note offering circular2016/08/05 · 0012018-0003086 hk:20704050.1 s-3 notes being issued as green...
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0012018-0003086 HK:20704050.1
NOTE OFFERING CIRCULAR
(incorporated with limited liability in the Republic of India)
Issue of
INR denominated 20,000,000,000 7.375 per cent. Notes due 2021 payable in U.S. Dollars
issued pursuant to the
U.S.$4,000,000,000
Medium Term Note Programme
The INR denominated 20,000,000,000 7.375 per cent. Notes due 2021 payable in U.S. Dollars (the Notes) will be issued by NTPC Limited (the
Issuer or NTPC), pursuant to its U.S.$4,000,000,000 Medium Term Note Programme (the Programme). The Notes will bear interest at the rate of
7.375 per cent. per annum from and including 10 August 2016 to but excluding 10 August 2021 and interest will be payable annually on 10 August of
each year, commencing on 10 August 2017 (the Offering). The Notes will mature on 10 August 2021. All payments of principal and interest on the
Notes will be made in U.S. Dollars. Prior to maturity, the Notes will be redeemable by the Issuer, in whole but not in part, in the event of certain
changes in Indian tax law. See "Terms and Conditions of the Notes".
The Notes will constitute the direct, unconditional, unsubordinated and (subject to Condition 4) unsecured obligations of the Issuer and will rank pari
passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than
subordinated obligations, if any) of the Issuer, from time to time outstanding.
Application has been made to the Financial Conduct Authority in its capacity as competent authority (the UK Listing Authority) for the Notes to be
admitted to the official list of the UK Listing Authority (the London Official List) and to the London Stock Exchange’s Professional Securities
Market (the PSM). The PSM is not a regulated market for the purposes of Directive 2004/39/EC. Application will also be made to the Singapore
Exchange Securities Trading Limited (the SGX-ST). Final permission to list the Notes will be granted when the Notes have been admitted to the
Official List of the SGX-ST (the SGX Official List). The SGX-ST assumes no responsibility for the correctness of any of the statements made or
opinions expressed or reports contained herein. Admission to the SGX Official List of the SGX-ST and quotation of the Notes on the SGX-ST are not
to be taken as an indication of the merits of the Issuer or the Notes. For so long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so
require, such Notes will be traded on the SGX-ST in a minimum board lot size of S$200,000 or its equivalent in other currencies.
Investing in the Notes involves risks. See “Additional and Supplemented Risk Factors” in this offering circular (the Note Offering Circular) and
"Investment Considerations" in the Original Offering Circular (as defined herein) for a discussion of certain factors to be considered in connection
with an investment in the Notes.
The Notes will be rated BBB- by Fitch Ratings Limited and BBB- by S&P Global Ratings, a division of the McGraw-Hill Companies, Inc. Such ratings of the Notes do not constitute a recommendation to buy, sell or hold the Notes and may be subject to revision or withdrawal at any time by
either such rating organisation. Each such rating should be evaluated independently of any other rating of the Notes, of the Issuer's other securities or
of the Issuer.
The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act) and may not be offered or
sold in the United States unless the Notes are registered under the Securities Act or an exemption from the registration requirements of the Securities
Act is available. The Notes will not be transferable except in accordance with the restrictions described under "Subscription and Sale" in the Note
Offering Circular and the Original Offering Circular and "Transfer Restrictions" in the Original Offering Circular.
The Notes offered outside the United States in reliance on Regulation S (the Regulation S Notes) will be evidenced by a Regulation S Global Note
(as defined in the Original Offering Circular) deposited with a common depositary for Euroclear Bank SA/NV (Euroclear) and Clearstream Banking
S.A. (Clearstream, Luxembourg), and registered in the name of a nominee of such common depositary.
It is expected that delivery of the Regulation S Global Note will be made on 10 August 2016 or such later date as may be agreed (the Closing Date)
by the Issuer and the Joint Lead Managers.
For the purposes of the Notes only, this Note Offering Circular is supplemental to, and should be read in conjunction with, the offering circular dated
4 November 2015 (the Original Offering Circular) (the Original Offering Circular together with this Note Offering Circular, the Offering
Circular).
Words and expressions defined in the Original Offering Circular shall have the same meanings where used in this Note Offering Circular unless the
context otherwise requires or unless otherwise stated herein.
Joint Lead Managers
Axis Bank, Singapore
Branch
HSBC MUFG Standard Chartered
Bank
The date of this Note Offering Circular is 4 August 2016.
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0012018-0003086 HK:20704050.1
TABLE OF CONTENTS
PAGE
ABOUT THIS DOCUMENT ............................................................................................................ S-1
GLOSSARY OF TERMS USED IN THIS OFFERING CIRCULAR ................................................. S-2
NOTES BEING ISSUED AS GREEN MASALA BONDS ................................................................ S-3
ADDITIONAL AND SUPPLEMENTED RISK FACTORS .............................................................. S-4
DESCRIPTION OF THE ISSUER .................................................................................................. S-18
SUPERVISION AND REGULATION ............................................................................................ S-19
USE OF PROCEEDS ...................................................................................................................... S-20
THE ISSUER'S GREEN BOND FRAMEWORK ............................................................................ S-21
SUBSCRIPTION AND SALE ......................................................................................................... S-23
PRICING SUPPLEMENT FOR GREEN MASALA BONDS .......................................................... S-25
TAXATION .................................................................................................................................... S-35
RECENT DEVELOPMENTS ......................................................................................................... S-37
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2016 ......................... S-40
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0012018-0003086 HK:20704050.1 S-1
ABOUT THIS DOCUMENT
This document is in two parts. The first part is the Note Offering Circular, which describes the
specific terms of the Notes being offered as Green Masala Bonds and also adds to and updates information contained in the Original Offering Circular. The second part, the Original Offering
Circular, provides more general information about the Issuer and the terms and conditions of the
Notes.
This Offering Circular comprises as a whole listing particulars in compliance with the listing rules
made under Section 73A of the Financial Services and Markets Act 2000 by the UK Listing Authority.
In the event of any conflict between the description of the Notes in this Note Offering Circular and the
description of the Notes in the Original Offering Circular, the description of the Notes in this Note
Offering Circular shall prevail.
No future financial statements are to be incporated by reference into this Offering Circular.
The Issuer accepts responsibility for the information contained in this Offering Circular. To the best
of the knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the
information contained in this Offering Circular is in accordance with the facts and does not omit
anything likely to affect the import of such information.
The reference to the specified office of the Paying Agent being “in London” appearing on page 212 of
the Original Offering Circular shall be deemed to be deleted and replaced “in Dublin”.
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0012018-0003086 HK:20704050.1 S-2
GLOSSARY OF TERMS USED IN THIS OFFERING CIRCULAR
All references to the Rupee Bond Circular or the ECB Guidelines in the Original Offering Circular
should be read as the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange)
Regulations, 2000 and the circulars issued thereunder by the RBI, including the Master Direction – External Commercial Borrowing, Trade Credit, Borrowing and Lending in Foreign Currency by
Authorised Dealers and Persons other than Authorised Dealers dated 1 January 2016, as amended.
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0012018-0003086 HK:20704050.1 S-3
NOTES BEING ISSUED AS GREEN MASALA BONDS
The Notes being offered as “green masala bonds”, are in alignment with the pre-issuance
requirements of the Climate Bonds Standard Version 2.0 issued by the Climate Bonds Initiative
(Green Masala Bonds). In that regard, KPMG India (KPMG) has issued an independent limited
assurance statement (the Assurance Report) and the Climate Bonds Initiative has issued a certificate
that the issue of the Notes has met the relevant criteria set by the Climate Bonds Standard Board (the
CBI Certificate), in each case with respect to the Issuer's Green Bond Framework (as defined and
described in further detail in the following pages of this Note Offering Circular).
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0012018-0003086 HK:20704050.1 S-4
ADDITIONAL AND SUPPLEMENTED RISK FACTORS
Investors should carefully consider the following Risk Factors as well as the other information
contained in this Offering Circular prior to making an investment in the Notes. In making an
investment decision, each investor must rely on its own examination of the Issuer and the terms of the
offering of the Notes. The risks described below are not the only ones that may affect the Notes.
