10.11%

(19553)

12.42%

=(11729)

Year 2007-08: 79562-(811894*0.1092)

= (9097)

Year 2008-09: 75135-(936267*0.1063)

= (24390)

Year 2009-2010: 83796-(1022242*.1011)

= (19553)

Graphical representation

Calculation of ROI Year 2006-07: 107668/730812*100

= 14.73%

Year 2007-08: 120530/811894*100

= 14.85%

-30000

-25000

-20000

-15000

-10000

-5000

0

2007

(811894*0.1092)

(936267*0.1063)

(1022242*.1011)

Graphical representation:-

07: 107668/730812*100

08: 120530/811894*100

2008 2009 2010

EVA

Year 2008-09 = 113824/936267*100

= 12.16%

Year 2009-2010: 126945/1022242*100

= 12.42%

Graphical representation

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

2007

09 = 113824/936267*100

2010: 126945/1022242*100

Graphical representation:-

2008 2009 2010

ROI

INTERPRETATION The above statement basically implies that unlike the traditional measure of accounting

measures of accounting profit where only a part of the cost of capital (cost of debt) is

deducted , EVA requires deduction of full cost of capit

equity).

Return on investment measures a company’s profitability &

generate profits from funds investors have placed at its disposal but just earning profit is

not enough, a business should earn sufficient profit to cover its cost of capital & create

surplus to grow.

Therefore it is advisable to the company to follow the EVA method as it gives a more

rigorous. A positive EVA means the firm generated a return to invested capital that

exceeds the opportunity cost of capital i.e. the “value”

In this case of NTPC EVA comes out to be negative th

company did not added any value to the shareholder’s wealth but if we look at ROI is not

necessarily good for the shareholders the reason could be that ROI measures profitability ,

while EVA measures shareholder wealth

of before-tax operating profit.

The reason for EVA being negative is the cost of capital being greater than the operating

profit of the firm i.e. there is no capital employed rather there is the capital ero

place. It shows that NTPC is not considering the cost aspects.

INTERPRETATION -:

The above statement basically implies that unlike the traditional measure of accounting


deducted , EVA requires deduction of full cost of capital (cost of debt as well

Return on investment measures a company’s profitability & its management’s ability to



ble to the company to follow the EVA method as it gives a more


exceeds the opportunity cost of capital i.e. the “value”

In this case of NTPC EVA comes out to be negative thereby implying that the profit of the



while EVA measures shareholder wealth. EVA focuses on after-tax instead income instead

tax operating profit.


profit of the firm i.e. there is no capital employed rather there is the capital ero

place. It shows that NTPC is not considering the cost aspects.

The above statement basically implies that unlike the traditional measure of accounting


al (cost of debt as well the cost of

its management’s ability to



ble to the company to follow the EVA method as it gives a more


ereby implying that the profit of the



tax instead income instead


profit of the firm i.e. there is no capital employed rather there is the capital erosion taking

EVA vs. Return of Investment (ROI) There are two very good reasons

ROIC) as a controlling tool and as a performance measure.

1. Steering failure in ROI

Increase in ROI is not necessarily good for shareholders i.e. maximizing ROI cannot be set

as a target. Increase in ROI would be unambiguously good only in the companies where

capital can be neither increased

2. EVA is more practical and understandable than ROI As an absolute and income statement based measure EVA is quite easily explained

to non-financial employees and furthermore the impacts of different day

actions can be easily

decreases EVA with $100. (ROI is neither easy to explain to employees nor can day

to-day actions easily be expressed in terms of ROI)

This latter benefit if often totally forgotten in academic discussio

course, be visible in desk studies or empirical studies which try to trace the

correlation of EVA and share prices.

Reason 1 : Steering failure in ROI

EVA vs. Return of Investment (ROI):-

reasons why EVA is much better than ROI (RONA, ROCE,

ROIC) as a controlling tool and as a performance measure. There are as follows:

Steering failure in ROI:-


in ROI would be unambiguously good only in the companies where

capital can be neither increased nor decreased.

EVA is more practical and understandable than ROI:-

As an absolute and income statement based measure EVA is quite easily explained

financial employees and furthermore the impacts of different day

actions can be easily turned into EVA- figures since an additional $100 cost

decreases EVA with $100. (ROI is neither easy to explain to employees nor can day

day actions easily be expressed in terms of ROI)

This latter benefit if often totally forgotten in academic discussio


correlation of EVA and share prices.

Steering failure in ROI:-

why EVA is much better than ROI (RONA, ROCE,

are as follows:


in ROI would be unambiguously good only in the companies where

-

As an absolute and income statement based measure EVA is quite easily explained

financial employees and furthermore the impacts of different day- to- day

figures since an additional $100 cost

decreases EVA with $100. (ROI is neither easy to explain to employees nor can day-

This latter benefit if often totally forgotten in academic discussion since it cannot of


suppose of a SBU earning currently a return (ROI,ROIC,ROCE) of 30 % and

suppose that this SBU faces an investment opportunity producing a return of 20 %

(an error occurred while processing this directive)

• Before investment: Capital 100, Operating profit 30, Capital cost 100 %

• ROI = 30/100=30%, EVA=30

• Investment’s

yearly operating profit is 20 % *20= 4

• After investment : Capital 100, Operating profit 30, Capital Cost 10%

• ROI = 34/100= 28% , EVA = 34

• In this case decreasing ROI is good for

not be maximized and therefore it is problematic controlling tool.

• Usually large corporations have at least some very profitable units and

particularly these units are steered wrongly with ROI.

Reason 2: EVA is more practical and understandable than rate of return(ROI):-

• Usually the rate of return is not used and totally understood at the lower level of

organization in the companies using ROI as the prime performance measure. i.e.

operating people do not use ROI while making day to day operation actions

• This kind of behavior is obvious since cost reduction, revenue increases capital

increases and reductions etc. are too difficult to convert into change of ROI with day

to activities

• Further those percentage would not be so informative to operating people than

absolute dollar changes in operating profit.


that this SBU faces an investment opportunity producing a return of 20 %

(an error occurred while processing this directive)

Before investment: Capital 100, Operating profit 30, Capital cost 100 %

ROI = 30/100=30%, EVA=30 – (10%*100) = 20

Investment’s capital requirement 20, return 20%/year : Thus increase in

yearly operating profit is 20 % *20= 4

After investment : Capital 100, Operating profit 30, Capital Cost 10%

ROI = 34/100= 28% , EVA = 34 – (10 % *120) = 22

In this case decreasing ROI is good for the shareholders, thus ROI should


Usually large corporations have at least some very profitable units and

particularly these units are steered wrongly with ROI.

EVA is more practical and understandable than rate of

Usually the rate of return is not used and totally understood at the lower level of


le do not use ROI while making day to day operation actions

This kind of behavior is obvious since cost reduction, revenue increases capital


e percentage would not be so informative to operating people than

absolute dollar changes in operating profit.


that this SBU faces an investment opportunity producing a return of 20 %

Before investment: Capital 100, Operating profit 30, Capital cost 100 %

capital requirement 20, return 20%/year : Thus increase in

After investment : Capital 100, Operating profit 30, Capital Cost 10%

the shareholders, thus ROI should


Usually large corporations have at least some very profitable units and

EVA is more practical and understandable than rate of

Usually the rate of return is not used and totally understood at the lower level of


le do not use ROI while making day to day operation actions

This kind of behavior is obvious since cost reduction, revenue increases capital


e percentage would not be so informative to operating people than

• This is even more understandable when we keep in mind that ROI is not an

unambiguous measure.

• Thus in ROI-steered companies the capital base is

operating people do not even realize that tying money in inventories or sales

receivables is costly.

• Therefore the meaning of capital efficiency is often forgotten and some operating

people do not even realize that tying mo

costly.

• EVA, in contrast to ROI, is an absolute measure easy to integrate into operating

activities since all cost reductions and revenue increases are already in terms of

EVA (reduction in all costs in one period

the similar fashion capital increases/ reductions are also fairly easy to turn into

change of EVA.

• Furthermore EVA is (in contrast to ROI) an unambiguous measure i.e. always

increasing EVA increases the position o

• It is also very common that in ROI

know what profitability is.

• Often many educated employees know something about the flaws of ROI and

therefore they have some vague conception that real profit

improve although ROI decreases.

This is even more understandable when we keep in mind that ROI is not an

unambiguous measure.

steered companies the capital base is left to very little attention in


Therefore the meaning of capital efficiency is often forgotten and some operating

people do not even realize that tying money in inventories or sales receivables is

EVA, in contrast to ROI, is an absolute measure easy to integrate into operating


EVA (reduction in all costs in one period = increase in EVA in the same period). In


Furthermore EVA is (in contrast to ROI) an unambiguous measure i.e. always

increasing EVA increases the position of shareholders.

It is also very common that in ROI-steered companies many employees do not really

know what profitability is.

Often many educated employees know something about the flaws of ROI and

therefore they have some vague conception that real profit

improve although ROI decreases.

