annual report 2015 - bpc.bt · education: master of law degree (ll.m) from the george washington...

2015Annual Report

Values of BPC

Integrity, mutual respect for each other, professionalism, accountability, care and “Tha Dhamtse”.

Our Vision

“To be the best electric utility in the region committed to quality services, maximization of value, and sustainable socio-economic development”

Our Mission

To Transmit, Distribute and Supply Electricity within the Country, wheel Electricity for Export, and Practice Good Corporate Governance.

Contents

Board of Directors 5 Management Team 7

Directors’ Report 8

CompanyProfile 15 Auditor’ Report 20

Exhibit to the Annexure 22

FinancialStatement 28

Ensuring Safety and Security at all times 5

Board of DirectorsDasho Tshering Dorji, ChairmanPosition: Secretary, MinistryofHomeandCultureAffairs

Education: Masters of Science in Management , Arthur D. LittleSchoolofManagement,Massachusetts,USA.

B.AEng(Hons) fromKiroriMalCollege,UniversityofDelhi,India

Experience: AmbassadortoBangladesh&Thailand. ChiefofProtocol,MinistryofForeignAffairs

Meeting Attendance: 5/5

Mr. Gem TsheringPosition: ManagingDirector, BhutanPowerCorporationLtd.

Education: B.TechfromMadras,India. MastersinPlanningandPolicyfromAIIT,Thailand.

Experience: Energy Specialist, Department Of Energy, Ministry ofTrade&Industry

Chief Engineer, Head of Division, Planning &Coordination Division, DoE, Ministry of Trade andIndustry

Superintending Engineer, Projects Planning &InvestigationDivision,DoE,MinistryofTrade&Industry

Meeting Attendance: : 5/5

Mr. Karma P Dorji, MemberPosition: ChiefEngineer,DHPS Ministry of Economic Affairs

Education: M.sc in International Development Technology, StateUniversity of California (Hambolt University) Arcara,UnitedStates

Electrical Engineering, PSG College of Technology,Coimbatore,TamilNadu

Experience: ExecutiveEngineer,Planning&CoordinationDiv,DHPS,MoEA.


6 Ensuring Safety and Security at all times

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015 Mr. Phento Tshering, Member

Position: ChiefForestryOfficer,ThimphuDivision MinistryofForest&Agriculture

Education: M.sc in Mountain Forest Ecology & Management,UniversityofNaturalResources&AppliedLifeSciences

M.scinForestry&Administration,IndraGandhiNationalForestAcademy,Dehradun

Experience: Divisional Forest Officer, Wangdue Terrirorial ForestDivision


Mr. Singye Dorji, MemberPosition: ChiefExecutiveOfficer WoodCraftCenter

Education: BachelorsDegreeinCommerce,SherubtseCollege

Experience: ExecutiveDirector,LhakiGroupofCompanies ManagingDirector,BhutanBoardProductsLimited.


Mr. Sonam Lhundup, MemberPosition: GeneralCounsel,DHI

Education: Master of Law Degree (LL.M) from the GeorgeWashington University Law School, Washington DC,USA.

BachelorofLaw(LL.B)fromtheUniversityofMumbai,India

Experience: SeniorLegalOfficerwiththeMoAandasmemberoftheLandActReviewCommitteeasitsMemberSecretary.

LegalLegalOfficeratthePolicyandPlanningDivisionoftheMinistryofAgriculture


Management Team

FromTop,LftMr.UjjwalDeepDahal,GM,BPSO,Mr.SandeepRai,Offtg.GM,DCSD,Mr.DrukchuDorji,GM,PSD,Mr.GorabDorji,GM,EDCD,Mr.NamgayWangchuk,GM,ICD,Mr.ShamsherPradhan,Offtg.Head/GM,TS

Bottom,FromLeftMr.TashiPenjor,CompanySecretary,Mr.NimDorji,Offtg.Head/GM,HRAS,Mr.GemTshering,MD,Mr.SonamTobjey,Director,FAS,Mr.ThinleyGyeltshen,GM,TD,Mr.PradeepM.Pradhan,AD,CorporateServices,Mr.DechenCholing,GM,RED


Directors’ Report on the Performance of Bhutan Power Corporation Limited for the year 2015

Introduction

Onbehalfof theBoardofDirectorsofBhutanPowerCorporationLimited,Ihavetheprivilegeto present this report on the performance of the Company for the period covering 1stJanuary 2015 to 31st December 2015 to DrukHoldingand InvestmentsLtd. (DHI), thesole shareholder, and to the other relevantstakeholders.

System Performance

The demand for electricity consumption fordomestic purpose has been growing steadilyovertheyearskeepinginpacewiththegrowthin the economic activities of the country. Thepeak demand has reached 336.52 MW ascomparedto333.14MWinthepreviousyear.Duringtheyear,8,483customerswereaddedand BPC today serves more than 168,279customers. The addition has been mostlythroughserviceconnectionoftheruralhomesinthecountrysidebroughtaboutbyextensiveRural Electrification coverage made by theCompany.

To meet the domestic consumption demand of power,2142.167MillionUnits (MU)ofenergywas purchased from Druk Green PowerCorporationLimited(DGPC)duringtheyearascomparedto2064.300MillionUnitsduringthepreviousyear. Of thetotalpurchases,royaltyenergyaccountedfor1093.953MUfortheyearascompared to1059.200MU in theprevious

year.The internal generation fromembeddedminiandmicrohydelsownedbythecompanywas14.676MUduringtheyear.

Thetotalsalefortheyearwas2057.141MUascomparedto1,977.182MUinthepreviousyearreflecting a growth of about 4.04% over theyear.TheenergywheeledbyBPCforexporttoIndiaforDGPCincreasedto5541.759MUfrom5,044.327MUin2014.

On the System Performance, I am happy toreport that BPC has been maintaining its system lossesatlimitscomparablewithintheregion.Ofthe totalenergyof7,703.296MUreceivedbythesystemduringtheyear,7,598.900MUwasthe total utilization of energy. This translatestheglobalenergylossfortheyearto1.35%ascomparedto1.13%in2014.ThedomesticT&Dlossfortheperiodis4.83%andforthepreviousyear the loss was 3.87%. The companyhas been able to maintain its losses withinpermissible limits due to timely preventive,plannedmaintenanceandup-gradationof thenetworksystem.

Theloadflowwithinthesystemiscoordinatedand monitored by the Bhutan Power SystemOperator (BPSO). The Center monitors thepowersystemsoperationonlineforcarryingouteffective dispatching of load and coordinationwithgeneratingplantsofDGPCandtheIndianEastern Region Load Dispatch Center atKolkatta.

Directors’ Report


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015Financial Reports

Iamhappytoreportthatsincetheyear2013,the Company has adopted the Bhutanese Accounting Standards (BAS) which arebased on International Financial ReportingStandards.BPCiscurrently in thefirstphaseof implementation of BASwith 18 standards.With the adoption of BAS, there is improvedfinancialreportingandthecompany’sfinancialstatements are consistent with internationalstandardsandpractices.

Auditors’ Report

TheAuditorshaveissuedanunqualifiedauditreportfortheyearwithnoadversecomments.Theyhave,however,disclosedasastatementoffactthatin2013BPChasgivenaninterestfreeadvanceofNu.400million to theshareholderDHIandNu.900millionintercorporateloantoM/s.DungsamCementCorporationLtdduringtheyear.Thecompanyhasalsoimplementedallthepreviousyears’recommendationsmadebytheAuditors.

Financial Performance

The total assets of the company stand atNu. 25,185.46 million as compared to Nu.24,651.64million as onDecember 31, 2014.ThenetworthofthecompanytodayisNu.19,035.58millionascompared toNu.18,466.62million onDecember 31, 2014.Gross assetsamounting toNu.1,500.34millionhavebeenaddedduringtheyear. Borrowings

The funds generated from the operating activitieswereadequatetomeettheinvestmentactivitiesof thecompanyandotheroperatingobligationsoftheyear.TheCompanyhasnotborrowed additional funds during the year to

finance its capital investments.The companyhas,however,continuedtotakesoftloansfromtheexistingfinancingarrangementprovidedforfinancingtheruralelectrificationworks.Thesesoft borrowings are made available to BPCthrough the Royal Government of Bhutan bytheAsianDevelopmentBank(ADB),theJapanInternational CooperationAgency (JICA) andthe Austrian Federal Government (ADA).During the year, BPC has drawn Nu.84.15million from JICA and Nu.77.46 million fromADB, totaling Nu.161.61 million. For theprevious year, the total borrowings were Nu.6,185.02 million. The principal repayment ofNu.196.76million has beenmade during theyearfortheexistingborrowings.Thetotalnetborrowing for theyear isNu.6,149.88millionfortheyearagainstNu.6,185.02millioninthepreviousyear.

Government Grants

TheRoyalGovernmentofBhutanstillcontinuestosupportBPCinmanyofitsprograms.Onesuchprogramistheconstructionof300x2kWPilotWindPowerProjectatRubessa,WangduePhodrang funded as grant by ADB through the Royal Government of Bhutan. The CompanyreceivedcapitalgrantofNu.8.21millionduringtheyear.

Construction Contract Works

Apart from constructing network expansionworks within the country, BPC also executesassociated transmission system (ATS) worksfor Punatshangchhu Hydro Electric ProjectAuthority I & II (PHPA-1 and II), MangdechuHydroElectricProjectAuthority(MHPA)andInter Connecting (GIS) Substation Jigmelingforevacuationofpowerfromthesegeneratingplantswhichareunderconstruction.Fortheseworks,thecompanyhasreceivedNu.1,075.30million,Nu.964.60million,Nu.1,244.46million


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015 and Nu 0.300 million respectively from the

HydropowerAuthoritiesduringtheyear.

Capital Investments

Duringtheyear,thecompanyspentNu.883.68millionascomparedtoNu.1,668.54millioninthepreviousyear incapitalworksfornetworkexpansionand foraugmentingand improvingthe ageing grid network. This investmentrepresents 64%of theProfit after tax of thecurrentyearbeforedividend.

On financing these capital works, BPC hasbeen able to meet its capital commitmentsfor system up-gradation works from its ownoperating activities while the work for RuralElectrification Project has been financedthrough soft borrowings scheme and grant fromtheRoyalGovernmentofBhutan.

Fortheconstructioncontractworksofbuildingassociated transmission system (ATS) forPunatsangchhu Hydroelectric Projects I andII,MangdechuHydroelectric ProjectAuthorityand the ICTGISSubstationatJigmeling, theCorporationspentNu.4,210.852millionduringtheyear.

Operating Results

The revenue of the Company has beengrowing steadily over the years. The grossrevenue earned for the year is Nu. 9,769.65millioncomparedtoNu.7,273.88millioninthepreviousyear.Thegrowthinthegrossrevenueis34%ascomparedto13.6%inthepreviousyear.Therevenuefromsaleofelectricitygrewby 14% fromNu. 4,032.66million in 2014 toNu. 4,588.08 million in 2015. The revenuefrom wheeling of power increased to Nu.632.27millionfromNu.575.05millionin2014representing a 10% growth. Other revenueearnedfortheperiodisNu.267.24millionascompared to Nu. 246.66 million in 2014, anincreaseintheearningsbyabout8%.

TheaveragetarifffortheyearisNu.2.27perkWh as compared to Nu. 1.966 per kWh in2014.

The revenue from construction contractsearned increased significantly from Nu.2,419.50millionin2014toNu.4,282.06millionduringtheyear,anincreaseintheearningby77%. The increase is attributed to the goodworksprogressmadeduringtheyear.

Stringing of Transmission Line


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015The total expense incurred for the year

includingpurchaseofpower,financecostsanddepreciationexpenses isNu.7,798.03millionas compared to Nu. 5,680.79 million in thepreviousyear.Theincreaseontheexpenditurehas mainly been on account of increase inconstructioncontractexpenditure.

TheCompanymadeanetprofitaftertaxofNu.1,380.74millionfortheyearascomparedtoNu.1,002.97millionin2014.Currenttaxassessedfor the year amounts to Nu.519.784 million.Fromtheprofitsearnedfortheyear,theBoardof the company proposes and recommends a dividendof95%whichworksouttoNu.155.82pershare,amountingtoatotaldividendpayoutofNu.1,281.655million.Inaddition,theBoardalsorecommendstransferofNu.5.74milliontoAssetReplacementReserve. Power System Expansion Programs

Iwouldliketoreportonthestatusofthemajorongoingworksofthepowersystemexpansionworksandthenewinitiativestakenduringtheyearsincetheseworksarecriticalforbuildingareliableelectricalpowernetworksystem.

Iamveryhappytoreportthattheconstructionof 220 kVSubstation atDhamdhum,Samtsehas been completed, commissioned andcapitalized in the year. The construction ofhollowblockquarterstohousetheprojectstaffdue to housing crisis in Tingtibi, which wasawardedtoDungkarConstructionatacontractvalueofNu.21.741millioninDecember2014wascompletedwithinthecontractperiodof8months.

Some of the capital works in progress in the year were:

a) Constructionoftwonumbers400kVD/CtransmissionlinestakenupbyBPCasadepositworkforPHPAIfortheevacuation

of power from Punatsangchhu-I HydroElectric Project to India is progressingwith physical progress of 79.42% forpackageAand72%forpackageBasonDecember2015.TherevisedscheduleofcompletionisJune2016.

b) Constructionoftwonumbers400kVD/CtransmissionlinestakenupbyBPCasadepositworkforMHPAfortheevacuationof power from Mangdechhu Hydro Electric Project made progress of 64%as of December 2015 with 235 tower foundationcastedand10Kmofstringingworks completed.Theworkwill have tobecompletedbyJanuary22,2017.

c) The contract for construction of 400kVD/C Transmission line from potheadyard Punatsangchhu II in Wangdue toJigmeling, Sarpang, taken up by BPCas a deposit work for PHPA II, wasawarded to M/s KEC International Ltd.,IndiaonJanuary16,2014ata contractvalueofNu.1809.112million.TheworkisprogressingquitewellandthephysicalprogressasonDecember2015is41.43%.TheworkwillhavetobecompletedbyJuly15,2017.

d) The construction of the 66 kVTransmissionLinefromThimphutoGasa,which was awarded to Joint Venture ofBhutan Engineering Company Pvt. Ltd.andBhutanEngineeringPowerCo.Pvt.Ltd. on November 6, 2014 at contractvalueofNu.341.738millionhasachievedprogressof25%asonDecember2015.The work will have to be completed onNovember5,2017.

e) The construction of O&M Infrastructureat Samtse, which was awarded toLoden Construction on September 30,2014atcontractvalueofNu.34.276, is


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015 43% completed as on December 2015.

The work will have to be completed bySeptember29,2016.

Rural Electrification (RE)

BPCwasentrustedwiththemandatetoprovideelectricityforallby2013inthe10thFiveYearPlan(FYP)withatotalof40,257householdstobeelectrified throughon-grid supply scheme.BPC triedall itsefforts tomeet themandate,andattheendofthe10thFYP,BPCachieved94%coverage.Thespilloverworkswerecarriedforward andas ofDecember 2015,BPChaselectrifiedtotalof43,273householdsachievingthemandatesof10thFYP.Theachievementisduetotheincreaseofhouseholdswhichwereleftoutorwherenewconstructionscameupinthetargetedareas.

BPC is still struggling to reachgridelectricityto some difficult and remote areas such asLaya in Gasa, Bardo in Zhemgang, Doban/Jigmecholing in Sarpang and Dorona inDagana which are targeted to be completedwithinearly2016.

LastmileREconnectivitywasfullofchallenges.One of the major challenges faced was theinaccessibility of work sites wherein thetransportationofmaterialshasbeenthesinglemost challenge.Thiswascoupledwithharshclimatic conditions and difficult geographicalterrain,scatteredworksitesresultinginsevereworking conditions, therebymaking it difficultto get laborers and also retain the existingworkers towork at the site. In some cases,BPClackedsupportfromthecommunity,whichfurtherdelayedtheprogressofREworks.

In spite of all challenges, I am proud andhappytoreportthatBPChasmadesignificantprogressand todayabout 99%ofBhutanesehomesalloverthecountryhaveaccesstogridelectricity supply. However, maintaining the

reliabilityofsupplyoftheextendedgridnetworkataffordablepricewillbeachallenge.

System Improvement Works

SystemimprovementisacontinuousactivityinBPC. It is necessary in order to improve thesupplyreliabilityandmeettheincreasingpowerdemand. Also, such system improvementworkshelpimprovesafetyandreduceenergyloss.

Inthedistributionsystem,besidesreplacementofoldconductors,up-gradationoftransformers,replacement of overloaded conductors andtransformers, conversion of bare conductorstoLVABC,DepartmentofCustomerServicesDepartment has carried out Construction of 33/11 kV substation at Samdrup Jongkhar,Construction of 33/11 kV substation atKhalangziPowerHouse,Mongar,Constructionof 2x5MVA substation at RBA Lungtenphug,Thimphu,Constructionof2x3MVAsubstation

Mangdechhu Transmission Line


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015atSipsuandUp-gradationof2x2.5MVAto2x

5MVAatRICBL,Thimphu.

In the transmission system, TransmissionDepartment has carried out up-gradation of66kVParosubstationwith2x20MVA,66/33kVpower transformer, re-alignment of 220kVRurichhu-Tsirangtransmissionline(rt42-rt43)atDogorthang forPHPA-II dumping yard, re-alignmentof132kVDewathang-RangialineforIndustrialestate,changedcurrent transformerat 220kV substation, Semtokha, carried outretrofittingofrelaysatHaasubstation,Shiftingof8MVAtransformer fromParo toWatsaandstartedworksontheupgradationofSingyegaonsubstationtoGISsubstation.

Corporate Governance

During the fiscal year, to enhance goodgovernanceandtoprovidestrategicguidanceto thecompany, theboardheld14meetings.TheAnnualGeneralMeetingwasheldon16thApril,2015.Besidesregularboardmeetings,2Board Audit Committee meetings and 2 Board Tender Committee meetings were also heldto decide and finalize on the procurement ofgoods,servicesandworks.

In all the meetings, the quorum as requiredwasdulymaintainedandalltheDirectorsoftheBoarddeclarednoconflictofinterestineachofthesemeetings.

Risk Management Framework

The 48th Board Meeting of Druk Holdingand Investments Limited (DHI) approvedthe implementation of Risk ManagementFrameworkinDHIandDHIownedCompanies.The framework, which constitutes a part ofits Corporate Governance Code, is aimed atdrivingperformanceenhancementandoptimalresource utilization in various companies itowns.

BPC,whichisgovernedbytheDHIownershipPolicywasdirectedtostarttheimplementationof theRiskManagementFrameworkby2014vide Letter No. DHI/CEO/DOC/2013 – 1039datedDecember4,2013.Accordingly,theRiskManagementDivision(RMD)wasinstitutedinAugust2014,withRiskOfficerastheHeadoftheDivision.SinceRiskManagementhasmulti-disciplinaryand cross-cutting functions, BPC had furtherassigned Departmental Risk Focal Persons,comprisingaseniorandexperiencedemployeeeachfromthe8Departments.

In 2015, BPC Risk Team came together toidentifycompany-wideriskfactors,andthefirstcompanyspecificRiskRegisterwascompiled.The Risk Register helps in contextualizingeveryriskitemandinobjectiveanalysisthereof,intermsoffinancialloss,reputationaldamage,severity of impact, probability of occurrence,evaluation of existing control mechanisms,additional control requirements, risk owners,etc.

This Risk Register was submitted to DHI,which will be coming out with a Group-wideRiskManagementPolicy.

Human Resources Management Initiatives

Themainhighlightof2015wastheappointmentof Mr. Gem Tshering, former Director,Transmission Wing as the new ManagingDirectorofBPCon1July,2015.HRAShasorganizedshorttermandlongtermtraining achieving training mandays of closeto 17,500, and recruited 23 new employeesin 2015. HRAS has spent considerable timein implementing the re-designation and staffbenchmarkingexerciseaspertheHRMasterPlan2014-2020.

To commemorate the celebration of the 60thBirthAnniversary of our belovedFourthDruk


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014 Gyalpo, hundreds of volunteers from BPC

helped in the construction of biking/walkingtrailaroundThimphucity.BPCalsoorganizedablooddonationcampaigninDecember2015.

Monitoring of Performance

The performance of both financial and non-financialaspectsof thecompany ismanagedand monitored through signing of the compact with DHI and through the PerformanceBased Incentive System (PBIS) which is themanagementtoolofmonitoringperformanceatalllevels.

Challenges

Someoftheissuesthathaveposedachallengeinourdrivetoexpandthenetworksystemandto provide uninterrupted and reliable powersupplytoitscustomersare:

1. Right of way and clearance issue fornew power infrastructures and their constructions.

2. Shifting and relocating of the existinglinesatallvoltagelevels.

3. Disruption in the supply in the vast gridnetwork of power system due to forcemajeureconditions(wind,storm,thunder,lightening, snow, rain and sometimesmanmade)

Acknowledgement

The Board of Directors and the Management teamwouldliketoextendsinceregratitudebyacknowledgingthetimelyassistanceprovidedbytheMinistryofEconomicAffairs,theMinistryof Finance and the Department of Hydropower Power Systems, Department of RenewalEnergy, Bhutan Electricity Authority in termsofpolicyguidance.Wewouldalsoliketoduly

acknowledge the support and cooperationrendered by all those agencies that havebeen closely associatedwith BPC directly orindirectly. We are also thankful to theADB,JICA and ADA for providing funding andtechnicalsupport towardsRuralElectrificationworks.

We would also like to place on record oursincere gratitude to the Chairman and other officersofDrukHolding&Investmentsfortheircontinued guidance and support during the year.

TheBoardandManagementwouldalsoliketoextend its deep appreciation to Dasho Bharat Tamang,who,as theManagingDirector fromJanuary 2008 to June 2015 had put in a lotof hard work and taken numerous personalinitiativestomakeBPCanexemplarycompanyinmanyrespects.

Finally, the Board would like to thank theemployees of the Corporation and theManagement Team for having maintainedtheir high level of professionalism, dedicationin their works and for delivering good andconsistentresults.Iamconfidentthatwiththeable leadership of themanagement andwithcontinued team efforts, BPC will continue tofulfillitscoremandates.Towardsthisend,theBoardwould like to assure the employeesofBPCourfirmsupportintheirpursuitinrealizingthegoalsandmissions.

TashiDelek!ForandonbehalfoftheBPCBoard

(TsheringDorji)Chairman


Company ProfileBhutan Power Corporation Limited (BPC)was formed as an offshoot of the erstwhileDepartmentofPower,thethenMinistryofTradeandIndustryandwaslunchedasPublicUtilityCompanyon1stJuly2002withanobjectivethatthecorporatizationoftheutilityfunctionswouldleadtogreaterefficiencyandbetterdeliveryofelectricitysupplyservicesinthepowersector.Later theOwnershipwas transferred toDrukHolding and Investment Limited (DHI), thecommercial arm of theRoyal Government ofBhutan,establishedin2007uponissuanceofRoyalCharterin2007“toholdandmanagetheexisting and future investments of the RoyalGovernment for the long term benefit of thepeopleofBhutan”

Our VisionTheBestpowerutilityintheregioncommittedtoqualityservices,maximizationofvalueandsustainable socio-economic development inpursuitofGNH.

Our MissionTo transmit, distribute and supply electricitywithin thecountry,wheelelectricity forexportandpracticeGoodCorporateGovernance.

Our Culture & ValueIntegrity, mutual respect for each other,professionalism,accountability,careand“ThaDhamtse”.

Destination StatementTomakeBPCintoa45billioncompanyby2020

Our businessBPCbuilds,owns,operatesandmaintainstheentire electrical transmission and distributionnetwork in the country including 19mini andmicro hydropower plants. Besides sale ofelectricity to customers within the country,BPC is responsible for “Wheeling” of powerover its transmission lines from the largehydropowerplantsownedby theDrukGreenPowerCorporationLimited(DGPC)forexport

Civil Award recipients


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015 to India. BPCwas entrustedwith amandate

toprovideelectricityforallby2013inthe10thFive Year Plan (FYP) with a total of 40,257households to be electrified through on-gridsupplyscheme.BPCtriedallitseffortstomeetthemandate,andattheendofthe10thFYP,BPC achieved 94% coverage. The spilloverworkswerecarried forwardand in2014BPCelectrified3198householdsthroughvariousREprogramsandasofDecember2015,BPChaselectrifiedtotalof40,852householdsachievingthemandatesof10thFYP.Theachievementisduetotheincreaseofhouseholdswhichwereleftoutorwherenewconstructionscameupinthetargetedareas.

BPCisalsoentrustedforpowergridexpansionto provide growing electricity demand ofindustries, commercial, institutional andresidential customers all over the country.BPCisalsolicensedtobuildICTConnectivityinfrastructuressuchasOPGWandADSSoverpowerlinestoprovidenotonlyelectricitysupplyservices but to facilitate bulk communicationof digital data, information and voice in thecountry. BPC is thus a provider of the “wire”services for both electricity supply aswell asICT.BPCwasalsogiven twonew licensesbyBhutanElectricityAuthority(BEA)i.e.,Licensetoconstructandoperate500kWRubesaWindPowerPlantandLicenseforSystemOperationofPowerSystemintheKingdomofBhutan.

With the Royal Government’s vision ofdeveloping10,000MWofhydropowercapacityby 2020, BPC has also been mandatedto construct the Associated Transmission System(ATS)including400kVlinesandInter-connectingpowerpoolingsubstationsrequiredfor evacuation of power from these megahydropower plants up to the Bhutan-Indiaborder.

Corporate Strategic Plan Using Balanced Scorecard SystemThe revision of Corporate Strategic Plan2007 was carried out to keep abreastwith the changing environment in relationto development activities, changes inpolicies, increased customer expectationsand technological changes. BPC is alsoexperiencingdrasticchangeinsocialobligationand political mandates to work towards thesocioeconomicdevelopmentofthecountryandto improve the living standards of the peoplebyprovidingreliableelectricitysupply.Inorderto overcome those challenges and to assistin planning, execution and implementationof BPC functions more efficiently, BPC hasdevelopednew corporate strategy plan usingtheBalancedScorecardSystemwhichisoneofthewidelyusedinternationalbestpracticesinmanagingtheorganization.ThenewstrategicplanwaspreparedwithexpertinputsfromtheInstitute, Balanced ScorecardAustralia alongwiththevisioninganddirectionsfromthepastBPCBoardofDirectorsandtheManagement.Sointhenextfiveyears,BPCwillbeguidedbythenewCorporateStrategicPlan2015intheoperationandfunctionsoftheorganization.


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015 Our Network

The BPC Grid network covers the wholecountry. The oldest system was establishedsince mid Sixties and in Seventies with thecommissioning of the mini hydel generationplants in each district headquarter. Most of

theoldassetsarenowbeingreplaced.Whileour present network system is fairly new,maintainingthevastgriddednetworkofassetsremains a challenge especially those in theperipheryofthecountry.

Theoverviewofthecompany’snetworksystemisdetailedbelow:

Transmission system (66kV up

to 400kV)

Distribution system(400/230kV up to

33kVTotal

Overheadlines 1096.655km 13,682.86km 14,779.515km

Undergroundlines 6.02km 474.21km 480.23km

Transmission Towers 3295Towers - 3925Towers

Transformer capacities 1035.5MVA 548.505MVA 1,584.005MVA

NumberofTransformers(including33kV) 83Numbers 4501Numbers 4,584numbers

GenerationCapacity(Diesel) 8238KVA

GenerationCapacity(smallhydro) 7920KW

TotalGenerationCapacity 15,334KW

TotalEnergypurchased(2015) 2142.166GWh

TotalEnergysold(2015) 2057.140GWh

TotalEnergyWheeled(2015) 5541.759GWh

TotalEnergyGenerated(2015) 14.675GWh

PeakDomesticDemand 336.52MW

Customer Connections

Residential 167,441

LVBulk 770

MV 52

HV 16

Losses

GlobalLoss 1.35%

DistributionLoss 8.98%

TransmissionLoss 0.71%


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Customer ServiceCustomercareanddeliveryofservicesisintheforefrontof our initiatives.Thecustomer careismanaged bymulti-task employees throughourservicecenterslocatednearthecustomerpremises. Customer complaints are handled

throughacentralizedContactCenterlocatedinThimphu.Ourcustomersatisfactionindexwas3.98onscaleof5basedonthirdpartysurveyresult.Ascomparedtothe2014CSIwhichis3.79,theCSIfor2015hasgoneupby0.19.

New Connections8,483 customers were added to the networksystemduringtheyear2015.

SafetyThe Board had approved the ‘Budget 2015’withtheTheme“EnsuringSafetyandSecurityat Work at all times” Therefore, to achievethis mandate, the Distribution & CustomerServices Department (DCSD) and theTransmission Department (TD) had jointlyconductedTrainingofTrainers(ToT)onSafetyManagementSystem inCentralMaintenance&TrainingDivision,Begana,for43supervisorylevel employeeswith the help ofConsultantsfromtheProvincialElectricityAuthority(PEA),Thailand.TheToTsweretrainedontheSafetyManagementSystem,thetopicscoveredwereviz. MorningSafetydrill,safety talk, toolboxmeeting, job safety analysis, Use of safety

Customer Service


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Erection-3 line realignment at semtokha

tools,useofPPE,andimportanceofgroundingandsafetysigns.TheywerealsomadeawareoftheActs,safetyregulationandcodes.

Thereafter, the trainer trained the other fieldemployees at various locations across thecountry.Thetotalnumberofemployeestrainedstoodat1141,ofwhich718employeeswereofDCSDand423employeeswereofTD.

During the year, the Safety Inspection andCompliance Division (SICD) under the MD’sOffice had carried out internal safety audits/inspections in the field to observe thatthe employees comply with the Statutoryrequirementssuchasadoptionofworkpermitsystem,isolation,testing,earthingandhazardsidentification and mitigation through morningsafetydrill/safetytalk,toolboxmeetingandjobsafetyanalysis.Itwasobservedthatalthoughittakestimeandit’shardtobringoutemployees’behavioralchangeandtheirmind-set towardssafe work culture within a short period oftime, however, with vigorous training onsafety had gained momentum in transforming the employees’ behavior. As such, after thetraining,therearesignsofimprovementintheapproachtosafeworkculture.TheSICDhadalso issued safety observations with advicefor improvement to the audited divisions andcreated safety awareness to the employeesduringthefieldvisits.

Prevention of workplace accident is a toppriority in BPC, thus, to minimize accidentrelated to GO switch miss-operation and HTfuse replacements, the SICD had conductedawareness cumhands-on-trainingon theuseofHot-stickforreplacementofHTDOfuseoftransformer inall the regionsafter successfulpilotingofthepracticeundertheR&Dinitiative.AllO&Min-chargesandonelinemanfromeachESDwere trained tooperate theHot-stickonLIVE-line.

ThepracticeonceadoptedintheESDswillbringin efficiency in operation and maintenance,increase customer satisfaction and ensure safetyoflinemen.AsitisdoneonLIVE-lineand


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fullyprotected. Distribution&CustomerServicesDepartmentDCSD mission is to provide reliable andefficient power supply to our customer. Inorder toachieveour target,DCSDconstantlyendeavor to findnewwaysandmeans tobeefficient and effective. Someof the initiativesundertakenandcompletedbyDCSD in2015areasfollows:

Utility Customer E-Services (UCES): It’s aportal,where the customer can interactwith BPC. Through UCES system, BPC’scustomers can view their monthly electricitybills and payment history, send enquiries orevengivefeedbacks.

Distribution transformer metering in ESD, Paro on pilot basis:The objective of this pilot project is tosegregate the sectional losses and establishcorrect reliability indices, monitor distributiontransformer loading through actual datacapture. Most importantly, this would helpin conducting energy audit. If the project issuccessful, after carrying out detail analysis,DCSDwantstorollouttootherESDsinfuture.Awardedtheworkforre-habilitationofChumeyMini-Hydel:

DCSDhadawardedtheworkforre-habilitationofChumeyMiniHydel toErhardAutomation,Austria. The re-habitation work is scheduledtobecompletedwithin24month.Withthere-habilitation of Chumey Mini-Hydel, BPC canprovidebackuppowersupplytoourcustomerduringemergencyandcangenerateadditionalrevenueforBPC.

B-Wallet: For the convenience of our valued customer,DCSDintroducedB-WalletsystemforBPC’sbillpayment.Atotalofmorethan3,297customershavemadepaymentthroughB-Walletsystem.

The impact of DCSD’s initiate seems to behaving impact with our valued customers,

as can be reflected through yearlyCustomerSatisfactionIndex(CSI)surveyof2015.DCSDachieved3.98onascaleof5whencomparedto2014CSIindexof3.79

Yet,DCSDwillnotbecomplacentwiththeCSIsurveyresultof2015.Ithasmanychallengesand difficulties ahead. DCSD now intends tofocus how to provide reliable power supplyespeciallyinremoteruralareas,whereaccesstolinesandcustomersareveryfaranddifficult.

Metering, Billing & Collection (MBC) Metering,BillingandCollectionisoneofthecorefunctionsofDCSDwhocatersthedemandsof168,279customers(asofDecember2015).Allthecustomersaremeteredandmonthlymeterreading and billing is conducted by DCSD.There are several categories of customersbasedonthevoltageleveltheyareconnectedto.

The monthly meter reading is taken by themultitask via smartmeter readers/Spotbillingmachines and the bills are presented to thecustomers on site itself. The HV and MVcustomers contribute to the major sales ofelectricity while sales to LV customers areinsignificant.

Customer CareCustomer care is one of the top most priorities ofDCSDandeveryemployeeistrainedtotakecareofthecustomer’sneedsbyprovidinganddelivering professional, helpful, high qualityservice and assistance before, during, andafterthecustomer’srequirementsaremet.

DCSDoperatesandmaintainstollfreecontactcenter 1250 which can be accessed by allthe customers to lodge their complaints. Thecontactcenteragentsareavailable24×7 thatreceives the complaints from all parts of thecountry.Oncethecomplaintislodged,smstothemultitask center staffs are sentwho thenattendstothecomplaint.

Meter TestingBhutan Power Corporation Ltd. procures


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around 10,000meters (combination of singleandthreephasemeters)annuallytometernewcustomersandforreplacementofoldexistingmeters.Intheabsenceofmetertestingbenchin BPC, all new meters are tested at thesupplier’spremises,which is timeconsumingand an added cost to BPC. Therefore, BPChasprocured’10positionfullyautomaticmetertest bench with accuracy class of 0.02’, andinstalleditatPhuentsholingon5thSeptember2015.

This meter-testing bench has been procuredbyBPCatacostofNu.7.8Millionandisseenasaveryimportantequipment.Theimportanceof thisequipment isnot just forBPCbut it isequallyimportantforBPC’svaluablecustomers.This meter-testing bench shall now facilitateconductingallkindsofroutine,acceptanceandcertificationtestsforallkindsofmetersinBPC.Theaccuracyofthereferencemeterisofclass0.02 and therefore all kinds of meter testingshallbeofhighprecisionandaccuracy.Doingthis,BPCshallensurethatallthemetersthatshallbeinstalledinthecustomerpremisesare

veryaccuratesothatthemeterrecordspreciseconsumption of the customers. BPC shallmaintain excellent standards for every meterconnectedtothecustomerpremises.

Thismeter-testingbench shall now test eachand every meter prior to dispatch. This isan effort of BPC to ensure that its valuablecustomersareassuredofprecisebilling fromthemeters.BPCisof theviewthat thissmallstep would further strengthen the existingassociationofBPCanditsvaluablecustomers.BPCasasocially responsibleorganization ismandated to safeguard the customers from unhealthysituationofwrongbilling.BPCisveryconfident that thismeter-testingbenchwillgoinalongwaytohelpBPCgainconfidenceofthecustomers,whichwouldultimatelyprotectthedistinguishedimageBPChasbuiltoverthepast13years.

Erection-2 Line realignment at semtokha


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Transmission Construction Department, Transmission WingTransmission Construction Department (TCD) under Transmission Services (TS)is mandated for implementation of majorpower transmission and associated O&Minfrastructure development works in line withthe Transmission expansion network plan.TCD is also taking up the construction oftransmission linesandpoolingsubstationsasadepositwork forHydroElectricProjects forwhich10%oftheexecutedvalueoftheprojectischargedasdepositworkcharges.

For the current financial year (2016) the targets of the Department are as follow: Construction of 132kV power

infrastructures (132 kV transmission lineand substation) to reach constructionpowersupplytoKHEL.

SignandawardofcontracttoDHIInfraandhandingoverofsitebyJanuary2016for66kVJemina-Changedaphutransmissionline.

Constructof2No.O&MinfrastructureatYurmosubstation.

Award the contract for G+2 building atTingibi.

Retaining wall, chain link fencing andwatersupplyat132kVYurmooSubstation.

AwardtheworksforO&MinfraatTsirang.

CompletePLCCcommunicationworksforMalbase-Signhaigaon-Dhamdumline.

Completion of O&M infrastructure andassociatedworksatDhamdum,Samtse.

Floatandawardtheworksforconstructionof approach road and boundary wall for66/33kVSipsoosubstation.

Construction of 132/33kV substation atMotongaandbayextensionatNganglamandKanglung.

Award and complete the works forconstructionof6blockssemi-permanentquarteratGayzor.

TakeuptheCWIPwithqualityandsafetywithaimtocompletethesameintime.

Safet training at Thimphu (4)


A

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015 TheprocessofcarryingoutEIAstudiesalong

the detail survey for obtaining EnvironmentClearance has become a challenge and isdelaying receipt of Environment Clearancesand the initiation of ground activities forconstruction of the power infrastructure is getting delayed. The in-house expertise forcarryingoutthedetailsurveyisfeltverymuchrequired. Till then, possibility of carrying outthedetailsurveyandEIAstudy/ECbeforetheawardoftheworksisbeingstudied.

Engineering Design and Contracts DepartmentEngineering Design and Contracts Department (EDCD)hasthemandateofprovidingtechnicalbackstopping and consultancy servicesfunctionsinsurvey,design,reviewandconductofEIAstudiesoftransmissionanddistributionprojects in BPC. During the year, includingIT and CivilWorks Division functions, EDCDcarriedoutthefollowingmajorworks: Completedreviewofallthedrawingsand

designs for the ongoing transmission and distributionprojectsintimelymanner.

Specifically designed and completedthe technical specifications, layout andscheme designs and drawings for the new substation namely; (a) 220/33 kVDagapela substation, (b) 132/33 kVMotangasubstation,(c)66/33kVSipsoosubstationand(d)66/33/11kVPangbesasubstation.

ConductedEnvironmentalImpactStudies(EIA) for new transmission line projectsand obtained Environmental Clearancefor 132 kV Motanga – Phunthsothangtransmissionline.Renewedandobtained(new) Environmental Clearances for allthedistributionprojectsbeingtakenupbyBPC.

Carried out and completed thetransmission line route alignment surveyworks,aspartofBPC’sdepositwork foroutsideagenciesnamely;(a)DrukGreenPower Corporation Limited (DGPC) and

(b) Kholongchu Hydro Energy Limited(KHEL).

Implemented successfully the AccessControl and CCTV surveillance systemsat Head Office, BPC.Also implementedonlinestoragesystemsforallusersinBPCforconvenientandeffectivemanagementoffiles.

Completeddesign,drawingsandtenderingworkstillawardoftheinfrastructureworksespeciallybuildingsforuserdepartments.

Designed, constructed and completeddaycarecenterforBPCheadoffice.

EDCDhasachievedamajormilestoneduringtheyearbyconductingandcompletingforthefirsttimethedetailsurveyofthetransmissionline for 66 kV Jimena – Changedaphutransmission line (10 km). Although a smallwork, it signifies a major step in embarking

Demo. of LIVE-line DO Fuse replacement with hot-stick


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surveyoftransmissionlinesinnearfuture.

Our peopleWerecognizeassetaskeytoourperformanceachievements and delivery outputs.Weworkhard towards attracting and retaining qualitypeople and provide themwith an opportunityfor professional career development throughtrainingsandhigherstudies.BPCencouragesemployees’ innovation efforts and initiativesandimprovementsinpracticesandprocessesfordeliveryofquality services.Wehavealsomutualrespectforeachother.

Aspartofcorporatepolicy,OrganizationClimateSurvey was conducted with an objective offinding out the actual organization climate ofthe employees, assess their satisfaction anddeterminetheirengagementlevel.

Employee StatisticsTechnical 1571Non-technical 677Total 2248CompositionofworkforceMale 1830Female 418Recruited during the year 26Separatedduringtheyear 57

Financial Performance for the year Annual turnover for2015 isNu9,769.65

millionascomparedtoNu7,273.88millionin2014,representinganoverallgrowthbyabout34%%fromthepreviousyear.

The revenueearned fromelectricitysaleisNu4,588.08millionascomparedtoNu

Assemblying of tower


A

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015 4,032.66million in2014, translating toa

growthof14%.

TherevenueearnedfromwheelingisNu632.27millionascomparedtoNu575.05millionin2014.

The gross revenue from ConstructionContract is Nu 4,282.06 million ascomparedtoNu2,419.40millionin2014.

OtherrevenueearnedisNu267.24millionascomparedtoNu246.66millionin2014.

TheaveragetarifffortheyearisNu2.217per kWh as compared to Nu 1.966 perkWhin2014.

TotalexpensefortheyearisNu7,798.03million including purchase of power;constructionexpense;financeCostsanddepreciationascomparedtoNu5,680.79millionin2014.

ProfitaftertaxearnedfortheyearisNu.1,380.74million.

The net asset of the Company stands at Nu25,185.46millionascomparedtoNu24,657.64millionin2014.

The net worth of the company is Nu19,035.58 million and for the previousyearitwasNu18,466.62million.

Cash flow for the year is positive byNu656.01million.

Capital investment for the year is Nu883.68million.

Amount spent for construction contracts is Nu4,246.70million.

Property,PlantandEquipmentatcost isNu24,497.05millionofwhichNu1,819.06million is in Capital Work in Progress.For the previous year the valuewasNu23,895.94million.

GrossassetaddedduringtheyearisNu1,500.34million.

6. CT installation being continued till late eveining (1) Semtokha CT Replacement


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The total Share Holders Equity is Nu13,717.57 million of which Nu 8,225.12millionisPaidupcapital.ForthepreviousyearitwasNu13,035.62millionofwhichthe paid up capital was Nu 8,190.19million.

ThetotalnetdebtoutstandingfortheyearisNu6,149.88millionascomparedtoNu6,185.02millionin2014.

Earnings per share BasicEPS(Nu.) Nu.168.38 DilutedEPS(Nu.)Nu.168.38

Shana Ongoing

Year in REVIEW

January-Blood Donation Campaign February

-Transfer of Regional Manager-Implementation of Stickology Program in Samtse

May-O&M Workshop

-Safety Awareness, Dagana

-Hosting of Conical Flag in Trashigang

July-Volunteers build Multi-purpose Trail at Kuenselphodrang.