Additional risks not currently known to the Issuer or that the Issuer, based on the information
currently available to it, currently deems immaterial may also impair the Issuer’s business operations.
All of these risks are contingencies which may or may not occur and the Issuer is not in a position to
express a view on the likelihood of any such contingency occurring. If any of the following or any
other risks actually occur, the Issuer’s business, prospects, results and financial condition could be
adversely affected and the price of and the value of investment in the Notes could decline and all or
part of the investments may be lost. These Risk Factors should be read in conjunction with those in
the Original Offering Circular under “Investment Considerations”.
In the event of any conflict between the descriptions under this “Additional and Supplemented
Risk Factors” in this Note Offering Circular and the descriptions under “Investment
Considerations” in the Original Offering Circular, the following descriptions in this Note
Offering Circular shall prevail.
The following Risk Factors are in addition to, and should be read in conjunction with, those in
the Original Offering Circular under “Investment Considerations”.
The Notes may not be a suitable investment for all investors seeking exposure to green assets.
At the Issuer’s request, KPMG has issued the Assurance Report and the Climate Bonds
Initiative has issued the CBI Certificate, in each case with respect to the Issuer's Green Bond
Framework. Neither of the Assurance Report or the CBI Certificate is incorporated into, nor does
either form part of, the Offering Circular. Neither the Issuer nor the Dealers make any representation
as to the suitability of the Assurance Report or the CBI Certificate. Neither of the Assurance Report or
the CBI Certificate is a recommendation to buy, sell or hold securities and each is only current as of
the respective date that it was initially issued. The Issuer has agreed to certain reporting and use of
proceeds obligations as described herein; however, it will not be an Event of Default under the Terms
and Conditions of the Notes if the Issuer fails to comply with such obligations. A withdrawal of the
Assurance Report or the CBI Certificate may affect the value of the Notes and may have
consequences for certain investors with portfolio mandates to invest in green assets.
The following risk factor appearing on page 90 of the Original Offering Circular shall be
deemed to be deleted in its entirety and replaced by the following:
The proposed adoption of Indian Accounting standards converged with IFRS (IND-AS) could have
a material adverse effect on the presentation of the Issuer’s financial statements.
The Issuer has historically prepared its annual and interim financial statements under Indian
GAAP. Public companies in India, including the Issuer, are now required to prepare annual and
interim financial statements under IND-AS in accordance with the roadmap announced on 2 January
2015 by the Ministry of Corporate Affairs, Government of India (the MCA), in consultation with the
National Advisory Committee on Accounting Standards (the MCA Press Release) for convergence
with IFRS. On 16 February 2015, the MCA notified the public of the Companies (Indian Accounting
Standards) Rules, 2015, which have come into effect from 1 April 2016. The Issuer intends to
announce its quarterly financial results pursuant to IND-AS for the first time for the quarter ended 30
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0012018-0003086 HK:20704050.1 S-5
June 2016. There can be no assurance that the Issuer’s financial condition, results of operations, cash
flows or changes in shareholders’ equity will not appear materially worse under IND-AS than under
Indian GAAP. In the Issuer’s transition to IND-AS reporting, we may encounter difficulties in the
ongoing process of implementing and enhancing the Issuer’s management information systems.
Moreover, there is increasing competition for the small number of IND-AS-experienced accounting
personnel available as more Indian companies begin to prepare IND-AS financial statements.
Furthermore, there is no significant body of established practice on which to draw in forming
judgments regarding the new system’s implementation and application. There can be no assurance
that the Issuer’s adoption of IND-AS will not adversely affect the Issuer’s reported results of
operations or financial condition and any failure to successfully adopt IND-AS could adversely affect
the Issuer’s business, financial condition and results of operations. In addition, in its transition to
IND-AS reporting, the Issuer may encounter difficulties in the on-going process of implementing and
enhancing its management information systems.
The following risk factor appearing on page 97 of the Original Offering Circular shall be
deemed to be deleted in its entirety and replaced by the following:
Rupee Denominated Notes are subject to selling restrictions and may be transferred only to a
limited pool of investors.
Rupee Denominated Notes can only be issued to and held by investors resident in
jurisdictions who are a member of the Financial Action Task Force (FATF) or a member of a FATF-
Style Regional Body and whose securities market regulator is a signatory to the International
Organisation of Securities Commission's (IOSCO’s) Multilateral Memorandum of Understanding
(Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with the
Securities and Exchange Board of India (SEBI) for information sharing arrangements. Additionally,
investors should not be resident of a country identified in the public statement of the FATF as: (i) a
jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism
deficiencies to which counter measures apply; or (ii) a jurisdiction that has not made sufficient
progress in addressing the deficiencies or has not committed to an action plan developed with the
FATF to address the deficiencies.
The following Risk Factors supplement and update the corresponding risk factor in the Original
Offering Circular under “Investment Considerations”
The Issuer’s operations and the Issuer’s expansion plans have significant fuel requirements and
the Issuer may not be able to ensure the availability of fuel at competitive prices.
The success of the Issuer’s operations and the proposed expansion of its generation capacity
will be dependent on, among other things, the Issuer’s ability to ensure unconstrained availability of
fuels at competitive prices during the life cycle of its existing and planned thermal power stations. The
Issuer’s primary fuels are coal, gas and naphtha, with approximately 87.25 per cent. of its directly
owned installed generating capacity as of 30 June 2016 being coal-fired and approximately 9.99 per
cent. being gas or naphtha-fired. Fuel costs represent the Issuer’s largest operating expense,
constituting approximately 75.0 per cent. of total operating expenses on a stand-alone basis.
The Issuer purchases substantially all of its coal from subsidiaries of Coal India Limited
(CIL) and Singareni Collieries Company Limited (SCCL). The Issuer had signed long-term coal
supply agreements (CSAs) covering units commissioned as of 31 March 2009 for 23,895 MW at its
15 directly owned coal-fired power stations and covering units with a total capacity of 9,620 MW
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commissioned after 31 March 2009 or currently under construction. The Issuer has entered into long-
term gas supply agreements with GAIL (India) Limited (GAIL) for the supply of gas to its directly
owned gas-fired power stations. The Issuer has also entered into a long-term regasified liquefied
natural gas (RLNG) supply agreement with GAIL. However, no assurance can be given that the
Issuer’s suppliers will be able to satisfy its contractual commitments and that alternative sources of
supply would be available on reasonable terms.
If the Issuer is unable to obtain supplies from these suppliers on acceptable terms and
conditions, no assurance can be given that it will be able to obtain supplies from alternative suppliers.
Further, coal and gas allocations and gas prices are currently determined by the Government, whilst
coal prices are set by CIL or SCCL, as the case may be. In the event that coal and gas supplies or gas
prices were to be deregulated, no assurance can be given that the Issuer will be able to obtain supplies
of coal and gas at competitive prices and in the required quantities.
As of the date of this Offering Circular, the Issuer has planned to source coal for some of the
power projects under construction from the coal mines allotted to it and is working towards starting
coal production from these mines commensurate with the start of power generation from the linked
end-use power projects. In order to meet the coal requirement in case of any delay in the start of coal
production from the captive mines, the Issuer has already approached the Government for allocation
of tapering coal linkages from the coal mines of CIL. If the Issuer is unable to timely produce coal
from these mines or as per the requirement of the related projects and does not obtain tapering coal
linkages, no assurance can be given that the Issuer will be able to obtain supplies from alternative
sources. Though transportation of coal from two captive mines to its linked end-use power projects
shall be through the Issuer’s own system, the transportation of coal from other mines to the linked
power projects will be made through the Indian railways network (some of which network, as of the
date of this Offering Circular, requires further strengthening). Any delays in development of the
related infrastructure by the railways could constrain the fuel supplies to the Issuer’s projects and no
assurance can be given that the Issuer will be able to transport the coal through alternative means.
Any such constraints on sourcing of coal could have a negative impact on the Issuer’s business,
prospects and financial condition as well as on current and future capacity addition plans.
