APTRANSCO APERC

Opening balance of CWIP as on 01.04.2003 502.50 370.50

Outlay during the year (FY 2003-04) 274.85 252.50

Expenses during the year capitalized 32.85 32.85

Interest during construction charged to Capital (IDC) 27.30 25.08 Total additions: Capital expenditure 335.00 310.43

Total (OB + Additions) 837.50 680.93 LESS: Works anticipated to be completed in FY 2003-04 310.60 250.00 Closing Balance of CWIP as on 31.03.04 and

Opening balance as on 01.04.2004 526.90 430.93

Additional Investments during the year (FY 2004-05) 465.90 297.00

Expenses during the year capitalized 39.00 39.00

Interest during construction charged to Capital (IDC) 25.10 16.00 Total Additions: Capital expenditure 530.00 352.00

Total (OB + Additions) 1056.90 782.93

LESS: Works anticipated to be completed in FY 2004-05 563.80 400.00 Closing Balance of CWIP as on 31.03.05 493.10 382.93 Compulsory investments:

525. The Licensee has projected the compulsory investments (Contingencies Reserve) at Rs. 20.70 crores for FY 2004-05 and the same are considered in the computation of the capital base by APERC.

Working capital requirements:

526. The Licensee’s plea for working capital and the interest on borrowings therefor have been considered in detail by the Commission in the context of the Discussion Paper submitted by the Licensees in response to paragraph 236 of the Commission’s Tariff Order of 24th March, 2002. A detailed analysis of the position in this regard taking into account the existing billing and collection lags revealed that the working capital calculated corresponds to roughly one month’s average cash and bank balance. However, considering the working capital difficulties in the transition that the Licensee represented strongly about, the Commission decided in Tariff Order FY 04 to allow the average cash and bank balance in the computation of the Capital Base at two months’ level of eligible items of expenses instead of one month as hitherto. This is intended to provide a trajectory to an efficient level over a period of 3 years. The level would therefore be at 2 months’ level for FY 2003-04 and FY 2004-05 and at 1½ months’ level for FY 2005-06. Thereafter, it would revert to the one month’s level. There will be no change in the level of Average Cost of Stores, which is already being provided at 2 months’ level of the annual repair and maintenance expenses.

Average cost of stores:

527. The APTRANSCO has proposed an amount of Rs.7.00 crores towards Average Cost of Stores for inclusion in the Capital Base calculations. It may be

mentioned here that in the Tariff Order for FY 2003-04, a level of 2 months’ requirement of Repair and Maintenance expenses was considered reasonable and the Commission has decided to continue the same level as detailed in the preceding Paragraph. An amount of Rs.6.67 crores calculated at two months’ requirement of the Repairs and Maintenance expenses (Rs.40.00 crores) as claimed by the Licensee is therefore provided.

Average cash and bank balance:

528. The Licensee has proposed Rs.22.10 crores towards Cash and Bank Balance. As stated in paragraph 526 above, the provision under this Head is to be calculated at two months’ level of eligible items of expenses for FY 2004-05. Accordingly, the average Cash and Bank Balance works out to Rs.28.66 crores as detailed in the Table below and is provided for in the calculation of the Capital Base:

Table No.72

Computation of requirement of Average cash and bank balances

(Rs. Crs)

Wages and Salaries 95.18 Admin. and General Expenses 23.50 Repairs and Maintenance 40.00 Rent, Rates and Taxes 0.90 Contribution to Employee funds 12.35

Total expenses 171.93

Average Cash and Bank Balances

(171.93 ÷ 6) 28.66

Note: All amounts are net of expenses capitalized. Capital base-Negative elements:

Accumulated Depreciation

529. The accumulated depreciation as projected by the Licensee in the filings is Rs.1503.20 crores against which Rs.1499.64 crores is admitted. The difference is due to the capitalisation of works in FY 2003-04 being taken at less than the projections in the filings as mentioned in paragraph 522.

Loans from government and approved institutions:

530. The APTRANSCO has projected an aggregate loan amount Rs. 2948.89 crores for meeting the capital expenditure during 2004-05 as indicated below:

Table No.73 (Rs. Crs) Items Govt. loans Institutional loans Long Term Short Term Cash credit line

889.85 1066.60 717.44 275.00

Total 2948.89

However, the total loan amount admitted for FY 2004-05 by the Commission is Rs. 2944.47 crores.

531. An analysis of the capital expenditure, loans, depreciation, consumer contribution, grants etc., as available in the audited Accounts for the years 2000-01, 2001-02, 2002-03 and the present filings for the years 2003-04 and 2004-05 reveals that except in 2002-03, the Licensee had always been repaying loans in excess of the scheduled repayments. This means that the Licensee had float funds much in excess of its requirements and these funds were utilised for the repayment / pre-payment (pre-closure / substitution, etc.) of project loans.

532. The Licensee’s programme for loan drawals, substitution and repayment of loans (due and pre-closure) etc. is not in conformity with the Capital Expenditure programme approved by the Commission. This distorts the overall financial position. A review of the power purchase payables and receivables position as on 31st March 2003 reveals that the payables (Rs.1779.42 crores) were higher than the receivables (Rs.917.07 crores) by Rs.862.35 crores, which means that the amounts realised from the power transmitted by the APTRANSCO to four DISCOMS have been used in the business by the Licensee by defaulting on the power purchase bills. In the last Tariff Order (FY 2003-04), the Licensee was categorically advised to institute an effective control mechanism to ensure proper utilisation of funds for the purpose for which they are meant and avoid as far as possible the mix-up of long term and short term funds.

533. The year-wise actual position up to the year 2002-03 and the projected position for the years 2003-04 and 2004-05 are as follows:

Table No.74

Statement showing capital expenditure, loans, depreciation and consumer contributions

(Rs. Crs) S.No. Particulars 1-4-2000 As on As on 31-3-2001 As on 31-3-2002 As on 31-3-2003 2003-04 2004-05

1 Gross Fixed Assets 1664.70 2521.24 3125.91 3552.56 3863.00 4427.00 2 Capital Work-in-progress 1016.76 580.10 434.54 370.51 526.90 493.10

3 Total 2681.46 3101.34 3560.45 3923.07 4389.90 4920.10

4 Accretions: Capital expenditure 0.00 419.88 459.11 362.62 466.83 530.20 5 Consumer contributions 15.03 15.03 30.62 40.59 30.62 30.62 6 Accretion: Net contributions received during the

year 0.00 0.00 15.59 9.97 0.00 0.00

7 Balance to be funded by loan drawals (4-6) 0.00 419.88 443.52 352.65 466.83 530.20

8 Loans drawn (*) 0.00 1429.37 1745.96 2252.10 775.16 767.00 9 Excess drawals (8-7) 0.00 1009.49 1302.44 1899.45 308.33 236.80

10 Accumulated Depreciation 587.32 691.48 849.11 1043.97 1263.90 1503.20 11 Accretion: Depreciation for the year 0.00 104.16 157.63 194.86 219.93 239.30

12 Loan repayments (*) 0.00 2239.33 1561.99 1574.24 796.04 787.51 13 Balance repayments (12-11) 0.00 2135.17 1404.36 1379.38 576.11 548.21

14 Total (excess repayments) or Excess

drawls on capital account (9-13) 0.00 (1125.68) (101.92) 520.07 (267.78) (311.41) * Details of loans drawn and repayments

(Rs. Crs)

2000-01 2001-02 2002-03 2003-04 2004-05

Particulars Drawn Repaid Drawn Repaid Drawn Repaid Drawn Repaid Drawn Repaid Payments due on

Capital liabilities 709.78 967.71 783.77 821.96 784.56 814.85 0.00 0.00 0.00 0.00 Capital liabilities 318.92 589.04 428.03 410.13 1112.05 655.98 165.60 272.25 329.77 256.42 Funds from State

Govt. 400.67 682.58 534.16 329.90 355.49 103.41 109.56 84.97 137.23 60.73 Short Term Loans 0.00 0.00 0.00 0.00 0.00 0.00 500.00 438.82 300.00 470.36

Total 1429.37 2239.33 1745.96 1561.99 2252.10 1574.24 775.16 796.04 767.00 787.51

The year-wise position of negative working capital (as per audited Accounts) is as follows:

Table No.75

Statement of negative working capital (Rs. Crs) 1-4-2000

(opening balance)

2000-01 2001-02 2002-03

A. Total Current Assets

B. Total Current Liabilities 1035.53 1890.57 2166.34 594.19 2358.22 701.81 1448.56 2226.15 Negative Working Capital (B-A) 855.04 1572.15 1656.41 777.59

(+) Borrowings for Working Capital 145.88 108.68 238.76 178.55 Gross Negative Working Capital (C) 1000.92 1680.83 1895.17 956.14

(-) Subsidy Receivable (-) Revenue Deficit 673.91 - 850.80 - 850.80 176.80 621.62 - (D) 673.91 850.80 1027.60 621.62

Adjusted net Negative Working Capital (C-D)

Net capital base:

535. With the above changes in the positive and negative elements of the capital base, the net Capital Base works out to Rs.156.83 crores as detailed in the Table below as against Rs.1416.40 crores projected by the Licensee:

Table No.76

Capital Base calculations for FY 2004-05

(Rs. Crs)

ITEM APTRANSCO APERC

Positive elements of capital base

Original cost of Fixed Assets 4413.60 4161.98 Capital Works-in-progress 493.10 382.93

Investments 20.70 20.70

Working capital

a) Average cost of stores 7.00 6.67 b) Average cash and bank balance 22.10 28.66

Total of positive elements of capital base 4956.50 4600.94

Negative elements of capital base

Accumulated Depreciation 1503.20 1499.64 Government loans 847.40

Approved loans 1066.60

Other market borrowings for CAPEX 122.90

2036.90 2944.47

Total of negative elements of Capital Base 3540.10 4444.11

Net Capital Base 1416.40 156.83

EXPENDITURE: