annual report 2015 - bpc.bt · education: master of law degree (ll.m) from the george washington...
TRANSCRIPT
2015Annual Report
Values of BPC
Integrity, mutual respect for each other, professionalism, accountability, care and “Tha Dhamtse”.
Our Vision
“To be the best electric utility in the region committed to quality services, maximization of value, and sustainable socio-economic development”
Our Mission
To Transmit, Distribute and Supply Electricity within the Country, wheel Electricity for Export, and Practice Good Corporate Governance.
Contents
Board of Directors 5 Management Team 7
Directors’ Report 8
CompanyProfile 15 Auditor’ Report 20
Exhibit to the Annexure 22
FinancialStatement 28
Ensuring Safety and Security at all times 5
Board of DirectorsDasho Tshering Dorji, ChairmanPosition: Secretary, MinistryofHomeandCultureAffairs
Education: Masters of Science in Management , Arthur D. LittleSchoolofManagement,Massachusetts,USA.
B.AEng(Hons) fromKiroriMalCollege,UniversityofDelhi,India
Experience: AmbassadortoBangladesh&Thailand. ChiefofProtocol,MinistryofForeignAffairs
Meeting Attendance: 5/5
Mr. Gem TsheringPosition: ManagingDirector, BhutanPowerCorporationLtd.
Education: B.TechfromMadras,India. MastersinPlanningandPolicyfromAIIT,Thailand.
Experience: Energy Specialist, Department Of Energy, Ministry ofTrade&Industry
Chief Engineer, Head of Division, Planning &Coordination Division, DoE, Ministry of Trade andIndustry
Superintending Engineer, Projects Planning &InvestigationDivision,DoE,MinistryofTrade&Industry
Meeting Attendance: : 5/5
Mr. Karma P Dorji, MemberPosition: ChiefEngineer,DHPS Ministry of Economic Affairs
Education: M.sc in International Development Technology, StateUniversity of California (Hambolt University) Arcara,UnitedStates
Electrical Engineering, PSG College of Technology,Coimbatore,TamilNadu
Experience: ExecutiveEngineer,Planning&CoordinationDiv,DHPS,MoEA.
Meeting Attendance: 5/5
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015 Mr. Phento Tshering, Member
Position: ChiefForestryOfficer,ThimphuDivision MinistryofForest&Agriculture
Education: M.sc in Mountain Forest Ecology & Management,UniversityofNaturalResources&AppliedLifeSciences
M.scinForestry&Administration,IndraGandhiNationalForestAcademy,Dehradun
Experience: Divisional Forest Officer, Wangdue Terrirorial ForestDivision
Meeting Attendance: 5/5
Mr. Singye Dorji, MemberPosition: ChiefExecutiveOfficer WoodCraftCenter
Education: BachelorsDegreeinCommerce,SherubtseCollege
Experience: ExecutiveDirector,LhakiGroupofCompanies ManagingDirector,BhutanBoardProductsLimited.
Meeting Attendance: 5/5
Mr. Sonam Lhundup, MemberPosition: GeneralCounsel,DHI
Education: Master of Law Degree (LL.M) from the GeorgeWashington University Law School, Washington DC,USA.
BachelorofLaw(LL.B)fromtheUniversityofMumbai,India
Experience: SeniorLegalOfficerwiththeMoAandasmemberoftheLandActReviewCommitteeasitsMemberSecretary.
LegalLegalOfficeratthePolicyandPlanningDivisionoftheMinistryofAgriculture
Meeting Attendance: 4/5
Management Team
FromTop,LftMr.UjjwalDeepDahal,GM,BPSO,Mr.SandeepRai,Offtg.GM,DCSD,Mr.DrukchuDorji,GM,PSD,Mr.GorabDorji,GM,EDCD,Mr.NamgayWangchuk,GM,ICD,Mr.ShamsherPradhan,Offtg.Head/GM,TS
Bottom,FromLeftMr.TashiPenjor,CompanySecretary,Mr.NimDorji,Offtg.Head/GM,HRAS,Mr.GemTshering,MD,Mr.SonamTobjey,Director,FAS,Mr.ThinleyGyeltshen,GM,TD,Mr.PradeepM.Pradhan,AD,CorporateServices,Mr.DechenCholing,GM,RED
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Directors’ Report on the Performance of Bhutan Power Corporation Limited for the year 2015
Introduction
Onbehalfof theBoardofDirectorsofBhutanPowerCorporationLimited,Ihavetheprivilegeto present this report on the performance of the Company for the period covering 1stJanuary 2015 to 31st December 2015 to DrukHoldingand InvestmentsLtd. (DHI), thesole shareholder, and to the other relevantstakeholders.
System Performance
The demand for electricity consumption fordomestic purpose has been growing steadilyovertheyearskeepinginpacewiththegrowthin the economic activities of the country. Thepeak demand has reached 336.52 MW ascomparedto333.14MWinthepreviousyear.Duringtheyear,8,483customerswereaddedand BPC today serves more than 168,279customers. The addition has been mostlythroughserviceconnectionoftheruralhomesinthecountrysidebroughtaboutbyextensiveRural Electrification coverage made by theCompany.
To meet the domestic consumption demand of power,2142.167MillionUnits (MU)ofenergywas purchased from Druk Green PowerCorporationLimited(DGPC)duringtheyearascomparedto2064.300MillionUnitsduringthepreviousyear. Of thetotalpurchases,royaltyenergyaccountedfor1093.953MUfortheyearascompared to1059.200MU in theprevious
year.The internal generation fromembeddedminiandmicrohydelsownedbythecompanywas14.676MUduringtheyear.
Thetotalsalefortheyearwas2057.141MUascomparedto1,977.182MUinthepreviousyearreflecting a growth of about 4.04% over theyear.TheenergywheeledbyBPCforexporttoIndiaforDGPCincreasedto5541.759MUfrom5,044.327MUin2014.
On the System Performance, I am happy toreport that BPC has been maintaining its system lossesatlimitscomparablewithintheregion.Ofthe totalenergyof7,703.296MUreceivedbythesystemduringtheyear,7,598.900MUwasthe total utilization of energy. This translatestheglobalenergylossfortheyearto1.35%ascomparedto1.13%in2014.ThedomesticT&Dlossfortheperiodis4.83%andforthepreviousyear the loss was 3.87%. The companyhas been able to maintain its losses withinpermissible limits due to timely preventive,plannedmaintenanceandup-gradationof thenetworksystem.
Theloadflowwithinthesystemiscoordinatedand monitored by the Bhutan Power SystemOperator (BPSO). The Center monitors thepowersystemsoperationonlineforcarryingouteffective dispatching of load and coordinationwithgeneratingplantsofDGPCandtheIndianEastern Region Load Dispatch Center atKolkatta.
Directors’ Report
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015Financial Reports
Iamhappytoreportthatsincetheyear2013,the Company has adopted the Bhutanese Accounting Standards (BAS) which arebased on International Financial ReportingStandards.BPCiscurrently in thefirstphaseof implementation of BASwith 18 standards.With the adoption of BAS, there is improvedfinancialreportingandthecompany’sfinancialstatements are consistent with internationalstandardsandpractices.
Auditors’ Report
TheAuditorshaveissuedanunqualifiedauditreportfortheyearwithnoadversecomments.Theyhave,however,disclosedasastatementoffactthatin2013BPChasgivenaninterestfreeadvanceofNu.400million to theshareholderDHIandNu.900millionintercorporateloantoM/s.DungsamCementCorporationLtdduringtheyear.Thecompanyhasalsoimplementedallthepreviousyears’recommendationsmadebytheAuditors.
Financial Performance
The total assets of the company stand atNu. 25,185.46 million as compared to Nu.24,651.64million as onDecember 31, 2014.ThenetworthofthecompanytodayisNu.19,035.58millionascompared toNu.18,466.62million onDecember 31, 2014.Gross assetsamounting toNu.1,500.34millionhavebeenaddedduringtheyear. Borrowings
The funds generated from the operating activitieswereadequatetomeettheinvestmentactivitiesof thecompanyandotheroperatingobligationsoftheyear.TheCompanyhasnotborrowed additional funds during the year to
finance its capital investments.The companyhas,however,continuedtotakesoftloansfromtheexistingfinancingarrangementprovidedforfinancingtheruralelectrificationworks.Thesesoft borrowings are made available to BPCthrough the Royal Government of Bhutan bytheAsianDevelopmentBank(ADB),theJapanInternational CooperationAgency (JICA) andthe Austrian Federal Government (ADA).During the year, BPC has drawn Nu.84.15million from JICA and Nu.77.46 million fromADB, totaling Nu.161.61 million. For theprevious year, the total borrowings were Nu.6,185.02 million. The principal repayment ofNu.196.76million has beenmade during theyearfortheexistingborrowings.Thetotalnetborrowing for theyear isNu.6,149.88millionfortheyearagainstNu.6,185.02millioninthepreviousyear.
Government Grants
TheRoyalGovernmentofBhutanstillcontinuestosupportBPCinmanyofitsprograms.Onesuchprogramistheconstructionof300x2kWPilotWindPowerProjectatRubessa,WangduePhodrang funded as grant by ADB through the Royal Government of Bhutan. The CompanyreceivedcapitalgrantofNu.8.21millionduringtheyear.
Construction Contract Works
Apart from constructing network expansionworks within the country, BPC also executesassociated transmission system (ATS) worksfor Punatshangchhu Hydro Electric ProjectAuthority I & II (PHPA-1 and II), MangdechuHydroElectricProjectAuthority(MHPA)andInter Connecting (GIS) Substation Jigmelingforevacuationofpowerfromthesegeneratingplantswhichareunderconstruction.Fortheseworks,thecompanyhasreceivedNu.1,075.30million,Nu.964.60million,Nu.1,244.46million
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HydropowerAuthoritiesduringtheyear.
Capital Investments
Duringtheyear,thecompanyspentNu.883.68millionascomparedtoNu.1,668.54millioninthepreviousyear incapitalworksfornetworkexpansionand foraugmentingand improvingthe ageing grid network. This investmentrepresents 64%of theProfit after tax of thecurrentyearbeforedividend.
On financing these capital works, BPC hasbeen able to meet its capital commitmentsfor system up-gradation works from its ownoperating activities while the work for RuralElectrification Project has been financedthrough soft borrowings scheme and grant fromtheRoyalGovernmentofBhutan.
Fortheconstructioncontractworksofbuildingassociated transmission system (ATS) forPunatsangchhu Hydroelectric Projects I andII,MangdechuHydroelectric ProjectAuthorityand the ICTGISSubstationatJigmeling, theCorporationspentNu.4,210.852millionduringtheyear.
Operating Results
The revenue of the Company has beengrowing steadily over the years. The grossrevenue earned for the year is Nu. 9,769.65millioncomparedtoNu.7,273.88millioninthepreviousyear.Thegrowthinthegrossrevenueis34%ascomparedto13.6%inthepreviousyear.Therevenuefromsaleofelectricitygrewby 14% fromNu. 4,032.66million in 2014 toNu. 4,588.08 million in 2015. The revenuefrom wheeling of power increased to Nu.632.27millionfromNu.575.05millionin2014representing a 10% growth. Other revenueearnedfortheperiodisNu.267.24millionascompared to Nu. 246.66 million in 2014, anincreaseintheearningsbyabout8%.
TheaveragetarifffortheyearisNu.2.27perkWh as compared to Nu. 1.966 per kWh in2014.
The revenue from construction contractsearned increased significantly from Nu.2,419.50millionin2014toNu.4,282.06millionduringtheyear,anincreaseintheearningby77%. The increase is attributed to the goodworksprogressmadeduringtheyear.
Stringing of Transmission Line
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includingpurchaseofpower,financecostsanddepreciationexpenses isNu.7,798.03millionas compared to Nu. 5,680.79 million in thepreviousyear.Theincreaseontheexpenditurehas mainly been on account of increase inconstructioncontractexpenditure.
TheCompanymadeanetprofitaftertaxofNu.1,380.74millionfortheyearascomparedtoNu.1,002.97millionin2014.Currenttaxassessedfor the year amounts to Nu.519.784 million.Fromtheprofitsearnedfortheyear,theBoardof the company proposes and recommends a dividendof95%whichworksouttoNu.155.82pershare,amountingtoatotaldividendpayoutofNu.1,281.655million.Inaddition,theBoardalsorecommendstransferofNu.5.74milliontoAssetReplacementReserve. Power System Expansion Programs
Iwouldliketoreportonthestatusofthemajorongoingworksofthepowersystemexpansionworksandthenewinitiativestakenduringtheyearsincetheseworksarecriticalforbuildingareliableelectricalpowernetworksystem.
Iamveryhappytoreportthattheconstructionof 220 kVSubstation atDhamdhum,Samtsehas been completed, commissioned andcapitalized in the year. The construction ofhollowblockquarterstohousetheprojectstaffdue to housing crisis in Tingtibi, which wasawardedtoDungkarConstructionatacontractvalueofNu.21.741millioninDecember2014wascompletedwithinthecontractperiodof8months.
Some of the capital works in progress in the year were:
a) Constructionoftwonumbers400kVD/CtransmissionlinestakenupbyBPCasadepositworkforPHPAIfortheevacuation
of power from Punatsangchhu-I HydroElectric Project to India is progressingwith physical progress of 79.42% forpackageAand72%forpackageBasonDecember2015.TherevisedscheduleofcompletionisJune2016.
b) Constructionoftwonumbers400kVD/CtransmissionlinestakenupbyBPCasadepositworkforMHPAfortheevacuationof power from Mangdechhu Hydro Electric Project made progress of 64%as of December 2015 with 235 tower foundationcastedand10Kmofstringingworks completed.Theworkwill have tobecompletedbyJanuary22,2017.
c) The contract for construction of 400kVD/C Transmission line from potheadyard Punatsangchhu II in Wangdue toJigmeling, Sarpang, taken up by BPCas a deposit work for PHPA II, wasawarded to M/s KEC International Ltd.,IndiaonJanuary16,2014ata contractvalueofNu.1809.112million.TheworkisprogressingquitewellandthephysicalprogressasonDecember2015is41.43%.TheworkwillhavetobecompletedbyJuly15,2017.
d) The construction of the 66 kVTransmissionLinefromThimphutoGasa,which was awarded to Joint Venture ofBhutan Engineering Company Pvt. Ltd.andBhutanEngineeringPowerCo.Pvt.Ltd. on November 6, 2014 at contractvalueofNu.341.738millionhasachievedprogressof25%asonDecember2015.The work will have to be completed onNovember5,2017.
e) The construction of O&M Infrastructureat Samtse, which was awarded toLoden Construction on September 30,2014atcontractvalueofNu.34.276, is
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The work will have to be completed bySeptember29,2016.
Rural Electrification (RE)
BPCwasentrustedwiththemandatetoprovideelectricityforallby2013inthe10thFiveYearPlan(FYP)withatotalof40,257householdstobeelectrified throughon-grid supply scheme.BPC triedall itsefforts tomeet themandate,andattheendofthe10thFYP,BPCachieved94%coverage.Thespilloverworkswerecarriedforward andas ofDecember 2015,BPChaselectrifiedtotalof43,273householdsachievingthemandatesof10thFYP.Theachievementisduetotheincreaseofhouseholdswhichwereleftoutorwherenewconstructionscameupinthetargetedareas.
BPC is still struggling to reachgridelectricityto some difficult and remote areas such asLaya in Gasa, Bardo in Zhemgang, Doban/Jigmecholing in Sarpang and Dorona inDagana which are targeted to be completedwithinearly2016.
LastmileREconnectivitywasfullofchallenges.One of the major challenges faced was theinaccessibility of work sites wherein thetransportationofmaterialshasbeenthesinglemost challenge.Thiswascoupledwithharshclimatic conditions and difficult geographicalterrain,scatteredworksitesresultinginsevereworking conditions, therebymaking it difficultto get laborers and also retain the existingworkers towork at the site. In some cases,BPClackedsupportfromthecommunity,whichfurtherdelayedtheprogressofREworks.
In spite of all challenges, I am proud andhappytoreportthatBPChasmadesignificantprogressand todayabout 99%ofBhutanesehomesalloverthecountryhaveaccesstogridelectricity supply. However, maintaining the
reliabilityofsupplyoftheextendedgridnetworkataffordablepricewillbeachallenge.
System Improvement Works
SystemimprovementisacontinuousactivityinBPC. It is necessary in order to improve thesupplyreliabilityandmeettheincreasingpowerdemand. Also, such system improvementworkshelpimprovesafetyandreduceenergyloss.
Inthedistributionsystem,besidesreplacementofoldconductors,up-gradationoftransformers,replacement of overloaded conductors andtransformers, conversion of bare conductorstoLVABC,DepartmentofCustomerServicesDepartment has carried out Construction of 33/11 kV substation at Samdrup Jongkhar,Construction of 33/11 kV substation atKhalangziPowerHouse,Mongar,Constructionof 2x5MVA substation at RBA Lungtenphug,Thimphu,Constructionof2x3MVAsubstation
Mangdechhu Transmission Line
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5MVAatRICBL,Thimphu.
In the transmission system, TransmissionDepartment has carried out up-gradation of66kVParosubstationwith2x20MVA,66/33kVpower transformer, re-alignment of 220kVRurichhu-Tsirangtransmissionline(rt42-rt43)atDogorthang forPHPA-II dumping yard, re-alignmentof132kVDewathang-RangialineforIndustrialestate,changedcurrent transformerat 220kV substation, Semtokha, carried outretrofittingofrelaysatHaasubstation,Shiftingof8MVAtransformer fromParo toWatsaandstartedworksontheupgradationofSingyegaonsubstationtoGISsubstation.
Corporate Governance
During the fiscal year, to enhance goodgovernanceandtoprovidestrategicguidanceto thecompany, theboardheld14meetings.TheAnnualGeneralMeetingwasheldon16thApril,2015.Besidesregularboardmeetings,2Board Audit Committee meetings and 2 Board Tender Committee meetings were also heldto decide and finalize on the procurement ofgoods,servicesandworks.
In all the meetings, the quorum as requiredwasdulymaintainedandalltheDirectorsoftheBoarddeclarednoconflictofinterestineachofthesemeetings.
Risk Management Framework
The 48th Board Meeting of Druk Holdingand Investments Limited (DHI) approvedthe implementation of Risk ManagementFrameworkinDHIandDHIownedCompanies.The framework, which constitutes a part ofits Corporate Governance Code, is aimed atdrivingperformanceenhancementandoptimalresource utilization in various companies itowns.
BPC,whichisgovernedbytheDHIownershipPolicywasdirectedtostarttheimplementationof theRiskManagementFrameworkby2014vide Letter No. DHI/CEO/DOC/2013 – 1039datedDecember4,2013.Accordingly,theRiskManagementDivision(RMD)wasinstitutedinAugust2014,withRiskOfficerastheHeadoftheDivision.SinceRiskManagementhasmulti-disciplinaryand cross-cutting functions, BPC had furtherassigned Departmental Risk Focal Persons,comprisingaseniorandexperiencedemployeeeachfromthe8Departments.
In 2015, BPC Risk Team came together toidentifycompany-wideriskfactors,andthefirstcompanyspecificRiskRegisterwascompiled.The Risk Register helps in contextualizingeveryriskitemandinobjectiveanalysisthereof,intermsoffinancialloss,reputationaldamage,severity of impact, probability of occurrence,evaluation of existing control mechanisms,additional control requirements, risk owners,etc.
This Risk Register was submitted to DHI,which will be coming out with a Group-wideRiskManagementPolicy.
Human Resources Management Initiatives
Themainhighlightof2015wastheappointmentof Mr. Gem Tshering, former Director,Transmission Wing as the new ManagingDirectorofBPCon1July,2015.HRAShasorganizedshorttermandlongtermtraining achieving training mandays of closeto 17,500, and recruited 23 new employeesin 2015. HRAS has spent considerable timein implementing the re-designation and staffbenchmarkingexerciseaspertheHRMasterPlan2014-2020.
To commemorate the celebration of the 60thBirthAnniversary of our belovedFourthDruk
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helped in the construction of biking/walkingtrailaroundThimphucity.BPCalsoorganizedablooddonationcampaigninDecember2015.
Monitoring of Performance
The performance of both financial and non-financialaspectsof thecompany ismanagedand monitored through signing of the compact with DHI and through the PerformanceBased Incentive System (PBIS) which is themanagementtoolofmonitoringperformanceatalllevels.
Challenges
Someoftheissuesthathaveposedachallengeinourdrivetoexpandthenetworksystemandto provide uninterrupted and reliable powersupplytoitscustomersare:
1. Right of way and clearance issue fornew power infrastructures and their constructions.
2. Shifting and relocating of the existinglinesatallvoltagelevels.
3. Disruption in the supply in the vast gridnetwork of power system due to forcemajeureconditions(wind,storm,thunder,lightening, snow, rain and sometimesmanmade)
Acknowledgement
The Board of Directors and the Management teamwouldliketoextendsinceregratitudebyacknowledgingthetimelyassistanceprovidedbytheMinistryofEconomicAffairs,theMinistryof Finance and the Department of Hydropower Power Systems, Department of RenewalEnergy, Bhutan Electricity Authority in termsofpolicyguidance.Wewouldalsoliketoduly
acknowledge the support and cooperationrendered by all those agencies that havebeen closely associatedwith BPC directly orindirectly. We are also thankful to theADB,JICA and ADA for providing funding andtechnicalsupport towardsRuralElectrificationworks.
We would also like to place on record oursincere gratitude to the Chairman and other officersofDrukHolding&Investmentsfortheircontinued guidance and support during the year.
TheBoardandManagementwouldalsoliketoextend its deep appreciation to Dasho Bharat Tamang,who,as theManagingDirector fromJanuary 2008 to June 2015 had put in a lotof hard work and taken numerous personalinitiativestomakeBPCanexemplarycompanyinmanyrespects.
Finally, the Board would like to thank theemployees of the Corporation and theManagement Team for having maintainedtheir high level of professionalism, dedicationin their works and for delivering good andconsistentresults.Iamconfidentthatwiththeable leadership of themanagement andwithcontinued team efforts, BPC will continue tofulfillitscoremandates.Towardsthisend,theBoardwould like to assure the employeesofBPCourfirmsupportintheirpursuitinrealizingthegoalsandmissions.
TashiDelek!ForandonbehalfoftheBPCBoard
(TsheringDorji)Chairman
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Company ProfileBhutan Power Corporation Limited (BPC)was formed as an offshoot of the erstwhileDepartmentofPower,thethenMinistryofTradeandIndustryandwaslunchedasPublicUtilityCompanyon1stJuly2002withanobjectivethatthecorporatizationoftheutilityfunctionswouldleadtogreaterefficiencyandbetterdeliveryofelectricitysupplyservicesinthepowersector.Later theOwnershipwas transferred toDrukHolding and Investment Limited (DHI), thecommercial arm of theRoyal Government ofBhutan,establishedin2007uponissuanceofRoyalCharterin2007“toholdandmanagetheexisting and future investments of the RoyalGovernment for the long term benefit of thepeopleofBhutan”
Our VisionTheBestpowerutilityintheregioncommittedtoqualityservices,maximizationofvalueandsustainable socio-economic development inpursuitofGNH.
Our MissionTo transmit, distribute and supply electricitywithin thecountry,wheelelectricity forexportandpracticeGoodCorporateGovernance.
Our Culture & ValueIntegrity, mutual respect for each other,professionalism,accountability,careand“ThaDhamtse”.
Destination StatementTomakeBPCintoa45billioncompanyby2020
Our businessBPCbuilds,owns,operatesandmaintainstheentire electrical transmission and distributionnetwork in the country including 19mini andmicro hydropower plants. Besides sale ofelectricity to customers within the country,BPC is responsible for “Wheeling” of powerover its transmission lines from the largehydropowerplantsownedby theDrukGreenPowerCorporationLimited(DGPC)forexport
Civil Award recipients
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015 to India. BPCwas entrustedwith amandate
toprovideelectricityforallby2013inthe10thFive Year Plan (FYP) with a total of 40,257households to be electrified through on-gridsupplyscheme.BPCtriedallitseffortstomeetthemandate,andattheendofthe10thFYP,BPC achieved 94% coverage. The spilloverworkswerecarried forwardand in2014BPCelectrified3198householdsthroughvariousREprogramsandasofDecember2015,BPChaselectrifiedtotalof40,852householdsachievingthemandatesof10thFYP.Theachievementisduetotheincreaseofhouseholdswhichwereleftoutorwherenewconstructionscameupinthetargetedareas.
BPCisalsoentrustedforpowergridexpansionto provide growing electricity demand ofindustries, commercial, institutional andresidential customers all over the country.BPCisalsolicensedtobuildICTConnectivityinfrastructuressuchasOPGWandADSSoverpowerlinestoprovidenotonlyelectricitysupplyservices but to facilitate bulk communicationof digital data, information and voice in thecountry. BPC is thus a provider of the “wire”services for both electricity supply aswell asICT.BPCwasalsogiven twonew licensesbyBhutanElectricityAuthority(BEA)i.e.,Licensetoconstructandoperate500kWRubesaWindPowerPlantandLicenseforSystemOperationofPowerSystemintheKingdomofBhutan.
With the Royal Government’s vision ofdeveloping10,000MWofhydropowercapacityby 2020, BPC has also been mandatedto construct the Associated Transmission System(ATS)including400kVlinesandInter-connectingpowerpoolingsubstationsrequiredfor evacuation of power from these megahydropower plants up to the Bhutan-Indiaborder.
Corporate Strategic Plan Using Balanced Scorecard SystemThe revision of Corporate Strategic Plan2007 was carried out to keep abreastwith the changing environment in relationto development activities, changes inpolicies, increased customer expectationsand technological changes. BPC is alsoexperiencingdrasticchangeinsocialobligationand political mandates to work towards thesocioeconomicdevelopmentofthecountryandto improve the living standards of the peoplebyprovidingreliableelectricitysupply.Inorderto overcome those challenges and to assistin planning, execution and implementationof BPC functions more efficiently, BPC hasdevelopednew corporate strategy plan usingtheBalancedScorecardSystemwhichisoneofthewidelyusedinternationalbestpracticesinmanagingtheorganization.ThenewstrategicplanwaspreparedwithexpertinputsfromtheInstitute, Balanced ScorecardAustralia alongwiththevisioninganddirectionsfromthepastBPCBoardofDirectorsandtheManagement.Sointhenextfiveyears,BPCwillbeguidedbythenewCorporateStrategicPlan2015intheoperationandfunctionsoftheorganization.
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015 Our Network
The BPC Grid network covers the wholecountry. The oldest system was establishedsince mid Sixties and in Seventies with thecommissioning of the mini hydel generationplants in each district headquarter. Most of
theoldassetsarenowbeingreplaced.Whileour present network system is fairly new,maintainingthevastgriddednetworkofassetsremains a challenge especially those in theperipheryofthecountry.
Theoverviewofthecompany’snetworksystemisdetailedbelow:
Transmission system (66kV up
to 400kV)
Distribution system(400/230kV up to
33kVTotal
Overheadlines 1096.655km 13,682.86km 14,779.515km
Undergroundlines 6.02km 474.21km 480.23km
Transmission Towers 3295Towers - 3925Towers
Transformer capacities 1035.5MVA 548.505MVA 1,584.005MVA
NumberofTransformers(including33kV) 83Numbers 4501Numbers 4,584numbers
GenerationCapacity(Diesel) 8238KVA
GenerationCapacity(smallhydro) 7920KW
TotalGenerationCapacity 15,334KW
TotalEnergypurchased(2015) 2142.166GWh
TotalEnergysold(2015) 2057.140GWh
TotalEnergyWheeled(2015) 5541.759GWh
TotalEnergyGenerated(2015) 14.675GWh
PeakDomesticDemand 336.52MW
Customer Connections
Residential 167,441
LVBulk 770
MV 52
HV 16
Losses
GlobalLoss 1.35%
DistributionLoss 8.98%
TransmissionLoss 0.71%
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Customer ServiceCustomercareanddeliveryofservicesisintheforefrontof our initiatives.Thecustomer careismanaged bymulti-task employees throughourservicecenterslocatednearthecustomerpremises. Customer complaints are handled
throughacentralizedContactCenterlocatedinThimphu.Ourcustomersatisfactionindexwas3.98onscaleof5basedonthirdpartysurveyresult.Ascomparedtothe2014CSIwhichis3.79,theCSIfor2015hasgoneupby0.19.
New Connections8,483 customers were added to the networksystemduringtheyear2015.
SafetyThe Board had approved the ‘Budget 2015’withtheTheme“EnsuringSafetyandSecurityat Work at all times” Therefore, to achievethis mandate, the Distribution & CustomerServices Department (DCSD) and theTransmission Department (TD) had jointlyconductedTrainingofTrainers(ToT)onSafetyManagementSystem inCentralMaintenance&TrainingDivision,Begana,for43supervisorylevel employeeswith the help ofConsultantsfromtheProvincialElectricityAuthority(PEA),Thailand.TheToTsweretrainedontheSafetyManagementSystem,thetopicscoveredwereviz. MorningSafetydrill,safety talk, toolboxmeeting, job safety analysis, Use of safety
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Erection-3 line realignment at semtokha
tools,useofPPE,andimportanceofgroundingandsafetysigns.TheywerealsomadeawareoftheActs,safetyregulationandcodes.
Thereafter, the trainer trained the other fieldemployees at various locations across thecountry.Thetotalnumberofemployeestrainedstoodat1141,ofwhich718employeeswereofDCSDand423employeeswereofTD.
During the year, the Safety Inspection andCompliance Division (SICD) under the MD’sOffice had carried out internal safety audits/inspections in the field to observe thatthe employees comply with the Statutoryrequirementssuchasadoptionofworkpermitsystem,isolation,testing,earthingandhazardsidentification and mitigation through morningsafetydrill/safetytalk,toolboxmeetingandjobsafetyanalysis.Itwasobservedthatalthoughittakestimeandit’shardtobringoutemployees’behavioralchangeandtheirmind-set towardssafe work culture within a short period oftime, however, with vigorous training onsafety had gained momentum in transforming the employees’ behavior. As such, after thetraining,therearesignsofimprovementintheapproachtosafeworkculture.TheSICDhadalso issued safety observations with advicefor improvement to the audited divisions andcreated safety awareness to the employeesduringthefieldvisits.
Prevention of workplace accident is a toppriority in BPC, thus, to minimize accidentrelated to GO switch miss-operation and HTfuse replacements, the SICD had conductedawareness cumhands-on-trainingon theuseofHot-stickforreplacementofHTDOfuseoftransformer inall the regionsafter successfulpilotingofthepracticeundertheR&Dinitiative.AllO&Min-chargesandonelinemanfromeachESDwere trained tooperate theHot-stickonLIVE-line.
ThepracticeonceadoptedintheESDswillbringin efficiency in operation and maintenance,increase customer satisfaction and ensure safetyoflinemen.AsitisdoneonLIVE-lineand
Ensuring Safety and Security at all times 21
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fullyprotected. Distribution&CustomerServicesDepartmentDCSD mission is to provide reliable andefficient power supply to our customer. Inorder toachieveour target,DCSDconstantlyendeavor to findnewwaysandmeans tobeefficient and effective. Someof the initiativesundertakenandcompletedbyDCSD in2015areasfollows:
Utility Customer E-Services (UCES): It’s aportal,where the customer can interactwith BPC. Through UCES system, BPC’scustomers can view their monthly electricitybills and payment history, send enquiries orevengivefeedbacks.
Distribution transformer metering in ESD, Paro on pilot basis:The objective of this pilot project is tosegregate the sectional losses and establishcorrect reliability indices, monitor distributiontransformer loading through actual datacapture. Most importantly, this would helpin conducting energy audit. If the project issuccessful, after carrying out detail analysis,DCSDwantstorollouttootherESDsinfuture.Awardedtheworkforre-habilitationofChumeyMini-Hydel:
DCSDhadawardedtheworkforre-habilitationofChumeyMiniHydel toErhardAutomation,Austria. The re-habitation work is scheduledtobecompletedwithin24month.Withthere-habilitation of Chumey Mini-Hydel, BPC canprovidebackuppowersupplytoourcustomerduringemergencyandcangenerateadditionalrevenueforBPC.
B-Wallet: For the convenience of our valued customer,DCSDintroducedB-WalletsystemforBPC’sbillpayment.Atotalofmorethan3,297customershavemadepaymentthroughB-Walletsystem.
The impact of DCSD’s initiate seems to behaving impact with our valued customers,
as can be reflected through yearlyCustomerSatisfactionIndex(CSI)surveyof2015.DCSDachieved3.98onascaleof5whencomparedto2014CSIindexof3.79
Yet,DCSDwillnotbecomplacentwiththeCSIsurveyresultof2015.Ithasmanychallengesand difficulties ahead. DCSD now intends tofocus how to provide reliable power supplyespeciallyinremoteruralareas,whereaccesstolinesandcustomersareveryfaranddifficult.
Metering, Billing & Collection (MBC) Metering,BillingandCollectionisoneofthecorefunctionsofDCSDwhocatersthedemandsof168,279customers(asofDecember2015).Allthecustomersaremeteredandmonthlymeterreading and billing is conducted by DCSD.There are several categories of customersbasedonthevoltageleveltheyareconnectedto.
The monthly meter reading is taken by themultitask via smartmeter readers/Spotbillingmachines and the bills are presented to thecustomers on site itself. The HV and MVcustomers contribute to the major sales ofelectricity while sales to LV customers areinsignificant.
Customer CareCustomer care is one of the top most priorities ofDCSDandeveryemployeeistrainedtotakecareofthecustomer’sneedsbyprovidinganddelivering professional, helpful, high qualityservice and assistance before, during, andafterthecustomer’srequirementsaremet.
DCSDoperatesandmaintainstollfreecontactcenter 1250 which can be accessed by allthe customers to lodge their complaints. Thecontactcenteragentsareavailable24×7 thatreceives the complaints from all parts of thecountry.Oncethecomplaintislodged,smstothemultitask center staffs are sentwho thenattendstothecomplaint.
Meter TestingBhutan Power Corporation Ltd. procures
22 Ensuring Safety and Security at all times
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around 10,000meters (combination of singleandthreephasemeters)annuallytometernewcustomersandforreplacementofoldexistingmeters.Intheabsenceofmetertestingbenchin BPC, all new meters are tested at thesupplier’spremises,which is timeconsumingand an added cost to BPC. Therefore, BPChasprocured’10positionfullyautomaticmetertest bench with accuracy class of 0.02’, andinstalleditatPhuentsholingon5thSeptember2015.
This meter-testing bench has been procuredbyBPCatacostofNu.7.8Millionandisseenasaveryimportantequipment.Theimportanceof thisequipment isnot just forBPCbut it isequallyimportantforBPC’svaluablecustomers.This meter-testing bench shall now facilitateconductingallkindsofroutine,acceptanceandcertificationtestsforallkindsofmetersinBPC.Theaccuracyofthereferencemeterisofclass0.02 and therefore all kinds of meter testingshallbeofhighprecisionandaccuracy.Doingthis,BPCshallensurethatallthemetersthatshallbeinstalledinthecustomerpremisesare
veryaccuratesothatthemeterrecordspreciseconsumption of the customers. BPC shallmaintain excellent standards for every meterconnectedtothecustomerpremises.
Thismeter-testingbench shall now test eachand every meter prior to dispatch. This isan effort of BPC to ensure that its valuablecustomersareassuredofprecisebilling fromthemeters.BPCisof theviewthat thissmallstep would further strengthen the existingassociationofBPCanditsvaluablecustomers.BPCasasocially responsibleorganization ismandated to safeguard the customers from unhealthysituationofwrongbilling.BPCisveryconfident that thismeter-testingbenchwillgoinalongwaytohelpBPCgainconfidenceofthecustomers,whichwouldultimatelyprotectthedistinguishedimageBPChasbuiltoverthepast13years.
Erection-2 Line realignment at semtokha
Ensuring Safety and Security at all times 23
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Transmission Construction Department, Transmission WingTransmission Construction Department (TCD) under Transmission Services (TS)is mandated for implementation of majorpower transmission and associated O&Minfrastructure development works in line withthe Transmission expansion network plan.TCD is also taking up the construction oftransmission linesandpoolingsubstationsasadepositwork forHydroElectricProjects forwhich10%oftheexecutedvalueoftheprojectischargedasdepositworkcharges.
For the current financial year (2016) the targets of the Department are as follow: Construction of 132kV power
infrastructures (132 kV transmission lineand substation) to reach constructionpowersupplytoKHEL.
SignandawardofcontracttoDHIInfraandhandingoverofsitebyJanuary2016for66kVJemina-Changedaphutransmissionline.
Constructof2No.O&MinfrastructureatYurmosubstation.
Award the contract for G+2 building atTingibi.
Retaining wall, chain link fencing andwatersupplyat132kVYurmooSubstation.
AwardtheworksforO&MinfraatTsirang.
CompletePLCCcommunicationworksforMalbase-Signhaigaon-Dhamdumline.
Completion of O&M infrastructure andassociatedworksatDhamdum,Samtse.
Floatandawardtheworksforconstructionof approach road and boundary wall for66/33kVSipsoosubstation.
Construction of 132/33kV substation atMotongaandbayextensionatNganglamandKanglung.
Award and complete the works forconstructionof6blockssemi-permanentquarteratGayzor.
TakeuptheCWIPwithqualityandsafetywithaimtocompletethesameintime.
Safet training at Thimphu (4)
24 Ensuring Safety and Security at all times
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015 TheprocessofcarryingoutEIAstudiesalong
the detail survey for obtaining EnvironmentClearance has become a challenge and isdelaying receipt of Environment Clearancesand the initiation of ground activities forconstruction of the power infrastructure is getting delayed. The in-house expertise forcarryingoutthedetailsurveyisfeltverymuchrequired. Till then, possibility of carrying outthedetailsurveyandEIAstudy/ECbeforetheawardoftheworksisbeingstudied.
Engineering Design and Contracts DepartmentEngineering Design and Contracts Department (EDCD)hasthemandateofprovidingtechnicalbackstopping and consultancy servicesfunctionsinsurvey,design,reviewandconductofEIAstudiesoftransmissionanddistributionprojects in BPC. During the year, includingIT and CivilWorks Division functions, EDCDcarriedoutthefollowingmajorworks: Completedreviewofallthedrawingsand
designs for the ongoing transmission and distributionprojectsintimelymanner.
Specifically designed and completedthe technical specifications, layout andscheme designs and drawings for the new substation namely; (a) 220/33 kVDagapela substation, (b) 132/33 kVMotangasubstation,(c)66/33kVSipsoosubstationand(d)66/33/11kVPangbesasubstation.
ConductedEnvironmentalImpactStudies(EIA) for new transmission line projectsand obtained Environmental Clearancefor 132 kV Motanga – Phunthsothangtransmissionline.Renewedandobtained(new) Environmental Clearances for allthedistributionprojectsbeingtakenupbyBPC.
Carried out and completed thetransmission line route alignment surveyworks,aspartofBPC’sdepositwork foroutsideagenciesnamely;(a)DrukGreenPower Corporation Limited (DGPC) and
(b) Kholongchu Hydro Energy Limited(KHEL).
Implemented successfully the AccessControl and CCTV surveillance systemsat Head Office, BPC.Also implementedonlinestoragesystemsforallusersinBPCforconvenientandeffectivemanagementoffiles.
Completeddesign,drawingsandtenderingworkstillawardoftheinfrastructureworksespeciallybuildingsforuserdepartments.
Designed, constructed and completeddaycarecenterforBPCheadoffice.
EDCDhasachievedamajormilestoneduringtheyearbyconductingandcompletingforthefirsttimethedetailsurveyofthetransmissionline for 66 kV Jimena – Changedaphutransmission line (10 km). Although a smallwork, it signifies a major step in embarking
Demo. of LIVE-line DO Fuse replacement with hot-stick
Ensuring Safety and Security at all times 25
A
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015towardsdevelopingin-housecapacityindetail
surveyoftransmissionlinesinnearfuture.
Our peopleWerecognizeassetaskeytoourperformanceachievements and delivery outputs.Weworkhard towards attracting and retaining qualitypeople and provide themwith an opportunityfor professional career development throughtrainingsandhigherstudies.BPCencouragesemployees’ innovation efforts and initiativesandimprovementsinpracticesandprocessesfordeliveryofquality services.Wehavealsomutualrespectforeachother.
Aspartofcorporatepolicy,OrganizationClimateSurvey was conducted with an objective offinding out the actual organization climate ofthe employees, assess their satisfaction anddeterminetheirengagementlevel.
Employee StatisticsTechnical 1571Non-technical 677Total 2248CompositionofworkforceMale 1830Female 418Recruited during the year 26Separatedduringtheyear 57
Financial Performance for the year Annual turnover for2015 isNu9,769.65
millionascomparedtoNu7,273.88millionin2014,representinganoverallgrowthbyabout34%%fromthepreviousyear.
The revenueearned fromelectricitysaleisNu4,588.08millionascomparedtoNu
Assemblying of tower
26 Ensuring Safety and Security at all times
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nnua
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ort 2
015 4,032.66million in2014, translating toa
growthof14%.
TherevenueearnedfromwheelingisNu632.27millionascomparedtoNu575.05millionin2014.
The gross revenue from ConstructionContract is Nu 4,282.06 million ascomparedtoNu2,419.40millionin2014.
OtherrevenueearnedisNu267.24millionascomparedtoNu246.66millionin2014.
TheaveragetarifffortheyearisNu2.217per kWh as compared to Nu 1.966 perkWhin2014.
TotalexpensefortheyearisNu7,798.03million including purchase of power;constructionexpense;financeCostsanddepreciationascomparedtoNu5,680.79millionin2014.
ProfitaftertaxearnedfortheyearisNu.1,380.74million.
The net asset of the Company stands at Nu25,185.46millionascomparedtoNu24,657.64millionin2014.
The net worth of the company is Nu19,035.58 million and for the previousyearitwasNu18,466.62million.
Cash flow for the year is positive byNu656.01million.
Capital investment for the year is Nu883.68million.
Amount spent for construction contracts is Nu4,246.70million.
Property,PlantandEquipmentatcost isNu24,497.05millionofwhichNu1,819.06million is in Capital Work in Progress.For the previous year the valuewasNu23,895.94million.
GrossassetaddedduringtheyearisNu1,500.34million.
6. CT installation being continued till late eveining (1) Semtokha CT Replacement
Ensuring Safety and Security at all times 27
A
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The total Share Holders Equity is Nu13,717.57 million of which Nu 8,225.12millionisPaidupcapital.ForthepreviousyearitwasNu13,035.62millionofwhichthe paid up capital was Nu 8,190.19million.
ThetotalnetdebtoutstandingfortheyearisNu6,149.88millionascomparedtoNu6,185.02millionin2014.
Earnings per share BasicEPS(Nu.) Nu.168.38 DilutedEPS(Nu.)Nu.168.38
Shana Ongoing
Year in REVIEW
January-Blood Donation Campaign February
-Transfer of Regional Manager-Implementation of Stickology Program in Samtse
May-O&M Workshop
-Safety Awareness, Dagana
-Hosting of Conical Flag in Trashigang
July-Volunteers build Multi-purpose Trail at Kuenselphodrang.
-Celebration of 13 BPC Day
August-Contract signing of GIS SubstationDCSD Progress Review Meeting-BPC, Phuentsholing win football tournament
A
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March-Lightning summit in Samtse -Introduction of safety talks and safety drills. April
-Contract award of 132 kV Motanga,
Phuentsholing Transmission Line
-Award of Meritorious promotion
June-Khadar Ceremony of New MD
September-Inauguration of New Meter Testing-Signing of MOU with Kolongchhu-BPC wins Khuru tournamentConstruction of Day Care Center
October-Horenso Training for Senior Employees-BPC Volunteers construct Biking Trial
November-Inauguration of Lunchuzekha water pump-Lighting of Monuments
December-Inauguration of B-Wallet with BT & BNB-Distribution Transformer (DT) -Metering InauguratedBPC- EGAT sign MOU
30 Ensuring Safety and Security at all times
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Eng
inee
ring
Des
ign
& C
ontra
ct
Dep
artm
ent
Pro
cure
men
t S
ervi
ces
Dep
artm
ent
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orks
&
Est
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agem
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Dep
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Tech
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Com
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f BPC
Ensuring Safety and Security at all times 31
Auditors’ Report
32 Ensuring Safety and Security at all times
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Ensuring Safety and Security at all times 33
Exhibit to the Annexure
34 Ensuring Safety and Security at all times
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Ensuring Safety and Security at all times 35
A
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36 Ensuring Safety and Security at all times
A
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Ensuring Safety and Security at all times 37
A
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015
As at
Note December 31, 2015
December 31, 2014
ASSETSNon-current assetsProperty,plantandequipment 5 18,437,820,812 18,401,306,634
Intangibleassets 6 56,559,502 96,108,373
Trade&otherreceivables 8 199,330 199,330
Long-termloansandadvances 9 420,069,277 8,653,518
Othernon-currentassets 10 491,063,498 437,507,988
Total non-current assets 19,405,712,419 18,943,775,843
Current assets
Inventories 11 425,349,163 243,455,212
Investments 7 - 300,000,000Amounts due from customers for contract work 12 485,810,049 523,302,674
Trade&otherreceivables 13 105,495,521 130,711,090
Cashandcashequivalents 14 3,035,926,578 2,379,916,062
Short-termloansandadvances 15 38,066,217 781,554,958
Othercurrentassets 16 1,689,099,472 1,348,922,857
Totalcurrentassets 5,779,747,000 5,707,862,853
Total Assets 25,185,459,419 24,651,638,696
EQUITY AND LIABILITIESShareholder’sEquity
ShareCapital 17 8,225,118,000 8,190,191,000Retained earnings 4,497,478,996 3,932,673,019InvestmentReserve 1,016,601,916 916,304,916
AssetReplacementReserve 87,673,037 74,117,037
ActuarialGain/(loss), (109,300,713) (77,670,430)
Total equity 13,717,571,236 13,035,615,542
Financial StatementStatement of Financial Position
Ensuring Safety and Security at all times 39
A
nnua
l Rep
ort 2
015As at
Note December 31, 2015 December 31, 2014
Liabilities
Non-current liabilities
Borrowings 18 5,953,118,042 5,988,262,858
Deferred grants 19 898,683,522 918,352,779
Deferred Customer’s Contribution 20 3,092,428 3,204,880
Employeebenefitliabilities 21 382,524,097 307,685,539
DeferredIncomeTaxliabilities(net) 22 551,463,686 480,369,787
Othernon-currentliabilities 23 681,339,770 896,481,543
Total Non-current liabilities 8,470,221,545 8,594,357,386
Current liabilities
Borrowings 18 196,757,453 196,757,453
Deferred grants 19 24,891,343 20,972,254
Deferred Customer Contribution 20 112,452 112,452
Amountsduetocustomersforcontractwork 12 930,279,750 1,707,403,863
Trade&otherpayables 24 411,674,304 357,086,401
Employeebenefitliabilities 21 202,815,969 172,554,806
Incometaxpayable(netofadvance) 25 336,611,845 233,181,272
Othercurrentliabilities 26 894,523,522 333,597,267
Total current liabilities 2,997,666,638 3,021,665,768
Total liabilities 11,467,888,183 11,616,023,154
Total equity and liabilities 25,185,459,419 24,651,638,696
TheaboveStatementofFinancialPositionshouldberead inconjunctionwith theaccompanyingnotes.
