Ksk Power Regulatory News (KSK)

KSK Power Ventur plc("KSK" or the "Group" or the "Company")

Audited Results for the year ended 31 March 2014

KSK Power Ventur plc (KSK.L), the power project company listed on the London Stock Exchange, with interests in multiple power plants and businesses across India, is pleased to announce the consolidated audited results for the year ended 31 March 2014.

Financial Highlights 

· Group Revenue decreased by 14% to $ 335.9 m (2013: $ 392.8 m)

· Gross Profit decreased by 42% to $ 91.1 m (2013: $ 157.2 m)

· Operating Profit decreased by 52% to $ 58.0 m (2013: $ 120.2 m)

· Profit before tax * decreased to a loss of $ 72.1 m (2013: profit of $ 37.5 m)

· Investments in Property Plant and Equipment ** decreased 2% to $ 3,215.3 m (2013: $ 3,273.5 m)

*An unrealised exchange loss of $ 38.1 million on account of the restatement of the foreign currency component of bank financing facilities and trade payables being recognized.

** Underlying increased of 8 % on constant currency basis, but headline decrease on account of translation difference from base currency as INR 59.86 per $ at closing as against INR 54.66 per $ at March 2013

Given the current trading environment, the underlying Revenue and Gross Profit declines for the current year as compared to the previous year, though marginal at the Rupee level, have been primarily on account of the lower than expected PLFs at Sai Wardha and Arasmeta projects and the overall price realisation.

Further, the currency depreciation of the Indian Rupee against the US Dollar of c.11%, since March 2013, has led to reporting of higher Revenue decline of 14% in US Dollar terms; together with associated performance and profitability.

Comparison of results

Operating Highlights 

· During the year operating assets recorded an aggregate generation of 6,514 MWh as against 5,546 MWh for the previous year, an increase of 17.4%, with the following individual Plant Load Factors ("PLF"):

* Net of 758 MWh of generation until November 2013, the associated revenue has been taken to the capital works in progress

Although the overall generation across the portfolio is below earlier expectations, this level was actually achieved despite the challenges currently facing all aspects of the energy sector in India.

· The 3.6 GW KSK Mahanadi power project is under construction with good progress being made that includes:

· Operating constraints at Sai Wardha with respect to coal costs, open access and PPAs continue. Efforts to address these issues are being pursued, with improvements expected during the year. In the interim, reduced asset utilisation levels means revenue and profitability will be lower than indicated earlier.

Commenting on the results, T. L. Sankar, Chairman of KSK said:

"The year 2014 witnessed the Company's power plants' aggregate gross generation reaching 6,514 MWhs. With the various challenges at Sai Wardha being addressed, and the additional 600 MW soon entering operations at KSK Mahanadi with operating capacity of Mahanadi aggregating to 1200 MW, we anticipate achieving 9,000 MWh of gross generation in the current year.

These results are in the context of the circumstances across the Indian power sector and the overall challenging times and economic environment in India. The year proved to be a difficult time for the entire power sector in India and the Company's management has continued its efforts to address the various challenges in the operating projects.

As regards resolving the issue of high price coal and seeking reimbursement for the inferior quality of coal at Sai Wardha, a prima facie order for admitting the company's submission and directing an investigation has already been passed during January 2014. A detailed investigation is currently underway by the office of the Director General of Competition Commission of India, and we are hopeful of being granted the necessary relief in the next few months. In addition efforts on seeking local regulatory intervention on power supplies, enhanced utilisation through appropriate open access arrangements are simultaneously being pursued. When this is successfully addressed, profitability is expected to revert to the previously achieved levels.

The phased construction of the KSK Mahanadi project is making steady progress, with the first 600 MW unit commissioned during the year. The commencement of fuel supplies under the tapering linkage Fuel Supply Agreement ("FSA") from South Eastern Collieries Limited ("SECL") is expected to have a high and positive impact, leading to enhanced operational profitability. With the second 600 MW unit due to enter operations for a substantial part of the current financial year, internal accruals are anticipated that will provide a robust support for the entire power generation portfolio of the Company. Further, interim coal imports from overseas through appropriate collaborative arrangements will provide sufficient fuel for the planned power generation from KSK Mahanadi.