-Celebration of 13 BPC Day

August-Contract signing of GIS SubstationDCSD Progress Review Meeting-BPC, Phuentsholing win football tournament

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March-Lightning summit in Samtse -Introduction of safety talks and safety drills. April

-Contract award of 132 kV Motanga,

Phuentsholing Transmission Line

-Award of Meritorious promotion

June-Khadar Ceremony of New MD

September-Inauguration of New Meter Testing-Signing of MOU with Kolongchhu-BPC wins Khuru tournamentConstruction of Day Care Center

October-Horenso Training for Senior Employees-BPC Volunteers construct Biking Trial

November-Inauguration of Lunchuzekha water pump-Lighting of Monuments

December-Inauguration of B-Wallet with BT & BNB-Distribution Transformer (DT) -Metering InauguratedBPC- EGAT sign MOU


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Eng

inee

ring

Des

ign

& C

ontra

ct

Dep

artm

ent

Pro

cure

men

t S

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ces

Dep

artm

ent

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orks

&

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Man

agem

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Dep

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Tech

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Auditors’ Report


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Exhibit to the Annexure


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015

As at

Note December 31, 2015

December 31, 2014

ASSETSNon-current assetsProperty,plantandequipment 5 18,437,820,812 18,401,306,634

Intangibleassets 6 56,559,502 96,108,373

Trade&otherreceivables 8 199,330 199,330

Long-termloansandadvances 9 420,069,277 8,653,518

Othernon-currentassets 10 491,063,498 437,507,988

Total non-current assets 19,405,712,419 18,943,775,843

Current assets

Inventories 11 425,349,163 243,455,212

Investments 7 - 300,000,000Amounts due from customers for contract work 12 485,810,049 523,302,674

Trade&otherreceivables 13 105,495,521 130,711,090

Cashandcashequivalents 14 3,035,926,578 2,379,916,062

Short-termloansandadvances 15 38,066,217 781,554,958

Othercurrentassets 16 1,689,099,472 1,348,922,857

Totalcurrentassets 5,779,747,000 5,707,862,853

Total Assets 25,185,459,419 24,651,638,696

EQUITY AND LIABILITIESShareholder’sEquity

ShareCapital 17 8,225,118,000 8,190,191,000Retained earnings 4,497,478,996 3,932,673,019InvestmentReserve 1,016,601,916 916,304,916

AssetReplacementReserve 87,673,037 74,117,037

ActuarialGain/(loss), (109,300,713) (77,670,430)

Total equity 13,717,571,236 13,035,615,542

Financial StatementStatement of Financial Position


A

nnua

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015As at

Note December 31, 2015 December 31, 2014

Liabilities

Non-current liabilities

Borrowings 18 5,953,118,042 5,988,262,858

Deferred grants 19 898,683,522 918,352,779

Deferred Customer’s Contribution 20 3,092,428 3,204,880

Employeebenefitliabilities 21 382,524,097 307,685,539

DeferredIncomeTaxliabilities(net) 22 551,463,686 480,369,787

Othernon-currentliabilities 23 681,339,770 896,481,543

Total Non-current liabilities 8,470,221,545 8,594,357,386

Current liabilities

Borrowings 18 196,757,453 196,757,453

Deferred grants 19 24,891,343 20,972,254

Deferred Customer Contribution 20 112,452 112,452

Amountsduetocustomersforcontractwork 12 930,279,750 1,707,403,863

Trade&otherpayables 24 411,674,304 357,086,401

Employeebenefitliabilities 21 202,815,969 172,554,806

Incometaxpayable(netofadvance) 25 336,611,845 233,181,272

Othercurrentliabilities 26 894,523,522 333,597,267

Total current liabilities 2,997,666,638 3,021,665,768

Total liabilities 11,467,888,183 11,616,023,154

Total equity and liabilities 25,185,459,419 24,651,638,696

TheaboveStatementofFinancialPositionshouldberead inconjunctionwith theaccompanyingnotes.


A

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015 Statement of Comprehensive Income

For the year ended

Note December 31,2015

December 31, 2014

Revenue

Incomefromsaleofelectricity 4,588,080,855 4,032,661,485

Incomefromconstructioncontracts 27 4,282,061,608 2,419,503,773

Wheelingcharges 632,268,364 575,053,223

Otherincome 28 267,237,517 246,660,388

Total Revenue 9,769,648,344 7,273,878,869

Expenditure

Purchaseofelectricity 1,550,124,223 1,493,389,240

Constructionmaterialconsumedandsub-contractingcharges 3,892,900,878 2,197,708,575

Operationandmaintenanceexpenses 29 311,798,776 267,902,009

Employeebenefitexpenses 30 876,916,718 689,582,338

Finance costs 31 124,257,613 128,572,118

Loss/(gain)onforeigncurrencyfluctuation(net) 43,028 2,523,716

Depreciationandamortizationexpenses 861,450,835 813,619,900

Otherexpenses 32 180,537,675 87,494,411

Total Expenditure 7,798,029,746 5,680,792,307


A

nnua

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ort 2

015Statement of Comprehensive Income (contd.)

For the year ended

Note December 31, 2015

December 31, 2014

Profit before income tax 1,971,618,598 1,593,086,562

Tax expenses 25

-Currenttax 519,783,722 415,284,847

-Deferredtax 71,093,899 174,827,633

Net Profit for the year 1,380,740,977 1,002,974,082

Earningspershare(‘EPS’) 33

BasicEPS(Nu.) 168.38 122.46

DilutedEPS(Nu.) 168.38 121.94

Profitfortheyear 1,380,740,977 1,002,974,082

Othercomprehensiveincome(loss)

Actuarialgains/(loss) (31,630,283) 19,024,136

Total comprehensive income for the year 1,349,110,694 1,021,998,218

TheaboveStatementofComprehensiveIncomeshouldbereadinconjunctionwiththeaccompanyingnotes.


A

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015

Stat

emen

t of C

hang

es in

Equ

ity fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

015

Eq

uity

Sha

re

capi

tal

Ret

aine

d ea

rnin

gsIn

vest

men

t R

eser

veA

sset

R

epla

cem

ent

Res

erve

Act

uaria

l ga

ins/

(loss

es)

Tota

l Equ

ity

Ref

er N

ote

17

BalanceasatJanuary1,2015

8,190,191,000

3,932,673,019

916,304,916

74,117,037

(77,670,430)

13,035,615,542

Netprofitfortheyear

1,380,740,977

1,380,740,977

Othercom

prehensiveincome:

-

Actuarialgains(losses)

(31,630,283)

(31,630,283)

TransfertoInvestmentR

eserve

(100,297,000)

100,297,000

TransfertoAssetReplacement

Reserve

(13,556,000)

13,556,000

Tran

sact

ion

with

the

owne

rs

Issueofsharecapital

34,927,000

34,927,000

PaymentofD

ividendsforthe

year

201

4

(702,082,000)

(702,082,000)

Bal

ance

as

at D

ecem

ber 3

1,

2015

8,22

5,11

8,00

04,

497,

478,

996

1,

016,

601,

916

87,6

73,0

37

(10

9,30

0,71

3)13

,717

,571

,236

TheaboveStatementofC

hangesinEquityshouldbereadinconjunctionwiththeaccompanyingnotes.


A

nnua

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ort 2

015

Stat

emen

ts o

f Cha

nges

in E

quity

for t

he y

ear e

nded

Dec

embe

r 31,

201

4

Equi

ty S

hare

ca

pita

lR

etai

ned

earn

-in

gsIn

vest

men

t R

eser

veA

sset

Rep

lace

-m

ent R

eser

veA

ctua

rial

gain

s/(lo

sses

)To

tal E

quity

Ref

er N

ote

17

BalanceasatJanuary1,2014

8,190,191,000

3,705,358,937

405,764,916

69,077,037

(96,694,566)

12,273,697,324

Netprofitfortheyear

1,002,974,082

1,002,974,082

Othercom

prehensiveincome:

Actuarialgains/(losses)

19,024,136

19,024,136

TransfertoInvestmentR

eserve

(510,540,000)

510,540,000

-

Tran

sact

ion

with

the

owne

rs(5,040,000)

5,040,000

-

Issueofsharecapital

PaymentofD

ividendsforthe

year

201

2(260,080,000)

(260,080,000)

Bal

ance

as

at D

ecem

ber 3

1,

2014

8,19

0,19

1,00

03,

932,

673,

019

916,

304,

916

74,1

17,0

37(7

7,67

0,43

0)13

,035

,615

,542

TheaboveStatementofC

hangesinEquityshouldbereadinconjunctionwiththeaccompanyingnotes.


A

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015 Statement of Cash Flows

For the year endedDecember 31,

2015December 31,

2014Cash flows from / (used in) operating activities

Profitbeforeincometax 1,971,618,598 1,593,086,562

Adjustments for:

Depreciationandamortization 861,450,835 813,619,900

Netloss/(gain)onsaleofproperty,plantandequipment -1,502,701 8,763,180

Interestexpenses 124,257,613 128,572,118

Interestincome -128,593,192 -103,563,977

Provisionfordoubtfuldebts 9,807,021 -1,178,989

ProvisionforobsolescenceofInventory -9,399,991 -983,375

Liabilities/provisionsnolongerrequired,writtenback -22,586 -1,435,894

AmortizationofGovernmentgrants -23,959,455 -21,306,399

Amortizationofdeferredcustomercontribution -112,452 -56,226

Operating profit before working capital changes 2,803,543,690 2,415,516,900

Decrease/(Increase)inInventories -172,493,961 50,603,067Decrease/(Increase)inamountduefromcustomercontractworks 37,492,626 -5,765,577

Decrease/(Increase)inTradeandotherreceivables 291,995,073 203,683,099

Increase/(Decrease)inAmountsduetocustomersforcontractwork -777,124,114 353,218,316

Increase/(Decrease)inTradeandotherpayables 473,919,215 -312,185,152

Net cash generated from operating activities before income tax

2,657,332,529 2,705,070,653

Incometaxpaid,netofrefundsreceived -416,353,149 -314,728,892

Netcashgeneratedfromoperatingactivities 2,240,979,380 2,390,341,761

Cash flows from / (used in) investing activities

Purchaseofproperty,plantandequipmentandIntangibleassets -883,680,609 -1,668,539,090

Receipt/(repayments)ofgovernmentgrants 8,209,286 171,074,065

Receipt/(repayments)ofDeferredcustomercontribution - 3,373,558


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For the year ended

December 31, 2015

December 31, 2014

Proceedsfromsaleofproperty,plantandequipment 26,767,169 1,257,864

Inter-CorporatedeposittoHoldingCompany - 600,000,000

RedemptionofInvestment 300,000,000

Redemptionofbanktermdeposits(net) -350,807,725 -332,644,394

Interestreceived 141,155,252 197,230,078

Net cash generated from investing activities -758,356,627 -1,028,247,919

Cash flows from / (used in) financing activitiesProceeds from Borrowings 161,612,637 320,137,771

IssueofshareCapital 34,927,000 -

Repayment of Borrowings -196,757,453 -196,757,453

Interestpaid -124,312,421 -130,764,047

Paymentofdividendonordinaryshares -702,082,000 -260,080,000

Net cash used in financing activities -826,612,237 -267,463,729

Net increase in cash and cash equivalents 656,010,516 1,094,630,113

Cashandcashequivalentsatbeginningoftheyear 2,379,916,062 1,285,285,949

Cash and cash equivalents at end of the year 3,035,926,578 2,379,916,062

TheaboveStatementofCashFlowsshouldbereadinconjunctionwiththeaccompanyingnotes.


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015 Notes to Financial Statements

No. BAS 1 BAS1 Presentationoffinancialstatements2 BAS2 Inventories3 BAS7 Cashflowstatements4 BAS8 Accountingpolicies,changesinaccountingestimatesanderrors5 BAS10 Eventsafterthebalancesheetdate6 BAS11 Construction contracts7 BAS12 Incometaxes8 BAS16 Property,plantandequipment9 BAS18 Revenue

10 BAS20 AccountingforGovt.GrantsandDisclosureofGovt.Assistance11 BAS21 The effects of changes in foreign exchange rates12 BAS23 Borrowing costs13 BAS24 Relatedpartydisclosures14 BAS33 Earnings per share15 BAS37 Provisions,contingentliabilitiesandcontingentassets

1. General information

BhutanPowerCorporationLimited(‘Company’)isawhollyownedsubsidiaryofDrukHolding& Investments (DHI), A Royal Governmentof Bhutan undertaking. The Company hasbeen incorporated and registered under The Companies Act of the Kingdom of Bhutan,2000withlimitedliability.TheregisteredofficeoftheCompanyislocatedatThimphu,Bhutan.

The Company is engaged in supply ofelectricity to the residents of the Kingdom ofBhutan and wheeling of electricity from thelargeHydropowerPlantsinBhutanforexporttoIndia.TheCompanyalsocarriesoutbusinessofconstructionofelectricityproject/distributionnetworksystem.

TheCompany owns, operates andmaintainsthe entire electricity transmission anddistributionnetworkintheKingdomofBhutanincluding19MiniandMicroHydropowerPlants.Apartfromconstructionofdistributionnetworksystem, the Company is also mandated toconstruct the associated Transmission Linesand Substations required for evacuation ofpowerfromHydropowerPlantstotheBhutan-

Indiaborder.

The financial statements of theCompany forthe year ended December 31, 2015 wereauthorized for issue in accordance with theresolutionoftheBoardofDirectorsdated14th

March2016.

2. Bhutanese Accounting Standards (BAS)

The Ministry of Finance embarked on theprocessofdevelopingAccountingStandardstopromotehighqualityfinancial reportingwhichare consistent with international practices.Pursuant to this development, the Ministryof EconomicAffairs of Royal Government ofBhutan has issued the Accounting StandardRulesforCompaniesinBhutan,2012,notifyingthe Bhutan Accounting Standards (‘BAS’) tobe implementedby theCompanies inBhutanin three phases (I, II and III)with effect fromJanuary1,2013.Consequently,theCompanyhasfollowedtheBASnotifiedforimplementationwitheffect fromJanuary1,2013(Phase-I), inpreparing the financial statements from theyear2013onwardstotheextentasapplicabletotheCompanyasunder.


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0152.1 The Company has not early adopted

those paragraphs of BAS which arehaving linkages to BAS which are to beimplemented under Phase II (with effectfrom January 01, 2016) and Phase III(witheffectfromJanuary01,2018).Theseparagraphs would be applied when therespectiveBASwillbeadopted.However,in cases where such paragraphs havebeenearlyadopted, thesamehavebeendisclosedintherespectivenote/accountingpolicy.

3. Summary of Significant Accounting Policies

3.1 Basis of preparation

These financial statements are generalpurpose financial statements that havebeenpreparedinaccordanceandtocomplywith the BAS, the Generally AcceptedAccounting Principles and the relevantprovisions of The Companies Act of theKingdom of Bhutan, 2000 including theAccountingStandardRulesforCompaniesinBhutan,2012.

The said financial statements have been

prepared on accrual basis of accountingwith the historical cost convention andgoing concern basis except as stated otherwiseintheFinancialStatements.Thepreparation of the Financial Statementsrequires the use of certain criticalaccounting estimates and judgments. Italso requires management to exercisejudgment in the process of applying theCompany’s accounting policies and thereported amounts of revenue, expenses,assets and liabilities may differ from theestimates. In areas involving a higherdegreeofjudgmentorcomplexity,orareaswhere assumptions and estimates are significant to the financial statements aredisclosedinNote4.

3.2 Capital Management

TheCompanymanagesitsfunds/capitalsoastoensurethatfundsareavailabletomeet futurecommitments,workingcapitalrequirements and also the dividend andtax expectations of its holding CompanyDruk Holding & Investments and RoyalGovernmentofBhutan.Capitalexpenditureis mostly met from operating cash flowsandfixedtermborrowingaremadeonlyformajorcapitalprojectsandsuchborrowingsare repaidwhen the project is completedandisgeneratingpositivecashflows.

3.3 Foreign currency translation

(a) Functionalandpresentationcurrency

Items included in thefinancialstatementsare measured using the currency of the primary economic environment in whichthe Company operates referred to as the “functional currency”. The functionalcurrency and presentation currency of the CompanyisBhutaneseNgultrum.

(b) Transactionsandbalances

Foreign currency transactions are translatedintothefunctionalcurrencyusingtheexchangeratesprevailingatthedatesofthetransactionsorvaluationwhereitemsarere-measured.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationat year-end exchange rates of monetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognizedintheStatementofComprehensiveIncome.

3.4 Property, plant and equipment

Thecostofanitemofproperty,plantandequipmentisrecognizedasanassetif,andonly if, it isprobable that futureeconomicbenefits associated with the item willflowtotheCompanyandthecostcanbemeasuredreliably.


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015 Property,plantandequipmentareinitially

recognized at cost. The initial cost ofproperty, plant andequipment comprisesits net purchase price after deducting for anytradediscountandrebates,includingimportdutiesandnon-refundablepurchasetaxes, any directly attributable costs ofbringingtheassettoitsworkingconditionandlocationforitsintendeduse.

Thecostofself-constructedassetsincludesthe borrowing costs that are directlyattributabletotheacquisition,constructionor production of qualifying assets (Refernote 3.18 below for accounting policyof borrowing cost). The cost of self-constructed assets not put to use and advancespaid towards theacquisitionofproperty,plantandequipmentoutstandingat each Statement of Financial Positiondate, are disclosed as Capital work-in-progress.

Subsequent to initial recognition,property, plant andequipmentare statedat cost less accumulated depreciationand accumulated impairment losses, ifany. Subsequent expenditures relatingto property, plant and equipment iscapitalized only when it is probable thatfuture economic benefits associatedwiththese will flow to the Company and thecostoftheitemcanbemeasuredreliably.

Subsequent costs are included in theasset’scarryingamountorrecognizedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociated with the item will flow to theCompany and the cost of the item can be measuredreliably.Thecarryingamountofthereplacedpartisderecognized.Allotherrepairs and maintenance are charged to theStatementofComprehensive Incomeduring the financial period in which theyareincurred.

Spare parts and servicing equipmentsare normally treated as inventory and

expensedas consumed.However,majorsparepartsandstand-byequipmentsaretreatedasproperty, plant andequipmentwhen they are expected to be used for more than one year. Also, where thespares parts or servicing equipment canonly be used in connection with an itemof property, plant and equipment theyare accounted for as property, plant andequipment.

Depreciation on property, plant andequipmentiscomputedusingthestraightline method over the estimated usefullives. Freehold land is not depreciatedas ithasanunlimiteduseful lifewhereasleaseholdlandisdepreciatedonastraightlinemethodover theprimary termof thelease.

The Company has, based on evaluationperformed by the technical Department,establishedtheestimatedrangeofusefullivesofassetsfordepreciatingitsproperty,plantandequipmentasfollows:

Buildings 30 yearsGenerationCivilworks 30 yearsTransmission assets 30 yearsDistribution assets 30 yearsComputerequipment 5 yearsVehicles 6.67yearsFurniture and Fixtures 10 yearsOfficeequipment 5 years

Significant parts of property, plant andequipment which are required to bereplaced at intervals and have specificusefullivesarerecognizedanddepreciatedseparately.

The useful life, residual value anddepreciation method are reviewed, andadjusted appropriately, at least at eachStatement of Financial Position dateto ensure that the method and period of depreciation are consistent with the


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015expected pattern of economic benefits.

Changeintheestimatedusefullife,residualvalue and / or depreciation method, ifany,isdepreciatedprospectivelyovertheasset’sremainingrevisedusefullife.

Thecostandtheaccumulateddepreciationfor property, plant and equipment sold,scrapped, retired or otherwise disposedoff are eliminated from the financialstatements and the resulting gains andlosses are included in the Statement ofComprehensiveIncome.

3.5 Intangible assets

Intangible assets include computersoftware and are carried at cost of acquisition/implementation lessaccumulated amortisation. Amortisationisrecognizedonastraightlinebasisovertheestimateduseful life asestimatedbythemanagement.

3.6 Impairment of assets

TheCompanyassessesateachbalancesheet date whether there is any indication that property, plant and equipment maybeimpairedbasedoninternalorexternalfactors. If any such indication exists, theCompany estimates the recoverableamount of the assets. If the carryingamount of the asset/cash generating unit exceeds the recoverable amount on thereporting date, the carrying amount isreduced to the recoverable amount. Therecoverable amount is measured as thehigherofthenetsellingpriceandthevalueinusedeterminedbythepresentvalueofestimatedfuturecashflows.

3.7 Income tax

Current tax assets and liabilities forthe current period are measured at the amountexpectedtoberecoverablefromor payable to the Income tax authoritybased on the current period’s taxable

income.The taxratesand tax lawsusedto compute the amount are those that are enacted or substantively enacted on thereportingdatebytheIncomeTaxAuthority.

Deferred income tax is provided on alltemporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts forfinancialreportingpurposes.

Deferred income tax liabilities arerecognized for all taxable temporarydifferences except when the deferred income tax liability arises from theinitial recognition of an asset or liabilityin a transaction that is not a business combination and that, at the time of thetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss.

Deferredincometaxassetsarerecognizedforalldeductibletemporarydifferencestotheextent that it isprobable that taxableprofit will be available against which thedeductible temporary differences canbe utilized, except when the deferredincometaxassetrelatingtothedeductibletemporary difference arises from the initial recognition of an asset or liabilityin a transaction that is not a business combination and, at the time of thetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss.

The carrying amount of deferred income tax assets is reviewed at each BalanceSheet date and reduced to the extentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.

Deferredincometaxassetsandliabilitiesare measured at the tax rates that are expected to apply to the year when theasset is realizedor the liability issettled,basedontaxrates(andtaxlaws)thathavebeenenactedorsubstantivelyenactedatthereportingdate.


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015 Deferredtaxassetsandliabilitiesareoffset

whenthereisalegallyenforceablerighttoset off current tax assets against current taxliabilitiesandtheCompanyintendstosettle its current taxassetsand liabilitieson net basis. Management evaluatespositions taken incomputationof incomein income tax returns with respect to situations inwhichapplicable income taxregulationissubjecttointerpretation.

The income tax liabilities are recognizedwhen, despite the Company’s beliefthat its income tax return positions are supportable, the Company believes, it ismorelikelythannot,basedonthetechnicalmerits, that certain positionsmay not befullysustaineduponreviewbyincometaxauthorities.Benefitsfromtaxpositionsaremeasured at the single best estimate ofthemostlikelyoutcome.

At each Statement of Financial Positiondate,thetaxpositionsarereviewed,andtothe extent that new information becomes available which causes the Companyto change its judgment regarding theadequacyofexistingincometaxliabilities,suchchangestoincometaxliabilitiesaredulyrecognizedinincometaxexpenseinthe year in which such determination is made.

Interest and penalties, if any, relatedto accrued liabilities for potential taxassessments are included in incometax charge for the year in which the assessmentiscompleted.

3.8 Investments

Investments primarily meant to be heldover long termperiod (i.e. formore than12 months from date of acquisition) arevalued at cost. Provision is made whenin the opinion of the management there is a decline, other than temporary, inthe carrying value of such investments.

Current investments are stated at thelowerofcostorquoted/fairvalue.

3.9 Construction Contracts

Construction contract is a contract specificallynegotiatedfortheconstructionofanassetorofagroupofassets,whichareinterrelatedorinterdependentintermsof design, technology, function, purposeor use. According to its characteristics,a construction contract can either be accounted for separately i.e., segmentedinto several components which areaccountedforseparatelyorcombinedwithanother construction contract in progress to forma single construction contract foraccountingpurposes.

The Company executes cost plusmarkup/fee construction contracts. The‘recoverablecostsincurredonthecontractplus an addition for the fixed markup/ fee agreed with the customer under the contractual terms’ as at the date ofStatementofFinancialPositionistreatedas Work in Progress - ‘ConstructionContracts’.

Progress billing and advances arededucted from the value of the Work inProgress-‘ConstructionContracts’’forthespecificcontractandrecordedas‘AmountsDue from Customers for Contract Work’andincaseprogressbillingandadvancesexceedthisvalue,thesamearerecordedunder liabilities as ‘Amounts Due toCustomersforContractWork’.

For the revenue recognition policy onconstructioncontracts,refernote3.21.

Amounts expected to be recovered orsettledwithin12monthsfromthereportingdate are classified as current assets/liabilities.Ifnot,theyarepresentedundernon-currentassets/liabilities.


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0153.10 Trade and other receivables

Trade receivables are amounts duefrom customers in the ordinary course of businessof transmissionandsupplyofelectricity.Tradereceivablesalsoincludeprogress billing under constructioncontracts.Tradereceivablesareinitiallyrecognizedatthesale/recoverablevalueandareassessedateachStatementofFinancialPositiondate forcollectability.The Company estimates the portion of its trade receivables that areuncollectablebasedonageing,conductof thecustomerandbusiness/historicalexperience and provision for doubtfultradereceivablesisaccordinglyprovidedfor. Trade receivables are classified ascurrent assets, if collection is expectedwithintwelvemonthsasattheStatementofFinancialPositiondate,ifnot,theyareclassifiedundernon-currentassets.

3.11 Loans and advances

LoansandadvancesrepresentadvancesgiventosuppliersandcontractorsintheordinarycourseofthebusinessactivitiesoftheCompany.Advancesalsoincludeinter corporate deposits placed bythe Company for earning interest income.LoanandadvancesareinitiallyrecognizedatthevalueofcashadvancedandareassessedateachStatementofFinancialPositiondateforrecoverabilityandtheprovision isrecognizedwhenitismorelikelythattheCompanywillnotbeabletocollect thesame.Loansandadvances are classified under currentassets if payment is recoverablewithinone year or less as at Statement ofFinancialPosition date, if not, theyareclassifiedundernon-currentassets.

3.12 Cash and cash equivalents

Cashandcashequivalentsincludecashin hand, bank balances and deposits,othershort-termhighlyliquidinvestments

withoriginalmaturitiesof threemonthsor less and that are readily convertibleto known amount of cash and cashequivalentandwhicharesubject toaninsignificantriskofchangesinvalue.

3.13 Inventories

Inventoryconsistsofstoresandsparesheldforoperationandmaintenanceanduseinconstructionofanasset.

Inventories are stated at the lower ofcost and net realizable value. Cost isdeterminedusingtheweightedaveragecost formula and comprises cost ofpurchasesandotherincidentalexpensesincurred in acquiring inventories andbringing them to their existing locationandcondition.

3.14 Investment and Asset Replacement Reserve

The nature and purpose of these reservesareasfollows:

i. Investment Reserve:

The reserve created during the earlieryear/s under the ‘Group InvestmentReserve (GIR) Scheme’ as per the DHIOwnershipPolicytoretainearningsintheDHIownedCompanies(DoCs)tofinanceProjects of strategic importance. Thestated objectives of InvestmentReserveare as under:

- Tobuildfundsforinvestments.- To build funds to meet national

exigencies.- To optimize on the limited pool of

capital available in the group andmaximizereturnstotheGovernmentandtheState.

- To facilitate transfer of capitalamong the Companies in the group and within the legal framework inBhutan.


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015 - To enable the DoCs to optimize

its capital structure and improvereturns.

- To provide predictability in flow offundsfromDoCstoDHIandtoMoF.

ii. Asset Replacement Reserve:

This Reserve is created to mitigate theriskofassetsoftheCompanyagainstanydamagesduetonaturalcalamities.

3.15 Borrowings

Borrowings are stated at principaloutstanding and interest accrued and due on such borrowings based on the applicable interest rate. Borrowings areclassifiedascurrent liabilitiesunless theCompany has an unconditional right todefersettlementoftheliabilityforatleast12monthsaftertheStatementofFinancialPositiondate.

3.16 Grants

Grants from Government and Non-Government sources are recognizedwherethereisreasonableassurancethatthegrantwillbereceivedandallattachedconditionswillbecompliedwith.

Grants relating to expense items arerecognized as income on a systematicbasis over the periods that the relatedcosts,whichitisintendedtocompensate,are expensed. The unallocated portionof such grant is presented as part of Deferred Grants in the Statement ofFinancialPosition.

Grants related to non-current assetsare treated as Deferred Income in theStatement of Financial Position andare recognized to the Statement ofComprehensive Incomeona systematicbasis over the useful life of the relatedassets.

Grant received as compensation forexpenses/lossesalreadyincurredorwithno future related costs is recognizedas income in the year it is received orbecomesreceivable.

BAS20-AccountingforGovernmentGrantanddisclosureofGovernmentAssistancehasbeen implementedby theCompanyretrospectively for the grants existed ason the transition date except its Para 10A regarding recognition of the benefitofgovernmentloanatbelowmarketrateofinterestasagovernmentgrant,asthesameisapplicablefromJanuary1,2018and the Company has not decided for the earlyimplementationofthesame.

3.17 Customer’s Contribution for network construction / expansion

Contribution received from customerstowards the construction / extension of distribution network / assets at thecustomer’s site is treated as Deferred Customer’sContributionintheStatementofFinancialPositionandisrecognizedtotheStatementofComprehensiveIncomeonasystematicbasisovertheusefullifeoftherelateddistributionnetwork/assetsand thedistributionnetwork /assetsarecapitalised under Property, plant andequipment.

3.18 Borrowing Costs

Borrowing costs consist of interest and other costs that Company incurs in connectionwiththeborrowingoffunds.

General and specific borrowing costs(net of investment incomeon temporaryinvestmentof thoseborrowings) thataredirectly attributable to the acquisition,constructionorproductionofaqualifyingassetarecapitalizedaspartofthecostsof the asset, until such time the assetsaresubstantially ready for their intendeduseorsale.Aqualifyingassetisanassetthatnecessarilytakesasubstantialperiod


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015of time to get ready for its intended use

or sale, which is two years or more asdecidedbytheCompanykeepinginviewthe nature of assets and past trend of time takenfortheircompletion.

AllotherborrowingcostsarechargedasexpensetoStatementofComprehensiveIncomeintheperiodtheyoccur.

3.19 Trade and other payables

Tradeandotherpayablesareobligationsincurred by the Company towards purchase of electricity and other goodsandavailingtheservicesthathavebeenacquiredoravailedintheordinarycourseof business. Trade and other payablesare classified under current liabilities, ifpayment is due within 12 months as at Statement of Financial Position date, ifnot,theyareclassifiedundernon-currentliabilities.

3.20 Employee benefit liabilities

Contribution to Provident Fundadministered by National Pension andProvidentFundischargedtoStatementofComprehensiveIncomeasandwhentheyfalldue.

Retirement benefit liabilities arerecognized when the Company has apresentobligation(legalorconstructive)as a result of past event, it is probablethatanoutflowof resourcesembodyingeconomic benefits will be requiredto settle the obligation and a reliableestimate can be made of the amount of theobligation.

Gratuity and Leave encashment areprovidedforbasedonactuarialvaluationasattheStatementofFinancialPositiondate. Retirement benefit liabilities arediscounted to present value applyingthepre-taxrateofreturnonGovernmentbonds of similar tenure and currency.

Increaseintheliabilityduetopassageoftime is recognized as interest expense.Actuarial gains and losses arising fromexperience adjustments and changesinactuarialassumptionsarechargedorcreditedtoequityinothercomprehensiveincomeintheperiodinwhichtheyarise.

Further, the contribution towards thegratuity liability is invested in fixeddepositswiththebanks.

The expected cost of Performance BasedIncentiveandVariableAllowancesisrecognizedasanexpensewhenthereis a legal or constructive obligation tomakesuchpaymentsasaresultofpastperformance and a reliable estimate oftheobligationcanbemade.

The employees of the Company arecovered under an insurance policywith death claim benefit in the event ofdeath of the employee while in serviceand within the policy term. The policyhas been underwritten through Singlepremium which will be refunded atthe end of policy period/term with pre-decided/fixedpolicybonus /benefitandafterdeductionofdeathclaimpaidwithinthepolicyterm.TheSinglepremiumpaidhasbeenconsideredas‘DepositagainstEmployees Insurance Policy’ and thedeathclaimspaid/payableareaccountedfor as expense and are reduced from the same during the year of incurrence /intimationofdeathclaimandthepolicybonus/benefitisaccountedforasincomeand added to the same on prorate basis over thePolicyperiod/ termbycredit to‘OtherIncome’.

3.21 Revenue Recognition

Revenueisrecognizedtotheextentthatitisprobablethattheassociatedeconomicbenefits will flow to the Company andthe revenue can be measured reliably.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.


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015 Thefollowingspecificrecognitioncriteria

must also be met before revenue isrecognized:

(a) Electricity Business:

Revenueattributabletosaleofelectricityis accounted for as per the tariff rates approved by the Bhutan ElectricityAuthority on the basis of billing toconsumersunderthebillingcyclefollowedbytheCompany.Revenueisrecognizedaselectricityisdeliveredandconsumedbycustomers.Accordingly,Revenuealsoincludesanestimateofunbilledrevenue.Unbilledrevenuerepresentsanestimateof electricity consumed by customerssince the date of each customer’s lastbilled meter reading that has not beenbilledatthereportingdate.

Wheeling charges (transmissioncharges)areaccountedon thebasisofperiodic billing to the power generatingcompaniesatthetariffratesapprovedbyBhutanElectricityAuthority.

(b) Construction Business:

The Company executes cost plusconstruction contracts for construction of electrical infrastructure, In thecaseofacost plus contract, the outcome can beestimatedreliablywhenitisprobablethattheeconomicbenefitsassociatedwiththecontractwillflowtotheCompanyandthecontractcostsattributabletothecontract,whetherornotspecificallyreimbursable,can be clearly identified and measuredreliably.Accordinglyrevenuefromacostpluscontractisrecognizedwithreferenceto therecoverablecosts incurredduringtheyearplusthefixedmarkupunderthecontractualterms.

(c) Interest income

Interest income is accrued on a timeproportion basis, with reference to theprincipaloutstandingandattheeffectiveinterestrateapplicable.

(d) Liquidated damages and penalties

Liquidateddamagesandpenaltiesoccurwhen contractors/suppliers fail to meetthekeyperformanceindicatorssetoutintheircontractwiththeCompany.Incomeresulting from claims for liquidateddamages and penalties are recognizedas other income when all performanceobligations are met (including when acontractualentitlementexists), itcanbereliablymeasuredanditisprobablethatthe economic benefits will flow to theCompany.

(e) Other items of revenue

Other items of revenue which arisefrom theprovisionofservices incidentalto the core activities of the businessare recognized when the services areprovidedanditisprobablethateconomicbenefits associatedwith the transactionwillflowtotheCompanyandamountcanbemeasuredreliably.

3.22 Earnings per share (‘EPS’)

The Company presents the basic and dilutedEPSdataforitsordinaryshares.Basic EPS is computed by dividing thenetprofit for theyearattributable to theordinaryshareholdersoftheCompanybytheweightedaveragenumberofordinarysharesoutstandingduringtheyear.

DilutedEPSiscomputedbyadjustingthenetprofit for theyearattributable to theordinary shareholders and by adjustingtheweightedaveragenumberofordinarysharesoutstandingtoassumeconversionofalldilutivepotentialordinaryshares.

3.23 Dividends

Dividends(includinginterimdividends)toordinaryshareholdersisrecognizedas a liabilityanddeductedfromshareholders’equityintheperiodinwhichthedividendsaredeclaredbytheBoardofdirectorsandapprovedbytheordinaryshareholders.


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0153.24 Critical accounting estimates and

assumptions

The preparation of the financialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthat affect the reported amounts in the financial statements. Although theCompany regularly assesses theseestimates, actual results could differmateriallyfromtheseestimates.Changesin estimates are recorded in the year in whichtheybecomeknown.

Actual results may differ frommanagement’s estimates if these results differ from historical experienceor other assumptions do not turn out to be substantially accurate, even if suchassumptions were reasonable whenmade.

The said estimates are based on the facts and events, that existed as at thedateofstatementoffinancialposition,orthatoccurredafter thatdatebutprovideadditional evidence about conditionsexisting as at the statement of financialpositiondate.

Theestimatesandassumptionsthathavea significant risk of causing a materialadjustment to the carrying values ofassets and liabilities within the nextfinancialyeararediscussedbelow.

4. Critical accounting estimates and assumptions

a) Useful lives of electricity generation, transmission and distribution assets

The costs of electricity generation,transmission and distribution assets are depreciatedonastraight-linebasisovertheirrespectiveusefullives.Managementestimatestheusefullivesoftheseassetsto be within 30 years. Changes in theexpected level of usage, technological

developments, level of wear and tearcould impact the economic useful livesandtheresidualvaluesof theseassets,therefore future depreciation charges could be revised and could have animpactontheprofitinfutureyears.

b) Retirement benefit obligations

The costs of retirement benefits andpresent value of the retirement benefitobligations are determined usingactuarial valuations. An actuarialvaluation involves making variousassumptions which may differ from actualdevelopmentsinthefuture.Theseincludethedeterminationofthediscountrate, future salary increases, mortalityratesandfuturepensionincreases.Dueto the complexity of the valuation andits long-term nature, retirement benefitobligations are sensitive to changes inthese assumptions.All assumptions arereviewedateachreportingdate.

c) Provision for doubtful debts

As at each Statement of FinancialPosition date, the Company assessesrecoverability of trade receivables.Provisionfordoubtfuldebtsisrecognizedbased on the historical experience ofcollectability of debts. The Companyestimates the portion of its outstanding receivables that cannot be collectedbased on aging schedules at anincreasing percentage of each aging category. Actual doubtful debts coulddifferfromtheseestimates.

d) Unbilled revenue

Theunbilledrevenueiscalculatedusingaverageoflastthreemonthsconsumptionfor the Low voltage consumer and theactual consumption for theMediumandHighVoltageconsumer.

Actualelectricityusagecoulddiffer fromthoseestimates.


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015

5.

Prop

erty

, pla

nt a

nd e

quip

men

t

Particulars

Freehold

Land

Buildingand

Civil

Structures

Generation

equipm

ent’s

Network

syst

emOthers

Capital

Advancesand

Con

stru

ctio

n workin

prog

ress

Total

Bal

ance

as

at J

anua

ry 1

, 20

15

Cos

t 68

,775

,377

1,98

9,75

7,82

872

0,99

5,99

917

,401

,477

,425

1,06

3,89

8,19

32,

435,

716,

329

23,6

80,6

21,1

51

Accum

ulateddepreciation

--4

00,5

51,9

72-4

69,7

11,6

65-3

,806

,428

,537

-602

,622

,343

--5

,279

,314

,517

Boo

k Va

lue

68,7

75,3

771,

589,

205,

856

251,

284,

334

13,5

95,0

48,8

8846

1,27

5,85

02,

435,

716,

329

18,4

01,3

06,6

34

Cha

nges

in b

ook

valu

e du

ring

the

year

Add

ition

s701,285

287,356,883

42,692,031

1,044,679,102

123,656,683

-616,660,293

882,425,692

Disposalsandsales

-186,633

-9,470,327

-3-33,695,763

-22,640,583

-65,993,309

Depreciationondisposals

322,972

18,579,887

21,826,130

40,728,989

Dep

reci

atio

n-69,363,437

-26,735,007

-589,726,108

-134,822,642

-820,647,194

Tota

l cha

nges

in b

ook

valu

e51

4,65

220

8,84

6,09

115

,957

,021

439,

837,

118

-11,

980,

412

-616

,660

,293

36,5

14,1

78

Bal

ance

as

at D

ecem

ber

31, 2

015

Cos

t69,290,029

2,267,644,384

763,688,02718,412,460,764

1,164,914,293

1,819,056,03624,497,053,534

Accum

ulateddepreciation

-469,592,438

-496,446,672

-4,377,574,757

-715,618,855

-6,059,232,722

Boo

k va

lue

69,2

90,0

291,

798,

051,

946

267,

241,

355

14,0

34,8

86,0

0744

9,29

5,43

81,

819,

056,

036

18,4

37,8

20,8

12

Bal

ance

as

at J

anua

ry 1

, 20

14

Cos

t68

,675

,374

1,59

1,76

1,14

071

4,98

5,91

014

,562

,265

,961

944,

131,

592

4,18

9,38

5,37

222

,071

,205

,348

Accum

ulateddepreciation

--335,187,691

-428,685,712

-3,2

75,8

21,3

36-4

87,9

74,2

78-

-4,5

27,6

69,0

18


A

nnua

l Rep

ort 2

015

Prop

erty

, pla

nt a

nd e

quip

men

t (C

ontd

.)

Particulars

FreeholdLand

Buildingand

Civil

Structures

Generation

equipm

ent’s

Networksys-

tem

Others

Capital

Advancesand

Con

stru

ctio

n workin

prog

ress

Total

Boo

k Va

lue

68,6

75,3

741,

256,

573,

449

286,

300,

198

11,2

86,4

44,6

2545

6,15

7,31

44,

189,

385,

372

17,5

43,5

36,3

30

Cha

nges

in b

ook

valu

e du

ring

the

year

Add

ition

s100,003

401,131,496

6,010,090

2,851,658,396

137,402,814

-1,753,669,043

1,64

2,63

3,75

5

Disposalsandsales

-3,134,807

-12,446,932

-17,636,212

-3

3,21

7,95

2

Dep

reci

atio

n on

disposals

1,570,097

6,824,533

14,802,278

23

,196

,907

Dep

reci

atio

n

-66,934,378

-41,025,953

-537,431,733

-129,450,342

-7

74,8

42,4

06

Tota

l cha

nges

in

book

val

ue10

0,00

333

2,63

2,40

8-3

5,01

5,86

32,

308,

604,

264

5,11

8,53

8-1

,753

,669

,043

857,

770,

304

Bal

ance

as

at D

e-ce

mbe

r 31,

201

4

Cos

t68,775,377

1,989,757,829

720,996,00017,401,477,425

1,063,898,194

2,435,716,32923,680,621,151

Accum

ulated

depr

ecia

tion

--400,551,972

-469,711,665

-3,806,428,537

-602,622,343

--5

,279

,314

,517

Boo

k va

lue

68,7

75,3

771,

589,

205,

857

251,

284,

335

13,5

95,0

48,8

8846

1,27

5,85

12,

435,

716,

329

18,4

01,3

06,6

34


A

nnua

l Rep

ort 2

015 5.1 Capital work-in-progress as at December 31, 2015 andDecember 31, 2014 comprise the

following:

ParticularsAs at As at

December 31, 2015 December 31, 2014Generationequipments 2,643,636 24,027,370

Transmissionlines 123,821,678 497,677,964

Distribution Assets 1,273,590,931 1,643,498,748

Opticalfibers - 306,936

Buildings 74,122,650 134,349,115

OtherCivilStructures 20,570,634 17,826,986

Others 117,456,635 18,311,896

Advanceforworks 206,849,871 99,717,315

Total 1,819,056,035 2,435,716,330

5.2 No Borrowing cost has been capitalized during the year on the qualifying asset. For thepreviousyearendedDecember31,2014,anamountofNu.2,389,037havebeencapitalizedonqualifyingassetsatanominalinterestrateasdefinedintherespectiveLoanagreement.

5.3 GrosscarryingvalueincludesFixedAssetstransferredfromerstwhileDepartmentofPower,RoyalGovernmentofBhutanatawrittendownvalueofNu1,760.89millionagainstissueofShareCapitaltoDHI.

5.4 Property,plantandequipmentarepledgedassecuritiesforborrowings.[Refernote18.1]

5.5 TheCompanyhasearlyadoptedPara43ofBAS16‘Property,plantandequipment’whichiseffectivefromannualperiodcommencingfromJanuary01,2016.TheearlyadoptiondoesnothavematerialimpactonthefinancialstatementsoftheCompany.

6. Intangible assets

Computer SoftwareAs at As at

December 31, 2015 December 31, 2014

Opening gross carrying value (i) 214,883,344 188,978,009

Additions 1,254,918 25,905,335

Disposals (299,133) -

Closing gross carrying value(ii) 215,839,129 214,883,344

Opening accumulated amortization (iii) (118,774,971) (79,997,477)

Depreciationondisposal 298,985

Addition (40,803,641) (38,777,494)

Closing accumulated amortization (iv) (159,279,627) (118,774,971)

Net carrying value (ii-iv) 56,559,502 96,108,373


A

nnua

l Rep

ort 2

015

Computer SoftwareAs at As at

December 31, 2015 December 31, 20141. InvestmentsLongTerm-OtherInvestments-Unquoted:

300,000RICBLBondsSeriesIIatNu.1,000/-perbond - 300,000,000

Total - 300,000,000

7. Investments analyzed as follows:As at December

31, 2015As at December 31,

2014Current portion -Non-currentportion - 300,000,000Total - 300,000,000

8. Trade & other receivables]]As at December

31, 2015As at December

31, 2014SecurityDepositforLandLease 199,330 199,330Total 199,330 199,330

9. Long-term loans & advancesAs at December


31, 2014AdvancetoHoldingCompany 400,000,000 -Advancetocontractors -Advancetoothers 5,226,200 -Prepaid Expenses 8,024,718 8,321,930Advancestoemployees-BikeLoan 5,856,734 138,189-WelfareLoan 176,777 193,399-Advance-M/PhoneLoan 784,848 -Total 420,069,277 8,653,518

10. Other non-current assetsAs at December


31, 2014DepositagainstEmployeeInsurancePolicy(ReferNote37(vi)) 433,586,764 424,136,478

InterestReceivableonPolicy 57,476,734 13,371,510Total 491,063,498 437,507,988


A

nnua

l Rep

ort 2

015 11. Inventories

As at December 31, 2015


Storesandspareparts 379,834,091 205,102,477

Stock-ISU 45,452,379 48,031,199

Stock–Uniform 645,953 1,357,157

Stock-InfocomSpares 1,052,370

Less:Provisionforobsoleteinventory (1,635,630) (11,035,621)

Total 425,349,163 243,455,212

12. Amounts due from/to customers for contract work



AmountsduefromcustomersforcontractworkWorkinprogress-ConstructionContracts 10,900,618,715 5,866,468,689

Less:Progressbillingandadvancesreceived 10,414,808,666 5,343,166,015

Total 485,810,049 523,302,674

AmountsduetocustomersforcontractworkWorkinprogress-ConstructionContracts

1,510,314,422 2,037,086,706

Less:ProgressbillingandAdvancesreceived 2,440,594,172 3,744,490,569

Total (930,279,750) (1,707,403,863)

Recognizedandincludedinfinancialstatementsas:Amounts due from customers for construction contracts