40 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 Statement of Comprehensive Income
For the year ended
Note December 31,2015
December 31, 2014
Revenue
Incomefromsaleofelectricity 4,588,080,855 4,032,661,485
Incomefromconstructioncontracts 27 4,282,061,608 2,419,503,773
Wheelingcharges 632,268,364 575,053,223
Otherincome 28 267,237,517 246,660,388
Total Revenue 9,769,648,344 7,273,878,869
Expenditure
Purchaseofelectricity 1,550,124,223 1,493,389,240
Constructionmaterialconsumedandsub-contractingcharges 3,892,900,878 2,197,708,575
Operationandmaintenanceexpenses 29 311,798,776 267,902,009
Employeebenefitexpenses 30 876,916,718 689,582,338
Finance costs 31 124,257,613 128,572,118
Loss/(gain)onforeigncurrencyfluctuation(net) 43,028 2,523,716
Depreciationandamortizationexpenses 861,450,835 813,619,900
Otherexpenses 32 180,537,675 87,494,411
Total Expenditure 7,798,029,746 5,680,792,307
Ensuring Safety and Security at all times 41
A
nnua
l Rep
ort 2
015Statement of Comprehensive Income (contd.)
For the year ended
Note December 31, 2015
December 31, 2014
Profit before income tax 1,971,618,598 1,593,086,562
Tax expenses 25
-Currenttax 519,783,722 415,284,847
-Deferredtax 71,093,899 174,827,633
Net Profit for the year 1,380,740,977 1,002,974,082
Earningspershare(‘EPS’) 33
BasicEPS(Nu.) 168.38 122.46
DilutedEPS(Nu.) 168.38 121.94
Profitfortheyear 1,380,740,977 1,002,974,082
Othercomprehensiveincome(loss)
Actuarialgains/(loss) (31,630,283) 19,024,136
Total comprehensive income for the year 1,349,110,694 1,021,998,218
TheaboveStatementofComprehensiveIncomeshouldbereadinconjunctionwiththeaccompanyingnotes.
42 Ensuring Safety and Security at all times
A
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ort 2
015
Stat
emen
t of C
hang
es in
Equ
ity fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
015
Eq
uity
Sha
re
capi
tal
Ret
aine
d ea
rnin
gsIn
vest
men
t R
eser
veA
sset
R
epla
cem
ent
Res
erve
Act
uaria
l ga
ins/
(loss
es)
Tota
l Equ
ity
Ref
er N
ote
17
BalanceasatJanuary1,2015
8,190,191,000
3,932,673,019
916,304,916
74,117,037
(77,670,430)
13,035,615,542
Netprofitfortheyear
1,380,740,977
1,380,740,977
Othercom
prehensiveincome:
-
Actuarialgains(losses)
(31,630,283)
(31,630,283)
TransfertoInvestmentR
eserve
(100,297,000)
100,297,000
TransfertoAssetReplacement
Reserve
(13,556,000)
13,556,000
Tran
sact
ion
with
the
owne
rs
Issueofsharecapital
34,927,000
34,927,000
PaymentofD
ividendsforthe
year
201
4
(702,082,000)
(702,082,000)
Bal
ance
as
at D
ecem
ber 3
1,
2015
8,22
5,11
8,00
04,
497,
478,
996
1,
016,
601,
916
87,6
73,0
37
(10
9,30
0,71
3)13
,717
,571
,236
TheaboveStatementofC
hangesinEquityshouldbereadinconjunctionwiththeaccompanyingnotes.
Ensuring Safety and Security at all times 43
A
nnua
l Rep
ort 2
015
Stat
emen
ts o
f Cha
nges
in E
quity
for t
he y
ear e
nded
Dec
embe
r 31,
201
4
Equi
ty S
hare
ca
pita
lR
etai
ned
earn
-in
gsIn
vest
men
t R
eser
veA
sset
Rep
lace
-m
ent R
eser
veA
ctua
rial
gain
s/(lo
sses
)To
tal E
quity
Ref
er N
ote
17
BalanceasatJanuary1,2014
8,190,191,000
3,705,358,937
405,764,916
69,077,037
(96,694,566)
12,273,697,324
Netprofitfortheyear
1,002,974,082
1,002,974,082
Othercom
prehensiveincome:
Actuarialgains/(losses)
19,024,136
19,024,136
TransfertoInvestmentR
eserve
(510,540,000)
510,540,000
-
Tran
sact
ion
with
the
owne
rs(5,040,000)
5,040,000
-
Issueofsharecapital
PaymentofD
ividendsforthe
year
201
2(260,080,000)
(260,080,000)
Bal
ance
as
at D
ecem
ber 3
1,
2014
8,19
0,19
1,00
03,
932,
673,
019
916,
304,
916
74,1
17,0
37(7
7,67
0,43
0)13
,035
,615
,542
TheaboveStatementofC
hangesinEquityshouldbereadinconjunctionwiththeaccompanyingnotes.
44 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 Statement of Cash Flows
For the year endedDecember 31,
2015December 31,
2014Cash flows from / (used in) operating activities
Profitbeforeincometax 1,971,618,598 1,593,086,562
Adjustments for:
Depreciationandamortization 861,450,835 813,619,900
Netloss/(gain)onsaleofproperty,plantandequipment -1,502,701 8,763,180
Interestexpenses 124,257,613 128,572,118
Interestincome -128,593,192 -103,563,977
Provisionfordoubtfuldebts 9,807,021 -1,178,989
ProvisionforobsolescenceofInventory -9,399,991 -983,375
Liabilities/provisionsnolongerrequired,writtenback -22,586 -1,435,894
AmortizationofGovernmentgrants -23,959,455 -21,306,399
Amortizationofdeferredcustomercontribution -112,452 -56,226
Operating profit before working capital changes 2,803,543,690 2,415,516,900
Decrease/(Increase)inInventories -172,493,961 50,603,067Decrease/(Increase)inamountduefromcustomercontractworks 37,492,626 -5,765,577
Decrease/(Increase)inTradeandotherreceivables 291,995,073 203,683,099
Increase/(Decrease)inAmountsduetocustomersforcontractwork -777,124,114 353,218,316
Increase/(Decrease)inTradeandotherpayables 473,919,215 -312,185,152
Net cash generated from operating activities before income tax
2,657,332,529 2,705,070,653
Incometaxpaid,netofrefundsreceived -416,353,149 -314,728,892
Netcashgeneratedfromoperatingactivities 2,240,979,380 2,390,341,761
Cash flows from / (used in) investing activities
Purchaseofproperty,plantandequipmentandIntangibleassets -883,680,609 -1,668,539,090
Receipt/(repayments)ofgovernmentgrants 8,209,286 171,074,065
Receipt/(repayments)ofDeferredcustomercontribution - 3,373,558
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For the year ended
December 31, 2015
December 31, 2014
Proceedsfromsaleofproperty,plantandequipment 26,767,169 1,257,864
Inter-CorporatedeposittoHoldingCompany - 600,000,000
RedemptionofInvestment 300,000,000
Redemptionofbanktermdeposits(net) -350,807,725 -332,644,394
Interestreceived 141,155,252 197,230,078
Net cash generated from investing activities -758,356,627 -1,028,247,919
Cash flows from / (used in) financing activitiesProceeds from Borrowings 161,612,637 320,137,771
IssueofshareCapital 34,927,000 -
Repayment of Borrowings -196,757,453 -196,757,453
Interestpaid -124,312,421 -130,764,047
Paymentofdividendonordinaryshares -702,082,000 -260,080,000
Net cash used in financing activities -826,612,237 -267,463,729
Net increase in cash and cash equivalents 656,010,516 1,094,630,113
Cashandcashequivalentsatbeginningoftheyear 2,379,916,062 1,285,285,949
Cash and cash equivalents at end of the year 3,035,926,578 2,379,916,062
TheaboveStatementofCashFlowsshouldbereadinconjunctionwiththeaccompanyingnotes.
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015 Notes to Financial Statements
No. BAS 1 BAS1 Presentationoffinancialstatements2 BAS2 Inventories3 BAS7 Cashflowstatements4 BAS8 Accountingpolicies,changesinaccountingestimatesanderrors5 BAS10 Eventsafterthebalancesheetdate6 BAS11 Construction contracts7 BAS12 Incometaxes8 BAS16 Property,plantandequipment9 BAS18 Revenue
10 BAS20 AccountingforGovt.GrantsandDisclosureofGovt.Assistance11 BAS21 The effects of changes in foreign exchange rates12 BAS23 Borrowing costs13 BAS24 Relatedpartydisclosures14 BAS33 Earnings per share15 BAS37 Provisions,contingentliabilitiesandcontingentassets
1. General information
BhutanPowerCorporationLimited(‘Company’)isawhollyownedsubsidiaryofDrukHolding& Investments (DHI), A Royal Governmentof Bhutan undertaking. The Company hasbeen incorporated and registered under The Companies Act of the Kingdom of Bhutan,2000withlimitedliability.TheregisteredofficeoftheCompanyislocatedatThimphu,Bhutan.
The Company is engaged in supply ofelectricity to the residents of the Kingdom ofBhutan and wheeling of electricity from thelargeHydropowerPlantsinBhutanforexporttoIndia.TheCompanyalsocarriesoutbusinessofconstructionofelectricityproject/distributionnetworksystem.
TheCompany owns, operates andmaintainsthe entire electricity transmission anddistributionnetworkintheKingdomofBhutanincluding19MiniandMicroHydropowerPlants.Apartfromconstructionofdistributionnetworksystem, the Company is also mandated toconstruct the associated Transmission Linesand Substations required for evacuation ofpowerfromHydropowerPlantstotheBhutan-
Indiaborder.
The financial statements of theCompany forthe year ended December 31, 2015 wereauthorized for issue in accordance with theresolutionoftheBoardofDirectorsdated14th
March2016.
2. Bhutanese Accounting Standards (BAS)
The Ministry of Finance embarked on theprocessofdevelopingAccountingStandardstopromotehighqualityfinancial reportingwhichare consistent with international practices.Pursuant to this development, the Ministryof EconomicAffairs of Royal Government ofBhutan has issued the Accounting StandardRulesforCompaniesinBhutan,2012,notifyingthe Bhutan Accounting Standards (‘BAS’) tobe implementedby theCompanies inBhutanin three phases (I, II and III)with effect fromJanuary1,2013.Consequently,theCompanyhasfollowedtheBASnotifiedforimplementationwitheffect fromJanuary1,2013(Phase-I), inpreparing the financial statements from theyear2013onwardstotheextentasapplicabletotheCompanyasunder.
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0152.1 The Company has not early adopted
those paragraphs of BAS which arehaving linkages to BAS which are to beimplemented under Phase II (with effectfrom January 01, 2016) and Phase III(witheffectfromJanuary01,2018).Theseparagraphs would be applied when therespectiveBASwillbeadopted.However,in cases where such paragraphs havebeenearlyadopted, thesamehavebeendisclosedintherespectivenote/accountingpolicy.
3. Summary of Significant Accounting Policies
3.1 Basis of preparation
These financial statements are generalpurpose financial statements that havebeenpreparedinaccordanceandtocomplywith the BAS, the Generally AcceptedAccounting Principles and the relevantprovisions of The Companies Act of theKingdom of Bhutan, 2000 including theAccountingStandardRulesforCompaniesinBhutan,2012.
The said financial statements have been
prepared on accrual basis of accountingwith the historical cost convention andgoing concern basis except as stated otherwiseintheFinancialStatements.Thepreparation of the Financial Statementsrequires the use of certain criticalaccounting estimates and judgments. Italso requires management to exercisejudgment in the process of applying theCompany’s accounting policies and thereported amounts of revenue, expenses,assets and liabilities may differ from theestimates. In areas involving a higherdegreeofjudgmentorcomplexity,orareaswhere assumptions and estimates are significant to the financial statements aredisclosedinNote4.
3.2 Capital Management
TheCompanymanagesitsfunds/capitalsoastoensurethatfundsareavailabletomeet futurecommitments,workingcapitalrequirements and also the dividend andtax expectations of its holding CompanyDruk Holding & Investments and RoyalGovernmentofBhutan.Capitalexpenditureis mostly met from operating cash flowsandfixedtermborrowingaremadeonlyformajorcapitalprojectsandsuchborrowingsare repaidwhen the project is completedandisgeneratingpositivecashflows.
3.3 Foreign currency translation
(a) Functionalandpresentationcurrency
Items included in thefinancialstatementsare measured using the currency of the primary economic environment in whichthe Company operates referred to as the “functional currency”. The functionalcurrency and presentation currency of the CompanyisBhutaneseNgultrum.
(b) Transactionsandbalances
Foreign currency transactions are translatedintothefunctionalcurrencyusingtheexchangeratesprevailingatthedatesofthetransactionsorvaluationwhereitemsarere-measured.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationat year-end exchange rates of monetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognizedintheStatementofComprehensiveIncome.
3.4 Property, plant and equipment
Thecostofanitemofproperty,plantandequipmentisrecognizedasanassetif,andonly if, it isprobable that futureeconomicbenefits associated with the item willflowtotheCompanyandthecostcanbemeasuredreliably.
48 Ensuring Safety and Security at all times
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015 Property,plantandequipmentareinitially
recognized at cost. The initial cost ofproperty, plant andequipment comprisesits net purchase price after deducting for anytradediscountandrebates,includingimportdutiesandnon-refundablepurchasetaxes, any directly attributable costs ofbringingtheassettoitsworkingconditionandlocationforitsintendeduse.
Thecostofself-constructedassetsincludesthe borrowing costs that are directlyattributabletotheacquisition,constructionor production of qualifying assets (Refernote 3.18 below for accounting policyof borrowing cost). The cost of self-constructed assets not put to use and advancespaid towards theacquisitionofproperty,plantandequipmentoutstandingat each Statement of Financial Positiondate, are disclosed as Capital work-in-progress.
Subsequent to initial recognition,property, plant andequipmentare statedat cost less accumulated depreciationand accumulated impairment losses, ifany. Subsequent expenditures relatingto property, plant and equipment iscapitalized only when it is probable thatfuture economic benefits associatedwiththese will flow to the Company and thecostoftheitemcanbemeasuredreliably.
Subsequent costs are included in theasset’scarryingamountorrecognizedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociated with the item will flow to theCompany and the cost of the item can be measuredreliably.Thecarryingamountofthereplacedpartisderecognized.Allotherrepairs and maintenance are charged to theStatementofComprehensive Incomeduring the financial period in which theyareincurred.
Spare parts and servicing equipmentsare normally treated as inventory and
expensedas consumed.However,majorsparepartsandstand-byequipmentsaretreatedasproperty, plant andequipmentwhen they are expected to be used for more than one year. Also, where thespares parts or servicing equipment canonly be used in connection with an itemof property, plant and equipment theyare accounted for as property, plant andequipment.
Depreciation on property, plant andequipmentiscomputedusingthestraightline method over the estimated usefullives. Freehold land is not depreciatedas ithasanunlimiteduseful lifewhereasleaseholdlandisdepreciatedonastraightlinemethodover theprimary termof thelease.
The Company has, based on evaluationperformed by the technical Department,establishedtheestimatedrangeofusefullivesofassetsfordepreciatingitsproperty,plantandequipmentasfollows:
Buildings 30 yearsGenerationCivilworks 30 yearsTransmission assets 30 yearsDistribution assets 30 yearsComputerequipment 5 yearsVehicles 6.67yearsFurniture and Fixtures 10 yearsOfficeequipment 5 years
Significant parts of property, plant andequipment which are required to bereplaced at intervals and have specificusefullivesarerecognizedanddepreciatedseparately.
The useful life, residual value anddepreciation method are reviewed, andadjusted appropriately, at least at eachStatement of Financial Position dateto ensure that the method and period of depreciation are consistent with the
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015expected pattern of economic benefits.
Changeintheestimatedusefullife,residualvalue and / or depreciation method, ifany,isdepreciatedprospectivelyovertheasset’sremainingrevisedusefullife.
Thecostandtheaccumulateddepreciationfor property, plant and equipment sold,scrapped, retired or otherwise disposedoff are eliminated from the financialstatements and the resulting gains andlosses are included in the Statement ofComprehensiveIncome.
3.5 Intangible assets
Intangible assets include computersoftware and are carried at cost of acquisition/implementation lessaccumulated amortisation. Amortisationisrecognizedonastraightlinebasisovertheestimateduseful life asestimatedbythemanagement.
3.6 Impairment of assets
TheCompanyassessesateachbalancesheet date whether there is any indication that property, plant and equipment maybeimpairedbasedoninternalorexternalfactors. If any such indication exists, theCompany estimates the recoverableamount of the assets. If the carryingamount of the asset/cash generating unit exceeds the recoverable amount on thereporting date, the carrying amount isreduced to the recoverable amount. Therecoverable amount is measured as thehigherofthenetsellingpriceandthevalueinusedeterminedbythepresentvalueofestimatedfuturecashflows.
3.7 Income tax
Current tax assets and liabilities forthe current period are measured at the amountexpectedtoberecoverablefromor payable to the Income tax authoritybased on the current period’s taxable
income.The taxratesand tax lawsusedto compute the amount are those that are enacted or substantively enacted on thereportingdatebytheIncomeTaxAuthority.
Deferred income tax is provided on alltemporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts forfinancialreportingpurposes.
Deferred income tax liabilities arerecognized for all taxable temporarydifferences except when the deferred income tax liability arises from theinitial recognition of an asset or liabilityin a transaction that is not a business combination and that, at the time of thetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss.
Deferredincometaxassetsarerecognizedforalldeductibletemporarydifferencestotheextent that it isprobable that taxableprofit will be available against which thedeductible temporary differences canbe utilized, except when the deferredincometaxassetrelatingtothedeductibletemporary difference arises from the initial recognition of an asset or liabilityin a transaction that is not a business combination and, at the time of thetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss.
The carrying amount of deferred income tax assets is reviewed at each BalanceSheet date and reduced to the extentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.
Deferredincometaxassetsandliabilitiesare measured at the tax rates that are expected to apply to the year when theasset is realizedor the liability issettled,basedontaxrates(andtaxlaws)thathavebeenenactedorsubstantivelyenactedatthereportingdate.
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015 Deferredtaxassetsandliabilitiesareoffset
whenthereisalegallyenforceablerighttoset off current tax assets against current taxliabilitiesandtheCompanyintendstosettle its current taxassetsand liabilitieson net basis. Management evaluatespositions taken incomputationof incomein income tax returns with respect to situations inwhichapplicable income taxregulationissubjecttointerpretation.
The income tax liabilities are recognizedwhen, despite the Company’s beliefthat its income tax return positions are supportable, the Company believes, it ismorelikelythannot,basedonthetechnicalmerits, that certain positionsmay not befullysustaineduponreviewbyincometaxauthorities.Benefitsfromtaxpositionsaremeasured at the single best estimate ofthemostlikelyoutcome.
At each Statement of Financial Positiondate,thetaxpositionsarereviewed,andtothe extent that new information becomes available which causes the Companyto change its judgment regarding theadequacyofexistingincometaxliabilities,suchchangestoincometaxliabilitiesaredulyrecognizedinincometaxexpenseinthe year in which such determination is made.
Interest and penalties, if any, relatedto accrued liabilities for potential taxassessments are included in incometax charge for the year in which the assessmentiscompleted.
3.8 Investments
Investments primarily meant to be heldover long termperiod (i.e. formore than12 months from date of acquisition) arevalued at cost. Provision is made whenin the opinion of the management there is a decline, other than temporary, inthe carrying value of such investments.
Current investments are stated at thelowerofcostorquoted/fairvalue.
3.9 Construction Contracts
Construction contract is a contract specificallynegotiatedfortheconstructionofanassetorofagroupofassets,whichareinterrelatedorinterdependentintermsof design, technology, function, purposeor use. According to its characteristics,a construction contract can either be accounted for separately i.e., segmentedinto several components which areaccountedforseparatelyorcombinedwithanother construction contract in progress to forma single construction contract foraccountingpurposes.
The Company executes cost plusmarkup/fee construction contracts. The‘recoverablecostsincurredonthecontractplus an addition for the fixed markup/ fee agreed with the customer under the contractual terms’ as at the date ofStatementofFinancialPositionistreatedas Work in Progress - ‘ConstructionContracts’.
Progress billing and advances arededucted from the value of the Work inProgress-‘ConstructionContracts’’forthespecificcontractandrecordedas‘AmountsDue from Customers for Contract Work’andincaseprogressbillingandadvancesexceedthisvalue,thesamearerecordedunder liabilities as ‘Amounts Due toCustomersforContractWork’.
For the revenue recognition policy onconstructioncontracts,refernote3.21.
Amounts expected to be recovered orsettledwithin12monthsfromthereportingdate are classified as current assets/liabilities.Ifnot,theyarepresentedundernon-currentassets/liabilities.
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0153.10 Trade and other receivables
Trade receivables are amounts duefrom customers in the ordinary course of businessof transmissionandsupplyofelectricity.Tradereceivablesalsoincludeprogress billing under constructioncontracts.Tradereceivablesareinitiallyrecognizedatthesale/recoverablevalueandareassessedateachStatementofFinancialPositiondate forcollectability.The Company estimates the portion of its trade receivables that areuncollectablebasedonageing,conductof thecustomerandbusiness/historicalexperience and provision for doubtfultradereceivablesisaccordinglyprovidedfor. Trade receivables are classified ascurrent assets, if collection is expectedwithintwelvemonthsasattheStatementofFinancialPositiondate,ifnot,theyareclassifiedundernon-currentassets.
3.11 Loans and advances
LoansandadvancesrepresentadvancesgiventosuppliersandcontractorsintheordinarycourseofthebusinessactivitiesoftheCompany.Advancesalsoincludeinter corporate deposits placed bythe Company for earning interest income.LoanandadvancesareinitiallyrecognizedatthevalueofcashadvancedandareassessedateachStatementofFinancialPositiondateforrecoverabilityandtheprovision isrecognizedwhenitismorelikelythattheCompanywillnotbeabletocollect thesame.Loansandadvances are classified under currentassets if payment is recoverablewithinone year or less as at Statement ofFinancialPosition date, if not, theyareclassifiedundernon-currentassets.
3.12 Cash and cash equivalents
Cashandcashequivalentsincludecashin hand, bank balances and deposits,othershort-termhighlyliquidinvestments
withoriginalmaturitiesof threemonthsor less and that are readily convertibleto known amount of cash and cashequivalentandwhicharesubject toaninsignificantriskofchangesinvalue.
3.13 Inventories
Inventoryconsistsofstoresandsparesheldforoperationandmaintenanceanduseinconstructionofanasset.
Inventories are stated at the lower ofcost and net realizable value. Cost isdeterminedusingtheweightedaveragecost formula and comprises cost ofpurchasesandotherincidentalexpensesincurred in acquiring inventories andbringing them to their existing locationandcondition.
3.14 Investment and Asset Replacement Reserve
The nature and purpose of these reservesareasfollows:
i. Investment Reserve:
The reserve created during the earlieryear/s under the ‘Group InvestmentReserve (GIR) Scheme’ as per the DHIOwnershipPolicytoretainearningsintheDHIownedCompanies(DoCs)tofinanceProjects of strategic importance. Thestated objectives of InvestmentReserveare as under:
- Tobuildfundsforinvestments.- To build funds to meet national
exigencies.- To optimize on the limited pool of
capital available in the group andmaximizereturnstotheGovernmentandtheState.
- To facilitate transfer of capitalamong the Companies in the group and within the legal framework inBhutan.
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015 - To enable the DoCs to optimize
its capital structure and improvereturns.
- To provide predictability in flow offundsfromDoCstoDHIandtoMoF.
ii. Asset Replacement Reserve:
This Reserve is created to mitigate theriskofassetsoftheCompanyagainstanydamagesduetonaturalcalamities.
3.15 Borrowings
Borrowings are stated at principaloutstanding and interest accrued and due on such borrowings based on the applicable interest rate. Borrowings areclassifiedascurrent liabilitiesunless theCompany has an unconditional right todefersettlementoftheliabilityforatleast12monthsaftertheStatementofFinancialPositiondate.
3.16 Grants
Grants from Government and Non-Government sources are recognizedwherethereisreasonableassurancethatthegrantwillbereceivedandallattachedconditionswillbecompliedwith.
Grants relating to expense items arerecognized as income on a systematicbasis over the periods that the relatedcosts,whichitisintendedtocompensate,are expensed. The unallocated portionof such grant is presented as part of Deferred Grants in the Statement ofFinancialPosition.
Grants related to non-current assetsare treated as Deferred Income in theStatement of Financial Position andare recognized to the Statement ofComprehensive Incomeona systematicbasis over the useful life of the relatedassets.
Grant received as compensation forexpenses/lossesalreadyincurredorwithno future related costs is recognizedas income in the year it is received orbecomesreceivable.
BAS20-AccountingforGovernmentGrantanddisclosureofGovernmentAssistancehasbeen implementedby theCompanyretrospectively for the grants existed ason the transition date except its Para 10A regarding recognition of the benefitofgovernmentloanatbelowmarketrateofinterestasagovernmentgrant,asthesameisapplicablefromJanuary1,2018and the Company has not decided for the earlyimplementationofthesame.
3.17 Customer’s Contribution for network construction / expansion
Contribution received from customerstowards the construction / extension of distribution network / assets at thecustomer’s site is treated as Deferred Customer’sContributionintheStatementofFinancialPositionandisrecognizedtotheStatementofComprehensiveIncomeonasystematicbasisovertheusefullifeoftherelateddistributionnetwork/assetsand thedistributionnetwork /assetsarecapitalised under Property, plant andequipment.
3.18 Borrowing Costs
Borrowing costs consist of interest and other costs that Company incurs in connectionwiththeborrowingoffunds.
General and specific borrowing costs(net of investment incomeon temporaryinvestmentof thoseborrowings) thataredirectly attributable to the acquisition,constructionorproductionofaqualifyingassetarecapitalizedaspartofthecostsof the asset, until such time the assetsaresubstantially ready for their intendeduseorsale.Aqualifyingassetisanassetthatnecessarilytakesasubstantialperiod
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015of time to get ready for its intended use
or sale, which is two years or more asdecidedbytheCompanykeepinginviewthe nature of assets and past trend of time takenfortheircompletion.
AllotherborrowingcostsarechargedasexpensetoStatementofComprehensiveIncomeintheperiodtheyoccur.
3.19 Trade and other payables
Tradeandotherpayablesareobligationsincurred by the Company towards purchase of electricity and other goodsandavailingtheservicesthathavebeenacquiredoravailedintheordinarycourseof business. Trade and other payablesare classified under current liabilities, ifpayment is due within 12 months as at Statement of Financial Position date, ifnot,theyareclassifiedundernon-currentliabilities.
3.20 Employee benefit liabilities
Contribution to Provident Fundadministered by National Pension andProvidentFundischargedtoStatementofComprehensiveIncomeasandwhentheyfalldue.
Retirement benefit liabilities arerecognized when the Company has apresentobligation(legalorconstructive)as a result of past event, it is probablethatanoutflowof resourcesembodyingeconomic benefits will be requiredto settle the obligation and a reliableestimate can be made of the amount of theobligation.
Gratuity and Leave encashment areprovidedforbasedonactuarialvaluationasattheStatementofFinancialPositiondate. Retirement benefit liabilities arediscounted to present value applyingthepre-taxrateofreturnonGovernmentbonds of similar tenure and currency.
Increaseintheliabilityduetopassageoftime is recognized as interest expense.Actuarial gains and losses arising fromexperience adjustments and changesinactuarialassumptionsarechargedorcreditedtoequityinothercomprehensiveincomeintheperiodinwhichtheyarise.
Further, the contribution towards thegratuity liability is invested in fixeddepositswiththebanks.
The expected cost of Performance BasedIncentiveandVariableAllowancesisrecognizedasanexpensewhenthereis a legal or constructive obligation tomakesuchpaymentsasaresultofpastperformance and a reliable estimate oftheobligationcanbemade.
The employees of the Company arecovered under an insurance policywith death claim benefit in the event ofdeath of the employee while in serviceand within the policy term. The policyhas been underwritten through Singlepremium which will be refunded atthe end of policy period/term with pre-decided/fixedpolicybonus /benefitandafterdeductionofdeathclaimpaidwithinthepolicyterm.TheSinglepremiumpaidhasbeenconsideredas‘DepositagainstEmployees Insurance Policy’ and thedeathclaimspaid/payableareaccountedfor as expense and are reduced from the same during the year of incurrence /intimationofdeathclaimandthepolicybonus/benefitisaccountedforasincomeand added to the same on prorate basis over thePolicyperiod/ termbycredit to‘OtherIncome’.
3.21 Revenue Recognition
Revenueisrecognizedtotheextentthatitisprobablethattheassociatedeconomicbenefits will flow to the Company andthe revenue can be measured reliably.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.
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must also be met before revenue isrecognized:
(a) Electricity Business:
Revenueattributabletosaleofelectricityis accounted for as per the tariff rates approved by the Bhutan ElectricityAuthority on the basis of billing toconsumersunderthebillingcyclefollowedbytheCompany.Revenueisrecognizedaselectricityisdeliveredandconsumedbycustomers.Accordingly,Revenuealsoincludesanestimateofunbilledrevenue.Unbilledrevenuerepresentsanestimateof electricity consumed by customerssince the date of each customer’s lastbilled meter reading that has not beenbilledatthereportingdate.
Wheeling charges (transmissioncharges)areaccountedon thebasisofperiodic billing to the power generatingcompaniesatthetariffratesapprovedbyBhutanElectricityAuthority.
(b) Construction Business:
The Company executes cost plusconstruction contracts for construction of electrical infrastructure, In thecaseofacost plus contract, the outcome can beestimatedreliablywhenitisprobablethattheeconomicbenefitsassociatedwiththecontractwillflowtotheCompanyandthecontractcostsattributabletothecontract,whetherornotspecificallyreimbursable,can be clearly identified and measuredreliably.Accordinglyrevenuefromacostpluscontractisrecognizedwithreferenceto therecoverablecosts incurredduringtheyearplusthefixedmarkupunderthecontractualterms.
(c) Interest income
Interest income is accrued on a timeproportion basis, with reference to theprincipaloutstandingandattheeffectiveinterestrateapplicable.
(d) Liquidated damages and penalties
Liquidateddamagesandpenaltiesoccurwhen contractors/suppliers fail to meetthekeyperformanceindicatorssetoutintheircontractwiththeCompany.Incomeresulting from claims for liquidateddamages and penalties are recognizedas other income when all performanceobligations are met (including when acontractualentitlementexists), itcanbereliablymeasuredanditisprobablethatthe economic benefits will flow to theCompany.
(e) Other items of revenue
Other items of revenue which arisefrom theprovisionofservices incidentalto the core activities of the businessare recognized when the services areprovidedanditisprobablethateconomicbenefits associatedwith the transactionwillflowtotheCompanyandamountcanbemeasuredreliably.
3.22 Earnings per share (‘EPS’)
The Company presents the basic and dilutedEPSdataforitsordinaryshares.Basic EPS is computed by dividing thenetprofit for theyearattributable to theordinaryshareholdersoftheCompanybytheweightedaveragenumberofordinarysharesoutstandingduringtheyear.
DilutedEPSiscomputedbyadjustingthenetprofit for theyearattributable to theordinary shareholders and by adjustingtheweightedaveragenumberofordinarysharesoutstandingtoassumeconversionofalldilutivepotentialordinaryshares.
3.23 Dividends
Dividends(includinginterimdividends)toordinaryshareholdersisrecognizedas a liabilityanddeductedfromshareholders’equityintheperiodinwhichthedividendsaredeclaredbytheBoardofdirectorsandapprovedbytheordinaryshareholders.
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0153.24 Critical accounting estimates and
assumptions
The preparation of the financialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthat affect the reported amounts in the financial statements. Although theCompany regularly assesses theseestimates, actual results could differmateriallyfromtheseestimates.Changesin estimates are recorded in the year in whichtheybecomeknown.
Actual results may differ frommanagement’s estimates if these results differ from historical experienceor other assumptions do not turn out to be substantially accurate, even if suchassumptions were reasonable whenmade.
The said estimates are based on the facts and events, that existed as at thedateofstatementoffinancialposition,orthatoccurredafter thatdatebutprovideadditional evidence about conditionsexisting as at the statement of financialpositiondate.
Theestimatesandassumptionsthathavea significant risk of causing a materialadjustment to the carrying values ofassets and liabilities within the nextfinancialyeararediscussedbelow.
4. Critical accounting estimates and assumptions
a) Useful lives of electricity generation, transmission and distribution assets
The costs of electricity generation,transmission and distribution assets are depreciatedonastraight-linebasisovertheirrespectiveusefullives.Managementestimatestheusefullivesoftheseassetsto be within 30 years. Changes in theexpected level of usage, technological
developments, level of wear and tearcould impact the economic useful livesandtheresidualvaluesof theseassets,therefore future depreciation charges could be revised and could have animpactontheprofitinfutureyears.
b) Retirement benefit obligations
The costs of retirement benefits andpresent value of the retirement benefitobligations are determined usingactuarial valuations. An actuarialvaluation involves making variousassumptions which may differ from actualdevelopmentsinthefuture.Theseincludethedeterminationofthediscountrate, future salary increases, mortalityratesandfuturepensionincreases.Dueto the complexity of the valuation andits long-term nature, retirement benefitobligations are sensitive to changes inthese assumptions.All assumptions arereviewedateachreportingdate.
c) Provision for doubtful debts
As at each Statement of FinancialPosition date, the Company assessesrecoverability of trade receivables.Provisionfordoubtfuldebtsisrecognizedbased on the historical experience ofcollectability of debts. The Companyestimates the portion of its outstanding receivables that cannot be collectedbased on aging schedules at anincreasing percentage of each aging category. Actual doubtful debts coulddifferfromtheseestimates.
d) Unbilled revenue
Theunbilledrevenueiscalculatedusingaverageoflastthreemonthsconsumptionfor the Low voltage consumer and theactual consumption for theMediumandHighVoltageconsumer.
Actualelectricityusagecoulddiffer fromthoseestimates.
56 Ensuring Safety and Security at all times
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5.
Prop
erty
, pla
nt a
nd e
quip
men
t
Particulars
Freehold
Land
Buildingand
Civil
Structures
Generation
equipm
ent’s
Network
syst
emOthers
Capital
Advancesand
Con
stru
ctio
n workin
prog
ress
Total
Bal
ance
as
at J
anua
ry 1
, 20
15
Cos
t 68
,775
,377
1,98
9,75
7,82
872
0,99
5,99
917
,401
,477
,425
1,06
3,89
8,19
32,
435,
716,
329
23,6
80,6
21,1
51
Accum
ulateddepreciation
--4
00,5
51,9
72-4
69,7
11,6
65-3
,806
,428
,537
-602
,622
,343
--5
,279
,314
,517
Boo
k Va
lue
68,7
75,3
771,
589,
205,
856
251,
284,
334
13,5
95,0
48,8
8846
1,27
5,85
02,
435,
716,
329
18,4
01,3
06,6
34
Cha
nges
in b
ook
valu
e du
ring
the
year
Add
ition
s701,285
287,356,883
42,692,031
1,044,679,102
123,656,683
-616,660,293
882,425,692
Disposalsandsales
-186,633
-9,470,327
-3-33,695,763
-22,640,583
-65,993,309
Depreciationondisposals
322,972
18,579,887
21,826,130
40,728,989
Dep
reci
atio
n-69,363,437
-26,735,007
-589,726,108
-134,822,642
-820,647,194
Tota
l cha
nges
in b
ook
valu
e51
4,65
220
8,84
6,09
115
,957
,021
439,
837,
118
-11,
980,
412
-616
,660
,293
36,5
14,1
78
Bal
ance
as
at D
ecem
ber
31, 2
015
Cos
t69,290,029
2,267,644,384
763,688,02718,412,460,764
1,164,914,293
1,819,056,03624,497,053,534
Accum
ulateddepreciation
-469,592,438
-496,446,672
-4,377,574,757
-715,618,855
-6,059,232,722
Boo
k va
lue
69,2
90,0
291,
798,
051,
946
267,
241,
355
14,0
34,8
86,0
0744
9,29
5,43
81,
819,
056,
036
18,4
37,8
20,8
12
Bal
ance
as
at J
anua
ry 1
, 20
14
Cos
t68
,675
,374
1,59
1,76
1,14
071
4,98
5,91
014
,562
,265
,961
944,
131,
592
4,18
9,38
5,37
222
,071
,205
,348
Accum
ulateddepreciation
--335,187,691
-428,685,712
-3,2
75,8
21,3
36-4
87,9
74,2
78-
-4,5
27,6
69,0
18
Ensuring Safety and Security at all times 57
A
nnua
l Rep
ort 2
015
Prop
erty
, pla
nt a
nd e
quip
men
t (C
ontd
.)
Particulars
FreeholdLand
Buildingand
Civil
Structures
Generation
equipm
ent’s
Networksys-
tem
Others
Capital
Advancesand
Con
stru
ctio
n workin
prog
ress
Total
Boo
k Va
lue
68,6
75,3
741,
256,
573,
449
286,
300,
198
11,2
86,4
44,6
2545
6,15
7,31
44,
189,
385,
372
17,5
43,5
36,3
30
Cha
nges
in b
ook
valu
e du
ring
the
year
Add
ition
s100,003
401,131,496
6,010,090
2,851,658,396
137,402,814
-1,753,669,043
1,64
2,63
3,75
5
Disposalsandsales
-3,134,807
-12,446,932
-17,636,212
-3
3,21
7,95
2
Dep
reci
atio
n on
disposals
1,570,097
6,824,533
14,802,278
23
,196
,907
Dep
reci
atio
n
-66,934,378
-41,025,953
-537,431,733
-129,450,342
-7
74,8
42,4
06
Tota
l cha
nges
in
book
val
ue10
0,00
333
2,63
2,40
8-3
5,01
5,86
32,
308,
604,
264
5,11
8,53
8-1
,753
,669
,043
857,
770,
304
Bal
ance
as
at D
e-ce
mbe
r 31,
201
4
Cos
t68,775,377
1,989,757,829
720,996,00017,401,477,425
1,063,898,194
2,435,716,32923,680,621,151
Accum
ulated
depr
ecia
tion
--400,551,972
-469,711,665
-3,806,428,537
-602,622,343
--5
,279
,314
,517
Boo
k va
lue
68,7
75,3
771,
589,
205,
857
251,
284,
335
13,5
95,0
48,8
8846
1,27
5,85
12,
435,
716,
329
18,4
01,3
06,6
34
58 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 5.1 Capital work-in-progress as at December 31, 2015 andDecember 31, 2014 comprise the
following:
ParticularsAs at As at
December 31, 2015 December 31, 2014Generationequipments 2,643,636 24,027,370
Transmissionlines 123,821,678 497,677,964
Distribution Assets 1,273,590,931 1,643,498,748
Opticalfibers - 306,936
Buildings 74,122,650 134,349,115
OtherCivilStructures 20,570,634 17,826,986
Others 117,456,635 18,311,896
Advanceforworks 206,849,871 99,717,315
Total 1,819,056,035 2,435,716,330
5.2 No Borrowing cost has been capitalized during the year on the qualifying asset. For thepreviousyearendedDecember31,2014,anamountofNu.2,389,037havebeencapitalizedonqualifyingassetsatanominalinterestrateasdefinedintherespectiveLoanagreement.
5.3 GrosscarryingvalueincludesFixedAssetstransferredfromerstwhileDepartmentofPower,RoyalGovernmentofBhutanatawrittendownvalueofNu1,760.89millionagainstissueofShareCapitaltoDHI.
5.4 Property,plantandequipmentarepledgedassecuritiesforborrowings.[Refernote18.1]
5.5 TheCompanyhasearlyadoptedPara43ofBAS16‘Property,plantandequipment’whichiseffectivefromannualperiodcommencingfromJanuary01,2016.TheearlyadoptiondoesnothavematerialimpactonthefinancialstatementsoftheCompany.
6. Intangible assets
Computer SoftwareAs at As at
December 31, 2015 December 31, 2014
Opening gross carrying value (i) 214,883,344 188,978,009
Additions 1,254,918 25,905,335
Disposals (299,133) -
Closing gross carrying value(ii) 215,839,129 214,883,344
Opening accumulated amortization (iii) (118,774,971) (79,997,477)
Depreciationondisposal 298,985
Addition (40,803,641) (38,777,494)
Closing accumulated amortization (iv) (159,279,627) (118,774,971)
Net carrying value (ii-iv) 56,559,502 96,108,373
Ensuring Safety and Security at all times 59
A
nnua
l Rep
ort 2
015
Computer SoftwareAs at As at
December 31, 2015 December 31, 20141. InvestmentsLongTerm-OtherInvestments-Unquoted:
300,000RICBLBondsSeriesIIatNu.1,000/-perbond - 300,000,000
Total - 300,000,000
7. Investments analyzed as follows:As at December
31, 2015As at December 31,
2014Current portion -Non-currentportion - 300,000,000Total - 300,000,000
8. Trade & other receivables]]As at December
31, 2015As at December
31, 2014SecurityDepositforLandLease 199,330 199,330Total 199,330 199,330
9. Long-term loans & advancesAs at December
31, 2015As at December
31, 2014AdvancetoHoldingCompany 400,000,000 -Advancetocontractors -Advancetoothers 5,226,200 -Prepaid Expenses 8,024,718 8,321,930Advancestoemployees-BikeLoan 5,856,734 138,189-WelfareLoan 176,777 193,399-Advance-M/PhoneLoan 784,848 -Total 420,069,277 8,653,518
10. Other non-current assetsAs at December
31, 2015As at December
31, 2014DepositagainstEmployeeInsurancePolicy(ReferNote37(vi)) 433,586,764 424,136,478
InterestReceivableonPolicy 57,476,734 13,371,510Total 491,063,498 437,507,988
60 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 11. Inventories
As at December 31, 2015
As at December 31, 2014
Storesandspareparts 379,834,091 205,102,477
Stock-ISU 45,452,379 48,031,199
Stock–Uniform 645,953 1,357,157
Stock-InfocomSpares 1,052,370
Less:Provisionforobsoleteinventory (1,635,630) (11,035,621)
Total 425,349,163 243,455,212
12. Amounts due from/to customers for contract work
As at December 31, 2015
As at December 31, 2014
AmountsduefromcustomersforcontractworkWorkinprogress-ConstructionContracts 10,900,618,715 5,866,468,689
Less:Progressbillingandadvancesreceived 10,414,808,666 5,343,166,015
Total 485,810,049 523,302,674
AmountsduetocustomersforcontractworkWorkinprogress-ConstructionContracts
1,510,314,422 2,037,086,706
Less:ProgressbillingandAdvancesreceived 2,440,594,172 3,744,490,569
Total (930,279,750) (1,707,403,863)
Recognizedandincludedinfinancialstatementsas:Amounts due from customers for construction contracts
-Currentportion 485,810,049 523,302,674
-
Amounts due to customers for construction contracts
-ForLowvaluecontract 97,362,301 77,664,318
-ForHighValuecontract 832,917,449 1,629,739,545
Total (930,279,750) (1,707,403,863)
Ensuring Safety and Security at all times 61
A
nnua
l Rep
ort 2
01513. Trade & other receivables
As at December 31, 2015
As at December 31, 2014
Receivablesagainsttransmissionandsupplyofelectricity 123,284,570 138,693,118
Less:Provisionfordoubtfuldebts (17,789,049) (7,982,028)
Total 105,495,521 130,711,090
14. Cash and cash equivalents
As at December 31, 2015
As at December 31, 2014
Cash in hand 2,859,720 2,305,369
Bankbalancesincurrentaccounts 3,021,309,990 2,367,458,994
BalancewithbanktowardsStaffWelfareFund 11,756,868 10,151,699
Total 3,035,926,578 2,379,916,062
14.1 Thereisnorestrictioninusageofcashandcashequivalents.
15. Short-term loans and advances
As at December 31, 2015
As at December 31, 2014
AdvancetoHoldingCompany - 400,000,000
Advancestosuppliers 10,715,918 24,820,233
Advancestocontractors - 325,780,073
BSTReceivable 313,000 313,000
Advancestoemployees
-Travelandsalaryadvance 108,159 25,250
-Expenses 1,012,787 257,994
-BikeLoan 3,640,272 1,556,849
-WelfareLoan 573,114 606,362
-Advance-M/phoneloan 613,104
Prepaid expenses 11,951,791 9,642,754
Otheradvances(ReferNote15.1) 9,138,072 18,552,443
Total 38,066,217 781,554,958
15.1 IncludesBSTadvancepaidtocontractors&othermiscellaneousadvances.
62 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 16. Other current assets
As at December 31, 2015
As at December 31, 2014
Interestaccrued:
-onfixeddeposits 5,112,410 6,673,344
-onRICBLBonds - 9,692,054
-onFixedDepositsforInvestmentReserve 7,364,384 17,526,076
-onFixedDepositforGratuityLiability 13,898,910 5,046,289
Fixeddepositshavingoriginaltenureofmorethanthree months
-withBankforGratuityliability(ReferNote37(i)) 343,000,945 98,182,053
-otherfixeddeposits 333,324,042 827,335,209
-FixedDepositforInvestmentReserve 600,000,000 -
AccruedUnbilledDebtor 385,233,752 367,850,647
Otherreceivables 1,165,029 16,617,185
Total 1,689,099,472 1,348,922,857
17. Share CapitalAs at December
31, 2015As at December
31, 2014
Authorized:
15,000,000EquitySharesofNu.1,000/-each 15,000,000,000 15,000,000,000
Total 15,000,000,000 15,000,000,000
Issued, Subscribed and fully Paid up:
8,225,118EquitySharesofNu.1,000/-each 8,225,118,000 8,190,191,000
Total 8,225,118,000 8,190,191,000
17.1 Allordinarysharesarerankedequally.Fullypaidsharescarryonevotepershareandcarrytherighttodividends.TherearenorestrictionsonthetransferofsharesintheCompanyoronvotingrightsbetweenholdersofshares.EntiresharecapitalisheldbytheholdingCompanyM/sDrukHolding&Investments(ARoyalGovernmentofBhutanUndertaking)
17.2 4,910,755equityshares(Previousyear4,875,828)havebeenallottedforconsiderationother
thancashand3,314,363equityshares(Previousyear:3,314,363)havebeenallottedpursuanttoconversionofgrantofRoyalGovernmentofBhutan.
17.3 ReconciliationofEquitysharesOutstanding
Ensuring Safety and Security at all times 63
A
nnua
l Rep
ort 2
015As at December
31, 2015As at December
31, 2014
At the beginning of the year
-Numberofshares 8,190,191 8,190,191
-Amount(inNu.) 8,190,191,000 8,190,191,000
Add: issued during the year
-Numberofshares 34,927 -
-Amount(inNu.) 34,927,000 -
Less:Redeemedduringtheyear
-Numberofshares - -
-Amount(inNu.) - -
At the end of the year
-Numberofshares 8,225,118 8,190,191
-Amount(inNu.) 8,225,118,000 8,190,191,000
18. Borrowings
As at December 31, 2015
As at December 31, 2014
i)Securedborrowings:
Termloanfrom‘NationalPensionandProvidentFund’(ReferNote18.1)
-forTransmissionLinesProject 377,347,500 419,275,000
ii)Unsecuredborrowings:
Termloansfrom‘RoyalGovernmentofBhutan’(ReferNote18.2)
-forRuralElectrificationProjects 5,442,612,781 5,325,858,359
-forTalaHydroelectricProject 329,915,214 439,886,952
6,149,875,495 6,185,020,311
Borrowings analyzed as follows
Current portion 196,757,453 196,757,453
Non-currentportion 5,953,118,042 5,988,262,858
Total 6,149,875,495 6,185,020,311
64 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 Nature of Security:
18.1 TermloanofNu377,347,500fromNationalpensionandprovidentfundhasbeenobtainedforsettingupoftheproject“220kVDoubleCircuitTransmissionLinesfromDagapela-Tsirang-GelephutoLodraiandissecuredbyfirstmortgagechargeonprojectassetsandcarryfixedrateof interest of 9%perannumand is repayablewithin12 years in24half yearly equalinstallmentswithlastinstallmentdueonSeptember01,2024.
18.2 OtherTermLoans:
i) RuralelectrificationLoanI(RE-I)ofNu.166,081,366hasbeenobtainedfromtheRoyalGovernmentofBhutanforRuralElectrificationWorksandisrepayablewithin30yearsataninterestrateof6%in60semi-annuallyequalinstallmentswithlastinstallmentdueonAugust15,2035.
ii) RuralelectrificationLoanII(RE-II)ofNu.293,213,404hasbeenobtainedfromtheRoyal
GovernmentofBhutanforRuralElectrificationWorksandisrepayablewithin24yearsataninterestrateof6%in48semi-annuallyequalinstallmentswithlastinstallmentdueonFebruary15,2032.
iii) RuralelectrificationLoanIII(RE-III)ofNu364,566,173hasbeenobtainedfromtheRoyal
GovernmentofBhutanforRuralElectrificationWorksandisrepayablewithin24yearsataninterestrateof6%in48semi-annuallyequalinstallmentswithlastinstallmentdueonMarch15,2036.
iv) LoanforTalaTransmissionLinesofNu.329,915,214hasbeenobtainedfromtheRoyal
GovernmentofBhutanandisrepayablewithin12yearsataninterestrateof9%insemi-annuallyequalinstallmentswithlastinstallmentdueonDecember15,2018.
v) Rural electrification loan - RE IV and V, JICA Loan I and II and the ADA loan of
Nu.4,618,751,838 has been obtained from the Royal Government of Bhutan is stilleffectiveandnotclosed.TherateofinterestandtheloantenureshallbedeterminedbytheRoyalGovernmentofBhutan.
18.3 ReferNote37(vii)fortransactionwisedetailundereachborrowing. 19. Deferred grants
Grants are received from the Royal Government of Bhutan as counterpart financing to theRural Electrification Loan to carry out the rural electrificationworks for the civil component andestablishmentexpenses.Thematerialcostsarefinancedthroughtheloan.Therearenoconditionsandcontingenciesattachedtothisgrant.
As at December 31, 2015
As at December 31, 2014
As at January 1 939,325,033 789,557,367Receivedduringtheyear 8,209,287 171,074,065Less:TransferredtotheStatementofComprehensiveIncome (23,959,455) (21,306,399)
As at December 31 923,574,865 939,325,033
Ensuring Safety and Security at all times 65
A
nnua
l Rep
ort 2
015Deferred grant analyzed as follows:
As at December 31, 2015
As at December 31, 2014
Current portion 24,891,343 20,972,254
Non-currentportion 898,683,522 918,352,779
Total 923,574,865 939,325,033
20. Deferred Customer’s Contribution As at December
31, 2015 As at December
31, 2014As at January 1 3,317,332 -
Receivedduringtheyear - 3,373,558
Less:TransferredtotheStatementofComprehensiveIncome (112,452) (56,226)
As at December 31 3,204,880 3,317,332
Deferred Customer’s Contribution analyzed as follows:
Current portion 112,452 112,452
Non-currentportion 3,092,428 3,204,880
Total 3,204,880 3,317,332
21. Employee Benefit LiabilitiesAs at December
31, 2015As at December
31, 2014Provision for:
-Gratuity(ReferNote37(i)) 405,785,435 341,518,127
-Leaveencashment 36,006,408 33,580,410
-PerformanceBasedIncentiveScheme 75,645,862 65,725,377
-PerformanceBasedVariableAllowance 67,902,361 39,416,431
Total 585,340,066 480,240,345
Employee benefit liabilities analyzed as follows:
Current portion 202,815,969 172,554,806
Non-currentportion 382,524,097 307,685,539
Total 585,340,066 480,240,345
66 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 22. Deferred Income Tax liabilities (net)
Theanalysisofdeferredincometaxassetsanddeferredincometaxliabilitiesandthegrossmovementonthedeferredincometaxliability(net)isasunder.
ParticularsFor the year ended
December 31, 2015 December 31, 2014
OpeningBalance 480,369,787 305,542,154
ChargedtotheStatementofComprehensiveIncome(ReferNote22.1) 71,093,899 174,827,633
Closing Balance 551,463,686 480,369,787
Note 22.1 The movement in deferred income tax assets and liabilities during the year endedDecember31,2015andDecember31,2014areasunder:
Deferred income tax liabilitiesAs at
January 1, 2015
Adjustment to Statement of
Comprehensive Income
As at December 31,
2015
Property,plantandequipment 502,441,976 74,807,345 577,249,321
Total 502,441,976 74,807,345 577,249,321
Deferred income tax assets
Provisionfordoubtfuldebts 2,394,608 2,942,106 5,336,715
Training 16,366,893 3,591,337 19,958,231
Provisionforobsoleteinventories 3,310,686 (2,819,997) 490,689
Total 22,072,188 3,713,446 25,785,634
23. Other non-current liabilitiesAs at December
31, 2015As at December
31, 2014
SecurityDeposits
-Energymeter 194,447,557 177,825,971
-Others(ReferNote23.1) 16,759,951 16,759,951
Performance security 85,185 1,869,100
Retention money 469,897,953 699,859,161
Payablestoemployees 149,124 167,360
681,339,770 896,481,543
23.1 Include the deposit received from Punatshangchhu-I Hydroelectric Project Authority ascompensationforBPCLassetsatWangduePhodrangwhichwillbeadjustableaftertheassetsbeingtransferredtothePHPA-Ioncompletionoftheproject.
Ensuring Safety and Security at all times 67
A
nnua
l Rep
ort 2
01524. Trade & other payables
As at December 31, 2015
As at December 31, 2014
Tradepayables:
-electricity 223,675,778 157,820,542
-suppliers&contractors 178,597,763 199,150,861
-services 8,356,719 114,998
Otherpayables 1,044,044 -
Total 411,674,304 357,086,401
25. Income tax payable (net of advances)
As at December 31, 2015
As at December 31, 2014
Provisionforcorporatetax 519,783,722 415,284,847
Less:Advanceincometaxandtaxdeductedatsource (183,171,877) (182,103,575)
Total 336,611,845 233,181,272
As at December 31, 2015
As at December 31, 2014
Current income tax
Currenttaxonprofitsfortheyear 519,783,722 415,284,847
Total Current income tax 519,783,722 415,284,847
Deferred income tax
Originationandreversaloftemporarydifferences 71,093,899 70,356,723
OnreassessmentinERP - 104,470,910
Total Deferred income tax 71,093,899 174,827,633
Income tax expense 590,877,621 590,112,480
Reconciliation between the provisions for income tax to the amount computed by applying thestatutoryincometaxratetotheincomebeforeprovisionforincometaxissummarizedbelow:
68 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015
As at December 31, 2015
As at December 31, 2014
Profit before tax 1,971,618,598 1,593,086,562
Tax calculated at domestic tax rates 591,485,579 477,925,969
Income tax effect due to:
-Othernon-deductibleexpenses
-Medicalexpenses 211,265 215,185
-Donations 549,600 219,120
-FinesandPenalties 1,073,445 322,224
-Others
-Depreciationondisposal 12,308,393 6,959,072
-Reversalondisposalofasset (14,750,661) -
-DeferredtaxonreassessmentinERP - 104,470,910
Income tax charge 590,877,621 590,112,480
Theapplicablecorporateincometaxratewassame,i.e.30%forthecurrentyearandearlieryearendedonDecember31,2015andDecember31,2014.
26. Other current liabilities
As at December 31, 2015
As at December 31, 2014
Securitydeposits:
-Energymeter 2,719,018 1,436,874
-Capacityreservecharges 9,607,950 1,850,350
-Performancesecurity 4,880,832 3,130,240
Retention money 820,119,816 229,638,968
Liabilitiesagainstassettakenover - 34,927,119
Interestaccruedbutnotdueonborrowings 32,071,672 32,126,479
Statutoryliabilities 8,444,669 520,228
WelfareGrantFund 11,716,868 10,111,699
Payablestoemployees 517,898 1,905,376
Accrued Expenses 1,791,400 15,638,014
Otherliabilities 2,653,399 2,311,920
Total 894,523,522 333,597,267
Ensuring Safety and Security at all times 69
A
nnua
l Rep
ort 2
01527. Income from construction contracts
December 31, 2015
December 31, 2014
Valueofcontractsperformedandservicecharges 4,281,806,936 2,418,281,225
Estimationchargesforworks 254,672 1,222,548
Total 4,282,061,608 2,419,503,773
28. Other Income December 31,
2015 December 31,
2014Interestincomeon:
-Fixeddeposits 21,906,171 20,356,045
-PolicyBenefitAccruedonEmployeeInsurancePolicy(ReferNote37(vi) 45,430,224 13,846,510
-FixedDepositforInvestmentReserve 25,979,651 17,526,076
-FixedDepositforGratuityLiability 15,725,365 13,301,504
-RICBLbonds 10,407,945 19,728,363
-AdvancetoHoldingCompany - 18,805,479
-Inter-CorporateLoan 9,143,835 -
Penaltiesandliquidateddamages 8,583,015 37,410,732
RevenueGrant - 674,873
Amortizationofdeferredgrants(ReferNote19) 23,959,455 21,306,399
Amortizationofdeferredcustomer’scontribution(ReferNote20) 112,452 56,226
Liabilitiesnolongerrequiredwrittenback 22,587 1,435,894
Write-backofProvisiononObsolescenceofMaterial 9,399,991 983,375
ScrapSales 4,634,690 8,193,040
Tenderformsales 2,214,300 1,963,569
Hireandleasecharges 1,546,939 721,883
Othermiscellaneousincome 88,170,897 70,350,420
Total 267,237,517 246,660,388
70 Ensuring Safety and Security at all times
A
nnua
l Rep
ort 2
015 29. Operation and maintenance expenses
December 31, 2015
December 31, 2014
Repairs and maintenance:
-Material/Stores 76,477,552 95,722,242
-Services 105,027,304 79,747,834
-MeterEquipment 1,170,447 69,109
-Vehiclerunningexpenses(POL) 24,286,630 23,939,096
-Consumables 10,862,999 7,389,074
-Others 93,973,844 61,034,654
311,798,776 267,902,009
30. Employee benefits expenses December 31,
2015 December 31,
2014Salaries,wages,bonusandallowances 676,875,343 534,625,279
Contributiontoprovidentandpensionfund 40,987,790 37,049,557
Contributionforgratuityandleaveencashment 84,569,041 60,447,393
Workmenandstaffwelfareexpenses 74,484,544 57,460,109
876,916,718 689,582,338
31. Finance cost
December 31, 2015
December 31, 2014
Interestonlongtermborrowingsfrom:
RoyalGovernmentofBhutanfor:
-RuralelectrificationProjects 52,587,466 55,593,247
-TalaHydroElectricProject 35,945,361 35,945,361
NationalPensionandProvidentfundfor:
-TransmissionLinesProject 35,599,384 39,310,486
Otherfinancecharges 125,402 112,061
Total 124,257,613 130,961,155Less:Amountscapitalizedonqualifyingassets - 2,389,037Total 124,257,613 128,572,118
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01532. Other expenses
December 31, 2015
December 31, 2014
Travellingexpenses 39,217,968 18,236,468
Rent charges 5,511,521 5,356,658
Rates and taxes 1,021,907 1,146,081
Printing and stationary 16,854,897 11,725,366
Licenseandregistrationfees 11,888,813 9,892,796
Audit fees and expenses 940,985 1,108,816
Officeexpenses 8,281,034 7,175,074
Consultancyfees 200,000 2,287,715
Entertainment expenses 5,641,879 4,372,863
PublicityandAdvertisementexpenses 2,410,579 1,610,237
Insurancecharges 2,697,309 2,200,515
Donations and Contributions 1,857,000 805,400
VehicleHirecharges 474,395 -
Baddebt/Provisionfordoubtfuldebts 9,807,021 (1,178,989)
Lossondisposalofproperty,plantandequipment 25,264,468 8,846,636
Board meeting expenses and sitting fees 1,347,642 1,105,298
ManagementFeeforholdingCompany 14,298,844 -
Miscellaneousexpenses 32,821,413 12,803,477
Total 180,537,675 87,494,411
33. Earnings per share (‘EPS’)
Basic EPS attributable to Ordinary shares December 31, 2015
December 31, 2014
Net Profit attributable to the owners of the Company 1,380,740,977 1,002,974,078
Issuedandoutstandingordinarysharesatthebeginning of the year 8,190,191 8,190,191
Effect of ordinary shares issued during the year 10,187 -
Weighted average number of ordinary shares 8,200,378 8,190,191
Basic EPS attributable to ordinary Shares 168.38 122.46
Sharespendingissueagainstassetstakenover - 34,927
Averagenumberofdilutedshares 8,200,378 8,225,118
Diluted EPS attributable to ordinary Shares 168.38 121.94
72 Ensuring Safety and Security at all times
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015 34. party transactions
TheCompanyisawhollyownedsubsidiaryofDrukHolding&Investments(aRoyalGovernmentofBhutanundertaking).TheCompanyhasnosubsidiaryCompany.TheCompanyconsidersthatforthepurposeofBAS24theRoyalGovernmentofBhutanisinapositionofcontroloverit,andtherefore regards theRoyalGovernmentofBhutanand itscontrolledcompanies/corporationsasrelatedpartiesforthepurposeofthedisclosuresrequiredbyBAS24.
Asummaryof theCompany’s transactionswith theRoyalGovernmentofBhutanand its relatedentitiesisincludedbelow:
Name of Related Party Relationship
Nature of transaction with
related party
Amount outstanding as on December 31, 2015
(Amount in Nu.)
Transactions during the year
(Amount in Nu.)
RoyalGovernmentof Bhutan
Ultimateholding
a)Borrowingsforruralelectrificationproject Cr.5,442,612,781
Disbursement(Cr.)161,612,637
Repayment(Dr.)44,858,215
b)BorrowingsforTalahydroelectricproject Cr.329,915,214 Repayment(Dr.)
109,971,738
c)Grantsreceivedforruralelectrification Cr.923,574,864 Received(Cr.)
8,209,286
d)InterestPaid/payableonBorrowings
Cr.18,645,226 Cr.88,532,827
DrukHolding&Investments
HoldingCompany
a)IssueofShareCapital
(b)AdditionalissueCr.8,225,118,000 34,927,000
b)Paymentofdividend 702,082,000
c)Inter-corporatedepositgiven
d)Saleofelectricity
f)InterestreceivedonInter-corporatedeposit
Dr.400,000,000268,002
9,143,835
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015
Name of Related Party Relationship
Nature of transaction with
related party
Amount outstanding as on December 31, 2015
(Amount in Nu.)
Transactions during the year
(Amount in Nu.)
DrukGreenPower Corpo-rationLimited
FellowSubsidiary
(a)Purchaseofelec-tricity for transmission and distribution
Cr.215,912,047 1,541,527,860
(b)Wheelingcharges Dr.13,424,084593,492,270
Dagachhu Hydro Power Corporation
FellowSubsidiary Wheelingcharges Dr.1,803,666 38,776,093.61
DrukAirCorporation Limited
FellowSubsidiary AirTravelService
15,348,946
RoyalInsur-ance Corpora-tion of Bhutan Ltd
Governmentundertaking
a) InsurancePremiumpaid
b) Deposit against EmployeesInsurancePolicy
Dr.491,063,498
9,450,286
c)RedemptionofBonds
d)Interestincomeearned on bonds
e)BenefitsaccruedonInsurancePolicy
f)DeathBenefitClaimsunderEmploy-eesInsurancePolicy
300,000,000
10,407,945
45,430,224
1,325,000
Key management personnel (‘KMP’)
KMPsarethosepersonshavingauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheCompanydirectlyorindirectlyincludinganydirectorwhetherexecutiveorotherwise.
KeymanagementpersonnelofthecompanyforthepurposeofdisclosureofcompensationincludetheManagingDirectorasrequiredbytheCompaniesActoftheKingdomofBhutan2000.
74 Ensuring Safety and Security at all times
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015 Summary of compensation paid to the KMP, Dasho Bharat Tamang, the former Managing
Director.
For the year endedDecember 31,
2015December 31,
2014
BasicSalaryandcontractallowance 860,531 1,432,224
Performancebasedvariableallowances 297,545 347,625
Performancebasedincentivescheme 169,400 165,624
Sittingfees 89,000 113,000
Contributiontoprovidentfund 63,105 105,024
Total 1,479,581 2,163,497
Summary of compensation paid to the KMP, Mr. Gem Tshering, present Managing Director.
For the year ended December 31,
2015December 31,
2014BasicSalaryandcontractallowance 768,000 -
Performancebasedvariableallowances 120,000
Performancebasedincentivescheme 79,200
Sittingfees 88,000 -
Contributiontoprovidentfund 52,800 -
Total 1,108,000 -
AstheliabilitiesforgratuityandleaveencashmentareprovidedonactuarialbasisfortheCompanyasawhole,theamountspertainingtoKMParenotascertainableseparatelyandassuchcouldnotbeincludedabove.
Note:
i) ReimbursementofexpensesincurredbyrelatedpartiesforandbehalfoftheCompanyandvice-versa,andtherelatedoutstandingamountshavenotbeenincludedintheabovedisclosures.
ii) ThedisclosuresgivenabovehavebeenreckonedonthebasisofinformationavailablewiththeCompanyandrelieduponbytheAuditors.
35. Capital Commitments
The Company has contractual commitments of Nu.8,577,724,815 and Nu 8,129,728,401 as atDecember31,2015andDecember31,2014respectively;pertainingtocapitalexpendituresrelatingtoacquisitionofProperty,plantandequipment.
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01536. Contingent liabilities
Asonthereportingdate,thereisapendinglitigationfiledagainsttheCompanyintheCourtsofLawintheCountry.TheprobableamountoftheclaimsfromthecasetothecompanyistothetuneofNu68millionandiscontingentonthejudgment.
37. Other Notes to Accounts
i. Gratuity:
TheliabilitytowardsGratuityisfundedthroughfixeddepositswiththebanks.AsonDecember31,2015 there isbalanceofNu.343,000,945 in thefixeddeposits (including interestofNu6,088,233.20accruedthereon)earmarkedtowardsgratuity liabilityofNu.405,785,435asonDecember 31, 2015, showing shortfall of Nu 62,784,490which shall bemade good in thecomingyear/sbyfurther investing in thefixeddeposits.However, the liabilityhasbeenfullyprovidedintheaccountsandduringtheyearaprovisionofNu64,267,308(Previousyear:Nu.10,576,437)hasbeenmadeintheaccounts.
ii. AsperlastdomestictariffrevisionfromJuly1,2015,therevisedweightedaveragetariffisNu.2.217/unitascomparedtoNu.1.996/unitpriortotherevision.
iii. As per the technical assessment of the slow and non-movingmaterial identified based onageingandusageleveloftheinventorygeneratedfromERP(SAP)Systemandalsobasedonidentification/segregationofobsoletestockatthetimeofphysicalverification,theadequateprovisionhasbeenmadeintheaccountstowardsobsoletematerial.
iv. Intheopinionofthemanagement,thevalueofassetsotherthanfixedassetsandinvestments,onrealizationintheordinarycourseofbusiness,willnotbelessthanthevalueatwhichthesearestatedintheStatementofFinancialPosition.
v. Thelettershavebeensenttomostofthepartiesforconfirmationofthebalancesundertradeandotherreceivables,loansandadvancesandtradeandotherpayables,however,duetonon-receiptoftheresponsefromfewparties,thebalancesaresubjecttoconfirmation/reconciliationinsomecases.Theimpact,ifany,subsequenttotheconfirmation/reconciliationwillbetakenintheyearofconfirmation/reconciliation.
vi. Duringtheyear,theCompanyhastakenasinglepremiuminsurancepolicywithRoyalInsuranceCorporationofBhutanLimited(RICB),forcoverageofitsemployeeswithdeathclaimbenefitintheeventofdeathwhileinserviceandwithinthepolicytermoffiveyears.ThepolicyhasbeenunderwrittenthroughSinglepremium,whichwillberefundedattheendofpolicyperiod/termwithpre-decided/fixedpolicybonus/benefitofNu.226,828,522andafterdeductionofdeathclaimspaidwithinthepolicyterm.TheSinglepremiumofNu.424,136,478paidduringtheyearhavebeenconsideredas‘DepositagainstEmployeesInsurancePolicy’under‘OtherNon-CurrentAssets’ in theStatementofFinancialPosition.ThedeathclaimbenefitsofNu.1,325,000paid/payableduringtheyearhavebeenreducedfromthesameandaccountedforas‘EmployeeBenefitExpense’andthepolicybonus/benefitofNu.45,430,224(PreviousyearNu13,846,510)accruedunderthepolicyhavebeenaddedinthesameonproratebasisbycreditto‘OtherIncome’.
76 Ensuring Safety and Security at all times
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015 vii. ThedetailofLoansFundsfortheyearisasunder:
(AmountinNu.)
Particularsoutstanding
as on 01.01.2015
Disburse-ment during
the year
Repayment during the
year
Loan Outstanding as on 31.12.2015
Interest Paid/provided for during the
year
From Royal Government of Bhutan (Unsecured)
A. For Rural Electrification works
ADB-REI 174,385,435 - 8,304,068 166,081,366 10,147,571
ADB-REII 311,539,241 - 18,325,838 293,213,404 17,995,973
ADB-REIII 382,794,482 - 18,228,309 364,566,173 22,369,173
ADB-REIV 1,138,451,374 - - 1,138,451,374 -
ADB-REV 515,563,578 77,462,625 - 593,026,203 -
ADA 312,903,654 - - 312,903,654 1,986,364
JICA-I 1,725,520,182 8,669,568 - 1,734,189,750 88,385
JICA-II 764,700,413 75,480,444 - 840,180,857 -
5,325,858,359 161,612,637 44,858,215 5,442,612,781 52,587,466
B. For Tala Transmission Lines
THP 304,952,617 - 76,238,154 228,714,463 35,945,361
THP-IDC 134,934,335 - 33,733,584 101,200,751 -
439,886,952 - 109,971,738 329,915,214 35,945,361
From National Pension and Provident Fund (Secured)
NPPF 419,275,000 - 41,927,500 377,347,500 35,599,384
419,275,000 - 41,927,500 377,347,500 35,599,384
Total 6,185,020,311 161,612,637 196,757,453 6,149,875,495 124,132,211
viii. Quantitativedetailofpurchase,generationandsalesofpowerfortheyearisasunder.
2015 2014
Units ( kWh)
Amount in Nu (m)
Units ( kWh)
Amount in Nu (m)
Purchase 2,100.9782 1,550.12 2,100.9782 1,550.12
Hydel 14.6759 14.6759
DG 0.0022 0.0022
Sale 2,057.1410 4,560.32 2,057.1410 4,560.32
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01538. The previous years figures have been regrouped and/or rearranged, wherever required.
39. Subsequent events
i. TheBoardofDirectorshasproposedafinaldividendofNu155.82pershareforthefinancialyearendedDecember31,2015.ThetotaldividendofNu.1,281,655,159andissubjecttoapprovalofthemembersintheGeneralMeetingtobeheldtoadoptthefinancialstatementsfortheyearendedDecember31,2015.Thesefinancialstatementsdonotreflectthisdividendpayable.
ii. InlinewiththeAssetreplacementpolicyoftheCompany,theBoardofDirectorshasproposedanamountofNu5,736,194 tobe transferred to InsuranceReserve for thefinancial yearendedDecember31,2015,whichiscalculatedat0.4%onthegrossassetadditionsduringthe year. This is subject to approval of themembers in theGeneralMeeting to be heldtoadopt thefinancialstatements for theyearendedDecember31,2015.Thesefinancialstatementsdonotreflectthistransfer.
Signaturesto‘Notes1to39’oftheFinancialStatementsForandonbehalfoftheBoardofDirectors
78 Ensuring Safety and Security at all times
Exhibit to the AnnexureRATIO ANALYSIS
Particulars 2015 2014
NPratio 0.202 0.219
This is essentially PBT margin,giventheformulabeingconsidered.It is, by and large, range bound,althoughisverylow.
FixedAssetsTurnoverRatio(Sales/AverageNetBlock) 0.597 0.493 Improved,thoughlow.
DebtorsTurnoverRatio(EnergySales/AverageDebtors) 39.641 31.527 Appearscomfortable.
CurrentRatio(CurrentAssets/CurrentLiabilities) 1.928 1.889 These are more than adequate.
We think there is a need toevaluate the necessity of holdinglarge cash balance which hasbeen highlighted by us in theManagementReport.
QuickRatio(CurrentAsset-Inventory/CurrentLiabilities) 1.786 1.808
InterestCoverageRatio(Profitbeforeinterest&tax/Interest) 16.867 13.391 Quitecomfortable&improved.
DebtServiceCoverageRatio(PAT+Dep+Interest/(Interest+PrincipalRepayment)
7.372 5.979 Quitecomfortable&improved.
GearingRatio(Debt/GrossValueofFixedAsset) 26.86% 28.82% Comfortable, despite a marginal
decline.
GearingonnetFixedasset 36.9% 38.5% Comfortable, despite a marginaldecline.
DebtEquityRatio(Debt/averageEquity) 45.97% 48.88% Comfortable.
ReturnonCapitalEmployed(PBIT/(Capital+Reserve+longtermliability) 10.55% 8.96% Thoughimproved,theseareonthe
lowersidedue to lowprofitability.However return on assets hasmore relevance in case banks &financecompanies.
Returnonasset(Profitaftertax)/averagenettotalassets 8.44% 6.79%
Returnonequity(returnavailable/AverageEquity) 10.32% 7.93%