While coal supplies from the Goa Industries Development Corporation ("GIDC") from the Gare Pelma coal block are anticipated to start during the year, initial progress by Gujarat Mineral Development Corporation ("GMDC") of the Morga-II Coal Block has already commenced post the Forest Clearance accorded during May 2013, the Prospecting License accorded in December 2013 and the in depth prospecting activities commenced in May 2014.

The currency impact due to the significant depreciation of the Rupee against the US Dollar has resulted in considerably greater costs on imported capital goods. The additional debt funding for the KSK Mahanadi power project, to cover the significant USD/INR currency fluctuation on project imports and the extended timelines, has been agreed in principle by the Consortium of Lenders. In this regard, the commitments of the entire consortium are expected to be firmed up on the same lines as the Current Facility Agreements, and are anticipated to be entered into by September/October 2014.

In line with the guidance given by the Indian Central Bank, where the progress of infrastructure projects has been affected by factors beyond the control of the project developers, an additional two years would be provided for project completion as well as commencement. The lenders consortium has agreed in principle to recognize the revision of debt repayment and the same is now expected to commence in June 2016 on quarterly basis. This deferment provides additional internal accruals over the next two years and the necessary latitude for additional units to commence operations.

The Company's management is focused on moving the various supply chain solutions forward with respect to operational assets, and addressing the on-ground situations to co-ordinate planned generation with fuel supplies for the assets under construction. With the underlying assets, associated performance and opportunities, KSK is well positioned to be one of the more stable, valuable and sustainable players in the Indian power generation landscape and views the future with confidence.

KSK's bold growth initiative, from start-up to becoming a leading independent power producer targeted to account for c.3% of total Indian power generation by 2016 (upon completion of all six units of KSK Mahanadi), demonstrates KSK's growth and profitability potential in this key area of the Indian economy.

KSK's performance during the year was only possible with the valuable and appreciated support of the various investors in the Company who have enabled us to pursue appropriate business opportunities in these challenging times."

For further information, please contact:

 Key Business Updates

POWER PLANTS UNDER OPERATION/CONSTRUCTION 

· 540 MW SAI WARDHA POWER LIMITED (SWPL):

The total gross power generated in the plant during the review period was 2,586 MWh with an average Plant Load Factor (PLF) of 55%. This reflected the challenging local operating environment, the fuel and the open access grid constraints experienced by Sai Wardha Power.

The various developments early in the period, including unjustified higher coal prices, have adversely affected Sai Wardha Power's profitability and appropriate recompense from Western Coalfields Limited is being pursued to address this matter. During the year the Company has sought the intervention of the Competition Commission of India ("CCI") both for the shortfall in the calorific value of the coal vis-à-vis the guarantees under the FSA, as well pursuing recompense for charging for coal supplied at much higher prices than those prescribed under the cost plus linkage arrangements, together with other onerous terms being insisted upon for supplying the balance of coal quantities. A prima facie opinion was expressed by the CCI on 22 January 2014 admitting the Company's submission, and by directing the Office of Director General to carry out a detailed investigation. Further developments and reliefs from the CCI are awaited.

While the Company is negotiating power sale arrangements to commence supplies for part of the capacity that was earlier being supplied to R-infra, the additional capacity that was earmarked to be supplied to captive industrial consumers also experienced limitations on open access from the local grid, in spite of long term PPA commitments from various industries. Subsequent to the year end, during April 2014, the Company sought the necessary judicial and regulatory intervention, and has now successfully re-secured open access for supplies to these captive consumers.

The Company continues to use every effort to pursue the coal price reduction and the granting of the necessary open access permissions, which will ultimately lead to the enhanced utilisation and profitability of the Sai Wardha plant.

· CONSTRUCTION OF 3.6 GW KSK MAHANADI POWER PROJECT:

The construction activity at KSK Mahanadi, a large, single location, greenfield private power plant continues, with significant achievements during the year under review, and the period up to this date:

With stabilised generation from the first 600 MW unit, and the progress being made with the second 600 MW unit, the Company's management continues to focus its efforts on expediting the construction of the remaining four units.

· 135 MW VS LIGNITE POWER PRIVATE LIMITED (VSLP):

The total gross power generated in the plant during the year was 902 MWh, with an average PLF of 76%. The Company is continuing its efforts to secure necessary long term PPAs from the local grid as well as appropriate legal reliefs with respect to tariffs from industrial customers. The Company anticipates that industrial customers, who have previously experienced extremely high tariffs, will find Company's power supplies and tariff proposition more attractive.

· 86 MW ARASMETA CAPTIVE POWER COMPANY PRIVATE LIMITED (ACPCPL):

The total gross power generated in the plant during the year was 341 MWh, with an average PLF of 45%, primarily due to the limited off-take by Lafarge India. The year under review witnessed decreased utilisation by Lafarge India for its cement plants, having a direct impact on the profitability of the Arasmeta plant. Lafarge is currently not taking any power from the plant. While continuing to press for its claim against Lafarge India to fulfil their obligations, the Company has now executed a long term PPA with the local utility, which was approved by the Regulatory Commission during May 2014.

With the new PPA arrangements in place, asset utilisation is expected to significantly improve and reach the earlier 80%+ PLF levels over the next few quarters. As a result, the Company anticipates increased generation, revenue and profitability from the Arasmeta plant.

· 58 MW SAI REGENCY POWER CORPORATION PRIVATE LIMITED (SRPCPL):

The total gross power generated in the combined cycle gas fired power plant during the year was 445 MWh, with an average PLF of 88%. With the continuous supply of gas and the efficient operation, the plant has produced an exceptional operational and financial performance, which the Company expects to continue in the future.

· 43 MW SITAPURAM POWER LIMITED (SPL):

The total gross power generated in the plant during the year was 342 MWh, with an average PLF of 91%. Although the fuel cost for the period under review has increased due to an increase in coal prices from the Singareni Collieries Company Limited, as well as from open market purchases, the energy generated in the period has been supplied to the captive consumers in accordance with the provisions of the PPA, and the balance of power sold to other customers under open access.

· 10 MW SAI MAITHILI SOLAR POWER PROJECT:

The total gross power generated in the plant during the year was 19 MWh, with an average PLF of 21%. The 10 MW PV solar power generation plant is located in the state of Rajasthan, operating under the Jawaharlal Nehru National Solar Mission.

· CONSTRUCTION OF ADDITIONAL SOLAR POWER GENERATION PLANTS:

In response to the continuing initiative of the Indian Government, the Company is seeking to develop an additional 250 MW of solar power generation projects in the medium term.

The initiative in the state of Tamil Nadu has not progressed at the anticipated pace as a result of the Government's detailed review of the policy of Solar Power Obligations ("SPO"). However, with recent developments, the first PPA with Tamil Nadu is expected and thereafter progress on debt financing, land acquisition, EPC and site preparation works will be accelerated.

· ANCILLARY INFRASTRUCTURE INITIATIVE AT KSK MAHANADI  

The Company's construction of the infrastructure to support the KSK Mahanadi power project witnessed tremendous progress with the commissioning of the entire water pipeline infrastructure and rail connectivity to the power plant for transportation.

• KSK Mineral Resources:

Mine development support and associated works on behalf of Goa Industrial Development Corporation (GIDC), the owner of the Gare Pelma block, will enable timely access to coal for the Mahanadi project. Commencement of production during the current year, and the gradual increase, is expected to be in line with the approved Mine Plan. This would enable the fuel requirement for operations to be met, and the commencement of power supplies to the Goa state.

• KSK Water Infrastructure:

Infrastructure works, including the construction of the 60km pipelines and the pump stations for the supply of water for the Mahanadi project, were completed and are operational. The additional intermediate reservoir works, sufficient to support the continuous operation of all six 600 MW units, are expected to be completed during the latter part of 2014.

• Raigarh Champa Rail Infrastructure:

The Company's 15.7 km inward railway line connecting the Mahanadi plant with the Indian Railways main line was completed during second half of 2013, enabling the movement of coal into the power plant. As regards the 65.5 km line connecting the Gare Pelma coal block to the main line, an integrated plan is being discussed with the new Government, and further progress is awaited to enable subsequent development activities.

 WIND POWER GENERATION AND HYDRO POWER GENERATION INITIATIVE  

The Company continues to pursue specific wind power generation initiatives as well as work on the hydro project portfolio for appropriate collaboration opportunities.

EQUITY AND FINANCING ARRANGEMENTS  

The Company raised £20.7 million of equity during the last quarter of the period through a placement of new shares in KSK Power Ventur plc ("KSK"). Additionally, post the reporting year end, c. £40 million of equity was raised by KSK Energy Ventures Limited ("KSKEV"), KSK's listed Indian subsidiary, through a Qualified Institutional Placement. Shareholder approval was also obtained for KSK to subscribe for up to 150 million warrants convertible into equivalent equity shares at KSKEV, enabling KSK to revert back to the earlier held 74.94% interest in KSKEV. It is anticipated that during the year an appropriate level of warrant subscription and conversion would be undertaken for the Company to retain its substantial interest in KSKEV.

Earlier in the year the Company secured debt financing within its Indian holding companies that enabled the earlier tender offer as well as the buyout of the entire minority of the KSK Mahanadi project, resulting in KSK owning a 74.94% interest in KSKEV, the subsidiary which owns the 100% interest in KSK Mahanadi Power Company Limited. Also, the Company is pursuing further refinancing opportunities on more favourable terms at the operating project level to provide the necessary liquidity to retire part of the existing higher rate debt.

Additionally, the Company has received and evaluating proposals for collaboration on the KSK Mahanadi project.

FINANCIAL PERFORMANCE

The underlying financial performance at the Indian Rupee level has witnessed marginal decline. However, with significant currency depreciation of the Rupee against the US dollar during the period, the results when reported in US Dollars reflect a substantial decrease as compared to the previous year.

With a total operating capacity of 1,491 MW, the consolidated operating revenue achieved was $ 336 m, with operating profits at $ 58 m, and a loss before tax of $ 72 m.

However, reported financials have been affected due to the significant Rupee Dollar fluctuation and associated non cash book adjustments for foreign exchange on the offshore supplies with respect to the Mahanadi project.

The significant increase of finance costs from $ 121 m to $ 166 m (primarily with $51 m solely on account of currency exchange effects during the current year) resulted in a decrease in earnings before taxes.

The movement in profit before taxation from $ 37 m to a loss before taxation of $ 72 m in the current year was due in part to $ 51 m exchange loss that arose in 2014, and is accounted for in finance costs.

Business Strategy

The high capital intensity and associated project debt required to develop and grow the Company's power generation business, coupled with high currency volatility and the current difficult Indian policy environment, will impact the Company's overall funding requirements and financial performance in the near term. Work continues on a number of major initiatives in this regard.

The challenge continues within the Indian power sector as a whole to obtain fuel at the right price, and to achieve open access for the supply of power to customers at sensible PPAs. However, with tapering linkage of coal supplies now secured to cover any potential delays for the Mahanadi plant, and with significant long term PPAs signed at higher tariff rates, the Company expects to secure the necessary further funding required for its major capital projects, resulting in an improved financial performance over time.

OUTLOOK

With unfulfilled demand for power generation in India expected to continue and grow through the coming decade, coupled with the high quality of the Company's growing asset base, a proven execution capability, an increasingly efficient business structure, and with secured fuel supplies to the power plants, KSK is well positioned to address the Indian power generation opportunities.

Further the improvement in the overall policy environment with a new federal Government in place supported by an integrated approach to issues of power generation, coal mining and renewable energy initiatives coming together under a combined Ministry.

On the successful phased completion of the balance units of the 3.6 GW KSK Mahanadi power project being added to the Company's existing portfolio, the Board believes KSK will be one of India's leading suppliers of power. 

An extract of the Audited Consolidated and Company Financial Statements for the year ended 31 March 2014 is shown below.

A full set of accounts will be available from the Company websites: www.kskplc.co.uk

PRINCIPAL RISKS AND UNCERTAINITIES

The business of the Group is subject to a variety of risks and uncertainties which, if they occur may have a materially adverse effect on the Group's business or financial condition, results or future operations. The risks & uncertainties set out in this document are not exhaustive and there may be risks of which the Board is not aware or believes to be immaterial, which may, in the future, adversely affect the Group's business. The risks and uncertainties faced by the Group and the industry as a whole have been previously provided in detail in the Annual Reports of the Company and the Interim Statements. The majority of the risks previously identified have not significantly changed. While the Company attempts to address the same, the key risks and uncertainties continued to be faced by the Group are as follows:

Extract of Consolidated and Company financial statements for the year ended 31 March 2014

COMPANY STATEMENT OF CHANGES IN EQUITYfor the year ended

(All amount in thousands of US $, unless otherwise stated)

(See accompanying notes to Consolidated and Company financial statements)

EXTRACT OF NOTES TO CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

for the year ended 31 March 2014

(All amount in thousands of US $, unless otherwise stated)

1. Corporate information

1.1. General information

KSK Power Ventur plc ('the Company' or 'KPVP' or 'KSK' or 'Parent'), a limited liability corporation, is the Group's Parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's Registered Office, which is also principal place of business, is Fort Anne, Douglas, Isle of Man, IM1 5PD. The Company's equity shares are listed on the Standard List on the official list of the London Stock Exchange.

1.2. Nature of operations

KSK Power Ventur plc, its subsidiaries and joint ventures (collectively referred to as 'the Group') are primarily engaged in the development, operation and maintenance of private sector power projects, predominantly through subsidiaries and jointly controlled entities with multiple industrial consumers and utilities in India with next level of growth coming through large base load power plant subsidiaries.

KSK focused its strategy on the private sector power development market, undertaking entire gamut of development, investment, construction (for its own use), operation and maintenance of power plant with supplies initially to heavy industrials operating in India and now branching out to cater to the needs of utilities and others in the wider Indian power sector.

The principal activities of the Group are described in note 11.

1.3. Statement of compliance responsibility statement

The Consolidated and Company financial statements contained in this document have been prepared in accordance with International Financial Reporting Standard and its interpretations as adopted by the European Union (EU) ('IFRS') and the provisions of the Isle of Man, Companies Act 1931-2004 applicable to companies reporting under IFRS.

The financial statements were authorised for issue by the Board of Directors on 11 July 2014.

1.4. Financial period

The Consolidated and Company financial statements cover the period from 1 April 2013 to 31 March 2014, with comparative figures from 1 April 2012 to 31 March 2013. In addition, statement of financial position as at 1 April 2012 presented in these consolidated financial statements due to retrospective application of certain accounting policies.

1.5. Basis of preparation

These Consolidated financial statements have been prepared on the historical cost convention and on an accrual basis, except for the following:

· Derivative financial instruments that are measured at fair value;

· Financial instruments that are designated as being at fair value through profit or loss account upon initial recognition are measured at fair value;

· Available-for-sale financial assets that are measured at fair value; and

· Net employee defined benefit (asset) / liability that are measured at fair value.

The financial statements of the Group and the Company have been presented in United States Dollars ('US $'), which is the presentation currency of the Company. All amounts have been presented in thousands, unless specified otherwise.

Balances represent consolidated amounts for the Group, unless otherwise stated. The Company's financial statement represents separate financial statement of KPVP.

Going Concern: The financial statements have been prepared on going concern basis which assumes the Group and the Company will have sufficient funds to continue its operational existence for the foreseeable future covering at least twelve months. The Group requires funds both for short-term operational needs as well as for long-term investment programmes mainly in construction projects for its power plants. The Group currently has net current liabilities of US $ 880,224, with short term facilities including current maturities of long term debts expiring in March 2015 totalling US $ 944,750 and a committed capital spend of US $ 1,589,164. The Group continues to generate cash flows from the current operations which together with the available cash and short term deposits provides liquidity both in short-term as well as in long-term.

Further, within current liabilities is an amount of long term debt of US $ 140,863 classified as the current portion of debt borrowed for KSK Mahanadi Power Project. As there has been time overrun in the project by approx. two years, a time and cost overrun proposal was submitted to the lead lender for approval of the re-scheduling of the DCCO (Date of commencement of commercial operation) and accordingly a consequential shift in the repayment date from 30 June 2014 to 30 June 2016. The same has been approved by the board of the lead lender of the project. Hence, an amount of US $ 140,863 will not be materialised till 30 June 2016.

Anticipated future cash flow, including QIP proceeds of US $ 65,072 (refer note 19) and undrawn long term committed facilities of US $ 1,135,523 together with cash and short term deposits of US $ 194,054 (including restricted cash) as at 31 March 2014 on a consolidated basis, are expected to be utilised to meet the on-going capital investment programme and liquidity requirement of the Group in the near future. In addition, a number of the facilities that are due to expire at 31 March 2015 are in the process of being extended and have a rollover clause in a number of cases.

The Group's forecast and projections, taking into account reasonable possible changes in trading performance, show that the Group has sufficient financial resources, together with assets that are expected to generate free cash flow to the Group. As a consequence, the Directors have a reasonable expectation that the Company and the Group are well placed to manage their business risks and continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis of accounting when preparing these financial statements.

2. Changes in accounting policy and disclosure

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new standards as of 1 April 2013, noted below:

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 April 2013.

· IFRS 13 Fair Value Measurement

· Presentation of items of Other Comprehensive Income (Amendments to IAS 1)

· IAS 19 Employee Benefits (2011)

· IFRIC 20 stripping cost in the production phase of surface mine

· IFRS 7 Financial instruments Disclosures - offsetting Financial Assets and Financial Liabilities

· Annual Improvements to IFRS 2009-2011 cycle

The nature and the effect of the changes are further explained below.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures, accordingly, the Group has included additional disclosures in this regard.

In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively, and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Group's assets and liabilities.

Presentation of items of Other Comprehensive Income (Amendments to IAS 1)

As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its consolidated income statement and statement of other comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also been re-presented accordingly. The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

IAS 19R Employee Benefits (2011)

IAS 19R includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognised in other comprehensive income (OCI) and permanently excluded from profit and loss; expected returns on plan assets that are no longer recognised in profit or loss, instead, there is a requirement to recognise interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include new disclosures, such as, quantitative sensitivity disclosures.

In case of the Group, the transition to IAS 19R had an impact on the net defined benefit plan obligations due to the difference in accounting for interest on plan assets and unvested past service costs. The effect of the adoption of IAS 19R is explained in note 18.

IFRIC 20 stripping cost in the production phase of surface mine

This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. Under the interpretation, the costs from this waste removal activity (stripping) which provide improved access to ore is recognised as a non-current asset (stripping activity asset) when certain criteria are met, whereas the cost of normal on-going operational stripping activities are accounted for in accordance with IAS 2 Inventories. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it form parts.

In case of the Group, the transition to IFRIC 20 had an impact on trade and other payable as the existing stripping cost liability balances have been written off to income statement. The effect of the adoption of IFRIC 20 is explained in Note 18.

IFRS 7 Financial instruments Disclosures - offsetting Financial Assets and Financial Liabilities

The amendment requires an entity to disclose information about rights to set-off financial instruments and related arrangements (e.g. collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity's financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether the financial instruments are set off in accordance with IAS 32. As the Group is not setting off financial instruments in accordance with IAS 32 and does not have relevant offsetting arrangements, the amendment does not have an impact on the Group.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3. Acquisition of non-controlling interest

During the year ended 31 March 2014, the Group has issued additional 30,148,613 shares in KSK Mahanadi Power Company Limited ("KMPCL") to KSK Energy Limited ("KEL") at a face value of Rs 10 (US $ 0.17) at par. The above transactions resulted in acquisition of 0.26 % of non-controlling interest.

The acquisition of interest in subsidiary from non-controlling interest is accounted as an equity transaction, and accordingly no gain or loss is recognised in the Consolidated income statement. The difference of US $ (29) between the fair value of the net consideration paid (US $ Nil) and the amount by which the non-controlling interest (US $ 29) is adjusted are debited to 'other reserve' within consolidated statement of changes in equity and attributed to the owners of the Company.

4. Dilution on Issuance of Equity Shares by Subsidiaries

During the year ended 31 March 2014, the Group has issued additional 78,000,000 shares in KSK Mahanadi Power Company Limited ("KMPCL") to Sai Wardha Power Limited ("SWPL") at a face value of Rs 10 (US $ 0.17) at par. The above transactions resulted in dilution of 0.42 % of non-controlling interest.

The dilution of interest in subsidiary from non-controlling interest is accounted as an equity transaction, and accordingly no gain or loss is recognised in the Consolidated income statement. The difference of US $ 41 between the fair value of the net consideration paid (US $ Nil) and the amount by which the non-controlling interest (US $ (41)) is adjusted are credited to 'other reserve' within consolidated statement of changes in equity and attributed to the owners of the Company.

5. Disposal group held for sale

The assets and liabilities related to Sai Regency Wind division (part of the power generation segment) have been presented as held for sale following the approval of the group's management and shareholders on 03 March 2014 to sell Sai Regency wind division. The transaction was completed by May 2014.

· Impairment loss relating to the disposal group

Impairment loss of US $ 1,476 for write down of the disposal group to the lower of its carrying amount and its fair value less cost to sell have been included in General and administrative expenses. The impairment losses have been applied to reduce the carrying amount of property plant and equipment within the disposal group.

· Assets and liabilities of disposal group held for sale

At 31 March 2014, the disposal group was stated at fair value less cost to sell and comprised the following assets and liabilities

· Cumulative income or expense included in OCI

There are no cumulative incomes or expenses included in OCI relating to the disposal group.

· Measurement of fair values

In accordance with IFRS 5, the assets and liabilities held for sale were written down to their fair value less costs to sell. This is a non-recurring fair value which has been measured based on definitive agreement entered into with third party and is therefore within level 1 of the fair value hierarchy.

6. Investments and other financial assets

Financial assets at fair value through profit or loss

The Group has invested into short-term mutual fund units and equity securities in various companies being quoted on Indian stock market. The fair value of the mutual fund units and equity securities are determined by reference to published data.

Available-for-sale investment

The Group has investments in listed equity securities of various companies being quoted on the Indian and London stock markets respectively. The fair value of the quoted equity shares are determined by reference to published data. The Group also holds non-controlling interest (1%-25%) in unlisted entities which are in the business of power generation and allied projects. The Group designated these unquoted equity shares as available-for-sale investment in accordance with the documented investment strategy of the Group to manage and evaluate performance of the equity shares on fair value basis. The fair value of unquoted ordinary shares has been estimated using a relative valuation using price earnings ratio / book value method. The valuation requires management to make certain assumptions about the inputs including size and liquidity.

Deposit with banks

This represents the deposits with the bank with the maturity term of more than twelve months from the reporting date.

Loans and receivables

This primarily includes interest-bearing inter-corporate deposits of US $ 5,010 (2013: US $ 13,538), deferred loan origination costs US $ 4,424 (2013: US $ 9,783), security deposit US $ 53,882 (2013: US $ 20,721), advance for investments US $ 2,610 (2013: US $ 3,469) and other financial assets US $ 45,743 (2013: US $ 43,182).

Loans to and receivables from JV partners

This primarily includes the share application money in the joint venture entities, interest bearing inter corporate deposit to joint venture partners and redeemable preference share capital held in the joint venture entities redeemable between 5 to 20 years.

Loans to and receivable from subsidiary

Loans to and receivable from subsidiary represents inter-corporate deposits given by the Company to its wholly owned subsidiaries.

Investment in subsidiaries

Investment primarily includes unquoted investments in subsidiaries in the Company financial statements. The Company has invested in 139,244,601 equity shares (2013: 139,244,601) in KEL, 12,000 equity shares (2013: 12,000) in KASL, 100,000,000 equity shares (2013: 100,000,000) in KGPP, 84,146,843 equity shares (2013: Nil) in KGEPL and 1 equity share (2013: 1) in KSVP totalling to US $ 227,234 (2013: US $ 143,414).

Investment and other financial assets amounting of US $ 177,207 (2013: US $ 153,621) for the Group is subject to security restrictions.

Impairment of financial assets

During the year ended 31 March 2014, the Group's available-for-sale financial asset of US $ 2,986 (31 March 2013: US $ 4,363) and loans and receivable of US $ 1,657 (31 March 2013: US $ 2,466) were collectively impaired.

During the year ended 31 March 2014, the Company's loans and receivable of US $ 335 (31 March 2013: US $ Nil) were collectively impaired and written off.

7. Cash and short-term deposits

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.

The Group has pledged a part of its short-term deposits amounting US $ 136,233 (2013: US $ 252,053) in order to fulfil collateral requirements (see note 9).

For the purpose of cash flow statement, cash and cash equivalent comprise:

1Include deposits pledged for availing credit facilities from banks and deposits with maturity term of three months to twelve months.

8. 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 Company 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 Company.

The Company has an authorised share capital of 500,000,000 equity shares (31 March 2013: 500,000,000) at par value of US $ 0.002 (£ 0.001) per share amounting to US $ 998.

During the year, the Company has raised US $ 33,327 (net of share issue expenses of US $ 755) by way of a placing of 15,930,000 equity shares of US $ 0.002 (£0.001) each with the parent company and institutional investors at a premium of US $ 2.14 (£ 1.299) per share. The placing shares rank pari-passu in all respects with the other ordinary shares including the right to receive all dividends and other distributions.

Share application money represents amount received from investors / parent pending allotment of ordinary shares

Reserves

Share premium represents the amount received by the Group over and above the par value of shares issued. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax consequences.

Revaluation reservecomprises gains and losses due to the revaluation of previously held interest of the assets acquired and liabilities assumed in a business combination.

Foreign currency translation reserve is used to record the exchange difference arising from the translation of the financial statements of the Group entities.

Capital redemption reserve represents statutory reserve required to be maintained under local law of India on account of redemption of capital. The reserve is credited equivalent to amount of capital redeemed by debiting retained earnings.

Other reserve represents the difference between the consideration paid and the adjustment to net assets on change of controlling interest, without change in control 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 by the subsidiaries are deducted from other reserves, net of any related income tax consequences. Further, it also includes the loss / gain on fair valuation of available-for-sale financial instruments.

Retained earnings mainly represent all current and prior year results as disclosed in the income statement and other comprehensive income less dividend distribution.

9. Interest-bearing loans and borrowings

The interest-bearing loans and borrowings comprise of the following:

Total debt of US $ 2,888,676 (2013: US $ 2,855,648) comprised:

§ Long-term "project finance" loans of the Group amounting US $ 2,153,328 (2013: US $ 1,908,435) is fully secured on the property, plant and equipment and other assets of joint venture and subsidiaries that operate power stations, allied services and by a pledge over the promoter's shareholding in equity and preference capital of some of the joint ventures and subsidiaries.

§ The short term loan taken by the Group is secured by the corporate guarantee provided by the Company, fixed deposits of the Group and by pledge of shares held in the respective entities.

§ Buyer's credit facility is secured against property, plant and equipment and other assets on pari-passu basis, pledge of fixed deposits and corporate guarantee of KEVL. These loans bear interest at LIBOR plus 25 to 450 basis points.

§ A number of the facilities that are due to expire at 31 March 2015 are in the process of being extended and have rollover clause in a number of cases.

§ Cash credit and other working capital facilities are fully secured against property, plant and equipment and other assets on pari-passu basis with other lenders of the respective entities availing the loan facilities.

§ Redeemable preference shares are due for repayment in 1-14 year.

§ Convertible debts are repayable by March 2025 as per the terms of the agreement.

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 2014, the Group has complied with the relevant significant covenants.

As at 31 March 2014, the Group has available US $ 1,135,523 of undrawn long term committed borrowing facilities.

The fair value of borrowings at 31 March 2014 was US $ 2,888,676 (2013: US $ 2,853,565). The fair values have been calculated by discounting cash flows at prevailing interest rates.

The interest-bearing loans and borrowings mature as follows:

10. Other financial liabilities

11. Segment information

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8. Management has analysed the information that the chief operating decision maker reviews and concluded on the segment disclosure.

For management purposes, the Group is organised into business units based on their services and has two reportable operating segments as follows:

· Power generating activities and

· Project development activities

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the Consolidated financial statements. Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments. There is only one geographical segment as all the operations and business is carried out in India.