Annual Report - CESC - 2009-2010

CESC LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

The Directors have pleasure in presenting the Annual Report and Audited
Accounts of CESC Limited for the year ended 31 March 2010.



Financial Results (Rs. Crores)
Particulars 2009-10 2008-09

Earnings from Sale of Electricity 3292.84 3,031.32
Other Income 156.20 170.02
Total Income 3,449.04 3,201.34
Profit before Depreciation &Taxation 727.69 639.77
Depreciation (205.64) (174.90)
Taxation (88.75) (55.18)
Profit before transfer to Reserves 433.30 409.69
Profit brought forward from previous year 125.91 135.14
Reserve for unforeseen exigencies (17.38) (15.58)
General Reserve (350.00) (350.00)
Proposed Dividend @ Rs. 4 per
Equity Share & tax thereon (58.27) (58.47)
Leaving a balance carried forward 133.56 125.91

Performance Overview:

During the year under review, the Company's earnings from sale of
electricity increased by 8.6% over last year to reach Rs. 3,292.8 crore -
the overall increase in total income was 7.7% (from Rs. 3,201.3 crore in
2008-09 to Rs. 3449.04 crore in 2009 10). Profit before depreciation and
taxation (PBDT) reflected a year-on-year increase of 13.7%. After providing
for depreciation of Rs. 205.6 crore and taxation of Rs. 88.8 crore, the
profit after taxes (PAT) for 2009-10 stands at Rs. 433.3 crore, which
reflects a 5.8% increase over the PAT figure of the previous year amounting
Rs. 409.7 crore.

A detailed review of the operations for the year ended 31 March 2010 is
given in the Management Discussion &Analysis, which forms a part of this
Report.

Dividend:

The Board is pleased to recommend payment of equity dividend for the year
ended 31 March 2010 at the rate of Rs. 4 per share on the paid-up equity
share capital as on that date. The dividend is proposed to be paid to those
shareholders whose names appear in the Register of Members of the Company,
or appear as beneficial owners as per particulars furnished by the
Depositories at the close of business on 9 July 2010. No tax on the said
dividend will be payable by the shareholders - as required, the Company
will pay appropriate tax thereon.

Subsidiaries:

As on 31 March 2010, CESC had eight subsidiaries: Spencer's Retail Limited
and its two subsidiaries (Au Bon Pain Cafe India Limited and Music World
Retail Limited); CESC Properties Limited and its wholly owned subsidiary -
Metromark Green Commodities Private Limited, Haldia Energy Limited and its
wholly owned subsidiary, Dhariwal Infrastructure Limited, and Nalanda Power
Company Limited. The details of operations of these subsidiaries are given
in the section 'Subsidiaries' in the Management Discussion &Analysis.

In accordance with the exemption granted by the Central Government under
Section 212(8) of the Companies Act, 1956, ('the Act') the accounts of the
above subsidiaries for the year 2009-10 and the related detailed
information will be made available to the holding and subsidiary companies
investors seeking such information at any point of time and are not
attached. Copies of the annual accounts of the subsidiary companies will
also be kept open for inspection by any investor in the Registered Office
of the Company and of the subsidiary companies concerned. The Company shall
furnish a hard copy of accounts of subsidiaries to any shareholder on
demand. The Company publishes Consolidated Financial Statements of the
Company and its subsidiaries duly audited by Messrs. Lovelock & Lewes,
Auditors, prepared in compliance with the applicable Accounting Standards
and the Listing Agreements with the Stock Exchanges. The Consolidated
Financial Statements for the year 2009-10 form part of the Annual Report
and Accounts.

Projects:

The third unit of 250 MW at Budge Budge Generating Station was commissioned
in February 2010, together with an associated power evacuation system
comprising 89 Km of 220 kV double circuit transmission lines.
Simultaneously, the 220 kV Eastern Metropolitan Substation with three 160
MVA, 220/132/33 kV transformers was also commissioned.

Haldia Energy Limited, a subsidiary of your Company, is in the process of
setting up a 2 X 300 MW coal fired thermal power plant at Haldia.
Substantial land acquisition has been completed for the first phase of the
project; also, the required clearances for the project (including
environmental clearances) have been obtained. The Ministry of Coal has
awarded the coal linkages for the proposed power plant. Site preparation
activities are now in progress.

Another subsidiary of your Company, Nalanda Power Company Limited, has
signed a Memorandum of Understanding with the Bihar State Electricity Board
to develop a 2,000 MW power project at Pirpainti Anchal, District
Bhagalpur, in two phases of 1,000 MW each. Preliminary approvals for this
project have been received and the company has filed applications for the
requisite approvals and clearances.

Dhariwal Infrastructure Limited, a wholly owned subsidiary of Haldia Energy
Limited, a subsidiary of the Company, is in the process of setting up a 2 X
300 MW coal fired thermal power plant near Chandrapur (Maharashtra).
Dhariwal Infrastructure has already acquired land for the plant, as well as
all statutory clearances, including environmental clearance from the
Ministry of Environment and Forests, as well as the Water Availability
Certificate from Water Resources Department, Government of Maharashtra. The
company also has the necessary coal linkages for the entire project from
South Eastern Coalfields Limited (SECL). As on date, the company is
involved in various pre-construction activities, viz. acquiring land for
the railway corridor, site enabling activities and installation of
construction power and water facilities. The company has also issued a
Letter of Intent for the engineering, procurement and commissioning (EPC)
of the complete 'balance of plant' systems on a key vendor.

A write-up on your Company's ongoing projects can be read in the 'Projects'
section and the 'Subsidiaries' section of the accompanying Management
Discussion &Analysis.

Awards:

During the year, your Company won the following awards

1. The Company has earned recognition from the United Nations Framework
Convention on Climate Change (UNFCCC) for its Clean Development Mechanism
(CDM) status.

2. Titagarh Generating Station's water conservation and recycling measures
were recognised by external experts: the station was adjudged as 'Water
Efficient Unit' in the National Award on Excellence in Water Management,
2009, conducted by CII Godrej GBC.

3. In recognition of its safety record and initiatives, Southern Generating
Station was awarded with 'Greentech Silver Award for Safety - 2010'
organised by Greentech Foundation.

Directors:

In terms of provisions of Section 256, read with Section 255 of the Act and
Article 102 of the Articles of Association of the Company, Mr. B. P.
Bajoria and Mr. P. K. Khaitan, Directors, retire by rotation at the
forthcoming Annual General Meeting and, being eligible, offer themselves
for re-appointment. The necessary resolutions for obtaining approval of
the Members have been incorporated in the notice of the forthcoming Annual
General Meeting. The requisite disclosure regarding the re-appointment of
the above Directors has been made in the Report of Corporate Governance
which forms part of the Directors' Report.

Mr. R. K. Misra was appointed by the Government of West Bengal as its
nominee in place of Mr. B. K. Paul, effective 12 January, 2010. The Board
places on record its appreciation of the valuable contribution made by Mr.
Paul during his tenure as a Director.

Listing:

The equity shares of your Company continue to be listed at the Bombay Stock
Exchange (BSE), the National Stock Exchange (NSE), the Calcutta Stock
Exchange (CSE) and the London Stock Exchange.

The Company has paid the requisite listing fee to the Stock Exchanges upto
the financial year 2010-11.

