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INFORMATION MEMORANDUM

ISSUE OF NON CONVERTIBLE REDEEMABLE TAXABLE 7.00% TNEB POWER BONDS SERIES 6/ 2003-04 IN THE NATURE OF PROMISSORY NOTES, CARRYING UNCONDITIONAL & IRREVOCABLE GUARANTEE BY GOVERNMENT OF TAMIL NADU FOR AN ISSUE AMOUNT OF Rs. 51.10 CRORES ON PRIVATE PLACEMENT BASIS.

CREDIT RATED: “A+(so)” by CRISIL

PERFORMANCE HIGHLIGHTS OF TNEB AT A GLANCE

Ø A+(so) by CRISIL reflects the GoTN continued superior debt servicing

capacity as exhibited by the low deficit and debt levels and high interest coverage ratio as compared to other states

Ø TNEB has been timely in servicing its debt. TNEB has also kept its receivables and creditors under control, which reflects very positively on its cash flow management and collection efficiency of T.N.E.B is 97.99%, which is the highest amongst the SEBs.

Ø Plant Load Factor at 81.02% against base norm of 69.90% Ø Transmission and distribution losses at 16.25% as against average of 32-36%

in neighboring States and this is the lower than the All India average. Ø TNEB posted profits of Rs.112.57 Crores during the financial year 2002-2003.

ADVISOR & SOLE ARRANGER DEBENTURE TRUSTEES REGISTRAR & TRANSFER AGENTS & BANKERS SPA Merchant Bankers Ltd. Indian Bank Integrated Enterprises (India) Ltd. 25, C Block, Community Centre 321 (Old No.155) 2nd floor, Kences Towers Janak Puri, New Delhi – 110 058 Tambu Chetty Street No.1 Ramakrishna Street Ph.: (011) 25517371, 25515086 Chennai – 600 001 North Usman Road, T. Nagar Fax: (011) 25532644 Ph.:(044) 25341461, 601 Chennai – 600 017 Fax:(044) 25340113 Ph.:(044) 28140801 –03 Fax:(044) 28142479

PLACEMENT DATES WILL BE INTIMATED TO THE PROSPECTIVE INVESTORS SEPRATELY

TAMIL NADU ELECTRICITY BOARD (Government of Tamil Nadu Undertaking)

Registered Office: N.P.K.R.R. Maaligai, Electricity Avenue, 800 Anna Salai, Chennai - 600 002

Ph: (044) 28521561, 28521080 Fax: (044) 28521561, 28521210 Website:www.tnebnet.org Email: [email protected]


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TABLE OF CONTENTS

CONTENTS PAGE NO. General Risk & Disclaimer Clause 4 - 5 Risk Factors : Internal Risk 6 -13 External Risk 13 Notes 14 PART A Government Guarantee Abstract & Notification 15 Terms of the Present Issue 16 Particulars of the Issue Name & Address : Auditors } Debenture Trustee } Registrar & Transfer Agents } 17 Advisors & Sole Arranger } Compliance Officer } Terms & Conditions for Private Placement 18 - 32 Authority to The Issue 18 Credit Rating 18 - 25 Who can apply 26 - 29 Application Form 33 Instruction for filing up the application form 34 PART B TNEB Background 35 Capital Structure 35 Management 35 -37 Operational Highlights 37 - 41 Auditors Report 42 - 50 Balance Sheet & Revenue Account 50 - 84 Notes to Accounts & Significant Accounting Policies 85 - 95 Sources & Uses of Funds 96 -104 Debt Outstanding 105-107 Debt Servicing Track Record 107 PART C Material Contracts & Documents Available For Inspection 108 PART D Declaration 109 Force Majeure 109


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DEFINATION/ ABBREVIATIONS USED. ADB : ASIAN DEVELOPMENT BANK APTRANSCO: TRANSMISSION CORPORATION OF A.P. LTD BCCL : BHARAT COKING COAL LTD. BSE : THE STOCK EXCHANGE, MUMBAI BHEL : BHARAT HEAVY ELECTRICALS LTD. CAR : CAPITAL ADEQUACY RATIO CRISIL : CREDIT RATING INFORMATION SERVICES OF INDIA LTD. CIL : COAL INDIA LTD. CMD : CHAIRMAN & MANAGING DIRECTOR CFC : CHIEF FINANCIAL CONTROLLER/ GENERAL CERC : CENTRAL ELECTRICITY REGULATORY COMMISSION CPP : CAPTIVE POWER PLANTS CSS : CENTRALLY SPONSORED SCHEME DFC : DEPUTY FINANCIAL CONTROLLER/ RESOURCES ECL : EASTERN COALFIELDS LTD. ED ; EXECUTIVE DIRECTOR ERAF : EXCHANGE RISK ADMINISTRATION FUND FI : FINANCIAL INSTITUTIONS GMR : GMR POWER CORPORATION PVT. LID. GOTN : GOVERNMENT OF TAMIL NADU HSD : HIGH SPEED DESIEL H.T : HIGH TENSION IPP : INDEPENDENT POWER PRODUCER IDC : INTEREST DURING CONSTRUCTION PERIOD KAIGA : KAIGA UNIT, NUCLEAR POWER CORPORATION KSEB : KERALA STATE ELECTRICTY BOARD KW : KILO WATT L.T : LOW TENSION LIC : LIFE INSURANCE CORPORATION OF INDIA LTD. MAPS : MADRAS AUTOMIC POWER STATION MCL : MAHANADI COALFIELDS LTD. MW : MEGA WATT NPA : NON PERFORMING ASSETS NSDL : NATIONAL SECURITIES DEPOSITORY LIMITED NLC : NEYVELLI LIGNITE CORPORATION NTPC : NATIONAL THERMAL POWER CORPORATION LTD. PFC : POWER FINANCE CORPORATION LTD. PGCIL : POWER GRID CORPORATION OF INDIA LTD. PPN : POWER GENERATING COMPANY LTD. RE : RURAL ELECTRIFICATION REC : RURAL ELECTRIFICATION CORPORATION LTD. RBI : RESERVE BANK OF INDIA R&M : RENOVATION & MODERNISATION SAMALPATTI: SAMALPATTI POWER CORPORATION PVT. LTD. SEBI : SECURITIES AND EXCHANGE BOARD OF INDIA STCMS : ST-CMS ELECTRIC COMPANY PVT. LTD. T&D : TRANSMISSION & DISTRIBUTION TIDCO : TAMIL NADU INDUSTRIAL DEV. CORPN. TTPS : TUTICORN THERMAL POWER STATION THADCO : TAMIL NADU ADI DRAVIDAR HOUSING DEV. CORPN. TNEB : TAMIL NADU ELECTRICITY BOARD


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INFORMATION MEMORANDUM-7.00% TNEB POWER BONDS SERIES 6/2003-04.

TAMIL NADU ELECTRICITY BOARD

(Government of Tamil Nadu Undertaking) Reg.Off.: N.P.K.R.R. Maaligai, Electricity Avenue, 800 Anna Salai, Chennai - 600 002

Ph: (044) 28521561, 28521080 Fax: (044) 28521561, 28521210 Website: www.tnebnet.org Email: [email protected]

ISSUE OF NON CONVERTIBLE REDEEMABLE TAXABLE 7.00% TNEB POWER BONDS SERIES 6/ 2003-04 IN THE NATURE OF PROMISSORY NOTES, CARRYING UNCONDITIONAL & IRREVOCABLE GUARANTEE BY GOVERNMENT OF TAMIL NADU FOR AN ISSUE AMOUNT OF Rs. 51.10 CRORES ON PRIVATE PLACEMENT BASIS.

General Risk Investors are advised to read the risk factors carefully before taking an investment decision in the offering(s). For taking an investment decision, investors must rely on their own examination of the Issuer and the offer including the risks involved. Issuer’s Absolute Responsibility The issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this information memorandum contains all information with regard to the issuer, and the issue, which is material in the context of the issue, that the information contained in this information memorandum is true and correct in all material aspect and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this information memorandum or any of such information or the expression of any opinions or intentions misleading in any material respect. Credit Rating: CRISIL A+(SO) For details of the above rating definitions, the investors are advised to refer para on “Credit Rating” in the information memorandum. The Rating is not recommendation to buy, sell or hold securities and Investors should take their own decisions. The rating may be subject to revision or withdrawal at any time by the assigning Rating Agency on the basis of new information. Each rating should be evaluated independent of any other rating. Listing: The Bonds are proposed to be listed at The Stock Exchange, Mumbai (BSE).


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Stock Exchange Disclaimer Clause: It is to be distinctly understood that the submission of the information memorandum to the Stock Exchange should not in any way be deemed or construed that the information memorandum has been cleared or approved by Exchange. Stock Exchange does not take any responsibility either for the financial or other soundness of this Issuer, or the achievements of the object for which placement is proposed to be made or for the correctness of the statement made or opinions expressed in the information memorandum. DISCLAIMER STATEMENT FROM THE ARRANGER In light of SEBI circular no. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 and SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003, it is advised that the Issuer Company has exercised self due-diligence to ensure complete compliance of prescribed disclosure norms etc in this Memorandum. The role of the Arranger in the assignment is confined to marketing and placement of the bonds on the basis of this Memorandum as prepared by the Issuer Company. The Arranger have neither scrutinized or vetted nor has it done any due-diligence for verification of the contents of this Memorandum. The Arranger shall use this Memorandum for the purpose of soliciting subscription(s) from qualified institutional investor(s) in the bonds to be issued by the Issuer Company on private placement basis. It is to be distinctly understood that the aforesaid use of this Memorandum by the Arranger should not in any way be deemed or construed that the Memorandum has been cleared & approved by Arranger; nor do they in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Memorandum; nor do they take responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this Issuer. The Arranger or any of its directors, employees, affiliates or representatives do not accept any responsibility and/or liability for any loss or damage arising of whatever nature and extent in connection with the use of any of the information contained in this Memorandum.


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RISK FACTORS

INTERNAL FACTORS A. Redemption Reserve: Creation of Redemption Reserve is not envisaged for the proposed issue of Bonds. Since Tamil Nadu Electricity Board has been constituted under Section 5 of the Electricity (Supply) Act, 1948 (Central Act No. 54 of 1948). The Board is engaged in the business of generation, transmission and distribution of electricity in the State of Tamil Nadu. The same is also not required to be created vide General Circular 9/2002 clarification no. 6/3/2001-CL.V, Dated 18-04-2002 issued by Department of Company Affairs, Ministry of Law, Justice and Company Affairs, Government of India. B. Credit Risk: TNEB’s debt servicing capability is expected to be dependent upon the Government of Tamil Nadu’s fiscal health in the medium term. The Government of Tamil Nadu fiscal position critically hinges on the continuation of fiscal, administrative and power sector reforms initiated in the State. Any improvement in the Government of Tamil Nadu fiscal position would depend on its ability to control its power subsidies. While at the same time, augmenting available revenues. Government of Tamil Nadu has now operationalised the ERC and the TNEB is in the process of filing its second tariff application. The tariff setting process as well as the release of subsidies will be done in a rational and transparent manner and the directives of ERC as well as the Memorandum of Understanding signed with the Ministry of Power would prompt the Government of Tamil Nadu to take the required measures to reform the power sector within the state. C. Market Risk: (A) Increased interest rate volatility exposes TNEB to tap the market at higher cost of borrowing which may influence the borrowing cost, in turn the cost of capital. Any increase in the rate of borrowing may not result in the tariff revision or subsidy compensation by the Government of Tamil Nadu, which will mean increase in the total finance cost. (B) The Electricity Act 2003 contemplates multi buyer model in place of single buyer model and open access to transmission and distribution network, which may have impact of participation of private sector in electricity distribution business. D. Credit Rating: TNEB has obtained credit rating from CRISIL. CRISIL has awarded A+(SO) to the debt programme of Rupees fifty-one Crores and ten lacs. A+(so) by CRISIL reflects the GoTNs continued superior debt servicing capacity as exhibited by the low deficit and debt levels and high interest coverage ratio as compared to other states E. Transmission & Distribution Losses: TNEB has been making constant efforts to bring down T&D losses. As per the industry average T&D losses are at 21-22% where as TNEB has improved to 16.25% (2001-2002) from 16.60% (2000 – 2001) Further TNEB has implemented following steps to reduce line losses from present 16.25%


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• Establishment of New Sub-stations • Erection of EHT lines • Installation of Capacitors • Installation of Electronic Meters in H.T. Services and • Installation of High precision Static Meters in LT services with

Consumption more than 10,000 Units per month. F. Asset Concentration: Asset Concentration to few industries, complete exposure to power sector shall be impacted by State and Central Government’s Policy on its reform process. G. Contingent Liabilities: 1. The arbitration proceedings between M/s. CIMMCO & TNEB was concluded on 16.3.97 and the award published on 29.8.97. The umpire in his award has directed TNEB to pay Rs. 1,49,51,790/- towards wage escalation to the company with interest at 15% p.a. from the date of award and also Rs. 1.5 lakh towards the cost incurred by the claimant in the Arbitration Proceeding. A petition before the High Court has been filed against the orders passed by the umpire and the appeal numbered as O.P. No: 1063/97. The case has not yet come up for hearing, after 09.04.02. 2. Andhra Pradesh State electricity Board have claimed Rs. 2.18 Crore towards cost of energy exported to Tamil Nadu Electricity Board between 1976-77 to 1981-82. The rate for various energy exchanges between Andhra Pradesh state Electricity Board and Tamil Nadu Electricity Board have not yet been settled. This issue is pending between Government of Tamil Nadu and Andhra Pradesh. 3. Claims under dispute and shown as contingent liability. (Rupees in lakh) Name Details 2001- 02 2002 – 03 Total NLC I BPSC 85.85 1400.16 1486.01 NLC II BPSC 74.24 1068.72 1142.96 MAPS Surcharge 677.00 0.00 677.00 KAIGA Rebate dispute 53.52 0.00 53.52

TALCHER II 0.00 1020.37 1020.37 ULDC 0.00 418.03 418.03 TRANS. CHARGES 115.95 342.70 458.65

PGCIL

REBATE DISPUTE 2.97 21.79 24.76 GMR Disallowed claims for

certain deviation form IPP parameters,

604.86 538.40 1143.26

SAMALPATTY -DO- 405.92 583.99 989.97 MADURAI POWER CORPN. PVT. LTD.

-DO- 547.19 583.56 1130.75

PPN -DO- 16374.03 6477.95 22851.98 STCMS -DO- 0.00 1815.87 1815.87 CPP AG Audit objection 0.00 25.11 25.11 Total 19012.56 14296.65 33309.21


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4. The TNEB has availed Rs. 136.74 Crore loans from ADB through PFC as complementary finance during 1990-91. The current value as on 31.03.2003 is Rs. 81 Crore. As per terms and conditions of the loan agreement 7% of the loan amount is to be made as exchange risk contribution to PFC on and from 11/91. Another 1.4% additional exchange risk contribution and also the reimbursement of loss on account of the exchange informed by the PFC is debited to interest and Finance charges every year. TNEB has made Rs. 140.20 Crore towards ERAF. As per the agreement the PFC invests the exchange risk contribution every year with the Banks or Financial Institutions to earn some interest. The total amount of such contributions is debited to interest and Finance charges in our accounts. Any loss or gain on the exchange risk fund investment made by the PFC at the end of the loan period will be to the Board’s account. TNEB has incurred a loss Rs. 96.90 Crore towards fluctuations in exchange rate (translation loss), which is being adjusted against ERAF. The loan carries besides interest, the following charges viz. agency tax, Asian Development Bank guarantee tax, service charges, exchange risk contribution @ 7% interest tax. The Balance Commitment to be serviced by TNEB is Rs. 54 Crore. 5. TNEB has filed a petition through Govt. of Tamil Nadu before the Finance Department / Govt. of India, praying for passing appropriate orders for withdrawal of appeal filed by I.T. Department for the assessment years 1994-95 and 1995-96 regarding TDS and Interest is as below:

YEAR TAX (TDS) Rs. INTEREST Rs. 1994-95 7,20,14,726 2,47,73,118 1995-96 8,53,52,065 1,65,35,365

So for the action taken by Govt. of India is not yet intimated. The Secretary/Energy Department/ Govt. of Tamil Nadu has been addressed, to inform the position as obtained from Govt. of India/Finance Department to TNEB. Further, the I.T. Department has issued a demand notice for the assessment year 1996-1997 also for the same issue for an amount of Rs. 50,24,792.00 (IT – Rs. 34,65,375.00 + Interest Rs. 15,59,417.00). Against this demand, 4 appeals have been made before the Commissioner of I.T. (Appeals) during 9/99, challenging the I.T. Dept’s orders on the alleged assessment of I.T. and interest. The case came for hearing on 29.12.2003 and posted on 06.04.2004. 6. The disputed deduction towards Grade Slippage, POL, etc. is Rs. 322.16 Crores as on 31.03.2003 as detailed below: Bills paid as on 31.03.2003 upto ECL Rs. 89.55 Crore (8/98 to 6/02) 06/02 BCCL Rs. 30.97 Crore (8/98 to 7/01) 07/01(No supply form 08/01) MCL Rs. 201.64 Crore (4/95 to 2/03) 02/03 Total Rs. 322.16 Crore 7. As per Umpire’s Award interest on belated payment Rs. 39.33 Crore and POL Rs. 4.52 Crore has to be paid to the coal companies. This amount relates upto 3/95. Further from 4/95 to 3/2002 M/s. ECL has claimed an amount of Rs. 23.10 Crore towards interest on belated payment.


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8. M/s. KCT Ltd. in civil suit 27/2000 filed in High Court has claimed an amount of Rs. 275910000 towards prices escalation in respect of construction of Tunnel access at PUSHEP. 9. M/s. KCT Ltd. have preferred a claim of Rs. 39.51 lakhs towards compensation charges in the construction of Tunnel at PUSHEP. This has been disputed and pending with High Court. 10. TNEB has obtained exemption from Employees Deposit Linked Insurance Scheme 1976 from the Central Government with effect from 1.7.1986. The Regional Provident Fund Commissioner, Madras has treated the TNEB as an un-exempted establishment for the period from 1.8.1976 to 30.6.1986 and preferred a claim of Rs. 6.37 Crore. TNEB has taken up the matter with the Employees Deposit Linked Insurance Scheme for the pre exemption period i.e. from 1.8.1976 to 30.6.1986 and orders on exemption is awaited from the Central Provident Fund Commissioner. 11. The rates to be charged for the power supplied to Karnataka Electricity Board against the Cauvery Water Release by Karnataka has not yet been finalized. The matter is under correspondence between the two Governments Viz. Tamil Nadu and Karnataka. The quantum of energy supplied was 178 M.U. during the year 1986 – 88 and the amount due comes to Rs. 11.89 Crores. 12. The Sundry Debtors towards sale of power includes an amount of Rs. 35.70 Crore relating to 116 court cases pending in various courts. The sundry Debtors also includes Rs. 307.39 Crore relating to M/s MALCO being the difference between the normal rate and concessional rate of Rs. 1/- per unit for the period from 5/96 to 3/99. H. Pending Grievances: As on December 31, 2003 there is no pending investor grievance. Further, no complaint was pending for more than 30 days. I. Tax Liabilities: As on 31.03.2003, there are no tax liabilities J. Non-Performing Assets & Overdues: 1. Arrears due from APTRANSCO to TNEB as on 31.03.2003 is Rs. 9806.57 lakhs (provisional) towards the Transmission and Wheeling charges, Fixed charges and overdrawn energy by APTRANSCO. 2. The amount to be paid by KSEB to TNEB towards Transmission and Wheeling Charges is Rs. 1785.81 lakhs. The amount to be paid by TNEB to KSEB towards Fixed Charges is Rs. 1920.82 lakhs. Hence net amount payable by TNEB to KSEB is Rs. 135.00 lakhs. As on 1.4.2001 the amount to be paid by KSEB after adjusting the amount paid for frequency linked penalty/incentive and towards the difference in cost of imported power and pooled cost of Central Generation Circle from out of the above, Rs. 170.86 lakhs is only payable by TNEB to KSEB 3. The APSEB has to pay Rs. 819.08 lakhs. In spite of repeated claims the APSEB has not accepted their liability. However this is being pursued for earlier realization.


