Opg Power Regulatory News (OPG)

15th August 2011

OPG Power Ventures PLC

("OPG", "the Group" or "the Company"),

Final Results for the Year to 31 March 2011

Milestone year provides solid platform for growth

OPG (AIM: OPG), the developer and operator of Group Captive power plants in India, announces results for the year ended 31 March 2011.

M.C.Gupta, Chairman of OPG, commented:

"OPG made significant progress in the year, with the successful commissioning of the 77 MW Chennai I facility and substantial advancement of the development pipeline that is set to deliver in excess of 742 MW by 2013, for which we are fully funded, and a total 1250 MW of capacity by 2015. 

"Significant uplifts in both revenue and profits were achieved as operating capacity increased to 113 MW (2010: 30 MW). OPG has a pipeline of 629 MW of development with equity fully funded. The Company continues to benefit from a structural shortage in supply of reliable power in India. With the planned additional supply likely to fall acutely short of the 300-315 GW by 2017 required in the next five years, we believe this dynamic will prevail and prices will remain firm.

"The Company's profitability and cash generation now provide an excellent platform for our long term growth. Given the market backdrop, our fully funded development pipeline and our track record, I remain confident of the Company's continued success."

For further information, please visit www.opgpower.com or contact:

Chief Executive's Statement

Milestone year provides solid platform for growth

The year ended 31 March 2011 was a landmark year for OPG, with the successful commissioning of the Group's first major project of 77 MW. The Chennai I plant is now operating consistently at load factors of around 90%, providing strong cash flow to the Group and underpinning our track record of successful project delivery.

The over-subscribed equity raising of c.£60m (gross of transaction fees) in February 2011 demonstrated support from the Company's stakeholders and provides capital to fund a 629 MW pipeline of projects under construction and development. Combined with the 113 MW of existing operational capacity, this total pipeline has increased substantially from the initial 377 MW that we committed to at our IPO in May 2008. We remain on track to deliver our target of 1250 MW of capacity by 2015.

Project Commissioning Schedule

Profitable operations and strong cash generation

Output levels and operations at Chennai I were successfully stabilised in August 2010 and the plant's operational performance has been in line with expectations. In the six months to June this year, the plant performed at an average monthly output level of 88%. 

Profit before tax was up 105 % to £11.16m, benefiting from a partial contribution from Chennai I which began commercial operations in August 2010. OPG's strong results for the year ended March 2011 are reflective of the Group Captive / open market sales strategy and the profit from continuing operations at 39 % of Revenue is among the highest in the industry. Average price realised for the year was Rs. 4.95/Kwh

In line with our stated strategy, we intend to continue to utilise cash generated from operations principally to fund growth and optimisation opportunities. 

Projects remain on-track despite local challenges

The Group's current total capacity stands at 113 MW (inclusive of the additional 6 MW of capacity recently added to the gas fired power station at Mayavaram), a significant increase from the 19.4 MW of operating capacity at the time of the IPO in May 2008. The Chennai development projects are progressing well; the accelerated commissioning of the second 77 MW unit (Chennai II) for 2012 is set to increase the Group's total operating capacity to 190 MW and further progressive increases are expected thereafter to achieve 742 MW by 2013. Some local objections faced in the wake of environmental clearances for the 300 MW Kutch project are now under resolution and we are awaiting formal approval from the Ministry of Environment and Forests, New Delhi. The project, which is fully funded, remains on track for commissioning in 2013.

Also during the year, OPG signed an MOU with the Government of Gujarat to build 5400 MW of capacity by 2018. Details of specific projects and an implementation schedule are currently in development and we look forward to reporting on further progress in due course.

During the year and since then, the Group continues to operate in an environment of elevated coal prices, administrative challenges in obtaining key approvals and higher interest costs. However, relative to our peer group we believe our margins and our continued growth demonstrate that the Group is well positioned to deal with such challenges through our local relationships and the flexibility incorporated into our business model and plant configurations. We have also incorporated key lessons from previous developments into subsequent projects and as a result we continue to be confident that the Company can deliver a profitable growth pipeline on-time and within budget. 

