Annual Report

2010

Bhutan Power Corporation Limited Bhutan Power Corporation Limited

Website : www.bpc.bt Meeting your energy needs
Bhutan Power Corporation Limited

Year of Incorporation : 1st July, 2002

Registered Office : P.O Box 580
Thimphu, Bhutan
Tele No : 975 2 325095
Fax No : 975 2 322279
Website : www.bpc.bt
 Values of BPC
Achieving our Vision & Mission requires dedicated people
who are bright, creative, and energetic, and who possess
the following values:

• Integrity and honesty

• Care for customers and stakeholders

• Socially and environmentally conscious

• Taking on challenges

Vision
To be Customer Centric, Commercially Viable and So-
cially Conscious, and to contribute to the Socio-economic
Development of the Country.

Mission
To Transmit, Distribute and Supply Electricity within the
Country, Wheel Electricity for Export, and practice Good
Corporate Governance.

“Electricity for All” by 2013

2 Bhutan Power Corporation Annual Report 2010

 Contents
CONTENTS PAGE NO

Director’s Report 4
Auditors’ Report 10
Balance Sheet 12
Profit and Loss Account 13
Cash Flow Statement 14
Notes for Cash Flow Statements 15
Schedules Forming part of Balance Sheet 16
Schedules Forming part of the Profit and Loss Account 20
Notes on Account forming Part of
Balanced Sheet and the Profit and Loss Account 23
Annexure to Auditors’ Report 31
Profit Variance Analysis 36
Financial Highlights 37

Bhutan Power Corporation Annual Report 2010 3

 Director’s Report
Director’s Report on the Performance of Bhutan
Power Corporation Limited for the year 2010

(1st January - 31st December 2010)

Introduction
As the Chairman of the BPC Board of Directors, it gives me great pleasure to present this
report to Druk Holding and Investments Ltd. (DHI), the Shareholder of BPC, on the perfor-
mance of the Bhutan Power Corporation Limited for the period covering 1st January 2010
to 31st December 2010.
Operational Performance
The domestic electricity demand has reached 257 MW in 2010 and the customer base has
grown over 108,799. During the year BPC has added 17,029 customers which comprises
of 11,868 rural and 994 Fill- in households through Rural Electrification (RE) program, and
4167 normal service connections. BPC purchased 1631.28 Million of units (MU) of ener-
gy, mainly from DGPC, to cater to the domestic demand, out of which royalty energy was
1,082.478 MU. Total sale to various categories of customers was 1570.77 MU. Sales growth
increased by 14.5% over the previous year. BPC also wheeled 5579.472 MU of energy for
export by DGPC to India as against 5404.82 MU in 2009. The global loss for the year was
1.17% whereas the domestic T&D loss was 5.07%.

BPC has been able to efficiently cope up with the expansion of power system and meet
the increased load demand with expected reliability of SAIFI and SAIDI of 2.5 interruptions
per customer per year and 4.62 hours of interruption per customer per year, respectively.
Towards delivery of effective and timely customer services and care, 135 service centers
with multi-task staff have been established across the country. In yet another effort to
improve the customer services, BPC launched on-line internet billing system in Thimphu and
Phuentsholing by which customers can now pay their electricity bills online through internet
bank transfer. The Customer Satisfaction survey conducted by the Institute of Management
Studies through DHI revealed that 96% of BPC’s customers are satisfied.

BPC has been entrusted the role of System Coordinator since 2007. Recognizing the high
rate of expansion of power system and growth in network complexity, need was felt by BPC
to establish a National Load Dispatch Center (NLDC), so as to enable online monitoring of
power systems operations for carrying out effective dispatching of load and coordination with
generating plants of DGPC and the Indian Eastern Grid system operator. The establishment
of NLDC, which involves an investment of over Nu. 205 million, is currently underway and is
expected to be completed by October 2011.

4 Bhutan Power Corporation Annual Report 2010

Financial Performance
Assets
The company has achieved huge growth in terms of building its asset base. The asset of the
company stands at worth Nu 15,852 million as on 31st December 2010. This corresponds to
an average growth rate of 16.3% over the last three years. In the year 2010, the asset has
increased by 31% over that of previous year on account of good progress of capital works
achieved during the year.
Loan Portfolio
The Company has drawn a loan of Nu 1,026.988 million from JICA and Nu 681.536 million
from ADB for Rural Electrification works totaling to Nu 1,708.524 million during the year. The
Corporation also made a principal repayment of Nu 126.296 million for the existing loans.
The total loan portfolio increased to Nu 4,085.478 million during the year.
Grants
The Company received capital grant of Nu 1,246.07 million for undertaking RE and deposit
works. After adjustments and transfer of the grant to paid-up equity capital, the cumulative
grant at the end of the year is Nu 2,183.780 million.
Net Worth
The net worth of the company today is Nu 11,751.4 million and the average growth rate of
the net worth has been 15.3% for the last three years. For the current year, the net worth
has increased by about 22%.
Revenue
BPC earned gross revenue of Nu 3,366.153 million during the year as compared to Nu
2,900.986 million in the previous year. The growth in the overall revenue is about 16.03
% from the previous year. The revenue from sale of electricity grew by 21.53 % from Nu
2,161.087 million in 2009 to Nu 2,626.410 million in 2010. The revenue earnings from wheel-
ing decreased to Nu 651.660 million in 2010 from Nu 675.602 million in 2009 which is on
account of reduction in the wheeling tariff from Nu 0.125 per unit to Nu 0.111 per unit with
effect from 1st August 2010.
Expenditure
The overall expenses increased from Nu 1,478.108 million in 2009 to Nu 1,569.001 million
during the year net of prior period adjustments. The increase in the spending is about 6% as
compared to the previous year. The purchase of power cost grew by 15%, employee cost
increased by 13%, operation and maintenance cost by 16% and Administrative expenses
by - 4% as compared to the previous year. There has been reduction in the purchase rate
of royalty energy from Nu 0.30 per unit to Nu 0.13 per unit with effect from 1st August 2010.
The corporation paid interest on loan for RE Project and Tala transmission assets amounting
to Nu 78.108 million. The RE projects and Tala transmission assets attract interest rates of
6% and 9 % respectively per annum.

Bhutan Power Corporation Annual Report 2010 5

Profit, Tax and Dividend
BPC made a net profit before tax of Nu 1,353.196 million as against Nu 986.452 million
in 2009 which is an increase of about 37%. The Corporate Income Tax for the year is as-
sessed at Nu 354.776 million against Nu 254.015 million in 2009.
A dividend of Nu 99.607 million has been proposed for the year after adjustment of Nu 150
million from previous year’s payout. For the previous year, dividend of Nu 333.109 million
was paid. An amount of Nu 894.974 million is proposed to be retained as Reserve to enable
BPC to take up system expansion works.
Capital Expenditure
During the year, the Corporation spent Nu 3,376.19 million towards capital expenditure. Of
this, asset worth about Nu 1,009 million has been added and Nu 2,367 million is still under
Capital Works in Progress. The capital spending for the year has been 85.53% of the bud-
get, which is the highest achieved till date.
The main source of cash for meeting the expenses of the Company during the year has come
from its own operations while the capital expenditures on RE and replacement of ground
wire by OPGW were supplemented from the RGoB as Grant. The larger portion of the RE
works were financed through Loans. The funds for the construction of 400 kV Punatshang-
chu I transmission lines were received from the Punatsangchhu-I Project Authority.
Power System Expansion Programs
BPC has completed the construction of the 66 kV Yurmo-Bumthang transmission line and
reached Kurichhu grid electricity supply to Bumthang during the year. A state-of-art 33 kV
GIS substation, the first of its kind in the country, has been commissioned in Garpang for
supply of electricity to Bumthang Dzongkhag.
For linking the Eastern and Western Grids and to enhance national energy security, BPC is
carrying out the construction of the 220 kV double circuit Dagachhu-Tsirang-Jigmeling and
132 kV Jigmeling-Lodrai transmission lines. The construction of the lines is progressing well
and scheduled for commissioning by July 2011. The scope of the 400 kV Punatsangchhu-I
power evacuation plan was finalized and involves construction of two 400 kV double circuit
transmission lines from Punatsangchhu-I to Lhamoizingkha using twin ACSR MOOSE con-
ductors. The contract for construction of the transmission lines was awarded in August 2010.
The project is scheduled to be completed by August 2014.
The construction of the 132 kV transmission line from Nganglam substation to Dungsam Ce-
ment Project at Nganglam was completed and the line was formally handed over.
BPC is also undertaking ICT connectivity infrastructure projects to implement Broadband
Master Plan of the Royal Government. The live - line replacement of ground wire with Opti-
cal Ground Wire (OPGW) for achieving national connectivity and creation of three Interna-
tional Gateways are progressing as per schedule. Contract for laying of ‘All Dielectric Self
Supporting (ADSS) Optical fiber’ project, with the objective to achieve ICT connectivity to
Trashiyangtse and Gasa Dzongkhag headquarters and 205 Gewogs in the country through
optical fiber networks by using low and medium voltage distribution poles, has been signed
in December 2010.