With respect to coal, while India has substantial proven reserves, significant investments
would be required to exploit and mine these reserves. No assurance can be given that such
investments will be made. The domestic demand for coal is expected to increase significantly in the
future, driven by significant capacity addition in the Indian power sector. High dependence on
domestic coal could therefore expose the Issuer to potential price and availability risks. In the event of
a shortage of coal, not only will the productivity of the Issuer’s coal-fired power stations be reduced
but it will also hinder the Issuer’s expansion plans. The Issuer also sources coal through bilateral short
term memoranda of understanding (MoUs) with SCCL or subsidiaries of CIL, through imports and
through e-auctions conducted by the subsidiaries of CIL. However, there is no assurance that such
sources of coal will continue to be available to the Issuer in the future at reasonable prices or terms or
at all.
With respect to gas, the Issuer’s use has been limited in the past due to inadequate supply of
domestic gas. The Issuer has arranged for the supply of RLNG through long- and short-term contracts
to meet part of its requirements. The short-term RLNG contracts are agreed on a “reasonable
endeavours” basis with no obligation on the part of the Issuer such as “ship-or-pay” or, “take-or-pay”
and no supply or pay obligation on the part of the suppliers. However, due to high RLNG prices, the
offtake of power by distribution companies and beneficiaries and, consequently, RLNG consumption
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have been low. The Issuer estimates that it will require 16.39 million metric standard cubic metres of
gas per day in fiscal 2016 to operate its directly owned gas-fired power stations at a plant load factor
(which is a measure equal to the percentage of capacity actually utilised) (PLF) of 85.0 per cent. If
the Issuer experiences a shortage in the supply of gas to its gas-fired power stations, the productivity
of those power stations would be reduced. Although the Issuer is in the process of securing a supply
of gas for the Issuer’s projects at Kawas and Gandhar, there is no assurance that it will be able to
secure an adequate supply of gas for its current gas-fired power stations or future gas-fired projects.
The Issuer’s ability to secure adequate fuel supply for its Kawas and Gandhar projects may also be
affected by its dispute with Reliance Industries Limited (RIL) on the sale and purchase agreement for
gas supply for those projects. See “The Issuer has executed a letter of intent with RIL for the purchase
of gas, which, if not declared as a valid and binding contract between the Issuer and RIL, may
negatively impact the Issuer’s financial condition and results of operation.” below. Any such
constraints on sourcing gas would have a negative impact on the Issuer’s business, prospects and
financial condition as well as current and future capacity addition plans.
The State Electricity Boards (SEBs) and state owned distribution companies account for more than
88 per cent. of the Issuer’s sales of electricity generated from its directly owned power stations and
any change that adversely affects the Issuer’s ability to recover dues from them would adversely
affect its financial position.
The SEBs and the state owned distribution companies are the largest purchasers of power
from the Issuer and accounted for more than 88 per cent. of the Issuer’s sales of electricity generated
from its directly owned power stations in fiscal 2015. The Issuer is obligated to supply power to them
in accordance with the terms of the allocation letters issued by the Government for each of the
Issuer’s power stations. Historically, the Issuer has had significant problems recovering payments
from the SEBs. The Scheme for One Time Settlement of Outstanding Dues (the OTSS) introduced
several measures to address these problems. Tripartite agreements (the Tripartite Agreements) were
signed under which the receivables for past due amounts from the SEBs were securitised, resulting in
the issue to the Issuer of 8.5 per cent. tax free state government special bonds issued under the OTSS
(the Tax Free Bonds). The Tax Free Bonds matured in various stages from 1 October 2006 until 1
April 2016. These agreements, inter-alia, provide that in case of any default in payment of current
dues by any state utility, the outstanding dues can be deducted from the state’s RBI account and paid
to the Issuer. In addition, the Tripartite Agreements require the SEBs to establish letters of credit
(LCs) to cover 105 per cent. of current payments for the sale of electricity generated from the Issuer’s
directly owned power stations. In addition to the Tripartite Agreements, the Issuer’s sales to the SEBs
from its directly owned power stations after 31 October 2016 are secured through supplementary
agreements with the SEBs under which the SEBs have agreed to create a charge over their own
receivables in favour of the Issuer, and in the event of a payment default, to assign their receivables
into an escrow account. If receivables of these SEBs are not received into such escrow accounts for
any reason whatsoever or if the security over such receivables is flawed, payments to the Issuer would
not be secured. Any change that adversely affects the Issuer’s ability to recover its dues from the
SEBs will adversely affect its financial position.
In fiscal 2014, the SEBs incurred losses of approximately Rs.985,950 million without
accounting for subsidy and Rs.624,620 million after accounting for subsidy received. (Source: Power
Finance Corporation Limited report on the performance of state power utilities: July 2015.) In
addition, there have also been instances of state governments promising free power to certain sections
of society, such as farmers. The adoption of such policies by state governments would adversely
affect the financial health of the SEBs, which would in turn adversely affect their ability to make
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payments to the Issuer. See “The unbundling of the SEBs pursuant to the Electricity Act could have
an adverse impact on the Issuer’s revenues.” below and the section entitled “The Power Industry in
India.”
There may be other changes to the regulatory framework that could adversely affect the Issuer.
The statutory and regulatory framework for the Indian power sector has changed significantly
in recent years and the full impact of these changes is unclear. There are likely to be more changes in
the next few years, some of which could potentially impose greater legal, compliance and
administrative burdens on the Issuer. The Electricity Act has put in place a framework for reforms in
the sector, but in many areas the details and timing of reforms are yet to be determined. It is expected
that many of these reforms will take time to be implemented. Furthermore, there could be additional
changes in tariff policy, requirements for unbundling of the SEBs, restructuring of companies in the
power sector, open access and parallel distribution and licensing requirements for, and tax incentives
applicable to, companies in the power sector. Such additional changes could adversely affect the
Issuer’s business prospects, financial condition and results of operations. For a discussion on the
regulatory framework of the electricity industry in India, see “Regulations and Policies in India”.
The Issuer’s expansion plans and diversification plans require significant capital expenditure and
if the Issuer is unable to obtain the necessary funds for expansion, its business plans and prospects
may be adversely affected.
The Issuer will need significant additional capital to finance its business plan and in
particular, its plan for capacity expansion. As of the date of the Original Offering Circular, the Issuer
was engaged in construction activities for projects representing 23,004 MW, including 4,495 MW
undertaken by its joint venture companies and subsidiaries, which are in different stages of progress
As of 30 June 2016, 24,059 MW is under construction, including 4,300MW through joint ventures
companies and subsidiaries. The Issuer is also pursuing a number of additional projects, representing
a further increase of more than 27,000 MW of capacity, which are in various stages, including
projects for which tenders have been invited or a feasibility report has been or is being prepared. The
scheduled completion dates of the Issuer’s expansion plans and budgets with respect to its expansion
plans are management estimates only and there is no assurance that such proposed expansion will be
completed or, if completed, that there will not be cost or time overruns.
The Issuer expects approximately 30 per cent. of its proposed capital expenditure to be funded
by internal accruals and/or through the issue of equity shares and the remaining approximately 70 per
cent. to be funded by debt financing. The Issuer’s ability to finance its planned capital expenditure is
subject to a number of risks, contingencies and other factors, some of which are beyond its control,
including the Issuer’s results of operations generally, tariff regulations, interest rates, borrowing or
lending restrictions, if any, changes to applicable laws and regulation, the amount of dividend
required to be paid to the Issuer’s shareholders and other costs and the Issuer’s ability to obtain
financing on acceptable terms. In addition, as of the date of this Offering Circular, there were a
number of large-scale infrastructure projects under development in India which may impair the
Issuer’s ability to obtain additional funding and it may not be able to receive adequate debt funding on
commercially reasonable terms in India. In such event, the Issuer may be required to seek funding
internationally, which would result in exposure to foreign exchange risks and which may require
approvals under, or be restricted by, laws and regulations in India. For further details, see also the
section entitled “Regulations and Policies in India — Foreign Exchange Laws”. If the Issuer is unable
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to raise required funds for expansion, its business plans and prospects may be adversely affected. See
also the section entitled “Description of the Issuer — Business — Capacity Expansion”.
The Issuer is also in the process of progressively diversifying the fuel mix of its power
stations. In addition, the Issuer plans to invest in power trading, electricity distribution, coal mining
and oil exploration. These diversification efforts will also require significant additional capital. There
can be no assurance that the Issuer will be able to raise the required capital to implement its
diversification plans on acceptable terms or at all. In the event that the Issuer cannot raise the funds to
diversify its business, its business, financial condition, prospects and results of operation may be
materially and adversely affected.