This is even more understandable when we keep in mind that ROI is not an

left to very little attention in


Therefore the meaning of capital efficiency is often forgotten and some operating

ney in inventories or sales receivables is

EVA, in contrast to ROI, is an absolute measure easy to integrate into operating


= increase in EVA in the same period). In


Furthermore EVA is (in contrast to ROI) an unambiguous measure i.e. always

steered companies many employees do not really

Often many educated employees know something about the flaws of ROI and

therefore they have some vague conception that real profit ability might also

FINDINGS:- � ROI increases in 2007-08 because of increase in EBIT but at the same time there is an

increase in Capital employed also thus implying that the effect of EBIT on ROI is more

as compared to that of capital employed.

� During the year 2007-08 the ROI has gone up by 12

year 2008-09, the ROI has decreased

increased by 26 basic points.

� As we see in the year 2007

cost of capital but in 2008

than the operating profit. In the year 2009

EBIT.

� EVA is better than ROI as an indicator of creation of value.

� Calculation reflects the idea that firm must earn enough to cover the cost of debt and

the opportunity cost of equity before it even begins to create value.

08 because of increase in EBIT but at the same time there is an


that of capital employed.

08 the ROI has gone up by 12 basic points

09, the ROI has decreased by 269 basic points. In the year 2009

points.

2007-08, EVA increases because of increase in EBIT & decrease in

cost of capital but in 2008-09 it move towards negative as the cost of capital is more

than the operating profit. In the year 2009-10, EVA increases because of increase in

r than ROI as an indicator of creation of value.

Calculation reflects the idea that firm must earn enough to cover the cost of debt and


08 because of increase in EBIT but at the same time there is an


points whereas during the

. In the year 2009-10, ROI

08, EVA increases because of increase in EBIT & decrease in

09 it move towards negative as the cost of capital is more

10, EVA increases because of increase in

Calculation reflects the idea that firm must earn enough to cover the cost of debt and


CONCLUSIONS:- The EVA depicts the actual profits benefit over cost of capital employed where as ROI

shows actual profits over normal profits. Hence EVA is good measure of evluating

performance as it evaluate profit against cost.

If EVA is positive, that it indicates that the firm is ad

EVA is negative , it shows that the firm is destroying value evan though it may be reporting

a positive or growing earning per share(EPS) or return on investment(ROI). This means, if

a firm wants to have an attractive

other investment options with a similar risk.

EVA shows financial performance with a new pair of glasses or offers new approach

especially for the companies where equity is viewed as free source of f

performance is measured by some earning figure.

Inflation can distort the value of EVA. Furthermore EVA suffers from wrong

periodization Economic value added is a residual income variable. It is defined as Net

operating profit after tax subtrac

In a periodical performance measurement EVA can how

misleading information because it suffers from the same shortcomings as (ROI). EVA

inspite of its fault seems to have importance for

and controlling tool.

-

actual profits benefit over cost of capital employed where as ROI


performance as it evaluate profit against cost.

If EVA is positive, that it indicates that the firm is adding value to its shareholders. But if



a firm wants to have an attractive invstment: it has to have a return that would exceed

other investment options with a similar risk.


especially for the companies where equity is viewed as free source of f

performance is measured by some earning figure.



operating profit after tax subtracted cost of capital tied in operations.

In a periodical performance measurement EVA can how-ever in some occasions give


inspite of its fault seems to have importance for companies as a performance measurement

actual profits benefit over cost of capital employed where as ROI


ding value to its shareholders. But if



invstment: it has to have a return that would exceed


especially for the companies where equity is viewed as free source of funds and



ever in some occasions give


companies as a performance measurement

RECOMMENDATION It is suggested that NTPC should take the following steps to change its negative EVA to

positive EVA such as:

� Earning more profit without using more capital and this

a cost analysis over product line or by doing analysis of expenses.

� Change capital structure to reduce capital cost by employing less capital or invest

capital in projects with greater return potential.

� Decrease overall cost o

available or it can buy back its equity.

RECOMMENDATION :-

It is suggested that NTPC should take the following steps to change its negative EVA to

Earning more profit without using more capital and this could be done by carry out


Change capital structure to reduce capital cost by employing less capital or invest

capital in projects with greater return potential.

Decrease overall cost of capitalby paying debts, loans etc. if sufficient funds are

available or it can buy back its equity.

It is suggested that NTPC should take the following steps to change its negative EVA to

could be done by carry out


Change capital structure to reduce capital cost by employing less capital or invest

f capitalby paying debts, loans etc. if sufficient funds are

APPENDICES

BIBLIOGRAPHY:- BOOKS

1. EVA and value based management- a practical guide to implementation

2. Financial management and policy

3. Financial Management by I.M. Pandey.

4. Stern Stewart & co.(1991), The Quest for value. The EVA Management guide.

5. NTPC journals

6. MAFA

WEBSITES:-

� www.ntpc.co.in

� www.google.com

� www.reliancepower.com

� www.tatapower.com

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