6 Bhutan Power Corporation Annual Report 2010

During the year, the Engineering and Design services of BPC provided in-house technical
services on the engineering and design aspects of all its transmission and distribution proj-
ects, except for the 400 kV Punatsangchhu-I Project for which the technical services of Pow-
ergrid Corporation of India Limited has been hired. In the field of ICT, BPC is fully involved in
the implementation of the SAP-ERP for integrated management of information systems and
business operations. The Project ‘ilogmey’ with its mission to ‘create a knowledge based,
customer centric efficient corporate environment, through integrated, accurate and acces-
sible information & decision support system’ is planning to go live with its 20 modules in
April 2011. The implementation of the ERP Project was started from June 24, 2010 with the
Implementation Partner (IP), Wipro Ltd, India.
Rural Electrification (RE)
BPC has been entrusted to fulfill one of the most important development priorities for the
country, i.e., “Electricity for All by 2013”, which involves reaching grid electricity to 40,257
rural households. The entrustment of this mandate posed a huge challenge to BPC, con-
sidering that up to end of the 9th FYP, only 52% was the coverage of RE. BPC is however
following a well charted plan to achieve the target. During the year, BPC has electrified
11,868 rural homes through various funding sources, i.e. JICA, ADB and ADA. BPC has
also, through its own funding, carried out Fill-in RE of 994 households. The rural populace
has been very appreciative to the BPC for bringing “Light” and enhancing their quality of Life.
Human Resources Management
In an effort to meet the huge requirement of manpower for the power expansion programs
and the various RE Programs, 160 new employees from various academic backgrounds
were recruited during the year. Recognizing the importance of developing the human re-
source capacity in BPC, a total of 9,744 person days of trainings was conducted both in-
country and ex-country. Furthermore, BPC provided three full scholarships and two partial
scholarships for eligible employees to pursue Masters Degrees in fields relevant to BPC.
Corporate Governance
Seven Board meetings were held during the year and the quorums of these meetings were
duly maintained. The Annual General Meeting for the year 2009 was held on 15th April 2010,
thereby complying with the Companies Act, 2000. Upon the requisition of the Shareholder,
an Extraordinary General Meeting was also held on 10th November 2010 to pass a resolu-
tion for the alteration of the Articles of Incorporation of BPC to align it with the DHI Owner-
ship Policy. Since BPC had to undertake huge volume of procurement of goods and ser-
vices, many Board Level Tender Committee meetings were held and tenders were awarded
in timely and transparent manner.
In order to ensure transparent management systems and controls, BPC continually re-as-
sesses the effectiveness of strategies and policies in place. A number of Manuals such as
the revised BPC-Service Rules and Regulations 2010, Inventory Manual, Vendor Perfor-
mance Management System and Inventory Management Manual were framed and imple-
mented during the year. Overall, the company is ensuring that its activities and plans are in
line with its Corporate Strategic Plan – 2007.

Bhutan Power Corporation Annual Report 2010 7

Compact signed with DHI
The Compact signed with DHI outlines the major activities to be taken up by BPC for the
year and accordingly these have been set as targets to be achieved for the year. BPC has
achieved most of the targets set in the compact for 2010, including the profit margin. The
payout of the 10% Performance Based Variable Allowance to the employees of BPC is
based on the achievement of the compact targets. The overall achievement of BPC with
respect to Compact targets is 99.86%.
Performance Based Incentive System (PBIS) Achievement
The Corporation has achieved the targets set against most parameters such as the Profit,
reliability (SAIFI and SAIDI), system losses and current budget compliance. The overall
achievement of the company was 83.42%. As per Board directives, the overall payout for
the company against PBIS achievement has been adjusted to maintain at two months of the
company’s basic salary.
Corporate Social Responsibility and subscription to the Philosophy of Gross Nation-
al Happiness (GNH)
BPC endeavors to mainstream the principles of GNH in all its plans and operations. It is also
enshrined in BPC’s vision statement to be socially conscious and contribute to the socio-
economic development of the country.
By implementing the RE projects to achieve ‘Electricity for All by 2013’, BPC is providing
access to clean renewable energy to the rural mass to alleviate poverty and uplift their socio-
economic condition. The implementation of this noble cause is a direct contribution by BPC
to achieve GNH. BPC is, through its own funding and initiative, implementing ‘RE fill-in’ proj-
ect in order to electrify the left out or newly built homes in the already electrified rural areas.
During the year, contributions, monetary or in-kind, were made by the corporation to various
religious and other institutions in line with the Donation Policy of BPC. The total amount of
monetary donation was Nu 1.634 million for the year. On 1st July 2010, BPC celebrated the
‘BPC Day’ to mark the incorporation of BPC eight years ago on 1st July 2002. In order to
commemorate the event, a blood donation campaign was organized in the BPC Corporate
Office premises in collaboration with the JDWNR Hospital, Thimphu.

Challenges

Inview of the lean flow electricity generation constraints a major challenge for BPC will be
to match the supply and demand of electricity in winter when the demand is at its maximum.
This problem is likely to continue until additional generation is available with commissioning
of the Puna-I HEP and other projects thereafter. Arrangement for re-import of power from
India especially to meet the winter peaking shortages is being explored.
While BPC is actively implementing the RE projects in all Dzongkhags for completion by
2013, the remoteness of the villages in difficult terrains continues to pose challenges to
BPC in transporting the materials. Further, with the simultaneous implementation of the
hydroelectric power projects under the 10,000 MW development plan, BPC will have to
construct the transmission lines and pooling stations for evacuation of power in line with
the hydroelectric projects’ completion schedules. This is expected to pose a huge challenge

8 Bhutan Power Corporation Annual Report 2010

which would stretch the institutional capacity of BPC. Along with the obligation to construct
the transmission and distribution infrastructures and establishing National ICT connectiv-
ity , BPC has to also simultaneously put in place proper O&M setups to look after the new
power and ICT infrastructures. An immediate issue being faced by BPC is the high attrition
rate of employees from BPC, particularly at the management and mid-management level,
due to more attractive service conditions in other organizations. This issue, which is already
a pressing concern, needs to be given priority at the level of the Board and Shareholder, in
order to retain and motivate the existing staff and to also attract much more expertise and
skills in the near future.
Acknowledgement
On behalf of the Board of Directors, I take this opportunity to extend our sincere gratitude
and appreciation to the Ministry of Economic Affairs, Ministry of Finance and the Depart-
ment of Energy for their timely assistance in terms of policy interventions and other matters.
Our appreciation also goes to the Department of Forests, Bhutan Electricity Authority, Land
Commission, National Environment Commission, Druk Green Power Corporation Ltd. for
their continued support and cooperation. Thanks are also due to Power Grid Corporation of
India Ltd, Central Electricity Authority of India, Electricity Generating Authority of Thailand,
Provincial Electricity Authority of Thailand and other agencies who have been closely asso-
ciated with BPC. We remain thankful to the ADB, JICA and ADA for their funding and techni-
cal assistance due to which BPC is confident to fulfill the target of ‘Electricity for all by 2013’.
Our special gratitude goes to Druk Holding & Investments for their invaluable guidance and
continued support towards instituting best business practices in BPC.

The Board would like to place on record our appreciation for the dynamic leadership provid-
ed by the Managing Director and the dedicated service and hard work put in by the manage-
ment and employees of BPC which resulted in an exemplary performance of the Company.
The Board would like to urge BPC to sustain and improve upon its level of competence to
achieve greater heights of success and fulfill the expectations of its stakeholders and cus-
tomers. Towards this, the Board would like to assure its full support to the management of
BPC.

For and on behalf of the BPC Board

(Yeshi Wangdi)
Chairman

Bhutan Power Corporation Annual Report 2010 9

 Auditor’s Report
TO THE MEMBERS OF BHUTAN POWER
CORPORATION LIMITED

1. We have audited the attached Balance Sheet of Bhutan Power Corporation Limited
(the Corporation) as at 31st December, 2010 and the related Profit and Loss Account
and Cash Flow Statement of the Corporation for the year ended on that date annexed
thereto all of which we have signed under reference to this report. These financial
statements are the responsibility of the Corporation’s Management. Our responsibil-
ity is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the generally accepted auditing stan-
dards and in keeping with the “General Terms of Reference and Minimum Audit Ex-
amination and Reporting Requirements” issued by the Royal Audit Authority, as given
in Schedule XIV of the Companies Act of The Kingdom of Bhutan, 2000. Those stan-
dards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatements. An audit
includes examining on a test basis, evidences supporting the amounts and disclo-
sures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the management, as well as evalu-
ating the overall financial presentation. We believe that our audit provides a reason-
able basis for our opinion.
3. As required by Section 75 of the Companies Act of the Kingdom of Bhutan, 2000
read with Section II of Schedule XIV thereto (the Minimum Audit Examination and
Reporting Requirements) we enclose in the Annexure - I a statement on the matters
specified therein, to the extent applicable.
4. We report that:
4.1 Our examination was made in accordance with the generally accepted ac-
counting standards and accordingly included such tests of accounting records
and such other auditing procedures as we considered appropriate for the pur-
poses of our audit.
4.2 We have obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purpose of our audit.
4.3 In our opinion proper books of account as required by law have been kept by
the Corporation so far as appears from our examination of the books.

10 Bhutan Power Corporation Annual Report 2010

 4.4 The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt
within this report have been prepared on the basis of generally accepted ac-
counting principles and that the financial statements are in agreement with the
books of account.
5. As disclosed in Accounting Policy No. 3 of Schedule 19, the method of account-
ing for depreciation followed by the Company is based on calculations made
at the rates which are different from those prescribed by the Companies Act of
the Kingdom of Bhutan, 2000, resulting in short charging of depreciation by Nu.
171,569,964, overstatement of Net Block of Fixed Assets by Nu. 171,569,964 and
overstatement of Net Worth by the same amount.
6. In our opinion and to the best of our information and according to the explanations
given to us and subject to our comments in paragraph 5 above, the said accounts
together with schedules, significant accounting policies and notes on accounts,
give the information required by the Companies Act of the Kingdom of Bhutan,
2000, in the manner so required and give a true and fair view:-
a) In the case of Balance Sheet, of the state of affairs of the Corporation as at
31st December 2010;
b) In the case of Profit and Loss Account, of the Corporation’s profit for the year
ended on that date and
c) In the case of the Cash Flow Statement, of the movement of cash during the
year ended on that date.

Dated, the 21 day of March,2010

Kolkata. For S. S. KOTHARI & ASSOCIATES
Chartered Accountants
(FRN: 305147E)

(P.K. BHATTACHARYA)
Partner
Membership No. 015899

Bhutan Power Corporation Annual Report 2010 11

 Balance Sheet
BALANCE SHEET AS AT 31st DECEMBER ,2010
PARTICULARS Schedules As at 31st As at 31st
December 2010 December 2009
Amount (Nu) Amount (Nu)
SOURCES OF FUND
Shareholders’ Fund
Share Capital 1 7,315,673,000 7,258,771,000
Reserves and Surplus 2 4,435,679,272 2,343,672,132
11,751,352,272 9,602,443,132
Loan Funds 3 4,100,405,277 2,518,789,820
Total 15,851,757,549 12,121,232,952
APPLICATION OF FUNDS
Fixed Assets 4
Gross Block 12,720,419,308 11,760,087,034
Less- Depreciation 2,778,312,766 2,354,721,911
Net Block 9,942,106,543 9,405,365,122
Capital Work in Progress 3,754,258,707 1,387,106,350
13,696,365,250 10,792,471,472
Current Assets,Loans and Advances
Inventories 5 365,094,070 369,996,149

Debtors 6 102,175,763 199,233,517

Cash and Bank Balances 7 2,231,514,009 1,785,694,297
Other Current Assets 8 754,783,443 337,765,215
Loan and Advances 9 1,031,006,289 359,351,198
Total Current Assets 4,484,573,574 3,052,040,375
Less: Current Liabilities and Provisions
Current Liabilities 10 1,146,352,511 701,329,446
Provisions 11 1,182,828,764 1,021,949,450
Total current liabilities & Provisions 2,329,181,275 1,723,278,896
Net Current Assets 2,155,392,299 1,328,761,480
Total 15,851,757,549 12,121,232,952
Notes on Accounts 19
Schedule 1 to 11 and Schedule 19 form an integral part of the Balance Sheet
In terms of our separate report of even date

For S. S. Kothari & Associates

Chartered Accountants

21 Old Court House Street

Kolkata-700001 P.K. BHATTACHARYA Director Managing Director Chairman
The 2/3.2011 Partner

12 Bhutan Power Corporation Annual Report 2010

 PROFIT AND LOSS ACCOUNT FOR YEAR
ENDED 31st DECEMBER 2010
PARTICULARS Schedules 2010 2009
Amount (Nu) Amount (Nu)
INCOME
Electricity Revenue 12 3,278,069,504 2,836,689,369
Other Revenue 13 88,083,333 64,296,345
Total 3,366,152,837 2,900,985,715
EXPENDITURE
Purchase of Power 897,450,929 779,288,080
Employee Cost 14 489,665,116 434,656,011
Operation and Maintenance Expenses 15 139,712,776 120,862,101
Administration and Other Expenses 16 40,074,306 41,621,512
Finance Charges 17 78,108,094 112,659,178
Prior period adjustments 18 (76,010,178) (9,480,427)
Total 1,569,001,042 1,479,606,455
Profit before Depreciation 1,797,151,795 1,421,379,260
Depreciation 443,955,868 434,927,367
Profit after Depreciation 1,353,195,927 986,451,893
Provision for Tax 354,766,000 254,015,170
Profit after tax 998,429,927 732,436,722
Proposed Dividend 99,607,482 333,109,181
Transfer to Insurance Reserve 3,848,084 1,832,000
Profit(Loss) for the period 894,974,361 397,495,542
Balance brought forward 1,269,575,377 872,079,836
Balance carried to Balance Sheet 2,164,549,738 1,269,575,377
Notes on Accounts 19

Schedules 12 to 19 form integral part of the Profit and Loss Account

In terms of our separate Report of even date

For S. S. Kothari & Associates

Chartered Accountants

21 Old Court House Street

Kolkata-700001 P.K. BHATTACHARYA Director Managing Director Chairman
The2/3.2011 Partner

Bhutan Power Corporation Annual Report 2010 13

 CASH FLOW STATEMENT
For the period from For the period from
Ist January to 31st Ist January to 31st
December December

Amount (Nu). Amount (Nu).

Net cash flow from operating activities ( Note - 1) 1,595,595,693 1,671,191,048

Returns on investments and servicing of finance ( Note 2) (379,613,317) (249,958,723)

Tax paid during the year (254,015,170) (242,074,346)

Capital expenditure ( Note 3) (3,347,849,646) (1,312,153,374)

Net cash inflow/(outflow) from investing activities (3,981,478,134) (1,804,186,442)

Net cash inflow/(outflow) before financing (2,385,882,441) (132,995,394)

Financing (Note 4) 2,831,702,153 759,637,464

Net cash inflow/(outflow) from financing activities 2,831,702,153 759,637,464

Increase/(Decrease ) in cash 445,819,712 626,642,070

Opening cash and cash equivalents 1,785,694,297 1,159,052,228

Closing cash and cash equivalents 2,231,514,009 1,785,694,297

Cash Inflow 445,819,712 626,642,070

In terms of our separate report of even date

For S. S. Kothari & Associates

Chartered Accountants

21 Old Court House Street

Kolkata-700001 P.K. BHATTACHARYA
The2/3.2011 Partner Director Managing Director Chairman

14 Bhutan Power Corporation Annual Report 2010

 NOTES FOR CASH FLOW STATEMENT
Note - 1. Net Cash flow from Operating Activities
Indirect Method
For the period from For the period from
Ist January to 31st Ist January to 31st
December 2010 December 2009

Amount (Nu). Amount (Nu).

Net profit before tax/operating profit 1,353,195,927 986,451,893

Add: Increase in Capital Reserve -
Add back:- Depreciation charges 443,955,868 434,927,367
Interest payable 78,108,094 112,659,178
Prior Period Depreciation - -
Loss on sale of fixed assets 522,063,962 - 547,586,545
Deduct:- Profit on sale of fixed assets - 4,875,074
Interest receivable 31,603,957 13,920,455
31,603,957 18,795,529 18,795,529
1,843,655,931 1,515,242,908
(Increase)/Decrease in stock 4,902,079 (51,840,576)
(Increase)/Decrease in Debtors 97,057,754 (92,908,705)
(Increase)/Decrease in Loans & advances (913,729,437) (98,957,738)
(Increase)/Decrease in other current assets (417,018,228) (234,020,656)
Increase/(Decrease) in Creditors 980,727,594 633,675,815
Net cash flow from operating activities 1,595,595,693 1,671,191,048
Note - 2 Returns on investments and servicing of finance
Interest received 31,603,957 13,920,455
Interest paid 78,108,094 112,659,178
Dividends paid 333,109,181 151,220,000
Dividend received - -
Total (379,613,317) (249,958,723)
Note - 3 Capital expenditure
Payments to acquire intangible fixed assets - -
Payments to acquire tangible fixed assets (1,009,032,646) (473,961,430)
Payments for capital work-in -progress (2,367,152,357) (850,705,743)
Receipts from sales of tangible fixed assets 28,335,357 12,513,799
Total (3,347,849,646) (1,312,153,374)
Note - 4 Financing
Issue of Shares & Debentures-cash 56,902,000 -
Issue of Shares & Debentures-other than - 1,372,286,000
cash
Increase in Capital reserve 1,193,184,696 (871,011,254)
Loan taken 1,581,615,457 258,362,718
Total 2,831,702,153 759,637,464

Bhutan Power Corporation Annual Report 2010 15

 Schedules forming part of Balance Sheet as at
31st December 2010
As at As at
31st December, 2010 31st December, 2009
Amount(Nu) Amount(Nu)

Schedule1: Share Capital

PARTICULARS
Authorised Share Capital
(7,500,000 equity shares of Nu 1000/- each) 7,500,000,000 7,500,000,000
Issued, Subscribed and Paid up

4,875,828 equity shares fully paid up for consideration 4,875,828,000 4,875,828,000

other than cash
2,439,845 equity shares fully paid up in cash 2,439,845,000 2,382,943,000
(previous year 2,382,943)
Total 7,315,673,000 7,258,771,000
Schedule2: Reserves and Surplus
(a) Profit and Loss Account 2,164,549,738 1,269,575,377
(b) Capital Reserve
As per Last account 30,333,223 45,060,595
Add. Addtions during the year 6,869,536
Less Charged to Depreciation 694,103 691,861
Less Trasfers/Adjustment 47,300 14,035,512
36,461,356 30,333,223

(c ) RGoB Grant Reserve Account 996,723,532 1,853,007,413

Addition during the year
(a) RGoB 496,072,000 520,462,919
(b) Puna Tshangchu 400 kV 750,000,000
Less adjustment during the year 59,015,438 1,376,746,800
2,183,780,094 996,723,532
(d ) Insurance Reserve 50,888,084 47,040,000

Total 4,435,679,272 2,343,672,132

Schedule 3:Loan Funds

Unsecured Loan :
From Royal Government of Bhutan 3,788,972,168 2,173,799,045
Interest During Construction 296,506,604 329,451,783
Interest accrued & due on unsecured loans 14,926,505 15,538,993
Total 4,100,405,277 2,518,789,820

16 Bhutan Power Corporation Annual Report 2010

 Schedules forming part of the Balance Sheet as at 31st December,
2010

Schedule-4 : Fixed Assets

Particulars Gross Block Depreciation

Gross Block Additions Disposal Balance Accumulated For the On Accumulated Net Block Net Block
as on 31/12/09 during during as on Depreciation year disposal Depreciation as on as on
the year the year 31/12/10 as on as on 31/12/2010 31/12/09
31/12/009 31/12/2010
(Nu) (Nu) (Nu) (Nu) (Nu) (Nu) (Nu) (Nu) (Nu)

Land 59,764,505 2,893,872 62,658,377 - - 62,658,377 59,764,505

Buildings 538,226,818 119,771,329 615,868 657,382,279 81,753,545 20,164,055 125,633 101,791,967 555,590,312 456,473,273

Other Civil 463,871,715 78,777,040 30,461 542,618,296 150,224,672 49,375,039 30,460 199,569,251 343,049,045 313,647,043
Structures
Generation 712,085,925 - 226,487 711,859,438 287,607,565 33,971,975 135,891.65 321,443,648 390,415,790 424,478,360
Equipments
Transmission 6,315,244,432 469,534,468 29,239,344 6,755,539,556 877,587,555 177,334,359 3,796,242 1,051,125,672 5,704,413,884 5,437,656,877
Lines
and Equip-
ments
Distribution 3,243,476,769 233,478,382 3,916,713 3,473,038,438 638,805,084 75,764,541 3,925,249 710,644,376 2,762,394,062 2,604,671,686
Lines
Other Equip- 233,852,766 74,104,655 7,559,604 300,397,817 223,334,765 63,444,760 6,133,068 280,647,007 19,750,810 10,518,001
ments

Vehicles 166,880,443 23,686,825 4,990,242 185,577,026 79,209,878 20,687,020 4,485,761 95,411,137 90,165,889 87,670,564

Furniture and 26,683,661 6,786,076 2,121,656 31,348,081 16,198,846 3,214,119 1,733,258 17,679,708 13,668,373 10,484,814
Fixtures
Total 11,760,087,034 1,009,032,646 48,700,376 12,720,419,308 2,354,721,911 443,955,868 20,365,563 2,778,312,766 9,942,106,542 9,405,365,122

Bhutan Power Corporation Annual Report 2010

Figures for 11,302,037,304 473,961,430 15,911,700 11,760,087,034 1,928,067,519 434,927,367 8,272,975 2,354,721,911 9,405,365,122
previous
year

17
 As at As at
31st December 31st December
Amount(Nu) Amount(Nu)

Schedule 5: Inventories
Stores and Spares 343,849,536 341,614,278
Stores & Spares at Site 21,244,534 28,381,871
Total 365,094,070 369,996,149

Schedule 6: Sundry Debtors (Unsecured )

Debts outstanding for more than six months 2,203,666 28,010,508
Other Debts 105,012,958 177,390,962
107,216,624 205,401,471

Sundry Debtors
Considered Good 102,175,763 199,233,517
Considered Doubtful 5,040,861 6,167,954
107,216,624 205,401,471
Less: Provision for doubtful debts 5,040,861 6,167,954
Total 102,175,763 199,233,517
Schedule 7: Cash and Bank Balances
Cash in hand 5,572,653 3,095,489
Bank Balances in Current Account with BoB 738,509,334 1,522,727,735
RMA Bills 300,000,000 -
Fixed Deposit 988,461,258 82,373,520
Fixed Deposit -Gratuity fund 198,970,764 177,497,553
Total 2,231,514,009 1,785,694,297

Schedule 8: Other Current Assets

Pre-Paid Expenses 42,821,940 73,140,814
Prepaid Loan 109,183,332 -
BST refund 869,242 968,760
Welfare loan 389,515 120,357
Miscellaneous current asset 66,455,339 6,789,286
Interst income receivable 29,839,973 5,731,132
Prepaid tax (TDS) 505,224,102 251,014,866
Total 754,783,443 337,765,215
Schedule 9: Loans and Advances
Unsecured,considered good
Personal Advances 49,910 51,184
Advances to Suppliers/Contractors 1,023,894,566 351,959,476
Travel advance to employees 45,465 366,366
Advance to employees for expenses 390,911 265,200
Advance to employess for Capital Works 10,321 760
Other advance 6,615,115 6,708,211
Total 1,031,006,289 359,351,198

18 Bhutan Power Corporation Annual Report 2010

 As at As at
31st December 31st December
Amount(Nu) Amount(Nu)
Schedule 10: Current Liabilities
Sundry Creditors - Suppliers 92,605,949 74,225,336
Sundry Creditors - Contractors 187,895,844 36,289,671
Sundry Creditors - Power 428,748,326 289,531,561
Capacity Reserve charge 7,653,375 7,683,898
Energy & Meter Security 95,359,302 78,410,079
Security deposit from Suppliers/Contractor 7,342,870 6,048,944
EMD from supplier/contractor 117,247 378,483
Income Tax deducted from Contractors/Suppliers - 70,271
Other employee related liabilities 2,101,951 3,869,606
Leave Encashment - Payable 30,183,563 27,600,620
Bonus Payable 41,914,587 38,345,492
PBVA payable 24,806,866
Retention Money - Contractors 139,250,547 67,022,324
Deposit receipt-deposit work 88,248,281 71,822,508
Unpaid cheques 123,803 30,654
Total 1,146,352,511 701,329,446

Schedule 11: Provisions

Provision for Expenses 30,438,480 15,071,137
Provision for gratuity 201,927,286 177,679,616
Provision of Corporate Income tax 850,855,516 496,089,516
Proposed Dividend 99,607,482 333,109,181
Total 1,182,828,764 1,021,949,450

Bhutan Power Corporation Annual Report 2010 19

 Schedules forming part of the Profit and Loss
Account for the year ended 31st December 2010

Schedule 12: Electricity Revenue 2010 2009

Amount (Nu) Amount (Nu)

Electricity Revenue 2,391,842,785 1,947,732,336

Sundries 19,995,084 22,534,329
Demand Charges 214,571,893 190,820,725
Wheeling charges 651,659,742 675,601,979
Total 3,278,069,504 2,836,689,369

Schedule 13: Other Revenue

Lease of OPGW optical 3,303,397 -
Revenue grant - 305,337
Interest on FDR 31,603,957 13,920,455
Income from deposit works 6,750,629 4,072,129
Tender form sales 1,747,500 2,923,700
Sale and repair of Transformer 1,251,025 923,836
Profit on sale/disposal/ of Assets - 4,875,074
Rental income 10,008,629 9,641,825
Hire charges 920,397 957,294
Liquidated damages 20,495,884 12,488,573
Other misc. income 11,807,478 12,689,795
Audit recoveries 194,437 1,498,326
Total 88,083,333 64,296,345

Schedule 14: Employee Cost

Salary 313,090,080 276,366,396
PF Contribution 22,013,686 17,275,808
Staff Training 37,841,409 35,849,370
Gratuity 21,180,217 13,042,078
Medical expenses reimbursements 1,299,590 1,004,132
TA/DA ( In Country) 13,728,783 23,396,545
TA/DA ( Outside Country) 2,679,168 3,006,821
Leave travel Concession 15,923,046 14,216,809
Leave Encashment 17,242,683 16,195,361
Performance Based Incentive system 41,856,118 33,431,559
Uniforms 2,810,336 871,132
489,665,116 434,656,011

20 Bhutan Power Corporation Annual Report 2010

 2010 2009
Amount (Nu) Amount (Nu)
Schedule 15: Operation and Maintenance costs
Repair and Maintenance of
Building 5,781,198 4,049,116
Vehicles and transport equipment 21,484,889 19,929,857
Distribution system 48,745,397 35,645,932
Other civil structures 10,546,643 5,175,289
Transmsiion system 7,764,633 22,063,838
Hydels 901,551 1,972,895
Diesel Generators 5,673,297 3,957,426
Office equipment 2,523,441 1,709,187
Other electrical equipment 974,587 128,159
Plant and machineries 6,269,567 7,283,789
Meter and metering equipment 5,661,285 4,480,619
Furniture 319,895 397,487
Other assets 198,685 909,054
Distribution system (Travel) 9,245,986
Transmission system (Travel) 9,149,728
Consumables 3,855,978 11,563,286
Lubricants 616,016 258,395
Povision of obsolescence of material - 1,337,773
Total 139,712,776 120,862,101

Schedule 16: Administrative and Other Expenses

Bank charges 1,135,631 1,550,301

Rent on Buildings Hired 291,587 1,482,336
Rent on Other Properties Hired/ Lease Line Rent 1,483,295 967,580
Rates and Taxes 894,528 424,317
Water Cess/ Sewerage Charges 145,849 108,054
Rental Vehicle 25,000 -
Rental of land 6,483 12,140
Telephone/Fax/Internet Expenses 2,900,706 3,458,057
Postage/ Courier/ Telegram 318,033 320,298
Printing and Stationery 8,299,812 8,504,921
Meeting Fees 1,373,415 1,334,540
Consultancy Fees / Charges - 713,371
Registration Charges - -
License Fess 5,951,676 5,469,279
Auditors Fees / Expenses 377,227 452,723
Hospitality and Entertainment Expenses 4,136,270 2,629,251
Publicity and Advertisement 2,493,134 1,990,648
Books , Periodicals and Newspapers 119,764 153,843
Electricity Charges 4,270,141 3,683,112
Misc. Administration and General expenses 1,274,749 720,739

Bhutan Power Corporation Annual Report 2010 21

 2010 2009
Amount (Nu) Amount (Nu)
Insurance Charges on Fixed Assets 617,167 893,321
Donations and Contributions 1,633,887 4,410,565
Transportation charges 78,672 577,915
Writeoffs 21,896 125,008
Provison for doubtful debts (Net) 514,937 1,502,274
Bad Debts writen off 413,047 136,919
Loss on sale/disposal of asset 1,297,398
40,074,306 41,621,512

Schedule 17: Finance Charges

Interest on RGOB unsecured loan RE 7,554,020 42,105,104
Interest on RGOB unsecured loan on THP asset 70,554,074 70,554,074
78,108,094 112,659,178

Schedule 18: Prior period expenses

Prior period energy Charge (450,989) (10,355,100)
Adjustment to past billing 28,891 66,032
Other misc income (1,604,250) (181,896)
Purchase of Power 32,365 -
Establishment Expenses 94,202 (22,050)
Adm & General expenses (65,567,600) (86,008)
Repair and Maintenance 1,547,863 1,223,434
Current liab. No longer required (3,758,886) (9,122)
Excess pro.for doubtful debts (1,641,638) (45,250)
Depreciation (4,690,136) (70,468)
(76,010,178) (9,480,427)

22 Bhutan Power Corporation Annual Report 2010

 Schedule 19

Notes on accounts forming part of the Balance

Sheet as at 31st December, 2010 and the Profit and
Loss Account for the year ended on that date.

A. Nature of Operations
Bhutan Power Corporation Limited is engaged in providing electricity to all residents of
the Kingdom of Bhutan. It is involved in construction and erection of transmission tow-
ers, transmission power lines and substations for procurement of power from the power
generation corporations in Bhutan and in transmission and distribution of the same both
within the country and in export of power to India.
B. Significant Accounting Policies:
1. Basis of Preparation

The financial statements have been prepared to comply in all material respects with the
generally accepted accounting principles and the relevant provisions of the Compa-
nies Act of the Kingdom of Bhutan, 2000, except in the cases and to the extent stated
elsewhere. The financial statements have been prepared under the historical cost con-
vention on an accrual basis except as stated otherwise. The accounting policies have
been consistently applied by the Corporation and are consistent with those used in the
previous year.
The preparation of financial statements in conformity with generally accepted prin-
ciples requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management’s best knowledge of cur-
rent event and actions, actual results ultimately may differ from those estimates.

2. Fixed Assets

(a) Fixed Assets are stated at cost of acquisition, including any costs attributable for
bringing the assets to their working conditions for their intended use less accumulated
depreciation. The date of capitalization is the actual date when the particular asset has
been put to use. Capital work in progress is stated at amount expended up to the date
of the Balance Sheet.

Bhutan Power Corporation Annual Report 2010 23

 Financing costs relating to acquisition of fixed assets are also included to the extent
they relate to the period till such assets are ready to be put to use.

(b) Indirect Expenses and overheads relating to projects incurred during the construction
period are capitalized.

3. Depreciation

Depreciation on fixed assets is provided on straight line method at the rates

prescribed by the management on the basis of the economic life of the Assets, which
are different from the rates prescribed under Section 66(3) of the Companies Act of
the Kingdom of Bhutan, 2000. No depreciation is provided on fixed assets sold or
retired during the year.

4. Grants & Subsidies

Capital Receipts including Grants and Subsidies from the Government related to
depreciable assets are treated as Capital Reserves, unless otherwise specified by
the Government, and apportioned over the life of the asset by way of depreciation
charge.

Grants and subsidies from Government are recognized on cash basis. Grant/subsidy
relating to an expense is recognized as income over the periods necessary to match
them with the related cost which they are intended to compensate.

5. Inventory
i. Inventories are valued at lower of cost or net realizable value.
ii. Cost is calculated on FIFO basis and comprises of expenditure incurred in the nor-
mal course of business in bringing such inventories to its location.
iii. Obsolete, slow moving and defective stocks are generally identified at the time of
physical verification of inventories and where necessary, adjustment is made for the
same.
iv. As the Corporation is engaged in the distribution of electricity, there are no finished
goods or raw materials.
v. Net realizable value is the estimated selling price in the ordinary course of business,
less estimated costs to make the sale.
vi. Loose tools are charged off to consumption on purchase.

24 Bhutan Power Corporation Annual Report 2010

6. Revenue Recognition

Electricity Revenue

i. Revenue from the Sale of Electricity within Bhutan is recognized on the basis of bills
raised on the consumers, net of discount for prompt payment of bills, and do not
include any duty payable to the Government.
ii. Revenues from Demand charges, Connection charges, Wheeling charges or any
other amounts recoverable from the consumers, except delayed payment surcharge,
are also recognized on the basis of bills raised on the consumers.
iii. Delayed payment surcharge is determined and recognized on receipt of overdue
payments from the consumers.
iv. Rates for electricity and wheeling charges are as approved by the Bhutan Electricity
Authority.
v. Doubtful debts are provided for in the accounts based on the policy of the Corpora-
tion as decided by the Board from time to time.
Other Revenue
Revenues other than electricity revenue, as mentioned above, are recognized and account-
ed for on accrual basis, except where stated otherwise.
Penalty claims etc. are recognized on cash basis.

Interest

Revenue is recognized on a time-proportion basis taking into account the amount outstand-
ing and the rate applicable.
 
7. Retirement benefits

i. The Corporation contributes to Provident Fund administered by National Pension

and Provident Fund and such contributions are charged to revenue every year on
the basis of as and when the contribution to the Fund becomes due.
ii. Gratuity is provided on the basis of entitlement of each employee as per the
Corporation’s Service Rules at the end of the year without doing actuarial valuation.
iii. Leave encashment and medical benefits are provided for in the financial statements
on accrual basis without doing actuarial valuation.

8. Foreign Currency Transactions

Transactions in foreign currency are recorded using the exchange rate prevailing at
the date of transactions. At the Balance Sheet date monetary assets and liabilities

Bhutan Power Corporation Annual Report 2010 25

 denominated in foreign currency are recorded using the closing exchange rates.
All other foreign currency assets and liabilities are stated at the rates ruling at the
year-end other than those covered by forward contracts, which are stated at the
contracted rates. Exchange differences arising on foreign currency transactions are
recognized in the Profit & Loss Account.
9. Contingent Liabilities

Liabilities are provided if there are reasonable prospects of such liabilities maturing.
Other contingent liabilities are disclosed by way of note.
10. Income Tax:
Current Tax is determined in respect of taxable income for the year based on appli-
cable rates & laws. Deferred tax is not recognized in the books.
11. Expenditure on new projects and substantial expansion:

Expenditure on material, labour and contractors appointed for executing the project
are capitalized. Indirect expenditure and overheads relating to projects incurred
during construction period are capitalized.

All direct capital expenditure on expansion is capitalized. Direct expenditure is

capitalized only if they increase the value of the asset beyond its original standard of
performance.
C. Notes on Accounts:
1) Bhutan Power Corporation Limited was incorporated on 1st July 2002 as wholly owned
company of the Royal Government of Bhutan and Fixed Assets transferred from erst-
while Department of Power was taken at written down value of Nu 1,760.89 million.
Subsequently, Bhutan Power Corporation Limited became a subsidiary company of
Druk Holding & Investments Limited (a Royal Government of Bhutan Undertaking)
consequent upon transfer of shares from the Ministry of Finance, Royal Government
of Bhutan to Druk Holding & Investments Ltd., and currently all the shares are held
by the Holding Company.
2) (a ) Provision for Taxation has been made in the accounts after the following
adjustment :-

26 Bhutan Power Corporation Annual Report 2010

 Amount in Nu

  2010 2009

Book profit for the year 1,353,195,928 986,451,893

Less difference between maximum allowable depreciation as per (171,569,964) (142,574,707)
Income Tax Act and Depreciation charged in the Accounts ( Nu
615,525,831.04-Nu 443,955,867.18)
Taxable Profit (loss) after adjustment 1,181,625,964 843,877,186

Add Provision for Doubtful Debts (Net) 927,984 1,502,274

Provision for obsolescence of material - 1,337,773
Taxable Profit 1,182,553,948 846,717,234
Provision for Corporate Income tax @ 30% 354,766,000 254,015,170

(b) The final tax liability is subject to assessment by the concerned Authority.
3) Gratuity:
a) Gratuity liability has been computed on the assumption that all the employees ceased
to be employed as on 31st December 2010.
b) In respect of Gratuity the Corporation has been depositing the difference between
opening and closing liability in fixed deposit specifically marked as “Investment towards
Gratuity Liability”.
As on 31st December 2010 value of such Investment is Nu 198,970,764 as against the
total Gratuity liability of Nu 201,927,285 indicating a shortfall of Nu 2,956,521 which
shall be invested in the year 2011.
c) In accordance with the Generally Accepted Accounting Principle and provision of
section 12.2 of Income Tax Act of Kingdom of Bhutan, 2001 interest income of Nu.
8,874,877.63 pertaining to such Investment have been credited to Gratuity Liability.
4) There has been a domestic tariff revision from 1st August 2010. The revised weighted
average tariff is Nu.1.659 /unit as compared to Nu. 1.561 /unit before the revision.
5) Details of Capital Grants received during the year.

Sl.No. Source Amount Purpose

Punatsangchu Hydro Electric Project
1 750,000,000 Construction of 400kV transmission line
Authority
2 Department of Energy 66,469,000 RE ADB IV
3 Department of Energy 157,570,000 RE JICA
4 Department of Energy 73,952,000 RE JICA
Implementation of National Broadband
5 DIT, MoIC 103,000,000
Master plan
6 Department of Energy 19,615,000 ADB RE III
7 Department of Energy 28,784,000 RE ADB IV
8 Department of Energy 122,000 SDA grant for RE-Tangsibji,
9 Department of Energy 46,560,000 RE ACB VI
  Total 1,246,072,000  

Bhutan Power Corporation Annual Report 2010 27

7) Particulars of Unsecured Loans from Royal Government of Bhutan.
Particulars Balance as on Received during Repaid during Interest Balance as on
1.1.2010 the year the year 31.12.2010
RE I 215,905,776   8,304,068 12,638,792 207,601,708
RE II 403,168,430   18,325,838 23,493,724 384,842,592
RE III 437,479,408   - 4,374,794 437,479,408
THP 686,974,312   830,924 37,600,784 686,143,388
THP IDC 395,342,139   98,835,535   296,506,604
RE JICA 180,669,992 1,026,988,060     1,207,658,052
RE IV- ADB 183,710,770 681,536,250   865,247,020
Total 2,503,250,827 1,708,524,310 126,296,365 78,108,094 4,085,478,772

9) Movement of Capital work in progress during the year is as stated below:-

Particulars Amount in Nu
CWIP as on 1.1.2010 1,387,106,350
Addition during the year 3,267,330,141
Total 4,654,436,491
Capitalized /Adjustment during the year 900,177,784
Balance as on 31.12. 2010 3,754,258,707

10) O&M expenditure pertaining to the following units have been capitalized during the
year:-
Sl.No Divisions Amount (Nu)
i) D&CD 4,795,307
ii) TCS Tsirang 9,644,251
iii) TCS Trongsa 4,099,962
iv) TCS Deothang 1,180,561
v) 400 KV Punatahngchu Transmission Line 12,687,950
vi) RED , HQ 5,100,973
vii) RECD Thimphu 7,256,263
viii) RECD Tsirang 7,981,834
ix) RECD Samtse 5,546,616
x) RECD S Jongkhar 5,978,818
xi) RECD Gelephu 9,899,849
xii) RECD Mongar 10,920,287
xiii) Urban Electrification 4,616,334
xiv) NLCD Project 753,406
xv) OPGW Project 319,667
  Total 90,782,079

11) Adjustment of assets transferred to Capital Reserve

i. The Corporation has procured an Emergency Restoration System (ERS) in the year
2006 (included in the Asset Schedule under Transmission Lines and Equipments) for