The Issuer’s expansion plans are subject to a number of risks and uncertainties.
The Issuer’s expansion plans are subject to a number of factors, including the state of the
local and global economy, difficulties in assimilating personal and integrating operations and cultures,
laws and regulations, governmental action, delays in obtaining permits or approvals, global prices of
crude oil and other fuels for transportation, prices of fuel supplies required for power station
operations, accidents, natural calamities, and other factors beyond its control. Power projects
generally have long gestation periods due to the process involved in their commissioning. Contracts
for construction and other activities relating to the projects are awarded at different times during the
course of the projects. In addition, the Issuer’s projects are dependent on external contractors for
construction, installation, delivery and commissioning, as well as the supply and testing of key plant
and equipment. The Issuer may only have limited control over the timing, quality of services,
equipment or supplies provided by these contractors. The Issuer is highly dependent on some of the
external contractors who supply specialised services and sophisticated and complex machinery. There
can be no assurance that the performance of the external contractors will meet the Issuer’s
specifications or performance parameters or that they will remain financially sound. The failure or
delay of the external contractors to perform could result in incremental cost or time overruns, or the
termination of a power project development. For example, the work at the Issuer’s Barh project has
been delayed by the non-performance of the contractor’s work in relation to constructing a steam
generator, pursuant to which the contractor’s contract with the Issuer has been terminated. There can
be no assurance that the Issuer would be able to complete its expansion plans in the time expected, or
at all, or that their gestation period would not be affected by any or all of these factors.
Furthermore, the Issuer’s ability to acquire sites for its expansion plans depends on many
factors, including whether the land is private or state-owned, whether the land is classified in a
manner that allows it to be used as contemplated by the Issuer’s projects, and the willingness of the
owners to sell or lease their land. In many cases, the area identified as a suitable site is owned by
numerous small landowners. Acquisition of private land in India can involve many difficulties,
including litigation relating to ownership, liens on the land, inaccurate title records, negotiations with
numerous land owners and obtaining Government approvals. Acquisition of Government land may
also involve a number of difficulties relating to rehabilitation and resettlement where people’s
livelihood is dependent on the land. Further, in instances where forest land is required to set up a
project, as of the date of this Offering Circular, Government clearance for diversion of forest land for
non-forest purposes is mandatory for a power project as well as its connected mines, and project
development could be severely affected in case of any delay in obtaining such clearances.
The Issuer may also face competing interests with respect to usage of land, as in the case of
the Issuer’s North Karanpura Thermal Power Project where work was put on hold for several years
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due to objections that the proposed location of the project is on coal-bearing land. Work on the project
has since been re-started.
The power industry in which the Issuer operates is highly regulated. For example, with
respect to the power business, several licences are required under the Electricity Act, including a
transmission licence, a distribution licence and an electricity trading licence. There is no assurance
that the Issuer or the concerned agency will be able to obtain all the necessary approvals or clearances
with respect to its expansion plans. Any of these factors could have a material adverse effect on the
Issuer’s business, financial condition and results of operation.
The Issuer may be adversely affected by changes in the Government’s policy relating to the Issuer.
The Government owns 69.74 per cent. of the Issuer’s paid-up capital. To date, the
Government’s ownership has been an important factor in some aspects of the Issuer’s business,
including the settlement of electricity dues payable by the SEBs to the Issuer. Any significant changes
in the Government’s shareholding in the Issuer, and/or pursuit by the Government of policies that are
not in the interests of the Issuer, could adversely affect the Issuer’s business.
The Issuer generally manages its business on a day to day basis independently from the
Government. The Government has named the Issuer as a “Maharatna” company as a consequence of
which the Issuer enjoys enhanced autonomy in making financial and other decisions. Adverse changes
in the terms of, or the loss of, “Maharatna” status may decrease the Issuer’s autonomy and the Issuer’s
ability to compete with other participants in the Indian power sector.
The Issuer’s operations create difficult environmental challenges, and changes in environmental
laws and regulations may expose the Issuer to liability and result in increased costs.
The Issuer’s power stations and power generation projects are subject to environmental laws
and regulations promulgated by the Ministry of Environment and Forests (MoEF) and the pollution
control boards of the relevant states. These include laws and regulations that limit the discharge of
pollutants into the air, land and water and establish standards for the treatment, storage and disposal of
hazardous waste materials. The Issuer expects that environmental laws and compliance requirements
will continue to become stricter. Compliance with current and future environmental regulations,
particularly by the Issuer’s older power stations, may require substantial capital expenditure and, in
certain cases, may require the closing down of non-complying power stations. In particular, the Issuer
generates high levels of ash in its operations. There are limited uses for ash and therefore demand for
ash is low. While the Issuer continues to explore methods to utilise or dispose of ash, its ash
utilisation activities are insufficient to dispose of the ash it generates. Furthermore, the Issuer is
required to achieve 100 per cent. ash utilisation on a progressive basis under the MoEF notification
dated 3 November 2009. Compliance with this requirement, as well as any future norms with respect
to ash utilisation, may add to the Issuer’s capital expenditures and operating expenses. In certain cases
where it may not be possible to increase the Issuer’s utilisation of ash to comply with this
requirement, the Issuer may need to reduce the generation of ash through a partial or full shutdown of
its operating power stations, thereby reducing its average PLF which could have a material adverse
effect on the Issuer’s business, financial condition and results of operation.
The Issuer could be subject to substantial civil and criminal liability and other regulatory
consequences in the event that an environmental hazard was to be found at the site of any of its power
stations or if the operation of any of the Issuer’s power stations results in material contamination of
the environment. For instance, in 2006, the Chattisgarh Environment Conservation Board through its
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0012018-0003086 HK:20704050.1 S-11
regional officer filed a criminal complaint against the Issuer’s Korba unit alleging air and water
pollution. Financial losses and liabilities as a result of increased compliance costs or due to
environmental damage or criminal liability due to such environmental breaches may affect the
Issuer’s reputation and financial condition.
Furthermore, there is a possibility that environmental compliance norms may be drastically
altered, resulting in substantial capital and operating expenditure to the Issuer, which may have an
adverse impact on the Issuer’s financial condition.
To note a recent example, in December 2015, the Government put forth the Environment
(Protection) Amendment Rules, 2015, stipulating strict requirements regarding water consumption
and emissions of particulate matter, sulphur dioxide, oxides of nitrogen and mercury for thermal power plants. The standards have been revised under three categories in terms of thermal power plants
brought online before 31 December 2003, between 1 January 2003 and 31 December 2016 and after 1
January 2017. The notice provides that thermal power stations brought online before 31 December 2016 shall meet the revised limits prior to 7 December 2017. The Issuer has written to the
Government for certain amendments to the notification citing difficulties in its implementation and for
extending the timeline.
There is no assurance that we can complete the required modifications in the plants to ensure
compliance to the revised regulations before the stipulated date or at all and this can have adverse
implications for the Group.
The Issuer’s business involves numerous risks that may not be covered by insurance.
While the Issuer maintains insurance of its operating plants with ranges of coverage that the
Issuer believes to be consistent with industry practice, the Issuer is not fully insured against all
potential hazards and events incidental to its business and there is no assurance that the Issuer’s
insurance coverage will be adequate and available to cover any loss incurred in relation to such types
of incidents. The Issuer is not covered for certain risks such as war, damage or destruction of data or
records or damage or loss due to pollution or contamination. Further, notwithstanding the Group’s
insurance coverage, any damage to the Group’s buildings, facilities, equipment, or other properties as
a result of occurrences such as fires, floods, water damage, explosions, power losses, typhoons and
other natural disasters may have an adverse effect on the Group’s business, financial condition, results
of operations and growth prospects. The occurrence of any such events not covered by insurance may
have a material adverse effect on the Issuer’s business, financial condition and results of operations
and the trading price of the Notes.
The Issuer may encounter problems relating to the operations of its joint ventures.
