Power Finance Corporation

Power Finance Corporation Ltd.Power Finance Corporation Ltd.(Funding For Brighter tomorrow)

Power Finance Corporation Ltd.Power Finance Corporation Ltd.(Funding For Brighter tomorrow)

Presented by-Ravi Mehrotra

Angshuman RudraDhruv Srivastav

Vishal kumar

Electricity Industry Structure & Regulations(EISR)

(PM-2207)

Power Finance Corporation Ltd.

Overview of PFC About PFC Mission, Vision & Objectives Accomplishments & Ratings Products & Services Ultra Mega Power projects Nodal agency Independent

Transmission projects Support to Non-conventional

Energy sources Offices & Clients

Structure of the Organisation The Organisation The authority & duties of the

employees The norms & working culture

Company AnalysisFinancial & Non-financial products & servicesLending ratesDisbursement

Strategy so farKnow Your Customer(KYC)Fair Practice Code(FPC)Partnership in Excellence(PIE)

Financial AnalysisSanctions & DisbursementsFFS & P/L account analysisNegligible NPAs

The SWOT analysisThe road aheadQ & A session


PFC was set up in July 1986 as a Financial Institution (FI) dedicated to Power Sector financing and committed to the integrated development of the power and associated sectors. The Corporation was notified as a Public Financial Institution in 1990 under Companies Act, 1956. The Corporation was registered as a Non Banking Financial Company by RBI and has been conferred with the status of Nav-Ratna PSU by Govt. of India on 22nd June, 2007.


Corporate VisionTo be the leading institution in financing for sustainable development of

Indian power sector & its linkages with an eye on global operations.

Corporate MissionTo become the most preferred Financial Institution in power & financial

sectors providing best products and services; promote efficient investments in Power Sector to enable availability of required quality power at minimum cost to consumers; reach out to global financial system for financing power development; act as a catalyst for reforming India's Power Sector; and build human assets and systems for Power Sector of tomorrow.


o To provide financial resources & encourage flow of investments to the power & associated sectors.

o To work as a catalyst to bring improvements in streamlining the functions of its borrowers in the areas of technical, financial & managerial to ensure optimum utilisation of available resources

o To mobilise various resources viz. domestic & international at competitive rates.

o To strive for up gradation of skills in power sector for effective & efficient growth of the sector.

o To maximise the rate of return through efficient operations & introduction of innovative financial instruments & services of the power sector.


Conferred with the ‘Navaratna’ status on 22nd June, 2007.

ISO 9001-2000 certified Quality Management System of Project Division.

‘Highest safety’ ratings by CRISIL & ICRA for resource mobilisation.

International Credit ratings has been pegged at that of ‘Sovereign’ by Standard & Poor’s(S&P), Moody’s & FITCH.

‘Golden Peacock’ award for excellence in Corporate Governance (National Category), 2007.

IPO launched on February, 2007 was oversubscribed 77 times, a record by any PSE so far.


PFC is providing large range of Financial Products and Services like Project Term Loan Lease Financing Direct Discounting of Bills, Short Term Loan Consultancy Services etc.

for various Power projects in Generation, Transmission, Distribution sector as well as for Renovation & Modernisation of existing power projects.

Ministry of Power, Central Electricity Authority and PFC are working together to facilitate development of Ultra Mega Power Projects with the capacity of about 4000 MW each under Tariff based competitive bidding route. Being large in size, these projects will meet the power needs of number of states through transmission of power on regional and national grids.


PFC has incorporated two wholly owned subsidiary companies to act as a SPV for developing two projects as of now. The SPVs would transferred to the successful bidders who would implement the projects to be selected through the process of International competitive bidding

• Project ITransmission strengthening for NR for enabling import of Power from NER/ER by NR

(Target Year – 2009-10)• Project IIEvacuation System for Maithon RB (1000 MW), Kodarma (1000MW), Mejia(1000MW)

and Bokaro Extn (500MW-Target year – 2009-11)


o PFC is giving priority in financing of new renewable energy generation projects viz. wind firms, small hydro plants, bio-mass projects etc.

o PFC is also targeting financing of Captive power plants including co-generations.

o PFC assists State Power Utilities in preparation of CDM projects for R&M of old thermal & hydro generation projects.

o PFC is taking necessary action for capacity building of State Power Utilities & had identified 10 R&M projects for getting benefits under CDM in coordination with various State power Utilities.


Registered OfficePower Finance Corporation Ltd.'Urjanidhi',1, Barakhamba Lane,Connaught PlaceNew Delhi-110 001

Regional Office (West)Power Finance Corporation Ltd.Ground Floor, Moonlight Building,158 Maharishi Karve Road, Churchgate, Mumbai-400 020

Regional Office (South)Power Finance Corporation Ltd.1st Floor (Rear Side), SPS Building, New No.185, Old No.137,Anna Salai,Chennai- 600 002


o State Electricity Boardso State Power Utilitieso State Electricity/Power Departmentso Other State Departments (like Irrigation Department) engaged in the

development of power projectso Central Power Utilitieso Joint Sector Power Utilitieso Equipment Manufacturerso Private Sector Power Utilities


Organization The corporation is run by a Board of Directors which is the highest decision making body. It works through a hierarchy of whole time executives and employees. The number of employees currently employed in managerial capacity including whole time Chairman and Managing Director and Directors stand at 183, while those in non-managerial capacity stand at 129, total being 312.The powers and duties of its officers and employeesAdequate institutional arrangements exist to enable the officers and employees of the corporation discharge their duties satisfactorily vis-à-vis various clients, customers and business associates. The scheme of empowerment through the instrument of delegation of power ensures that various issues related to disposal of business and serving clients and customers are addressed with adequate speed thereby ensuring quality service.


Function and dutiesThe function and duties of the corporation in relation its customer and clients include

providing a range of services and products in the area of (a) Financial and fund based services; (b) Institutional Development services; and (c) Others including fee based consultancy services.

The procedure followed in the decision making processThe procedure followed in the decision making process, including channels of

supervision and accountability.Overall management of the Company is vested with the Board of Directors of the

Company. The Board of Directors is the highest decision making body within the Company.

Instrument of delegation of power broadly flows from top-downwards with Board of Directors in its capacity of being the highest decision making body having powers to dispose of business decision and with the same having been delegated to Chairman and Managing Director, Directors and there below for adequate and speedy decision making.

Power Finance Corporation Ltd.The norms set for the discharge of functionsThe functions of the corporation are sought to be discharged in an efficient and effective manner through a variety of norms, rules and guidelines set for the purpose, such as –

(a) Adherence to Business ethics, (b) Zeal to Excel and Zest for Change, (c) Focus on Customer requirements, (d) Strict adherence to Commitments, (e) Adherence to Prudential norms of the corporation, (f) Compatibility with national plans and priorities, availability & adequacy of all

inputs needed to judge Financial & Techno economic viability as also necessary and appropriate clearances,

(g) Integrity and fairness in all matters, (h) Respect for Dignity and Potential of Human beings. (i) Ensure speed of response, (j) Foster Learning, Creativity & Teamwork.


The following are the general documents which are held by the department for effective & efficient working of its operations:

1 Articles of Association and Memorandum of Association. 2 Manuals developed for conducting of business and work.

a) HR manual, b) Servicing manual (Domestic and International), c) Procurement manual, d) Vigilance manual, e) Resource Mobilization Manual (Domestic and International), f) Investment Manual, g) Risk Management Policy etc.

3 Operational Policy Statements.


Products & Services:-Financial Products & Services Project Term Loan (Rupee and Foreign Currency) Short Term Loan Short/Medium Term Loan to Equipment Manufacturers Direct Discounting of Bills Scheme - For Buyers Direct Discounting of Bills Scheme - For Sellers Lease Financing Scheme Buyer's Line of Credit Debt Refinancing Scheme Asset acquisition Scheme Project Rupee Bridge Loan Scheme Line of Credit for Import of Coal Assistance for Studies/Consultancies/Training

Non-financial ServicesGuaranteeConsultancy Services


Acting as an instrument for ushering in reforms in the state utilities.PFC has been providing support to help power utilities improves their technical, financial and managerial skills to make this vital sector of economy efficient, self sustaining and to adapt itself to the dynamic changes taking place.

Utility Development Plans.– Operational and Financial Action Plan (OFAP)OFAP document based on diagnostic study encompasses in different areas of

functioning of the power utilities.

Reforms & Restructuring of SEBs.PFC has been actively persuading State Govt. to reforms and restructuring of

their power sector in order to make them commercially viable.


Guarantee AssistancePFC issues guarantees on behalf of projects to guarantee their payment obligations. The

guarantees enable projects to secure financing from a wider spectrum of sources at more competitive rates, including borrowings from commercial banks, foreign lenders and the debt capital markets.

Purpose of Guarantee AssistanceTo provide non-fund based assistance by way of guarantees for performance of

activities/contractual obligations under agreements such as guarantee for performance under Fuel Supply Agreement for facilitating procurement of raw material like gas, oil, coal or any other form of fuel.

Types of guarantees :-(i) State / Central Government Guarantee(i) State / Central Government Guarantee(ii) Charge on assets(ii) Charge on assets(iii) Corporate Guarantee(iii) Corporate Guarantee(iv) Personal Guarantee of Promoters(iv) Personal Guarantee of Promoters(v) Pledge of shares(v) Pledge of shares(vi) Charge on Revenue(vi) Charge on RevenueAny other security acceptable to PFCAny other security acceptable to PFC


Range of Services offered by PFC Consultancy Services

Since operationalisation of PFC's Consultancy Services Unit in October 1999, it has grown many folds to provide consultancy services at competitive prices.

