CESC Ltd

Dear Shareholder

After a terrible 2020-21 when the devastating Covid-19 waves, lockdowns and Super Cyclone Amphan affected your Company's operations as well as its financial results, I am happy to share with you that things have returned to normal in 2021-22.

This reversion to normalcy was due to three factors.

First, though the third Omicron wave spread far and wide, its effects were far more muted than its devastating predecessor, the Delta.

Second, though we started late, India's vaccination programme has been a resounding success. As a nation, we have already administered almost 193 crore doses of the vaccine. Over 100 crore people have had their first dose; almost 89 crore have had their second dose; and some 3.4 crore have had their precautionary shot after two doses. In terms of size, scale and sheer geographical spread, it is an achievement of a kind that the world has never seen. The relatively restricted effects of Omicron had much to do with the protection that vaccination gave to our citizens.

The third factor was the speed at which your Company's management and employees re-geared its efforts and work practices to get back to delivering the kind of performance that people associate with CESC. Despite the effects of yet another cyclone — Yaas, which occurred in May 2021 — your Company was much better prepared with the right technology, systems and processes to operate under such stressful conditions. It also ensured 100% vaccination of its permanent and contract employees at the earliest, which further reduced the risks of operating an essential service that supplies 24x7 electricity to 3.5 million customers.

Therefore, despite the challenges of Covid-19 and Cyclone Yaas, your Company reported creditable results for 2021-22. The key features are:

• Total standalone income (including other income) of your Company increased by 5.3% to Rs 7,479 crore in 2021-22. It is to be noted that this growth occurred notwithstanding the fact that electricity tariffs remained unchanged throughout the year.

• Although costs increased in part due to higher fuel costs, profit before taxes (PBT), after incorporating regulatory income, grew by 23.2% to Rs 1,044 crore.

• Profit after taxes (PAT) was H 814 crore in 2020-21 and H 816 crore in 2021-22.

Further details are available in the chapter on Management Discussion and Analysis.

Let me now briefly touch upon some elements of the business performance your Company's (i) Kolkata operations, (ii) other generation projects, and (iii) other distribution ventures.

For the Kolkata operations, your Company generated 10,003 million units (MU), out of which over 98% came from the 750 MW generating station at Budge Budge and the 600 MW generating station at Haldia.

Budge Budge and Haldia have consistently excelled in operating efficiencies, energy conservation, quality systems and processes; and are officially certified with respect to Quality Management Systems, Environment Management Systems, Occupational Health and Safety Management Systems and Energy Management Systems. Moreover, Haldia received the 1st runner-up prize at the 14th CII (ER) Energy Conservation Awards, 2021.

Your Company has set stringent environmental standards for its generation plants. In addition, I am happy to inform you that there are now over one lakh trees planted at both Haldia and Budge Budge; and over 30% of the plant area at Haldia is now under green cover. Our environmental initiatives have been recognised. During the year, Budge Budge won the 15th ICC Environment Excellence Awards (2021) for the Power Sector.

CESC's distribution infrastructure serves 3.5 million customers in Kolkata, Howrah, Hooghly, North and South 24 Parganas. In 2021-22, some 1.5 lakh meters were installed, of which over 97,000 were new connections. The average time taken to provide a new connection was 1-2 days. Distribution losses have consistently reduced over the last few years, and continued to do so in 2021-22.

Your Company has achieved high degree of automation through investments in technology and equipment. It has a fully functional SCADA system along with ring main unit automation and remote terminal unit integration for remote monitoring and control of its network.

My personal favourite for the year has been the introduction of an IoT-based ‘Water level Indicator' in roadside pillar boxes in waterlogged areas to automatically sense inundation and trigger messages to the control room to takepre-emptiveactions.Thiswillensure greater public safety. I was delighted when we won the Independent Power Producers Association of India (IPPAI) Power Awards 2022 for this project.

Outside of the Kolkata operations, your Company has two thermal power projects with a capacity of 600 MW at Chandrapur (Maharashtra) and 40 MW atmospheric fluidised bed combustion power plant in Asansol (West Bengal). In addition, it has an 18 MW DC solar power project at Ramanathapuram (Tamil Nadu). Chandrapur and Ramanathapuram have long term power purchase agreements, while Asansol operates in the merchant power market.

Also, other than the Kolkata operations, your Company has five operational distribution ventures. These are for Greater NOIDA (Uttar Pradesh); Kota, Bharatpur and Bikaner (Rajasthan); and Malegaon (Maharashtra). In 2021-22, together these five serviced almost 7.2 lakh consumers and accounted for electricity sales of 4,965 MU — showing a creditable growth of 13.5% vis-a-vis 2020-21.

I am proud of your Company's human resources and the programmes that it conducts to institutionalise best-in-class HR practices. For instance, in 2021-22 alone, it carried out more than 300 training programmes covering over 6,000 man-days. Its Asia Institute of Power Management, the ISO 9001-2015 certified training and consulting wing of CESC, has established itself in the training of power professionals.

I am delighted to inform you that your Company received the prestigious Great Place to Work (GPTW) Certification for the third time in a row. It also featured among ‘India's 100 Best Companies to Work For' and ‘India's Best Workplaces in Energy, Oil & Gas' by GPTW for 2021.

For all the travails that we have suffered in the recent past, India is set to achieve anywhere between 6% and 7% real GDP for the next five to seven years. That will make it the fastest growing country among all large emerging nations, including China. In such a milieu, one can be confident about growing power demand — and, with it, rising income for your Company.

There is, however, one short- to medium-term constraint. It has to do

30%

over 30% of the plant area at Haldia is now under green cover. Our environmental initiatives have been recognised. During the year, Budge Budge won the 15th ICC Environment Excellence Awards (2021) for the Power Sector.

with rapidly rising cost of fuel — recently brought about by the Russia-Ukraine conflict but also on account of longer term demand-supply factors. In such a scenario, it is vital that power producers and distributors be able to expeditiously pass on purely the element of higher fuel cost through tariffs. Unfortunately, while this forms a part of each power supply contract, we still see reluctance of state governments and regulators to give their assent in a timely manner. This, in turn, negatively affects the financial results of power producers. I hope we will see considerably less of this reluctance in the years to come.

Notwithstanding this limitation, I am optimistic of the future of power generation and distribution in India. As I am of your Company. I, therefore, look forward to an era of even stronger growth, greater revenues and higher shareholder value.

One last comment. Just because the Omicron wave was mild, it doesn't mean that Covid-19 is over. The virus mutates, and we can expect other waves in the future. Therefore, be fully vaccinated. Take your precaution shots. Maintain social distance and sanitation. And wear your masks, especially when outside. Be safe. Because your family deserves it.

With my best wishes,

Yours sincerely,

Dr. Sanjiv Goenka

Chairman