As of the date of this Offering Circular, the Issuer has formed 22 joint venture companies
with various third parties for undertaking specific business activities. The Issuer’s joint venture
partners may:
be unable or unwilling to fulfil their obligations, whether of a financial nature or otherwise;
have economic or business interests or goals that are inconsistent with the Issuer’s;
take actions contrary to its instructions or requests or contrary to the Issuer’s policies and
objectives;
take actions that are not acceptable to regulatory authorities;
become involved in litigation;
have financial difficulties; or
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0012018-0003086 HK:20704050.1 S-12
have disputes with the Issuer.
Any of the foregoing may have an adverse effect on the business, prospects, financial
condition and results of operations of the Issuer.
The Issuer’s ability to raise foreign capital is constrained by global economic conditions and
conditions in foreign financial markets.
The Issuer has raised and expects to continue to raise capital in foreign markets. The Issuer’s
ability to raise foreign capital is constrained by the conditions of these markets. The global capital and
credit markets have recently been experiencing periods of extreme volatility and disruption. The
global financial crisis, including the continuing sovereign debt crisis in Europe, concerns over
recession, inflation or deflation, energy costs, geopolitical issues, commodity prices and the
availability and cost of credit, have contributed to unprecedented levels of market volatility and
diminished expectations for the global economy and the capital and credit markets. On 23 June 2016,
the United Kingdom held a referendum on its membership of the European Union and voted to leave
(Brexit). There is significant uncertainty at this stage as to the impact of Brexit on general economic
conditions in the United Kingdom and the European Union and any consequential impact on global
financial markets. For example, Brexit could give rise to increased volatility in foreign exchange rate
movements and the value of equity and debt investments. A lack of clarity over the process for
managing the exit and uncertainties surrounding the economic impact could lead to a further
slowdown and instability in financial markets. These factors, combined with others, may impact the
Issuer’s ability to raise capital in foreign markets. An inability to raise foreign capital or access
foreign credit markets would have a material adverse effect on its business and financial condition.
The Issuer’s business, financial condition and results of operations may be materially and
adversely affected if the Issuer is unable to take advantage of certain tax benefits or if there are any
adverse changes to the tax regime in the future.
Section 80-IA of the Income Tax Act, 1961 (the Income Tax Act) provides that, subject to
certain conditions being fulfilled, 100 per cent. of the profits derived from the projects for the
generation, distribution or transmission of power would be entitled for deduction from total income
for 10 consecutive assessment years out of 15 years, beginning from the year in which the project
commences power generation, transmission or distribution of power, if the activity is commenced
before 31 March 2017. If such or other tax benefits become unavailable, the Issuer’s financial
condition, results of operations and business could be materially and adversely affected.
The draft bill on goods and services tax was introduced in December 2014 and the bill has
been pending before the upper house of the parliament for its approval. As the bill has not been
approved, the Issuer is unable to ascertain the full impact of the proposed tax changes on its revenues.
See the investment consideration “The proposed new taxation system could adversely affect the
Issuer’s business and the trading price of the Notes.”
The Issuer has not appointed the requisite number of independent directors on its Board
As the Issuer is a Government company, the power of appointment of its Board is vested with
the President of India, acting through the administrative ministry. As of the date of this Offering
Circular, the Issuer has not been able to maintain the minimum Board composition as required under
the Companies Act, 2013, the rules thereunder and the listing agreements with the Indian stock
exchanges. If the Indian stock exchanges decide to undertake any action against the Issuer including
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0012018-0003086 HK:20704050.1 S-13
levying of penalties or if there is any communication with the regulatory agencies in that regard, it
may have a material adverse effect on the Issuer’s reputation, materially and adversely affect the
Issuer’s business, prospects and results of operations.
The Issuer has contingent liabilities under Indian Accounting Standards, which may adversely
affect its financial condition.
As of 31 March 2015, the contingent liabilities appearing in the Issuer’s consolidated
financial statements were as follows:
Category Amount
(Rs. in million) Claims against the Company not acknowledged as debts in respect of:
Capital works ..................................................................................................
81,272 Land compensation cases ................................................................................. 3,143
Fuel claims ...................................................................................................... 5,672
Statutory claims ............................................................................................... 8,964
Disputed income tax/sales tax/excise demand .................................................. 52,595
Other contingent liabilities ............................................................................... 9,142
Total ............................................................................................................... 160,788
Some of the beneficiaries have filed appeals against the tariff orders of the CERC. The
amount of contingent liability relating to these appeals is not ascertainable.
Natural calamities could have a negative effect on the Indian economy and cause the Issuer
business to suffer.
India has experienced natural calamities such as earthquakes, floods, droughts including
the flash flood that affected the state of Uttarakhand in June 2013 and the cyclone which affected
various parts of Odisha in October 2013. In fiscal 2015, the agricultural sector was adversely
affected by unseasonal rains and hailstorms in northern India in March 2015. As a result, the gross
value added, which is the value of output less the value of intermediate consumption, in the
agricultural sector decreased by 0.2% in fiscal 2015 as compared to 4.2% growth in fiscal 2014. In
addition, in July 2012, three of India’s inter-connected northern power grids collapsed for several
hours, resulting in widespread power outages across the country. Prolonged power outages, spells
of below normal rainfall in the country or other natural calamities could have a negative impact on
the Indian economy, affecting the Issuer’s business and potentially causing the trading price of the
Notes to decrease.
Political, economic and social developments in India could adversely affect the Issuer’s business.
The Issuer derives virtually all of its revenues and resources such as fuel, equipment and
materials from India. All of the Issuer’s electricity generating facilities and other assets are located
in India and all of the Issuer’s officers and directors are resident in India. The Issuer’s operations
and financial results and the market price and liquidity of the Notes may be affected by changes in
Government policy or taxation or social, ethnic, political, economic or other developments in or
affecting India. Since achieving independence in 1947, India has had a mixed economy with a
large public sector and an extensively regulated private sector. The Government and the state
governments have in the past, among other things, imposed controls on the prices of a broad range
of goods and services, restricted the ability of businesses to expand existing capacity and reduce
the number of employees, and determined the allocation to businesses of raw materials and foreign
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0012018-0003086 HK:20704050.1 S-14
exchange. Since 1991, the Government has significantly relaxed most of these restrictions.
Nonetheless, the role of the Government and state governments in the Indian economy as
producers, consumers and regulators, remains significant in ways that directly affect the Issuer and
the electricity industry in India. Moreover, most recent parliamentary elections were completed in
May 2014, which was won by the Bhartiya Janta Party led National Democratic Alliance.
Although the current government has continued India’s economic liberalisation and deregulation
programmes, there can be no assurance that these will continue in the future. The rate of economic
liberalisation is subject to change and specific laws and policies affecting banking and finance
companies, foreign investment, currency exchange and other matters affecting investment in the
Issuer’s securities are continuously evolving as well. Other major reforms that have been proposed
are the goods and services tax, the direct tax code and the general anti-avoidance rules. Any
significant change in India’s economic liberalisation, deregulation policies or other major
economic reforms could adversely affect business and economic conditions in India generally and
the Issuer’s business in particular. India has also witnessed civil disturbances in the past. While
these civil disturbances did not directly affect the Issuer’s operations, it is possible that future civil
unrest as well as other adverse social, economic and political events in India could have an adverse
impact on the Issuer.
Trade deficits could have a negative effect on the Issuer’s business and the trading price of the
Notes.
India’s trade relationships with other countries can influence Indian economic conditions. In
fiscal 2016, the merchandise trade deficit was estimated at U.S.$118.5 billion compared with
U.S.$137.7 billion in fiscal 2015 and U.S.$135.8 billion in fiscal 2014. This large merchandise trade
deficit neutralises the surpluses in India’s invisibles, which are comprised of international trade in
services, income from financial assets, labour and property and cross-border transfers of mainly
workers’ remittances in the current account, resulting in a current account deficit. If India’s trade
deficits increase or become unmanageable, the Indian economy, and therefore the Issuer’s business,
future financial performance and the trading price of the Notes could be adversely affected.
Any downgrading of India’s debt rating by an international rating agency could have a negative
impact on the Issuer’s business.
On 25 April 2012, Standard and Poor’s Ratings Services, a Division of the McGraw Hill
Companies Inc. (S&P) revised the outlook on the long-term ratings on India from “stable” to
“negative” citing the slowdown in India’s investment and economic growth and the widened current
account deficit, resulting in a weaker medium term credit.