28 Bhutan Power Corporation Annual Report 2010

 which Chukha Hydro Power Corporation and Kurichu Hydro Power Corporation had
contributed Nu 8.60 million & Nu 4.30 million respectively and the balance of the cost
(Nu 4.30 million) is borne by the Corporation. Such contribution was credited to the cap-
ital reserve. Proportionate amount of depreciation for the year Nu 429,991 pertaining
to cost borne by the above two agencies has been deducted from the capital reserve
during the year.
ii. The Corporation has procured Inventory Management Software amounting to Nu 1.310
million in 2007 which was funded by Asian Development Bank. Such contribution has
been credited to the Capital Reserve and proportionate amount of depreciation for the
year Nu 261,870 have been adjusted from capital reserve.
iii. The Corporation has received Tools and Plants amounting to Nu 6,687,800 from Japan
International Cooperation Agency during the year which has been credited to Capital
Reserve. Out of the total amount received, Tools and Plants worth Nu 6,640500 has
been capitalized and balance amounting to Nu 47,300 being in the nature of consum-
ables has been expensed during the year. Depreciation for the year for the capitalized
items amounting to Nu 2,241.67 and the amount expensed has been deducted from
Capital reserve.
12) A reserve fund of Nu 3.848 million has been appropriated from retained earning to miti-
gate the risk of BPC assets against any damages due to natural calamities. This is not
funded separately.
13) Remunerations paid/payable to the Managing Director (excluding gratuity) during the
year.
2010 2009

Remuneration Nu. 1,258,044/- Nu. 1,207,760/-

Sitting fees Nu. 142,000/- Nu. 151,000/-
14) Quantitative Information of purchase and sales of power:

2010 2009  

Units ( MU) Amount in Nu million Units ( MU) Amount in Nu million

Purchase 1,631.283 897.451 1,416.994 779.288

Hydel 23.211   25.278
DG 0.246   0.138
Sale 1,570.772 2,606.415 1,371.915 2,138.553

15) Cost of Energy purchased from the Generating companies:

Bhutan Power Corporation Annual Report 2010 29

 Unit Energy Royalty Energy Additional Energy Total
Drawn (Million
Available Paid at Rate Amount Quantity Rate Amount Nu)
(MU) Royalty (Nu) (Million (MU) (Nu) (Million Nu)
charge Nu)
(MU)
182.983 999.439 149.916 0.30 44.975 33.07 1.20 39.681 84.655
CHP
147.467 1173.804 176.071 0.13 22.889 -28.60 1.20 -34.324 -11.435

651.715 2065.259 309.789 0.30 92.937 341.93 1.20 410.311 503.248

THP
455.219 2604.866 390.730 0.13 50.795 64.49 1.20 77.387 128.182

104.466 189.573 28.436 0.30 8.531 76.03 1.20 91.236 99.767

KHP
86.184 183.586 27.538 0.13 3.580 58.65 1.20 70.376 73.956

Total 1628.034 7216.526 1082.479   223.706 545.556   654.667 878.373

16) The Corporation is contingently liable for unexecuted Capital commitment contracts
amounting to Nu. 11,140 million and claims against the Company not acknowledged as
debts Nu. 7,336 million.
17) Segment Results for the year 2010 are given below:-

  Generation Transmission Distribution Others Total

REVENUE 651.660 2,626.410 88.083 3,366.153
-
EXPENDITURES 31.343 247.771 1,211.780 78.108 1,569.001
PROFIT (31.343) 403.889 1,414.630 9.975 1,797.152

18) Previous year’s figures have been regrouped /rearranged wherever necessary.
Signatures to Schedules 1 to 18.

For S. S. KOTHARI & ASSOCIATES

Chartered Accountants

(P. K. BHATTACHARYA) Director Managing Director Chairman

Partner
The 21 March, 2011

30 Bhutan Power Corporation Annual Report 2010

 ANNEXURE – I

REFERRED TO IN OUR AUDIT REPORT OF EVEN DATE

MINIMUM AUDIT EXAMINATION AND REPORTING REQUIREMENTS

1.1 The Corporation has maintained proper records to show full particulars including
quantitative details of the fixed assets.
In accordance with a phased programme adopted by the Company to complete
physical verification all fixed assets within a cycle of 3 years, certain fixed assets
have been physically verified during the year. Physical verification of all the Units
have been completed during the year as per the phased programme and discrep-
ancies noticed on such verification, which were not material, have been adjusted.
1.2 None of the fixed assets have been revalued during the year.
1.3 The physical verifications of stores and spares at all locations except for TMD,
Thimphu, TMD, Phuentsholing and TMD, Gyelposhing were conducted during
the year.
As the Corporation is engaged in transmission and distribution of electricity, the
question of physical verification of finished goods and raw materials does not
arise.
1.4 In our opinion and according to information and explanations given to us, the
procedures of physical verification of stock followed by the management are ad-
equate in relation to the size of the Corporation and the nature of its business.
However, efforts should be made to complete physical verification of stores and
spares at all locations within the year.
1.5 The discrepancies noticed on physical verification of stocks as compared to book
records in respect of all Units where physical verification have been conducted
except in ESD, Thimphu, ESD, Samdrup Jongkhar and ESD, Tsirang, have been
adjusted in the books of accounts and the discrepancies were not material. In
respect of ESD, Thimphu, ESD Samdrup Jongkhar and ESD, Tsirang, shortage /
excess have not been adjusted pending ascertainment of the same on compila-
tion and finalization of the physical verification reports and also discrepancies,
if any, remain unadjusted pending completion of physical verification of TMD,
Thimphu, TMD, Phuentsholing and TMD, Gyelposhing.
1.6 On the basis of our examination of stock records, we are of the opinion that the
valuation of the stock is fair and proper and in accordance with the normally ac-
cepted accounting principles and as per the policy of the Corporation. During the
year the Company has ascertained the extent of slow-moving and non-moving
items at RSD, Gelephu at Nu. 312,749 and Nu. 609,329 respectively. Pending
technical assessment of the items and ascertainment of the extent of obsoles-
cence, no provision has been made for the same. Slow moving and non-moving
items of other Regional Stores and O&M Stores are in the process of being as-
certained.
The basis of valuation of stock is same as in the preceding year.

Bhutan Power Corporation Annual Report 2010 31

1.7 The Corporation has taken unsecured loans from the Royal Government of Bhu-
tan and the rate of interest and other terms and conditions of such loans are not
prima facie prejudicial to the interest of the Corporation.
The Corporation has not taken any loan from any companies under the same
management.
1.8 The Corporation has not granted loans to any company under the same Manage-
ment.
1.9 The Corporation, wherever it has given any loans and advances to its staff or
other parties against purchases orders / work orders, has generally ensured that
repayments / adjustments are made promptly and as per the stipulations.
1.10 The loans and advances granted by the Corporation to officers/staff are in keep-
ing with the provisions of its service rules. We have not come across instances
of excessive/frequent advances or any accumulation of large advances against
particular individual.
1.11 The Corporation has established adequate system of internal controls to ensure
completeness, accuracy and reliability of accounting records, carrying out the
business in an orderly and efficient manner, to safeguard the assets of the com-
pany as well as to ensure adherence to the rules/regulations and system and
procedures.
However, based on the Units visited by us we are of the opinion that the sys-
tem of documentation (such as Goods Receipt Notes and Completion Certifi-
cates) for maintenance of records and accounting of fixed assets and stores and
spares (capital and revenue) needs to be further strengthened. Also effective
steps should be taken for completing reconciliation of Inventory balances at the
earliest.
1.12 There is a system of competitive bidding commensurate with the size of the Cor-
poration and nature of its business, for the purchase of goods and services in-
cluding stores, plant and machinery, equipment and other assets.
The Corporation is engaged in transmission and distribution of electricity and pur-
chases and sales of electricity are regulated by the Bhutan Electricity Authority.
1.13 In absence of declarations received from the Directors, we are unable to specifi-
cally ascertain whether there is any transaction for purchases and sales of goods
and services made in pursuance of contracts or arrangements entered into with
the director(s) or any other party(ies) related to the director(s) or with companies
or firms in which the director(s) are directly or indirectly interested. However, the
Directors of the Corporation are all Government nominees and there may or may
not be transactions with other Government Companies.
1.14 The damaged items have been identified and auctioned off during the year. No
further provision is required on this account.

32 Bhutan Power Corporation Annual Report 2010

1.15 As the Corporation is mainly engaged in transmission and distribution of electric-
ity, this clause is not applicable.
With regard to stores items, transformers and other project items directly trans-
ported by the Corporation, there is no insurance policy for handling/transit losses
within Bhutan.
1.16 The Corporation is engaged in transmission and distribution of electricity, and
so there is no question of breakage/loss in transit to its raw materials, finished
goods and packing materials. However, reasonable records of energy received
and energy distributed are maintained by the Corporation.
1.17 The Corporation maintains scrap register to record sale and disposal of scraps.
However, scraps and unserviceable items as disclosed by the Units were reported
to the Board for approval of disposal and accordingly, based on Board’s approval,
they were auctioned at Phuntsholing.
1.18 According to the records of the Corporation examined by us and according to the
information and explanations given to us, in our opinion, the Corporation is regu-
lar in depositing its provident fund, salary tax and health tax, contract tax, Bhutan
sales tax dues with the appropriate authorities.
1.19 There was no undisputed amount payable in respect of tax deducted at source.
1.20 According to the information and explanations given to us, and on the basis of our
checking of the accounts and other books and records, to the best of our knowl-
edge, no personal expenses have been debited to the Profit & Loss Account
other than those payable under contractual obligations / service rules.
1.21 The Corporation has reasonable system of recording receipts, issues and con-
sumption of stores and allocating materials consumed to the respective jobs,
commensurate with its size and nature of its business.
1.22 Quantitative reconciliation is carried out at the end of the accounting year in re-
spect of electricity.
1.23 Board approval has been obtained for all write offs of losses in the books.
1.24 There is a reasonable system of authorization at proper levels and adequate sys-
tem of internal control commensurate with the size of the Corporation and nature
of its business, on issue of stores and allocation of labour to jobs.
1.25 The price for sale of electricity is fixed by the Bhutan Electricity Authority.
1.26 The Corporation is engaged in transmission and distribution of electricity and the
due dates of bills raised on the customers are fixed based on the category of the
customers and the region. In our opinion, the credit allowed to the customers is
reasonable.
1.27 As there is no sale through commission agents, this clause is not applicable to
the Corporation.

Bhutan Power Corporation Annual Report 2010 33

1.28 In our opinion, the system for follow-up with debtors and other parties for recov-
ery of outstanding amounts are reasonable.
Age-wise analysis of outstanding amounts is carried out by the management as
and when required for information and follow-up action.
1.29 The Corporation generally has surplus cash/bank balances and based on future
requirements, funds are invested in Fixed Deposit with Banks and in Royal Mon-
etary Authority Bills.
1.30 According to the information and explanations given to us, and on the basis of
examination of books and records, in our opinion and to the best of our knowl-
edge, the activities carried out by the Corporation are lawful and intra vires to the
Articles of Incorporation of the Corporation.
1.31 On the basis of our verification and according to the information and explanations
given to us, the Corporation has a regular system of approval of the Board for all
capital investment decisions. Investments in new projects are made after consid-
ering the technical and economic feasibility of such projects.
The Corporation has not made any financial investments of its funds in securities
except occasional investments of surplus funds in Fixed Deposits with Banks and
in Secured Bonds of Royal Monetary Authority of Bhutan.
1.32 The Corporation has an adequate budgetary control system.
1.33 The details of remunerations paid to the Managing Director and sitting fees paid
to other directors are disclosed in the Notes to the Accounts.
1.34 According to the information and explanations given to us, the directives of the
Board have been complied with.
1.35 Price fixation is done by the Bhutan Electricity Authority, set up by the Royal Gov-
ernment of Bhutan. On the basis of information received from the management,
and on the basis of our verification of records and documents, price sensitive
information, to the best of our knowledge, have not been transmitted by any of-
ficer of the Corporation, unauthorisedly to any other person with intent to benefit
themselves.

1.36 During the year the Corporation has identified the slow-moving and non-moving
items of stores and spares at Central Stores and based on technical assess-
ments of the items, provision has been made.

34 Bhutan Power Corporation Annual Report 2010

 2 Computerized Accounting Environment
a) The organizational and system development controls and other internal
controls should be adequately strengthened by introducing on-line record-
ing of transactions. However the Management has already taken effective
steps to introduce ERP system shortly.
b) Adequate safeguard measures and backup facilities exist in the organiza-
tion.
c) Adequate backup facilities and disaster recovery measures including
keeping the files in different and remote locations is in place.
d) There is an adequate operational control to ensure correctness and valid-
ity of input and output data information.
e) Adequate measures are in place to control unauthorized access over
computer installations and files.
3. Based on the net asset position reflected by the Corporation’s Balance Sheet as
at 31st December, 2009 and audited by us in accordance with the generally ac-
cepted auditing standards and on the basis of such other tests as we considered
necessary in this regard, we have no reason to believe that the Corporation is not
a going concern on the Balance Sheet date.
4. According to the information and explanations given to us by the management
and based on a Compliance Checklist compiled by the Corporation Officials, the
Corporation has complied with all the provisions of the Companies Act of the
Kingdom of Bhutan, 2000, except in case of charging of Depreciation in Accounts
as disclosed in Accounting Policy No. 3 of Schedule 19.
5. It is not possible for us to comment as regards adherence to all Laws, Rules and
Regulations, System, Procedures and Practices by the Corporation, as compre-
hensive Compliance Reporting and Recording System of the Corporation in this
regard is currently not in place. However, any non-compliance or departure from
accepted practice and approved systems / procedures having effect on financial
statements that came to our notice during the course of our audit have been indi-
cated by the way of notes on accounts.
6. Financial and Operational Resume of the Corporation has been given in Exhibits
to this Annexure – I.

Place: Kolkata For S. S. KOTHARI & ASSOCIATES

Dated, the 21 dayMarch 2011 Chartered Accountants
(FRN: 305147)

(P. K. BHATTACHARYA)
Partner
Membership No: 015899

Bhutan Power Corporation Annual Report 2010 35

 PROFIT VARIANCE ANALYSIS FOR THE
YEAR ENDED 31.12.2010
PARTICULARS 2010 2009 Variance Ramarks
Amount (Nu) Amount (Nu)

INCOME
Electricity Revenue 3,278,069,504 2,836,689,369 441,380,135 F
0 0
Other Revenue 88,083,333 64,296,345 23,786,988 F

Total 3,366,152,837 2,900,985,715 465,167,123

EXPENDITURE

Purchase of Power 897,450,929 779,288,080 118,162,849

A
Employee Cost 489,665,116 434,656,011 55,009,105
A
Operation and Maintenance Expenses 139,712,776 120,862,101 18,850,674
A
Administration and Other Expenses 40,074,306 41,621,512 (1,547,206)
F
Finance Charges 78,108,094 112,659,178 (34,551,084)
F
Prior period adjustments (76,010,178) (9,480,427) (66,529,751)
F
Total 1,569,001,042 1,479,606,455 89,394,588

Profit before Depreciation 1,797,151,795 1,421,379,260 375,772,535

F
Depreciation 443,955,868 434,927,367 9,028,501
A
Profit after Depreciation 1,353,195,927 986,451,893 366,744,034
F

NOTE
F= Favourable A=Adverse

36 Bhutan Power Corporation Annual Report 2010

 EXHIBIT TO THE ANNEXURE
FINANCIAL HIGHLIGHTS OF OPERATIONS
DURING 2010
Particulars 2010 2009
Nu in Nu in
millions millions

Gross earning from sale of Electricity 3,278.07 2,836.69

Other Revenue 88.08 62.80
Power Purchase ( Gwh) 1,631.28 1,414.44
Cost Per unit(Nu.) 0.55 0.55
Power Sale ( Gwh) 1,570.77 1,371.91
S.P. per unit(Nu.) 1.66 1.56
Employee cost 489.67 434.66
Employee cost per unit sold(Nu.) 0.31 0.32
Operation & Maintenance expenses 139.71 120.86
Expenses per unit (Nu.) 0.09 0.09
Profit before Depreciation and Tax(PBDT) 1,797.15 1,421.38
Profit Before Tax(PBT) 1,353.20 986.45
RATIO ANALYSIS
GP ratio 0.53 0.49
Fixed Assets Turnover Ratio (Sales/ Average Net Block) 0.35 0.31
Inventory Turnover Ratio (Sales/Average Inventory) 9.16 8.43
Debtors Turnover Ratio (Sales/Average Debtors) 21.75 18.57
Current Ratio (Current Assets/Current Liabilities) 1.93 1.77
Quick Ratio (Current Asset-Inventory/Current Liabilities) 1.77 1.56

Bhutan Power Corporation Annual Report 2010 37