Indian power market remains in deficit

Despite volatility elsewhere in the global economy, India's GDP is expected to continue to grow at around 8% in the coming years, resulting in annual power demand growth of 10%. India's total planned capacity additions as at 31 March 2011 were only 52% of the targeted 78,000 MW and there remains an expected shortfall of 30-35% versus the target by March 2012. This trend points towards continuing and increasing power production deficits which currently run at about 10%.

With the planned additional supply likely to fall acutely short of the 300-315 GW required over the next five years and given the imperative for a correction in pricing by state utilities, we believe this supply constrained environment will prevail and power prices will remain firm.

OPG maintains flexibility in its procurement of coal

70% of OPG's projects under development have committed supplies of Indian coal, with the remaining 30% utilising imported coal. This balance of supply has enabled OPG to establish close working relationships with both domestic and imported coal suppliers, thereby mitigating the threat of coal not being available from any one source.

With coal in relatively short supply, the Indian power sector has unsurprisingly experienced upward price pressure for this key input to the power business. Most Indian power producers, unlike OPG, are reliant on obtaining coal either from the development of coal blocks or entirely on imported coal. In addition, the design of OPG's boilers allows the use of both high moisture imported and higher ash domestic grades of coal either exclusively or in a blended fuel source. We expect coal prices to remain firm in the short term given the current economic growth rates in Asia, although prices should eventually stabilise in the medium term as coal supplies and demand fall more into line. The Company continues to look for additional opportunities to enhance profitability by optimising its fuel procurement. 

Team

Our priority is to provide a safe, healthy working environment to our employees and be responsible towards the communities in which we operate.

Our talented team is central to achieving the objectives of the Company. Over the last year the team has built upon its significant experience and knowledge in developing and operating power plants as evidenced by the high load factors being achieved at Chennai I and the continued progression and expansion of the Company's growth pipeline. We value their commitment and contribution and would like to thank them for their continued efforts.

Summary

OPG has made significant progress in the year, successfully commissioning the 77 MW Chennai I facility, producing significant increases in both revenue and profits. In the current year we expect to benefit from its full year contribution albeit in an environment of high coal prices and borrowing costs. We expect our operating model to provide flexibility with regards to these challenges. Most importantly we believe the profitable operation of Chennai I in 2011 creates a firm platform for the Company's long term growth. Accordingly, we feel confident about the delivery of our 2015 target of 1,250 MW.

Operational Review

2011 saw the commencement of generation from the 77 MW Chennai I Plant. Across the Group, total power generation capacity was more than triple the previous year at 113 MW. Operationally, all plants performed well at availability factors between 89% and 95%.

Production and output levels:

1 OPG Power Generation - Chennai (77 MW) commenced commercial operations in Aug 2010.

2 OPG Energy - Mayavaram (25.4 MW) has increased capacity by 6 MW as of June 2011.

Chennai I - 77 MW

In April 2010, the first unit of the Chennai power project was synchronised with the grid. Following stabilisation, commercial operation started in August 2010. The plant was used for testing in the month of December 2010 to optimise performance and to ensure high performance levels of the boiler for Chennai II.

During the year, the Chennai I plant achieved an average output level of 75.3%. In the first 6 months of 2011 calendar year, average output levels were higher at 88%. Chennai I is sustaining these high levels of performance and on this basis, we are confident of maintaining an average performance of over 85% for the financial year 2012.

Waste Heat - 10 MW

The 10 MW waste heat fired plant near Chennai, which will shortly be completing three years since commissioning, also performed satisfactorily with output levels during the year averaging 63.4% of capacity (2010: 73%). The lower output level was on account of extended maintenance closure of the waste heat furnaces of the sponge iron unit and we expect improved output levels in the current year.

Mayavaram - 25.4 MW

The 19.4 MW gas fired plant in Mayavaram, now in its eighth year of operation, delivered a satisfactory performance. Capacity was enhanced to 25.4 MW in June 2011. Gas flow levels were restored from August 2010 to the levels of 2008 following the connection of additional productive wells. Consequently the plant load factor or output level during the year was 81% compared to 66% in the previous year. A significant increase in the gas prices was absorbed and the operation remained profitable. The project has been registered under the UNFCCC for carbon credit and is awaiting validation and verification; CERs (Certified Emission Reductions) will be available for trading thereafter.

Power output from all three operational plants was sold principally in the short term market, achieving amongst the highest tariffs available.

Development Projects

We are currently developing total capacity at the Chennai site of 317 MW (previously 237 MW) through the following projects:

The Gujarat 2 x 150 MW project has received Environmental Clearance and construction is to commence once additional clearance from the Ministry of Environment and Forests, New Delhi is received for sea water intake and outfall. The proposal has been cleared by the Expert Committee constituted by the Ministry and the Company is awaiting formal approval shortly. In the meantime, the Company has undertaken the required preparation to ensure this Project moves into construction promptly, given its targeted commissioning in 2013.

Bellary

During the year OPG acquired a partially constructed 12MW themal power plant in the industrial area of Bellary, Karnataka. The plant is on a 120 acre site and has the potential to expand/build up to 250 MW of capacity. The 12 MW is expected to commission in 2013.

Financial Review

Income Statement Summary

Revenue

OPG's revenue increased to £33.15m, 188% growth year on year, primarily due to the commencement of commercial operations at Chennai I (77 MW) in August 2010.

Gross Profit

Gross profit increased to £14.4m in 2011 (2010: £7.3m). Gross profit was also driven by the contribution of Chennai I since August 2010 and offset by the increase in gas prices and the difference in average exchange rate used in the income statement (1GBP = INR 70.96 (2011) and INR 76.19 (2010))

EBITDA

EBITDA3 for the year was £15.54m, up 124%, and reconciled with profit after tax as follows:

3excludes exceptional or non-operational items such as the annual charge for stock options which is a non-cash item or expenses relating to projects under construction.

Taxation

The income tax charge of £2.41m in 2011 (2010: £1.43m) comprises current tax of £2.11m (2010: £1.41m) and deferred tax of £0.30m (2010: £0.02m). The current tax charge has increased by £1m primarily due to the increase in profits which are subject to Corporate Income Tax or Minimum Alternate Tax (MAT) as appropriate. The majority of profits derived from OPG's operations in India are subject to MAT. MAT is charged on book profits in India at a rate of 19.93% but is available as a credit against corporate income tax in the following 10 years. The deferred tax charge of £0.30m (2010: £0.02m) in 2011 is mainly on account of property, plant and equipment and the impact of depreciation unabsorbed due to timing differences as between book and tax depreciation. The Groups' 2011 effective tax rate for the year was 22% (2010: 26%).

Non-Operational Items

Pre-operating expenses represent expenses pertaining to Projects under construction charged to the income statement. These expenses in 2010-11 were lower at £0.40m in 2011 (2010: £1.17m) as one major project commenced commercial operation during the year.

Employee Stock Option charges are linked to share based payments to certain Directors and are non-cash in nature.

Profits after Tax

Profits after tax increased by £4.73m representing 118% year on year growth, from £4.02m in 2010 to £8.75m in 2011, as a result of the contribution from the 77 MW Chennai I.

Earnings per share

Earnings per share of 2.129 pence in 2011 represent an increase of 559 % over 2010 on account of higher net earnings attributable to shareholders from Chennai I in which the Group has an economic interest of 99 %.

Property, Plant and Equipment

Property, Plant and Equipment increased during the period by £11.36m, an 18% year on year growth, mainly reflecting the increase in capital work in progress on account of additional power plants in Chennai and Gujarat. Total Property, Plant & Equipment at £73.99m (2010: £62.63m) includes assets under construction amounting to £18.42m (2010: £47.46m) and Property, Plant & Equipment (net of depreciation) amounting to £55.57m (2010: £15.17m). During the year an amount of £ 40.30m has been capitalised in the Chennai 77 MW plant.

Current Assets

Current assets have increased by £68.81m to £132.13m year on year primarily as a result of:

Current Liabilities

Current liabilities have increased by £5.43m primarily due to the commencement of operations in the 77 MW power plant.

Other Non Current Liabilities

Other non current liabilities have increased by £13.7m primarily on account of an increase in bank borrowing to meet the capital project expenses.

Cash Flow

Operating cash flow increased from £5.77m in 2010 to £15.15m in 2011, an increase of £9.38m, or162%. The increase is primarily driven by an increase in operational activity. Net proceeds of £57.4m were from the equity raising January 2011.