Directors' Responsibility Statement:

Pursuant to Section 217(2AA) of the Act, your Directors hereby state and
confirm that:-


i) in the preparation of annual accounts for the financial year ended 31
March 2010, the applicable accounting standards have been followed along
with proper explanation relating to material departures;

ii) appropriate accounting policies have been selected and applied
consistently and judgments and estimates have been made that are reasonable
and prudent so as to give a true and fair view of the state of affairs of
the Company as at 31 March 2010 and of the profit for the period from 1
April 2009 to 31 March 2010;

iii) proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the Act
for safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities;

iv) the annual accounts for the financial year ended 31 March 2010 have
been prepared on a going concern basis.

Promoter Group:

Pursuant to intimation from the Promoters, the names of the Promoters and
entities constituting 'group' are disclosed in the Annual Report for the
purpose of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997.

Corporate Governance:

A report on Management Discussion and Analysis is also attached herewith
(Annexure - W). A separate Report on Corporate Governance (Annexure 'B'),
along with Additional Shareholder Information (Annexure 'C'), as prescribed
under the Listing Agreement with the Stock Exchanges, are annexed as a part
of this Report along with the Auditor's Certificate.

Fixed Deposits:

Your Company has not accepted any deposits within the meaning of Section
58A of the Act and, as such, no amount of principal or interest was
outstanding as on the date of the Balance Sheet. 699 deposits aggregating
Rs. 1.07 crore remained unclaimed as on 31 March 2010.

Auditors:

Messrs. Lovelock & Lewes, Chartered Accountants, Statutory Auditors of the
Company hold office till the conclusion of the forthcoming Annual General
Meeting and being eligible, offer themselves for reappointment. The Company
has received a letter from the Statutory Auditors to the effect that their
reappointment, if made at the forthcoming Annual General Meeting, would be
within the limits prescribed under Section 224 (1 B) of the Act.

Cost Audit:

Messrs. Shome & Banerjee, Cost Accountants, were re-appointed o conduct the
audit of the cost accounting records of the company for the year under
review.

Conservation of Energy, Research & Development, technology Absorption,
Foreign Exchange Earnings and outgo:

The information relating to conservation of energy, research & development,
technology absorption and foreign exchange earnings and outgo, as required
under Section 217(l)(e) of the Act read with the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988 is given in
Annexure 'D', forming part of this Report.

Particulars of Employees:

The information as required in accordance with Section 217(2A) of the Act
read with the Companies (Particulars of Employees) Rules, 1975, as amended,
is set out in an annexure to this Report. However, as per the provisions of
Section 219(l)(b)(iv) of the Act, the Report and the Accounts are being
sent to all the Shareholders of the Company excluding the aforesaid
information. Any shareholder interested in obtaining such information may
write to the Company Secretary at the Registered Office of the Company. The
said information is also available for inspection at the Registered Office
during working hours up to the date of the Annual General Meeting.

Industrial Relations:

A detailed section on your Company's Human Resource initiatives is attached
in the Management Discussion & Analysis. During the year under review,
industrial relations in your Company continued to be cordial.

Acknowledgement:

The Board wishes to place on record its sincere appreciation for the
continued assistance and support extended to your Company by its consumers,
banks, vendors, Government authorities and employees.

Your Directors are also grateful for your continued support and
encouragement.

On behalf of the Board of Directors

R.P. Goenka
Kolkata, 21 June, 2010 Chairman

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC OVERVIEW

Global Energy Outlook:

Year 2009 witnessed a fall in global energy use - for the first time since
1981. This was in no small measure due to the economic crisis that lasted
from the second half of 2008 till the third quarter of 2009. But as the
world started climbing from the recessionary trough, albeit at differing
rates, energy consumption is again growing. Despite a sharp fall in 2009
(preliminary estimates indicate a cle-growth of upto 2%), world primary
energy demand is projected to grow by 1.5% per annum from 2007 to reach 678
Quadrillion BTu (Chart A).

The U.S. energy market, which is the biggest in the world, continued to
reflect the impact of the economic slowdown - falling by 3% in 2009 on the
back of a 1 % fall in 2008. On the other hand, energy needs for emerging
economies, especially China and India, is growing at an accelerated pace as
future industrial and economic growth emanates from this region (Chart B).
China and India are now the primary drivers of global energy needs, and are
expected to account for over half the incremental energy demand between now
and 2030.

Fossil fuels remain the dominant source of energy, contributing to more
than three-quarters of energy generation. Though natural gas has become the
fastest growing fossil fuel energy source, coal is still the fuel of
choice, contributing to 41 % of global energy needs. Coal is expected to
see the biggest increase in demand as heavily coal dependent China and
India power ahead in terms of industrial growth and electricity generation.
Globally, 4,800 giga-watts (G' of power generation capacity are expected to
be added by 2030 - most of which will be coal fired. As a result, coal's
share as a primary energy source is expected to rise to 44%.

This growth in energy demand has consequential effects in terms of carbon
dioxide (C02) emissions. C02 emissions are expected to rise from a level of
20.9 gigatonnes (Gt) in 1990 to 40.2 Gt in 2030 - an average annual rate of
growth of 1.5%. To combat this, using cleaner coal technology, improving
end-use efficiency, creating better and more efficient generation and
distribution infrastructure are primary areas of concern.1

India's Power Scenario:

India is the world's fifth largest generator of power with an installed
capacity of 159 GW2. Fossil fuels are the primary source of energy for
64.3% of this generation; among fossil fuels, coal has 82.2% share, i.e.
approximately 84.2 GW of power generation in India uses coal as the energy
source. Hydro electricity is India's second largest source for power,
contributing 23.1% (36.8 GW) of the total power mix. Though nuclear power
has started gaining ground as an alternative fuel source, barely 4,560 MW
of nuclear power is generated - contributing 2.9% to India's total power
generation (see Table 1).

Table 1 : Power Generation in India: 2009-10: By Fuel Source

Fuel MW % share

Coal 84,198.38 52.8%
Gas 17,055.85 10.7%
Diesel 1,199.75 0.8%
Thermal 102,453.98 64.3%
Nuclear 4,560.00 2.9%
Hydro 36,863.40 23.1%
Others 15,521.11 9.7%

Total 159,398.49 100.00%

Source: Central Electricity Authority, March 20 10 India's per capita
annual power consumption, at 704 kWh, however, compares unfavourably with
other developed and emerging economies. The US leads per capita consumption
at

(1) Sources : Energy Information Administration, US Department of Energy,
Energy
Outlook 2009; International Energy Agency, World Energy Outlook, 2009

(2) Source: Ministry of Power website : for generation figures around
15,000 kWh; China (with a population greater than India) has a consumption
of around 1,800 kWh - approximately two and a half times that of India3 .

During the period April 2009 to March 2010, the all-India peak demand for
power was 119,166 MW of power - whereas the actual power met was 104,009 MW
- a shortfall of 12.7%. This all-India average, however, hides glaring
fluctuations within regions (Table 2).

Table 2: Power Demand and Deficit: 2009-10

Peak Peak
Region Demand Met Deficit Deficit %
(MW) (MW)

Northern 37,159 31,439 (5,720) (15.4%)
Western 39,609 32,586 (7,023) (17.7%)
Southern 32,178 29,049 (3,129) (9.7%)
Eastern 13,220 12,384 (836) (6.3%)
North-Eastern 1,760 1,445 (315) (17.9%)
All India 119,166 104,009 (15,157) (12.7%)

Sources: Ministry of Power; Central Electricity Authority

In India, transmission of power is done generally through transmission
lines of 132 kV,220 kV, 400 kV, 765kV AC and 1 500 kV HVDC. With a view to
augment transmission capacity, the Ministry of Power plans to set up a
National Power Grid by 2012, with approximately 200,000 MW of generation
capacity and consequent increases in transmission capacity.3 In 2009-10,
the target was to augment the transmission network by a further 17,573
circuit kilometres (ckm); however, a total of 13,721 ckm was achieved
(Table 3).