On 18 June 2012, Fitch Ratings Ltd. (Fitch) scaled down India’s sovereign credit rating
outlook from “stable” to “negative,” citing structural challenges such as corruption, inadequate
economic reforms, and slow economic growth combined with elevated inflation. On 25 April 2012
and 18 June 2012, respectively, as a result of their downgrading of India’s outlook, both S&P and
Fitch downgraded the outlook on the Issuer’s rating from “stable” to “negative”. In June 2012 and
January 2013, S&P and Fitch, respectively, announced that they may lower India’s sovereign credit
rating below investment grade, citing slowing GDP growth, setbacks or reversals in India’s economic
policy, a widening fiscal deficit and/or increasing spreads of credit default swaps for Indian banks.
S&P reiterated in May 2013 that, although there had been some easing of pressure towards a
downgrade of the rating, there is still a likelihood of such a downgrade unless significant
improvements are seen in factors such as a high fiscal deficit and levels of government borrowing.
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0012018-0003086 HK:20704050.1 S-15
However, on 12 June 2013 Fitch revised the outlook on India’s sovereign credit rating from
“negative” to “stable” and consequently the outlook of the Issuer’s rating has been revised from
“negative” to “stable”. Subsequently, in August 2013 Fitch warned that India’s sovereign rating may
be lowered if the India is unable to meet its fiscal deficit target. In September 2013, Moody’s
Investors Service Inc. (Moody’s) put India’s sovereign credit rating on notice, warning that any
changes Moody’s makes to India’s sovereign rating outlook will depend on the depth and extent of
the current economic downturn and the trends in the balance of payments situation. In April 2015,
Moody’s revised India’s sovereign rating outlook from “stable” to “positive” and retained the long-
term rating at “Baa3” as it expected actions of policymakers to enhance India’s economic strength in
the medium term. Similarly, Standard & Poor’s upgraded its outlook on India’s sovereign debt rating
to “stable” in September 2014 and retained such rating in October 2015, while reaffirming the “BBB”
long-term rating. Standard & Poor’s stated that the revision reflects the view that India’s improved
political setting offers an environment which is conducive to reforms that could boost growth
prospects and improve fiscal management.
There can be no assurance that these ratings will not be further revised, suspended or
withdrawn by S&P, Moody’s or Fitch or that any other global rating agency will not also downgrade
the Issuer’s or India’s sovereign credit ratings.
Any adverse revisions to India’s credit ratings for domestic and international debt by
international rating agencies may adversely impact the Issuer’s ability to raise additional financing,
and the interest rates and other commercial terms at which such additional financing is available. This
could have a material adverse effect on the Issuer’s business and future financial performance, the
Issuer’s ability to obtain financing for capital expenditures, and the trading price of the Notes.
Depreciation of the Rupee against foreign currencies may have an adverse effect on the Issuer’s
results of operations and financial conditions.
As of 31 March 2015, the Issuer’s consolidated foreign currency borrowings of approximately
Rs.256.68 billion were denominated in U.S. dollars, Japanese yen and euros, while substantially all of
the Issuer’s revenues are denominated in Rupees. The Rupee has been quite volatile during fiscal
2014 and 2015 when compared against the U.S. dollar. First, it depreciated by 26.7 per cent. from
54.28 per U.S.$1.00 as at 31 March 2013 to an all-time low of 68.82 per U.S.$1.00 as at 28 August
2013 and then appreciated by 12.9 per cent. to close the fiscal 2014 at 59.89 per U.S.$1.00. In fiscal
2015, the Rupee depreciated by 4.4 per cent. to close the year at 62.50 per U.S.$1.00 and in fiscal
2016, the Rupee depreciated by 6.0 per cent., to close the year at 66.25 per U.S.$1.00. Overall, the
Rupee depreciated by 10.6 per cent. over the course of fiscal 2014 through to 2016. Volatility in
India’s currency and the possibility of slower growth pose significant risks for the financial prospects
of companies in India, as well as a greater default risk for Indian companies with foreign-denominated
debt. Depreciation of the Rupee against foreign currencies will increase the Rupee cost to the Issuer of
servicing and repaying the Issuer’s foreign currency borrowings. In addition, in fiscal 2015, imported
coal accounted for 9.8 per cent. of the total coal purchased by the Issuer for its directly owned power
stations. A depreciation of the Rupee would also increase the costs of coal imports by the Issuer. If as
a result of future changes in tariff regulations the Issuer is unable to recover the costs of foreign
exchange variations through its tariffs, the Issuer may be required to use hedging arrangements, which
may not fully protect the Issuer from foreign exchange fluctuations.
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0012018-0003086 HK:20704050.1 S-16
Indian accounting principles and audit standards differ from those which prospective investors
may be familiar with in other countries.
As stated in the report of the Issuer’s independent auditors included in this Offering Circular,
the Issuer’s financial statements are in conformity with Indian GAAP, consistently applied during the
periods stated, except as provided in such report, and no attempt has been made to reconcile any of
the information given in this Offering Circular to any other principles or to base it on any other
standards. Indian GAAP differs from accounting principles and auditing standards with which
prospective investors may be familiar in other countries. See “Summary of Significant Differences
between Indian GAAP and IFRS”. Public companies in India, including the Issuer, have been required
to prepare financial statements under the Indian Accounting Standards (IND-AS) according to the
implementation roadmap drawn up by the Indian Ministry of Corporate Affairs. The Issuer may be
adversely affected by this transition.
The insolvency laws of India may differ from other jurisdictions with which holders of the Notes
are familiar.
As the Issuer is incorporated under the laws of India, an insolvency proceeding relating to the
Issuer, even if brought in another jurisdiction, would likely involve Indian insolvency laws, the
procedural and substantive provisions of which may differ from comparable provisions of another
jurisdiction.
An outbreak of avian, swine influenza, MERS or other contagious diseases may adversely affect
the Indian economy and the Issuer’s business.
A number of countries in Asia, including India, as well as countries in other parts of the
world, have had confirmed cases of the highly pathogenic H5N1 strain of avian influenza in birds.
Certain countries in Southeast Asia have reported cases of bird to human transmission of avian
influenza resulting in numerous human deaths. In 2009, there was a global outbreak of a new strain of
influenza virus commonly known as swine flu. Since 2012, an outbreak of the Middle East
Respiratory Syndrome corona virus (MERS) has affected several countries, primarily in the Middle
East. Future outbreaks of avian influenza, swine flu, MERS or a similar contagious disease could
adversely affect the Indian economy and economic activity in the region. As a result, any present or
future outbreak of avian influenza, swine flu or other contagious diseases could have a material
adverse effect on the Issuer’s business.
The Notes are not guaranteed by the Republic of India.
The Notes are not the obligations of, or guaranteed by, the Republic of India. Although the
Government owned 69.74 per cent. of the Issuer’s issued and paid up share capital as of the date of
the Offering Circular, the Government is not providing a guarantee in respect of the Notes. In
addition, the Government is under no obligation to maintain the solvency of the Issuer. Therefore,
investors should not rely on the Government ensuring that the Issuer fulfils its obligations under the
Notes.
The following Risk Factor is deleted in its entirety from the Original Offering Circular
under “Investment Considerations” as it is no long applicable.
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0012018-0003086 HK:20704050.1 S-17
Interest on the Notes may be subject to EU withholding under the Savings Directive.
Under Council Directive 2003/48/EC on the taxation of savings income in the form of interest
payments (the Savings Directive), EU Member States are required to provide to the tax authorities of
other EU Member States with details of certain payments of interest or similar income paid or secured
by a person established in an EU Member State to, or for the benefit of, an individual resident in
another EU Member State or certain limited types of entities established in another EU Member State.
For a transitional period, Austria is required (unless during that period it elects otherwise) to operate a
withholding system in relation to such payments (subject to a procedure whereby, on meeting certain
conditions, the beneficial owner of the interest or other income may request that no tax be withheld).
The end of the transitional period is dependent upon the conclusion of certain other agreements
relating to information exchange with certain other countries. A number of non-EU countries and
territories including Switzerland have adopted similar measures (a withholding system in the case of
Switzerland).
On 24 March 2014, the Council of the European Union adopted a Council Directive (the
Amending Directive) amending and broadening the scope of the requirements described above. The
Amending Directive requires EU Member States to apply these new requirements from 1 January
2017, and if they were to take effect the changes would expand the range of payments covered by the
Savings Directive, in particular to include additional types of income payable on securities. They
would also expand the circumstances in which payments that indirectly benefit an individual resident
in a Member State must be reported or subject to withholding. This approach would apply to
payments made to, or secured for, persons, entities or legal arrangements (including trusts) where
certain conditions are satisfied, and may in some cases apply where the person, entity or arrangement
is established or effectively managed outside of the European Union.
However, the European Commission has proposed the repeal of the Savings Directive from 1
January 2017 in the case of Austria and from 1 January 2016 in the case of all other EU Member
States (subject to on-going requirements to fulfil administrative obligations such as the reporting and
exchange of information relating to, and accounting for withholding taxes on, payments made before
those dates). This is to prevent overlap between the Savings Directive and a new automatic exchange
of information regime to be implemented under Council Directive 2011/16/EU on Administrative
Cooperation in the field of Taxation (as amended by Council Directive 2014/107/EU). The new
regime under Council Directive 2011/16/EU (as amended) is in accordance with the Global Standard
released by the Organisation for Economic Co-operation and Development in July 2014. Council
Directive 2011/16/EU (as amended) is generally broader in scope than the Savings Directive,
although it does not impose withholding taxes. The proposal also provides that, if it proceeds,
Member States will not be required to apply the new requirements of the Amending Directive.
If a payment were to be made or collected through an EU Member State which has opted for a
withholding system and an amount of, or in respect of, tax were to be withheld from that payment,
neither the Issuer nor any Paying Agent (as defined in the Terms and Conditions of the Notes) nor any
other person would be obliged to pay additional amounts with respect to any Note as a result of the
imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in an EU
Member State that is not obliged to withhold or deduct tax pursuant to the Savings Directive.
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0012018-0003086 HK:20704050.1 S-18
DESCRIPTION OF THE ISSUER
The paragraph on “Renewables” appearing on page 118 of the Original Offering Circular shall be
deemed to be deleted in its entirety and replaced by the following:
Renewable Energy
The Issuer has commissioned a solar photo voltaic (PV) project with a capacity of 200 MW at
Anantpur, Andhra Pradesh in April 2016 and a total capacity of 310 MW at various other locations.
Furthermore, the Issuer is augmenting its capacity, through renewable sources of energy, to broad-
base its generation mix to ensure long-term competitiveness, mitigation of fuel risks and promotion of
sustainable power development.
The Issuer has set a target to achieve by 2022 a capacity of 10,000 MW of renewable energy. Various
initiatives in this regard include:
1. signing an MoU with the government of Karnataka for a 1,000 MW solar PV project to be
located in the state of Karnataka;
2. signing a letter of understanding with the government of Madhya Pradesh for the
development of a 750 MW solar PV project in the state of Madhya Pradesh;
3. the construction of a 50 MW solar PV project at Anantapur, in the state of Andhra Pradesh, a
250 MW solar PV project at Mandsuar, in the state of Madhya Pradesh and a 260 MW solar
PV project at Badhla, Phase-II, Jodhpur, in the state of Rajasthan;
4. bidding for a 125 MW new solar PV project at Anantapur, Phase-II, Andhra Pradesh, a 625
MW solar PV project at Anantapur, Phase-III, Andhra Pradesh and a 18 MW solar PV project
at Chiriya Tapu, Andaman & Nicobar;
5. commissioning in July 2016 of a 450 kWp capacity rooftop solar PV project at Vindhyachal
in the state of Madhya Pradesh in addition to commissioning of a 200 MW of solar PV project
in April 2016; and
6. signing an MoU with the Chattisgarh Renewable Energy Development Agency for the
development of the Tattapani Geothermal project in in the state of Chattisgarh.
The Issuer is also planning a 100 MW wind power project in India and a 1,500 kWp rooftop solar PV
project at Kudgi, in the state of Karnataka.
Furthermore, the Issuer has also been nominated as the implementing agency by the Ministry of New
and Renewable Energy for the selection of developers under the National Solar Mission for a total
capacity of 15,000 MW.
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0012018-0003086 HK:20704050.1 S-19
SUPERVISION AND REGULATION
The paragraph appearing on page 182 of the Original Offering Circular shall be deemed to be deleted
in its entirety and replaced by the following:
ECB Policy on Issuance of Overseas Rupee-Denominated Bonds
The RBI has set out the regulations relating to issuance of Rupee denominated bonds overseas
(Rupee Denominated Bonds or Rupee Denominated Notes ), in the “Master Direction – External
Commercial Borrowings, Trade Credits, Borrowing and Lending in Foreign Currency by Authorised
Dealers and Persons other than Authorised Dealers” dated January 1, 2016, as modified or replaced
from time to time (the ECB Guidelines). Under the ECB Guidelines, any company or body corporate,
including real estate investment trusts and infrastructure investment trusts, can issue plain vanilla
Rupee Denominated Bonds- with a three-year minimum maturity period. These issuances can be
listed or unlisted and may only be made in a jurisdiction and to can only be subscribed by a resident
of a country that is a member of the FATF or member of a FATF Style Regional Body and whose
securities market regulator is a signatory to the International Organization of Securities Commission's
(IOSCO’s) Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to
bilateral Memorandum of Understanding with the Securities and Exchange Board of India (SEBI) for
information sharing arrangements. Additionally, investors should not be resident of a country
identified in the public statement of the FATF as: (i) a jurisdiction having a strategic Anti-Money
Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply;
or (ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not
committed to an action plan developed with the FATF to address the deficiencies.
Banks incorporated in India cannot subscribe to such Rupee-Denominated Bonds; however,
they can act as arrangers and underwriters for such issuances. There is no all-in-cost ceiling for
Rupee-Denominated Bond issuances and pricing is in accordance with market conditions. Issuers can
raise up to Rs.50 billion under the automatic route beyond which an RBI approval would be required.
The proceeds of such issuance can be used for all purposes except for: (i) real estate projects other
than development of integrated township and affordable housing projects; (ii) investment in capital
markets and domestic equity investments; (iii) prohibited activities under the Foreign Direct
Investment Guidelines; (iv) land acquisition; and (v) on-lending to other entities for any of the above
objectives.
Issuers issuing Rupee Denominated Bonds offshore are required to comply with provisions of
the ECB Guidelines in relation to reporting requirement, security creation and parking of proceeds
offshore. The issuance of Notes is being made under the automatic route under the ECB Guidelines.
Furthermore, investors are allowed to hedge their Rupee exposure through permitted
derivative products with an AD Category-I Bank in India; or through the offshore branches or
subsidiaries of Indian banks; or branches of foreign banks with a presence in India on a back to back
basis.
In relation to the Notes, the Issuer is required to provide the list of primary Noteholders
procured from the Dealer to the relevant regulatory authorities in India as and when required.
.
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0012018-0003086 HK:20704050.1 S-20
USE OF PROCEEDS
Funding of Eligible Green Projects
The Issuer will apply the net proceeds from the sale of the Notes to finance investments in the
following renewable energy projects (Eligible Green Projects) in accordance with the ECB Guidelines:
a) Solar projects or assets in one or more of the following activities:
(i) solar electricity generation facilities where a minimum of 85% of the electricity
generated from the facility will be derived from solar energy resources; and
(ii) wholly dedicated transmission infrastructure for solar electricity generation facilities.
b) Wind projects or assets in one or more of the following activities:
(i) the development, construction and operation of wind farms; and
(ii) wholly dedicated transmission infrastructure for wind farms.
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0012018-0003086 HK:20704050.1 S-21
THE ISSUER'S GREEN BOND FRAMEWORK
Green Bond Framework Overview
The Issuer is committed to generate and provide reliable power at competitive prices in a sustainable
manner by optimising the use of multiple energy resources with innovative eco-friendly technologies, thereby contributing to the economic development of the nation, social growth of the society and
promoting a healthy environment. The Issuer aims to strive for the achievement of the following
objectives:
Contribute towards a clean and sustainable environment with respect to land, water and air;
Conserve resources by reducting, reusing and recycling;
Initiate and support measures to optimise usage of renewable energy, increase energy efficiency and reduce green house gas emissions;
Support measures for biodiversity conservation by following the practices of protecting, conserving and restoring ecosystems;
Be transparent, ethical and fair to all stakeholders;
Be supportive in developing and enhancing people's standard of living in and around the power plant stations; and
Generate awareness, share knowledge and support training programmes on sustainable development among employees, neighbouring communities and the public at large.
Furthermore, the Issuer has a Board committee titled the "Corporate Social Responsibility and Sustainability Committee" comprising three full time directors, an independent director and a
Government nominee director, which formulates and recommends to the Board the Issuer’s corporate
social responsibility policy (including that of sustainable development) from time to time.
The Issuer’s Green Bond Framework sets out how the Issuer proposes to use the proceeds from the
issuance of the Notes, including any subsequent issuance of green bonds, for the construction of
Eligible Green Projects (as defined below) in a manner consistent with the Issuer's sustainable values, and in turn provide transparency and relevant disclosure to investors for purposes of making their
investment decisions.
The Issuer’s Green Bond Framework has been established in accordance with the Climate Bonds
Standard version 2.0 and also adheres to the Green Bond Principles, 2016, issued by the International
Capital Markets Association.
Selection and Evaluation of Eligible Green Projects
As part of the Issuer’s selection and evaluation of Eligible Green Projects, (as defined below) a
“Feasibility Report” will be prepared prior to any investment in a renewable project and the project
will also be appraised by an independent agency. Thereafter, investment proposals will be reviewed
by a project sub-committee of the Board, and based on the recommendations of the project sub-
committee, necessary approvals will be granted by the Board.
The Issuer's “corporate budget group” will then make an assessment of the potential eligibility of the
projects based on the criteria outlined in the Issuer’s Green Bond Framework and thereafter determine
if the proceeds from the green bond issuance can be deployed for any of those projects. If the criteria
is met, the “corporate budget group” would then recommend the utilisation of the proceeds from the
green bond issuance to the respective eligible green projects (Eligible Green Projects) for further
approval by the Issuer’s Director (Finance).
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0012018-0003086 HK:20704050.1 S-22
Management of Proceeds
The Issuer will (i) maintain one or more separate bank account(s) for receiving the proceeds from the
issuance of the Notes, (ii) allocate an amount equal to the net proceeds derived from the issuance of
the Notes for financing various Eligible Green Projects and (iii) establish various internal tracking
systems to monitor and account for the allocation of such proceeds from the issuance of the Notes.
Furthermore, unallocated proceeds from the issuance of the Notes shall be held in various forms of
temporary investment instruments, including cash, corporate liquid term deposits, term deposits with
commercial banks, units of debt mutual funds or government securities that are permitted for purposes
of investments in accordance with the Issuer’s investment policy and applicable guidelines of the RBI.
Reporting
As long as the Notes and any subsequent green bonds issued by the Issuer remain outstanding, the
Issuer will report annually the use of proceeds for the issue of the Notes through its website
http://www.ntpc.co.in/ and provide information, including (i) the project type, capacity and location
for each green bond issuance; (ii) the current allocated and outstanding amounts and contractual
maturity dates of such issuances; (iii) the degree of reduction in green house gases achieved; and (iv)
confirmation that the use of proceeds from the green bond issuances are in conformity with the
Issuer’s Green Bond Framework.
Assurance
The Issuer’s Green Bond Framework will be reviewed by KPMG and will be certified by the Climate
Bonds Initiative for the issue of the Notes. Such certification will also be published on the Issuer’s
website.
The Issuer will also receive post-issuance certification from the Climate Bonds Initiative to assure
continued adherence to the Issuer’s Green Bond Framework with respect to allocation of proceeds,
ongoing eligibility of the projects and assets, adequacy and output of the Issuer’s internal control and
systems and use of unallocated funds. This post issuance certification by the Climate Bonds Initiative
is expected to be obtained within one year after issuance of the Notes and will be published on the
Issuer’s website http://www.ntpc.co.in/.
http://www.ntpc.co.in/http://www.ntpc.co.in/
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0012018-0003086 HK:20704050.1 S-23
SUBSCRIPTION AND SALE
The following selling restrictions are in addition to, and should be read in conjunction with,
those in the Original Offering Circular under “Subscription and Sale”
Additional Selling Restriction for issuance of Rupee Denominated Notes
Each of the Issuer and Dealers represented and agreed that:
(a) the Offering Circular or any material relating to the Rupee Denominated Notes has not been
and will not be circulated or distributed to any prospective investor who does not meet the
FATF Requirements (as defined below) or to any offshore branch of an Indian bank; and
(b) the Rupee Denominated Notes will not be offered or sold and have not been offered or sold as
part of the primary issuance to any person who does not meet the FATF Requirements or to
any offshore branch of an Indian bank, it being agreed that the Dealers have no responsibility
for determining the FATF Requirements compliance status of investors when such Rupee
Denominated Notes are subsequently reoffered or resold.
Disclosure of information relating to holders of the Rupee Denominated Notes
In addition, holders and beneficial owners shall be responsible for compliance with restrictions on the
ownership of the Rupee Denominated Notes imposed from time to time by applicable laws or by any
regulatory authority or otherwise. In this context, holders and beneficial owners of Rupee
Denominated Notes shall be deemed to have acknowledged, represented and agreed that such holders
and beneficial owners are eligible to purchase the Rupee Denominated Notes under applicable laws
and regulations and are not prohibited under any applicable law or regulation from acquiring, owning
or selling the Rupee Denominated Notes. Potential investors should seek independent advice and
verify compliance with FATF Requirements prior to any purchase of the Rupee Denominated Notes.
The holders and beneficial owners of Rupee Denominated Notes shall be deemed to confirm that
for so long as they hold any Rupee Denominated Notes, they will meet the FATF Requirements
and will not be an offshore branch of an Indian bank.
Further, all Noteholders represent and agree that the Rupee Denominated Notes will not be
offered or sold on the secondary market to any person who does not comply with the FATF
Requirements or which is an offshore branch of an Indian bank.
To comply with applicable laws and regulations, the Issuer or its duly appointed agent may from time
to time request Euroclear and Clearstream, Luxembourg to provide them with details of the
accountholders within Euroclear and Clearstream Luxembourg, as may be appropriate, that hold the
Rupee Denominated Notes and the number of Rupee Denominated Notes held by each such
accountholder.
Euroclear and Clearstream, Luxembourg participants which are holders of the Rupee Denominated
Notes or intermediaries acting on behalf of such Noteholders would be deemed to have hereby
authorised Euroclear and Clearstream, Luxembourg, as may be appropriate, to disclose such
information to the Issuer or its duly appointed agent.
For the purposes of this section, FATF Requirements means an investor who is a resident of a country:
a) that is a member of the FATF or a member of a FATF-style regional body;
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0012018-0003086 HK:20704050.1 S-24
b) whose securities market regulator is a signatory to the International Organization of Securities
Commission's Multilateral Memorandum of Understanding (Appendix A Signatories) or a
signatory to bilateral Memorandum of Understanding with the Securities and Exchange Board
of India for information sharing arrangements; and
c) which is not identified in a public statement of the FATF as:
(i) being a jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply; or
(ii) being a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies.
Further if a jurisdiction requires that the Offering be made by a licensed broker or dealer and the Joint
Lead Managers or any affiliate of the Joint Lead Managers is a licensed broker or dealer in that
jurisdiction, the Offering shall be deemed to be made by that Joint Lead Manager or its affiliate on
behalf of the Issuer in such jurisdiction.
Each of the Joint Lead Managers and its affiliates may engage in investment or commercial banking
and other dealings in the ordinary course of business with the Issuer or its affiliates from time to time
and may receive fees and commissions for these transactions. In addition to the transactions noted
above, each Joint Lead Manager and its affiliates may, from time to time after completion of the
Offering, engage in other transactions with, and perform services for, the Issuer or its affiliates in the
ordinary course of their business. Each Joint Lead Manager or its affiliates may also purchase Notes
for asset management and/or proprietary purposes but not with a view to distribution or may hold the
Notes on behalf of clients or in the capacity of investment advisors. Whil