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4. An amount of Rs. 2.97 Crore being the differential cost of HSD, used as main Fuel instead of Naptha has been claimed from M/S BHEL, which is under dispute. The date of claim for unit 3 is June 1998 to May 1999 and for unit 4 June 1998 to September 1999. 5. The expenditure for projects covered under ADB loans (EAP) executed by the TNEB are met by the Board from its own fund. As per the tripartite agreement between ADB, GOTN and TNEB the proceeds received from the GoTN from ADB through Govt. of India should be on-lent to TNEB. However as per Boards’ claim the Government has not on-lent up to 31.03.2003 an amount of Rs. 644.27 Crore received from ADB. 6. The Claim towards the Grade Slippers relates to the period upto 7/98 is 183.37 Crores as on 3/03/2003 detailed below: Name of the coal companies TNEB’s Claim (Rs. in crores) ECL 4/95 to 7/98 117.04 MCL 4/92 to 3/95 5.37 BCCL 4/95 to 7/98 49.00 BCCL 4/91 to 3/92 11.96 183.37 7. The voyage accounts for the chartered vessels for the year 2001 – 02 has since been received and it is under scrutiny. M/s. PSC have rendered the voyage accounts for the year 2001-02 for Rs. 280.51Crores as against the advance payment made for Rs. 268.53 Crores for the year 2001 – 02. For 2002-03, PSC have been paid advance payment of Rs. 255.52 Crores for which voyage accounts are due. Amount receivable from M/s. PSC for the years 1998-99 and 2000-2001 amounts to Rs. 24.97 Crore. Amount payable by TNEB to M/s. PSC for the years 1997-98 and 1992-2000 amounts to Rs. 24.24 Crores. 8. A sum of Rs. 24.41 Crores towards the cost of 382418.53 MT of embedded coal is due to be recovered from the handing contractors M/s. KCT Ltd., and M/s. SIC Ltd. They had been permitted time up to 30.09.2000 to retrieve and hand over the embedded coal. The cost of coal and other charges have been recovered from the contractors while finalizing the accounts. The amount recovered is being refunded to the contractor as and when the embedded coal is retrieved and handed over for shipment. So far 2,59,714 MT coal is retrieved and a sum of Rs. 16.06 Crores has been refunded. 9. M/S. PSC have been paid a sum of Rs. 9.429 Crores as advance to meet out their income tax commitment and the amount will be adjusted against thrown vessel final settlement of account at the end of the every year commencing from 2003-04 onwards. 10. The Government of Tamil Nadu in G.O. Ms. 165 Industries (MIG) dated 28.04.1992 and G.O. Ms. 37 Industries (MIG) dated 10.02.1995 ordered a package of scheme relief/concession to M/s. M ALCO Ltd., Mettur based on the representation of the company and rehabilitation scheme sanctioned by BIFR for the revival of the company. Some of the relief/concessions are:


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i) Concessional consolidated tariff rate @ Re. 1/- per KWH (Including Electricity Tax of 5%) for 4 years and after 4 years the company should pay HT tariff rate.

ii) Electricity dues of Rs.15.83 Crores from 1.10.1984 to 17.11.1988 shall be paid in installments, the mode of which will be decided during the 5th year of operation without interest.

iii) Electricity dues of Rs. 9.93 Crore from 18.11.1988 to 28.02.1991 shall be paid in monthly installments without interest in 4 years after one year of moratorium period from the date of re-opening.

vi) The Current Consumption Charges from 04/1991 onwards shall be based on the actual recorded consumption and future bills adjusted accordingly. The company was reopened on 21.02.1995.

TNEB has permitted M/s. MALCO in B.P. No. 14 Dated 20.04.1999 to settle the arrears of Rs. 15.83 Crore for the period from 01.10.1984 to 17.11.1988 in 12 installments at the rate of Rs. 1.32 Crores per months. So far Rs. 11.88 Crore have been paid up to 11/1999 and balance of Rs. 3.95 Crore is payable in 3 installments. The current consumption charges as on 31.03.2003 including Electricity tax is furnished below:

The company started to clear the dues of Rs. 13.49 Crores relating to the period from 18.11.1988 to 20.02.1995 (Rs.9.93+3.56 Crore) form 3/96 bills onwards at the rate of Rs. 28.11 lakhs per month. So far 45 installments up to 12/99 amounting to Rs. 1264.89 have been cleared and balance of Rs. 84.32 lakhs is yet to be cleared. BIFR in its order-dated 10.091997 has declared that M/S. MALCO Ltd., Mettur ceased to be a sick industrial company and all the proceeding in this case were closed. The Board is now losing about Rs. 9 to 10 Crore because of the Concessional Tariff at Re. 1/- per KWH. If the Board continues to apply concessional tariff even during the period when the company is financially sound, it will be construed as an under preference to a H.T. Consumer under section 23 (1) of I.E. Act, 1910.

Year Amount (Rs. in Lakhs) 1987-88 77 4/88 to 11/88 318 1991-1992 45 1992-1993 78 1993-1994 109 1994-1995 124 1995-1996 0.00 1996-1997 6988 1997-1998 10143 1998-1999 12857 1999-2000 0.00 2000-2001 171 2001-2002 5872 2002-2003 2442 Total 39224


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The Government of Tamil Nadu in its G.O. Ms.No.190, Energy, dated 11.12.1997 issued orders that the TNEB shall collect the normal H.T. Tariff from M/S. MALCO with effect from 28.04.1996 as the period of four years of tariff concession which was effective from 28.04.1992 elapsed on 27.04.1996. The concession given to M/s. MALCO was withdrawn with reference to orders in G.O. Ms. No. 190 Dt. 11.12.1997 and the C.C. arrears from 5/96 to 11/97 amounting to Rs. 158.41 Crores was demanded.

M/s. MALCO filed a W.P. 19331/97 in the Hon’ble High Court / Chennai. While disposing the WMP No. 30295 &30296/1997 in the above WP. 19331/97 the Hon’ble high court/Chennai while staying the operation of demand of Rs. 1,58,41,47,869/- imposed a condition that the appellant to remit a sum of Rs. 25 Crore within a period of two weeks vide judgment dated 24/12/1997. M/s. MALCO preferred an appeal against the above orders vide W A No.5 of 1998 in the Hon’ble High Court/Chennai The learned Judge passed an interim order dated07.01.1998 that the appellant to pay a sum of Rs. 5 Crore within a period of one week, without prejudice to its right and contentions. The consumer paid the above amount on 12.01.1998. The WA was finally allowed with the specific order that the appellant shall continue to pay the electricity charges at Re. 1/- per KWH, till the disposal of the WP or till the expiry of the period of scheme, whichever is earlier. The Board filed a Special Leave petition © No.10762/98 in the Supreme Court/Delhi against the above judgment.

The Supreme Court ordered on 27/07/1999 that pending disposal of the WP.19331/97, M/s. MALCO to pay Rs. 50 Crore in five installments, commencing from 01.10.1999. But the consumer paid only Rs. 10 Crores. It was further ordered that the above order should be subject to final decision of WP. 19331/97 pending in the High Court/Chennai. The WP. 19331/97 in the High Court/Chennai. Was disposed in favour of the consumer vide judgment Dt. 06.12.1999. The High Court/Chennai passed orders that the petitioner is entitled to get refund of the sum of Rs., 15 Crores (5+10 Crore) and the Board can adjust a sum of Rs. 4,79,54,593/- due to be collected from M/s. MALCO against the above sum. The Board has filed an appeal against the above judgment WA No.2506/99 and the case is yet to come up for hearing. The amount outstanding is Rs. 307 Crore as shown below: Arrears from 01.10.1984 to 17.11.1988. 3 Out of 12 installments sanctioned in BP No. 14 Dt. 20.04.1999. Rs. 3,95,23,893.23 5/96 to 11/97 Rs.143, 41,47,869.00 12/97 to 20.02.99 Rs.159,18,04,283.00

306,54,75,945.23


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18/11/88 to 20/02/95 3 out or 48 installments not paid 84,32,550.00 307,39,08,495.23

The amount due to difference in rates billed during 1998-99 up to 21.02.99 has been kept under current liability keeping the debit under sundry debtors for sale of power. J. Nature of Bonds: Bonds are Redeemable, non-convertible and are in the nature of promissory notes The bonds are offered in DEMAT form. Transfer of these bonds will be as per the Depository Rules. EXTERNAL FACTORS A. Change in Government policies may impact the performance of the power sector, which may in turn affect TNEB. TNEB has demonstrated remarkable resilience in adjusting to the changed environment and competition in the wake of the economic reforms initiated by the Government. B. Risk of Competition: Competition in the power sector has increased and is likely to increase further with the entry of independent power producers. TNEB may face competition both in procuring and distribution of power. While focusing attention on cutting cost to be competitive, TNEB has been able to reduce its transmission loss substantially, for instance during the period 2001-02 T&D losses were at 16.25%and also its finance charges by swapping its high cost debt. TNEB is taking further steps to bring its costs down and remain competitive. C. Power Theft: TNEB losses vital revenue due to power theft by consumers. Anti Power Theft Squad of TNEB conducted as many as 98,427 surprise inspections involving 1,853 H.T services and 96574 L.T services during the period and detected 1841 cases of theft of energy. The total amount assessed in theft of energy cases was Rs. 2121.75 lakhs. Brief synopsis for five years on power theft is highlighted as under;

YEAR No. Of Thefts Detected

No. of Malpractices

Noticed*

Anticipated Revenue Loss to TNEB (Rs. Lakhs)

1998-99 407 7563 1082 1999-2000 482 8833 2195 2000-2001 417 3650 511 2001-2002 417 3449 885 2002-2003 468 5987 989

*Misuse of tariff, unauthorized extension and additional loads.


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NOTES

1. Allotment against all valid applications for the TNEB Bonds will be made on a full and firm allotment basis.

2. TNEB has appointed Indian Bank to act as debenture trustee to the

bondholders. TNEB and the Trustees will enter into a Trustee Agreement, specifying inter alia, the powers, authorities and obligations of the Trustees and TNEB.

The bondholders shall, without further act or deed, be deemed to have irrevocably given their consent to the Trustees or any of their agents or authorized official to do all such acts, deeds matters and things in respect of or relating to the Bonds as the Trustees may in their absolute discretion deem necessary or require to be done in the interest of the bondholders.

3. The netwoth of TNEB as on March 31, 2003 was Rs. 1776.56 Crores.

4. The financial information as contained in the Auditor’s report including

the schedules & notes to accounts and significant accounting policies ending 31st March’ 2002 have been duly audited by Auditor General, Chennai, The same is enclosed in Part B of this information memorandum.

Where as the financial statement ending 31st March’ 2003 state provisional figures authenticated by TNEB.


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PART A

GUARANTEE ISSUED BY THE GOVERNMENT OF TAMIL NADU

GOVERNMENT OF TAMIL NADU

NOTIFICATION

FINANCE (LOAN & ADVANCES CELL) DEPARTMENT G.O.Ms.No.103 Dated 23-03-2004 Sabhanu Panguni - 10

Thiruvalluvar Aandu – 2035

1.G.O.Ms.No.49, Energy (D2) Department Dated 10.06.2002 2. G.O.Ms.No.226, Finance(L&A Cell) Department Dated 26.06.2002 3. G.O.Ms.No.26, Energy (D2) Department Dated 9.03.2004

In exercise of the powers conferred under clause (1) of Article 293 of the constitution of India, The Governor of Tamil Nadu hereby declares that the principal and interest on the bonds to be issued by the Tamil Nadu Electricity Board, Chennai 600002 to the aggregate value of Rs.936 Crores (Rupees nine hundred and thirty six Crores only) be unconditionally and irrevocably guaranted by the Government of Tamil Nadu for a period of 12 years from the date of issue of Bonds. Necessary entries regarding this Government order have been made in the Guarantee Register vide Serial No.231.

(BY ORDER OF THE GOVERNOR)

Sd/-

ASHISH VACHHANI DEPUTY SECRETARY TO GOVERNMENT


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SALIENT FEATURES & TERMS OF THE ISSUE

7.00% TNEB POWER BONDS-SERIES 6/ 2003-04

Issue Size

Rs. 51.10 Crores.

Nature Of Bonds

The bonds are redeemable, non-convertible and are in the nature of promissory notes.

Application Size

Minimum of One (1) Bond of Face Value of Rs. 10,00,000.00 & in multiples thereof.

Interest Rate

7.00% p.a. from the date of allotment (Annually)

Interest Payment

Payable annually on 10th November each year

Tenor

10 years

Put/ Call Option

At par, on November 10th 2007 At par, at the end of 7th year

Redemption

At par at the end of 10th year from the date of allotment.

Credit Rating

A+ (so) by CRISIL.

Security

Irrevocably & unconditionally guaranteed by the Government of Tamil Nadu

Trustees

Indian Bank

Mode of Issuance

DEMAT


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AUDITORS Indian Audit & Accounts Department Accountant General/ (Audit) II RA-TNEB, 800 Annasalai Chennai- 600 002 DEBENTURE TRUSTEES Indian Bank Madras George Town Branch 321 (old No. 155) Thambu Chetty Street Chennai – 600 001 Phone : (044) 23531465, 25350721, EPBX : (044) 25341461 Fax.: (044) 25340113 REGISTRAR & TRANSFER AGENT. Integrated Enterprises (India) Ltd. 2nd floor, Kences Tower No.1, Ramakrishna Street, North Usman Road T.Nagar, Chennai – 600 017 SOLE ARRANGER & ADVISORS

SPA Merchant Bankers Ltd. 25, C Block, Community Centre Janak Puri, New Delhi – 110 058 Ph.: (011) 25517371, 25515086 Fax: (011) 25532644

COMPLIANCE OFFICER

Tel (044) 28521080 Fax (044) 28521561/ 2852 1080 The investor may contact the compliance officer in case of any pre-issue/ post-issue related problems such as non-receipt of letters of allotment/ debenture certificate/ refund orders.

Mr. K.Sundaravadhanam. B.Sc., A.C.A., A.C.S Dy Financial Controller/ Resources TAMIL NADU ELECTRICITY BOARD 7th Floor N.P.K.R.R. Maaligai Electricity Avenue, 800 Anna Salai Chennai – 600002


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TERMS AND CONDITIONS OF PRIVATE PLACEMENT NOMENCLATURE 7.00% TNEB POWER BONDS SERIES 6/ 2003-04, the bonds are redeemable, non-convertible and are in the nature of promissory notes. OBJECTS OF THE PRIVATE PLACEMENT The funds raised from this placement have been/ would be utilized for development of Transmission and Distribution Network of TNEB. AUTHORITY FOR THE ISSUE The issue of bonds has been authorized vide resolution of the Board passed on 04838/A34/A342/2004 dated 21-01-2004. Permission of the Government was obtained vide G.O.MS No.101 dated 30.06.2000 for the 11.90% TNEB Millennium Power Bonds –Series 2/2000 and current issue i.e. 7.00% TNEB POWER BONDS SERIES 6/ 2003-04 is obtained vide G.O.MS.No.103 dated 23-03-2004. UNDERWRITING The present issue is not underwritten. MINIMUM SUBSCRIPTION Pursuant to the notification no. SEBI/MRD/SE/AT/46/2003 dated 22nd December’ 2003 issued by SEBI minimum subscription clause is not applicable to the privately placed debt securities. IMPERSONATION Any person who-

a) makes in a fictitious name an application to TNEB of acquiring, or subscribing for any securities therein, or

b) Otherwise induces TNEB to allot or register any transferor of securities therein to him, or any other person in a fictitious name shall be punishable under the extant laws.

CREDIT RATING The present issue of bonds has been assigned credit rating by CRISIL as A+(so) indicating adequate safety. The rating has been assigned vide their letter No.:PR/RIN/03/2004-055 dated March 29’ 2004 Details of Credit Rating done in the last three years; Borrowing Programme

Date of Issuance Rating Assigned

Rating Agency

Reference

Rs. 114.68 Crores

March 29’ 2004 A+(SO) CRISIL PR/RIN/03/2004-056

Rs. 500 Crores 17th September’ 2002

A+ (SO) CRISIL LR/RIN/09/2002-1267

Rs. 300 Crores 8th July’ 1998 AA- (SO) ICRA RTG/CHEN/06/98-99


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Confidential PROVISIONAL RATING LETTER CRISIL Limited

Ref.:PR/RIN/03/2004-055 March 29, 2004 Mr.S.Kathiresan Chief Financial Controller Tamil Nadu Electricity Board 7th Floor, NPKRR Maaligai 800 Annasalai Chennai – 600 002 Dear Mr. Kathiresan, Provisional Credit Rating for the proposed Rs.51.10 Crore Bond Programme of Tamil Nadu Electricity Board (TNEB) backed by an irrevocable and unconditional guarantee from the Government of Tamil Nadu (GoTN). We refer to your request for a rating for the above captioned debt program. The proposed structured transaction and instrument details are briefly described in Annexure a. Our Rating committee, after due consideration, has assigned a provisional rating of “A+ (SO)” (pronounced as “Single A plus structured obligation”) rating to the captioned bond issue. This provisional rating indicates adequate certainity regarding timely payment of financial obligations on the instrument. This provisional rating is based on the strength of the guarantee provided by GoTN to the instrument securing all principal and interest obligations on the Bond Program, the payment structure designed to ensure full and timely payment to the investors and the tripartite agreement between TNEB, GoTN and The Trustees as set out in Annexure-a and also the strength of the warranties to be given by TNEB as set out in Annexure b. Further, in view of your decision to accept CRISIL’s provisional rating, we request you to apprise us of the instrument details (in the enclosed format) as soon as it has been placed. In the event of the Board not making the issue within a period of 180 days from the above date, or in the event of any increase in the size of the issuance or any change in the structure of your proposed issue, a fresh letter of revalidation from CRISIL will be necessary. Kindly note that the indicated provisional rating would become valid only upon completing the relevant documentation requirements. They would be complied with on furnishingof Guarantee Agreement, the debenture trustee agreement and the tripartite agreement between TNEB, GoTN and Trustee, warranties as indicated in Annexure-b, the rating acceptance letter and the Information Memorandum and a letter from the Trustee as set out in Annexure d within 90 calender days from the date of opening of the issue. CRISIL has a practice of keeping all its ratings under continuous surveillance and ratings are revised as and when circumstances so warrant. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at +91 (22) 5691 3001 – 09.


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CRISIL has assumed that the representations made by the issuer TNEB are true and that the structure, based on which the provisional rating is assigned, shall work and operate as represented by the issuer. CRISIL does not guarantee the accuracy, adequacy or completeness of the representations made by the issuer to CRISIL and/or the representations to be made in the Offer Documents. CRISIL is not responsible for any acts of commission or omission of the issuer and/or the Trustee. CRISIL reserves the right to suspend, withdraw or revise the rating assigned to the above- mentioned programme, at any time, on the basis of new information, or unavailability of information or other circumstances which CRISIL believes may have an impact on the rating. Should you require any clarifications, please feel free to contact us. With best regards, Yours sincerely, ________Sd/-________________ ______Sd/-___________________ P S RAmesh Ravisankar. P Head– Infrastructure Sector Ratings Manager – Infrastructure Sector Ratings Encl.: As above Ø Annexure a: Instrument details Ø Annexure b: Warranties to be furnished by the issuer Ø Annexure c: Format for intimating placement details of the Bonds Ø Annexure d: Letter to be obtained form the Trustee CRISIL has a practice of keeping all its ratings under continuous surveillance and ratings are revised as and when circumstances so warrant. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at +91 (22) 5691 3001 – 09.


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Annexure a Instrument Details Instrument Bond Issuer Tamil Nadu Electricity Board (TNEB) Nature of Instruments Redeemable. Non-convertible and in nature of promissory

notes Coupon rate 7.0% payable on semi-annual basis Face Value of Bonds Rs. 51.1 Crore Tenor 10 years with put and call option at the end of 7th year and

principal redemption at the end of 10th year Payment Mechanism Trustee administered payment mechanism as detailed

below Trustees To be appointed Security Irrevocably & unconditionally guaranteed by the

Government of Tamil Nadu. Timely Interest and payment of principal to be ensured through tripartite agreement between Government of Tamil Nadu, the trustees and the company.

SEBI Guidelines Not applicable Rating Assigned A+ (so) by CRISIL. Credit Enhancement and payment mechanism for the instrument: Repayment obligations on the proposed bond issue are supported through an unconditional and irrevocable guarantee by the Government of Tamil Nadu (GoTN). Timely servicing of financial obligations on the proposed bond issue will be facilitated through tripartite agreement between TNEB, GoTN and the Trustee on the bondholders. The key features of the tripartite agreement for ensuring timely payment of dues to bondholders are as follows:

1.Within 45 days from the allotment of bonds, the TNEB would open a no-lien account (called “Designated Account”) with a Bank for meeting the obligations on the proposed bond issue. A amount equivalent to the forthcoming interest and/or principal payment would have to be transferred by TNEB to the Designated Account with due intimation to the Trustee.

2. The trustee would be required to monitor the balance in the Designated Account to

ensure that on every due date for payment of interest and/or principal installment, adequate funds are available in the Designated Account for servicing of the Bonds.

CRISIL has a practice of keeping all its ratings under continuous surveillance and ratings are revised as and when circumstances so warrant. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at +91 (22) 5691 3001 – 09.


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3. TNEB shall ensure that on every due date for payment of interest/principal installment, a

certificate from the concerned bank confirming the availability of adequate funds in the Designated Account for servicing of the bonds would be sent to the Trustee.

4. For every payment due date “T” the Trustee would alert the guarantor in writing on day (T-

30) regarding upcoming interest servicing/ principal repayment obligations, Such written alert by The Trustee would not constitute an invocation of guarantee for the purpose of this clause.

5. In the event of any short fall in the Designated Account on the due date for payment of

interest and/or principal installment (day “T”). The Trustee would intimate the same to the Secretary, Finance Department, of the GoTN, or any other designated official on the same day and invoke the guarantee, to ensure that the State Government transfers funds to the designated account to make up for any shortfall within 3 working days (T+3).

6.In the event of transfer of funds alter the due date for payment (but within T+3 days)

TNEB/ GoTN would also pay additional interest for those many days beyond day ‘T’. As the payment mechanism envisaged is a (T+3) structure, this would be construed as an event of default.

TNEB would ensure that the terms of the instrument require that the bondholders who wish to exercise the put option, if any, to advise TNEB at least 60 days prior to the due date.

Kindly note that the rating of the above mentioned bonds programme is based on the strength of the proposed credit enhancement mechanism, as elaborated above to ensure full and timely payment to the bondholders. Any decision from any of these may lead to a change in CRISIL’s rating for the bond programme.



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Annexure b

As issuer of the Bonds-TNEB will give the following warranties:

1. All information provided to CRISIL with regard to the operation of the guarantee structure is true and correct.

2. The executants of the legal documentation on behalf of the TNEB has been

duly empowered and authorized to execute the same and to perform all the obligations in accordance with the terms set out therein.

3. TNEB undertakes to incorporate the instrument details and the payment

structure as proposed by CRISIL in the Information Memorandum of the bond issue.

4. TNEB undertakes to satisfy all the covenants as need be to ensure that the

guarantee for the Redeemable Non Convertible Bond are valid till the latter are fully redeemed.

5. TNEB would reproduce CRISIL’s Rating letter and rationale in entirety, in the

offer document for the aforesaid bonds.

6. Within 45 days from the date of the allotment of the bonds or 60 business days prior to the first due date for payment of interest and / or principal installment for the bond issue, whichever is earlier, TNEB would do the following

• Open a Designated A/c with a bank approved by CRISIL, for meeting the obligations on the aforesaid bonds.

• Execute all such deeds, documents and Power of Attorney necessary entitling the Trustees to operate the Designated Account



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Annexure c

Details Of the Rs. 51.10 crore Bond Issue of TNEB guaranted by GoTN

Instrument Type: Amount Placed: Maturity Period: Coupon Rate: Call/ Put Options if any: Interest Payment Dates: Principle Repayment Details:

Date Amount

Investors: Trustees:



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Annexure d

Format of the Letter to be obtained from the Trustee within 90 calendar days from the date of opening of the issue

To CRISIL Limited Chennai Re: Rs. 51.1 crore Bond Programme of Tamil Nadu Electricity Board (TNEB) backed by an irrevocable & unconditional guarantee from The Government of Tamil Nadu.

With regard to the captioned transaction, we in our capacity as the Trustee for the transaction, confirm that all the requisite transaction documents are as per the terms and conditions of the information memorandum and CRISIL’s provisional rating letter Ref. No. PR/RIN/03/2004-055 dated March 29, 2004 and have been duly executed.



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NATURE OF BOND The bonds will be issued in the nature of Promissory Notes secured by the guarantee of the Government of Tamil Nadu and are non-convertible, non-cumulative and redeemable. NOTE: THE TENOR OF THE BOND, THE PARTIAL/TOTAL REDEMPTION, AND THE PAYOUTS THEREOF, SHALL BE RECKONED FROM THE DATE OF ALLOTMENT (S). INTEREST Interest is payable yearly at 7.00% p.a. from the date of allotment of bonds subject to deduction of tax at source as per the Income Tax Act, 1961. The interest shall be payable yearly on 10th November. Where ever the option is not being considered for re-investment interest at the rate of 7.00% (seven percent) shall be paid for the delayed period along with redemption proceeds. GUARANTEE Approval of the Government of Tamil Nadu has been received by TNEB extending irrevocable and unconditional guarantee vide order no. G.O.MS.No. 103 dated 23-03-2004, for the present issue of 7.00% TNEB POWER BONDS SERIES 6/2003-04. However, State Government guarantee (G.O.Ms.No.101 dated 30.06.2000) for the 11.90% TNEB Millimnieum power Bonds Series 2/2002 which are available for re-investment vide 7.00% TNEB POWER BONDS SERIES 6/2003-04 is valid for a residual period i.e. November 10th 2007, the same has been placed for amendment to the Government of Tamil Nadu asking extension of the same till the maturity of the current Bond issue i.e. ten years. However, if the Government guarantee is not amended and extended beyond the residual period, TNEB shall refund the amount to the investors along with interest due thereon after expiry of the residual maturity. INTEREST PAYMENT DATES The Bonds shall carry interest at the rate of 7.00% p.a. from the date of allotment (subject to deduction of tax at source at the rates prevailing from time to time under the Income Tax Act, 1961 or any statutory modification or re-enactment thereof) payable yearly on November 10th each year throughout the tenor of the bond. In order to be eligible for an interest payment, transferee(s) should send in their requests for registration of transfer, at least one month prior to the interest payment date. In the event of delay in the lodgments of transfer by the transferee(s), interest cheque shall be delivered to the holder whose name appears in the Register of Bondholders. In such cases claims for interest, if any, by the transferee(s) would need to be settled with the transferor(s) and not with TNEB. WHO CAN APPLY a) Individuals, Hindu Undivided Families and Association of Persons b) All India Term Lending and Refinancing Institutions. c) Companies, Bodies Corporate and Societies registered under the applicable laws

and Authorized to invest in Bonds d) Banks including RRBs’ and Cooperative Banks, Financial Institutions and Mutual

Funds e) Non-Government Provident Funds, Superannuation Funds and Gratuity Funds.


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f) Non Banking Finance Companies and Residuary Non Banking Finance Companies

g) Insurance Companies h) Religious Trusts, Temple/Trusts and Charitable Institutions i) Port Trusts APPLICATION BY CORPORATE BODIES/COMPANIES/STATUTORY CORPORATION The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Association/Constitution/Bye Laws (ii) resolution authorizing investment containing operation instructions (iii) specimen signatures of the authorized signatories and (iv) Form 15AA for claiming exemption from deduction of tax at source on interest income. APPLICATION BY ALL-INDIA TERM LENDING AND REFINANCING INSTITUTIONS R.B.I vide circular DBS.FID.No. C-11 /01.02.00/2003-04 January 8, 2004 has issued clarifications for FI’s to invest in Non-SLR debt securities. Para 2 sub para of the stated circular read as under;

a. The FIs may invest until March 31, 2004 in the existing unlisted securities, which were issued on or before November 30, 2003. In case, the issuers have applied to the stock exchange(s) for listing of such unlisted securities and the security is rated as minimum investment grade, the FIs may continue to invest in such unlisted securities even after March 31, 2004 but only until December 31, 2004.

b. As regards the unlisted securities issued after November 30, 2003, the FIs may invest, till December 31, 2004, up to 10 per cent of the incremental investments in the categories covered under these guidelines over the corresponding figure of outstanding investments as on November 30, 2003.

c. With effect from January 1, 2005 only those FIs would be eligible to make fresh investments (up to the prescribed prudential limits) in the unlisted securities covered in these guidelines whose investments in such securities are within the prudential limits prescribed.

The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Association/Constitution/Bye Laws (ii) resolution authorizing investment containing operation instructions (iii) specimen signatures of the authorized signatories and (iv) Form 15AA for claiming exemption from deduction of tax at source on interest income. APPLICATION BY COMMERCIAL BANKS The Reserve Bank of India has vide its Monetary and Credit Policy for the first half of 1997-98 (ref. No. CPC.BC.162/07.01.279/96-97) clarified that investment by Scheduled Commercial Banks in Preference Shares/Bonds/Bonds of Private Corporate Bodies will be excluded from the limit of 5 percent of their incremental deposits in the previous year. Thus, the present ceiling is now applicable only for investments in ordinary shares of corporates including PSUs. Further, R.B.I made clarification vide circular No.DBOD.NO.BP.BC.53/21.04.141/2003-04 dated December 10’ 2003 para 4(a)(iii) Banks may invest until March 31’ 2004 in the existing unlisted securities (those issued on or before November 30’ 2003). With effect from April 1, 2004 banks may also invest in the above category of unlisted securities until December 31, 2004


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provided the issuers have applied to the stock exchange (s) for listing and the security is rated minimum investment grade. Para 4(a)(iv) Banks may also invest in unlisted securities issued after November 30, 2003 up to 10% of the incremental Non-SLR investments over the outstanding Non-SLR investments as on November 30, 2003 upto December 31, 2004. These clarifications were made to R.B.I circular DBOB.BP.BC.44/21.04.141/2003-04 dated November 12’ 2003 which stated that Banks must not invest in un-rated Non-SLR securities. Banks investment in unlisted Non-SLR securities should not exceed 10% of its total investment in Non-SLR securities as on March 31, of the previous year. The unlisted Non-SLR securities in which banks may invest upto the limits specified, should comply with the disclosure requirements as prescribed by the SEBI for listed companies. The application must be accompanied by certified true copies of (i) Power of Attorney and (ii) Specimen Signature of Authorised Signatories. APPLICATION BY REGIONAL RURAL BANKS RBI has permitted RRBs through its circular no. RPCD No. RRB.BC/76 3.5.34/96-97 to invest their non-SLR surplus resources in bonds of PSUs fully owned by Central or State Governments or in which the Central and State Governments hold more than 50% of the equity without any ceiling subject to the exposure norms specified therein.

Further, reference should be made to Draft prudential guidelines on RRBs’ investment in non-SLR debt securities issued by R.B.I vide circular RPCD.CO.RRB.BC. /03.05.34/2003-04 dated November 28, 2003 before making investments in these Bonds.

APPLICATION BY PRIMARY CO-OPERATIVE BANKS/URBAN CO-OPERATIVE BANKS The Reserve bank of India vide its Notification No. BR.CIR 72/16.20.00/93-94 dated may 16, 1994 has clarified that the primary urban co-operative banks can invest their surplus funds upto 10% of their deposits in bonds of public sector undertakings. Further, the Reserve Bank of India vide its Notification No. BR. 12/16.20.00/95-96 dated January 6, 1996 has requested the Registrar of Cooperative Societies of all States to grant general permission to the primary co-operative banks for such investments, subject to their complying with other conditions and safety measures laid down by the RBI from time to time. Application has been made to the Registrar of Co-operative Societies for notifying these bonds as eligible investments by co-operative societies registered in the State of Tamil Nadu.

Further, reference should be made to Draft prudential guidelines on co-operative banks’ investment in non-SLR debt securities issued by R.B.I vide circular RPCD.CO.RF.BC. /07.02.03/2003-04 dated November 28, 2003.

APPLICATION BY PROVIDENT FUNDS, SUPERANNUATION AND GRATUITY FUNDS In Supersection of the Notification of the Government of India in the Ministry of Labour No.S.O.398 dated 11th July’1998 regarding investment by Provident Funds, Superannuation Funds and Gratuity Funds.


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As per para (iii) (a) of the said notification; “Provident, Superannuation and gratuity funds are permitted to invest upto 30% of their eligible investable funds in the Bonds/ Securities of Public Financial Institutions as specified under Section 4A of the Companies Act’ 1956, and Public Sector Companies as defined in Section 2(36A) of The Income Tax Act’ 1961 including Public Sector Banks” “TNEB is a Public Sector Company within the meaning of the said notification as 100% of the paid up capital is held by the Government of Tamil Nadu and therefore it has been advised that the Bonds being issued under this issue is eligible for investment by the Provident Funds, Superannuation Funds and Gratuity Funds, subject to compliance of the terms and conditions of their Trust Deeds to the extent mentioned in the notification.” Further, non-government Provident Funds/ Superannuation Funds and Gratuity Funds can invest inter-alia, 15% of their investable funds in negotiable securities where both principal and the interest are unconditionally and irrevocably guaranted by the State Government. Further, as per para (iv) of the said notification an additional amount of 30% of the corpus of exempted Provident Funds can be invested in any of the three categories as decided by their Trustees.” APPLICATION BY NON-BANKING FINANCE COMPANIES (NBFCS) As per Circular No. DFC (COC) No. 2/02/04/96-97 dt. July 24, 1996 issued by the Reserve bank of India, NBFC’s and RNBFCs are required to invest, interalia, upto 10% of their deposits in Government Guaranteed Bonds to meet their liquidity requirements. RBI had on June 18, 1997 raised the requirement to 15% and directed NBFC’s vide its notification no. DFC121/ED (G)-98 dt. January 31, 1998 to achieve the stipulated 15% level on and from April 1, 1999. APPLICATION BY INSURANCE COMPANIES As per Circular No. 132(1)/INVT/93 dtd. September 20, 1994 issued by Insurance Division of Department of Economic Affairs, Ministry of Finance, Government of India, insurance companies can invest upto 30% of their fresh accretions after 1-4-95 in State Government Securities, in other Government Guaranteed Securities and Central Government securities with at least 20% of their fresh accretions after 1-4-95 being invested in Central Government Securities. APPLICATION BY CHARITABLE AND RELIGIOUS TRUSTS The bonds being unconditionally and irrevocably guaranteed by the Government of Tamil Nadu, within section 20(a) of the Indian Trust Act, 1882 and hence are considered eligible investments for Trusts which are registered under the said act. Other Trusts, whose Trust Deeds provide for investment in Bonds may apply to this issue of bonds, subject to the approval of the Charity Commissioner or other appropriate authority as the case may be. Investment in these bonds will qualify as eligible investments under section 11 (5) of the Income Tax Act, 1961. Application has been made to Government of Tamil Nadu for notifying these bonds as eligible investments for trusts. Approval for the same is awaited. APPLICATION BY PORT TRUSTS As per section 88 of the Major Port Trusts Act, 1963 the bonds being guaranteed by the Government of Tamil Nadu are categorized as public security for the purpose of investments by Port Trusts.


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MINIMUM APPLICATION One bond of the face value of Rs. 10,00,000/- (Rupees ten Lakhs only) and in multiples thereof. MODE OF APPLICATION Application for acceptance and re-investment to the current Bond series must be in the prescribed form and must be completed in block letters in English. Forms must be accompanied by Acceptance letter of the terms and condition mentioned here in. The application may also be handed over to Sole Arranger & Advisor i.e. SPA Merchant Bankers Ltd. at their designated offices that will arrange for lodgment of the forms However for fresh proceeds Application for the bonds must be in the prescribed form and must be completed in block letters in English. Forms must be accompanied by a demand daft, drawn and made in favour “Tamil Nadu Electricity Board, Chennai – 600002” and crossed "Account Payee only" and lodged at the office of TNEB. The application along with application money may also be handed over to Sole Arranger & Advisor i.e. SPA Merchant Bankers Ltd. at their designated offices that will arrange for lodgment of the forms with TNEB. Applications made by Provident Funds/Superannuation Funds/Gratuity Funds and religious/Charitable Trusts, Banks, Insurance Companies; Bodies Corporate should be accompanied by: a) Certified true copies of the Deed of Incorporation/Memorandum & Articles of

Association (if applicable) & necessary authorization. b) Resolution authorizing investment and c) Those applicants, not being in the category of individuals, desirous of claiming

exemption from deduction of tax at source are required to submit a certificate issued by the concerned Income Tax Officer on Form 15 AA. In the case of individuals, if tax on his total income including the interest on bonds applied is nil, he may submit Form 15H in order to avoid deduction of tax at source.

d) Details of Depository Participants name, DP-ID and Beneficiary Account Number in the appropriate place in the Application Form

APPLICATION UNDER POWER OF ATTORNEY A certified true copy of the power of attorney attested by a Gazetted Officer of State/Central Government/Bank Manager of the Nationalised Bank or the relevant authority along with the relevant resolution authorizing the same as the case may be along with the names and specimen signatures of all the authorized signatories and the tax exemption certificate/document, if any, must be lodged along with the submission of the completed application form. Further modifications/additions in the power of attorney or authority should be notified to TNEB at its Head Office along with a true copy attested as above, of the modified/additional power of attorney and relevant resolution, if any, authorizing the same. LETTER OF ALLOTMENT The full value of the redemption amount shall be considered for allotment of the Bonds. Intimation of allotment shall be sent to investors within 30 days of the acceptance received from the investor.


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However for the fresh proceeds, the full face value of the bonds is payable with the application form. Interest will be paid at the same coupon rate from the date of encashment of Draft. TAX DEDUCTION Tax will be deducted at source from all discount/interest payouts including that payable on application money in accordance with the provisions of Income Tax Act, 1961. Applicants desirous of claiming exemption should submit Form 15AA or Form 15H duly verified in the prescribed manner. They may lodge the specific order, if any issued by the IT Department exempting them from payment of tax. BASIS OF ALLOTMENT Acceptance letter from the investor along-with duly completed and filled in application form will be the basis of allotment. TNEB is also free to do the allotment on more than one date. DEMATERIALISATION TNEB is in the process of making arrangements with National Securities Depository Ltd. (NSDL) /Central Depository Services Limited (CDSL) for registering itself and thereafter issuing the bonds in dematerialized form. The investors will hold the bonds in dematerialized form and deal with the same as per the provisions of Depositories Act, 1996 /rules as notified by NSDL/CDSL from time to time. Investors should mention their Depository Participants name, DP-ID and Beneficiary Account Number in the appropriate place in the Application Form. The Board shall take necessary steps to credit the Depository Account of the allottee(s) with the number of bonds allotted. ISSUE OF LETTER OF ALLOTMENT AND BOND CERTIFICATE The Board will make allotment to the investors in due course after verification of the Application form(s) and the accompanying documents. The Letter(s) of Allotment shall be exchanged for Dematerialized Bonds, which will be credited to the Investors, Demat account. The Depository Account of the investors with NSDL/CDSL will be credited as soon as all the formalities with NSDL/CDSL are completed. Once the Depository Account of the investors is be credited, the letter of Allotment will stand null and void. Thereafter, the Board will not entertain any claims on the basis of the letter of allotment. REMATERIALISATION THE Board will not undertake rematerialiastion of the said bonds. MODE OF TRANSFER Transfer of Bonds s in Dematerialized form would be in accordance with the rules / procedures as prescribed by NSDL. PUT/CALL OPTION There is put/call option;

• At par, on November 10th 2007 and • at par, at the end of 7th year,

from the date of allotment on the bonds.


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However, if the Government guarantee is not amended and extended beyond the residual period i.e. November 10th 2007, TNEB shall refund the amount to the investors along with interest due thereon after expiry of the residual maturity i.e. November 10th 2007 from the date of allotment. PAYMENT ON REDEMPTION The payment of the redemption amount of the Bonds will be made by the Board to the holders as given in the list of beneficiaries of the Depositories (NSDL/CDSL). On the maturity, as the bonds will be held in the Dematerialized Form, the bonds will be taken as discharged on payment of the redemption amount by the Board to the holders as given in the list of beneficiaries of the Depositories on the record date. On final maturity, such payment will be a legal discharge of the liability of the Board towards the Bondholders. On such payment being made, the Board will inform NSDL and accordingly the account of the Bondholders with NSDL will be adjusted. The Board’s liability to Bondholders towards all their rights shall stand extinguished from the date of redemption in all events and on the Board dispatching the redemption amount to the Bondholder(s). RECORD DATE The Record Date will be 30 days prior to each interest payment/ principal repayment date. SUCCESSION In the event of demise of the sole/first holder of the bond, TNEB will recognize the Executor or Administrator of the deceased bondholder, or the holder of succession certificate or other legal representative as having title to the bonds. TNEB shall not be bound to recognize such Executor, Administrator or Holder unless such Executor, Administrator obtains Probate or Letter of Administration or such Holder is a holder of a Succession Certificate or other legal representation, as the case may be, from a duly constituted court in India. The Board of Directors may, if in their absolute discretion think fit, dispense with production of Probate or Letter of Administration or Succession Certificate or other legal representation, in order to recognize such holder as being entitled to the bonds standing in the name of the deceased bondholder. FUTURE BORROWINGS TNEB will be entitled to borrow/avail finance in whatever form as also issue debentures/bonds/other securities in any manner having such ranking in priority, pari passu or otherwise and change the capital structure on such terms and conditions as TNEB may think appropriate without the consent of the bondholder(s). RIGHTS OF BONDHOLDERS Apart from the rights of receiving interest, principal and other rights specifically mentioned in this Information Memorandum the bondholders are not entitled to any other rights. The rights, privileges, terms and conditions attached with these bonds may be varied, modified or abrogated by the issuer with the consent of the Trustees. RIGHT TO REISSUE In the event of the bonds being bought back or redeemed before maturity under any circumstances including secondary market operations, TNEB shall be deemed to have always had the right to re-issue the bonds.


33


Registered Office: N.P.K.R.R. Maaligai, Electricity Avenue, 800 Anna Salai, Chennai - 600 002 Ph : (044) 28521561, 28521080 Fax : (044) 28521561, 28521210

Application Form Sole Arranger & Advisors: SPA Merchant Bankers Ltd. Application Form No. Dear Sir, Having read and understood the contents of the memorandum of the private placement. I/ we apply for allotment to me/ us of the 7.00% TNEB Power Bonds Series 6/ 2003-04. The amount payable on exercise of the call option may be adjusted by TNEB as re-investment proceeds towards 7.00% TNEB power bonds series 6/ 2003-04 / application as shown below is remitted herewith. On allotment, please place my/ our name on the register of Bond Holder. I/ we bind ourselves to the terms & conditions as contained in the term sheet for private placement. I/ we note that the Board is entitled in its absolute discretion to accept or reject this application, whole or in part without assigning any reason what so ever. I/ we understand that TNEB shall be doing such acts and signing such documents to carry their duties being true and Just to us/ we.

FOR OFFICE USE ONLY (TNEB)

Date of Receipt of Application Date of Clearance of Cheque (Please Read CRISILfully The Instructions On The Next Page Before Filling Up This Application form.)

No. Of Bonds Applied For (In Words) No. Of Bonds Applied For (In Figures) Amount (Rs.in words) Amount (Rs. In Figures) Cheque/ Demand Draft No. Cheque/ Demand Draft drawn on

(Name of the Bank) Date

(Pls tick Status which ever is applicable) Bank RRB DFI Co-operative Bank AOP OCB Individual PF/ GF Mutual

Fund Insurance Co. NBFC Others

Others, please specify___________________________________________________________________________ Ist APPLICANT DETAIL Name & Address of the investor Pin Telephone No Fax No. Ist Applicants Signatures

2nd APPLICANT DETAIL Name & Address of the investor Pin Telephone No Fax No. 2nd Applicants Signatures

Tax Details PAN/ GIR No. IT/ WARD

CIRCLE

Bank Details Bank Name & Address

Account No. Nature of Account DEMAT ACCOUNT DETAILS

DP Name Client ID Demat Account No.

Depository Participant ID No.


Registered Office: N.P.K.R.R. Maaligai, Electricity Avenue, 800 Anna Salai, Chennai - 600 002 Ph : (044) 28521561, 28521080 Fax : (044) 28521561, 28521210

Acknowledgement/ Receipt - 7.00% TNEB Power Bonds Series-6/ 2003-04 Sole Arranger & Advisors: SPA Merchant Bankers Ltd. Application Form No. (To be filled in by investor) Received From Address of Investor An application for Chq/ DD No. Amount Rs Dated Drawn On, Name of the Bank & Address

Acknowledgement Receipt Stamp


34

TAMIL NADU ELECTRICITY BOARD-7% TNEB 6/2003-04

INSTRUCTIONS TO THE APPLICATION FORM 1. Application form must be completed in full in Block Letters in English .A blank

space must be left between or more parts of the name.

Signature should be made in English or in any of the Indian Languages. Thumb impressions must be attested by an authorized official of a Bank or by a Magistrate/Notary Public under his /her official seal.

2. Application form duly completed in all respects must be submitted at the office of TNEB or SPA Merchant Bankers Ltd. Demand Drafts should be drawn in favour of Tamil Nadu Electricity Board, Chennai-600002 and crossed A/c Payee Only & lodged with TNEB or SPA Merchant Bankers Ltd.

3. Outstation Cheques, cash, money orders, Postal orders and stock invest will

NOT be accepted.

4. As a matter of precaution against possible fraudulent encashment of interest warrants due to loss/misplacement, applicants are requested to mention the full particulars to their bank account as specified in the Application Form. Interest warrants will then be made out in favour of the bank for credit to the applicant’s account. In case the full particulars are not given cheques will be issued in the name of the applicant at his / her risk.

5. Receipt of applications will be acknowledged by the Company on the

‘Acknowledgment Slip’, appearing below the Application Form. No separate receipt will be issued.

6. In case of Applications under Power of Attorney or by issued Companies or

other corporate Bodies a certified copy of Power of Attorney or a copy of the approval of the relevant authority as the case may be & should be deposited along with the Application form.

7. All applicants should mention their Permanent Account Number or the GIR

number allotted under Income-Tax ACT 1961 and the Income-Tax Circle /Ward/District. In case where neither the PAN not GIR number has been allotted. The fact of non-allotment should be mentioned in the application form in the space provided.

8. The application would be accepted as per the terms of the Scheme outlined in

the Memorandum of Private Placement.

A B C D E F G

In case of any further enquiry please contact: Mr. K.Sundaravadhanam. B.Sc., A.C.A., A.C.S

Dy Financial Controller/ Resources TAMIL NADU ELECTRICITY BOARD

7th Floor N.P.K.R.R. Maaligai, Electricity Avenue, 800 Anna Salai, Chennai – 600002

Tel (044) 28521080 Fax (044) 28521561/2852 1210


35

PART – B

INFORMATION ON TAMIL NADU ELECTRICITY BOARD - ISSUER BACKGROUND Tamil Nadu Electricity Board (TNEB) was constituted as a statutory body on 1st July 1957 under section 5 of the Electricity (Supply) Act, 1948 (Central Act No. 54 of 1948). The Board is engaged in the business of generation, transmission and distribution of electricity in the State of Tamil Nadu. CAPITAL STRUCTURE OF THE BOARD Government of Tamil Nadu holds complete equity share capital of the Board. Equity Share Capital for the last three financial years is presented in tabulated form as under; Equity Share Capital Amount Rs. Crs. Financial Year Ending 2003 225.00 Financial Year Ending 2002 200.00 Financial Year Ending 2001 100.00

MANAGEMENT The day-to-day affairs of TNEB are managed by the members of the Board consisting of 7 members headed by the Chairman. The organization is divided into 8 zones headed by a Chief Engineer and each zone is further divided into Circles managed by Superintendent Engineer. The constitution of the Members of the Board is given below: Designation Name Qualification Chairman

Thiru T S Sridhar

I.A.S

Member (Accounts)

Thiru S. Nagalsamy

I.A. & A.S.

Member (Distribution)

Thiru M Durairaj

B.E

Member (Generation)

Thiru A.A. Sadagopan

B.E., M.Sc. (Engg.)

Secretary to Govt., Energy Department and Member, TNEB

Thiru R. Rathinasamy

I.A.S


36

Secretary to Government, Finance Department and Member, TNEB

Thiru N. Narayanan

I.A.S

Secretary to Government, Industries Department and Member, TNEB

Thiru Arun Ramanathan

I.A.S

CHANGE IN MEMBERSHIP OF THE BOARD FOR LAST THREE YEARS S.NO. Name

Thiru/ Ms. Status in TNEB

Date of Appointment

Date of Cessation

Reason for change

1. Thiru K. Gnandesikan, IAS

Chairman 22.05.2001 01.01.2004 As notified by Ministry of Power, GoTN.

2. Thiru K Poornalingam, IAS

Chairman 01.04.2001 21.05.2001 As notified by Ministry of Power, GoTN.

3. Thiru S Thannirmalai, B.E., M.B.A

Member (Generation)

01.04.2001 31.10.2001 As notified by Ministry of Power, GoTN.

4. Thiru S Natarajan, B.E.

Member (Generation)

12.12.2001 As notified by Ministry of Power, GoTN.

5. Thiru C Andrew Tennyson Abraham, M.Sc.(Engg.)


01.04.2001 18.07.2001 As notified by Ministry of Power, GoTN

6. Thiru A Balasubramanian, B.E., M.I.E., P.G.D.B.A.


09.08.2001 As notified by Ministry of Power, GoTN

7. Thiru Lal Rawna Sailo, IAS

Member, TNEB & Energy Secretary to GOTN


8. Thiru R Rathinasamy, IAS

Member, TNEB & Energy Secretary to GOTN

22.05.2001 As notified by Ministry of Power, GoTN

9. Thiru R Santhanam, IAS

Member, TNEB & Finance Secretary to GOTN


10. Thiru Sakthikanda Das, IAS

Member, TNEB & Industries



37

Secretary to GOTN

11. Thiru M A Gowrishankar, IAS

Member, TNEB & Industries Secretary to GOTN


SUBSIDIARIES TNEB has no subsidiary companies. COMPANIES UNDER THE SAME MANAGEMENT TNEB is a statutory body on 1st July 1957 under section 5 of the Electricity (Supply) Act, 1948 (Central Act No. 54 of 1948) and wholly owned by Government of Tamil Nadu. There are no other listed/ unlisted companies under the same management within the meaning of Section 370 (1B). OPERATIONAL HIGHLIGHTS TNEB has among the best operations amongst all the SEB’ s in the country characterized by low transformer breakdown rates and good collection efficiency. Sustained efforts at replacing defective or low accuracy meters have been successful, with the increase witnessed in metered units among the best in the country. Tamil Nadu, with a population of about 52 million people, and spread over an area of 1,30,000-sq. km. entered the power sector in 1927. Today, TNEB has an installed capacity of 7920 MW with a comfortable thermal-to-hydel mix of 70:30 and a myriad of power sources. Tamil Nadu State has per capita consumption 484 units as compared to the national average of 355 units. The State has achieved 100% electrification of its villages. OPERATIONAL PERFORMANCE OF TNEB AT A GLANCE

1976-77

1986-87

1996-97 1999-00 2000-01 2001-02

Installed Capacity (MW) 2,364 3,987 6,908 7,204 7,513 7,920 Generation & Purchase (MU) 8,350 14,853 32,700 38,313 41,764 43,923 Energy Sales (MU) 6,576 11,999 25,805 30,090 33,290 35,196 Line Loss (%) 18.34 18.65 16.90 16.75 16.50 16.25* Per capita consumption (Kwh) 146 232 420 480 510 567* EHT & HT sub-stations (Nos.) 304 475 734 876 913 948 EHT & HT lines (ckt Kms) 71,569 91,908 1,24,991 1,36,883 1,62,524 1,65,524 L.T Lines (lakh ckt Kms) 2.14 3.00 4.01 4.15 4.23 4.35 Distn. Transformers (Nos) 42.499 68,826 1,11,522 1,29,554 1,35,457 1,40,710

ELECTRIFICATION Towns, Villages & Hamlets (Nos)

63,274 63,755 64,063 64,093 64,099 64,124

Pump sets (Lakhs) 7.85 11.16 15.67 16.79 17.22 17.62 Consumers (Lakhs) 32.23 64.86 112.14 133.30 143.51 151.88 * Provisional


38

INSTALLED CAPACITY TNEB operates and maintains 45 generating stations out of which 8 are Thermal, 36 are Hydel and 1 is a Windmill. The break up of the same is given below: S.No. Particulars Installed Capacity 1 Thermal 2970 2 Gas 227.88 3 Hydro 1995.90 4 Wind 813.395 5 Central 1913 TOTAL 7920.175 * Excluding IPPs PLANT LOAD FACTOR The Plant Load Factor of PLF is very crucial in determining the efficiency levels of a generating plant. TNEB has consistently maintained a PLF of 81.02% against base norm of 69.90%. Infact for thermal stations, its PLF is much higher as enumerated below:

PLANT PLANT LOAD FACTOR TTPS 88% MTPS 87% NCTPS 85%

TNEB is proud to state that these plants are eligible for Government of India’s Gold Medal. EXISTING REVENUE COLLECTION MECHANISM TNEB has an efficient collection mechanism with 164 Revenue branches and 2300 collection centers throughout the and at the collection centers at the section level for LT consumers. ♦ Revenue is collected from the customers by TNEB at the circle office of the

Distribution Circles for HT consumers and at the collection centers at the section level for LT consumers.

♦ Revenue collected at the circle/section levels is deposited into the collection accounts maintained with various banks and transferred to headquarters.

AVERAGE REALISATION FROM SALE OF POWER The breakup of energy sold to various categories of consumers during 2001-02 is given in the table below:

Sale of Energy 2001-2002 Numbers Consumption (MU)

HT 5010 10519 LT Domestic 9716824 7953 Industrial 402321 3027 Agriculture 1645329 9362 Public Lighting & 264309 978


39

Public Water Works Huts 1381362 160 Education etc 137106 348 Misc. & others 1636467 2849 15188728 35196

Projects commissioned during 2002-2003(352.80 MW) 1. Valuthur GTPP 95.00 2. Neyveli Zero Unit (IPP) 250.00 3. Amaravathi HEP 4.00 4. Aliyar Small HEP 2.50 5. Perunchani HEP 1.30

THE FINANCIAL PERFORMANCE OF TAMIL NADU ELECTRICITY BOARD The financial performance of the TNEB rests on two critical factors - operative effectiveness and periodic revision of power tariff for which the Government of Tamil Nadu has since constituted the State Electricity Regulatory Commission. The State Government has approved the new tariff structure for TNEB the salient features of which are outlined below: v For the first time the agricultural consumer will come under the tariff at 250

per HP per year or 20p per unit consumed v The new Power tariff will get TNEB an Additional Resource Mobilisation of

1400 crs for CY 2003-04 v The tariff unveils incentives to industrial consumer e.g. a 5% discount on the

night consumption for Industrial consumers TNEB’s cash flow has increased by 16% in very first billing of the new tariff

The following is a table enumerating key financial figures of TNEB in the past 4 years REVENUE ACCOUNT

REVENUE RECEIPTS

Actuals 1999-2000

Actuals 2000-2001

Actuals 2001-2002

Re 2002-2003

(Rupees in crore) Revenue from sale of Power 6349.27 7425.07 8058.23 9485.54Tariff Compensation 1776.39 1693.21 322.57 250Misc.Income 124.21 153.03 155.27 216.1Total Revenue Receipts (A) 8249.87 9271.31 8536.07 9951.64Revenue ExpeBSEs Power Purchase 2543.08 3134.16 4489.39 5547.92Fuel Purchase 2583.27 2655.66 2784.47 2909.68Repairs & Maintenance 121.52 121.9 126.52 153.86Employee Cost 1314.07 1369.63 1444.68 1516.8Admn. & General ExpeBSEs 116.83 118.02 122.91 130.21Depreciation 542.62 567.84 642.76 692.76Interest & Finance Charges 583.68 643.6 650.3 748.43Prior period charges credit 78.74 269.89 456.85 10.46


40

Other Debits 9.82 2.74 24.09 14.19Total Revenue ExpeBSEs (B) 7893.63 8883.44 10741.97 11724.31Grant-in-aid 1962.14Revenue Surplus/Gap (A-B) 356.24 387.87 -2205.9 189.47 Balance Sheet As At 31.03.2003 & 31.03.2002 (Rupees in Lakhs) Sch. No.

Particulars 31-03-2003 31-03-2002

NET ASSETS 19 Gross Block 1458845 130672 Less Accumulated Depreciation 530158 442697 NET FIXED ASSETS 928687 857975 21 Capital Expenditure In Progress 307791 331587 22 Assets not in use 134 172 23 Deffered Costs 436 400 24 Intangible Assets 0 0 25 Investments 930 9747 NET CURRENT ASSETS 26 Total Current Assets 349765 392619 Less: TOTAL CURRENT

LIABILITIES

27 Security Deposits From Consumers

211203 189430

28 Other Current Liabilities 381978 546619 TOTAL CURRENT LIABILITIES 593181 736049 NET CURRENT ASSETS -243416 -343430 29 Subsidy Receivable from the

Govt. 265010 265010

Deficit NET ASSETS 1259572 1121461 FINANCED BY 30 Borrowings for Working Capital 19000 31 Payments due on Capital

Liabilities

32 Capital Liabilities 716707 650406 33 Funds from State Government 22500 20000 34 Contributions, Grants and

Subsidies towards Cost of Capital Assets

232515 207214

35 Reserves & Reserve Funds 131080 125018 Surplus 137770 118823 TOTAL FUNDS 1259572 1121461


41

BUSINESS PLAN

BUSINESS PLAN (RUPEES IN CRORES)

Ensuing years PARTICULARS 2003-04 2004-05 2005-06 2006-07

Sale of Power 39458 42417 45598 49018 Rate of Realizations (paise/kwh) 302.14 317.25 333.52 350.61 Operating expeBSEs 11899 13450 15188 17153 Return on Fixed Assets 234 245 270 295

Total Operating ExpeBSEs (including Return on Fixed Assets 12133 13695 15458 17448 Less: Revenue from Non Tariff Income 211 238 250 262 Revenue subsidies Net Revenue Requirement 11922 13457 15208 17186 Revenue billed from the existing tariff of TNEB 10523 12816 14466 16349 Deficit without tariff revision -1399 -641 -742 -837 Additional Revenue from the proposed tariffs 1399 641 742 837 Deficit/Surplus at the end of the financial year 0 0 0 0 Depreciation included in total operating expeBSEs 750 887 974 1067 Cash deficit/surplus excluding Return on Fixed Assets 750 887 974 1067 Cash deficit/surplus including Return on Fixed Assets 984 1132 1244 1362


42

AUDITORS REPORT FOR THE FINANCIAL YEAR ENDING 31ST MARCH’ 2002


43


44


45


46


47


48


49


50

Private & Confidential Directed & Meant for Specific Use of The Addressee

TAMIL NADU ELECTRICITY BOARD – POWER BONDS SERIES 6/2003-2004

51

51

PROVISIONAL STATEMENT OF ACCOUNTS, CASH FLOW STATEMENT & SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDING 2003. The figures stated in the statement of accounts represent audited results for the financial year for the year ending 2002 and provisional figures for the financial year ending 2003



52

52

REVENUE & APPROPRIATION ACCOUNT



53

53



54

54

BALANSE SHEET



55

55

SCHEDULE-I : REVENUE FROM SALE OF POWER & ANALYSIS THEREOF



56

56



57

57



58

58

SCHEDULE – 4 : REVENUE FROM SUBSIDIES & GRANTS



59

59

SCHEDULE – 6 : POWER PURCHASED



60

60

SCHEDULE – 7 : POWER GENERATED



61

61

SCHEDULE – 8 : COST INCURRED ON REPAIRS & MAINTENANCE



62

62

SCHEDULE – 10 : ADMINISTRATION & GENERAL EXPENSES



63

63

SCHEDULE – 11 : DEPRICIATION SCHEDULE – 12 : INTEREST CHARGES



64

64



65

65

WORKING INTEREST DURING CONSTRUCTION PERIOD



66

66

SCHEDULE – 16 : EXTRA ORDINARY ITEMS SCHEDULE – 17 : PROVISION FOR INCOME TAX



67

67

SCHEDULE – 18 : NET PRIOR PERIOD CREDITS/ CHARGES



68

68

SCHEDULE – 19 & 20 : FIXED ASSETS & DEPRICIATION



69

69



70

70



71

71



72

72

SCHEDULE – 21 : CAPITAL EXPENDITURE IN PROGRESS



73

73

SCHEDULE – 22 : ASSETS NOT IN USE SCHEDULE – 23 : DEFERRED COSTS



74

74

SCHEDULE – 24 : INTANGIBLE ASSETS SCHEDULE – 25 : INVESTMENTS



75

75

SCHEDULE – 26 : CURRENT ASSETS



76

76



77

77



78

78

SCHEDULE – 28 : CURRENT LIABILITIES SCHEDULE – 29 : SUBSIDY RECEIVABLE FROM GOVERNMENT SCHEDULE – 30 : BORROWING FOR WORKING CAPITAL



79

79

SCHEDULE – 31 : PAYMENT DUE ON CAPITAL LIABILITIES



80

80



81

81

SCHEDULE – 32 : CAPITAL LIABILITIES



82

82

FUNDS FROM STATE GOVERNMENT



83

83



84

84

RESERVES & RESERVE FUNDS



85

85

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES



86

86



87

87



88

88



89

89



90

90



91

91



92

92



93

93



94

94



95

95



96

96



97

97



98

98



99

99

CASH FLOW STATEMENT / SOURCES & USES OF FUNDS.



100

100



101

101



102

102



103

103



104

104



105

105



106

106



107

107



108

108



109

109

SUMMARY OF OUTSTANDING LOAN



110

110

DEBT SERVICING TRACK RECORD TNEB has a consistent record of paying principal and interest on all loans, Bonds and deposits on due dates. There has been no default in servicing of the debt obligation/ (s).



111

111

PART C MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS The following contracts and also documents for inspection referred to hereunder, may be inspected at the registered office of the company at Chennai during office hours from the date of this information memorandum until the date of closure of the issue. MATERIAL CONTRACTS

a) Copy of the agreement with NSDL. b) Letter from INDIAN BANK, Chennai giving their consent to act as debenture trustees to the

issue. c) Letter from Integrated Enterprises (India) Ltd giving consent to act as Registrar to the issue.

DOCUMENTS

a) Papers & documents relating to formation of TNEB under Section 5 of the Electricity (Supply) Act’ 1948.

b) Copies of the Credit Rating done for last three years. c) Copy of the Credit Rating for the current issue. d) Audited accounts for the financial years ending 2002, 2001, 2000, 1999 an dthe Auditors

Report thereon along with the tax opinion, if any. e) Copy of the Board Resolution authorizing the Bond issue.



112

112

PART D

DISCLAIMER This memorandum of private placement is neither a Prospectus nor a statement in lieu of Prospectus. It does not constitute an offer or an invitation to subscribe to the bonds issued by Tamil Nadu Electricity Board “TNEB”. Apart from this memorandum, no offer document or prospectus has been prepared in connection with the offering of this Bond issue i.e. 7.00% TNEB Power Bonds Series 6/ 2003-2004 or in relation to the Issuer nor is such a prospectus required to be registered under applicable Laws. Accordingly, this memorandum has neither been delivered for registration nor is it intended to be registered. This memorandum of private placement is not intended to form the basis of evaluation for the potential investors to whom it is addressed and who are willing and eligible to subscribe to these Bonds issued by TNEB. This memorandum of private placement has been prepared to give general information regarding TNEB to persons proposing to invest in this issue of Bonds and it does not purport to contain all the information that any such person may require. TNEB believes that the information contained in this memorandum of private placement is accurate in all respect as of date hereof. TNEB does not undertake to update this memorandum of private placement to reflect subsequent events and thus it should not be relied upon without first confirming its accuracy with TNEB. Potential investors are required to make their own independent evaluation and Judgement before making the investment. It is the responsibility of potential investors to have obtained all consents, approvals or authorizations required by them to make an offer to subscribe for, and purchase the bonds. Potential investors should also consult their tax advisor(s) on the tax implications of the acquisitions, ownership, sale and redemption of Bonds and income arising thereon either by way of interest or capital gains. This memorandum of private placement is not intended for distribution and it is meant solely for the consideration of the person to whom it is addressed and should not be reproduced by the recipient. The Bonds mentioned herein are being issued on a private placement basis and this offer does not constitute nor should it be considered a public offer/ invitation.

FORCE MAJEURE TNEB reserves the right to withdraw the issue any time in the event of any unforeseen development adversely affecting the economic and regulatory environment. In such an event, TNEB will have the discretionary right to take call on further, best-suited course of action. This memorandum of private placement is issued by TNEB and signed by its authorised signatory. Chief Financial Controller/ General Dated: This offer is being made on a private placement basis and cannot be acted upon by any person other than the one to whom the offer has been made.