Debt and Liquidity

The Group has net cash of £29.64m (2010: net debt £10.18m) and negative gearing of 24% (2010: positive gearing of 10%). As development of projects proceeds it is expected that the gearing may turn positive. The borrowings are in respect of the construction of power stations. The Group is in a position to raise borrowings for its power station developments. All of the Group's debt is denominated in Indian Rupees being the functional currency of its Indian Operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2011 

(All amounts in £, unless otherwise stated)

CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 March 2011

(All amounts in £, unless otherwise stated)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2011

(All amounts in £, unless otherwise stated)

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2011

(All amounts in £, unless otherwise stated)

NOTES TO THE CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

For the year ended 31 March 2011

(All amounts in £, unless otherwise stated)

1. Corporate information

1.1. Nature of operations

OPG Power Ventures plc ('the Company' or 'OPGPV'), its subsidiaries (collectively referred to as 'the Group') are primarily engaged in the development, owning, operation and maintenance of private sector power projects In India. The electricity generated from its plants is sold principally to public sector undertakings and heavy industrial companies in India or in the short term market. The business objective of the group is to focus on the power generation business within India and thereby provide reliable, cost effective power to the industrial consumers and other users under the 'open access' provisions mandated by the Government of India.

1.2. Statement of compliance

The consolidated and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the European Union (EU) and the provisions of the Isle of Man, Companies Act 2006 applicable to companies reporting under IFRS.

1.3 General information

OPG Power Ventures plc, a limited liability corporation, is the Group's ultimate parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's registered Office, which is also the principal place of business, is IOMA House, Hope Street, Douglas, Isle of Man 1M1 1JA. The Company's equity shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

The Financial statements were approved by the Board of Directors on 12th August, 2011

2. Changes in accounting policies

The Group has adopted the following revision and amendments to IAS 27 Consolidated and Separate Financial Statements (Revised 2008) issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the annual period beginning 1 April 2010:

IAS 27R introduced changes to the accounting requirements for transactions with non-controlling (formerly called 'minority') interests and the loss of control of a subsidiary. The group had already made an accounting policy decision to treat such transactions in a similar manner as suggested by the revised standard. Hence there was no financial impact on these financial statements.

2.1. Standards, amendments and Interpretations to existing standards that are not effective and have not been early adopted by the Group.

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

Standards and Interpretations adopted by the European Union as at 31 March 2011

The management does not expect the application of the other standards to have any material impact on its financial statements when those Standards become effective. The Group does not intend to apply any of these pronouncements early.

3. Summary of significant accounting policies

3.1. Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for financial assets and liabilities at fair value through profit or loss and available-for-sale financial assets measured at fair value.

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007) and have been presented in Great Britain Pound ('₤'), which is the functional and presentation currency of the Company.

3.2. Basis of consolidation

The consolidated financial statements incorporate the financial information of OPG Power Ventures Plc and its subsidiaries for the year ended 31 March 2011.

A subsidiary is defined as an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are fully consolidated from the date of acquisition, being the date on which control is acquired by the Group, and continue to be consolidated until the date that such control ceases. All subsidiaries have a reporting date of 31st March and use consistent accounting policies adopted by the Group.

All intra-group balances, income and expenses and any resulting unrealized gains arising from intra-group transactions are eliminated in full on consolidation.

Non-Controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. Acquisitions of additional stake or dilution of stake from/ to minority interests/ other venturer in the Group where there is no loss of control are accounted for using the equity method, whereby, the difference between the consideration paid or received and the book value of the share of the net assets is recognised in 'other reserve' within statement of changes in equity.

3.3. List of subsidiaries

Details of the Group's subsidiary which are consolidated into the Group's consolidated financial statement, are as follows:

1 As of 10 February, 2011 pursuant to agreement for assignment of debt between CHL and OPGPV the entire shares held in GEPL and GHPL have been transferred by "OPGPV" to "CHL". .