The Range of Services offered addresses the following aspects:1. Restructuring and Reform activities, and assistance to reformed

entities.2. Financial Management of resources, including mobilization and

accounting systems.3. Risk Assessment, feasibility analysis, project structuring and

development ofappropriate solutions for improving efficiency.4. Development of sustainable Human Resources Plans.5. Communication and information dissemination.6. Information Management systems.7. Legal and Contract Services for the Power Sector


Lending ratesCircular regarding revised interest rates applicable w.e.f. 3rd March,2007Interest Rates with 3 / 10 year reset provision for Rupee Term Loan (RTL) have been revised upward by 75 bps across the board from their existing level.Circular regarding revision of interest rate for Short Term Loans w.e.f. 10th November,2007It has been decided that the interest rate for Short Term Loan (STL) shall be reduced by 50 bps from 11.25% p.a. to 10.75% p.a. on disbursements and rollovers made/to be made on or after 10.11.2007

Disbursement By PFCPFC makes the disbursement in the following manner:a) Direct Payment to Supplier/contractorb) Reimbursement Claim to borrowerc) Advance Payment to borrower


PFC’s customers, for the purpose of KYC, are categorized as under: Lending side customers Borrowing side customersLending side customers (borrowers) would include state utilities and IPPs. Borrower

side customers (investors) include banks, institutions, trusts, corporates etc.

Benefits of KYC Customer Acceptance Policy and Customer Identification Monitoring of Transactions Risk Management Customer Education


PFC has developed the Fair Practices Code (FPC) for its lending operations based on the RBI guidelines, which intends to provide assurance to all the borrowers of the Company’s commitment to fair dealing and transparency in its businesses transactions. The Fair Practices code developed by PFC applies to the following areas:

• Application and processing of Loans • Loan appraisal and terms & conditions • Disbursement of Loans.

PFC has put in place a Grievance Redressal Mechanism. Citizens/Consumer have a right to approach concerned officers to settle grievances if they have any.

A senior officer is designated as Director (Public Grievances) who is available for the purpose


In order to keep pace with emerging market requirements PFC has taken several new initiatives. Some of the key policies introduced are: Financing of Spares & Services under Partnership in Excellence.

Rating & categorization mechanism for State sector entities.

PFC introduced special Interest rates to renewable projects to have business growth in this segment.

Extending special interest rates in case of large Generation project loans, volume discount in case of loans for Transmission & distribution Schemes & Rebate in Interest rates after commissioning in case of Generation projects during 2006-07.

Power Finance Corporation Ltd.FUNDS FLOW STATEMENT AS AT 31st MARCH 2007(Rs. In Lakhs)

Description As at 31.03.2007 As at 31.03.2006

I . SOURCES OF FUNDSShare Holder’s Funds 859308.91 693815.59Loans Funds 3358418.22 2692481.91Deferred Tax Liablity (Net of Asset ) 114259.48 97054.70Interest Subsidy Fund from GOI 123162.90 120032.99Total 4455149.51 3603385.192. APPLICATION OF FUNDSFixed Assets 8142.30 5531.68Investments 5887.88 1651.09Loans 4390282.94 3560253.15Current Assets, Loans & Advances 262024.51 178533.59 Less : Current Liabilities & Provisions 211191.91 145717.45Net Current Assets 50832.60 32816.14Total 4455149.51 3603385.19


PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2007(Rs. In lakhs)

Description Year ended 31.03.2007 Year ended 31.03.2006INCOME 392765.15 312758.63EXPENSES 241609.87 187261.39___________Profit for the year 151155.28

125497.24___________Profit before tax (PBT) 151153.28 126483.35___________Profit after tax(PAT) 98613.89 97095.01____________Earning Per Share(EPS) 9.46 9.42(Face Value-Rs.10 each)

D/P Ratio= 25%ROE= 86%

Growth of dividend=64.5%


During the year ended 31st March, 2007, the Company recorded a significant 25.58% growth in total revenue.

The total loan assets (net of provision) grew by 23.31%

The net worth of the Company grew by 24.37%

Net NPAs as % of Loan Assets decreased to 0.06% as against 0.20% in the year 2005-06.

Profit before Tax (PBT) grew by 19.5%.

However, Profit after Tax (PAT) grew marginally by 1.56% from Rs.970.95 crore in the year 2005-06 to Rs.986.14 crore in the year 2006-07.


Strength#Unique Player

#Strong Financial# Growth Acceleration#Backed by Ministry

Weakness#Internal Control

#PSU-Bureaucracy#RBI norms

#ECB Restrictions

Opportunities#Tariff based bidding

# UMPPs# Transmission Service

#The 11th plan

Threats#Accessing Funds

#Cheap Interest Rate# Dependence on a single

Sector


• In the years ahead, PFC intends to continue to encourage and promote reforms in the power sector.

• Looking at the size of investment requirements, PFC wants to diversify its portfolio & expand its services.

• Plans are also afoot to further promote and develop Consulting and Advisory services.

• PFC is also contemplating to explore opportunities available in the area of Private equity investment with an objective to bridge the last mile equity gap of Private power projects in India.

• The UMPPs are also expected to facilitate fee-based revenue & enhance PFC’s lending operations.


• www.google.co.in• www.pfc.gov.in• www.thehindubusinessline.com• www.economictimes.com• Financial Management.

–I.M.Pandey.• Google search on 21st Annual

General Meeting of PFC.• The Businessline.

Power Finance Corporation

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