-Currentportion 485,810,049 523,302,674

-

Amounts due to customers for construction contracts

-ForLowvaluecontract 97,362,301 77,664,318

-ForHighValuecontract 832,917,449 1,629,739,545

Total (930,279,750) (1,707,403,863)


A

nnua

l Rep

ort 2

01513. Trade & other receivables



Receivablesagainsttransmissionandsupplyofelectricity 123,284,570 138,693,118

Less:Provisionfordoubtfuldebts (17,789,049) (7,982,028)

Total 105,495,521 130,711,090

14. Cash and cash equivalents



Cash in hand 2,859,720 2,305,369

Bankbalancesincurrentaccounts 3,021,309,990 2,367,458,994

BalancewithbanktowardsStaffWelfareFund 11,756,868 10,151,699

Total 3,035,926,578 2,379,916,062

14.1 Thereisnorestrictioninusageofcashandcashequivalents.

15. Short-term loans and advances



AdvancetoHoldingCompany - 400,000,000

Advancestosuppliers 10,715,918 24,820,233

Advancestocontractors - 325,780,073

BSTReceivable 313,000 313,000

Advancestoemployees

-Travelandsalaryadvance 108,159 25,250

-Expenses 1,012,787 257,994

-BikeLoan 3,640,272 1,556,849

-WelfareLoan 573,114 606,362

-Advance-M/phoneloan 613,104

Prepaid expenses 11,951,791 9,642,754

Otheradvances(ReferNote15.1) 9,138,072 18,552,443

Total 38,066,217 781,554,958

15.1 IncludesBSTadvancepaidtocontractors&othermiscellaneousadvances.


A

nnua

l Rep

ort 2

015 16. Other current assets



Interestaccrued:

-onfixeddeposits 5,112,410 6,673,344

-onRICBLBonds - 9,692,054

-onFixedDepositsforInvestmentReserve 7,364,384 17,526,076

-onFixedDepositforGratuityLiability 13,898,910 5,046,289

Fixeddepositshavingoriginaltenureofmorethanthree months

-withBankforGratuityliability(ReferNote37(i)) 343,000,945 98,182,053

-otherfixeddeposits 333,324,042 827,335,209

-FixedDepositforInvestmentReserve 600,000,000 -

AccruedUnbilledDebtor 385,233,752 367,850,647

Otherreceivables 1,165,029 16,617,185

Total 1,689,099,472 1,348,922,857

17. Share CapitalAs at December


31, 2014

Authorized:

15,000,000EquitySharesofNu.1,000/-each 15,000,000,000 15,000,000,000

Total 15,000,000,000 15,000,000,000

Issued, Subscribed and fully Paid up:

8,225,118EquitySharesofNu.1,000/-each 8,225,118,000 8,190,191,000

Total 8,225,118,000 8,190,191,000

17.1 Allordinarysharesarerankedequally.Fullypaidsharescarryonevotepershareandcarrytherighttodividends.TherearenorestrictionsonthetransferofsharesintheCompanyoronvotingrightsbetweenholdersofshares.EntiresharecapitalisheldbytheholdingCompanyM/sDrukHolding&Investments(ARoyalGovernmentofBhutanUndertaking)

17.2 4,910,755equityshares(Previousyear4,875,828)havebeenallottedforconsiderationother

thancashand3,314,363equityshares(Previousyear:3,314,363)havebeenallottedpursuanttoconversionofgrantofRoyalGovernmentofBhutan.

17.3 ReconciliationofEquitysharesOutstanding


A

nnua

l Rep

ort 2

015As at December


31, 2014

At the beginning of the year

-Numberofshares 8,190,191 8,190,191

-Amount(inNu.) 8,190,191,000 8,190,191,000

Add: issued during the year

-Numberofshares 34,927 -

-Amount(inNu.) 34,927,000 -

Less:Redeemedduringtheyear

-Numberofshares - -

-Amount(inNu.) - -

At the end of the year

-Numberofshares 8,225,118 8,190,191

-Amount(inNu.) 8,225,118,000 8,190,191,000

18. Borrowings



i)Securedborrowings:

Termloanfrom‘NationalPensionandProvidentFund’(ReferNote18.1)

-forTransmissionLinesProject 377,347,500 419,275,000

ii)Unsecuredborrowings:

Termloansfrom‘RoyalGovernmentofBhutan’(ReferNote18.2)

-forRuralElectrificationProjects 5,442,612,781 5,325,858,359

-forTalaHydroelectricProject 329,915,214 439,886,952

6,149,875,495 6,185,020,311

Borrowings analyzed as follows

Current portion 196,757,453 196,757,453

Non-currentportion 5,953,118,042 5,988,262,858

Total 6,149,875,495 6,185,020,311


A

nnua

l Rep

ort 2

015 Nature of Security:

18.1 TermloanofNu377,347,500fromNationalpensionandprovidentfundhasbeenobtainedforsettingupoftheproject“220kVDoubleCircuitTransmissionLinesfromDagapela-Tsirang-GelephutoLodraiandissecuredbyfirstmortgagechargeonprojectassetsandcarryfixedrateof interest of 9%perannumand is repayablewithin12 years in24half yearly equalinstallmentswithlastinstallmentdueonSeptember01,2024.

18.2 OtherTermLoans:

i) RuralelectrificationLoanI(RE-I)ofNu.166,081,366hasbeenobtainedfromtheRoyalGovernmentofBhutanforRuralElectrificationWorksandisrepayablewithin30yearsataninterestrateof6%in60semi-annuallyequalinstallmentswithlastinstallmentdueonAugust15,2035.

ii) RuralelectrificationLoanII(RE-II)ofNu.293,213,404hasbeenobtainedfromtheRoyal

GovernmentofBhutanforRuralElectrificationWorksandisrepayablewithin24yearsataninterestrateof6%in48semi-annuallyequalinstallmentswithlastinstallmentdueonFebruary15,2032.

iii) RuralelectrificationLoanIII(RE-III)ofNu364,566,173hasbeenobtainedfromtheRoyal

GovernmentofBhutanforRuralElectrificationWorksandisrepayablewithin24yearsataninterestrateof6%in48semi-annuallyequalinstallmentswithlastinstallmentdueonMarch15,2036.

iv) LoanforTalaTransmissionLinesofNu.329,915,214hasbeenobtainedfromtheRoyal

GovernmentofBhutanandisrepayablewithin12yearsataninterestrateof9%insemi-annuallyequalinstallmentswithlastinstallmentdueonDecember15,2018.

v) Rural electrification loan - RE IV and V, JICA Loan I and II and the ADA loan of

Nu.4,618,751,838 has been obtained from the Royal Government of Bhutan is stilleffectiveandnotclosed.TherateofinterestandtheloantenureshallbedeterminedbytheRoyalGovernmentofBhutan.

18.3 ReferNote37(vii)fortransactionwisedetailundereachborrowing. 19. Deferred grants

Grants are received from the Royal Government of Bhutan as counterpart financing to theRural Electrification Loan to carry out the rural electrificationworks for the civil component andestablishmentexpenses.Thematerialcostsarefinancedthroughtheloan.Therearenoconditionsandcontingenciesattachedtothisgrant.



As at January 1 939,325,033 789,557,367Receivedduringtheyear 8,209,287 171,074,065Less:TransferredtotheStatementofComprehensiveIncome (23,959,455) (21,306,399)

As at December 31 923,574,865 939,325,033


A

nnua

l Rep

ort 2

015Deferred grant analyzed as follows:



Current portion 24,891,343 20,972,254

Non-currentportion 898,683,522 918,352,779

Total 923,574,865 939,325,033

20. Deferred Customer’s Contribution As at December

31, 2015 As at December

31, 2014As at January 1 3,317,332 -

Receivedduringtheyear - 3,373,558

Less:TransferredtotheStatementofComprehensiveIncome (112,452) (56,226)

As at December 31 3,204,880 3,317,332

Deferred Customer’s Contribution analyzed as follows:

Current portion 112,452 112,452


Total 3,204,880 3,317,332

21. Employee Benefit LiabilitiesAs at December


31, 2014Provision for:

-Gratuity(ReferNote37(i)) 405,785,435 341,518,127

-Leaveencashment 36,006,408 33,580,410

-PerformanceBasedIncentiveScheme 75,645,862 65,725,377

-PerformanceBasedVariableAllowance 67,902,361 39,416,431

Total 585,340,066 480,240,345

Employee benefit liabilities analyzed as follows:

Current portion 202,815,969 172,554,806


Total 585,340,066 480,240,345


A

nnua

l Rep

ort 2

015 22. Deferred Income Tax liabilities (net)

Theanalysisofdeferredincometaxassetsanddeferredincometaxliabilitiesandthegrossmovementonthedeferredincometaxliability(net)isasunder.

ParticularsFor the year ended

December 31, 2015 December 31, 2014

OpeningBalance 480,369,787 305,542,154

ChargedtotheStatementofComprehensiveIncome(ReferNote22.1) 71,093,899 174,827,633

Closing Balance 551,463,686 480,369,787

Note 22.1 The movement in deferred income tax assets and liabilities during the year endedDecember31,2015andDecember31,2014areasunder:

Deferred income tax liabilitiesAs at

January 1, 2015

Adjustment to Statement of

Comprehensive Income

As at December 31,

2015

Property,plantandequipment 502,441,976 74,807,345 577,249,321

Total 502,441,976 74,807,345 577,249,321

Deferred income tax assets

Provisionfordoubtfuldebts 2,394,608 2,942,106 5,336,715

Training 16,366,893 3,591,337 19,958,231

Provisionforobsoleteinventories 3,310,686 (2,819,997) 490,689

Total 22,072,188 3,713,446 25,785,634

23. Other non-current liabilitiesAs at December


31, 2014

SecurityDeposits

-Energymeter 194,447,557 177,825,971

-Others(ReferNote23.1) 16,759,951 16,759,951

Performance security 85,185 1,869,100

Retention money 469,897,953 699,859,161

Payablestoemployees 149,124 167,360

681,339,770 896,481,543

23.1 Include the deposit received from Punatshangchhu-I Hydroelectric Project Authority ascompensationforBPCLassetsatWangduePhodrangwhichwillbeadjustableaftertheassetsbeingtransferredtothePHPA-Ioncompletionoftheproject.


A

nnua

l Rep

ort 2

01524. Trade & other payables



Tradepayables:

-electricity 223,675,778 157,820,542

-suppliers&contractors 178,597,763 199,150,861

-services 8,356,719 114,998

Otherpayables 1,044,044 -

Total 411,674,304 357,086,401

25. Income tax payable (net of advances)



Provisionforcorporatetax 519,783,722 415,284,847

Less:Advanceincometaxandtaxdeductedatsource (183,171,877) (182,103,575)

Total 336,611,845 233,181,272



Current income tax

Currenttaxonprofitsfortheyear 519,783,722 415,284,847

Total Current income tax 519,783,722 415,284,847

Deferred income tax

Originationandreversaloftemporarydifferences 71,093,899 70,356,723

OnreassessmentinERP - 104,470,910

Total Deferred income tax 71,093,899 174,827,633

Income tax expense 590,877,621 590,112,480

Reconciliation between the provisions for income tax to the amount computed by applying thestatutoryincometaxratetotheincomebeforeprovisionforincometaxissummarizedbelow:


A

nnua

l Rep

ort 2

015



Profit before tax 1,971,618,598 1,593,086,562

Tax calculated at domestic tax rates 591,485,579 477,925,969

Income tax effect due to:

-Othernon-deductibleexpenses

-Medicalexpenses 211,265 215,185

-Donations 549,600 219,120

-FinesandPenalties 1,073,445 322,224

-Others

-Depreciationondisposal 12,308,393 6,959,072

-Reversalondisposalofasset (14,750,661) -

-DeferredtaxonreassessmentinERP - 104,470,910

Income tax charge 590,877,621 590,112,480

Theapplicablecorporateincometaxratewassame,i.e.30%forthecurrentyearandearlieryearendedonDecember31,2015andDecember31,2014.

26. Other current liabilities



Securitydeposits:

-Energymeter 2,719,018 1,436,874

-Capacityreservecharges 9,607,950 1,850,350

-Performancesecurity 4,880,832 3,130,240

Retention money 820,119,816 229,638,968

Liabilitiesagainstassettakenover - 34,927,119

Interestaccruedbutnotdueonborrowings 32,071,672 32,126,479

Statutoryliabilities 8,444,669 520,228

WelfareGrantFund 11,716,868 10,111,699

Payablestoemployees 517,898 1,905,376

Accrued Expenses 1,791,400 15,638,014

Otherliabilities 2,653,399 2,311,920

Total 894,523,522 333,597,267


A

nnua

l Rep

ort 2

01527. Income from construction contracts

December 31, 2015

December 31, 2014

Valueofcontractsperformedandservicecharges 4,281,806,936 2,418,281,225

Estimationchargesforworks 254,672 1,222,548

Total 4,282,061,608 2,419,503,773

28. Other Income December 31,

2015 December 31,

2014Interestincomeon:

-Fixeddeposits 21,906,171 20,356,045

-PolicyBenefitAccruedonEmployeeInsurancePolicy(ReferNote37(vi) 45,430,224 13,846,510

-FixedDepositforInvestmentReserve 25,979,651 17,526,076

-FixedDepositforGratuityLiability 15,725,365 13,301,504

-RICBLbonds 10,407,945 19,728,363

-AdvancetoHoldingCompany - 18,805,479

-Inter-CorporateLoan 9,143,835 -

Penaltiesandliquidateddamages 8,583,015 37,410,732

RevenueGrant - 674,873

Amortizationofdeferredgrants(ReferNote19) 23,959,455 21,306,399

Amortizationofdeferredcustomer’scontribution(ReferNote20) 112,452 56,226

Liabilitiesnolongerrequiredwrittenback 22,587 1,435,894

Write-backofProvisiononObsolescenceofMaterial 9,399,991 983,375

ScrapSales 4,634,690 8,193,040

Tenderformsales 2,214,300 1,963,569

Hireandleasecharges 1,546,939 721,883

Othermiscellaneousincome 88,170,897 70,350,420

Total 267,237,517 246,660,388


A

nnua

l Rep

ort 2

015 29. Operation and maintenance expenses

December 31, 2015

December 31, 2014

Repairs and maintenance:

-Material/Stores 76,477,552 95,722,242

-Services 105,027,304 79,747,834

-MeterEquipment 1,170,447 69,109

-Vehiclerunningexpenses(POL) 24,286,630 23,939,096

-Consumables 10,862,999 7,389,074

-Others 93,973,844 61,034,654

311,798,776 267,902,009

30. Employee benefits expenses December 31,

2015 December 31,

2014Salaries,wages,bonusandallowances 676,875,343 534,625,279

Contributiontoprovidentandpensionfund 40,987,790 37,049,557

Contributionforgratuityandleaveencashment 84,569,041 60,447,393

Workmenandstaffwelfareexpenses 74,484,544 57,460,109

876,916,718 689,582,338

31. Finance cost

December 31, 2015

December 31, 2014

Interestonlongtermborrowingsfrom:

RoyalGovernmentofBhutanfor:

-RuralelectrificationProjects 52,587,466 55,593,247

-TalaHydroElectricProject 35,945,361 35,945,361

NationalPensionandProvidentfundfor:

-TransmissionLinesProject 35,599,384 39,310,486

Otherfinancecharges 125,402 112,061

Total 124,257,613 130,961,155Less:Amountscapitalizedonqualifyingassets - 2,389,037Total 124,257,613 128,572,118


A

nnua

l Rep

ort 2

01532. Other expenses

December 31, 2015

December 31, 2014

Travellingexpenses 39,217,968 18,236,468

Rent charges 5,511,521 5,356,658

Rates and taxes 1,021,907 1,146,081

Printing and stationary 16,854,897 11,725,366

Licenseandregistrationfees 11,888,813 9,892,796

Audit fees and expenses 940,985 1,108,816

Officeexpenses 8,281,034 7,175,074

Consultancyfees 200,000 2,287,715

Entertainment expenses 5,641,879 4,372,863

PublicityandAdvertisementexpenses 2,410,579 1,610,237

Insurancecharges 2,697,309 2,200,515

Donations and Contributions 1,857,000 805,400

VehicleHirecharges 474,395 -

Baddebt/Provisionfordoubtfuldebts 9,807,021 (1,178,989)

Lossondisposalofproperty,plantandequipment 25,264,468 8,846,636

Board meeting expenses and sitting fees 1,347,642 1,105,298

ManagementFeeforholdingCompany 14,298,844 -

Miscellaneousexpenses 32,821,413 12,803,477

Total 180,537,675 87,494,411

33. Earnings per share (‘EPS’)

Basic EPS attributable to Ordinary shares December 31, 2015

December 31, 2014

Net Profit attributable to the owners of the Company 1,380,740,977 1,002,974,078

Issuedandoutstandingordinarysharesatthebeginning of the year 8,190,191 8,190,191

Effect of ordinary shares issued during the year 10,187 -

Weighted average number of ordinary shares 8,200,378 8,190,191

Basic EPS attributable to ordinary Shares 168.38 122.46

Sharespendingissueagainstassetstakenover - 34,927

Averagenumberofdilutedshares 8,200,378 8,225,118

Diluted EPS attributable to ordinary Shares 168.38 121.94


A

nnua

l Rep

ort 2

015 34. party transactions

TheCompanyisawhollyownedsubsidiaryofDrukHolding&Investments(aRoyalGovernmentofBhutanundertaking).TheCompanyhasnosubsidiaryCompany.TheCompanyconsidersthatforthepurposeofBAS24theRoyalGovernmentofBhutanisinapositionofcontroloverit,andtherefore regards theRoyalGovernmentofBhutanand itscontrolledcompanies/corporationsasrelatedpartiesforthepurposeofthedisclosuresrequiredbyBAS24.

Asummaryof theCompany’s transactionswith theRoyalGovernmentofBhutanand its relatedentitiesisincludedbelow:

Name of Related Party Relationship

Nature of transaction with

related party

Amount outstanding as on December 31, 2015

(Amount in Nu.)

Transactions during the year

(Amount in Nu.)

RoyalGovernmentof Bhutan

Ultimateholding

a)Borrowingsforruralelectrificationproject Cr.5,442,612,781

Disbursement(Cr.)161,612,637

Repayment(Dr.)44,858,215

b)BorrowingsforTalahydroelectricproject Cr.329,915,214 Repayment(Dr.)

109,971,738

c)Grantsreceivedforruralelectrification Cr.923,574,864 Received(Cr.)

8,209,286

d)InterestPaid/payableonBorrowings

Cr.18,645,226 Cr.88,532,827

DrukHolding&Investments

HoldingCompany

a)IssueofShareCapital

(b)AdditionalissueCr.8,225,118,000 34,927,000

b)Paymentofdividend 702,082,000

c)Inter-corporatedepositgiven

d)Saleofelectricity

f)InterestreceivedonInter-corporatedeposit

Dr.400,000,000268,002

9,143,835


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015

Name of Related Party Relationship

Nature of transaction with

related party

Amount outstanding as on December 31, 2015

(Amount in Nu.)

Transactions during the year

(Amount in Nu.)

DrukGreenPower Corpo-rationLimited

FellowSubsidiary

(a)Purchaseofelec-tricity for transmission and distribution

Cr.215,912,047 1,541,527,860

(b)Wheelingcharges Dr.13,424,084593,492,270

Dagachhu Hydro Power Corporation

FellowSubsidiary Wheelingcharges Dr.1,803,666 38,776,093.61

DrukAirCorporation Limited

FellowSubsidiary AirTravelService

15,348,946

RoyalInsur-ance Corpora-tion of Bhutan Ltd

Governmentundertaking

a) InsurancePremiumpaid

b) Deposit against EmployeesInsurancePolicy

Dr.491,063,498

9,450,286

c)RedemptionofBonds

d)Interestincomeearned on bonds

e)BenefitsaccruedonInsurancePolicy

f)DeathBenefitClaimsunderEmploy-eesInsurancePolicy

300,000,000

10,407,945

45,430,224

1,325,000

Key management personnel (‘KMP’)

KMPsarethosepersonshavingauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesoftheCompanydirectlyorindirectlyincludinganydirectorwhetherexecutiveorotherwise.

KeymanagementpersonnelofthecompanyforthepurposeofdisclosureofcompensationincludetheManagingDirectorasrequiredbytheCompaniesActoftheKingdomofBhutan2000.


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015 Summary of compensation paid to the KMP, Dasho Bharat Tamang, the former Managing

Director.

For the year endedDecember 31,

2015December 31,

2014

BasicSalaryandcontractallowance 860,531 1,432,224

Performancebasedvariableallowances 297,545 347,625

Performancebasedincentivescheme 169,400 165,624

Sittingfees 89,000 113,000

Contributiontoprovidentfund 63,105 105,024

Total 1,479,581 2,163,497

Summary of compensation paid to the KMP, Mr. Gem Tshering, present Managing Director.

For the year ended December 31,

2015December 31,

2014BasicSalaryandcontractallowance 768,000 -

Performancebasedvariableallowances 120,000

Performancebasedincentivescheme 79,200

Sittingfees 88,000 -

Contributiontoprovidentfund 52,800 -

Total 1,108,000 -

AstheliabilitiesforgratuityandleaveencashmentareprovidedonactuarialbasisfortheCompanyasawhole,theamountspertainingtoKMParenotascertainableseparatelyandassuchcouldnotbeincludedabove.

Note:

i) ReimbursementofexpensesincurredbyrelatedpartiesforandbehalfoftheCompanyandvice-versa,andtherelatedoutstandingamountshavenotbeenincludedintheabovedisclosures.

ii) ThedisclosuresgivenabovehavebeenreckonedonthebasisofinformationavailablewiththeCompanyandrelieduponbytheAuditors.

35. Capital Commitments

The Company has contractual commitments of Nu.8,577,724,815 and Nu 8,129,728,401 as atDecember31,2015andDecember31,2014respectively;pertainingtocapitalexpendituresrelatingtoacquisitionofProperty,plantandequipment.


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01536. Contingent liabilities

Asonthereportingdate,thereisapendinglitigationfiledagainsttheCompanyintheCourtsofLawintheCountry.TheprobableamountoftheclaimsfromthecasetothecompanyistothetuneofNu68millionandiscontingentonthejudgment.

37. Other Notes to Accounts

i. Gratuity:

TheliabilitytowardsGratuityisfundedthroughfixeddepositswiththebanks.AsonDecember31,2015 there isbalanceofNu.343,000,945 in thefixeddeposits (including interestofNu6,088,233.20accruedthereon)earmarkedtowardsgratuity liabilityofNu.405,785,435asonDecember 31, 2015, showing shortfall of Nu 62,784,490which shall bemade good in thecomingyear/sbyfurther investing in thefixeddeposits.However, the liabilityhasbeenfullyprovidedintheaccountsandduringtheyearaprovisionofNu64,267,308(Previousyear:Nu.10,576,437)hasbeenmadeintheaccounts.

ii. AsperlastdomestictariffrevisionfromJuly1,2015,therevisedweightedaveragetariffisNu.2.217/unitascomparedtoNu.1.996/unitpriortotherevision.

iii. As per the technical assessment of the slow and non-movingmaterial identified based onageingandusageleveloftheinventorygeneratedfromERP(SAP)Systemandalsobasedonidentification/segregationofobsoletestockatthetimeofphysicalverification,theadequateprovisionhasbeenmadeintheaccountstowardsobsoletematerial.

iv. Intheopinionofthemanagement,thevalueofassetsotherthanfixedassetsandinvestments,onrealizationintheordinarycourseofbusiness,willnotbelessthanthevalueatwhichthesearestatedintheStatementofFinancialPosition.

v. Thelettershavebeensenttomostofthepartiesforconfirmationofthebalancesundertradeandotherreceivables,loansandadvancesandtradeandotherpayables,however,duetonon-receiptoftheresponsefromfewparties,thebalancesaresubjecttoconfirmation/reconciliationinsomecases.Theimpact,ifany,subsequenttotheconfirmation/reconciliationwillbetakenintheyearofconfirmation/reconciliation.

vi. Duringtheyear,theCompanyhastakenasinglepremiuminsurancepolicywithRoyalInsuranceCorporationofBhutanLimited(RICB),forcoverageofitsemployeeswithdeathclaimbenefitintheeventofdeathwhileinserviceandwithinthepolicytermoffiveyears.ThepolicyhasbeenunderwrittenthroughSinglepremium,whichwillberefundedattheendofpolicyperiod/termwithpre-decided/fixedpolicybonus/benefitofNu.226,828,522andafterdeductionofdeathclaimspaidwithinthepolicyterm.TheSinglepremiumofNu.424,136,478paidduringtheyearhavebeenconsideredas‘DepositagainstEmployeesInsurancePolicy’under‘OtherNon-CurrentAssets’ in theStatementofFinancialPosition.ThedeathclaimbenefitsofNu.1,325,000paid/payableduringtheyearhavebeenreducedfromthesameandaccountedforas‘EmployeeBenefitExpense’andthepolicybonus/benefitofNu.45,430,224(PreviousyearNu13,846,510)accruedunderthepolicyhavebeenaddedinthesameonproratebasisbycreditto‘OtherIncome’.


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015 vii. ThedetailofLoansFundsfortheyearisasunder:

(AmountinNu.)

Particularsoutstanding

as on 01.01.2015

Disburse-ment during

the year

Repayment during the

year

Loan Outstanding as on 31.12.2015

Interest Paid/provided for during the

year

From Royal Government of Bhutan (Unsecured)

A. For Rural Electrification works

ADB-REI 174,385,435 - 8,304,068 166,081,366 10,147,571

ADB-REII 311,539,241 - 18,325,838 293,213,404 17,995,973

ADB-REIII 382,794,482 - 18,228,309 364,566,173 22,369,173

ADB-REIV 1,138,451,374 - - 1,138,451,374 -

ADB-REV 515,563,578 77,462,625 - 593,026,203 -

ADA 312,903,654 - - 312,903,654 1,986,364

JICA-I 1,725,520,182 8,669,568 - 1,734,189,750 88,385

JICA-II 764,700,413 75,480,444 - 840,180,857 -

5,325,858,359 161,612,637 44,858,215 5,442,612,781 52,587,466

B. For Tala Transmission Lines

THP 304,952,617 - 76,238,154 228,714,463 35,945,361

THP-IDC 134,934,335 - 33,733,584 101,200,751 -

439,886,952 - 109,971,738 329,915,214 35,945,361

From National Pension and Provident Fund (Secured)

NPPF 419,275,000 - 41,927,500 377,347,500 35,599,384

419,275,000 - 41,927,500 377,347,500 35,599,384

Total 6,185,020,311 161,612,637 196,757,453 6,149,875,495 124,132,211

viii. Quantitativedetailofpurchase,generationandsalesofpowerfortheyearisasunder.

2015 2014

Units ( kWh)

Amount in Nu (m)

Units ( kWh)

Amount in Nu (m)

Purchase 2,100.9782 1,550.12 2,100.9782 1,550.12

Hydel 14.6759 14.6759

DG 0.0022 0.0022

Sale 2,057.1410 4,560.32 2,057.1410 4,560.32


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01538. The previous years figures have been regrouped and/or rearranged, wherever required.

39. Subsequent events

i. TheBoardofDirectorshasproposedafinaldividendofNu155.82pershareforthefinancialyearendedDecember31,2015.ThetotaldividendofNu.1,281,655,159andissubjecttoapprovalofthemembersintheGeneralMeetingtobeheldtoadoptthefinancialstatementsfortheyearendedDecember31,2015.Thesefinancialstatementsdonotreflectthisdividendpayable.

ii. InlinewiththeAssetreplacementpolicyoftheCompany,theBoardofDirectorshasproposedanamountofNu5,736,194 tobe transferred to InsuranceReserve for thefinancial yearendedDecember31,2015,whichiscalculatedat0.4%onthegrossassetadditionsduringthe year. This is subject to approval of themembers in theGeneralMeeting to be heldtoadopt thefinancialstatements for theyearendedDecember31,2015.Thesefinancialstatementsdonotreflectthistransfer.

Signaturesto‘Notes1to39’oftheFinancialStatementsForandonbehalfoftheBoardofDirectors


Exhibit to the AnnexureRATIO ANALYSIS

Particulars 2015 2014

NPratio 0.202 0.219

This is essentially PBT margin,giventheformulabeingconsidered.It is, by and large, range bound,althoughisverylow.

FixedAssetsTurnoverRatio(Sales/AverageNetBlock) 0.597 0.493 Improved,thoughlow.

DebtorsTurnoverRatio(EnergySales/AverageDebtors) 39.641 31.527 Appearscomfortable.

CurrentRatio(CurrentAssets/CurrentLiabilities) 1.928 1.889 These are more than adequate.

We think there is a need toevaluate the necessity of holdinglarge cash balance which hasbeen highlighted by us in theManagementReport.

QuickRatio(CurrentAsset-Inventory/CurrentLiabilities) 1.786 1.808

InterestCoverageRatio(Profitbeforeinterest&tax/Interest) 16.867 13.391 Quitecomfortable&improved.

DebtServiceCoverageRatio(PAT+Dep+Interest/(Interest+PrincipalRepayment)

7.372 5.979 Quitecomfortable&improved.

GearingRatio(Debt/GrossValueofFixedAsset) 26.86% 28.82% Comfortable, despite a marginal

decline.

GearingonnetFixedasset 36.9% 38.5% Comfortable, despite a marginaldecline.

DebtEquityRatio(Debt/averageEquity) 45.97% 48.88% Comfortable.

ReturnonCapitalEmployed(PBIT/(Capital+Reserve+longtermliability) 10.55% 8.96% Thoughimproved,theseareonthe

lowersidedue to lowprofitability.However return on assets hasmore relevance in case banks &financecompanies.

Returnonasset(Profitaftertax)/averagenettotalassets 8.44% 6.79%

Returnonequity(returnavailable/AverageEquity) 10.32% 7.93%

annual report 2015 - bpc.bt · education: master of law degree (ll.m) from the george washington...

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