2 Pursuant to the voting rights agreement entered by GEPL with Tamil Nadu Properties and Salem Food Products Limited ( hereinafter collectively referred as "investors'), the investors agreed that in consideration of GEPL agreeing to subscribe for shares in OPGRE, the investors will exercise all voting rights in accordance of the directions of GEPL. The total voting rights held by the investors amount to 56.35 percent. Further the investors have also appointed GEPL as the lawful attorney to exercise their voting rights. Therefore the combination of the directly held interests together with the voting rights of the investors controlled by the group via contracts, have the effect that the group controls a majority of voting rights in OPGE. Accordingly this is considered to be a subsidiary of the group.

3 Pursuant to the voting rights agreement entered by OPGPG with Tamil Nadu Properties and Salem Food Products Limited ( hereinafter collectively referred as "investors'), the investors agreed that in consideration of OPGPG agreeing to subscribe for shares in OPGE, all voting rights in OPGE will be exercised in accordance with the directions of OPGPG. The total voting rights held by the investors amount to 36.88 percent. Further the investors also appointed OPGPG as the lawful attorney to exercise their voting rights. Therefore the combination of the directly held interests together with the voting rights of the investors controlled by the group via contracts, have the effect that the group controls a majority of voting rights in OPGE. Accordingly this is considered to be a subsidiary of the group.

3.4. Foreign currency translation

The functional currency of the Company is the Great Britain Pound Sterling (£). The Cypriot entities are an extension of the parent and pass through investment entities. Accordingly the functional currency of the subsidiaries in Cyprus is the Great Britain Pound Sterling. The functional currency of the Company's subsidiaries operating in India, determined based on evaluation of the individual and collective economic factors is Indian Rupees. The presentation currency of the Group is the Great Britain Pound (£) as submitted to the AIM market where the shares of the Company are listed.

At the reporting date the assets and liabilities of the Group are translated into the presentation currency which is Great Britain Pound Sterling (£) at the rate of exchange ruling at the Statement of financial position date and the statement of comprehensive income is translated at the average exchange rate for the year. Exchange differences are charged/ credited to other comprehensive income and recognized in the currency translation reserve in equity.

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Statement of financial position date are translated into functional currency at the foreign exchange rate ruling at that date. Aggregate gains and losses resulting from foreign currencies are included in finance income or costs within the profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to functional currency at foreign exchange rates ruling at the dates the fair value was determined.

3.5. Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group, and revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable in accordance with the relevant agreements, net of discounts, rebates and other applicable taxes and duties.

Sale of electricity

Revenue comprises revenue from sale of electricity. Revenue from the sale of electricity is recognised when earned on the basis of contractual arrangement with the customers and reflects the value of units supplied including an estimated value of units supplied to the customers between the date of their last meter reading and the reporting date.

Interest and dividend

Revenue from interest is recognised as interest accrues (using the effective interest rate method). Revenue from dividends is recognised when the right to receive the payment is established.

3.6. Taxes

Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.

Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. For management's assessment of the probability of future taxable income to utilise against deferred tax assets. Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.

3.7. Financial assets

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Financial assets and financial liabilities are measured initially at fair value adjusted by transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value.

Financial assets and financial liabilities are measured subsequently as described below

For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:

The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group.

Investment in subsidiaries

In the parent company's financial statements, the investments in subsidiaries are accounted for using the cost method with income from the investment being recognised only to the extent that the parent company receives distributions from accumulated profits of the investee arising after the date of acquisition.

Available-for-sale financial assets:

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group's available-for-sale financial assets include Mutual funds and listed securities. Available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income.

Reversals of impairment losses are recognised in other comprehensive income, except for financial assets that are debt securities which are recognised in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised.

3.8. Financial liabilities

The Group's financial liabilities include borrowings, trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognised in profit or loss.

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'finance costs' or 'finance income'.

3.9. Fair value of financial instruments

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the Statement of financial position date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

3.10 Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and/or impairment losses, if any. The cost includes expenditures that are directly attributable to property plant & equipment such as employee cost, borrowing costs for long-term construction projects etc, if recognition criteria are met. Likewise, when a major inspection is performed, its costs are recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in the profit or loss as incurred.

The present value of the expected costs of decommissioning of the asset after its use is included in the costs of the respective asset, if the recognition of the criteria for a provision is met.

Land is not depreciated. Depreciation on other assets is computed on straight-line basis over the useful life of the asset based on management's estimate as follows:

Assets in the course of construction are stated at cost and not depreciated until commissioned.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year the asset is derecognised.

The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively if appropriate.

3.11. Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Group as a lessee

Contracts to lease assets are classified as finance leases if they transfer substantially all the risks and rewards of ownership of the asset to the group. Leases where the Group does not acquire substantially all the risks and benefits of ownership of the asset are classified as operating leases.

Operating lease payments are recognised as an expense in the profit or loss on a straight line basis over the lease term. Lease of land is classified separately and is amortised over the period of lease.

3.12. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets. Interest income earned on the temporary investment of specific borrowing pending its expenditure on qualifying assets is deducted from the costs of these assets.

Gains and losses on extinguishment of liability, including those arising from substantial modification from terms of loans are not treated as borrowing costs and are charged to profit or loss.

All other borrowing costs including transaction costs are recognized in the profit or loss in the period in which they are incurred, the amount being determined using the effective interest rate method.

3.13. Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or cash-generating unit's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

3.14. Cash and cash equivalents

Cash and cash equivalents in the Statement of financial position comprise cash at banks and on hand and short-term deposits.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits, net of restricted cash and outstanding bank overdrafts.

3.15. Inventories

Inventories are stated at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition is accounted based on weighted average price.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.

3.16. Earnings per share

The earnings considered in ascertaining the Group's earning per share (EPS) comprise the net profit for the year attributable to ordinary equity holders of the parent. The number of shares used for computing the basic EPS is the weighted average number of shares outstanding during the year.

3.17. Other provisions and contingent liabilities

Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions are not recognised for future operating losses.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised, unless it was assumed in the course of a business combination. In a business combination, contingent liabilities are recognised on the acquisition date when there is a present obligation that arises from past events and the fair value can be measured reliably, even if the outflow of economic resources is not probable. They are subsequently measured at the higher amount of a comparable provision as described above and the amount recognised on the acquisition date, less any amortisation.

3.18. Share based payments

The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans feature any options for a cash settlement.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions).

All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to 'Other Reserves'.

If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.

3.20. Employee benefits

Gratuity

In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment.

Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each Statement of financial position date using the projected unit credit method.

The Group recognises the net obligation of a defined benefit plan in its statement of financial position as an asset or liability, respectively in accordance with IAS 19, Employee benefits. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to profit or loss in the statement of comprehensive income in the period in which they arise.

3.21. Business Combinations

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established using pooling of interest method. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder's consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity. Any excess consideration paid is directly recognised in equity.

4. Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires management to make certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The principal accounting policies adopted by the Group in the consolidated financial statements are as set out above. The application of a number of these policies require the Group to use a variety of estimation techniques and apply judgment to best reflect the substance of underlying transactions.

The Group has determined that a number of its accounting policies can be considered significant, in terms of the management judgment that has been required to determine the various assumptions underpinning their application in the consolidated financial statements presented which, under different conditions, could lead to material differences in these statements.

The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Estimates and uncertainties:

When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. Information about significant judgments, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below.

The key assumptions concerning the future and other key sources of estimation uncertainty at the Statement of financial position date, that have a significant risk of causing a material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Actual results can differ from estimates.

5. Segment information

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment has been identified as the steering committee that makes strategic decisions. Management has analysed the information that the chief operating decision maker reviews and concluded on the segment disclosure. In identifying its operating segments, management generally follows the Group's service lines, which represent the generation of the power and other related services provided by the Group. The activities undertaken by the Power generation segment includes sale of power and other related services. The accounting policies used by the Group for segment reporting are the same as those used for Consolidated financial statements.

For management purposes, the Group is organised into only a single business unit of power generation and distribution of the same to customers. There are no geographical segments as all revenues arise from India.

Revenue on account of sale of power to one party amounts to £ 25,790,162 (2010: £ 4,312,446).

6. Depreciation, costs of inventories and employee benefit expenses included in the consolidated and Company's statements of comprehensive income

(a) Depreciation and costs of inventories included in the consolidated statements of comprehensive income

For the group depreciation included in general and administrative expenses amount to £ 63,081 (2010: £ 195,461)

For the company depreciation included in general and administrative expenses amount to £ Nil (2010: £ Nil)

(b) Employee benefit expenses forming part of general and administrative expenses are as follows:

(c) Auditor's remuneration for audit services amounting to £ 35,000 (2010: £ 35,612) is included in general and administrative expenses.