Table 3: Transmission Lines in Circuit Kilometres : 2009-10

Transmission Lines Target Achieved

220 kV 7,113 5,139
400 kV 9,548 7,857
500 kV HVDC 280 280
765 kV 632 445

Total 17,573 13,721

Source: Ministry of Power

If India is to achieve double digit growth over the next few years, ramping
up India's power infrastructure is of utmost importance. According to
CRISIL Research estimates, about Rs. 750,000 crore is likely to be invested
in the power sector by 2013-14, of which Rs. 480,000 crore is expected to
be invested in power generation. This quantum of investment can only take
place with large scale private sector participation in this business. It is
expected that nearly half of these investments would have to emanate from
private power players, thus giving rise to new opportunities for growth4 .

Operations:

CESC Limited ('CESC'or'the Company) operates across 567 sq. km. of licensed
area in Kolkata. To supply power to the licensed area, CESC operates four
generating stations: Budge Budge, Southern, Titagarh and New Cossipore,
which cumulatively generate 1,225 MW. Three of these stations (Budge Budge,
Southern and Titagarh) use pulverised fuel (PF) as the primary energy
source.

Demand for power across the licensed area is quite variable and depends
upon the time of day or night and the season. Demand during peak periods
can be as high as 1,660 MW; during the lean period, it drops to as low as
380 MW. During peak demand, CESC in addition to its own generation, also
purchases power from the state and national power grid; conversely, during
the lean period, CESC exports surplus production, when possible.

CESC puts best effort for maximisation of own generation to supply the
customer uninterrupted, reliable and cost effective power. In spite of the
different age, capacity and technologies of the four generating stations,
CESC has excelled to achieve the best possible results, some of which are
nationally and internationally benchmarked.

Generation

Table 4 gives the details of installed capacity, generation and plant load
factor (PLF) for the year 2009-10 for the three pulverised fuel plants.

Table 4: Details of CESC's generating stations for 2009-10

Generating Installed Plant Load
Stations Capacity (MVi) Generation (MU) Factor (PLF): %
FY FY FY FY FY FY
2009-10 2008-09 2009-10 2008-09 2009-10 2008-09

Budge Budge 3*250 MW 2*250 MW 4,286 4,403 93.75% 100.53%
Titagarh 4*60 MW 4*60 MW 1,889 1,934 89.84% 91.98%
Southern 2*67.5 MW 2*67.5 MW 1,102 1,119 93.15% 94.62%

Note: Budge Budge's 3rd unit was commissioned on 28 February 2010; hence,
its effect is seen only for one month in FY2009-10

(3) Source: KPMG: Power Sector in India: White paper on Implementation:
Challenges and Opportunities, Jan 2010

(4) Source : CRISIL Research : Power Annual Review - Opinion; Aug 2009;
quoted in KPMG White Paper

Output from a power plant is measured by Plant Load Factor (PLF) which is
the ratio of actual power produced to the maximum power producing capacity.
CESC's composite Plant Load Factor (PLF) of the three PF plants was 92.61 %
for 2009-10 - well above the national average (see Chart C). To achieve
this high PLF the company has taken various steps and measures like full
utilisation of designed limit, benchmarking with top in class power plants,
integrated operation and maintenance planning and exploring the fullest
export opportunity.

Budge Budge:

Budge Budge is CESC's newest power generation plant; with two units of 250
MW each being a little over a decade old. In order to reduce the Company's
dependence on purchased power to meet the licensed area's demand, CESC had
gone in for adding a third 250 MW unit at Budge Budge. Work on this unit
commenced in the year 2006 and on 28 February 2010, the third unit started
commercial generation. During the year, Budge Budge generated 4,286 MU of
power, with a PLF of 93.75% and a Plant Availability Factor (PAF) of
94.62%.

Titagarh:

CESC's Titagarh station generated 1,888.8 MU of power during the year, with
a PLF of 89.84% and a PAF of 96.38%. That the station could generate these
efficiencies in spite of its age (twenty seven years) and that it is fast
reaching the end of its effective working life, bears ample testimony to
the continuous and rigorous maintenance programmes that CESC conducts.

Southern:

Southern generated 1,101.58 MU of power during the year under review, with
a PLF of 93.15%. Various energy savings initiatives, regular energy audit,
in-house refurbishment / renewal of major energy consuming equipment,
adopting industry best practices and other similar measures are being
undertaken at Southern.

New Cossipore:

The Company's generating station at New Cossipore was established way back
in 1950. Yet, the sixty-year station generated 390.4 MU of power during the
year, thus extending reliable support to the system during peak hours.

Improvement of Availability:

From around 90% overall availability a few years ago, CESC has now improved
overall availability to around 95%. This has been made possible - thanks to
detailed maintenance planning and through adopting best maintenance
practices and techniques.

The entire maintenance planning has been structured : (a) to reduce forced
outages; and (b) to reduce the capital overhauling time. To reduce forced
outages, CESC has adopted a number of measures. This includes detailed
failure analysis of each failure, taking appropriate corrective actions or
process modification to eliminate such failure, mean time before failure
(MTBF) analysis and benchmarking, time bound action plan, periodic
inspection schedules for all units and adopting integrated condition
monitoring of dynamic equipment with sophisticated hardware and software.
To reduce the time in case of boiler tube leakage failure, the Company has
undertaken steps like sliding pressure operation and introducing tackles
like sky climbers.

To reduce the capital overhauling time, CESC has introduced a 'round the
clock maintenance' regime and modular replacement of components. The time
saving technique of forced air cooling system to cool down the turbine in a
very short time has also yielded satisfactory results.

Energy Conservation:

CESC's generating stations have also excelled in the field of energy
conservation. CESC has undertaken technical enhancements, following best
practices and implementing recommendations of external energy auditors.

Quality:

All PF stations of CESC are ISO 9001:2008 certified in respect of Quality
Management Systems. Various quality projects are undertaken and
successfully implemented on a regular basis.

Environment Conservation:

In CESC, incorporating environment conservation measures is a part of the
way the Company does business. Efforts are made all through the year to
continue production in environment friendly ways. Today, all PF stations of
CESC are ISO 14001:2004 certified in respect of Environmental Management
Systems. The Company continuously explores ways and means by which
pollutants like Suspended Particulate Matter (SPM) emission from the PF
stations can be reduced and maintained well below the prescribed limits. In
the sixty year old New Cossipore Generating Station, Wet Electrostatic
Precipitators (ESPs) have been installed in order to reduce the SPM level -
the first of its kind in any power plant in the world.

All three PF stations have sustained 'zero effluent discharge' status with
100% recycling of effluents, thus ensuring that 'not a single drop of
effluent flows out from the station' - a first of its kind in India. In
Titagarh, a'root zone treatment system' has been installed for treatment of
sewage, which recycles the effluent water back into the system.

CESC's environment friendly status was acknowledged by Greentech
Foundation. Titagarh also won a national award for 'Excellence in Water
Management' instituted by the CII Godrej Green Business Centre. As a
Company, CESC has earned recognition from the UNFCCC for its CDM status.
This is the first such achievement by any coal based TPS in the world.

Ash is another area of environmental concern, all the more so given the
high ash content of Indian coal. Since 2000, CESC has achieved 100%
utilisation of ash in an environmental friendly manner. The ash is utilised
for manufacturing Portland Puzzolana (PP) cement, fly ash bricks, blocks
and similar products. Also, some of the fly ash is exported to Bangladesh
by barge for their cement industries. Budge Budge was awarded the National
Award for meritorious performance under 'Environmental Management' Category
by the Ministry of Power for outstanding performance during 2008-09. This
is the first time this award has been initiated at the national level and
Budge Budge is the first thermal power station to win this award.

Safety and Health:

CESC maintains the best industrial safe practices across the generating
stations. All the PF stations are OHSAS 18001: 2007 certified which
pertains to occupational health and safety management systems. Accident
rates have reduced substantially over the last five years. In addition to
following prescribed safe practices, strict safety vigilance, use of
personal protective equipment and use of proper tools and tackles, have
been made mandatory at the generating stations. Several programmes have
also been taken to promote safety awareness among employees, including
classroom training, mock drill and demonstration and publishing safety
manuals, magazines and audio-visual aids. In recognition of its safety
management practices, Southern has won the Silver Award in 2010 from the
Greentech Foundation.

Ensuring occupational health is also a high priority area for CESC's
operations. As part of the occupational health initiatives, immunisation
has been done for all employees and contracted workmen, routine blood tests
are carried out for all employees, as are special tests, such as for
vertigo, eyesight and audiometry. Training on occupational health, Cardio
Pulmunary Resuscitation and on first-aid are imparted from time to time as
well.

Distribution:

CESC's customer profile reflects a growing system demand, a need for
consistently high quality supply and increase in customer base. Coupled
with a need to replace plant and equipment of older vintage, this has
necessitated CESC in undertaking a number of new investments during the
year to strengthen its distribution network. These investments have been
made with the objectives of providing new connections, enhancing the
quality and security of supply, reducing downtime and overloads.

The lines for evacuating power from the new third unit of Budge Budge
generating station to Eastern Metropolitan substation was commissioned in
2009-10. About 89 Km of 220 kV double circuit lines were laid; 3.5 Kms of
the lines are underground and the balance overhead. Executing this project
posed significant challenges: mainly in terms of acquiring 'right of way'
for setting up the towers for the overhead lines and getting space for
laying underground cables (See Box: Budge Budge Third Unit: A Success
Story).

Apart from the above, the Company undertook several projects in 2009-10, in
order to enhance and upgrade its distribution network. Significant among
them were the following :

+ The plant capacity at the East Kolkata substation was augmented by an
additional 75 MVA 132/33 kV transformer.

+ Three new distribution stations were commissioned and the plant
capacities at ten others were increased. This has added 170.5 MVA
transformer capacity in the 33 kV distribution network. A further 137.3 MVA
transformer capacity has been added to the Low Tension (J) distribution
network by commissioning 377 new MVAC sources and capacity increases in the
existing sources.

+ To meet the load growth in the system, the network of underground cables
across the licensed area was increased: by 14.26 ckm at 132 kV, 20.5 ckm at
33 kV and 321 ckm at 11/6 kV. Simultaneously, the MVAC distribution network
was extended by 357.5 ckm comprising of underground and overhead lines.

+ Some of the 33 kV gas filled cables were replaced by new cross-linked
polyethylene (XLPE) cables.

+ In the 11/6 kV network, substantial work was done. 965 Gas Insulated Ring
Main Units were installed, along with new switchgear. Existing switchboards
were also extended along with replacement of old circuit breakers at
different voltage levels.

+ To relieve loading on the network and to enhance the voltage profile, 75
Mega Volt Ampere Reactive (MVAR) power capacitors at 33 kV level have also
been installed.

+ SCADA and RMU automation systems have been commissioned and the
communication and networking facilities have been enhanced in order to
improve consumer experience.

+ To enhance efficiency at the point of delivery to the consumer, a total
of 174,504 meters were installed, either as new connections or as
replacements; 15,355 house service connections were also installed to take
care of new supplies and additional loads.

Over a period of time, CESC intends to continue upgrading its distribution
network through a number of measures. Some of these measures are as
follows:

+ Replacement of obsolete bulk oil switchboards.

+ Bringing in power to northern belt of operating area by laying 220 kV
underground cable circuit.

+ Installation of about 100 MVAR HW EHV capacitor banks.

+ Setting up a new 132/33 kV Substation at Patuli and increasing
transformation capacity at selected substations.

+ Introducing 33 kV Gas Insulated Switchgear (GIS) at strategic
distribution stations to enhance network reliability.

+ Continued replacement of old electromechanical meters of Low Tension AC
(LTAC)/ MVAC consumers by superior quality electronic meters.

CESC has engaged Singapore Power, one of the world's best power utilities,
to help in implementing best-in-class maintenance practices for its
distribution assets. The engagement also visualises a ten-year strategic
plan for network development that would cope with the growing system
demand, improve upon quality benchmarks and blueprint the replacement of
old and ageing equipment upto the 132/33 kV substation level.

Energy conservation and reduction of losses in the distribution network is
a key area of focus for all power utilities. This is true for CESC as well.
During 2009-10, a number of measures were adopted that contributed to the
ongoing efforts to reduce ATC losses and increase energy conservation. Some
of the more noteworthy ones are as follows:

+ A total of 75 MVAR shunt capacitors were added during the year to
maximise reactive power compensation.

+ Underground cables were stanclardised at a higher rating - 1000 MM2 at 33
kV and 300 mm2 at 6/11 kV. At the same time, substation plant capacities
are being augmented, and a programme is in place for laying new underground
and overhead lines.

+ During the year, medium and low voltage consumers were progressively
changed over from DC supply to AC supply: this will be an ongoing process
till the programme is completed.

+ Distribution lines and transformers are being progressively upgraded from
6 kV to 11 kV in order to minimise losses. During the year, 84 such
transformers, representing approximately 34 MVA, were upgraded.

+ Energy Audit at Testing Department and other premises were carried out by
accredited energy auditors to assess and identify the potential areas of
energy saving.

The impact of these ongoing measures is apparent. CESC's ATC losses compare
favourably with the best in the industry and are significantly lower than
the national average. With the Company focusing on these measures, not just
for one year but a significant period of time, it is expected that the
distribution network will be able to deliver high quality, reliable supply
of power, while simultaneously enhancing safety and operational simplicity,
thus creating customer delight.

New Projects:

During the previous year's Management Discussion & Analysis, mention was
made of the third 250 MW unit that the Company was setting up at Budge
Budge in order to address the growing power demand from its licensed area.
The third unit was commissioned on 28 February 2010, together with an
associated power evacuation system comprising 89 Km of 220 kV double
circuit lines, of which 3.5 Km are underground and the balance are
overhead. At the same time, the state of the art 220 kV Eastern
Metropolitan Substation with three 160 MVA, 220/132/33 kV transformers were
also commissioned. This substation now is the prime synchronisation point
between CESC and WBSEDCL and also is the largest import point.

In addition to this landmark project, CESC is also undertaking a number of
other smaller but important projects in order to increase power
availability and quality through its licensed area. Among them, the
significant ones are the following :

+ Building a new Receiving Station for connecting with WBSETCL Rishra
Substation. This is being done to import additional power and thus maintain
reliability and security of supply in the western part of the licensed area
as well as to augment the power available at Titagarh area.

+ Building new 132/33 kV Substations at B.T. Road and Dum Dum - these would
improve the network and supply reliability in these areas.

+ To facilitate additional power flow with greater reliability, network
augmentation and reorganisation of connectivity to other load centre
substations from the new Eastern Metropolitan substation are ongoing as per
plan. During the year, connectivity was also enhanced by the commissioning
of the 132 kV 160 MVA underground cable circuit between Eastern
Metropolitan substation and East Kolkata substation and Eastern
Metropolitan substation and Princep Street Receiving Station.

+ Additionally, another 132 kV 160 MVA underground cable circuit is being
laid between Eastern Metropolitan substation and Princep Street Receiving
Station via Park Lane substation.

Haldia Energy Limited (HEL) is a subsidiary of CESC. During the year, HEL
acquired 100% shareholding of Dhariwal Infrastructure Limited (DIL). DIL is
in the process of setting up 2 X 300 MW coal fired thermal power plant at
Chandrapur (Maharashtra). Land has already been acquired for the plant and
the ash pond site; necessary statutory clearances have been obtained,
including environmental clearance from Ministry of Environment and Forest
and Water Availability Certificate for the project from Water Resources
Department of the Government of Maharashtra. Coal linkages for the entire
project have been established with South Eastern Coalfields Limited (SECL).
DIL is currently acquiring land for the railway corridor; simultaneously,
site preparation activities are also being carried out, such as land
grading and levelling, installing construction power and water facilities,
etc. The company has also issued a Letter of Intent for the engineering,
procurement and commissioning (EPC) of the complete 'balance of plant'
systems on a key vendor.

In addition to the Chandrapur project through DIL, HEL is also executing a
2 X 300 MW coal fired thermal power project at Haldia in West Bengal. All
requisite clearances, including environmental clearances have been
obtained; coal linkages have also been secured, the land needed for Phase I
of the project has been largely acquired.

Nalanda Power Company Ltd. (Nalanda), another subsidiary of CESC, has
signed an MOU with the Bihar State Electricity Board (BSEB) for development
of a 2,000 MW power project in Bhagalpur district of Bihar, in two phases
of 1,000 MW each. The pre-feasibility report has been submitted to the
Ministry of Environment and Forests and Prior Environmental Clearance has
been received. Nalanda is now conducting Environmental Impact Assessment
(EIA) studies and the land acquisition process is in progress. Approvals
from the State Water Department for water intake have been approved and
long-term coal linkages are in the process of being tied up.

BUDGE BUDGE THIRD UNIT: A SUCCESS STORY:

With the commissioning of the 250 MW third unit at Budge Budge, CESC has
increased its in-house generating capacity by over 25% at one stroke.
Started in 2006, the project was completed on time, being commissioned on
28 February 2010.

The Budge Budge project faced and overcame several challenges.
Environmental stipulations mandated that the cumulative emission outputs of
all three units could not exceed the emission norms that were laid down for
the first two units - which not only meant that the new third unit would
have to be extremely pollution efficient, but also that the two older units
would have to perform better than the laid down standards.

Establishing the Eastern Metropolitan substation and laying the lines from
the generating station to the substation posed multifarious challenges.
Seventy percent of the substation land was hazardous and of poor soil
quality; this meant much more than normal soil treatment. The total length
of the lines from the generation station to the substation was earlier
estimated at 70 Km. Growth of settlements, environment concerns, government
regulations and the need to divert the line away from proposed areas of
development meant that the effective final length has become nearly 89 Km.
Whereas no underground cable laying was envisaged earlier, 3.5 Km of cables
had to be laid underground in order to avoid settlements and water bodies.
With the final route for the lines deviating even further east, CESC faced
massive problems regarding the poor soil quality in which to embed the
overhead towers. With the towers being installed in low lying or marshy
areas, getting heavy construction machinery proved to be a hugely difficult
task. That the substation was put up in eighteen months and the lines
successfully laid is testament to the tenacity, grit and capability of the
CESC team.

The team at the generation side can also be very proud of their
achievements. CESC had taken a conscious decision to use core Operations
people as part of the project team. This meant that the operations team
were fully synchronised with the project team during the project phase; the
main EPC contractors and the project team worked hand in hand to commission
the plant. And the result? Over 85% PLIF in the first month of operations.
Truly, a success story!

Technology:

Condition monitoring of major plant and equipment of distribution network
has been adopted as a non-negotiable imperative to predict potential
failure in equipment before actual occurrence. This has helped CESC to
mitigate damage, significantly reduce downtime and improve reliability of
the system network. Condition monitoring is being carried out with latest
technology based instruments for measurement of Partial Discharge (PD),
Transient Earth Voltage (TEV), ultra-sonic signal detection, infra red
thermo-graphic scanners, application of Sweep Frequency Response analysis
and use of shock detection analyser during transport of large transformers.

To monitor the health and potential of joint failure in EHV and HV cables,
the Company uses Oscillatory Wave Transmission System (OWTS) measuring
techniques. On the HV distribution network, CESC is progressively switching
over to Sulphur Hexafluoricle (SF6) filled Ring Main Units, thus enabling
safe on-load operations and quicker restoration of supply outages.

Technology is also used to enhance service capability to HT customers, who
are covered under Automated Meter Reading (AMR) from remote sites, using
GSM and GPRS communication networks.

On the generation side, CESC had adopted two new technologies (a) the
Variable Frequency Drive (VFD) and (b) Turbine Forced Air Cooling System.
The first controls efficiencies of induction motors operating at low load
by controlling the voltage and frequency. The second helps in cooling down
a turbine faster - from a normal cooling time of around 96 to 100 hours to
around 32 hours - thus saving significant downtime and consequently
increasing plant availability.

Human Resources:

CESC recognises that its people resources are key enablers for the
realisation of its long-term corporate objectives of growth, continuous
performance improvement and creating sustainable customer satisfaction. On
one hand, the Company's HR strategies are aligned to business processes and
corporate objectives, while on the other they also map and plan for
individual career and growth aspirations.

In CESC, recruitment planning is structured to factor current people
strengths, anticipated attrition and future needs and is based on the
Company's long-term business plans. At the same time, the knowledge and
developmental needs and competencies of current employees are identified
and addressed through structured analysis and training programmes.
Learnings are categorised at three levels : (a) Individual Learning; (b)
Team Learning; and (c) Organisational Learning. Appropriate programmes are
designed and executed based on learning needs. Thus, training and
development is not just focused on acquiring and improving upon technical
skills; a more holistic approach is adopted, where knowledge, skills,
attitude and social behaviour of employees are all part of the 'training
and development package'. The objective is that the employee should no
longer be a mere executor of instructions but an empowered enabler of
business decisions.

The compensation structure at CESC is geared to reflect the performance of
employees. For its non-covenanted employees, the Company has executed a
Memorandum of Understanding with the employees' union, which covers all
parameters of employee remuneration. Compensation for executives are
determined through a structured Performance Management System (PMS). To
align the PIVIS to corporate objectives and goals, a Balanced Scorecard
model for middle and senior management has been adopted, which is then
periodically audited, evaluated and corrected where needed. This
transparent and robust methodology has motivated people at all levels to do
better.

The leadership team at CESC is actively involved in building the people
strength and people qualities of the Company. This involvement takes place

at various levels, e.g. leading cross functional teams, chairing various
review meetings, etc. The senior management team also leads the campus
recruitment exercise that CESC conducts annually, thus not only identifying
the most appropriate talent for induction, but also building 'Brand CESC'
at the campus level. This has reaped rich dividends - CESC is today an
'employer of choice' at a number of state institutions, including the
Indian Institutes of Technology (IlTs). Senior management team members are
also actively involved in developing course content and direction for the
in-house training and induction programmes of new recruits.

Not only the senior team, but even other employees are empowered to be team
leaders, even where senior executives are team members. Cross- Functional
Teams (CFTs) drive change management processes within the organisation. The
teams deal with issues like customer centricity, talent management,
communication strategy, cle-layering, organisational excellence and
performance management system, e-learning, knowledge portal, corporate
social responsibility and benchmarking.

Employees returning from specialised training programmes share their
learnings and knowledge with others in the Company through structured
sessions - senior management members are also participants in a number of
them. CESC has also set up collaborative programmes with IIT Kharagpur to
conduct refresher programmes; moreover, nearly fifty middle-level managers
have been trained at Singapore through an exchange programme aimed at
inculcating best practices and processes.

CESC's industrial relations environment has remained cordial and congenial
and, during the year, there have been no major incidents of service
interruption due to IR issues. Trade Union elections were conducted in 42
establishments during the year, without any major disturbance.

As on 31 March 2010, CESC had a workforce of 10,492 people on its rolls.

Information Technology:

Knowledge and information are key enablers for any effective business
processes; they also need to be aligned with the policy and strategy of the
organisation. CESC is no exception to this rule. Although the information
transaction process has existed in a cligitised environment for a
considerable period of time; however, with greater business complexities
and increased stakeholder expectations, harmonised and cligitised
information and knowledge has gained enhanced importance as a tool for
analysis and an enabler for future strategic and tactical initiatives.
Recognising this business imperative, CESC, over the past few years, have
undertaken comprehensive steps to acquire knowledge and information through
a structured framework that involves all concerned stakeholders.

During the last couple of years, CESC has been focusing on re engineering
the Company's IT Architecture with a view to achieving higher efficiencies
in all business processes that are primarily IT driven. As a consequence to
these initiatives, the Company's new IT architecture can be broadly grouped
under three major sub-systems:

a. A centralised high availability and high performance computing
environment from where all 'mission critical' applications of the Company
would be running;

b. CESCNET, a city wide high-speed optical fibre communi cation
infrastructure which serves as the 'digital nervous system' and
communications backbone of IT operations within the organisation; and

c. Stanclardised hardware and Software stack of all End-User systems that
are connected to the CESCNET highway.

Keeping this IT landscape in mind, several disparate systems running in
different locations across the Company are being migrated to a centralised
location. CESC has already started reaping tangible benefits from this
encleavour, as witnessed by improved efficiencies, better utilisation of IT
infrastructure, reduced operational risks and substantial cost savings.

This process of consolidation, virtualisation and rationalisation has not
only led to streamlining of the day-to-day operations and lowering of
operational costs but has also laid a solid foundation for implementing the
Company's Disaster Management System. As part of the Business Continuity
Plan, a state-of-the-art Data Centre from where a number of 'mission
critical' applications would be running is being set up. In the event of a
disaster at the primary site, all important services would be seamlessly
restored from the Disaster Recovery Site.

Subsidiaries:

As on 31 March 2010, CESC has eight subsidiaries. Details of their business
and operations are given below.

1. Haldia Energy Limited (HEL), a subsidiary of CESC, is in the process of
setting up a 2 X 300 MW coal fired thermal power plant at Haldia.
Substantial land acquisition has been completed for the first phase of the
project; also, the required clearances for the project (including
environmental clearances) have been obtained. The Ministry of Coal has
awarded the coal linkages for the proposed power plant. Site preparation
activities are now in progress.

2. Dhariwal Infrastructure Limited (DIL) is a wholly owned subsidiary of
HEL. DIL is in the process of setting up 2 X 300 MW coal fired thermal
power plant at Chandrapur (Maharashtra). Land has already been acquired and
the requisite statutory clearances have been obtained. Coal linkages for
the project have also been established. DIL is currently acquiring land for
the railway corridor; simultaneously, site preparation activities are also
being carried out. The company has also issued a Letter of Intent for the
engineering, procurement and commissioning (EPC) of the complete 'balance
of plant' systems on a key vendor.

3. Nalanda Power Company Ltd. (Nalanda) is a subsidiary of CESC, engaged in
the business of generating power. Nalanda has signed an MOU with the Bihar
State Electricity Board (BSEB) for developing a 2,000 MW power project at
Pirpainti Anchal, District Bhagalpur, in two phases of 1,000 MW each.

4. Spencer's Retail Limited (SRL), a subsidiary of CESC, is in the business
of organised retail. SRL has established 206 stores across India under the
'Spencer's' label - including 5 standalone apparel stores and 19
hypermarkets. The store. cater to all family needs - groceries, personal
care products and home accessories.

5. Music World Retail Limited (MWRL) is a wholly owned subsidiary of SRL,
catering to the music and movies experience. Eighty eight stores across
India under the label 'Music World'and'Books & Beyond'sell all genres of
musical albums, movies and books.

6. Au Bon Pain Caf6 India Limited (ABPCIL) is a subsidiary of Spencer's
Retail Limited, catering to the retail coffee and fast food segment. As the
master franchisee of ABP Corporation, USA in India, ABPCIL opened its first
two retail caf6 stores in Bangalore during the year.

7. CESC Properties Limited is currently executing a shopping mall project
in Kolkata. The total built up area of the mall is envisaged at
approximately 730,000 sq. ft., with shops, reta outlets, an entertainment
zone, multiplexes, a food court and fine dining areas. A Letter of Intent
has already been issued to the design-built contractor. Actual construction
work on the site has started from February 2010.

8. Metromark Green Commodities Private Limited is a wholly owned subsidiary
of CESC Properties Limited engaged in real estate development in the
outskirts of Kolkata. The company is currently engaged in constructing a
warehouse in Howrah. The warehouse is expected to have a built-up area of
45,000 sq. ft., with ten loading and unloading bays with provision for two
goods lifts. The work order for the project has been issued to the lead
contractor and work has commenced.

Besides the above subsidiaries, CESC also holds 50% of the paid up Share
Capital of Mahuagarhi Coal Company Private Limited, a joint venture company
for exploration of coal from Mahuagarhi non-coking coal block in the State
of Jharkhand for meeting the requirement of coal. As part of its CSR
initiative, CESC is providing support to Alipore Institute of Management &
Technology in setting up Trinity - IMI International Business School at
Alipore, in the heart of the city of Kolkata, for providing high quality
management education.

FINANCIAL PERFORMANCE

Table 5 summarises the financial performance of CESC Limited for the year
ended 31 March 2010.

Table 5: Stand-alone Financial Performance of CESC Limited for the year
ended 31 March 2010 Rs. Crore


2009-10 2008-09 % Change

Earnings from Sale of Electricity 3292.84 3,031.32 8.63

Other Income 156.20 170.02 (8.13)

Net Sales/Income from Operations 3449.04 3,201.34 7.74

Cost of Power Purchased 636.99 412.46 54.44

Fuel Costs 1077.07 944.72 14.01

People Costs 426.02 370.24 15.06

Generation, Distribution, 403.05 693.19 (41.86)
Administration & Other Costs

Total Expenses 2543.13 2,420.61 5.06

EBIDTA 905.91 780.73 16.03

Depreciation 205.64 174.90 17.58

EBIT 700.27 605.83 15.59

Interest & Finance Costs 178.22 140.96 26.43

PBT 522.05 464.87 12.30

Less: Provision for Taxes

Current Tax 88.75 52.68 68.47

Fringe Benefit Tax - 2.50 -

PAT 433.30 409.69 5.76

During 2009-10, the gross revenue of the Company was Rs. 3449.04 crore,
which reflected an improvement of 7.74% over the 2008-09 figure of Rs.
3201.34 crore.

Although overall expenses grew by 5.06% over 2008-09 (Rs. 2543.13 crore in
2009-10 vis-a-vis Rs. 2420.61 crore in 2008-09), earnings before interest,
depreciation and taxes (EBIDTA) went up by 16.03% over last year to
Rs.905.91 crore.

Interest costs increased by 26.43% over 2008-09 figures (Rs. 140.96 crore)
to reach Rs. 178.22 crore, mainly on account of increase of interest on
fixed loans; the total loan funds of the Company having increased from Rs.
2421.81 crore to Rs. 2811.71 crore.

Profit before depreciation and taxation (PBDT) reflected a year-on year
increase of 13.74% - from Rs. 639.77 crore in 2008-09 to Rs. 727.69 crore
in 2009-10.

Depreciation, at Rs. 205.64 crore, was higher than the previous year's
figure of Rs. 174.90 crore; mainly due to increase of plant and machinery
(net increase of Rs. 1160.77 crore) and distribution system (increase of
Rs. 551.76 crore).

The Company's profit after taxes (PAT) for 2009-10 stands at Rs. 433.30
crore, which reflects a 5.76% increase over the PAT figure of the previous
year (Rs. 409.69 crore).

Risks & Concerns:

CESC's Risk Management Committee operates based on a comprehensive Risk
Management framework that the Company has put in place overtime. The
Committee is headed by the Managing Director and all senior management team
members are part of the Committee. Divisions, on an ongoing basis, identify
operational and tactical risks and suggest measures for mitigation and
control. The Committee then supervises and monitors the risk identification
and mitigation activities of each division.

CESC identifies the following as significant risks and concerns.

Generation and Distribution:

In order to cater to the growing demand for power in its licensed area,
CESC has commissioned the third 250 MW unit at Budge Budge in February
2010, thus augmenting generation capacity to 1,225 MW. It is, however,
becoming more and more difficult to build generating stations inside a
congested megalopolis like Kolkata - not the least because of environmental
concerns.

As CESC's plants age, it is but natural that their operating efficiencies
shall reduce; beyond a point in time, shutting down and replacement of
these plants will become imperative. If the Company is not allowed to build
replacement plants at the sites where current generating stations exist,
the cost of evacuating and distributing power from far flung locations into
the licensed area will increase substantially, in turn impacting quality of
service delivery and profitability.

Fuel:

Notwithstanding an increased use of oil, natural gas, renewable energy
sources and nuclear energy, coal remains the primary source of energy for
power generation in India. Total demand for coal is expected to increase
from 432 million tonnes in 2005-06 to 670 million tonnes in 2011-12; the
power sector itself is expected to need 500 million tonnes by 2011-125.

(5) Source: Planning Commission, Approach Paper to 11th Five Year Plan.

(6) Source: CERC, Annual Report for Short-term Power Market in India, 2009.

Given this exploding demand for coal and expected shortages in coal supply,
securing coal linkages of appropriate quality and at competitive prices
remains a challenge and a risk for the Company. For its existing and future
projects, CESC looks at long-term coal linkages with prime suppliers, thus
mitigating availability risks.

There is also another associated risk. High quality coal, is becoming
scarcer. Some of CESC's older plants had been designed for high quality
coal as input energy source. With the supply of this type of coal drying
up, it will become, over a period of time, more difficult to operate these
generating stations - and replacing these with plants capable of using
currently available qualities of coal will become necessary, with its
attendant capital cost commitments.

Ash Management:

Fly ash is a standard by-product of a coal based power generation process.
It is, however, a pollutant; therefore, efficiently managing and recycling
fly ash is an important environmental concern for any power utility using
coal as a primary source of energy. A large portion of CESCs dry ash is
used by the cement and brick industries; some of it is also exported to
Bangladesh on river barges. All the generating stations of the Company have
achieved 100% ash utilisation. CESC is now exploring opportunities in
'value added' ash utilisation.

The Merchant Market:

The short-term market for traded power, i.e. for contracts of less than one
year, has changed a fair deal between 2007 and 2009. The total volume of
electricity transacted through trading licenses has increased from 20.18
billion units in 2007 to 30.16 billion units in 2009, i.e. 2.93% of the
total electricity generated in 2007 to 4.08% of the total electricity
generated in 2009. The price for traded power, however, has shown sharp
fluctuations. Although 2009 witnessed the highest ever prices in the short-
term trading market; overall the weighted average price of short-term
traded electricity in 2009 was lower than 20086.

This fluctuation in prices has an impact on the Company's profitability, as
well as its ability to supply power to the licensed area. To meet peak
demand, CESC has to purchase power, sometimes at high costs. This is
especially true during the daytime in summer months and when other
compulsions create a supply bottleneck for available power in the grid. On
the other hand, during the lean period, demandfor power falls across the
board; CESC's generated power then fetches relatively low prices when sold
to the national or state grid. Managing peak demand and being able to
profitably sell power during the lean demand period, therefore, remain
challenges for the Company, at least in the short term.

Future Outlook:

On an aggregated basis, in 2009-10, India generated 746 billion units of
power against a requirement of 830 billion units -a deficit of 83 billion
units or 10.1 %7. As the economy grows, especially the manufacturing
sector, demand for power will only increase. During the Twelfth Plan
period, assuming a GDP growth rate of 9%, electricity demand is likely to
grow @ 7.2% p.a. This will mean that energy generation should increase to a
level of 1,470 billion units by 2016-178. Meeting this demand will require
substantial investment. Under the circumstances, growing private sector
investment in the power sector is an inevitability.

CESC is keen to be an active participant in this push for power generation
and distribution. Apart from its third unit at Budge Budge, which has
already been commissioned, the Company, through its subsidiaries, has been
actively looking at implementing various power projects, both in West
Bengal and in other states. These are at various stages of progress and
CESC expects that, over the next few years, it will become a significant
player in thermal power, not only in its licensed area, but on a pan-India
basis.

Internal Controls:

The Company maintains established internal control system in order to
ensure operational efficiency, optimum utilisation of resources and
compliance with applicable laws and regulations and Information Technology
audit. The internal control functions are carried out by the Internal Audit
Department, based on an annual audit plan; the audit plan gives due
weightages to the various risk parameters associated with the business. The
findings of the Internal Audit Department and the actions taken thereon are
reviewed and monitored by the Audit Committee and placed before the Board
of Directors, wherever necessary.

Cautionary Statement:

The financial statements appearing above are in conformity with accounting
principles generally accepted in India. The statements which may be
considered 'forward looking statements' within the meaning of applicable
laws and regulations, have been based upon current expectations and
projection about future events. The management cannot, however, guarantee
that these forward looking statements will actually be realised or
achieved.

On behalf of the Board of Directors

R.P. Goenka
Kolkata, 21 June 2010 Chairman

List of persons constituting group coming within the definition of 'group'
for the purpose of Regulation 3(l)(e) of the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations,
1997.

Accurate Commodeal Private Limited
Adapt Investments Ltd
Adorn Investments Ltd
Alipore Towers Pvt Ltd
Allwyn Apartments Pvt Ltd
Amber Apartments Pvt Ltd
B N Elias & Company Pvt Ltd
Best Apartments Pvt Ltd
Blue Niles Holdings Ltd
Brabourne Investments Ltd
Carniwal Investments Ltd
Ceat Ltd
Chattarpati Investments Ltd
Dakshin Bharat Petrochem Ltd
Eastern Aviation & Inds Pvt Ltd
FGP Ltd
Goodhope Sales Private Limited
Goodluck Dealcom Private Limited
Harrisons Malayalam Financial Services Ltd
Harrisons Malayalam Ltd
Highway Apartments Pvt Ltd
Idea Tracom Private Limited
Indent Investments Pvt Ltd
Instant Investments Ltd.
Integrated Coal Mining Ltd
KEC International Ltd
Kestrel Investments Ltd.
Kutub Properties Pvt Ltd
Off-Shore India Ltd
Organised Investments Ltd
Pedriano Investments Limited
Peregrine Investments Ltd
Petrochem International Ltd
Phillips Carbon Black Ltd
Puffin Investments Ltd
Rainbow Investments Ltd
RPG Cellular Inv & Holdings Pvt Ltd
RPG Enterprises Ltd
RPG Farms Ltd
RPG Industries Pvt Ltd
RPG Infrastructure Inv Ltd
RPG Landscapes Ltd
RPG Life Sciences Ltd
RPG Resorts Ltd
Sarala Pharmaceuticals Ltd
Saregama India Ltd
Shaft Investments Pvt Ltd
South Asia Electricity Holdings Ltd
Spencer & Co Ltd
Spencer International Hotels Ltd
Spencer Travel Services Ltd
Spencer's Retail Ltd
Sri Krishna Chaitanya Trading Co Pvt Ltd
Sri Parvathi Suthan Trading Co Pvt Ltd
Stylefile Events Ltd
Summit Securities Ltd
Swallow Investments Ltd
Tirumala Dealtrade Private Limited
Ujala Agency Private Limited
Universal Industrial Fund Ltd
Zensar Technologies Ltd
Sri Rama Prasad Goenka
Smt Sushila Goenka
Sri Harsh Vardhan Goenka
Smt Mala Goenka
Sri Sanjiv Goenka
Smt Preeti Goenka
Sri Anant Vardhan Goenka
Smt Radha Goenka
Sri Shashwat Goenka
Rama Prasad Goenka & Sons (HUF)
Harsh Anant Goenka (HUF)
Sanjiv Goenka & Others (HUF)

Particulars as required under Section 217(l)(e) of the Companies Act 1956
(Annexure 'D1 to Directors' Report)

Particulars relating to Conservation of Energy, Technology Absorption etc.
for the year ended 31 March 2010.

A. Conservation of Energy:

1. Following measures taken over the year has contributed to Energy
Conservation & Reduction of Losses in Distribution Network.

i. Reactive power compensation by way of installing shunts capacitor banks
at various voltage levels of T&D Network. During the year 75 MVAR shunt
capacitors were added.

ii. Standardization to higher rated UG cables, 1000 mm2 at 33 kV & 300 mm2
at 6/11 kV Distribution Network as an ongoing process.

iii. Continued augmentation of Substation plant capacity and laying new
underground and overhead lines.

iv. Induction of energy efficient Distribution Transformers with low losses
by including Loss Capitalization as a bid evaluation criterion as an
ongoing process.

V. Progressive changeover of DC supplies to AC for medium / low voltage
consumers.

vi. Progressive Voltage upgrade of Distribution Lines and Transformers from
6 kV to 11 kV to lower losses. During the year 84 nos. Distribution
Transformers were upgraded to 11 kV from 6 kV, representing 34 VIVA approx.

vii. Energy Audit at Testing Department and other premises were carried out
by accredited energy auditors to assess and identify the potential energy
saving locations accompanied with installation of energy efficient lamps
and luminaries and BEE rated room air-conditioners at various locations.

2. Additional investment/proposals:-

Following investments / proposals have been planned that will contribute to
reliability, security and safety in T&D Network: -

i. Replacement of obsolete & hazardous bulk oil switch boards at Princep
Street and Titagarh Receiving Station.

ii. Bringing in power to northern belt of operating area by laying 220 kV
underground cable circuit is planned from Eastern Metropolitan Substation
to New Cossipore Generating Station prior to ceasing of generation at the
station. Replacement of obsolete & hazardous bulk oil switchboards at New
Cossipore Generating Station alongwith consolidation of space area for T&D
assets has also been framed as an integral activity

iii. Installation of about 100 MVAR HV/ EIHIV capacitor banks in the
ensuing year.

iv. New 132/33 kV Substation at Patuli and augmentation of transformation
capacity at Chakmir S/S, Princep Street Receiving Station etc.

v. Induction of 33 kV GIS at strategic Distribution stations to enhance
network reliability at 33 kV and mitigate the network operational
complexity.

vi. Continued replacement of old electromechanical meters of LTAC/ MVAC
consumers by superior quality electronic meters.

vii. Installation of remote metering AMR at selected MVAC sources for
energy audit as an ongoing process.

3. Impact of the measures:-

Impact of the measures as outlined under Items above may be set out as
follows:

i. Strengthen the Transmission & Distribution Network to cope with the
growing System Demand, demand for quality and reliable supply,

ii. Reduce component of T&D loss, enhance safety and network operational
simplicity, reduce downtime, reduce frequency of breakdown and improve
customer service and system efficiency.

B. Technology Absorption

i. Condition monitoring of major Plant & equipment of T&D network has been
adopted as a ritual to identify potential failure points in the equipment
before actual occurrence of failure. These have helped to mitigate damage,
downtime significantly and improve reliability of the system network.
Condition monitoring are being carried out with latest technology based
instruments for measurement of Partial Discharge (PD), Transient Earth
Voltage (TEV), Ultra-sonic signal detection, Infra-red Thermo-graphic
Scanners, application of Sweep Frequency Response analysis and use of Shock
detection analyzer during transport of large transformers.

ii. Oscillatory Wave Transmission System (OWTS) measuring technique was
employed to monitor the health and potential joint failure in EIHIV & HV
cables.

iii. All HT consumers are covered under AMR from remote using GSM & GPIRS
communication network.

iv. Progressive induction of SF6 filled Ring Main Units continued in HV
Distribution Network to enable safe, on load operations for quicker
restoration of supply outages.

Research & Development

R & D activities were oriented towards improvements in various operational
functions.

C. Foreign Exchange Earnings and outgo:

There has been a foreign exchange earning during the year of Rs. 2.91 crore
for carbon credit. The foreign exchange outgo during the year amounted to
Rs. 213.09 crore which included repayment of principal and finance charges
on foreign currency loans, fuel charges, dividend to non-resident
shareholders, fees to UK Registrars, London and Luxembourg Stock Exchange
fees, technical service fees, travelling expenses etc.

On behalf of the Board of Directors

R.P. Goenka

Kolkata, 21 June, 2010 Chairman