(d) Foreign exchange (loss)/gain included in the general and administrative expenses/ other income is as follows:

7. Other income

a) Other income comprises of:

The item "Compensation for loss of profit" includes £1,021,691, due to OPG PG, a subsidiary, from the EPC contractor for delay in guaranteed commissioning date of their 77 MW plant, non achievement of guaranteed performance parameters at the plant and consequent loss of revenue to OPG PG. This amount represents loss of profits which is reliably measurable as at the reporting date and has been recognized based on the terms and conditions as specified in the EPC Contract.

8. Finance costs

Finance costs comprises of:

Interest expenses on loans and borrowings, includes interest expenses on financial liability at amortised cost of £ 2,271,354 (2010: £362,302) in consolidated financial statement.

9. Finance income

The finance income comprises of:

10. Tax expense / (income)

The major components of income tax expense for the years ended 31 March 2011 and 2010

Consolidated statement of comprehensive income

Consolidated statement of changes in equity: Tax reconciliation

Reconciliation between tax expense and the product of accounting profit multiplied by India's domestic tax rate for the years ended 31 March 2011 and 2010 is as follows:

The Company is subject to Isle of Man corporate tax at the standard rate of zero percent. As such, the Company's tax liability is zero. Additionally, Isle of Man does not levy tax on capital gains. However, considering that the Company's operations are entirely based in India, the effective tax rate of the Group has been computed based on the current tax rates prevailing in India. Further, a substantial portion of the profits of the Group's India operations are exempt from Indian income taxes being profits attributable to generation of power in India. Under the tax holiday the taxpayer can utilize an exemption from income taxes for a period of any ten consecutive years out of the fifteen years from the date of commencement of the operations.

The Group is subject to the provisions of Minimum Alternate Tax ('MAT') under the Indian Income taxes for the year ended 31 March 2011 and 2010. Accordingly, the Group calculated the tax liability for current taxes in India after considering MAT. The Group has carried forward credit in respect of MAT tax liability paid to the extent it is probable that future taxable profit will be available against which such tax credit can be utilized.

Deferred income tax for the group at 31 March 2011 and 2010 relates to the following:

Movement in temporary differences during the year

In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

Shareholders resident outside the Isle of Man will not suffer any income tax in the Isle of Man on any income distributions to them. Further, dividends are not taxable in India in the hands of the recipient. However, the Company will be subject to a "dividend distribution tax" currently at the rate of 15% (plus applicable surcharge and education cess) on the total amount distributed as dividend.

As at 31 March 2011 and 31 March 2010, there was no recognised deferred tax liability for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries, the Group has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future.

11. Property, plant and equipment, net

The property, plant and equipment comprises of:

The net book value of land and buildings block comprises of:

Property, plant and equipment with a carrying amount of £ 55,365,467 (2010: £ 15,013,210) is subject to security restrictions (refer note 18).

12. Investments and other financial assets

Available-for-sale investment - quoted short-term mutual fund units

The Group has investments in mutual fund units. The fair value of the quoted mutual fund instruments are determined by reference to published data.

Loans and receivables (Current)

Advance to Suppliers include the amounts paid as advance for supply of fuel to the group. Other advances of the group primarily includes duty drawback receivable and transmission charges receivable amounting to £ 2,169,718 (2010: 157,383). For the previous year GEPL and GHPL (step down subsidiaries of the company) had advanced an amount of £ 3,438,102 as inter corporate loan. Also, an amount of £ 2,806,644 was receivable from the bank on sale of available for sale investments. Capital advances comprise of payment made to EPC contractors for construction of assets and advances paid for purchase of capital equipments. The management expects to realise these in the next one year.

Loans and receivables of the company primarily includes non interest-bearing inter-corporate deposits of £ 58,981,826 (2010: £ 61,145,096) being the loan advanced by the company to Caromia Holdings Limited by the company which is repayable on demand.

Investment in subsidiaries

Investment refers investments in subsidiaries in the Company financial statements. CHL is a 100 percent held subsidiary of the Company. In the previous year GEPL and GHPL were 100 percent subsidiaries of the Company. The carrying amounts disclosed above are maximum possible credit risk exposure in relation to these financial assets.

13. Trade and other receivables

Trade receivables are non-interest bearing and are generally due within 14 days terms. Out of the above, £ 8,576,366 (2010: £ 3,348,207) has been pledged for security as borrowings (refer note 18). As at 31 March 2011, trade receivables of £ Nil (2010 £ Nil) were collectively impaired and provided for.

The age analysis of the overdue trade receivables is as follows:

14. Inventories

Out of the above, £ 4,708,191 (2010: £129,725) has been pledged for security as borrowings (refer note 18)

15. Cash and cash equivalents

Cash and short term deposits comprise of the following:

Short-term deposits are made for varying periods, depending on the immediate cash requirements of the Group. They are recoverable on demand.

Restricted cash represents deposits which have been pledged by the group in order to fulfil collateral requirements (refer note 18)

16. Issued share capital

Share Capital

The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder of ordinary shares, as reflected in the records of the Group on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Group.

The Company has an authorized share capital of 351,504,795 equity shares (2010: 286,989,795) at par value of £ 0.000147 (2010: £ 0.000147) per share amounting to £ 51,671 (2010: £ 42,187).

The Company has issued share capital at par value of £ 51,671 (£0.000147) per share.

Reserves

Share premium represents the amount received by the Group over and above the par value of shares issued and the excess of the fair value of share issued in business combination over the par value of such shares. Any transaction costs associated with the issuing of shares are deducted from securities premium, net of any related income tax benefits.

Translation reserve is used to record the exchange differences arising from the translation of the financial statements of the foreign subsidiaries.

Other reserve represents the difference between the consideration paid and the adjustment to net assets on change of controlling interest, without change in control, Other reserves also includes any costs related with share options granted and gain/losses on re-measurement orof Available for sale financial assets.

Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income less dividend distribution.

17. Share based payments

The board has granted share options to directors and nominees of directors which are limited to 10 percent of the group's share capital. Once granted, the share must be exercised within ten years of the date of grant otherwise the options would lapse.

The vesting conditions are as follows:

·; The 300 MW power plant of Kutch in the state of Gujarat must have been in commercial operation for three months.

·; The Closing share price being at least £ 1.00 for consecutive three business days.

The related expense has been amortised over the estimated vesting period of 4.21 years (expected completion of the Kutch plant) and an expense amounting to £ 1,454,207 (2010: £ 1,206,959) was recognised in the profit or loss with a corresponding credit to other reserves.

Movement in the number of share options outstanding and their related weighted average exercise price are as follows:

Assumptions on Valuation of Options

The weighted average price fair value of options granted during the previous period was determined using the Black-Scholes valuation model was £ 0.28 per option. The significant inputs into the model were weighted average share price of £ 0.66 (2011) at the grant date, exercise price shown above, volatility of £ 0.60 (2010 £ 0.60), dividend yield of NIL (2010 NIL), an expected option life of 4.21 years (2010 - 3.71 Yrs) and annual risk free rate of 3% .The volatility measured at the standard deviation of continuously compounded share returns is based on daily share prices of the last three years.

18. Borrowings

The borrowings comprise of the following:

Total debt of £ 50,319,196 (2010: £37,332,042) is secured as follows:

Long-term "project finance" loan contains certain restrictive covenants for the benefit of the facility providers and primarily requires the Group to maintain specified levels of certain financial ratios and operating results. The terms of the other borrowings arrangements also contain certain restrictive covenants primarily requiring the Group to maintain certain financial ratios. As of 31 March 2011, the Group has met all the relevant covenants.

The fair value of borrowings at 31 March 2011 was £ 50,319,196 (2010: £37,332,042). The fair values have been calculated by discounting cash flows at prevailing interest rates.

The borrowings mature as follows:

19. Trade and other payables

20. Related party transactions

Where control exists:

Key Management Personnel:

Related parties with whom the group had transactions during the period

Related party transactions during the year

The following table provides the total amount of transactions that have been entered into with related parties and the outstanding balances as the end of the relevant financial years: